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







 UNITED STATES NEGOTIATING OBJECTIVES FOR THE WTO SEATTLE MINISTERIAL 
                                MEETING

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 5, 1999

                               __________

                             Serial 106-52

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
65-092 CC                   WASHINGTON : 2000



                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

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

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman

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


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




                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 8, 1999, announcing the hearing.................     2

                               WITNESSES

Office of the United States Trade Representative, Hon. Susan 
  Esserman, Deputy United States Trade Representative............    24

                                 ______

Ambrose, Kathleen A., Chemical Manufacturers Association.........   143
American Council of Life Insurance, Charles Lake.................   159
American Family Life Assurance Company Japan, Charles Lake.......   159
American Farm Bureau Federation, Dean Kleckner...................    94
American Federation of Labor and Congress of Industrial 
  Organizations, David Smith.....................................   154
American Forest & Paper Association, John Dillon.................    99
Arizona Department of Agriculture, Sheldon R. Jones..............   174
American Insurance Association, Charles Lake.....................   159
Becerra, Hon. Xavier, a Representative in Congress from the State 
  of California..................................................    10
Cargill, Incorporated, Ernest S. Micek...........................    60
Chemical Manufacturers Association, Kathleen A. Ambrose..........   143
Chiquita Brands International, Inc., Steven G. Warshaw...........   134
Chubb Corporation, Dean R. O'Hare................................    68
Coalition of Service Industries, Dean R. O'Hare..................    68
Dawson, Rhett, Information Technology Industry Council...........   169
Dillon, John, International Paper, and the American Forest & 
  Paper Association..............................................    99
Emergency Committee for American Trade, Ernest S. Micek..........    60
Health Insurance Association of America, Charles Lake............   159
Information Technology Industry Council, Rhett Dawson............   169
International Insurance Council, Charles Lake....................   159
International Paper, John Dillon.................................    99
Jones, Sheldon R., Arizona Department of Agriculture.............   174
Kleckner, Dean, American Farm Bureau Federation..................    94
Lake, Charles, American Family Life Assurance Company Japan, the 
  American Council of Life Insurance, America Insurance 
  Association, Health Insurance Association of America, 
  International Insurance Council, and Reinsurance Association of 
  America........................................................   159
Lambert, Charles D., National Cattlemen's Beef Association.......   138
Micek, Ernest S., Cargill, Incorporated and the Emergency 
  Committee for American Trade...................................    60
Miller, Hon. Dan, a Representative in Congress from the State of 
  Florida........................................................    15
National Association of Manufacturers, William Weiller...........   129
National Cattlemen's Beef Association, Charles D. Lambert........   138
National Wildlife Federation, Mark Van Putten....................   104
O'Hare, Dean R., Chubb Corporation, and Coalition of Service 
  Industries.....................................................    68
President's Advisory Committee on Trade Policy and Negotiations, 
  John E. Pepper.................................................    55
Procter & Gamble Company, John E. Pepper.........................    55
Purafil, Inc., William Weiller...................................   129
Regula, Hon. Ralph, a Representative in Congress from the State 
  of Ohio........................................................    13
Reinsurance Association of America, Charles Lake.................   159
Sandler, Gilbert Lee, Sandler Travis & Rosenberg, P.A., and the 
  Washington International Insurance Company.....................   164
Smith, David, American Federation of Labor and Congress of 
  Industrial Organizations.......................................   154
Van Putten, Mark, National Wildlife Federation...................   104
Warshaw, Steven G., Chiquita Brands International, Inc...........   134
Washington International Insurance Company, Gilbert Lee Sandler..   164
Weiller, William, Purafil, Inc., and the National Association of 
  Manufacturers..................................................   129
Weller, Hon. Jerry, a Representative in Congress from the State 
  of Illinois....................................................     7

                       Submissions for the Record

Ad Hoc WTO Round Processed Food Coalition: Bestfoods, Campbell 
  Soup, ConAgra, General Mills, Herbalife International, J.R. 
  Simplot Co., Lamb-Weston, National Food Processors Association, 
  National Potato Council, Nestle USA, Oregon Potato Commission, 
  Pepperidge Farm, PepsiCo, Pet Food Institute, Procter & Gamble, 
  Ralston Purina, Tricon Global Restaurants, Welch's, Wm. Wrigley 
  Jr. Company, John F. McDermid, joint letter....................   184
Aluminum Association, Inc., statement and attachment.............   187
American Crop Protection Association; American Forest and Paper 
  Association; American Plastics Council; Biotechnology Industry 
  Organization; Chemical Manufacturers Association; Chemical 
  Specialties Manufacturers Association; Coalition for Truth in 
  Environmental Marketing Information; National Association of 
  Manufacturers; National Fisheries Institute; National Foreign 
  Trade Council; Soap and Detergent Association, New York, NY; 
  and U.S. Council for International Business, New York, NY; 
  joint statement and attachments................................   189
American Free Trade Association, Miami, FL, statement............   195
American Iron and Steel Institute, statement.....................   199
American Lands Alliance, Antonia Juhasz and Faith Campbell, 
  statement and attachments......................................   204
American Sugar Alliance, James Wm. Johnson, Jr., joint statement.   213
American Textile Manufacturers Institute, statement and 
  attachments....................................................   219
Association of International Automobile Manufacturers, Inc., 
  Arlington, VA, statement and attachment........................   221
Black, Edward J., Computer & Communications Industry Association, 
  and Pro Trade Group, joint statement...........................   264
Boyd, Robert T., Torrington Company, Torrington, CT, statement...   353
Brown, Larry R., Timken Company, Canton, OH, letter..............   349
Bunden, Kenichi, Floral Trade Council, Haslett, MI, statement....   284
Business Roundtable, statement...................................   228
Business Software Alliance, Robert W. Holleymann II, statement...   245
Campbell, Faith, American Lands Alliance, statement and 
  attachments....................................................   204
Center for International Environmental Law, David R. Downes; 
  National Wildlife Federation, Jake Caldwell; Sierra Club, San 
  Francisco, CA, Dan Seligman; World Wildlife Fund, David Schorr; 
  Friends of the Earth, Andrea Durbin; Natural Resources Defense 
  Council, Justin Ward; Greenpeace USA, Scott Paul; Defenders of 
  Wildlife, and Community Nutrition Institute, Rina Rodriguez; 
  American Lands Alliance, Antonia Juhasz; Consumer's Choice 
  Council, Cameron Griffith; Earthjustice Legal Defense Fund, San 
  Francisco, CA, Martin Wagner; Institute for Agriculture and 
  Trade Policy, Minneapolis, MN, Kristin Dawkins; and Pacific 
  Environment and Resources Center, Oakland, CA, Doug Norlen; 
  joint letter and attachment....................................   248
Center for Science in the Public Interest, Benjamin Cohen, 
  statement......................................................   257
Chocolate Manufacturers Association, McLean, VA, Stephen G. 
  Lodge, joint statement.........................................   259
Cohen, Benjamin, Center for Science in the Public Interest, 
  statement......................................................   257
Computer & Communications Industry Association, Edward J. Black, 
  joint statement................................................   264
Consumer Federation of America, Arthur S. Jaeger, statement......   267
Crawford, Bob, Florida Department of Agriculture & Consumer 
  Services, Tallahassee, FL, statement and attachments...........   287
DaimlerChrysler Corporation, statement...........................   268
Defenders of Wildlife, statement.................................   270
Distilled Spirits Council of the United States, Inc., statement..   272
Dresser-Rand Company, The Woodlands, TX, statement...............   275
Federal Express Corporation, Memphis, TN, M. Rush O'Keefe, Jr., 
  statement......................................................   279
Floral Trade Council, Haslett, MI, Kenichi Bunden, statement.....   284
Florida Department of Agriculture & Consumer Services, 
  Tallahassee, FL, Bob Crawford, statement and attachments.......   287
Grocery Manufacturers of America, Mary Sophos, statement.........   291
Harvey, Pharis J., International Labor Rights Fund, statement....   298
Hatano, Daryl, Semiconductor Industry Association, statement.....   343
Holleymann, Robert W., II, Business Software Alliance, statement.   245
Intellectual Property Committee, statement.......................   293
IBC, Inc., John F. McDermid, joint letter........................   184
International Labor Rights Fund, Pharis J. Harvey, statement.....   298
International Mass Retail Association, Arlington, VA, statement..   300
ITT Industries, White Plains, NY, Wingate Lloyd, joint statement.   303
J.C. Penney Company, Inc., and National Retail Federation, joint 
  statement......................................................   306
Jaeger, Arthur S., Consumer Federation of America, statement.....   267
Johnson, James Wm., Jr., United States Beet Sugar Association, 
  and American Sugar Alliance, joint statement...................   213
Judge, Steve, Securities Industry Association, statement and 
  attachments....................................................   338
Juhasz, Antonia, American Lands Alliance, joint statement and 
  attachments....................................................   204
Labor/Industry Coalition for International Trade, statement......   308
Libbey Inc., Toledo, OH, Arthur H. Smith, statement..............   311
Lloyd, Wingate, U.S. Chamber of Commerce, and ITT Industries, 
  White Plains, NY, joint statement..............................   303
Lodge, Stephen G., National Confectioners Association, and 
  Chocolate Manufacturers Association, McLean, VA, joint 
  statement......................................................   259
McDermid, John F., IBC, Inc., and Ad Hoc WTO Round Processed Food 
  Coalition: Bestfoods, Campbell Soup, ConAgra, General Mills, 
  Herbalife International, J.R. Simplot Co., Lamb-Weston, 
  National Food Processors Association, National Potato Council, 
  Nestle USA, Oregon Potato Commission, Pepperidge Farm, PepsiCo, 
  Pet Food Institute, Procter & Gamble, Ralston Purina, Tricon 
  Global Restaurants, Welch's, and Wm. Wrigley Jr. Company, joint 
  letter.........................................................   184
Micron Technology, Inc., Boise, ID, statement....................   314
National Confectioners Association, McLean, VA, Stephen G. Lodge, 
  joint statement................................................   259
National Retail Federation, and J.C. Penney Company, Inc., joint 
  statement......................................................   306
North Dakota Durum Wheat Farmers: Jerome Anderson, Ross, ND; 
  Marshall Craft, Stanley, ND; Louis Kuster, Stanley, ND; and 
  Curt Trulson, Ross, ND, statement..............................   316
O'Keefe, M. Rush, Jr., Federal Express Corporation, Memphis, TN, 
  statement......................................................   279
Pharmaceutical Research and Manufacturers of America, statement..   317
PPG Industries, Inc., Pittsburgh, PA, statement..................   323
Pro Trade Group, Edward J. Black, joint statement................   264
Quinn, Hon. Jack, a Representative in Congress from the State of 
  New York, statement............................................   328
Ranchers-Cattlemen Action Legal Fund (R-CALF), Columbus, MT: 
  Midland Bull Test, Columbus, MT, Leo R. McDonnell, Jr.; 
  Sullivan Kelley Farm, Meeker, CO, Kathleen S. Kelley; R-CALF, 
  Columbus, MT, John Lockie; R-CALF, Miles City, MT, Jack 
  McNamee; Herried Livestock Market, Inc., Herreid, SD, Herman 
  Schumacher; Open Spear Ranch, Melville, MT, Dennis McDonald; R-
  CALF, Melville, MT, Bill Donald; R-CALF, Big Timber, MT, Chuck 
  Rein; and R-CALF, Columbus, MT, John Patterson; joint statement   328
Rubber and Plastic Footwear Manufacturers Association, statement 
  and attachment.................................................   334
Safe Alternatives for our Forest Environment, Hayfork, CA, Bill 
  Welsch, letter.................................................   336
Securities Industry Association, Steve Judge, statement and 
  attachments....................................................   338
Semiconductor Industry Association, Daryl Hatano, statement......   343
Smith, Arthur H., Libbey Inc., Toledo, OH, statement.............   311
Sophos, Mary, Grocery Manufacturers of America, statement........   291
Timken Company, Canton, OH, Larry R. Brown, letter...............   349
Torrington Company, Torrington, CT, Robert T. Boyd, statement....   353
U.S. Chamber of Commerce, Wingate Lloyd, joint statement.........   303
U.S. Integrated Carbon Steel Producers: Bethlehem Steel Corp., 
  U.S. Steel Group, LTV Steel Co., Ispat Inland Inc., and 
  National Steel Corp., joint statement..........................   355
United States Beet Sugar Association, James Wm. Johnson, Jr., 
  joint statement................................................   213
U.S. Virgin Islands, Government of:
    Statement....................................................   357
    Belair Watch Corporation, Hampden Watch Company, Inc., 
      Progress Watch Co., Unitime Industries, Inc., and Tropex, 
      Inc., Joint statement......................................   363
Welsch, Bill, Safe Alternatives for our Forest Environment, 
  Hayfork, CA, letter............................................   336

 
 UNITED STATES NEGOTIATING OBJECTIVES FOR THE WTO SEATTLE MINISTERIAL 
                                MEETING

                              ----------                              


                        THURSDAY, AUGUST 5, 1999

                  House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:20 a.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON TRADE

                                                Contact: (202) 225-1721
FOR IMMEDIATE RELEASE

July 8, 1999

No. TR-13

Crane Announces Hearing on United States Negotiating Objectives for the 
                    WTO Seattle Ministerial Meeting

    Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on 
Trade of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on United States negotiating 
objectives for the upcoming World Trade Organization (WTO) Ministerial. 
The hearing will take place on Thursday, August 5, 1999, in the main 
Committee hearing room, 1100 Longworth House Office Building, beginning 
at 10:00 a.m.
      
    Oral testimony at the hearing will be from both invited and public 
witnesses. Invited witnesses will include Ambassador Susan Esserman, 
Deputy United States Trade Representative. Also, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.
      

BACKGROUND:

      
    The Uruguay Round was the eighth round or series of multilateral 
trade negotiations under the General Agreement on Tariffs and Trade 
(GATT). The agreements reached at the end of 1994 during the Uruguay 
Round were noteworthy in that they greatly expanded coverage of GATT 
rules beyond manufactured goods trade to include agricultural trade, 
services trade, trade-related investment measures, intellectual 
property rights, and textiles.
      
    One of the most visible accomplishments of this multilateral round 
was to establish the WTO to administer the GATT agreements and to 
settle disputes among WTO members. The Uruguay Round agreement also 
calls for the resumption of negotiations by the year 2000 to further 
liberalize trade in agriculture and services, as well as examine 
government procurement practices and enforcement of intellectual 
property rights. The negotiations will begin formally at the WTO 
Ministerial conference to be hosted by the United States in Seattle, 
Washington, from November 30 through December 4, 1999. It will be the 
largest trade event ever held in the United States and will bring 
together representatives of the 133 member countries of the WTO. The 
members will consider the procedures and substance of the so-called 
``built-in'' WTO agenda, as well as other issues such as transparency 
and possible reforms to the dispute settlement system.
      
    In announcing the hearing, Chairman Crane said: ``The Seattle 
Ministerial meeting represents a much needed opportunity for U.S. 
workers and businesses. It holds the promise of renewing momentum to 
reduce the continuing barriers facing U.S. agricultural, goods, and 
services exports. It is important that Congress monitor the development 
of United States negotiating objectives for the Seattle Ministerial, as 
well as the adequacy of logistical and other preparations for this 
historic event.''

FOCUS OF THE HEARING:

      
    The focus of the hearing will be to examine United States 
preparations for the Seattle Ministerial Meeting. Testimony will be 
received on specific objectives for the negotiations, the outlook for a 
successful meeting, and the anticipated impact of launching a new round 
of WTO negotiations on jobs, wages, economic opportunity, and the 
future competitiveness of U.S. manufacturers and service providers.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Pete Davila at (202) 225-1721 no later than the close 
of business, Monday, July 26, 1999. The telephone request should be 
followed by a formal written request to A.L. Singleton, Chief of Staff, 
Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515. The staff of 
the Subcommittee on Trade will notify by telephone those scheduled to 
appear as soon as possible after the filing deadline. Any questions 
concerning a scheduled appearance should be directed to the 
Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Subcommittee are required to submit 200 copies, along with 
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their 
prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade office, room 1104 
Longworth House Office Building, no later than Tuesday, August 3, 1999. 
Failure to do so may result in the witness being denied the opportunity 
to testify in person.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Thursday, 
August 19, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Trade office, room 1104 Longworth House 
Office Building, by close of business the day before the hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``HTTP://WWW.HOUSE.GOV/WAYS__MEANS/''.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                


    Chairman Crane. We are going to have a series of 
interruptions today with a heavy legislative schedule, and so I 
think it is essential that we commence. Our first panel 
consists of our colleagues, Jerry Weller, Xavier Becerra, Ralph 
Regula, Dan Miller and Jack Quinn.
    But before you fellows testify, I want to welcome everyone 
here this morning. The Trade Subcommittee meeting today is to 
consider the U.S. negotiating objectives for the WTO, World 
Trade Organization, ministerial meeting that will be held in 
Seattle, Washington, from November 30 until December 3 of this 
year, and the Trade Subcommittee intends to be out there for 
part of that ministerial meeting before heading to the Far 
East.
    Today, we intend to have an open give-and-take regarding 
what U.S. priorities should be for this important meeting, the 
first of its kind to be held in the United States. As my 
colleagues know, I am a strong supporter of the WTO. I think I 
can speak for most of my colleagues here when I say that we are 
fully supportive of achieving a successful launch of a new 
round of world trade negotiations in Seattle.
    A consensus seems to have emerged among our trading 
partners that the new round should be concluded within 3 years, 
by the end of 2002. While comfortable with the shorter 
timeframe, I recognize that these will be tough negotiations 
given the intractable problems that the U.S. and other 
countries have with Europe and Japan in the agriculture and 
other sectors.
    Since its establishment in 1995, the WTO has functioned 
effectively, aiding our efforts to ensure that job-creating 
U.S. exports are receiving fair access to 134 nations around 
the world. As the world's greatest exporter, the best engine 
for our impressive economic growth has been expanding 
international trade under the oversight of the WTO.
    Almost 12 million U.S. jobs are supported by exports. When 
we increase exports in particular, we are increasing the number 
of high-wage, high-tech jobs in cities and towns across 
America.
    The U.S. wins with fair rules that are promoted by an 
institution that has the moral authority to ensure that they 
are followed. Americans instinctively understand principles of 
fair play, and I believe overall support for the WTO will build 
as understanding grows about how this institution promotes 
economic growth worldwide. The high visibility of the meeting 
in Seattle creates a great opportunity to expand appreciation 
of this important institution.
    The dispute settlement mechanisms of the WTO have in 
general worked in our favor. Of the cases brought by the U.S., 
we have won or favorably settled 22 and lost only two. We must 
assure, however, that our trading partners, particularly the 
European Union, come into compliance quickly when the WTO rules 
against them. Despite our tremendous record in the WTO, I am 
very concerned about the recent decision against the U.S. 
foreign sales corporation provision. We will hold a hearing in 
the Ways and Means Committee in the fall to discuss this issue.
    With that, I want to recognize the Ranking Member of the 
Subcommittee and thank him for helping us assemble such a 
distinguished set of witnesses for our discussion today.
    Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman. And before I start with 
my opening statement, I would like to apologize on behalf of I 
would think all the Members and surely those on the Democratic 
side. This hearing as it turns out is being held at the same 
time as the floor action on the tax bill, and so some of us 
will be ducking in and out, and I will be leaving after this to 
participate in the debate and come back as soon as I can.
    And, again, many of the Members will be in and out and we 
are sorry that this hearing is being punctuated. There is also, 
for Democrats, a third event going on at this very same time 
and as I look around, it is only Xavier and I who are not 
there.
    Mr. Chairman, thank you for calling today's hearing, on the 
important subject of the upcoming WTO ministerial meeting to be 
held in Seattle later this year. It promises to be a historic 
situation marking the launch of the next round of world trade 
negotiations. It will be the largest trade event ever held in 
and hosted by the United States.
    In any major undertaking, the first steps are often 
critical ones. They define the shape of the endeavor. They give 
direction to the task at hand. This will be especially so in 
Seattle as the 134 countries initiate a new effort to develop 
rules that will govern the course of trade in the next 
millennium. As host of the ministerial, the United States will 
have an opportunity, indeed a responsibility, to place its mark 
on the new round of trade negotiations. It is of the utmost 
importance, therefore, that the administration, in consultation 
with Congress, clearly identify its goals for the new round and 
state those goals definitively in Seattle.
    I know our witnesses today will describe a range of issues 
that they consider to be priorities for the ministerial meeting 
and I look forward to hearing those views. In the interest of 
helping to get the discussion going, let me suggest three areas 
that should be high on our negotiators ``to do'' list at the 
ministerial and throughout the next round.
    First, the administration should use the ministerial and 
other meetings to emphasize the importance of full compliance 
by Members with their WTO obligations. The mechanism for 
pursuit of that goal should continue to include the WTO's trade 
policy review mechanism, TPRM. It should be bolstered by 
requiring governments to set target dates for coming into 
compliance with particular commitments and make nonconfidential 
versions of information collected during the TPRM process 
available to members in dispute settlement proceedings.
    Second, the United States should have as a principal goal 
in the next round the development of rules concerning 
transparency in policies and practices affecting foreign 
producers ability to get goods and services to customers. This 
should include rules and the publication of laws, regulations, 
rules and administrative and judicial decisions. Further, the 
United States should seek rules requiring defendant governments 
in dispute settlement proceedings to cooperate in the 
disclosure of evidence of government actions except where there 
is a clear threat to national security.
    Third, the ministerial and the next round of negotiations 
should be the occasion for recognizing--and many of you have 
heard me say this before--that trade policy is more than just 
about lowering tariffs and eliminating traditional nontariff 
barriers, as important as that is. As the world economy has 
become more integrated, and indeed it has, issues once 
considered to be beyond the scope of trade policy are now very 
much a part of trade dynamics. Those issues include the ways in 
which countries regulate or fail to regulate their labor 
markets.
    Accordingly, the United States should, among other things, 
support negotiating objectives that include the development of 
rules that ensure adherence to trade and labor standards.
    Next, support the establishment of a working group in the 
WTO on the impact of labor market standards on trade.
    And fourth, support development of ongoing institutional 
linkages between the WTO and ILO on trade labor market issues.
    I would welcome comment on these suggestions during today's 
hearings, and I look forward to hearing the proposals 
specifically coming from our witnesses. Thank you.
    Mr. Chairman, if you would excuse me for a few minutes. If 
they will call me in turn on the floor, I will be right back.
    [The opening statement of Mr. Ramstad follows:]

Statement of Hon. Jim Ramstad, a Representative in Congress from the 
State of Minnesota

    Mr. Chairman, thank you for calling this important hearing 
today to discuss our negotiating objectives at the upcoming 
Seattle Ministerial Meeting.
    It is critical that we prepare an aggressive, strategic 
plan for achieving our objectives at the upcoming Ministerial. 
Seattle will host the largest trade event ever held in the 
U.S., and we must ensure that it is also the most successful 
for achieving greater trade liberalization for American 
workers, consumers, manufacturers, farmers and service 
providers.
    I want to pay special attention to market access for U.S. 
agriculture commodities and value-added foods. We all know the 
current problems that face farmers, but the truth is that 
American farmers have been disproportionately hit by foreign 
trade barriers for many years--despite being the largest single 
positive contributor to the US trade balance!
    Agriculture is a difficult sector to address, but it is 
part of the ``build-in'' agenda and deserves significant 
attention. We must make sure not only that these discussions 
begin. We must also ensure they are substantive, aggressive and 
fruitful. American farmers deserve our best effort.
    We will never accomplish our goals if nations are allowed 
to cling to old, market-distorting, protection-driven programs 
and practices. Countries with the most blatant and arduous 
trade barriers for U.S. agriculture exports, such as the 
European Union, will fight any and all efforts to make real 
progress in knocking down these unfair, anti-trade practices. 
They will try to protect them and keep them in the ``blue 
box.'' This cannot be tolerated!
    We must also structure our approach at these meetings to 
set ourselves up for the greatest gains for agriculture as 
possible. I believe we should adhere to the Uruguay Round 
framework, which provides for a comprehensive, formula-based 
negotiation without exceptions. We should pursue conclusion 
with a single undertaking encompassing all sectors.
    Mr. Chairman, thanks again for calling this hearing. I look 
forward to hearing from our witnesses today about the necessary 
elements for launching a comprehensive, successful round of 
multilateral trade negotiations in Seattle.
      

                                


    Chairman Crane. All right. Thank you, we will proceed in 
the order I presented you.
    Mr. Weller.

 STATEMENT OF HON. JERRY WELLER, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF ILLINOIS

    Mr. Weller. Thank you, Mr. Chairman. Thank you for the 
opportunity to testify today. I would like to reintroduce to 
the Trade Subcommittee an issue that I brought before the Full 
Committee during the markup of the Financial Freedom Act of 
1999. This issue involves the loss of 20,000 American film 
industry jobs from runaway film production. I want to raise 
this issue to urge that our domestic film industry be given a 
seat at the table at the WTO talks in Seattle to address the 
cultural content issue and its relationship to runaway film 
production.
    The problem with runaway film production is a growing 
national issue which directly impacts thousands of American 
workers from New York to Florida, Washington to California, and 
Illinois to Texas. During the Committee discussion on the 
Financial Freedom Act, I offered an amendment which I later 
withdrew to introduce a wage-based tax credit and creative 
financing tax incentives to counter loss of film production 
jobs to Canada.
    Remember the film ``Coming to America''? Unfortunately, it 
seems that filmmaking jobs are now running from America. In 
fact, a one-time Presidential candidate once referred to that 
``giant sucking sound'' of jobs heading south. Well, that giant 
sucking sound is really the sound of 20,000 film industry jobs 
heading north to Canada.
    A recent study commissioned by the Directors Guild of 
America and the Screen Actors Guild shows that in 1993 over $10 
billion in economic activity was lost to runaway economic film 
and television production. This is more than five-fold since 
the beginning of this decade. In the last 4 years alone, Texas 
has shown a 31 percent decrease in direct production revenues, 
while my State of Illinois is down nearly 20 percent. 
Nationally, this has resulted in a loss of 20,000 jobs.
    In looking at the small businesses and jobs lost by this 
phenomenon, we are not just talking about directors and actors; 
rather, we are talking about the small businesses that support 
the film industry and make America great. These include 
caterers, hotel and motel operators, restaurants and bars, 
rental equipment businesses, electricians, set construction 
workers and many others involved in this vitally important and 
culturally indigenous economic activity. Over the years this 
industry has been a leading exporter and driver of small 
business job creation.
    Mr. Chairman, this is a constituent issue which we should 
take seriously. This is also a constituent issue for you and 
other Members of the Subcommittee. I come from a district which 
includes Joliet, Elwood and Calumet City, the home of Joliet 
Jake and Elwood Blues, which I often refer as the ``Blues 
Brothers'' district. Last year, my constituents and I were 
stunned when they decided to make the film ``Blues Brothers 
2000,'' they chose to film it in Toronto rather than Chicago. 
Even more embarrassing was the fact that the Canadian 
filmmakers were calling the Chicago Film Commission to ask them 
how to best portray Chicago.
    With my statement I have included the Directors Guild and 
Screen Actors Guild study explaining the reasons why the film 
industry is moving out of the country, and they have concluded 
that one of the many reasons is the tax incentives offered in 
other countries like Canada, Australia and the United Kingdom, 
which we do not have here in the United States. Canada alone 
offers Federal and provincial tax credits between 22 and 46 
percent of labor costs. These incentives are enough to make any 
business consider relocating, particularly when savings from 
filming in Canada can mean a dollar savings overall.
    The United States shouldn't be put in a competitive 
disadvantage by tax incentives offered abroad. Rather we need 
to level the playingfield for the small businesses impacted by 
the runaway production and create jobs in America, for 
Americans.
    Related to this is an issue of Canadian cultural content 
policy. The Canadian government has given certain ``cultural 
industries'' special treatment. This policy has been 
implemented in large part by Canadian legislation as well as 
some foreign trade issues such as tariffs, taxes, foreign 
investment restrictions and content requirements that 
discriminate against U.S. cultural industries. Canada has 
consistently protected its cultural industries.
    This has been discussed and negotiated in the past. I 
believe that it must be addressed in Seattle with the backdrop 
of the issue of runaway film production. We have a situation in 
which thousands of U.S. jobs are being lured to Canada and 
other countries through favorable tax treatment, while at the 
same time cultural policies established by the Canadians and 
others discriminate against U.S. interests thereby creating a 
double hit to industries like our domestic film production.
    Mr. Chairman, even if the problem of runaway production had 
not become so great, the Canadian insistence on maintaining 
cultural content rules and regulations ought to be put on the 
table at the Seattle WTO talks. However, simple fairness 
requires response by the United States to the increasing 
efforts by Canada to attract production away from the United 
States. So long as these efforts continue, the U.S. must 
address the Canadian cultural content rules. Canada cannot 
unilaterally decide to invite in our productions jobs, but 
close the door on American domestic productions.
    Mr. Chairman, with the problem of runaway film production 
in mind, I ask that the issue of cultural content be placed on 
the table and addressed at the WTO talks in Seattle. Let's be 
honest about this issue of runaway production. It is all about 
jobs. The average film industry worker earns $26,000 a year. 
This Congress has given great attention, and the right kind of 
attention, to the loss of 10,000 steel industry jobs over the 
past year. The film industry has lost over 20,000 jobs in the 
past year, and most of those jobs have emigrated north. It is 
time to address this problem and save U.S. jobs.
    Mr. Chairman, thank you for the opportunity to testify. I 
look forward to addressing any questions you may have.
    [The prepared statement follows:]

Statement of the Hon. Jerry Weller, a Representative in Congress from 
the State of Illinois

    Mr. Chairman,
    Thank you for this opportunity to testify here today. I 
want to reintroduce to the Subcommittee an issue that I brought 
before the full Committee during the markup of the Financial 
Freedom Act of 1999. The issue is the loss of 20,000 American 
film industry jobs from runaway film production. I want to 
raise this issue to urge that our domestic film industry be 
given a seat at the table at the WTO talks in Seattle to 
address the cultural content issue and its relationship to 
runaway film production.
    The problem with runaway film production is a growing 
National issue which directly impacts thousands of working 
Americans from New York to Florida; Washington to California, 
Illinois to Texas. During the committee discussion on the 
Financial Freedom Act, I offered an amendment to introduce a 
wage based tax credit and creative financing tax incentives to 
counter the loss of film production jobs to Canada.
    Remember the film ``Coming to America?'' Unfortunately, its 
seems that film making jobs are now running from America. In 
fact, a one time Presidential candidate once referred to that 
giant sucking sound of jobs heading south--well that giant 
sucking sound is really the sound of 20,000 film jobs heading 
north to Canada.
    A recent study commissioned by the Director's Guild of 
America and the Screen Actors Guild shows that in 1998 over $10 
billion was lost to runaway economic film and television 
production. This is more than fivefold since the beginning of 
the decade. In the last four years, Texas has shown a 31% 
decrease in direct production revenues, while my state Illinois 
is down nearly 20%. This has resulted in a loss of 20,000 jobs 
nationally.
    In looking at the small businesses and jobs lost by this 
phenomena, we are not just talking about directors and actors, 
rather we are talking about the small businesses that support 
the film industry and make America great. This includes: 
caterers, hotel and motel operators, restaurants and bars, 
rental equipment businesses, electricians, set construction 
workers and many others involved in this vitally important and 
culturally indigenous economic activity. Over the years, this 
industry has been a leading exporter and driver of small 
business job creation.
    Mr. Chairman this is a constituent issue which we should 
take seriously. This is a constituent issue for you too. I come 
from a district which includes Joliet, Elwood and Calumet City, 
the home of Joliet Jake and Elwood Blues, which I often refer 
to as the ``Blues Brothers'' district. Last year, my 
constituents and I were stunned when they decided to make the 
film ``Blues Brothers 2000,'' they choose to film it in Toronto 
rather than Chicago. Embarrassing was the fact that the 
Canadian filmmakers were calling the Chicago film commission to 
ask them how to best portray Chicago.
    With my statement, I have included the Directors Guild and 
Screen Actors Guild study explaining the reasons why the film 
industry is moving out of the country, and they have concluded 
that one of the main reasons is the tax incentives offered in 
other countries like Canada, Australia and the U.K. which we do 
not have in the United States. Canada alone offers federal and 
provincial tax credits of between 22% and 46% of labor costs. 
Those incentives are enough to make any business relocate. 
Particularly when savings from filming in Canada can mean a 
dollar savings overall.
    The United States should not be put at a competitive 
disadvantage by tax incentives offered abroad. Rather we need 
to level the playing field for the small businesses impacted by 
runaway production and create jobs in America, for Americans.
    Related to this there is an issue of Canadian cultural 
content policy. The Canadian Government has given certain 
``cultural industries'' special treatment. This policy has been 
implemented in large part through Canadian legislation, as well 
as some foreign trade through tariffs, taxes, foreign 
investment restrictions and content requirements that 
discriminate against U.S. cultural industries. Canada has 
consistently protected its cultural industries.
    This has been discussed and negotiated in the past. I 
believe that it must be addressed in Seattle with the backdrop 
of the issue of runaway film production. We have a situation in 
which thousands of U.S. jobs are being lured to Canada and 
other countries through favorable tax treatment. While at the 
same time, cultural policies established by the Canadians and 
others discriminate against U.S. interests thereby creating a 
double hit to industries like domestic film production.
    Mr. Chairman, with the problem of runaway film production 
in mind, I ask that the issue of cultural content be placed on 
the table and addressed at the WTO talks in Seattle. Lets be 
honest about this issue of runaway production--its all about 
jobs. The average film industry worker earns $26,000 a year. 
This Congress has given great attention to the loss of 10,000 
steel industry jobs over the past year. The film industry has 
lost 20,000 jobs and most of those jobs have emigrated north. 
It is time to address the problem and save U.S. jobs.
    Thank you Mr. Chairman.
      

                                


    Chairman Crane. Thank you.
    Mr. Becerra. Wait. One thing before you start, Xavier. Try 
and keep your oral testimony to 5 minutes or less and all 
written statements will be made a part of the permanent record.

STATEMENT OF HON. XAVIER BECERRA, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Becerra. Thank you, Mr. Chairman, and thank you to the 
Members of the Subcommittee, my fellow Subcommittee Members. 
Let me also begin by thanking my colleague, Mr. Weller, for 
having raised this issue of runaway productions as we start to 
develop and negotiate objectives for the upcoming World Trade 
Organization ministerial in Seattle.
    This issue may not have quite the direct connection that 
you might think in terms of the ministerial that we are about 
to embark upon in Seattle, but it certainly does relate to 
trade. Jobs are leaving communities across the Nation and 
production companies are choosing more and more to film outside 
not just of California, but outside of this country. Whether it 
is New York, North Carolina, Illinois, Washington State, Texas, 
Oregon, Maryland, Michigan, Wisconsin, all of these States 
along with California and others have been able to attract 
substantial production in the past. But unfortunately we are 
seeing more and more that these sites are being abandoned for 
places abroad.
    Mr. Weller mentioned that already we can talk about the 
20,000 jobs that have been lost, some $10.3 billion in economic 
loss to the United States in 1998 alone as a result of these 
fleeing productions.
    Now, we are not talking about the movie stars who make the 
million dollar salaries. We are talking about the ordinary 
working people who build sets, provide lighting, cater food, 
operate hotels, and work in other capacities directly or 
indirectly in support of production of movies and television 
programs. The average film industry worker makes about $26,000 
a year.
    Although a number of factors have caused productions to 
leave the United States, it is clear that government tax 
credits by other countries do have an impact. In Canada, since 
1996, we have seen that nation offer to those production 
companies that come into their country 11 percent tax credits 
for labor costs and production costs. When you add up what the 
provincial governments also provide you have somewhere between 
22 percent to 46 percent savings of their labor expenditures 
for production companies going into Canada. There are other 
things they do as well. They provide duty free import of stage 
props, special effects equipment, other things that give these 
production companies a rather large break.
    Now, I raise this issue today because, as Mr. Weller has 
said, there is a disconnect, perhaps a little, between what the 
U.S. is accepting in terms of Canadian insistence upon its 
cultural content laws while at the same time it is aggressively 
targeting U.S. jobs. For instance, only 40 percent of films 
aired on Canadian television can be produced in other 
countries. The Disney Channel and HBO are not allowed to have 
their own channels in Canada due to laws designed to protect 
Canadian competitors.
    At the same time, it is not uncommon for Canadian 
government officials to fly to Los Angeles, New York, and other 
U.S. production centers to attend events and to meet directly 
with film and television producers to advertise their incentive 
structure. For example, representatives of Revenue Canada--that 
is the Canadian IRS--attended a recent ``Location 99'' show in 
Los Angeles in order to promote Canadian incentives.
    I know the Office of U.S. Trade Representative will be 
testifying today and we are looking forward to addressing this 
issue with her a little further and we encourage Ambassador 
Barshefsky to try to limit this content exception. We know that 
she has tried in the past to try to eliminate it and we 
appreciate that.
    In 1996, the motion picture and television industry made 
$27.5 billion in contributions simply to the State of 
California's economy. If you add up the rest of the other 49 
States you will find that the impact of this industry is 
tremendous. Canada is now the second largest exporter of 
television programming, following the United States. In 1998, 
Toronto became the third busiest production center in the world 
after Los Angeles and New York. And Vancouver now ranks fourth.
    If we do not engage on this issue, we will find that we 
have irreversibly and irretrievably lost jobs in this country 
because we have failed to act in a timely manner. We certainly 
don't want to have to constantly go to the floor of the House 
to do what we did yesterday to try to support the steel 
industry.
    I would hope that we would move quickly. While we may not 
be dealing directly with this issue through the ministerial in 
Seattle, it is a good time to talk about cultural content and 
other factors that do in the end cost U.S. jobs.
    Mr. Chairman, I thank you and the Members of this 
Subcommittee for the attention.
    [The prepared statement follows:]

Statement of the Hon. Xavier Becerra, a Representative in Congress from 
the State of California

    Let me begin by thanking Chairman Crane, Ranking Democrat 
Levin, and my fellow Subcommittee Members for affording me the 
opportunity to testify here this morning. I want to also 
commend my colleague Mr. Weller, for raising the issue of 
runaway productions as we start to develop our negotiating 
objectives for the upcoming World Trade Organization 
Ministerial in Seattle.
    Jobs are leaving communities across the nation as 
production companies choose to film abroad rather than filming 
in California, New York, North Carolina, Illinois, Washington 
state, Texas, Oregon, Maryland, Michigan, or Wisconsin, as they 
had in the past. In 1998, the U.S. suffered a $10.3 billion 
economic loss because of productions moving to other countries. 
Last year runaway productions accounted for the loss of 20,000 
U.S. jobs.
    It is important to note that job loss resulting from 
runaway productions affects ordinary working people who build 
sets, provide lighting, cater food, operate hotels, wait tables 
in restaurants and bars, and work in other capacities that 
directly and indirectly support the production of movies and 
television programs. The average film industry worker makes 
about $26,000 a year.
    Although a number of factors have caused productions to 
leave, it is clear that government tax credits in other 
countries have played an integral role in the exodus of U.S. 
production companies. Countries like Canada recognize the 
benefits that U.S. movie and television production companies 
can bring to local economies. Since 1996 Canada has offered 
federal rebates that equal 11% of spending for all Canadian 
labor involved in a production. Many provincial governments 
supplement these incentives, creating a total savings of 22% to 
46% on Canadian labor expenditures. Moreover, as of January 
1998, wardrobe, stage props, special effects equipment, and 
photographic equipment, of U.S. origin, used in the production 
of feature films, t.v. movies, or t.v. series are imported 
duty-free.
    I raise this issue today because there is a disconnect 
between the U.S. accepting Canada's insistence upon its 
cultural content laws while at the same time it aggressively 
targets U.S. jobs. For instance, only 40% of films aired on 
Canadian television can be produced in other countries. The 
Disney Channel and HBO are not allowed to have their own 
channels in Canada due to laws designed to protect Canadian 
competitors. At the same time, it is not uncommon for Canadian 
government officials and film commission representatives to fly 
to Los Angeles, New York City, or other U.S. production centers 
to attend events or meet directly with film and television 
producers to advertise their incentive structure. For example, 
representatives of Revenue Canada (the Canadian IRS) attended a 
recent ``Location 99'' show in Los Angeles in order to promote 
Canadian incentives.
    The Office of the U.S. Trade Representative will be 
testifying in the next panel and I look forward to further 
developing the discussion on cultural content laws at that 
time. Three years ago the Trade Representative attempted to 
persuade Canada to drop cultural content restrictions, but 
unfortunately did not succeed. I encourage Ms. Barshefsky to 
redouble her efforts in this endeavor. In the past, the issue 
of cultural exemptions was more narrowly focused on whether a 
clear violation of free trade should be granted an exception. I 
think that the answer was ``NO'' then, and I think it is ``NO'' 
today.
    However, the unfairness of the exception is even more 
dramatic today. The recent study commissioned by the Directors 
Guild of America and Screen Actors Guild demonstrates how the 
runaway productions problem has escalated since the last round 
of trade talks. Consequently, the U.S. must fight harder than 
ever to eliminate the cultural content restriction and open up 
the Canadian markets to all productions.
    In 1996, the motion picture and television industry made a 
$27.5 billion contribution to California's economy--$14.2 
billion in economic activity was generated in Los Angeles 
alone. The industry is integral to sustaining our economic 
prosperity not only due to jobs created by the entertainment 
industry but also because it spurs growth in related sectors 
such as the fashion and apparel industry, furniture 
manufacturing, multi-media industry, and tourism.
    Canada is now the second-largest exporter of television 
programming, following the U.S. In 1998, Toronto became the 
third busiest production center in the world, after Los Angeles 
and New York, with Vancouver ranking fourth. If we do not 
engage on this issue, we will find that we have irretrievably 
lost U.S. jobs because we failed to act in a timely manner.
      

                                


    Chairman Crane. Thank you. Mr. Regula.

 STATEMENT OF HON. RALPH REGULA, A REPRESENTATIVE IN CONGRESS 
                     FROM THE STATE OF OHIO

    Mr. Regula. Thank you, Mr. Chairman. And I will summarize 
my remarks. I think there is a lot of synergy between what is 
happening on the floor today and this hearing, because we will 
hear a lot of speeches during the debate that we have a 
surplus, the economy is strong, and therefore we should give 
some of the money back to the taxpayers. That strong economy is 
predicated on both free and fair trade. And I think you might 
call this a quality of life hearing as much as a trade hearing, 
because if we are to have a strong economy prospectively and 
generate all of those surpluses we are hearing about out in the 
future, it is going to have to depend on a strong economy with 
jobs, with an opportunity to trade. And obviously a free flow 
of trade internationally is a very strong bulwark against the 
reduction in the economy.
    I just noticed in the paper today that South America 
generally has had some diminution in their economy overall, and 
that will affect us, as we found out with Asia when the Asian 
economy got sick and we got the flu in a backhanded way.
    So I commend you for what you are doing. But let me say 
also that we put a lot of effort into the Uruguay round. I was 
involved as cochairman of the Steel Caucus in getting 
protection of our antidumping laws, and the antidumping laws go 
to the question of fairness as well as the freedom in our trade 
relationships.
    I am concerned that there is a group in the WTO that wants 
to reopen the question of antidumping rules and thereby weaken 
the U.S. trade laws. I commend Ambassador Barshefsky for 
ensuring that the WTO working group on the Interaction between 
Trade and Competition Policy focuses its attention on 
significant, well-defined international competition policy and 
not include trade remedy instruments.
    I would just have one simple message as they look at the 
WTO rules: leave the dumping rules alone. If anything, 
strengthen them, but do not tamper with them and do not respond 
to some countries that want greater access to our country. We 
had a debate last night on the steel issue and obviously we 
heard that over and over again that there have been predatory 
practices that tend to circumvent our antidumping laws.
    We do have an enormously open marketplace, and I think we 
are a model for the rest of the world, but as part of this we 
need protection against unfair trade practices. I certainly 
advocate WTO consistent reforms to the trade laws, including 
reforming the injury standard for section 201 cases to the 
injury standard provided in WTO's safeguards agreement. The 
U.S. currently has a higher injury standard than is required by 
WTO rules. This change would allow industry and labor to use 
section 201 more effectively.
    We constantly hear the statement that the industry and 
labor should use the laws that we have rather than seek 
additional protection that perhaps goes in excess of our 
current law. I have to smile, I see President William 
McKinley's picture up here, who was a former Chairman of Ways 
and Means, and he built his first run as a Member of this body 
on the protective tariff and that was the keystone of his first 
campaign. And yet if you read the speech in Buffalo after he 
had been inaugurated for a second term and he said we are in a 
world trade situation and we have to open markets and we have 
to trade with the world. So he really did a substantial 
reversal on the issue of trade.
    Those statements he made in Buffalo are certainly very 
relevant today and I think you have an enormous challenge as a 
Subcommittee to give recommendations to our negotiators in 
Seattle to ensure that our industry and our Nation is in a free 
trade environment, but also a fair trade environment. And I 
thank you for the opportunity to be here.
    [The prepared statement of Mr. Regula follows:]

Statement of the Hon. Ralph Regula, a Representative in Congress from 
the State of Ohio

    Mr. Chairman and Members of the Trade Subcommittee, thank 
you for the opportunity to present testimony regarding the U.S. 
negotiating objectives for the WTO Seattle Ministerial Meeting. 
As you are well aware, the Seattle Ministerial will convene 
this November in order to launch and set the negotiating 
parameters for a new ``round'' of multilateral trade 
negotiations.
    U.S. Trade Representative Charlene Barshefsky testified 
earlier this year before the Commerce, Justice, State 
Appropriations Subcommittee that the agenda for these meetings 
should include such issues as broad reductions in tariffs, the 
elimination of export subsidies and further reductions in 
trade-distorting domestic supports linked to production. I 
further understand that these trade talks will focus more 
directly on reshaping WTO rules on agriculture, services and 
intellectual property. The question remains, what other issues 
will be added to the list of items subject to negotiation.
    While I support market opening efforts, I would like to 
stress that maintaining free trade depends on maintaining fair 
trade. In this regard, I believe that it is imperative that the 
United States hold firm against reopening the WTO's antidumping 
rules.
    As a veteran of the Uruguay Round negotiations, I remind 
everyone that the current WTO antidumping rules were agreed to 
only with great difficulty. I personally participated in many 
meetings and worked closely with industry, labor and 
administration officials to ensure that U.S. trade laws were 
not adversely impacted or significantly weakened during the 
Uruguay Round.
    I am concerned that there continues to be a group of 
countries that seek to reopen the WTO antidumping rules and 
call for a weakening of the U.S. trade laws. Most recently, 
there were efforts in the WTO Working Group on the Interaction 
between Trade and Competition Policy to weaken our trade laws. 
I commend the U.S. Trade Representative for ensuring that this 
working group focuses its attention on significant, well-define 
international competition policy issues that do not include 
trade remedy instruments.
    Effective antidumping rules are a cornerstone of an open 
market policy. The United States now has one of the most open 
markets in the global marketplace. But, there must be some 
protection against unfair trading practices if we are going to 
make our markets available to all our trading partners. We 
still face many trading partners that have not reciprocated by 
fully opening their markets. So it is only fair that our 
domestic industries have some protection against dumped and 
subsidized imports.
    A case in point is the recent steel import surge that 
occurred in 1998, with imports still continuing at higher than 
average rates in 1999. The U.S. industry and labor have sought 
redress through our unfair trade laws and as these cases move 
through the process, we are now seeing some relief provided to 
slow the rate of dumped and subsidized steel imports. But, even 
under expedited procedures, the process has been long and 
costly for domestic steel manufacturers and American steel 
workers. For this reason alone, it is imperative that our U.S. 
trade laws are not weakened.
    I would further advocate several WTO-consistent reforms to 
the U.S. trade laws, including conforming the injury standard 
for Section 201 cases to the injury standard provided in the 
WTO Safeguards Agreement. The U.S. currently has a higher 
injury standard. This would allow industry and labor to use 
Section 201 more effectively to counter import surges. I also 
support the provisions of H.R. 1505 introduced by Rep. Phil 
English which would strengthen our trade laws in a manner 
consistent with our international obligations.
    I would like to close by saying that there have been no 
major problems with WTO Members' implementation of the 
antidumping agreement, and certainly non that justify reopening 
the agreement itself. While continued monitoring of how the 
Uruguay Round rules are being implemented makes sense, that is 
very different from re-negotiating those rules. The United 
States should be very clear about this distinction, and should 
be careful not to agree to anything under the 
``implementation'' rubric that will in practice lead to 
reopening the antidumping agreements.
    Thank you again for the opportunity to testify before the 
Subcommittee regarding the importance of maintaining strong and 
effective U.S. trade laws as a way to ensure that there is 
truly a ``level playing field'' as we work to open more markets 
throughout the world.
      

                                


    Chairman Crane. We thank you, and harking back to the 
McKinley example, McKinley pushed through the most 
protectionist tariff measure in the history of this country in 
1890 and that brought on what was called the ``Panic of '93,'' 
Grover Cleveland took the blame for that and he was not 
responsible for that stupid piece of legislation and he began 
immediately dismantling it and made the observation at the time 
that when you put those walls around the country, you are 
inflicting the greatest injury on that man who earns his daily 
bread with the sweat of his brow.
    Now, our good friends on the other side of the aisle are 
ones who have that great free-trade tradition throughout their 
history until post World War II. We hope they will start coming 
back to the fold. And Republicans learned the hard way as 
McKinley did. But we are lifting the blinders too.
    Mr. Neal. Mr. Chairman, I would hope that you would point 
out what party Mr. McKinley belonged to.
    Chairman Crane. Republican. And Cleveland was a good free-
trade Democrat.
    My colleague Dan Miller is our next witness.

STATEMENT OF HON. DAN MILLER, A REPRESENTATIVE IN CONGRESS FROM 
                      THE STATE OF FLORIDA

    Mr. Miller. Thank you, Mr. Chairman. One of our major goals 
as we approach the negotiations in Seattle is to open up 
markets and bring down barriers to our products, especially for 
our farmers around the world. But when we approach this, we 
need to have clean hands. If we are asking other countries to 
open their products, we cannot be protective of our products 
and we have one that stands out like a sore thumb and that is 
the sugar program, because that is a very heavily protected 
program in this country.
    It is designed where the Federal Government forces the 
price of sugar to be about four times the world price. The 
price of sugar in the United States is about 23 cents a pound. 
The world price according to the paper this morning is about 6 
cents a pound. This is very much an anti-free-market program 
that is due to expire in 2002, so we need to make sure that it 
is not allowed to continue certainly past that date.
    Let me briefly describe the program. The program is 
designed, since we cannot grow enough sugar in the United 
States we must import some sugar, that we control the total 
supply and force the price up. And what the Federal Government 
does is through a nonrecourse loan program, and the loan 
program is in the 18- to 22-cent range, depending on the type 
of sugar, and we cannot lose any money on this nonrecourse 
loan, they have to maintain a price above 22 cents. That is the 
reason the price stays at 23 cents a pound approximately. And 
we have a quota system with countries--this is a very strange 
program--so we have 40 countries in the world that are allowed 
to sell sugar to the United States. Now, 10 of these countries 
cannot each grow enough sugar for their own consumption. And it 
is amazing, big countries that grow a large amount of sugar 
such as Australia, they sell it to everybody in the world for 6 
cents a pound but not to the United States. They sell it to us 
for 23 cents a pound. It makes no economic sense.
    And then we have 10 countries that cannot even grow enough 
for their own consumption and they are buying it from countries 
like Australia and then selling it to us and making this 
profit. It is a strange program and does not belong in our free 
enterprise system in this country. It is very much 
anticonsumer. The GAO study shows the cost of this program as 
at least $1 billion a year. It kills jobs in this country. Let 
me describe some of the jobs that are hurt.
    First of all, refineries. Sugar refineries cannot get 
enough sugar and they have been closing for the past decade 
because of this program. We have lost over 10 sugar refineries. 
These are good high paying union jobs, by the way. But we have 
the users of sugar. One is Bob's Candies down in Georgia. It is 
a candy cane company where sugar is a major cost of its 
production. It has to pay the 23 cents for its sugar, but its 
competitors in Canada only pay 6 cents for sugar. It cannot 
compete. It is having to shift its jobs overseas to be able to 
be competitive in the sugar cane business. This is a company 
that has been around for three generations.
    In yesterday's Hill Magazine, there was a case in Michigan, 
Congressman Dingell's district, of a company that is a $35 
million a year company with 60 employees and it was importing 
some type of sugar syrup from Canada and the trade people say 
you are importing that because all you want is the sugar out of 
it. Well, all they are going to do is shut down that company 
and move those jobs from Detroit.
    This is very much an antijob program and anti-free-market 
program. It is an embarrassment really to us I think because we 
have had articles in Time Magazine and Reader's Digest and the 
``Fleecing of America'' on television explaining how we allow 
this to continue. And if we are going to be people that believe 
in the free market system, we need to make sure that we say, 
hey, we are willing to allow all of our products to compete in 
the world market, and if we are going to expect Canada and 
Japan and China and other ones to come to the table and to 
negotiate in the same way with clean hands.
    So I say we need to have clean hands when we negotiate and 
we need to make sure that as this program expires in 2002 we 
don't allow it to be reauthorized, because it is going to be 
difficult for our negotiators to be in there seeking a fair 
deal. And I would like to submit my official statement for the 
record and also a recent GAO report that was just released this 
week analyzing the entire sugar program, and I thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Miller follows:]

Statement of the Hon. Dan Miller, a Representative in Congress from the 
State of Florida

    Chairman Crane, Ranking Member Levin, Distinguished 
Colleagues:
    Thank you for allowing me to testify about the important 
WTO ministerial meeting that will take place in Seattle later 
this year. I feel this is ``fish or cut bait'' time for the 
United States in seeking free and fair trade and to truly help 
our farmers and industry. I applaud this committee for holding 
this important hearing.
    Much of the financial hardship being experienced by our 
nation's farmers is due to contraction of overseas markets for 
U.S. agricultural exports. What I want to stress to you today 
is the importance of having the United States Trade 
Representative enter into the Seattle Round with ``clean 
hands'' in order to change that troublesome trend. Ostensibly, 
Seattle is an opportunity to knock down barriers to trades and 
allow American industry a greater opportunity to export into 
other countries. This would result in greater incomes for U.S. 
farmers and businesses. The sugar program undermines our trade 
objectives and is colliding with efforts to help small farmers.
    The Seattle meeting is the best opportunity to be pro-U.S. 
farmer if we have the courage to knock down barriers. If every 
country is allowed to exempt politically well connected 
commodities from trade negotiations by taking them off the 
table before they enter the room, then there can be no progress 
on free trade. For example, if the United States continues to 
knock out foreign sugar, then Canada can justify kicking out 
United States dairy and Europe can knock out US oilseed crops, 
and so on. Seattle must not allow this protectionist and 
wasteful cycle to continue. Quite simply, our negotiators must 
decide whether it is more important to preserve an outdated 
sugar program than to open markets for competitive American 
farm products. Remember the US sugar program hurts more people 
than it helps.
    I would like to concentrate my remarks on how the domestic 
sugar program hurts our economy and hampers the competitiveness 
of many important American industries. As you know, I have been 
very active in reforming the sugar program and I have 
introduced H.R. 1850 to phase out this program.
    Through price supports, the sugar program keeps the price 
of sugar in the United States artificially high. By tightly 
limiting the amount of sugar that may be imported into the 
United States, and subsidizing the operations of sugar 
producers through federal loans, the sugar program forces the 
price of domestic sugar to be at least twice as high as the 
price of sugar on the world market.
    While this is a sweet deal for sugar producers, it leaves a 
sour taste in the mouths of taxpayers, consumers, American 
workers, and the environment. The GAO estimates that the sugar 
program costs consumers more than $1 billion every year in 
higher prices for food and table sugar. Jobs for American 
workers have been eliminated because of sugar refineries that 
have been forced to shut down and because of companies 
relocating overseas where sugar is cheaper. A more recent GAO 
study shows that domestic users incur a cost of $200 million 
annually for each penny in excess of the estimated price needed 
to avoid forfeitures. This does not even address the higher 
costs forced on users by the inflated prices of the program.
    The environment is damaged by sugar production in Florida. 
The subsidized production of sugar in Florida results in 
phosphorous-laden run-off flowing into the Everglades, which 
contributes to the destruction of this fragile ecosystem. 
Amazingly, the federal government continues to subsidize sugar 
producers, even as Congress participates in a multi-billion 
dollar project to repair the damage done to the Everglades. 
Recently, the Army Corps of Engineers announced a long-awaited 
and ambitious plan to save the Everglades.
    For the past several Congresses I have introduced 
amendments to the Agriculture Appropriations Bill as well as 
stand alone legislation to reform the federal sugar program. 
This year I introduced H.R. 1850 with Congressman George Miller 
(D-CA). H.R. 1850 has the support of national taxpayer, 
consumer, and environmental advocacy groups. It has also been 
co-sponsored by Trade subcommittee Chairman Crane and 
subcommittee members Clay Shaw and Jim Ramstad.
    As my time is limited let me concentrate on several 
troublesome aspects of this program. Specifically, how the 
sugar program costs consumers over $1 billion dollars a year 
and benefits a select few sugar producers. Moreover, I will 
discuss how the sugar program kills U.S. sugar refinery and 
manufacturing jobs.

                           Costs to Taxpayers

    In 1993, the GAO has estimated that the present sugar 
program costs over $1 billion per year in higher prices for 
table sugar and food. This cost has been confirmed by Public 
Voice for Food and Health Policy. I believe this cost is 
probably higher today due to the disparity of world sugar 
prices and the US sugar program price. Not only do higher costs 
affect the prices paid at the cash register, they affect the 
taxpayer in the costs of government. Higher food costs mean 
higher entitlement spending under Food Stamps or other 
government programs such as school lunches and Meals on Wheels. 
It is a regressive form of corporate welfare benefitting a 
select few producers while making every consumer pay more at 
the cash register to justify this program.
    The U.S. Department of Commerce has noted that the ``effect 
of the sugar program is similar to a regressive sales tax, 
which hits lower-income families harder than upper income 
families.'' If you support regressive taxation, then I guess 
you have no problem with the U.S. sugar program. If you do not 
favor taxing the poor more heavily, however, you should favor 
changes in our sugar policies.
    Finally, the flight of businesses out of the country due to 
the high domestic cost of sugar results in lost revenue at the 
local, state and federal levels. Although no calculation of 
this lost revenue is currently available, it is significant in 
light of the many thousands of displaced workers.

                        Benefit to a Select Few

    The GAO reported that 42% of the sugar programs benefits 
went to just 1 % of the sugar producers in 1991 and 33 big 
sugar barons each received more than $1 million in extra 
revenues under the program. One producer even received $65 
million in one year.
    Time Magazine did a story last November on the Fanjul 
family that outlined how the U.S. sugar subsidy has helped 
propel this family into the ranks of the multi-millionaires. I 
commend it to your reading as it fairly captures how the sugar 
program helps a few well connected folks while sacrificing the 
good of the rest of the country.
    I must emphasize this because you will hear; ``Don't kick 
farmers when they are down'' or ``the family farm needs 
support, not a kick in the teeth.'' Great sound bites, but 
totally inappropriate with the sugar program. Sugar plantations 
are not family farms in the normal sense of that phrase. In 
1995, the USDA compared the non-cash economic benefits that 
accrue to farmers of various commodities thanks to government 
action. Wheat gets $23 per acre in government benefits, cotton 
farmers $87 per acre. Sugar gets $472 per acre. Moreover this 
artificially high price per acre of sugar acreage complicates 
efforts to restore the Everglades by creating an economic 
incentive to utilize more Everglades for sugar farming. And all 
this benefit goes to a select few sugar barons.
    So when our trade representatives defend the US sugar 
program in global trade talks, they are defending the Fanjuls, 
the politically well connected, the select few, but definitely 
not the average family farmer hurt by the contraction of 
overseas markets. The USTR must not protect a few folks who are 
profiting from an overpriced subsidy program at the expense of 
cattlemen, corn growers and other important American 
commodities. Nor must the USTR protect the select few sugar 
barons at the expense of the many important domestic users of 
sugar such as candy makers and refineries which are important 
US industries.

                               Jobs Lost

    The two main American industries adversely affected by our 
sugar program are sugar refineries and manufacturers of 
products that utilize sugar.
    Often, sugar refineries are unable to find a consistent and 
adequate supply of sugar to operate year round. The variations 
create economic inefficiencies and waste which result in these 
facilities being unable to stay in business. Moreover, 
refineries process sugar and require sugar cane and beet to 
operate. Needless to say, buying this raw material in the 
United States is overly expensive when compared to the world 
price. Why would a company buy large quantities of sugar cane 
at $ .22 per pound when they can buy at $.045 per pound in a 
foreign nation and take advantage of other favorable economic 
factors such as labor costs and government regulation? 
Defending the status quo will only send more jobs overseas.
    Accordingly, it is not hard to see why our sugar system is 
sending refinery jobs overseas. As recently as 1981 there were 
23 sugar refineries in the United States. Today, there are only 
11 refineries. Over 3,500 jobs have been lost by closures at 
the refineries due to a sugar program that only benefits a 
select few.
    Similarly, manufacturers of products that rely on sugar are 
greatly affected by the present sugar subsidy. Ask any 
businessman would they rather buy sugar at 22 cents per pound 
or at 4.5 cents per pound and they would all agree they would 
like the cheaper sugar. Even with a duty that raises the cost 
to over 19 cents per pound when sugar is brought into America, 
businessmen know that 19 cents is cheaper than 22 cents. And 
businessmen know that they need to pack up and leave the United 
States if they want to get that cheaper sugar. Also, the 
incentive remains to move operations overseas if the company is 
pursuing an aggressive export strategy.
    I think the best example of the present sugar program 
driving jobs out of America is the story of Bob's Candies. 
Bob's Candies was the largest producer of candy canes in 
America. Candy canes are a very cyclical industry and are made 
to be a low cost candy. However, the U.S. sugar program throws 
large roadblocks in the way of domestic candy makers. 
Accordingly, Bob's Candies moved to Jamaica where sugar is much 
cheaper. The president of Bob's Candies recently told Reader's 
Digest that the company would save more than $2 million a year 
in raw materials if the sugar program was scrapped. This 
savings would enable the company to keep jobs in America and 
lower retail prices. Unfortunately, it just makes good business 
sense to go overseas to get cheaper sugar to make candy. How 
many Bob's Candy Canes will this Committee tolerate?
    Also, the Committee should note that the cost of our sugar 
program was a main reason why Coke and other soda companies do 
not use sugar in soft drinks. Sugar got too expensive. The 
program priced sugar out of the lucrative soft drink industry. 
Instead, soft drinks now use high fructose corn syrup (HFCS) 
which does not have the high costs and economic inefficiencies 
of the sugar program.
    Finally, I ask this committee to keep in mind the fact the 
sugar industry is not large in comparison to other aspects of 
the economy. According to USDA data there are between 40,000 
and 70,000 jobs directly related to the sugar program. This is 
a small number compared to the 520,000 jobs in the food 
processing industry or the thousands of lost Everglades related 
tourist jobs. Congress and our trade representatives must not 
blindly protect a small special interest sugar program at the 
expense of the greater good.
    The U.S. sugar protection program and its implementation 
causes odd distortions in the world wide import and export of 
sugar that are utterly inconsistent with free trade and free 
markets. According to the GAO study on the sugar program 
released just this week, the United States allocates import 
levels to some 40 trading partner countries in a manner that 
bears little relationship to the realities of supply and 
demand.
    For example, Brazil and the Philippines are both 
``allowed'' by the USTR to import approximately the same 
tonnage of sugar under this bizarre quota system despite the 
fact that Brazil produces 21 times more sugar (5,215,000 tons) 
than the Philippines (249,000 tons). Furthermore, 10 of the 40 
countries who are given sugar quota allocations by the United 
States to import sugar here are actually net importers of sugar 
themselves. 11 of the 40 countries who receive an allocation 
have average worldwide export levels that are less than their 
U.S. allocation level.
    Can such a system really be consistent with our free trade 
message? How would the United States react if one of our 
trading partners gave American corn farmers a quota level that 
was the same as that of Honduras? Would we take seriously 
another country's admonitions about free trade if that country 
allocated imports of American beef at the same low level as 
those of Liberia? These are the questions that naturally flow 
from examination of our sugar program and I hope that our trade 
representatives at Seattle do not feel compelled to expend 
valuable credibility defending such an archaic and economically 
inefficient system that does not advance the overall interests 
of the United States.
    Put another way, the Seattle meeting must be the forum for 
the United States to effectuate the greater good. Many more 
American jobs and consumers need cheaper sugar and many more 
non-sugar farmers need our trade policy to be freed from the 
millstone of our domestic sugar subsidy. If the Seattle 
Ministerial is successful, the USTR can save American jobs in 
refining and manufacturing of anything that uses sugar. Also, 
the USTR will save the taxpayers billions of dollars.
    Again, I thank you Mr. Chairman for not only allowing me to 
testify but for your continued leadership on the efforts to end 
the sugar subsidy. It is in America's best interests to get rid 
of foreign and domestic subsidies like our sugar program and I 
am appreciate all the efforts this subcommittee will undertake 
to accomplish this goal.
      

                                


    Chairman Crane. And without objection, so ordered with 
regard to your request.
    Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman. I appreciate the 
testimony. It is enlightening. I just have two or three 
questions I would like to ask Mr. Weller. The Canadians are 
obviously concerned about their cultural heritage and feel 
sometimes overwhelmed about their proximity to the United 
States, so just to try to sort of depersonalize this thing and 
get into the guts I would like to ask you two or three 
questions.
    First of all, what is really the practical impact here of 
the Canadian cultural content rules? And second, does the 
United States prohibit broadcast distribution or sale of 
Canadian-produced programming? And third, really do the 
Canadian cultural context rules have a real impact on 
employment of actors and directors and things like that? You 
might want to turn to those questions.
    Mr. Weller. Sure, Mr. Houghton, and thank you for your 
questions and I also want to thank you on behalf of all of us 
interested in the question of runaway production for your 
commitment to work with us and later this year conduct a 
hearing on the issue of runaway production with the Oversight 
Subcommittee. I thank you for your commitment to do that.
    When it comes to the impact of the Canadian cultural 
content rules, it could have a profound impact on U.S. 
producers of television and motion pictures. There is a recent 
Law Review article by publishers of Syracuse University Law 
Review. They noted that certain cable channels like the Disney 
Channel are prohibited as a result of cultural content rules 
enforced by the Canadian government. And the irony of this is 
that similar prohibitions have caused and forced many Canadian 
citizens who are interested in obtaining these channels to buy 
U.S. satellite dishes on the black market.
    And, moreover, Canada mandates that private stations must 
have a 60-percent Canadian content measured over the broadcast 
day and 50 percent over the evening hours, while the Canadian 
government-owned CBC must have 60-percent Canadian content at 
all times. It does have a very big impact on American film 
production as well as American television production.
    You had also asked whether or not the United States 
prohibits broadcast distribution or sale of Canadian-produced 
programs. Not at all. The United States of course has a free 
market for Canadian products. And not only do we permit their 
programming, but many Canadian television shows and television 
stars have been very successful. Let me list some of those. 
SCTV, Due South, and Road to Avalon, and performers like Rick 
Moranis, Dan Ackroyd, Jim Carrey, and Michael J. Fox have all 
been very successful in the United States precisely because we 
give our consumers the freedom and the right to choose the type 
of program that they want to watch and not have that enforced 
by the government.
    You had also asked if the Canadian cultural content rules 
have an impact on the employment of U.S. actors, directors and 
technical crews and others, and they do have an impact. Canada 
has adopted a point system that must be satisfied if a 
production is to achieve the cultural content designation. 
Under the point system six of 10 creative production positions 
must be performed by Canadians. In addition 75 percent of all 
expenditures have to be made to Canadians. Thus U.S. citizens 
are cut out of the action. They are cut out of the broad number 
of jobs in Canadian cultural content production. And of course 
Canada has those opportunities for the promises of wage rebates 
and tax incentives as well.
    That is really one of the key reasons why it is so 
important that the issue of runaway production as well as 
cultural content be addressed at the Seattle talks because it 
is having a real impact on an industry which is so important to 
the United States. Domestic film production is indigenous to 
our Nation. We have lost 20,000 jobs. Most of those have 
emigrated north as a result of not only the Canadian content 
rules but the vast array of incentives, particularly tax 
incentives, that the Canadians are offering to American film 
producers to relocate and go north.
    So thank you for those questions. They are important and 
basic questions.
    Mr. Houghton. Thank you. Mr. Chairman, do I have just a 
minute more? I would like to ask Mr. Regula a question on 301. 
We are very concerned about 301 and also section 201. Clearly 
there are people that want to change that. Do you really hear 
the drums beating pretty loudly on that focusing on the 
ministerial in Seattle?
    Mr. Regula. Well, I think this Subcommittee should address 
those issues. I believe Mr. English has a bill that tries to 
reflect the experience we have had and proposes some trade law 
changes. To summarize what I think will be the situation in 
Seattle is an effort by countries to change WTO rules to make 
it easier to dump into our markets. I think in anticipation of 
that, we want to hold firm because our laws are working. If 
anything, strengthen them and streamline them to make it easier 
for demostic companies to bring actions.
    Chairman Crane. Mr. Neal.
    Mr. Neal. Mr. Weller, is it your belief that what the 
Canadians are doing is legal under existing trade law?
    Mr. Weller. We certainly believe there is some legitimate 
questions that should be raised. We believe that they are using 
their cultural content rules to put the United States at a 
great disadvantage, particularly when it comes to film 
production. When you think about it, the average film 
production has about $25 million in economic impact. The 
average film industry worker makes $26,000 a year. We have lost 
20,000 jobs, most of which have gone north because of Canadian 
tax incentives as well as the Canadian content rules. And when 
cable channels that you and I have the opportunity just through 
freedom of choice if we have cable at home, Disney, HBO, are 
prohibited as a result of cultural content, something is wrong 
and we should raise that issue and it should be put on the 
table.
    Mr. Neal. The U.S. film industry still remain a net 
exporter. Is it your understanding that they would be reluctant 
to bring a case?
    Mr. Weller. I can't speak specifically for the U.S. film 
industry. I will let them speak for themselves. But our belief 
is that there are abuses that do need to be raised. We have 
seen a growth in film production, but if you see how those jobs 
have grown, more and more of them are shifting to Canada. And 
we have seen in my city of Chicago, and I imagine if you look 
at the economic impact in the Boston area you have probably 
seen an impact as well, in Chicago we have seen a 20-percent 
reduction in the amount of production activity as a result of 
runaway production. In Texas, which has been extremely hard 
hit, almost a third of their film production has been lost and 
runaway production has clearly been identified.
    And I would urge you to take a look at the monitor study 
that was done by the Directors Guild and the Screen Actors 
Guild, which we would be happy to provide you a copy of, which 
numbers the impacts in the communities such as Boston and 
Chicago. It is not just a Hollywood issue.
    Mr. Neal. Thank you, Mr. Weller. Thank you, Mr. Chairman.
    Chairman Crane. Next, Mr. Foley.
    Mr. Foley. Thank you, Mr. Chairman. Mr. Chairman, I want to 
thank Congressman Weller and Congressman Becerra for focusing 
on the runaway production issue. In the House Entertainment 
Task Force we are going to be doing, we hope, extensive study 
and have extensive dialog on the issue and I think you raise 
some very, very important points and I would like to ask you 
both, if you can in the brief time, to comment on some of the 
incentives that Canada provides as a tax motivation to bring 
films to Canada. First Mr. Weller and then Mr. Becerra.
    Mr. Weller. Sure. And Mr. Foley, of course I want to thank 
you for your leadership and involvement on this issue. Folks a 
lot of times when they think of the film industry and movies 
and television production they always think of Hollywood and 
this is not just a Hollywood issue. This is a constituent issue 
for me in Illinois and I know it is for you in Florida and for 
Mr. Becerra in California, but it impacts dozens of urban 
areas, rural areas as well as many, many States have found 
domestic film production to be a job generator and a job 
creator.
    In fact, in Illinois we had 55 productions that were either 
fully or partially filmed in Illinois. So we are one of those 
States that recognizes the importance of the film industry.
    However, we have a challenge, and the Canadian government, 
both the Federal and provincial governments, have been very, 
very aggressive in offering financial incentives to television 
as well as film production. And these include wage credits, as 
well as other forms of tax subsidies which could reimburse in 
some provinces up to 40 percent of the cost of the production. 
Now from the standpoint of any businessperson if they could 
find a way to reduce costs by 40 percent, they are going to 
consider that other area to do business.
    So my belief is that we really need to work in a bipartisan 
way to find ways of reducing the cost of production in the 
United States and keep these jobs here. As I noted in my 
testimony in this Congress in the last 9 years, and I represent 
an area with significant amount of steel production so it is an 
issue I am very concerned about, but we have lost 10,000 steel 
jobs in the past year and this Congress has given a tremendous 
amount of attention to that issue. But unfortunately the 
administration nor Congress have paid little attention to the 
issue that needs to be on the radar screen and that is the 
issue of runaway production. When you have lost 20,000 jobs, 
that is serious. That is twice as many jobs as have been lost 
in the steel industry alone.
    So clearly the tax incentives as well as the weaker 
Canadian dollar have contributed to the loss of jobs that have 
headed north.
    Mr. Becerra. Good question, and thank you again for the 
role you are playing in this as well. Certainly Florida should 
be very concerned because it is one of the States that does 
have major production facilities and sites. More specifically, 
because I think Mr. Weller did a very good job of answering the 
questions, if the government in Canada provides an 11 percent 
rebate--they don't call it a tax credit, they call it a 
rebate--on all production costs that are related to labor. So 
someone who works there, you pay that person a salary, you get 
to reduce that in your costs by 11 percent. The Federal 
Government in Canada will give you back 11 percent. On top of 
that the provincial governments provide a number of incentives, 
rebates, tax credits. So you can get anywhere from 22 up to 46 
percent of a rebate, tax credit, whatever you would like to 
call it, an incentive to do business.
    On top of that, Canada is now offering to production 
companies from abroad from other countries like the United 
States duty-free import of its stage facilities, of its 
production equipment, its photographic equipment, special 
effects equipment. All of this now gets to come in without any 
charge for importation. So they are saving quite a bit of money 
when they go to a place like Canada.
    We need to do something to make sure we have a level 
playingfield.
    Mr. Foley. Thank you very much and I thank you both for 
your hard work on this and hopefully, and I know Mr. Weller has 
asked Mr. Houghton to potentially have some hearings in depth 
in a variety of locations and I look forward to working with 
both of you. If I may, Mr. Miller, I cannot escape without a 
conversation on sugar. I didn't expect one today, but I might 
as well jump in.
    The price of sugar has remained stable without question in 
the last 9 years. There has been no increase in the wholesale 
price of sugar. Why then can you explain the price of the 
finished product going up so dramatically? There doesn't seem 
to be a nexus between the cost of sugar and the end retail 
price.
    Mr. Miller. Basic economics 101 said that--you are talking 
about if we went to the world market 6 cents a pound you would 
not see a price change in products. But that is only one 
component of the price and I think you would see price changes 
in things that have high content of sugar. There is no 
justification for us to be paying 23 cents a pound for sugar in 
the United States and 6 cents a pound in Canada. How can we 
compete? It is the same way we can't compete when they have 
incentives for products like that.
    But the most important thing is to have the ability to have 
clean hands. We are protecting one product and when we go there 
and try to open up markets for dairy products and what have 
you, it is not a fair field.
    Mr. Foley. My time has expired, but I would love to 
continue the dialog. I am sure we will have a chance on the 
floor.
    Chairman Crane. Gentlemen, we appreciate your participation 
today, and that concludes this panel.
    We now welcome our next panel, our witness, Hon. Susan G. 
Esserman, Deputy U.S. Trade Representative and you may proceed 
when ready. And we would also ask you to try and keep oral 
testimony in the neighborhood of 5 minutes and all written 
testimony will be made a part of the permanent record. Proceed 
when ready.

 STATEMENT OF HON. SUSAN ESSERMAN, DEPUTY UNITED STATES TRADE 
                         REPRESENTATIVE

    Ms. Esserman. Thank you, Mr. Chairman, Members of the 
Subcommittee. I very much appreciate this opportunity to 
testify on the important issue of the U.S. agenda at the World 
Trade Organization.
    In 4 months, Ambassador Barshefsky will open the WTO's 
third ministerial conference in Seattle. This will be the 
largest trade event ever held in America, bringing trade 
ministers, business executives and citizen groups to Seattle 
from all over the world. It will highlight to the world our 
economic achievements and focus public attention as never 
before on the role that trade plays in the longest peacetime 
expansion in American history.
    We also expect at the ministerial to launch a new round of 
international trade negotiations. This round builds upon 50 
years of bipartisan American commitment to a fair, open, and 
free international economy capped by the conclusion of the 
Uruguay round, which created the WTO in 1994. In the 5 years 
since, the WTO has fully proven its value to the United States 
and the world. For example, Americans have taken greater 
advantage of a more open world economy by increasing exports by 
over $200 billion, contributing to the economic growth we have 
enjoyed and helping us gain high-skill, high-wage jobs.
    The WTO's strong dispute mechanism has strengthened our 
ability to ensure compliance with trade agreements and has 
resulted in tangible gains for American companies and workers 
and the WTO has been vital to our ability to address the 
financial crisis as its rules-based system has helped to 
prevent the outbreak of a cycle of protection and retaliation 
which would have hurt the United States as the world's largest 
exporter as much as any other country in the world.
    As we look to a new round, we see immense promise to go 
further and as President Clinton has stated, to create a world 
trading system attuned to both the pace and scope of the new 
world economy and to the enduring values which give direction 
and meaning to our lives.
    We are now consulting with this Subcommittee, Members of 
Congress, interested Americans in business, agriculture, NGOs 
and others, about the objectives for the round.
    I am going to very briefly outline our core objectives. Our 
view is that the core of the negotiating agenda should address 
market access concerns, including tariffs, nontariff measures, 
subsidies and other measures, with benchmarks to ensure that 
the negotiations stay on schedule. These broad-based markets 
access negotiations would lead to immense new business and job 
opportunities for our workers, companies and farmers.
    The agenda and its results must unquestionably be broad 
enough to create a political consensus by addressing the market 
access priorities of all members. It also must be manageable 
enough to be completed within 3 years and avoid raising major 
compliance problems afterward.
    This market access agenda would have four substantial 
components: Of course, at the core of the negotiating agenda is 
agriculture and here we seek elimination of export subsidies, 
reduction of trade-reducing supports, lower tariffs and better 
administration of tariff rates, quotas, disciplines on state 
trading enterprises, improved market access for least developed 
countries, and ensuring that trade in agricultural 
biotechnology products is based on transparent, predictable and 
timely processes.
    The second core element is service. Our objective here 
would include liberalizing a broad range of services, ensuring 
that the WTO rules anticipate the development of new 
technologies, and developing disciplines to ensure transparency 
and good governance on regulation of services.
    Third, industrial goods where broad market access 
negotiation would buildupon the accelerated tariff 
liberalization initiative. Here we seek to reduce existing 
tariff disparities, use applied rates as the basis of 
negotiation, address nontariff and other measures affecting 
market access and, as in agriculture, improved market access 
for the least developed WTO members.
    Fourth, we will pursue trade facilitation negotiations 
which would remove customs impediments so that exports 
expeditiously reach customers in foreign markets. We intend to 
expand on this base by pursuing work in several areas. For 
example, a special priority will be creating a trade 
environment that promotes the unimpeded development of 
electronic commerce.
    Second, we will seek to ensure that trade liberalization 
promotes and supports sustainable development. This will 
include identifying and pursuing areas such as the elimination 
of tariffs on environmental technologies and the elimination of 
fishery subsidies that both distort trade and harm the 
environment.
    We will use the WTO's Trade and Environment Committee to 
examine the environmental implications of negotiations as they 
proceed. We will seek institutional reforms to open up the WTO 
and we have made a commitment to conduct an environmental 
review of the round.
    Third, the relationship between trade and labor will be a 
high priority. As President Clinton has said, we must put a 
human face on the global economy, giving working people 
everywhere a stake in its success, equipping them all to reap 
its rewards, and provide for their families the basic 
conditions of a just society.
    The WTO has a role to play in this area, including ensuring 
respect for core labor standards. Our goal here is to ensure 
that the WTO reaps the broadest benefits for the largest 
possible number of working people in all nations. To this end, 
and consistent with the Uruguay round Agreements Act, we have 
called for the establishment of a work program to address trade 
issues relating to labor standards.
    Finally, the past 5 years revealed areas in which 
institutional reforms would further strengthen the WTO and its 
base of public support. A special focus here will be ensuring 
that the WTO more fully reflects the basic values of 
transparency, accessibility and responsiveness to citizens.
    Before ending my remarks, Mr. Chairman, let me very briefly 
review the areas we are seeking to conclude by Seattle which we 
will help to build momentum for a successful round. We expect 
the accession to the WTO of a number of countries. We are 
especially pleased by the progress we have made with the 
transition economies as their integration into the world 
economy will help their reform and democratization policies 
succeed.
    We expect to conclude the ongoing review of the WTO's 
dispute settlement mechanism with a focus here on ensuring 
timely compliance with panel decisions and greater 
transparency. We will seek to extend the current standstill on 
application of tariffs to electronic transmissions. We will 
also seek to conclude a multilateral agreement on transparency 
in government procurement promoting new opportunities around 
the world and reducing the potential for bribery and 
corruption. And finally we will be working toward consensus on 
the accelerated tariff liberalization initiative and on an 
expansion of the information technology agreement.
    Mr. Chairman, these are ambitious goals in the short term 
for the round but they are goals fully in the tradition of the 
50 years of bipartisan commitment to American leadership in 
world trade. The task before us now is to bring this work 
forward into the next century.
    Thank you very much.
    [The prepared statement follows:]

Statement of the Hon. Susan Esserman, Deputy United States Trade 
Representative

                  American Goals in the Trading System

    Mr. Chairman, Congressman Levin, Members of the 
Subcommittee:
    Thank you very much for inviting me to testify today on the 
U.S. agenda at the World Trade Organization.
    This November 30th, the United States will host the World 
Trade Organization's Ministerial Conference in Seattle. The 
Ministerial will be the largest trade event ever held in the 
United States, bringing heads of government, trade ministers, 
business leaders and non-governmental associations from around 
the world and focusing public attention as never before on the 
role trade plays in American prosperity. Ambassador Barshefsky 
will have the honor of chairing this meeting.
    At the Ministerial, we also expect to launch a new Round of 
international trade negotiations, which President Clinton 
called for in his State of the Union Address. This has the 
potential to create significant new opportunities for American 
workers, businesses, and farm and ranch families. We also seek 
to improve the WTO itself, to make the organization more 
transparent, responsive, and accessible to citizens. And we can 
ensure that its work supports and complements efforts to 
protect the environment, improve the lives of workers, reduce 
hunger and improve health.
    We are now building the necessary consensus internationally 
for an agenda with broad support in the U.S. and worldwide. And 
with the Ministerial just four months away, the Trade 
Subcommittee has chosen an ideal time to review the United 
States' stake in the trading system and our goals for its 
future. As we prepare for the Ministerial and the Round, we 
look forward to continuing to work closely with the 
Subcommittee and with other Members of Congress to develop the 
strategy and objectives that will yield the best results for 
our country and for the world. Today I would like to review for 
you our stake in the world trading system; the consultations we 
have undertaken in preparation for the Ministerial; and the 
results we hope to achieve at Seattle and in the Round.

                    U.S. Stake in the Trading System

    The United States is now the world's largest exporter and 
importer, carrying on over $2 trillion worth of goods and 
services trade each year. The jobs of millions of American 
workers, the incomes of farm families, and the prospects for 
many of America's businesses depend on open and stable markets 
worldwide.
    This is the foundation of the leading role we have taken in 
the development of the trading system for over fifty years, 
since the creation of the General Agreement on Tariffs and 
Trade in 1948. Throughout these decades, Republican and 
Democratic Administrations, working in partnership with 
Congress, have concluded eight negotiating Rounds. Each 
successive Round, culminating in the Uruguay Round which 
created the WTO, has opened markets for Americans, and helped 
to advance basic principles of rule of law, transparency and 
fair play in the world economy.
    Since the Uruguay Round's conclusion in 1994, Americans 
have taken full advantage of these benefits.
      With the opening of world markets, American 
exports have risen by well over $200 billion, contributing to 
the rapid economic growth we have enjoyed, and the continuation 
of the longest peacetime expansion in America's history. This 
has also helped us to gain high-skill, high-wage jobs, reverse 
a 20-year period of decline in wages, and in fact increase 
wages by 6% in real terms.
      The strong dispute settlement system created by 
the Uruguay Round has allowed us to improve significantly our 
enforcement of the trading rules. Since the creation of the 
WTO, we have filed more cases than any other member, and have a 
very strong record of favorable settling or prevailing in the 
cases we have filed.
      And the trading system has been vital to our 
ability to address the financial crisis. The commitments WTO 
members have made have helped to ensure that, with 40% of the 
world in recession, and six major economies contracting by 6% 
or more, we at least so far have seen no broad reversion to 
protectionism. This is a tribute to the strength of the trading 
system we have helped to build. It has prevented enormous 
economic damage to our national economy, our farmers and our 
working people; ensured that affected countries have the 
markets essential to recovery; and helped avert the political 
tensions that can arise when economic crisis leads to trade 
conflicts.

                             The Work Ahead

    Despite these achievements, however, much work remains 
ahead. The trading system can be made more effective in 
removing trade barriers, more transparent and accessible in its 
own workings, and broadened to include nations now outside. 
With the Ministerial and Round, we will address issues such as 
the following:
      World trade barriers remain high in many areas, 
including in several crucially important sectors in which U.S. 
producers are the world leaders. Agriculture and services are 
crucially important examples; in industrial goods, we often 
face significant trade barriers, subsidies and other practices 
overseas which a new Round can address.
      Our leadership in the scientific and 
technological revolution creates new challenges and 
opportunities for the trading system to address. Electronic 
commerce and the growth of the Internet as a medium for trade 
is an especially important example.
      Membership in the WTO can make a major 
contribution to reform in the transition economies--that is, 
the nations in Europe and Asia moving away from communist 
systems. As successful reformers and WTO members such as 
Poland, the Czech Republic and Hungary have observed, WTO 
membership on commercially meaningful grounds helps to 
integrate transition economies into world trade and make the 
reforms necessary to create market-based economies, thus 
promoting long-term growth and liberalization.
      The results of future WTO agreements can 
contribute to the world's efforts to reduce hunger, protect the 
environment, improve the lives of workers, promote health and 
nutrition, support financial stability, fight bribery and 
corruption, and promote transparency and good governance 
worldwide.
    The balance of my testimony today will review our WTO 
agenda in four areas: ensuring implementation of the Members' 
present commitments; developing the agenda for a successful 
Ministerial and a new Round; encouraging the accession, on 
commercially meaningful grounds, of new members; and the 
specific steps that can advance the broader vision and yield 
immediate results for the U.S. and world economies.

                     I. Compliance With Agreements

    First of all, we are working to ensure full compliance with 
existing agreements. We have met our commitments on time and in 
full, and we expect our trading partners to do the same.
    No matter what the new agenda will be, a fundamental 
component of our trade policy will remain the effective 
implementation of existing agreements. We have made this point 
clear to our partners in Geneva, and in this regard, 1999 is an 
especially important year. By January 1, 2000, WTO Members must 
meet Uruguay Round commitments under the Agreements on 
Intellectual Property, TRIMs, Subsidies, and Customs Valuation. 
In succeeding years, final liberalization commitments under the 
Agreement on Clothing and Textiles as well as certain aspects 
of the TRIPS and Subsidies Agreement will phase in. Likewise, 
Uruguay Round tariff commitments will soon be realized in full.
    These commitments represent the balance of concessions 
which allowed completion of the Uruguay Round and have helped 
realize its benefits since then. The credibility of any future 
negotiations depends on their implementation. To ensure 
implementation, we use all methods available. This includes use 
of dispute settlement and U.S. trade laws when necessary, but 
also a commitment to the technical assistance programs that 
allow some of the developing countries to gain the capacity to 
meet complex demands in areas such as services, agriculture and 
intellectual property. In our recent submissions to the WTO 
General Council, therefore, we have proposed methods to address 
legitimate problems with compliance now and in the context of 
new negotiations, and ways to make technical assistance 
programs more effective in promoting full integration into the 
world economy.
    We also are encouraging those WTO Members which have not 
ratified the Basic Telecommunications and Financial Services 
Agreements to do so as soon as possible. This will not only 
open markets to U.S. Providers, but ensure that all Members can 
benefit from their commitments and that they can win the 
benefits of competition, transparency and technological 
progress these Agreements offer.

               II. Developing an Agenda for the New Round

    As we address compliance issues, we are also developing the 
agenda for the new negotiating Round President Clinton called 
for in the State of the Union Address, to be launched at the 
Ministerial in Seattle.
    Our work in this regard has its foundation in a series of 
domestic consultations with a wide range of interested groups 
and individuals: Congress, business groups, agriculture, labor 
organizations, academics, environmental groups, state and local 
government, and others. This has included many individual 
meetings; Trade Policy Staff Committee hearings in Atlanta, 
Detroit, Los Angeles, Chicago, as well as Washington DC, to 
gather ideas on priorities and objectives; and a series of 
Listening Sessions jointly with the Department of Agriculture 
on the agricultural agenda, traveling to Indiana, Florida, 
Minnesota, Tennessee, Texas, California, Washington, Nebraska, 
Delaware, Vermont, Iowa and Montana to hear directly from 
farmers, ranchers and others. We have also, of course, met 
frequently with our trading partners at the WTO in Geneva, and 
in meetings such as the US-Africa Ministerial, FTAA 
conferences, the US-EU Summit, the Quad meeting in Tokyo and 
others to review their priorities, exchange views and develop 
consensus.
    Given our consultations and conversations to date, we 
believe the agenda should take the following shape:
      The core of the agenda should address market 
access concerns including agriculture, services and industrial 
goods, with benchmarks to ensure that the negotiations remain 
on schedule for completion within three years.
      The agenda should also pay special attention to 
areas in which trade policy can encourage technological 
progress, notably in electronic commerce.
      This agenda should support and complement efforts 
to improve worldwide environmental protection, and ensure that 
trade policy yields the maximum benefit for the broadest range 
of workers.
      This negotiating agenda should be complemented 
and balanced by a work-program to address areas in which 
consensus does not yet exist for negotiations; and by a series 
of measures to reform the WTO, with a special focus on 
transparency and citizen access.
    We can decide on the precise structure for negotiations 
once consensus on the agenda is achieved. It is clear, however, 
that the agenda and final result must unquestionably be broad 
enough to create a political consensus by addressing the market 
access priorities of all Members. At the same time, we should 
ensure that it is manageable enough to complete within three 
years and avoid raising major compliance problems afterwards.
    Specifically, our ideas would include the following:

1. Market Access

    Market access negotiations, as the core of the 
negotiations, should cover the built-in agenda of agriculture 
and services, and also address non-agricultural goods.
    In agriculture, in liberalizing trade we have the potential 
to create broader opportunities for American farm and ranch 
families, fight hunger and promote nutrition worldwide through 
ensuring the broadest possible supplies of food at market 
prices, and help to protect the land and water by guaranteeing 
the right to use modern science and reduce trade-distorting 
measures which increase pressure on land, water and habitat. To 
secure this opportunity, we would set the following objectives:
      Completely eliminate, and prohibit for the 
future, all remaining export subsidies as defined in the 
Agreement on Agriculture.
      Substantially reduce trade-distorting supports 
and strengthen rules that ensure all production-related support 
is subject to discipline, while preserving criteria-based 
``green box'' policies that support agriculture while 
minimizing distortion to trade;
      Lower tariff rates and bind them, including but 
not limited to zero/zero initiatives;
      Improve administration of tariff-rate-quotas;
      Strengthen disciplines on the operation of state 
trading enterprises;
      Improve market access through a variety of means 
to the benefit of least-developed Members by all other WTO 
Members; and
      Address disciplines to ensure trade in 
agricultural biotechnology products is based on transparent, 
predictable and timely processes.
    In services, American industries are the most competitive 
in the world, as demonstrated by our $258 billion in services 
exports last year. The Uruguay Round has created an important 
set of rules, but in many cases, actual sector-by-sector 
market-opening commitments simply preserved the status quo. 
Effective market access and removal of restrictions will allow 
U.S. providers to export more efficiently, and help address 
many broader issues worldwide. Examples include improving the 
efficiency of infrastructure sectors including communications, 
power, transport and distribution; improving environmental 
protection services; easing commerce in goods, thus creating 
new opportunities for manufacturers and agricultural producers; 
and helping to foster financial stability through competition 
and transparency in financial sectors. To realize these 
opportunities, objectives would include:
      Liberalize restrictions in a broad range of 
services sectors;
      Ensure that GATS rules anticipate the development 
of new technologies;
      Prevent discrimination against particular modes 
of delivering services, such as electronic commerce or rights 
of establishment; and
      Develop disciplines to ensure transparency and 
good governance in regulations of services.
    In industrial goods, further market-opening will help 
Americans promote high-wage, high-skill jobs and create 
economies of scale that allow U.S. firms to invest more in 
research and development and become more competitive. Here, 
broad market access negotiations in the next Round would build 
upon the Accelerated Tariff Liberalization initiative, which 
calls for the early liberalization of eight specific sectors 
and which we hope to complete by the time of the Ministerial, 
through objectives including:
      Reduce existing tariff disparities;
      Provide recognition to Members for bound tariff 
reductions made as part of recent autonomous liberalization 
measures, and for WTO measures.
      Use of applied rates as the basis for 
negotiation, and incorporation of procedures to address non-
tariff and other measures affecting market access; and
      Improve market access for least developed WTO 
Members by all other Members, through a variety of means.

2. Additional Issues

    Most delegations agree that negotiations should be 
completed within three years. Given this reality, and in order 
to find an appropriate balance of interests and a convergence 
of views, certain issues might be appropriate for a forward 
work-program that would help Members, including ourselves, more 
fully understand the implications of newer topics and build 
consensus for the future. In addition, several broader issues 
will inform our work on the core market access issues. Issues 
to address would include:
a. Electronic Commerce

    For example, one of the most exciting commercial 
developments of recent years has been the adaptation of new 
information and communications technologies, notably the 
Internet, to trade. This has very important implications for 
reducing the cost of goods to consumers, improving the 
efficiency of companies, and for speeding growth in developing 
regions, as Internet access greatly reduces the obstacles 
entrepreneurs, artisans and small businesses face in finding 
customers and managing paperwork.
    It is critical that the WTO act now to ensure that 
artificial barriers do not delay or block the benefits of this 
new method of conducting trade. We have therefore promoted a 
broad electronic commerce agenda at the WTO and elsewhere, 
including a work-program to ensure technological neutrality in 
the development of WTO rules, and capacity-building efforts to 
ensure that developing countries have access to the Internet. 
We are encouraged that most WTO members agree that all e-
commerce activities are covered by the traditional WTO 
disciplines of transparency, non-discrimination and no 
unnecessary obstacles to trade. As I will note later, our top 
immediate priority is to ensure that cyber-space remains duty-
free--that is, that countries do not apply tariffs to 
electronic transmissions.

b. Sustainable Development and Committee on Trade and 
Environment

    In all these areas, we intend to take special care to 
ensure that trade liberalization promotes and supports 
sustainable development. In particular, we will pursue trade 
liberalization in a manner that is fully consistent with and 
supportive of this Administration's strong commitment to 
protection of the environment. This means a number of things.
    First, it means that we must consider the environmental 
implications of the negotiations from start to finish. In this 
connection, President Clinton has committed to an environmental 
review of the likely consequences of the Round and we have 
called on other countries to do likewise. In the same vein, we 
have proposed using the WTO's Trade and Environment Committee 
to discuss the environmental implications of negotiations as 
they proceed.
    Second, it underscores the importance of institutional 
reforms to ensure that the public can see the WTO and its 
processes, notably dispute settlement, in action and contribute 
to its work. Stakeholders have an important role to play in 
helping to assess the environmental implications of the new 
round.
    Third, it means pursuing trade liberalization in a way that 
is supportive of high environmental standards. This means, 
among other things, that the WTO must continue to recognize the 
right of Members to take science based measures to achieve 
those levels of health, safety and environmental protection 
that they deem appropriate--even when such levels of protection 
are higher than those provided by international standards.
    Fourth, it means that we have a responsibility for 
identifying and pursuing ``win-win'' opportunities where 
opening markets and reducing or eliminating subsidies hold 
promise for yielding direct environmental benefits. Examples we 
have identified thus far include elimination of tariffs on 
environmental goods through the Accelerated Tariff 
Liberalization initiative; liberalization of trade in 
environmental services; elimination of fishery subsidies that 
contribute to overcapacity; and continued liberalization in the 
agriculture sector.
    Fifth, it means that we will promote strengthened 
cooperation between the WTO and other international 
organizations dealing with environmental matters. In this 
connection, we are pleased that discussions are going on right 
now between the WTO and the United Nations Environment Program 
on increasing cooperation.
    We have tabled a number of proposals to advance these 
objectives. Also, we are carefully examining the proposals put 
forward by other countries on trade and environment. In 
addition, as we look at other proposals from other countries 
that are not trade and environment proposals per se, we will be 
considering how they relate to the environment. In all of this 
work, we welcome the input of this Committee and all 
stakeholders.

c. Trade and Labor

    Likewise, the relationship between trade and labor is an 
especially important priority. As President Clinton said to the 
ILO Conference in June:
    ``We must put a human face on the global economy, giving 
working people everywhere a stake in its success, equipping 
them all to reap its rewards, providing for their families the 
basic conditions of a just society.''
    Trade policy has a role to play in the realization of this 
vision, and development of the trading system must come 
together with efforts to ensure respect for core labor 
standards, and our goal is to ensure that the WTO brings the 
broadest benefits for the largest possible number of working 
people in all nations.
    In the Declaration issued at the WTO's First Ministerial 
Conference in Singapore, WTO members renewed their commitment 
to the observance of core labor standards. This was the first 
time such a group of Trade Ministers had formally addressed 
labor standards. While this was an important first step, we 
believe that more attention to the intersection of trade and 
core labor standards is warranted as governments and industries 
wrestle with the complex issues of globalization and 
adjustment, and that the WTO has a role to play in the process. 
We are continuing to consult with Congress and the labor 
community in the U.S., as well as with WTO members who share 
our interest, on contributions the WTO can make to the goal.
    In January, we submitted a proposal for the establishment 
of a work-program in the WTO to address trade issues relating 
to labor standards, and areas in which Members of the WTO would 
benefit from further information and analysis on this 
relationship and developments in the ILO. In addition, we will 
seek enhance institutional links between the ILO and the WTO 
through mutual observer status, to help facilitate 
collaboration on issues of concern to both organizations. We 
will consult with the Subcommittee on these matters in the 
months ahead.
    Work at the WTO on these issues is, of course, part of a 
broader effort centered on the International Labor 
Organization, which with the President's leadership recently 
concluded a landmark Convention on the Elimination of the Worst 
Forms of Child Labor. This builds on a June 1998 Declaration on 
Fundamental Principles and Rights covering core labor standards 
as well as a follow-up mechanism. In support of this work, the 
President announced in his 1999 State of the Union address a 
Core Labor Standards and Social Safety Net Initiative, 
including a budget request for $25 million for multilateral 
assistance to be provided through the ILO, to help countries 
provide basic labor protections and improve working conditions. 
We also, of course, make use of the labor policy tools in our 
trade statutes, notably the labor conditionality under the 
Generalized System of Preferences, to promote respect for core 
labor standards.

3. Institutional Reform

    The past five years of experience with the WTO have also 
revealed areas in which the institution can be further 
strengthened. We thus seek to ensure that the WTO more fully 
reflects the basic values of transparency, accessibility and 
responsiveness to citizens; ensure that its work and that of 
international organizations in related fields are mutually 
supportive and promotes as much as possible the larger vision 
of a more prosperous, sustainable and just world economy; and 
strengthen public support for the WTO. Our proposals here 
include:
    Institutional Reforms that can strengthen transparency, and 
build public support for the WTO by:
      Improving means for stakeholder contacts with 
delegations and the WTO; and
      Enhancing transparency in procedures to the 
maximum extent possible.
    Capacity-building, to ensure that the WTO's less advanced 
members can implement commitments, use dispute settlement 
effectively and take maximum advantage of market access 
opportunities. This plan is based on our close consultation 
with our partners in Geneva to ensure that technical assistance 
and capacity-building programs meet their actual needs and 
practical experience. This is to our advantage, as it will help 
these countries grow and become better markets for U.S. goods 
and services. Specific areas here would include:
      Improve cooperation, coordination and 
effectiveness among international organizations in identifying 
and delivering technical assistance;
      Build upon and expand the ``Integrated 
Framework'' concept adopted to help least developed countries 
implement commitments;
      Ensure the most effective use of resources on 
technical assistance programs;
      Strengthen capacity-building in regulatory and 
other infrastructure needs; and
      Explore a development partner program for the 
least-developed nations.
    Trade Facilitation, which will ensure that U.S. small and 
medium-sized businesses as well as less developed economies can 
take full advantage of the market-opening commitments created 
by the Round. Here, objectives would include:
      Clarifying and strengthening the transparency 
requirements of WTO Agreements; and
      Helping to improve customs procedures, so as to 
increase transparency and facilitate more rapid release of 
goods, ensuring that our exports reach foreign markets more 
rapidly.

                      III. Toward the Ministerial

    In the months ahead, we will be working with our trading 
partners to develop consensus on the negotiating agenda 
(including issues of timing, and benchmarks to ensure that the 
negotiations begin and end promptly), preparing logistically 
for a successful meeting in Seattle, and continue to consult 
with the Subcommittee and Congress as a whole on specific 
negotiating objectives in each area. At the same time, we also 
hope to reach consensus on several initiatives which would both 
help build the foundation of a successful Round, and take 
advantage of existing opportunities to open markets and reform 
the WTO. They would include:

1. Accessions

    First, the accession of new WTO Members, on commercially 
meaningful grounds, is a major endeavor and critical for the 
creation of a fair, open and prosperous world economy.
    Since 1995, seven new Members have joined: Bulgaria, 
Ecuador, Kyrgyzstan, Latvia, Mongolia, Panama and Slovenia, 
with Estonia soon to follow. With 31 more accession applicants, 
we look forward to further accessions on a similar basis in the 
months ahead. Georgia just completed its working party process 
and a number of others may soon follow, in advance of the 
Seattle meeting. Already this year, we have completed bilateral 
negotiations with Taiwan and made significant progress on the 
accessions of Albania, Armenia, China, Croatia, Jordan, 
Lithuania, Moldova and Oman. We have also held important and 
fruitful meetings with Russia, Saudi Arabia and Ukraine.
    Our hope is that a number of these applicants will have 
completed their accessions by November. Clearly, however, not 
all of the applicants will complete their accession processes 
by the Ministerial and the opening of the new Round. In these 
cases, as was the case in the Uruguay Round, we would work with 
Congress and our trading partners to develop an acceptable 
formula under which these economies could be involved in the 
new negotiations while moving ahead with accession.

2. Dispute Settlement Review

    Second, to promote American rights and interests, and to 
ensure the credibility of the WTO as an institution, a dispute 
settlement system that helps to ensure compliance with WTO 
agreements, provides clarity in areas of dispute, and is open 
to public observers is of great importance.
    Our experience thus far with dispute settlement has been 
generally positive: we have used the system more than any other 
WTO member, with many successful results. The European Union's 
failure to implement panel results in two cases, however, has 
been very troubling, and we hope to ensure that in the future, 
losing parties comply or face penalties in a more timely 
fashion. Likewise, we believe the system can be more responsive 
to citizen concerns in a number of ways.
    Thus, in the ongoing Dispute Settlement Review at the WTO, 
we are seeking greater transparency and ensuring timely 
implementation of panel findings. We are particularly 
interested in providing for earlier circulation of information 
on panel reports, making parties' submissions to panels public, 
allowing for submission of amicus briefs and opening the 
hearings to observers from the public. Our hope is to conclude 
this work by the Ministerial.

3. Electronic Commerce

    As I noted earlier, we have begun a long-term work program 
in the WTO to ensure the unimpeded development of electronic 
commerce. In the immediate future, our priority is to avoid the 
imposition of tariffs on electronic commerce. No WTO member now 
considers electronic transmissions as imports subject to 
customs duties--a policy affirmed when we led in securing in 
last May's ``standstill'' on e-commerce tariffs. We are working 
to secure consensus on extending this policy by the 
Ministerial, which would help us prevent the imposition of an 
enormous new burden on this new method of trade.

4. Accelerated Tariff Liberalization and Information Technology 
Agreement II

    Fourth, we hope to achieve agreements which expand market 
access opportunities in areas of interest to U.S. producers and 
to our trading partners by the time of the Ministerial. The two 
areas of special concentration include:
      Accelerated Tariff Liberalization--Eliminating or 
harmonizing tariffs in chemicals; energy equipment; 
environmental goods; fish and fishery products; gems and 
jewelry; medical equipment and scientific instruments; toys; 
and forest products; and
      ITA II--An ``Information Technology Agreement 
II'' adding new products (e.g. radar equipment, computer 
accessories, consumer electronics and printed circuit boards) 
to the sectors already covered by the first ITA.

5. Collaboration with Other International Organizations

    Fifth, we are working toward making the WTO more able to 
collaborate with international institutions to support economic 
stability and stability through mutual observer status, joint 
research programs when appropriate, and other specific 
initiatives. Such organizations would include the World Bank, 
the International Monetary Fund, the International Labor 
Organization, the UN Environmental Program, the UN Development 
Program, the OECD, UNCTAD, and others.

6. Transparency

    Sixth, specific measures to improve transparency, both as 
an institutional matter within the WTO, and in governance 
worldwide. The two priorities for the months ahead include:
      WTO--The WTO should ensure maximum understanding 
and access to meetings and procedures, consistent with the 
government-to-government character of the institution. As I 
noted earlier, dispute settlement is a special focus for this 
work. Essential goals include such additional measures as more 
rapid publication of panel reports, and more rapid de-
restriction of documents.
      Transparency in Government Procurement--The WTO 
can also help to promote transparency and good governance 
worldwide. In this regard, an agreement on transparency in 
procurement would create more predictable and competitive 
bidding, which would reduce opportunities for bribery and 
corruption, and help ensure more effective allocation of 
resources.

7. Recognizing Stakeholder Interests

    Seventh and finally, it is clear that the interest in the 
WTO and its work of civil society organizations (including 
businesses, labor organizations, agricultural producers, 
women's organizations, environmental groups, academic 
associations and others) is growing. Likewise, delegations and 
WTO staff will benefit from hearing a broad range of opinions 
and views on the development of trade policy. We are thus 
working toward consensus on methods for such stakeholder 
organizations to observe meetings as appropriate, and share 
views as delegations develop policy.

                               Conclusion

    In summary, Mr. Chairman, the United States in the months 
ahead has a remarkable opportunity.
    Our predecessors in ten Administrations and twenty-five 
Congresses have left us a legacy of bipartisan commitment and 
achievement in creating a fair and open world trading system. 
As a result of their work, American workers are more 
productive, American companies more competitive and American 
families more prosperous than ever before.
    In the years ahead, we can do the same for the next 
generation, if we work together to ensure that the WTO is 
adapted to address new areas of commere, persistent trade 
barriers, and the concerns of our citizens. As host and Chair 
of the Seattle Ministerial Conference, we have a keen 
responsibility to help create and bring to completion the 
agenda that will realize this vision. We look forward to 
working in partnership with the Members of this Committee to do 
so.
    Thank you very much.
      

                                


    Chairman Crane. Thank you, Ms. Esserman. How does the 
administration foresee the issue of labor being addressed in 
the upcoming WTO ministerial?
    Ms. Esserman. Mr. Chairman, we are working on this issue in 
a number of ways, and we have been consulting broadly on the 
issue with the labor community, with your Subcommittee, and 
other Members of Congress. Let me outline how we see it to 
date, but I will tell you that we are still in the process of 
formulating our ideas here.
    First, as I said, we think it is very important that the 
WTO ensure the maximum benefits for the largest number of 
people, working people in the world. And there are a number of 
things that we are thinking about to support that goal. First, 
we think it is important that the WTO have a better labor 
perspective and to that end we support International Labor 
Organization observership.
    Also, the United States on a routine basis raises, in all 
the reviews of individual countries--the reviews of their trade 
regimes--we raise to the attention of the WTO these countries' 
compliance with core labor standards.
    Third, we have been working and trying to expand the base 
of countries that share our perspective on the importance of 
respect for core labor standards.
    And fourth, we have indicated to the WTO that we intend to 
pursue a work program on the relationship between trade and 
labor as called for in the Uruguay Round Agreements Act.
    Chairman Crane. There is strong support in the U.S. 
agriculture community for treating the negotiations as a single 
undertaking that encompasses all sectors and this group 
suggests that a comprehensive set of concessions has to be on 
the table in order to achieve the reforms we are seeking in 
agriculture from our trading partners. Many U.S. industrial and 
service sectors on the other hand want to negotiate, in effect, 
``early harvests'' on some issues. How does USTR propose to 
reconcile these two divergent approaches to the overall 
structure of the negotiations and is there a way to assure both 
groups that their interests will not be compromised?
    Ms. Esserman. Mr. Chairman, I do believe there is a way to 
ensure both groups that their interests will not be 
compromised. Here is how we are approaching this issue.
    First, we have said repeatedly, Ambassador Barshefsky has 
said repeatedly, it is most important that as we shape the 
structure of these negotiations, we first decide appropriate 
subjects for negotiation. Once we decide the subjects for 
negotiation, then we will determine how all of these subject 
areas will be negotiated.
    In other words--let me just say, basically we envision that 
the core of the negotiations will be market access. And here 
what we would envision is that at the end, we would have a 
broad basis of areas for concessions so that there would be a 
sufficiently attractive package for all of these groups. The 
way in which we believe we can fit the interests of both groups 
is that we are pursuing early results for the eight sectors 
involved in the accelerated tariff liberalization initiative 
and here we believe that the way to bridge the gap is that the 
ultimate final implementation of the results with respect to 
these eight sectors would be contingent on the completion of an 
overall broad package at end of the round.
    Chairman Crane. It has come to my attention that U.S. 
businesses, particularly accounting firms, are being 
handicapped by national laws and procedures which restrict 
their ability to get the right people to the right place at the 
right time. I was pleased to see mention a movement of natural 
persons as an area ripe for negotiation in your recently tabled 
services paper. Can you elaborate on our plans to proceed on 
this important issue in the upcoming round of negotiations?
    Ms. Esserman. At this point, let me just say that that is a 
broad area for pursuit in the services negotiation. At this 
point I don't have further details about it, but I would be 
happy to follow up with you on this issue.
    Chairman Crane. Thank you. And finally, if we are serious 
about reducing trade barriers we will have to acknowledge that 
it is a reciprocal proposition and we cannot start by taking 
whole industries off the table. If we do, other countries will 
do likewise. And our opportunities to open foreign markets will 
be gone. Does the administration agree that our peak tariffs on 
agricultural products are subject to negotiation in the Seattle 
Round? And why isn't a formula approach to tariff cuts the 
fairest way to proceed?
    Ms. Esserman. Let me just say that we have not just 
determined the best way to proceed. Obviously, we want to 
achieve the maximum benefits for our exporting community, and 
so we haven't determined, given the fact that overall our 
tariffs are lower, substantially lower than other countries' 
tariffs, whether or not a formula approach would be the best 
way to proceed.
    Chairman Crane. Thank you very much. Mr. Levin.
    Mr. Levin. Thank you. Welcome. Your testimony did touch 
this more comprehensively than you had a chance to recite here, 
because of time, on issues of compliance and transparency. And 
I just want to urge, as you know, that there be some 
considerable emphasis on these issues. They are part of the 
ongoing or not yet ongoing discussions with China and WTO. And 
there are immense problems of transparency of compliance that 
need to be resolved in that economy and operating in that 
economy. And I do think that our WTO accession agreements have 
to address these issues.
    Also, though, there has to be a regimen within the WTO on 
compliance and transparency that applies to everybody, 
including new members and emerging economies where transparency 
often is pretty opaque. So I welcome your emphasis on those 
areas.
    Mr. Crane raised the issue of the role of labor in Seattle. 
So I just want to say a few words about that and you can 
comment if you want. You said the issue of labor will be a high 
priority, and I hope everyone hears that. It may be a bit 
confusing when you say the core of the negotiations is market 
access. It is not clear to me how you put those two together 
plus your other high priorities, and maybe there needs to be 
some attention, further attention to the language that is used. 
But let me say just a word so we all understand what is 
involved, you cited the President in his statement at the ILO 
about people everywhere having a stake in the progress in 
providing everywhere that families have the basic benefits of a 
just society. The President has repeated elsewhere in his talk 
about a leveling up, not a leveling down. I think everybody 
should understand what is at stake in terms of U.S. policy is 
indeed a concern about the workers everywhere but a primary 
concern about people who work in this country, and the labor 
market issue relates globally, but also primarily to the impact 
of trade agreements on Americans.
    So I hope you will continue your consultations. I hope you 
will be direct. It is the only way we are going to have enough 
discussion so we prepare for Seattle. It gets a little fuzzy 
when you talk about a work program. I don't think anybody or 
most people know what that means. I believe there needs to be a 
hard fight to set up a working group that relates to the labor 
market issues that are vital increasingly within the trade 
equation. And we just all have to discuss it and prepare for 
that and be prepared to make a hard fight at Seattle. As you 
say, it is a high priority and when anybody says it is a high 
priority, the test of it is how hard they fight for it.
    I don't know if you want to respond. There are lots of 
other parts of your testimony and we are eager to consult and, 
more than consult, discuss these issues with you as well as 
China-WTO if the negotiations recommence.
    I want to end by just emphasizing there isn't much time for 
a major round. We have only a few months now to fully get ready 
and August isn't, except for some of you and maybe some of us, 
the busiest work period. So I wish you good luck and I just 
hope that you will be clear and direct. And if there is 
controversy, let's try to have it energize us instead of 
freezing us in place. End of question.
    Chairman Crane. Mr. Houghton.
    Do you want to respond?
    Ms. Esserman. I would just say, Congressman Levin, I very 
much appreciate your remarks and we certainly share your 
concern and interest in this issue and we look forward to 
working with you and other Members of the Subcommittee to make 
sure the goals and the initiatives in this area are concrete.
    Mr. Levin. Thank you.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Thank you very much. Well, Ms. Esserman, you 
do a great job. It is wonderful to have you here. Thanks very 
much for your testimony. I really have two basic questions. One 
is in terms of 301. Is there any thought of the administration 
reopening any of the antidumping and implementing provisions 
that were negotiated in the Uruguay Round in Seattle? Then, 
maybe could you take a crack at that. Then I got another 
question.
    Ms. Esserman. I can answer that very clearly. The United 
States is firm that it is not appropriate to have antidumping 
as a subject for negotiation in the next round.
    Mr. Houghton. OK. Well, that is good. Now, the Secretary, 
looking at your testimony, it seems to me that it is working up 
toward the Seattle Ministerial Conference. There is really a 
set of two categories: one is the housekeeping, the other is 
the content. Housekeeping meaning accessions, dispute, 
settlement review, collaboration, transparency, recognizing the 
stakeholder interest, things like that.
    Now, they may be most important but it would seem to me in 
terms of the overall thrust of trying to generate business for 
the United States, that the accelerated tariff liberalization 
and electronic commerce are going to be really, really 
critical. You talk about market access. You know, it seems to 
me that we talk market access and many of the people that we 
sell to or import from talk market access, but there is no sort 
of monitoring. You obviously can see this in terms of our 
current account deficit. So when we are talking about things 
that produce more business, produce more jobs, produce more 
opportunities, is there any way to monitor that market access 
so that we really know where we are going?
    Ms. Esserman. Actually now that the WTO is a full 
institution there is a much greater ability to monitor 
countries' compliance with commitments. Perhaps the most 
visible way in which we enforce the commitments is by filing 
dispute settlement cases. But there are also each--there are a 
number of formal Committees in the WTO which serve as a forum 
for raising concerns, about whether a member has complied with 
their commitment, to try to foster compliance, to resolve an 
issue before a dispute settlement needs to happen. And there is 
also a way to monitor compliance with commitments, for example, 
whether or not countries are reducing tariffs according to 
their commitments, whether or not they are providing the true 
commitments that they signed onto in the services agreement.
    So there is a vehicle for doing that now that the WTO is a 
full institution.
    Mr. Houghton. Yeah, but there are nontariff barriers, such 
as in the distribution systems, so that if you take a look at 
the raw numbers in terms of products imported let's say from x 
country and exported and it is going the wrong way for us and 
it is going to be a long time until another ministerial and you 
have all these Committees that you have got to go to, isn't 
there a sort of simple index that we can use to say, hey, you 
know, this isn't really quite what we had in mind?
    Ms. Esserman. You mean a sort of formula for addressing 
some of the things?
    Mr. Houghton. Yeah.
    Ms. Esserman. We are working on some of these issues. These 
are the very things that we are focusing on in this next round. 
A big area for the new round, as I mentioned, is services. And 
here particularly in the distribution area there are a number 
of barriers to our ability to effectively sell and have 
effective distribution in foreign markets, and that is going to 
be a high priority for us and we will think very carefully 
about your question.
    Mr. Houghton. Thanks very much. Thank you, Mr. Chairman.
    Chairman Crane. Mr. Neal.
    Mr. Neal. Thank you, Mr. Chairman. Will there be a direct 
opportunity for labor and business to present their 
recommendations to the ministers at the gathering?
    Ms. Esserman. For labor? I am sorry.
    Mr. Neal. Will there be a direct opportunity for labor and 
business groups and other vital groups as well to present their 
recommendations and perhaps policy suggestions to the 
ministers?
    Ms. Esserman. Yes. First of all, there is an extensive and 
elaborate process here in the United States in which we consult 
and receive advice both written and with extensive meetings 
here on a ongoing basis. But we do think it is very important 
for members of the civil society to have direct access to the 
ministers, not only just to provide submissions but we had an 
experiment in the WTO this year in doing just that. We had a 
high-level meeting on trade and the environment in which 
members of the civil society not only presented their 
submissions but also had a chance to present their views 
publicly to the 135 member governments. We are also 
contemplating doing the very same thing on a range of issues 
the day before the ministerial begins in Seattle.
    Mr. Neal. I see. Now, is there considerable amount of 
prepping that has to occur for the other member nations?
    Ms. Esserman. Is there a considerable amount of?
    Mr. Neal. Prepping. Do you have to prepare them for the 
kinds of questions that they might get from labor and 
environmental groups, for example?
    Ms. Esserman. No, I think that there is a fair, there is a 
fair amount of attention and interest to this issue, but I 
guess the answer is no and yes. Yes, in the sense that, as you 
may know, many governments around the world, countries around 
the world do not share our interest in labor. So there is a 
great deal of work that needs to be done. And we are going to 
talk to other governments about the importance of including the 
labor perspective more broadly into the WTO.
    Mr. Neal. So you are suggesting, then, that this is going 
to be a direct participation, this won't be filtered through?
    Ms. Esserman. We are seeking to include mechanisms for 
direct participation, for venues for direct participation by 
labor groups, by environmental groups, so that they have a 
chance to directly provide their views to the ministers in the 
WTO. This is something that we have been urging on the other 
countries in the WTO. They don't necessarily share our interest 
in doing this, but we very, very strongly advocated doing it in 
the environmental area. We think it was a successful meeting 
and we are going to continue to advocate doing that in other 
areas as well.
    Mr. Neal. So this would be for labor, environmental and 
business groups; they would all have that opportunity?
    Ms. Esserman. Yes, business groups, consumer groups, 
members of society and businesses.
    Mr. Neal. Thank you.
    Chairman Crane. Ms. Dunn.
    Ms. Dunn. Thank you very much, Mr. Chairman. And welcome, 
Ambassador Esserman. It is delightful to have you with us. We 
think you are doing a fine job and appreciate it very much. And 
I might add my invitation to others that Mr. McDermott and I 
have extended to everybody to come to Seattle in the fall and 
we are hopeful that this Subcommittee will be there in some 
form. We look forward to being involved as closely as we can be 
to make it successful.
    I am concerned about the recent FSC, Foreign Sales 
Corporation ruling. And I am very concerned about its impact on 
American business in making us less competitive, which after 
all was the reason for starting the FSC provisions in the first 
place. I am wondering, I am interested in knowing what you 
think will be the effect of the loss of FSC on industries that 
are important to me, the high-tech industry, for example, 
agriculture, that is an important industry to us in Washington 
State. And I am wondering what you plan to do, whether you are 
going to appeal, but I wonder first if you would give us some 
sense of what you believe the impact would be.
    Ms. Esserman. Well, I do think it is premature to determine 
the impact of this. First, we did receive a report that was 
unfavorable to us. It is not finalized yet. So this is the 
first step in the process. We think the panel that made--that 
wrote that report was plain wrong. So we are looking very 
carefully at all of our options and including appeal, which we 
are looking at quite seriously. Especially, given the 
importance of the issue. But it is really premature to assess 
the impact because there are many more steps still in the 
process. Certainly we share your concern about the decision and 
the importance of this.
    Ms. Dunn. You mentioned earlier that you were working 
toward the accession of several countries to the WTO. I have 
not heard a discussion of that before because we are all so 
focused on China I believe right now and the Republic of China 
and the PRC and their accession. Could you give us some sense 
of what is happening with other nations and what you expect to 
see in terms of accession of other nations at the fall WTO?
    Ms. Esserman. Yes. China does receive a huge amount of 
attention here, but meanwhile we have been making a lot of 
progress. A number of eastern--central European countries have 
been making a lot of progress in their accessions and we may 
see about 8 to 10 accessions by the time of the ministerial, 
including Baltic countries, Albania, Georgia, Armenia, and 
others so we view this as a very important development because 
here this great number of countries are making the very 
significant reforms that are necessary to transform their 
economies into market economies.
    Ms. Dunn. And that is so helpful because they will be 
living under the rules from then on. It will be very useful to 
us since we have been so forthright and open to other nations.
    Let me ask you one other question. You had mentioned in 
response to Congressman Crane's question that you were going to 
continue negotiating on accelerated tariff reduction but any 
results might take effect sometime later, I thought is what you 
said. We are concerned on behalf of certain industries. I 
represent the forest products industry, for example, who have 
been working on this issue for years and really would like to 
see it move along. I am wondering if you could clarify that for 
me so that I could pass along to them the sense of the USTR.
    Ms. Esserman. Absolutely. The accelerated tariff 
liberalization initiative is a very important priority for us. 
The President moved forward on this in 1997 in Vancouver and we 
have been pursuing it since. And last year at the APEC leaders 
meeting it was determined this issue would go into the WTO to 
see conclusion in 1999 and we are continuing to work on that. 
It is very important to seek early results in these areas.
    As you know, there have been concerns that Chairman Crane 
mentioned among the agricultural community and, working with 
the agricultural community and those interested in these 
sectors, we believe that we have come up with an approach that 
addresses the interests of these sectors as well as the 
agricultural community. And here there would be an 
implementation of results, provisionally, for example a 
lowering of tariffs early, but the final implementation would 
be contingent and a part of the overall package at the end of 
the round. And that is how we see fitting the two together.
    Ms. Dunn. Good. Thank you very much. I might just say, Mr. 
Chairman, when we were in New Zealand last December we had the 
opportunity to sit down with Mike Moore, who will be the new 
head of the WTO, and New Zealand was a very, very strong 
partner with us at APEC and supported our position completely 
on this. So I think that makes it more hopeful.
    Thank you very much.
    Ms. Esserman. Might I just add right there, if I could, 
just to say, number one, New Zealand is very active in this 
initiative that is so important to us, but also just to say how 
delighted we are that we have Mike Moore as the Director 
General of the WTO. I know that you had expressed your views on 
the importance of having him here. He, I think, will be 
terrific for the WTO, for the United States, because he 
appreciates the importance of trade liberalization to our 
future prosperity. He has a common touch. I think he will be a 
very effective advocate of trade to our people and the world, 
and I think he understands very much the importance of the 
American market.
    Chairman Crane. To which I will add amen.
    Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. Ambassador Esserman, 
thank you for being with us. In your testimony you make mention 
that one of your goals is to reduce existing tariff disparities 
in industrial goods. I don't think there is any sector, at 
least in the American economy, that was required to make 
greater concessions under the Uruguay round than the textile 
and apparel industry.
    And I know the President, I have some of his quotes here 
that he has made with regard to that in November of 1993. The 
President said, and I quote, ``I do recognize and appreciate 
that the U.S. textile and apparel sector has been asked to make 
substantial concessions under the Uruguay round.'' he went on 
to say that the U.S. will, quote, ``insist that our willingness 
to phase out textile quotas be linked directly to the 
achievement of effective market access in individual countries 
by removal of nontariff barriers and lowering tariffs.''
    I understand that countries--Pakistan, for example, are 
asking that we accelerate the removal of some of our barriers, 
yet in some areas, Brazil, Argentina, Pakistan, India, we have 
the most difficult time getting some of our products into those 
countries. Given the concessions that this sector of our 
economy has made, don't you--let me ask you, have you taken a 
posture, any position with regard to textile and apparel 
industry? Are you going to try to protect those industries from 
further concessions being made in this ministerial and what are 
you planning to do to try to open up those other markets that 
are out there for our U.S. textile and apparel products?
    Ms. Esserman. You are quite right, Congressman, that there 
have been a number of these countries calling for us to 
accelerate our liberalization of our expiration of the quotas 
in textiles and we have made quite clear that that is simply 
not in the cards. We will not be doing that. And at the same 
time we have raised concerns about the lack of openness of 
their market, for example, India in particular. And so, we have 
very much been clear on this issue in Geneva.
    Mr. Becerra. So I take that as a clear sign you will do 
what you can to protect the industry as it is and also open up 
those markets that agree they would participate in the free 
trade of those products.
    Ms. Esserman. We are going to be pursuing opening up these 
markets and we have no interest in accelerating the expiration 
of these quotas.
    Mr. Becerra. Thank you for that. I don't know if you heard 
all of the testimony by Members of Congress, but Congressman 
Weller and I focused on the issue of cultural content rules. 
Can you tell me if this is at all an issue that you are 
planning to address at the ministerial in Seattle, the whole 
issue of cultural content? I know it is a big issue with 
Canada, obviously France, other countries as well. Give me the 
Trade Representative's position at this stage on that issue.
    Ms. Esserman. Let me just say generally that the issue of 
culture is a big and important issue and we need to work 
together to ensure that we are most effectively addressing the 
issue. Of course all countries have a right to preserve their 
cultural heritage, but what we are concerned about is when 
those measures are just a disguised form of protectionism.
    Mr. Becerra. Are you planning to raise that though in 
Seattle?
    Ms. Esserman. We are going to be raising and addressing 
these issues and we want to work with you to make sure that we 
are addressing your specific issue. Canada last week in Geneva 
raised the issue of culture. It wasn't quite in the form of a 
proposal, we are not sure what it is; but let me just say that 
we are going to be applying the standard that I just indicated. 
But we would like to work with you to make sure that we are 
fully addressing your concerns.
    Mr. Becerra. One last question, I know we need to run for a 
vote, the TRIPs agreement, the trade-related aspects of 
intellectual property rights agreement, I know that some 
countries have asked to reopen that and I know that we have in 
the year 2002 an opportunity to do just that. Are you planning 
to reopen any type of negotiation on TRIPs before 2002?
    Ms. Esserman. At this point we don't envision reopening the 
TRIPs agreement. Our most important objective here is to ensure 
that other countries comply with their obligations here. That 
is very important to us. We have been working closely with 
industry, with our trading partners around the world, not just 
to wait till when their commitments come due but to work in 
advance of that to ensure that we have the maximum of 
opportunity for countries to be meeting their commitments in 
this important area.
    Mr. Becerra. Please be sure to let us know if you are at 
all thinking of opening that up before 2002 because that would 
concern a number of us who don't see enough progress. And a 
final question, if I could ask, with regard to some of the 
World Intellectual Property Organization, WIPO agreements that 
were reached to try to provide protections for intellectual 
property, I know a number of countries have not ratified some 
of those various agreements. Are you going to try to push to 
see if we can encourage countries to see if we can ratify those 
quickly?
    Ms. Esserman. Yes, we are very much doing that.
    Mr. Becerra. Thank you very much.
    Chairman Crane. Ms. Esserman, I apologize because we don't 
control the procedure over there on the floor, but this is the 
second bells and so the Subcommittee will stand in recess 
subject to call of the Chair. I urge colleagues to run over 
there, vote, and run right back. We will be right back.
    [Recess.]
    Chairman Crane. We apologize, Ms. Esserman, for the 
interruption. I will now yield to our distinguished colleague 
from Minnesota, Mr. Ramstad.
    Mr. Ramstad. Thank you very much, Mr. Chairman, and thank 
you, Madam Ambassador, for your testimony and for the good job 
you are doing.
    Earlier Mr. Levin stressed the need to have fighters for 
America's interest at the WTO Round in Seattle. I can assure 
you Minnesota will be well represented with fighters, our 
delegation will be headed by our Governor, Governor Jesse 
Ventura, and he is a fighter in every sense of the word. And 
like our Governor, all Minnesotans are concerned that our 
farmers get a fair break, which means significant 
liberalization for the agricultural sector.
    I am sure you are familiar with the recent study done by 
the Dutch Agriculture Ministry in preparation for the Seattle 
Ministerial meeting?
    Ms. Esserman. I am not familiar with the specifics of that.
    Mr. Ramstad. This study concluded that dairy compacts in 
our country undermine our position for reduced trade barriers 
for dairy products and that if the United States erects 
barriers like the Northeast Interstate Dairy Compact within our 
country, then we have no standing to negotiate reduction of 
agriculture trade barriers elsewhere. The Northeast Interstate 
Compact expires on September 30 of this year and unfortunately 
there are some in Congress who want it to continue to the 
detriment of efficient dairy farmers in our country by passing 
a bill, H.R. 1402, This would be a death sentence for our dairy 
farmers.
    I would like to first of all, Mr. Chairman, submit this 
letter for the record from Governors Ventura and Tommy Thompson 
of Wisconsin opposing, strongly opposing, H.R. 1402.
    Chairman Crane. Without objection so ordered.
    [The information follows:]
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    Mr. Ramstad. Madam Ambassador, let me just ask you this: 
You don't believe, do you, that it is in our best interest to 
continue with this Northeast Compact?
    The USDA has already testified in opposition to the 
legislation in front of the Agriculture Committee. I think it 
is a fair question. It just seems to me if we let it expire we 
will be on solid footing going into the agriculture 
negotiations.
    Ms. Esserman. Well, I would of course never agree with our 
agriculture--never disagree with our Agriculture Department.
    Mr. Ramstad. You never disagree.
    Ms. Esserman. Would not disagree with our Agriculture 
Department. I understand that Secretary Glickman has, if I 
understand it correctly, has opposed the market ordering aspect 
of this particular package but not the support aspect of it. 
And from that standpoint, we have looked at the support aspect 
of it. By itself it does not violate international trade 
obligations.
    Mr. Ramstad. So you don't agree with the Dutch Ministry of 
Agriculture, the Dutch study that really concluded our Federal 
dairy policy violates the WTO rules? That is their bottom line.
    Ms. Esserman. As I said, I have not even seen this study 
and I would be loathe to disagree--loathe to agree with the 
conclusion of a study that I have never seen.
    Mr. Ramstad. I will be happy to share that with you as well 
as with Members of the Subcommittee.
    Thank you for your very candid, straightforward answer that 
you share Senator Glickman's opposition to continuing this 
compact.
    For my remaining minutes, could you just elaborate about 
how provisional implementation works and is it realistic?
    Ms. Esserman. I do think it is realistic. I think this is a 
good way to ensure that we are securing the goals of our 
agriculture community and also ensuring that we serve the 
interests of our industrial base. First, as I said at the 
outset, it is critically important to succeed that we have a 
broad package at the end of the day, at the conclusion of the 
round to ensure that all of our interests are served and that 
our agriculture community's interests are served.
    The accelerated tariff liberalization initiative includes 
initiatives that fully were pursued in the Uruguay round and in 
fact in the Uruguay Round Agreements Act there is direction to 
us to continue to pursue early liberalization in these areas. 
So we are going to continue to pursue results, early results. 
We believe the way to meld the interest is they would be 
achieved on a provisional basis, on a provisional early basis, 
and then made permanent at the end of the round, so that these 
industries continue to have a stake in the negotiations until 
the final day, which is very important to our agriculture 
community.
    Mr. Ramstad. Thank you, Madam Ambassador.
    Thank you, Mr. Chairman.
    Chairman Crane. Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman, and, Ambassador 
Esserman, thank you for your testimony today. I told you in 
advance what my question was going to be but let me lead up to 
it by saying as a free trader and someone who strongly supports 
an effective WTO, I share the ambitious agenda you have for the 
ministerial and for the new round and indeed hope to work with 
you to make that possible. It includes improving the WTO as you 
stated in your testimony.
    You have also said that the first step is to ensure 
compliance with existing agreements, and I think that is fine. 
I would go one step before that and say we need to ensure 
compliance with existing dispute resolutions, the settlements 
that we have already entered into that are not yet being 
implemented where we still don't have relief for U.S. industry. 
Again as a free trader and someone who is very interested in 
accession of China to the WTO and in the viability of the WTO 
system, I am very concerned about the fact that we are not 
ensuring just that those agreements that we have made since the 
last round are being implemented, but that indeed the dispute 
resolutions are being taken seriously. With the beef and banana 
cases, taken together, with the Europeans we have about $300 
million in retaliation now against the European Union, and many 
on the Hill frankly think we have achieved a victory, and it is 
off a lot of people's radar screens. That concerns me because 
in fact we have absolutely no relief in sight for the U.S. 
industries affected. In the banana case, as you know, there is 
a possibility of that but the Europeans have continued to put 
forward regimes that are even more illegal along the lines of 
the WTO illegal regime that was already determined as such by 
two GATT panels and WTO. In the beef case, heads of state are 
going around saying we will never comply.
    So I guess my focus would be to be sure that this system 
works, the standard of success is going to be whether U.S. 
industry receives the relief that is due them under 
international trading rules, and as you and I have talked about 
in the past and I have talked to your predecessors about this, 
I feel strongly that in order for us to have the free trade 
caucus here on the Hill prevail on a number of issues, 
including WTO accession issues but also on fast track and other 
issues, we have to show the current system works.
    I would ask you today if that is your agency's standard of 
success and, if so, what can we do to increase the likelihood 
that with that standard of success measurable relief will 
indeed be provided to U.S. companies in these and other cases.
    Ms. Esserman. Congressman, well, I share your views about 
the problems of compliance, compliance not only with agreements 
but compliance with dispute panel rulings. I also share your 
view that the ultimate test of success is getting results for 
our industry. And to that end, we are deeply disappointed by 
the European Union's behavior in both of these disputes. I 
might say that they are alone in how they have responded to 
dispute settlement panel rulings. Even Japan has complied with 
dispute settlement panel rulings. So while we do believe we 
need to amend the dispute settlement mechanism and we are 
working intensely on it now because the banana episode 
certainly showed that we needed to make some improvements, the 
big problem is Europe and not more than the dispute settlement 
system itself.
    Let me just talk about bananas and beef and a little bit 
about the reform. I do believe that the combined effect of the 
retaliation in the two cases is starting to have effect. And by 
effect, I mean that the private sector interests, that upon 
which the retaliation is imposed, the 100 percent duties, are 
now beginning to feel the pinch and they recognize that there 
are consequences if their government does not comply with panel 
rulings, and we have gotten a number of indications that that 
is so. And that is the point of having retaliation, so that--
you cannot have retaliation, as we all know, because that does 
not bring the benefits to the industry, but to put maximum 
pressure on the government ultimately to comply, and that is 
what our goal is here.
    Mr. Portman. Again I would restate in a slightly different 
way what I said earlier, which is if these cases cannot be 
resolved fairly with our allies, admittedly the Europeans have 
been the most flagrant violators, then it is hard for many of 
my colleagues on the Hill to understand how we can ever expect 
a country like China or other countries that we like to see 
accede to the WTO comply with similar rulings. I would hope 
that these cases they are precedent cases certainly for 
agriculture, and I would argue for the WTO dispute settlement 
system in general, continue to be a top focus of USTR.
    I commend you for your success in the litigation but now it 
is a question of implementation. I encourage you to turn up the 
heat and be sure that these two cases are resolved and others 
that are outstanding. As you said earlier, the Europeans are 
one country that has most commonly been out of compliance with 
these cases. It is important to note and get on the record that 
the U.S. has indeed complied every time the United States has 
been found in violation of a WTO ruling.
    Ms. Esserman. Let me assure you that this remains a top 
priority for us because retaliation is not the answer. In 
addition, we are also working to reform the dispute settlement 
mechanism itself because we do not want a country as Europe did 
to seek to exploit ambiguities in the rulings. What we are now 
seeking is to have a clarity about the procedure that should be 
employed if a country is questioning whether or not another 
country has truly taken effective compliance measures 
consistent with the panel ruling. So here we are setting up 
very clear procedures and we are also seeking to take time, 
shorten the--take time out of the early phases of the dispute 
settlement process. So we are working at bottom to secure more 
effective compliance rules.
    Mr. Portman. I know I am over my time, I apologize, but the 
finality of the rulings is very important. I know we have 
talked about the endless loop before. I was going to talk about 
that with a later panel, but I know USTR has also focused on 
that. If we are going to glue up the WTO we have to have 
finality in these cases so countries cannot continue to 
endlessly elongate the litigation.
    Ms. Esserman. Right. Finality is what we are trying to 
achieve here.
    Chairman Crane. Mr. Weller.
    Mr. Weller. Thank you, Mr. Chairman. Good afternoon, 
Ambassador. Appreciate the opportunity to talk with you. 
Earlier when I testified before this Subcommittee I raised the 
issue of the loss of domestic film industry jobs and economic 
impact of the issue of runaway production, a study done by the 
Directors Guild and Screen Actors Guild which was recently 
released, and you may not have seen that yet, but they 
estimate, according to the study, that we have lost about 
125,000 domestic film industry jobs over the last decade. The 
problem is accelerating. We have lost 20,000 film production 
jobs in the United States last year and if it continues to 
escalate at the current trend we could see as many as 35,000, 
36,000 jobs lost next year.
    So representing the Chicago area and concerned about in 
other communities around this country where film production is 
an important part of our economy, I believe that the issue of 
runaway production particularly, as well as the cultural 
content issue, should be on the table at the upcoming Seattle 
Round. And I guess what are you familiar--to begin with, let me 
just ask, are you familiar with the cultural content issue?
    Ms. Esserman. I am familiar to some degree with this issue.
    Mr. Weller. Well, do you believe that the Canadian cultural 
content rules, are they designed to solely protect Canadian 
culture or do you believe that to some extent these rules are 
more designed to protect Canadian jobs or actually create 
additional jobs and attract them from the United States?
    Ms. Esserman. Well, Congressman, we certainly understand a 
country's right to take legitimate measures to promote their 
culture, but we do have concerns about measures such as some of 
these that are really economic protection in disguise. I don't 
know all of the particulars in this area. But as I mentioned to 
Congressman Becerra earlier, we would be pleased to work with 
you to make sure we have this fully on the agenda in a way that 
serves the interests of this sector.
    I know there are a number of factors here that have 
contributed to the runaway jobs, including the incentives, also 
wage rates and exchange rates, which are a little bit more 
difficult to address, as I know you must appreciate. But we 
want to work with you to make sure we have a full appreciation 
and we are most fully achieving what we can for this sector.
    Mr. Weller. Ambassador, it appears when the television 
stations in any of the networks that serve Canada are required 
to have at least 60 percent of their programming be Canadian 
cultural content, that it makes it very difficult for American-
produced television as well as films to be shown in Canada. At 
the same time they turn right around and through some very 
aggressive financial incentives are working to attract our 
jobs.
    Let me ask you: Is it your view that the cultural content 
rules, that Canada is applying them fairly? Obviously I think 
we all want to protect the culture of the individual countries. 
And personally representing Chicago area, having Blues Brothers 
2000 filmed in Canada had an impact on our culture because 
Blues Brothers are part of our culture in Chicago. But do you 
believe that the rules as the Canadian Government is currently 
administering them, are they applied fairly and evenly across 
the board?
    Ms. Esserman. Congressman, I am not familiar with all the 
particulars here, but we have a number of concerns about the 
protective effect of these rules, culture rules in Canada.
    Mr. Weller. Are you familiar with the point system that 
they use to qualify for tax incentives?
    Ms. Esserman. I am not familiar with the specific figures 
of it, but I would be delighted to become familiar to make sure 
we are fully looking at that issue.
    Mr. Weller. I welcome the opportunity to sit down with you 
relatively soon to discuss this issue. Clearly it is a major 
economic issue not only in Chicago but nationally. We have 
spent a lot of attention over the last 9 to 12 months talking 
about the loss of the steel industry jobs. We have lost 10,000 
steel industry jobs in the past year, we have lost twice as 
many film industry jobs. It is clearly an issue that must be on 
the table.
    I look forward to working with you and look forward to 
sitting down with you shortly. Thank you, Ambassador. Thank 
you, Mr. Chairman.
    Chairman Crane. Mr. English.
    Mr. English. Thank you, Mr. Chairman. Ambassador Esserman, 
welcome, and your comments as always are thoughtful and useful. 
I wanted to pursue a line of questioning that Mr. Houghton had 
opened up where I would welcome your elaboration. And I want to 
start by reading a couple of lines from an article that was 
published yesterday in Korea. ``Seoul will join forces with 
Japan, India, Brazil and the Association of Southeast Asian 
Nations to revise the antidumping agreement of the World Trade 
Organization and thus eradicate the possibility of abuses by 
the world's main trading nations, a foreign affairs trade 
ministry industry official said yesterday. The antidumping 
agreement is one of the hottest issues under discussion in the 
process of launching the so-called new round negotiations.''
    Now, given your comment to Mr. Houghton that the 
administration would resist reopening the antidumping 
agreement, may I ask, given the effort that is being made here 
by some of those countries that certainly in the case of steel 
have clearly been identified as being involved in dumping on 
our domestic market, what is the administration's plan to 
prevent the Seattle Round from resulting in a weakening of our 
rules against unfair trade and given the commitment of these 
countries to try to make this one of the focuses of the Seattle 
Round? How committed is the administration and what is the 
administration's strategy for heading off this result?
    Ms. Esserman. Congressman English, let me assure you that 
we are very committed to head this off. I am quite aware of the 
determination of Japan and Korea and some of the ASEAN 
countries. But what I would like to do is have--I think I do 
have an opportunity to meet with you tomorrow. I would like to 
use that occasion to go into our strategy, which is quite 
detailed, but I would share it with you privately rather than 
have our trading partners have a chance to hear that.
    Mr. English. I will certainly take that opportunity and I 
will take that as a very positive response on your part and I 
look forward to that meeting.
    On a separate issue, obviously we are in the process of a 
negotiation with China that will eventually lead to the 
resolution of their accession into the WTO. But separately, we 
have had a negotiation with the government in place on Taiwan. 
And it seems that Taiwan is in a more advanced place for being 
considered as a candidate for WTO membership. On Taiwanese 
accession, do you feel it is possible that the WTO could 
consider Taiwan for membership without creating a sovereignty 
issue with China?
    And let me express in my view, Taiwan should be considered 
separately from China. And if Taiwan is in a position for WTO 
membership, my hope is that they will be considered. Can you 
comment on Taiwanese accession in and the administration's view 
of this issue.
    Ms. Esserman. It is true that at this moment that the 
Taiwan accession is more advanced than the China accession. And 
we--there was a working party or meeting in Geneva last week I 
believe or last Friday on the Taiwanese accession. Let me 
simply say that we are going to continue to work with Taiwan on 
its accession and you know we look to the successful accession 
of both Taiwan and China.
    Mr. English. Outstanding.
    Mr. Chairman, that concludes my questioning. Again, 
Ambassador, I thank you for the opportunity to pursue this 
line.
    There are many of us in Congress who are very concerned 
that the Seattle Round may become a focus for an effort to 
water down some of the basic protections that we are able to 
provide under current WTO rules for domestic industries that 
are the target specifically of unfair trade practices. Mr. 
Cardin and I have legislation which we hope the administration 
will favorably consider over time to strengthen our existing 
laws in America to allow remedies to our domestic companies and 
workers in some of these situations.
    We welcome your examination of that legislation which is 
WTO consistent, and I look forward to our dialog.
    Ms. Esserman. Thank you.
    Chairman Crane. Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman. And Ambassador, 
always great to see you. You know, we know that free trade 
depends upon fair trade. And I think we reflect, we study, we 
realize we have got to have or need a WTO to make sure we have 
fairness, and we assure compliance.
    And I look forward to the Seattle round on November 30. I 
think we have tremendous opportunities and I am a person who 
wants to see those opportunities made available for the next 
generation in the 21st century and there is no question our 
maintaining and sustaining a strong economic growth depends on 
our being in the trade arena. I got a couple questions and I 
would like to ask you. Because I think the WTO's credibility is 
at stake. I have--I don't apologize but I have become obnoxious 
about the beef deal. I know I have. I pound the table, I have 
shouted, I have jumped up and down and got out of character 
because I think we have not fulfilled our commitment to that 
particular industry. And I think we slighted that situation.
    And let me say I am not a negotiator, I guess I could say 
maybe I have been a horse trader to a certain extent, but 10 
years ago we realized that the European Union on banning the 
beef hormones on our beef coming into that country, they held 
us at bay for 10 years. Then we go through all the appeals. And 
then basically finally said, well, after that period of time, 
looking through $900 million possible tariffs, we said there is 
$205 million penalty, or $205 million that your shop, USTR 
said, hey, we are going to finally come up with European Union, 
the WTO. I will put it that way. The WTO finally said $116 
million. That is nearly $90 million that we sent there. And I 
didn't hear no screaming, no position being discussed about 
that. That is an 84-percent reduction. That is a win in 
anyone's position on someone else's part. I think we got to 
have stronger teeth.
    And this is where I want to go to your point. You stated 
``European Union's failure to implement panel results in two 
cases, however, has been troubling and we hope to ensure that 
the future losing parties comply to face penalties in a more 
timely fashion.''
    Ambassador, ``we hope to ensure.'' What are we doing to put 
some teeth in it? ``We hope'' is feeble. It is wimpish if I can 
say that. What are we doing? I think we have to be strong if we 
are--if we are going to put some backbone behind the WTO on 
this stuff. I have high hopes of Mike Moore from New Zealand. 
In fact, I am going to New Zealand during August and we will be 
meeting some folks down there on trade. But what are we doing 
there when you say ``we hope'' ?
    Ms. Esserman. Well, Congressman, I regret that you said the 
word ``hope.'' we are working with great resolve to try to 
achieve results in two ways. First, as I mentioned to 
Congressman Portman, to correct, to amend the dispute 
settlement rules so there is clarity in dealing with the 
situation like Europe where a country is not seeking to comply 
but seeking to drag its feet. So we are trying to set up rules 
where there will be a time certain where countries pay the 
consequences for failure to implement panel rulings. So we are 
changing the rules.
    And second, on beef, we share your disappointment in that 
retaliation is not the end that we are seeking for the beef 
industry. However, the retaliation, as I mentioned to 
Congressman Portman, is now starting to have its effect. There 
are many, many producers in Europe who are now feeling the 
effects of this retaliation, which is, after all, 100 percent 
of the value of a product. We impose 100 percent retaliation.
    These companies are feeling the effect of the retaliation. 
And now the government is forced to see the consequences of its 
failure to come in compliance. I am not saying that we are 
there yet, but we--and we don't feel that we are there yet, not 
at all, because there is no result here. We share your 
frustration.
    Mr. Watkins. Let me if I could, Mr. Chairman, could you 
provide us instead of saying--instead of saying hoping, could 
you provide us those steps that you are planning on taking and 
recommending and also about the--you said ensuring timely 
implementation? Also what we are going to be doing to try to 
ensure timely implementations? Can you provide it for me and 
also the Subcommittee?
    Ms. Esserman. I would be pleased to do that.
    Mr. Watkins. I wonder about us saying we are not going to 
take up antidumping discussions at the Seattle WTO meeting 
because it is an issue in the steel industry, it is an issue in 
the oil industry, it is an issue now with Mexico, saying maybe 
going to put 215-percent tariffs on some agriculture going into 
Mexico. How can we say, stand idly by and say we are not going 
to discuss that or have that on the agenda there. That is one 
question. And who is handling the antidumping in your shop at 
the USTR in the discussion so I can discuss some things with 
them?
    Ms. Esserman. I am, and I would be delighted to discuss 
those issues with you. We believe that it is very important to 
the United States' interests to have strong and effective 
antidumping laws. And the purpose of Japan and Korea and the 
ASEAN countries is to weaken those disciplines. I think we have 
seen in the course of this steel crisis how incredibly 
important it is to have strong and effective rulings against 
unfair trade. It is the basis upon which we can move forward 
boldly to open up our markets.
    So that is the basis for the position. I would be pleased 
to come and talk to you.
    Mr. Watkins. I would welcome that. I say this in high hopes 
also, for the future for the WTO, try and make sure that we 
have free and fair trade around. I try to confront it in a 
positive way, because I want it to work. I want us to make sure 
we assure our industries across--whether it is bananas or beef, 
the other aspects of it, make sure that we know that we are 
making the fairness a major issue by making sure they follow 
what we have agreed to.
    So, again, I will say in a very positive way, I hope and I 
know that we have got to be there. I want to, I am pushing 
that. I want a 21st century globally competitive economy. Build 
a trading center in Oklahoma.
    I want to make sure that we are out in front leading 
because our future if we are going to be an economic power has 
to be out there in trade.
    Thank you for the job you are doing.
    Ms. Esserman. Thank you.
    Chairman Crane. Let me thank you, Madam Ambassador. We 
appreciate your patience. We apologize for the disruption 
during your appearance today.
    With that, we will excuse you and welcome our next panel.
    [Questions submitted by Chairman Crane and Ambassador 
Barshefsky's responses follow:]

Questions Submitted for the record By Congressman Philip M. Crane for 
Ambassador Charlene Barshefsky

  Question 1: As you know, I am concerned about using the WTO to deal 
with labor issues that are not related to trade and for which there is 
       no national or international consensus. Please detail the 
      Administration's plan to handle labor issues at the Seattle 
                              Ministerial.

Answer 1:

    The implementing legislation for the Uruguay round requires the 
President to seek the establishment of a WTO Working Party on trade and 
labor standards. We sought to accomplish this at the Singapore 
Ministerial meeting but were not successful. At Seattle we again will 
attempt to obtain the establishment of a Working Group on Trade and 
Labor. The purpose of this Group is to have a serious examination--
through discussion and analysis--of a number of trade related labor 
topics. We believe that the International Labor Organization, the World 
Bank, the International Monetary Fund, and the United Nations 
Conference on Trade and Development should collaborate on this work. In 
this regard, we also feel that the ILO should be given observer status 
at the ILO. The Working Group would prepare a report for submission to 
the next WTO Ministerial.
    We recognize that ILO is the preeminent international labor 
organization. It has energetic, new leadership, and it has negotiated 
significant agreements in the past year involving core labor standards 
and exploitative child labor. However, there are important issues 
involving the relationship between trade and labor that require 
consideration at the international level, and the ILO is not equipped 
to undertake this review. On the other hand, the WTO, working with 
other international institutions, can make a valuable contribution to 
the understanding of these issues. Our WTO proposal outlines six trade 
related labor issues; these are all issues that can benefit from the 
WTO's comparative advantage as the international community attempts to 
understand them better. We have proposed a constructive and supportive 
role for the WTO in the labor area.

    Question 2: During the August 5th Trade Subcommittee hearing, I 
    indicated that I was concerned that U.S. businesses were being 
handicapped by national laws and procedures that restrict their ability 
  to get the right people to the right place at the right time. I was 
 pleased to see mention of ``movement of natural persons'' as an area 
 ripe for negotiations in your recently tabled services paper. I would 
 appreciate an explanation of your plans to proceed on this important 
 issue in the upcoming round of negotiations which will be launched in 
                                Seattle.

Answer 2:

    To maintain their competitiveness in foreign markets, U.S. services 
companies often require the ability to bring along their top personnel 
to manage operations and perform specialized tasks overseas. Some U.S. 
companies also perform short-term consultancy or other work requiring 
brief visits. The WTO General Agreement on Trade in Services (GATS) 
recognizes this by creating a category for temporary entry of ``natural 
persons'' as service suppliers. Further, there is work underway in the 
GATS to promote greater transparency in government regulation, an area 
that U.S. companies have identified as a particular problem with 
respect to such temporary entry
    in foreign countries.
    We are working with U.S. companies to help ensure that in the next 
services negotiations, our companies will have greater freedom to move 
these top-level, specialized personnel as needs arise.

   Question 3: At the hearing a representative of the International 
Insurance Council discussed pro-competitive regulatory principles (copy 
  attached) that his group has suggested. I am interested whether you 
view these principles as a possible basis for developing United States 
     negotiating objectives for this important industry. I am also 
 interested in your views on these principles and the extent to which 
 you intend to pursue them in the next round of services negotiations.

Answer 3:

    The U.S. Trade Representative's Office already has been giving 
close attention to these principles promoted by several representatives 
of the U.S. insurance community and has drawn from them in formulating 
U.S. objectives for the ``GATS 2000'' negotiations. The U.S. 
negotiating proposal includes major issues identified by the U.S. 
financial services industry, such as improving market access and 
national treatment; promoting transparency and fairness of domestic 
regulatory regimes, with appropriate regard for the prudential clause; 
and review of whether existing definitions include all important 
commercial activities. Like many in industry, the U.S. believes that 
these issues have to be examined as a package to guarantee open and 
meaningful market access for financial services providers. We intend to 
pursue these issues vigorously and through the use of all possible 
negotiating approaches in the upcoming round of services negotiations.
      

                                


    That is Mr. John Pepper, Chairman of Procter & Gamble in 
Cincinnati and Chairman also of the President's Advisory 
Committee on Trade Policy and Negotiations; Ernest Micek, 
Chairman, Cargill, Inc., Minneapolis, on behalf of the 
Emergency Committee for American Trade; Dean O'Hare, President 
and chief executive officer, Chubb Corp. and Chairman of the 
Coalition of Service Industries; Dean Kleckner, President of 
the American Farm Bureau Federation; John Dillon, chairman of 
the board and chief executive officer, International Paper Co.; 
Mark Van Putten, President and chief executive officer, 
National Wildlife Federation.
    And let me apologize to all of you gentlemen for the kind 
of chaotic day we are experiencing. As you sit down here, we 
are in the midst of our tax bill on the floor, which is kind of 
a hot topic, and that accounts for many of our Members being 
tied up over there during the debate. But the other thing is I 
realized as some of you have tight time constraints, and so for 
everyone's benefit, if you are on a tight time constraint or 
you have flights to catch, at any time, excuse yourself, and we 
understand your situation, too.
    And now I would like to yield to my distinguished 
colleague, Mr. Portman, first, to welcome Mr. Pepper, his 
constituent.
    Mr. Portman. Thank you, Mr. Chairman. I will be brief just 
to welcome John Pepper, who has been a voice of reason on free 
trade, and has not only done this, Mr. Chairman, in terms of 
policy over the years, being one of the leading advocates of 
explaining the benefits of free trade and did it through 
business practices, but also in the last 30 years deeply 
involved in our community back home. He has a passion for youth 
and helping them, as shown through his work in education and 
antidrug efforts--he is on the board of the Coalition for a 
Drug-Free Cincinnati with me--and his work on racial 
cooperation and dialog. And I welcome him this morning--this 
afternoon, now, and look forward to his testimony.
    Chairman Crane. And next I would like to yield to our 
distinguished colleague from Minneapolis, Mr. Ramstad, to 
welcome his constituent Mr. Micek.
    Mr. Ramstad. Thank you, Mr. Chairman. I will be brief. It 
is a pleasure to extend a special welcome to my good friend 
Ernie Micek, chairman of Cargill and also chairman of the 
Emergency Committee for American Trade, ECAT.
    I want to thank you again, Ernie, for appearing once again 
before the Subcommittee, and for your important leadership in 
helping us knock down tariff and nontariff barriers to USA 
exports. Nobody has been a better corporate citizen than 
Cargill, not only in Minnesota, but worldwide, and nobody has 
been a more impressive, more committed chief executive officer 
than you have. So thank you for all that you are doing and for 
your leadership, and welcome again to the Subcommittee.
    Chairman Crane. And I would just like to ask one question, 
because I heard a rumor, Mr. Kleckner. I know you are from Park 
Ridge. Is it true that Hillary Clinton used to babysit you when 
you were a toddler?
    Mr. Kleckner. I don't know, Mr. Chairman. She did go to 
school in Park Ridge, and as I look out my office window, I 
look down the street to where she was born and raised just two 
blocks away.
    Chairman Crane. John Wayne Gacy another two blocks. They 
are both from Henry Hyde's district. That is why I raised the 
question, because it is right next door to me.
    Mr. Levin. I have nobody to introduce.
    Chairman Crane. Now, gentlemen, if you will proceed in the 
order that I introduced you on the schedule here.
    Mr. Pepper.

    STATEMENT OF JOHN E. PEPPER, CHAIRMAN, PROCTER & GAMBLE 
 COMPANY, CINCINNATI, OHIO, AND CHAIRMAN, PRESIDENT'S ADVISORY 
           COMMITTEE ON TRADE POLICY AND NEGOTIATIONS

    Mr. Pepper. Thank you, Mr. Chairman. And thank you, Rob.
    As the Chairman indicated, I appear here today as the 
Chairman of the President's Advisory Committee on Trade Policy 
and Negotiations, ACTPN as we call it. I accepted this role a 
year ago because I feel very strongly that forging a consensus 
and taking action to take greater advantage of trade 
liberalization is critical to this country's future, is 
critical to the growth of the economy and the growth of jobs. 
We all know the importance of the WTO Ministerial that is 
coming up in terms of furthering trade liberalization.
    My convictions on this for years have rested on two simple 
things: One, we have got far lower tariffs and lower barriers 
than anybody else, and if we can get other people down to our 
area, it is going to help us greatly, and if we don't, we are 
going to suffer, as we are suffering right now, for example, as 
Chile's 11 percent duty is being reduced for Mexico and Canada 
and not for us; as we see an increasing amount of trade between 
Brazil and Argentina that we are not taking part of because of 
MERCOSUR.
    And the other fundamental here, of course, is that the 
overwhelming part of this world's population lies outside of 
this country, and we need to ship more products to it, and we 
can if we have a level playingfield.
    As we went into ACTPN this year, and recognizing the WTO, 
we decided we would focus 100 percent of our time on advising 
Charlene Barshefsky and Sue Esserman on that agenda. We will 
comment today on three of those aspects: Market access, 
particularly agriculture; the new economy, particularly e-
commerce; and the role of trade and labor. You will hear from 
Dean Kleckner and Dean O'Hare on two of those. I will be brief.
    On market access, as 60 percent of the world trade will 
soon be covered by regional free trade and customs union 
agreements, ACTPN supports a bold initiative to bring those 
efforts into the WTO. We also support a broad market access 
package. Tariff and nontariff barriers in all industrials 
should be dramatically reduced and export subsidies eliminated.
    There is no more important element in the next WTO Round 
then Agriculture. Dean will talk to that. I would just 
highlight here the particular focus we have brought to the 
issue of biotechnology. The USTR's goal is to ensure that 
access to new agricultural technologies, specifically GMOs, 
genetically modified organisms, are not restricted by 
protectionism and unfounded fear. And this represents a huge 
risk to U.S. agriculture, indeed to the world's populations.
    While there is, I can tell you, general agreement among the 
ACTPN members not to reopen the current sanitary and 
phytosanitary standards, and we think that is very important. 
There is a working group that has been charged with defining 
the issues in SPS that present problems to some of our members 
and determine how these problems could be addressed. Dean will 
talk about that in a minute.
    The ACTPN Services Working Group has urged USTR to adopt 
broad liberalization and market access in a range of sectors, 
including audiovisual services, telecommunications, travel, 
tourism and others. We have recommended to the USTR that they 
adopt a negative list schedule as the most effective 
negotiating strategy. Dean O'Hare, CEO of the Chubb Corp. and a 
member of ACTPN, will comment on this in a moment.
    We spent a lot of time in the last 9 months on the subject 
of the new economy, and particularly e-commerce. We have 
concluded that especially since e-commerce is in its infancy, 
governments must resist the urge to regulate or impose tariffs 
or nontariff barriers. Clearly avoidance of harm should be the 
guidance here, avoidance of mischief. We should allow 
technology to follow market forces as it matures.
    The evaluation of e-commerce in the last year has led our 
members to recognize that e-commerce is only one element of an 
incredibly fundamental change in the global economy, that of 
IT, information technology. Internet usage is doubling every 
100 days. Computers' power is doubling every 18 months. By 
2006, one-half of the U.S. work force will be employed in 
industries that are either major producers or users of IT 
products. IT growth is already stretching existing trade 
agreements, and it is going to raise many new unforeseen 
issues.
    Make no mistake, this is an area where the United States is 
leading. IT as a percentage of gross domestic product is 5.3 
percent in this country compared to 2.9 percent in Europe. 
Fortunately, Lew Gerstner of IBM has agreed to chair an ACTPN 
task force on IT which will deal with this rapidly changing 
technology and make appropriate recommendations for policy not 
just for the WTO, but on a continuing basis.
    Charlene Barshefsky has asked that an IT task force 
consider presenting an education forum for the trade ministers 
on IT issues in Seattle. We think that is a good idea.
    A priority without consensus right now in ACTPN is the 
controversial role of labor and trade. In Procter & Gamble we 
refer to controversial issues like this as ``mooses on the 
table.'' They are issues that people are reluctant to deal with 
head on, that they tend to talk past each other on and where 
there are legitimate competing agendas.
    ACTPN members John Sweeney and Tom Donahue of the Chamber 
of Commerce have agreed to lead the examination of conflicts 
that have often arisen between labor leadership and the 
advocates of trade liberalization. They will be presenting 
their conclusions at our September 28 ACTPN meeting. We are 
hopeful that there will be common ground that we can find on 
some issues such as the elimination of forced labor, exploitive 
child labor, respect for ILO labor standards and the importance 
of transparency in the resolution agreements.
    Finally, I would simply note that there has been heavy 
emphasis in the ACTPN on what has been stressed here by you 
gentlemen today, the importance of assuring compliance and 
accountability with agreements and with resolution rulings. If 
the WTO is not delivering on what it has agreed, we have a 
failed system. And I would assure you that in our discussions, 
the energy we have seen around this from Sue Esserman and 
Charlene Barshefsky has been intense.
    In conclusion, let me just express my conviction here that 
each one of us must take ownership of this if we are to be 
successful in Seattle and take advantage of the enormous 
opportunities that this country has through a successful round. 
P&G along with 140 organizations have formed the U.S. Alliance 
for Trade Expansion, a coalition to bring together a lot of 
different efforts to promote the benefits of a rule-based 
trading system for all Americans.
    As Members of the Trade Subcommittee, I would respectfully 
suggest that each of you has a vital role to play. Your 
education of other Members as well as your constituents about 
the importance of the ministerial and free trade certainly must 
go alongside what we in industry do to tell our members about 
its importance. I cannot imagine a higher stakes issue than 
what we are talking about here or a higher stakes event than 
the WTO Ministerial. Thank you very much.
    Chairman Crane. Thank you, Mr. Pepper.
    [The prepared statement follows:]

Statement of John E. Pepper, Chairman, Procter & Gamble Company, 
Cincinnati, Ohio, and Chairman, President's Advisory Committee on Trade 
Policy and Negotiations

    Mr. Chairman and distinguished members of the Trade 
Subcommittee, I am John E. Pepper, Chairman of The Procter & 
Gamble Company. I appear today as Chairman of the President's 
Advisory Committee on Trade Policy and Negotiations (ACTPN).
    This is an organization that was created by the Trade Act 
of 1974. It consists of approximately 45 members who are 
appointed by the President and represent business, labor, 
industry, agriculture, services, retailers, environment and 
consumer interests. The ACTPN is charged with advising the 
President and USTR on trade matters.
    Let me begin by saying that I accepted the role as Chairman 
of ACTPN because I feel passionately that unless the U.S. sets 
an example by forging a consensus on many of the controversial 
issues related to trade policy, this country will jeopardize 
its role as a global leader. While the views of our ACTPN 
members on specific components of the negotiating objectives 
for the WTO Ministerial are diverse, we are all in agreement 
that the U.S. has a unique opportunity to provide leadership in 
bringing together the 133 representatives of the WTO member 
countries. Success will bring enormous benefits to the world 
economy. Failure would be a blow to our common prosperity. We 
must not let that happen.
    As host of the WTO Ministerial, the U.S. plays a key role 
in establishing the agenda for trade liberalization over the 
next decade. Why is this important? Over one-third of U.S. 
economic growth since 1992 has resulted from trade. Americans 
by nature believe in playing by the rules. If we can bring 
those rules to the rest of the world and establish a level 
playing field, U.S. companies will be able to send our products 
to other countries and make our strong economy even stronger. 
If not, American firms and workers will be placed at a 
competitive disadvantage. ACTPN members are concerned that our 
trading partners are concluding preferential trade agreements 
without us. Already, Chile's 11% tariff is being reduced 
unilaterally for both Mexico and Canada, but not for the U.S. 
MERCOSUR countries are progressively eliminating tariff rates 
among member countries. Virtually all trade between Brazil and 
Argentina now enjoys a duty-free status. With 95% of the 
world's population living outside the U.S., the vast majority 
of growth potential for American industry--growth that provides 
American jobs--comes not from the U.S., but the rest of the 
world.
    To support our U.S. negotiators in the challenges 
confronting them at Seattle, Ambassador Barshefsky has engaged 
the ACTPN in three key areas--market access, the new economy, 
and the role of trade and labor. I'd like to briefly comment on 
our policy recommendations in these areas.

                             Market Access

    As 60% of world trade will soon be covered by regional free 
trade and customs union agreements, ACTPN supports a bold 
initiative to bring these efforts into the WTO.
    ACTPN also supports a broad market access package, such as 
that negotiated in the Uruguay Round. To be specific, tariff 
and non-tariff barriers in all industrial sectors should be 
dramatically reduced, and export subsidies eliminated. 
Obviously, we'll continue to battle our European friends over 
their $60 billion in agriculture trade-distorting subsidies, 
but like Vince Lombardi, I believe ``winning becomes a habit.''

 Agriculture

    U.S. farmers lead the world in productivity and efficiency, 
sustaining our health and quality of life at home and aiding a 
hungry world abroad. As agriculture is certain to be a key 
element of the next WTO Round, the ACTPN has focused our energy 
on agricultural products of modern biotechnology and the U.S. 
Trade Agenda. USTR's goal is to insure that access to new 
agricultural technologies is not restricted by protectionism 
and fear. While there was general agreement among ACTPN members 
not to reopen the current sanitary and phyto sanitary (SPS) 
standards, a working group has been charged with defining the 
issues in SPS that present problems to some of our members and 
determine how these problems should be addressed. Dean 
Kleckner, President of the American Farm Bureau Federation and 
a long-time member of ACTPN, will elaborate more on this in his 
testimony.

 Services

    In 1998 U.S. services exports were $260.3 billion, while 
imports were $180.8 billion, producing a trade in services 
surplus of $79.4 billion. Services comprise nearly 30% of U.S. 
exports. Additionally, in 1998 U.S. service exports supported 
about four million U.S. jobs--jobs both in services and 
manufacturing sectors.
    The ACTPN Services Working Group urged USTR to adopt broad 
liberalization and market access in a range of sectors 
including, but not limited to, audio visual services, 
telecommunications, travel, tourism and others. The Working 
Group also recommended to USTR that they adopt a negative list 
schedule as the most effective negotiating strategy and one 
which would speed market access. Dean O'Hare, CEO of Chubb 
Corporation and a member of ACTPN, will comment in more detail 
on the services agenda.

                            The New Economy

    Since 1994, the ACTPN has produced five reports on the WTO. 
This morning, I want to review the most recent report--on the 
subject of e-commerce--and share with you the context of 
ongoing ACTPN discussions on the ``new economy'' which is so 
critical to America's future.
 E-Commerce

    At our June 10, 1999 meeting, ACTPN finalized a report led 
by Hewlett-Packard's Lew Platt that dealt with a variety of 
electronic commerce issues.
    ACTPN opposes the classification of electronic commerce as 
a good or service. While it still believes that substantive 
regulation of electronic commerce should be left to the member 
countries and other international organizations, it advocates 
the adoption of WTO rules on transparency notification and 
review of domestic regulation. Our key message is, e-commerce 
is in its infancy and governments need to resist the urge to 
regulate. We should allow technology to follow market forces as 
it matures.

 Information Technology

    ACTPN's evaluation of e-commerce led our members to 
recognize that e-commerce is only one element of a fundamental 
change in the global economy--that of information technology 
(IT).
    Lew Gerstner of IBM reported to ACTPN members that 
computing power has been doubling every eighteen months for the 
past 30 years, with a parallel geometric decline in prices. 
Internet usage doubles every 100 days. By 2006 almost half of 
the U.S. work force will be employed by industries that are 
either major producers or users of IT products and services.
    IT's explosive growth is already stretching existing trade 
agreements, and is certain to raise new, unforeseen issues. And 
make no mistake--the U.S. is leading the creation of this new 
economy. IT spending as a percentage of GDP in the U.S. in 1998 
was 5.3%. By comparison, Europe was 2.9% and Japan was 3.5%, 
which is where the U.S. was in 1990. Our trade policy must 
reflect this rapidly growing global marketplace.
    An ACTPN Task Force was established to make recommendations 
to USTR on how to ensure we remain in a leadership position to 
deal with this rapidly changing technology. I'm pleased to 
report that Lew Gerstner has agreed to chair this important 
effort.
    Charlene Barshefsky has also requested that the IT Task 
Force consider presenting educational forums for trade 
ministers on IT issues at Seattle. I personally think this is a 
terrific idea and a meaningful role for ACTPN to play at the 
Ministerial.

                             Trade & Labor

    A priority for which there is no consensus in ACTPN, but 
one that must be addressed if we are to make progress in trade 
policy, is the controversial role of labor and trade. In 
Procter & Gamble, we refer to controversial issues as ``moose 
on table.'' These are issues that no one wants to deal with 
head on as there are always competing agendas. Unfortunately, 
unless leadership focuses on the moose, these issues never get 
resolved. ACTPN members, John Sweeney of the AFL-CIO and Tom 
Donahue of the COC have assumed leadership for our group in 
clarifying trade and labor issues and in establishing a 
framework for resolving these concerns through U.S. trade 
policy. Their goal is to present issues upon which there is and 
is not agreement at our September 28, 1999, ACTPN Meeting. I 
remain hopeful that there will be some areas of mutual 
agreement and progress. Global growth can and should be 
accompanied by safer workplaces, elimination of forced labor 
and exploitive child labor and respect for core labor 
standards. The WTO, in particular, can work in more 
coordination with the International Labor Organization on some 
of these issues. While developing countries are expected to 
argue against inclusion of any work on trade and labor in the 
WTO, our U.S. negotiators have a unique opportunity to deliver 
results in this important area.

                               Conclusion

    In conclusion, let me say that each of us here today must 
assume ownership if the U.S. is to be successful in Seattle. My 
Company, Procter & Gamble, along with the Coalition of Service 
Industries, the American Farm Bureau Federation, and over 140 
other organizations, have led the formation of the U.S. 
Alliance for Trade Expansion. The mission of this coalition is 
to promote the benefits of a rules-based trading system for all 
Americans and support U.S. Leadership at the Seattle 
Ministerial.
    As Members of the Trade Subcommittee, each of you also has 
a vital role to play at the WTO. Your education of other 
Members of Congress and your own constituents about the 
importance of the Ministerial and what it means to the future 
of this great country is paramount. Congress as a whole must 
build on their recent trade successes including passage of the 
Africa Growth and Opportunity Act, CBI, China NTR and Vietnam 
NTR. Bipartisan support for GSP renewal and permanent NTR for 
China (if an agreement is reached) should follow. We must 
support our U.S. negotiators. They will be working around the 
clock to build a better future for you, me and for our 
children.
    Tom Friedman writes in his book, The Lexus and the Olive 
Tree, that globalization is everything and its opposite. We are 
a nation that is not afraid to go to the moon, but also still 
loves to come home for Little League. We are a nation that 
invented both cyberspace and the backyard barbecue. We can 
never take this for granted. For globalization to be 
sustainable, America must be at its best--today, tomorrow, all 
the time. That is our challenge and our responsibility.
    Thank you.
      

                                


    Chairman Crane. Mr. Micek.

STATEMENT OF ERNEST S. MICEK, CHAIRMAN, CARGILL, INCORPORATED, 
 MINNEAPOLIS, MINNESOTA, AND CHAIRMAN, THE EMERGENCY COMMITTEE 
                       FOR AMERICAN TRADE

    Mr. Micek. Thank you, Mr. Chairman. I am testifying today 
before the Trade Subcommittee as Chairman of the Emergency 
Committee for American Trade, which is comprised of the heads 
of major American companies with global operations who 
represent all principal sectors of the U.S. economy.
    ECAT believes that in order to have a successful Seattle 
WTO Ministerial, the focus of the meeting must be kept on the 
launch of a new comprehensive round of trade negotiations. 
These negotiations should enhance market access for the 
industrial, agricultural and service sectors, and ensure that 
WTO rules accomodate the development of new technologies key to 
the U.S. economic growth in the 21st century.
    While building a positive trade-expanding agenda for the 
ministerial and a new round is critical, we will not be 
successful with that agenda here at home unless we also build a 
consensus in support of trade expansion among American workers 
and their families. This means that we must demonstrate how 
trade liberalization improves the lives of Americans and helps 
all economies meet basic human needs.
    ECAT believes that one way to increase trade's contribution 
to human well-being is to make eliminating barriers to trade in 
food a central negotiating objective in the agenda coming from 
the Seattle Ministerial.
    Toward this end, ECAT is launching a Food Chain Coalition. 
The coalition will promote the reduction or elimination of 
major barriers to trade at all levels of the food production 
and distribution chain. Putting food prominently among 
negotiating priorities will increase food security, accelerate 
economic development, and promote a sustainable environment. 
This new paradigm also can help to achieve the critical 
consensus necessary to support open trade policies.
    Before outlining our specific Food Chain Coalition 
proposal, I will briefly discuss ECAT's overall recommendations 
for the Seattle WTO Ministerial agenda and new WTO Round.
    The United States must take the lead in crafting an agenda 
for the WTO Ministerial and for a new round that is focused on 
trade liberalization. The agenda must avoid globally divisive 
issues such as nontrade-related labor or environmental matters 
or competition policy on which there is not yet a broad-based 
consensus within the WTO.
    The United States needs to recognize the ways in which 
trade liberalization contributes to resolving some of these 
problems and to building consensus for cooperation. For 
example, the elimination of barriers to food trade that ECAT is 
proposing also yields environmental benefits by encouraging 
agricultural practices that promote production in advantaged 
areas while lessening demands on environmentally fragile lands.
    In order to provide a positive foundation for continuing 
liberalization in a WTO new round, ECAT believes that the 
United States should urge that WTO members adopt a standstill 
commitment on trade-restrictive measures at the ministerial. 
The ministerial agenda also should include a renewed effort to 
broaden WTO membership to include those emerging economies that 
are not yet subject to WTO rules, particularly China.
    In order to ensure that the new WTO Round negotiations 
promote trade expansion, ECAT recommends that the formulation 
of the agenda be guided by the following general principles:
    One, the focus of the negotiations should be trade 
liberalization. A new round agenda should be as comprehensive 
as possible. All WTO members should be required to adhere to 
new round agreements once they are finalized. A new round 
should be completed expeditiously according to an agreed-on 
timetable.
    The United States should seek maximum liberalization 
through improved market access with as few exceptions as 
possible. New round negotiations should not weaken existing WTO 
agreements or create opportunities for the imposition of new 
trade restrictive measures. A new round should also promote 
full implementation and compliance with existing WTO 
agreements.
    Trade liberalization objectives that address basic human 
needs should be a focus of the WTO negotiations. ECAT believes 
that these principles, which are set out in greater detail in 
our written statement, can effectively guide the formulation of 
U.S. objectives for a new round.
    ECAT has formed a Food Chain Coalition to promote the 
elimination of major barriers to food trade affecting the 
agricultural, manufacturing, and service sectors within the 
WTO. There are several reasons ECAT has chosen to take this 
unusual step. First, ECAT has learned from its trade education 
focus group research that supporters of global trade expansion 
must demonstrate the importance of trade to the daily lives of 
American workers and their families to enjoy their support for 
liberalization. One of the most compelling ways that we can 
emphasize the human dimension of global trade liberalization is 
by eliminating barriers to food trade.
    Second, the Food Trade Coalition can build on the momentum 
within APEC for an open food system by extending its trade 
liberalization objectives to the WTO.
    Third, the Food Chain Coalition captures the growing 
interest in agrifood trade liberalization. That interest 
extends well beyond farmers to people who supply them with 
seed, chemicals, fertilizer equipment and capital. It also 
applies to those who handle, transport, process, finance, and 
market food products. By using the elimination of barriers to 
trade and investment at all levels of the food chain as an 
organizing principle, the Food Chain Coalition seeks to create 
cross-sectoral alliances in support of common negotiating 
priorities. These priorities include eliminating export 
subsidies, zeroing out tariffs and eliminating investment 
restrictions.
     Focusing on the shared interests in economic development 
and liberalization enables businesses and governments to build 
a new set of alliances and common interests. This will increase 
the potential for success in new round negotiations. In terms 
of the new WTO new round, the coalition urges the United States 
to seek zero-for-zero tariff harmonization on agrifood products 
wherever possible and on related industrial products such as 
engines and engine systems.
    In conclusion, ECAT, looks forward to continuing to work 
with you, Mr. Chairman, and other Trade Subcommittee Members on 
negotiating objectives for the new round, and in particular, 
our Food Chain Coalition project. I appreciate the opportunity 
to present our views. Thank you very much.
    [The prepared statement follows:]

Statement of Ernest S. Micek, Chairman, Cargill, Incorporated, 
Minneapolis, Minnesota, and Chairman, Emergency Committee for American 
Trade

                              Introduction

    I am Ernie Micek, Chairman of Cargill, Incorporated. 
Cargill is a privately held agribusiness company founded over 
130 years ago in Iowa. Today the company is headquartered in 
Minneapolis, Minnesota, and our 80,000 employees are engaged in 
marketing, processing, and distributing agricultural, food, 
financial, and industrial commodities throughout the world.
    I am testifying before the Trade Subcommittee today as 
Chairman of the Emergency Committee for American Trade, 
comprised of the heads of major American companies with global 
operations who represent all principal sectors of the U.S. 
economy. The annual sales of ECAT companies total over one 
trillion dollars, and the companies employ approximately four 
million men and women.
    ECAT believes that in order to have a successful Seattle 
WTO ministerial the focus of the meeting must be kept on trade 
expansion through the launching of a new, comprehensive round 
of trade negotiations. The ministerial should lay out an agenda 
for the new round that enhances market access for traditional 
industrial and agricultural products, while accommodating WTO 
rules to the development of new technologies that will be key 
to U.S. economic growth in the twenty-first century, such as 
biotechnology and electronic or e-commerce. The agenda also 
should strengthen the rules of the global trading system.
    While building a positive, trade-expanding agenda for the 
ministerial and the new round are critical, we will not be 
successful with that agenda here at home unless we also 
maintain our efforts to build a consensus in support of trade 
expansion among American workers and their families. This means 
that we must make the case that trade liberalization improves 
the lives of American workers and their families and helps all 
economies meet basic human needs.
    ECAT believes that one way to increase trade's contribution 
to human well-being is to make eliminating barriers to trade in 
food a central negotiating objective in the agenda coming forth 
from the Seattle ministerial. Toward this end, ECAT is 
launching a ``Food Chain Coalition'' that will promote the 
reduction or elimination of major barriers to trade at all 
levels of the food production and distribution chain. Putting 
food prominently among negotiating priorities will increase 
food security, accelerate economic development, and promote a 
sustainable environment. This new paradigm also can help to 
achieve the critical consensus necessary to support open trade 
policies.
    The ECAT food chain concept builds on the idea of an open 
food system that has gained support within the Asia Pacific 
Economic Council (APEC) and extends it to the WTO. A study by 
the U.S. Department of Agriculture has concluded that two-
thirds of the welfare gains from trade liberalization within 
APEC comes from the agri-food sector alone. Given the many 
global distortions to agri-food trade, there are similar 
benefits to come from an ``open food'' initiative within the 
WTO.
    Before outlining our specific Food Chain Coalition 
proposal, I will present ECAT's recommendations for the Seattle 
WTO ministerial agenda and new WTO round.

Launching a New Trade Round at the Seattle WTO Ministerial Seattle WTO 
                         Ministerial Objectives

    As we approach the millennium, we must ensure that U.S. 
trade and investment remain the powerful engines of economic 
growth that have helped to produce the longest period of 
peacetime economic expansion in American history and the lowest 
unemployment rate in 30 years. With 96 percent of the world's 
customers outside of the United States, the future growth of 
the American economy depends on expanding world markets. Just 
as ECAT member companies recognize that they must be global 
firms to thrive, the United States must maintain its 
preeminence as a global economy to continue to prosper into the 
next century.
    To accomplish this, the United States must take the lead in 
crafting an agenda for the Seattle WTO ministerial and for a 
new round that is focused on trade liberalization. That agenda 
should avoid globally divisive issues, such as non-trade-
related labor or environment matters or competition policy, on 
which there is not yet a broad-based consensus within the WTO. 
That is not to say that these issues are unimportant. It is 
merely to recognize that, if contentious issues dominate the 
ministerial, confidence in the global trading system and U.S. 
leadership will be undermined.
    The United States needs to recognize and articulate the 
ways in which trade liberalization contributes to resolving 
some of these problems and to building consensus for 
cooperation. For example, the elimination of trade-distorting 
agricultural subsidies and the reduction of tariffs on 
environmental goods and services reduce harm to the 
environment, while speeding the spread of technologies that 
enable countries to be efficient and to be environmental 
stewards. The elimination of barriers to food trade that ECAT 
is proposing also yields environmental benefits by encouraging 
agricultural practices that promote production in advantaged 
areas while lessening demands on environmentally fragile lands. 
On labor issues, the United States is pursuing an appropriate 
course in increasing its support for the ILO and focusing its 
efforts to achieve a forum on global labor issues within that 
organization.
    ECAT also has some other specific recommendations for the 
ministerial. The United States could help in maintaining an 
open and transparent economy by urging that WTO members adopt a 
standstill commitment on trade-restrictive measures. Such a 
commitment would safeguard the liberalization achieved under 
the Uruguay Round and subsequent sectoral negotiations while 
preventing backsliding. It also would provide a positive 
foundation for continuing liberalization in the context of a 
new round. As the largest and most open economy in the world, 
the United States is in the best position to call for such a 
commitment. Indeed, the WTO Secretariat, in a recent highly 
laudatory report on U.S. trade policies, noted the critical 
role that the United States plays in serving as a positive role 
model for other WTO member countries by maintaining open 
markets. It also cited the key role of the United States in 
helping to restore global economic stability in the wake of the 
Asian financial crisis and the breakdown of the Russian 
economy.
    To be successful, the ministerial agenda also should 
include a renewed effort to broaden WTO membership to include 
those emerging economies that are not yet subject to WTO rules. 
China, the largest emerging economy in the world, must be 
brought into the multilateral trading system. Its admission to 
the WTO on the basis of a commercially-acceptable protocol of 
accession should be given top priority. The high degree of 
financial instability in Asia and the slowdown in the global 
economy make it more critical than ever that China become 
subject to WTO rules and a participant in liberalization 
initiatives.
    Reaching an agreement on sectoral market-access 
initiatives, such as the negotiations on the eight sectors 
covered under the Accelerated Tariff Liberalization (ATL) 
negotiations, at the time of the ministerial would help to make 
it a success and would provide momentum for even broader 
liberalization negotiations in a new round. ECAT particularly 
supports efforts under the ATL initiative to eliminate tariffs 
on chemicals, toys, medical equipment and scientific 
instruments, and forestry products. Similarly, progress at the 
ministerial in negotiations to remove non-tariff barriers in 
the information technology sector is important and would also 
promote a successful meeting.
    U.S. business has a significant role to play in ensuring 
the success of the ministerial by encouraging the adoption of a 
positive agenda and making the case for the contributions of 
the WTO in continuing trade liberalization. ECAT supports the 
work of the Alliance for U.S. Trade, an ad hoc coalition of 
U.S. business associations and companies that is coordinating 
business support for ministerial activities, and similar 
efforts by other groups.
    A WTO ministerial that produces a trade-expanding agenda 
backed by consensus will send a strong signal to global markets 
about the strength and vitality of the open trading system. A 
ministerial that endorses an expansion of the open trading 
system will encourage emerging economies to stay the course on 
trade liberalization. Success in advancing a trade-liberalizing 
agenda at the Seattle meeting will help to reinforce U.S. 
domestic support for the WTO by demonstrating that the WTO 
continues to advance American interests in promoting greater 
market access for U.S. goods, services, and agriculture. A 
clearly articulated trade liberalizing agenda also will build 
support for renewal of trade-negotiating authority.

                        The WTO New Round Agenda

    In order to ensure that the new WTO round negotiations 
promote trade expansion, ECAT recommends that the formulation 
of the agenda be guided by the following principles:
     The focus of the negotiations should be trade 
liberalization. Progress on non-trade related labor and 
environmental issues should be pursued in other appropriate 
international fora.
     A new round agenda should be as comprehensive as 
possible in order to generate the greatest interest among WTO 
member countries and to maximize the opportunity for 
liberalization. A round should encompass the built-in agenda of 
agriculture and services, as well as industrial tariffs, 
customs facilitation, transparency in government procurement, 
and other new areas. However, the agenda should not open areas 
on which there is little consensus or likelihood of progress.
     In keeping with the legal framework of the 
multilateral WTO agreements, all WTO members should be required 
to adhere to new round agreements once they are finalized.
     A new round should be completed expeditiously 
according to an agreed timetable. Consideration should be given 
to allowing for provisional implementation of agreements 
concluded in advance of the agreed deadline but with leverage 
retained to ensure that progress is made across all areas, 
including difficult ones.
     The United States should seek maximum 
liberalization in market-access negotiations with bound 
reductions in tariff and non-tariff barriers to agricultural 
and industrial products and in the services sector, with as few 
exceptions as possible. The negotiations on industrial products 
should cover as many sectors as possible.
     New round negotiations should not weaken existing 
WTO agreements or create opportunities for the imposition of 
new trade-restrictive measures or discriminatory treatment, 
particularly with respect to new areas such as biotechnology 
and e-commerce.
     A new round should promote full implementation of 
and compliance with existing WTO agreements. WTO members should 
consider the provision of additional technical assistance to 
developing countries to promote this goal.
     The United States should align U.S. negotiating 
objectives with promoting higher U.S. and global living 
standards. Trade liberalization objectives that address basic 
human needs should be a focus of the WTO negotiations.
    ECAT believes that these principles can effectively guide 
the formulation of U.S. objectives for a new round and can help 
maximize the benefits of the negotiations to the U.S. 
agricultural, manufacturing, and services sectors. ECAT's views 
on the major areas that should be included in a new round are 
provided below.

Agriculture

    The agriculture negotiations should aim to secure 
substantial, progressive reductions in support and protection, 
including deep cuts in bound tariff rates and the elimination 
of export subsidies. Negotiations should reduce average tariff 
bindings over six years by 50 percent from current levels. 
Tariff peaks should be reduced to levels that will not prohibit 
imports. Negotiations should clarify that tariff-rate quotas 
are transitional measures and provide for their phase-out. 
Sectoral zero-for-zero tariff agreements should also be 
encouraged.
    The agriculture negotiations should seek further reductions 
in trade-distorting domestic supports, both by reducing support 
levels and by shifting to less trade-distorting support 
mechanisms. The United States also should seek to eliminate the 
monopoly control of state-trading entities (STEs) and 
strengthen WTO rules to ensure that agricultural trade is 
conducted on commercial terms.
    As outlined in greater detail in the section of our 
testimony describing our Food Chain Coalition proposal, ECAT 
believes that the Seattle ministerial declaration should build 
on the initiative being developed within APEC and establish a 
global ``open food system.'' To this end, the ministerial 
declaration should include language establishing a ``WTO 
Working Party on the Creation of an Open Food System.''

General Agreement on Trade in Services (GATS)

    The United States should pursue new negotiations to 
liberalize trade in services, particularly financial services, 
as part of a new round. The negotiations should seek to broaden 
and deepen the liberalization commitments under the GATS. 
Further liberalization of services trade will enhance global 
growth, assist developing countries in obtaining the necessary 
infrastructure to sustain development, and help restore 
investor confidence in global markets.
    The services negotiations should also include a review of 
regulatory regimes in order to promote the creation of 
transparent, impartial, and pro-competitive regulatory regimes 
in local markets. The creation of such regimes is essential to 
make the GATS national treatment and market-access commitments 
meaningful.
    In seeking expanded liberalization commitments, the United 
States should aim to limit reservations to the greatest degree 
possible. In particular, it should seek commitments to ensure 
national treatment and the right of establishment, eliminate 
restrictions on cross-border transactions, promote pro-
competitive regulatory reform, and remove obstacles to the free 
movement of business personnel.

Market-Access Negotiations

    A new round should include market-access negotiations to 
remove tariff and non-tariff barriers in a wide range of 
industrial sectors. The tariff negotiations on industrial 
products should include new zero-for-zero tariff initiatives on 
small engines and other industrial products. The negotiations 
should also seek the elimination of tariff peaks and so-called 
``nuisance'' tariffs of five percent or less.
    The market-access negotiations should include efforts to 
achieve tariff reductions in the eight ATL sectors to the 
extent such reductions have not been finalized by the time of 
the ministerial. As was recently endorsed by the APEC 
Ministers, the market-access negotiations should cover the six 
additional sectors identified in APEC for further 
liberalization, particularly food products.
    Textile and apparel tariffs, which remain very high 
relative to other industrial products, also should be included 
in market-access negotiations, with the goal of seeking further 
reductions before the termination of textile and apparel quotas 
in 2005. Finally, the negotiations should encompass efforts to 
broaden membership in the Chemical Tariff Harmonization 
Agreement (CTHA), with the understanding that no further 
reductions in chemical tariffs should be considered until all 
major chemical-producing nations are fully committed to the 
CTHA.

Trade Facilitation

    ECAT strongly supports the inclusion of business-
facilitation issues on the ministerial agenda. The United 
States should seek a WTO agreement on trade facilitation that 
would encompass the adoption of a binding WTO agreement based 
on the rules contained in the International Convention on the 
Simplification and Harmonization of Customs Procedures (Kyoto 
Convention), a work program on trade facilitation, and a 
commitment to simplify rules of origin. The United States 
should encourage the WTO to focus its trade-facilitation 
efforts on customs procedures and advocate the establishment of 
a WTO working group on the harmonization and simplification of 
customs procedures. The United States also should support the 
simplification and harmonization of non-preferential rules of 
origin, so that they no longer create unnecessary trade 
impediments.

TRIPs Agreement

    The United States should ensure that the full 
implementation of the TRIPs agreement remains a priority under 
the WTO built-in agenda. It should resist any effort by 
developing countries to extend the year 2000 deadline for their 
implementation of the agreement and support the provision of 
technical assistance to developing countries to facilitate 
implementation. It also should oppose the extension of the 
moratorium on the application of WTO dispute settlement to 
intellectual property cases in which there is no direct 
violation of the TRIPs agreement.
    The United States should oppose efforts to expand Article 
27.3 of the TRIPs agreement, which provides that WTO members 
may deny the patentability of certain plants and animals. Under 
the WTO built-in agenda, this provision is to be reviewed four 
years after the date of entry into force of the WTO agreement. 
The review was originally intended to provide the opportunity 
to eliminate or narrow the exclusion. Some WTO members are now 
advocating that the review be used as the occasion to broaden 
the exception based on concerns about the increasing use of 
biotechnology in agriculture and other areas. While the United 
States may not now be able to succeed in eliminating the 
exception, it should nonetheless continue to oppose any 
expansion of the exclusion.
    ECAT also believes that strict enforcement of the TRIPs 
agreement should remain a priority, particularly in the areas 
of piracy of computer software, music CDs, and violations of 
the trademarks of U.S.-branded products such as apparel.

Government Procurement

    ECAT supports U.S. efforts to bring more countries into the 
WTO Procurement Agreement, to broaden its coverage, and to 
negotiate an agreement on transparency in procurement. The 
United States should seek to conclude an agreement on 
transparency by the time of the ministerial. It should include 
requirements regarding the transparency of procurement laws and 
regulations, adequate notice of bidding opportunities, use of 
objective criteria in preparing bid specifications and in 
evaluating bids, adequate dispute settlement, and WTO 
notification of preference levels.
    The transparency provisions of the Government Procurement 
Agreement should be harmonized with the text of a new 
transparency agreement.

Sanitary and Phytosanitary Standards (SPS) Agreement

    The Uruguay Round produced a strong agreement on sanitary 
and phytosanitary standards that requires such standards be 
based on sound science. This agreement should be rigorously 
enforced and should not be reopened in the course of new round 
negotiations. The WTO rules should continue to require that 
governments base regulations on the best scientific information 
available and not impose an unattainable ``zero-risk'' 
standard. The United States should oppose any effort to allow 
SPS standards to be imposed on any basis other than the current 
sound science requirement, as it would substantially weaken the 
agreement and create the opportunity for WTO members to use 
health and safety regulations to create new trade barriers.

Dispute Settlement

    While the WTO dispute settlement process has overall been a 
strong enforcement mechanism for WTO rules and market-access 
commitments, the process can be strengthened. For example, 
procedural reforms in the areas of expediting the timetable for 
the dispute settlement panel process and implementation of 
panel and appellate body reports should be considered.

E-Commerce

    E-commerce is an increasingly important venue for 
international trade throughout all sectors of the economy. It 
is imperative that WTO rules address trade barriers and other 
trade-related aspects of e-commerce. ECAT believes that a top 
priority for the Seattle ministerial should be to make the 
current standstill regarding tariffs on electronic 
transmissions permanent.

                      ECAT's Food Chain Coalition

Objectives

    ECAT has formed a Food Chain Coalition to promote the 
elimination of major barriers to food trade affecting the 
agricultural, manufacturing, and services sectors within the 
WTO. The Coalition has three primary objectives: 1) providing a 
framework for focusing on a key area in which trade 
liberalization meets basic human needs; 2) extending the trade 
liberalization component of the APEC Food System concept into 
the WTO; and 3) creating greater leverage to pursue improved 
market access and other goals in a new round by facilitating a 
cross alliance of interests organized around barriers to food 
production and distribution. There are several reasons ECAT has 
chosen to take this unusual step.
    First, ECAT has learned from its TradeWorks trade education 
focus group research that supporters of global trade expansion 
must demonstrate the importance of trade to the daily lives of 
American workers and their families to enjoy their support for 
liberalization. This theme is echoed in the Administration's 
call for putting a ``human face'' on trade. One of the most 
compelling ways that we can emphasize the human dimension of 
global trade liberalization is by eliminating barriers to food 
trade. This will make food supplies more secure, stabilize 
prices in world markets, and improve access to needed 
foodstuffs.
    Second, the Food Chain Coalition can build on the momentum 
within APEC for an open food system by extending its trade-
liberalization objectives to the WTO. The Information 
Technology Agreement and the current Accelerated Tariff 
Liberalization negotiations provide ample precedent for the 
incorporation of APEC initiatives into the WTO system.
    Third, the Food Chain Coalition expresses the broad 
interest in agri-food trade liberalization. That interest 
extends well beyond farmers to the people who supply them with 
seeds, chemicals, fertilizer, equipment, and capital and to 
those who handle, transport, process, finance, and market food 
products. In using the elimination of barriers to trade and 
investment at all levels of the food chain as an organizing 
principle, the Food Chain Coalition seeks to create cross-
sectoral alliances in support of common negotiating priorities, 
such as eliminating export subsidies, zeroing out tariffs, and 
eliminating investment restrictions. The Food Chain Coalition 
also enables business to express its shared stake in open 
markets. People must be well and reliably fed before they can 
become regular customers for other goods and services. Focusing 
on the shared interests in economic development and 
liberalization enables businesses and governments to build a 
new set of alliances and common interests that will increase 
the potential for success in new round negotiations.
    The Coalition covers a broad spectrum of issues--ranging 
from traditional agricultural tariff, quota, and, export 
subsidy matters to the intellectual property, regulatory, 
labeling, and import-restriction questions raised by a new 
generation of biotechnology products. It covers agri-food 
products themselves, as well as equipment, machinery, financial 
services, and other inputs that go into a modern food system.
    By reaching outside the traditional core of companies and 
groups involved in agricultural trade issues to equipment, 
chemical, pharmaceutical, apparel, financial, and other 
industries that are increasingly affected by food issues, the 
Coalition will garner broader domestic and international 
support for its priority negotiating objectives. The Food Chain 
Coalition also will focus attention on issues that directly 
affect the welfare and health of hundreds of millions of people 
now joining the global economy, thereby putting a ``human 
face'' on trade.

Priorities for the WTO Ministerial

    The 1999 WTO ministerial provides an historic opportunity 
for the United States to shape the world trade agenda into the 
next century and to lay the foundation in particular for global 
liberalization of food trade. To that end, the Coalition 
supports the inclusion of language in the ministerial 
declaration establishing a WTO ``Working Party on the Creation 
of an Open Food System.''
    The Coalition would like to see the working party examine 
not only traditional liberalization initiatives, but also other 
issues, such as achieving food security through a principle of 
non-discrimination, that are integral to meeting the challenge 
of providing the world's growing population affordable, 
abundant, nutritious, and environmentally sustainable food 
supplies. Among the novel issues to be addressed should be 
providing technical assistance to developing countries on rural 
development strategies, sanitary and phytosanitary standards 
issues, and the use of trade and financial risk tools to 
enhance food security.

Priorities for the WTO New Round

    The Coalition sees this broader, more integrated strategy 
as critical to achieving its fundamental goal in this 
historically sensitive area--more open markets for the products 
and services involved in the production and distribution of 
food. In particular, the Coalition urges the United States to 
seek ``zero-for-zero'' tariff harmonization on agri-food 
products wherever possible. The Coalition also supports the 
initiation of ``zero-for-zero'' tariff negotiations on engines 
and engine systems and the expansion of the existing ``zero-
for-zero'' tariff agreements for construction and agricultural 
equipment to include a greater number of WTO member countries. 
The Coalition also believes that the elimination of 
agricultural export subsidies should be a priority in a new 
round.

Conclusion

    The Trade Subcommittee's hearing today is a vitally 
important part of the overall effort that must be made by the 
Administration, the Congress, and the U.S. business community 
to work together to forge a trade-expanding agenda for the 
Seattle WTO ministerial and a new WTO round. ECAT looks forward 
to continuing to work with you, Mr. Chairman, and other Trade 
Subcommittee members on negotiating objectives for the new 
round and in particular on our Food Chain Coalition project.
    I appreciate the opportunity to present ECAT's views and 
would be happy to answer any questions subcommittee members may 
have.
      

                                


    Chairman Crane. Thank you, Mr. Micek.
    And next Mr. O'Hare.

   STATEMENT OF DEAN R. O'HARE, CHAIRMAN AND CHIEF EXECUTIVE 
 OFFICER, CHUBB CORPORATION, WARREN, NEW JERSEY, AND CHAIRMAN, 
                COALITION OF SERVICE INDUSTRIES


    Mr. O'Hare. Mr. Chairman and Members of the Subcommittee, I 
am Dean O'Hare, chairman and CEO of the Chubb Corp. It is my 
pleasure to appear today in my capacity as chairman of the 
Coalition of Service Industries.
    We believe that the ability of the U.S. services economy to 
generate new jobs and GDP depends on an aggressive trade policy 
that opens new markets for our businesses. In my own company, 
we could not maintain our U.S. employment base or survive long 
term if we were not expanding abroad.
    The U.S. nonlife-insurance market is mature, and its growth 
rate is low. We now generate almost 25 percent of our premium 
income from outside the United States, and I expect that figure 
to rise substantially.
    Our experience supports the point that you cannot sell 
services to people unless you are in the local market. Our 
firm's foreign operations do not cost U.S. jobs. They help to 
maintain our employment base in the United States. There is no 
question that U.S. service industries are among the most 
competitive in the world. Nonetheless, we have formidable 
foreign corporate rivals wanting to clean our clock. This is 
why we need an aggressive U.S. trade policy strongly led by 
both the administration and Congress, and equally strongly 
supported by the business community. That policy should be 
clearly focused on trade expansion through the WTO across a 
broad range of service sectors.
    It also means that we must pursue tax policies that promote 
our competitiveness, such as the McCrery-Neal active financing 
bill.
    In the coming negotiations, the services sector wants free, 
open, contestable, competitive markets for its products. These 
conditions can be obtained by getting our trade partners to 
commit to, first, ensure the right of U.S. companies to 
establish operations in foreign markets and to wholly own them.
    Second, ensure that U.S. companies receive national 
treatment so that they have the same rights as domestic 
companies.
    Third, promote procompetitive regulatory reform focused on 
appropriate and consistent rules as well as transparency and 
impartiality of regulatory administration.
    Fourth, remove barriers to greater cross-border trade.
    And, finally, remove obstacles to the free movement of key 
businesspersonnel and business information.
    CSI, along with a number of other organizations, has 
submitted more detailed objectives to the USTR, and I ask with 
your permission, Mr. Chairman, that our submission be included 
in the record. We, and our many associated industries, will 
continue to work closely with our negotiators in defining 
precise negotiating goals.
    Most importantly, CSI is organizing the first World 
Services Congress in Atlanta, November 1 through 3, to provide 
strong support for the Services 2000 negotiations. We believe 
that in order to complete the new round of negotiations by 
2003, the content of the round must be manageable. We prefer a 
negotiation focused on the core items of service, agriculture, 
and industrial products.
    With the possibility that early agreements could be reached 
in one or more service sectors, we would like the flexibility 
to put these into force so as not to lose the economic 
advantages they would offer.
    Specific goals for the service sector include, first, 
extending the coverage of GATS commitments; second, exploring 
alternative innovative negotiating techniques to speed up 
services sector negotiations; third, pursuing procompetitive 
regulatory reform principles; and fourth, creating an open 
environment for the development of electronic commerce.
    In short, Mr. Chairman, we have a very full plate of issues 
pressing for resolution in the new round. To achieve them, we 
believe the round must be kept short and that its content be 
manageable and achievable within a 3-year timeframe.
    Markets move too fast to give us the luxury of a decade-
long negotiation. We need greater market advice as soon as it 
can be negotiated.
    Thank you for the opportunity to express these views.
    Chairman Crane. Thank you, Mr. O'Hare.
    [The prepared statement and attachment follow:]

Statement of Dean O'Hare, Chairman and Chief Executive Officer, Chubb 
Corporation, Warren, New Jersey, and Chairman, Coalition of Service 
Industries

    It is a pleasure to appear today to present the views of 
the Coalition of Service Industries (CSI) on US preparations 
for the World Trade Organization (WTO) Ministerial Meeting in 
Seattle, specific objectives for the negotiations, and the 
anticipated impact of a successful new round of WTO 
negotiations on jobs, wages, economic opportunity, and the 
future competitiveness of US service providers.
    CSI was established in 1982 to create greater public 
awareness of the major role services industries play in our 
national economy; promote the expansion of business 
opportunities abroad for US service companies; advocate an 
increased focus on liberalization of trade in services in 
international trade negotiations; and encourage US leadership 
in obtaining a fair and competitive global marketplace.
    CSI members include an array of US service industries 
including the financial, telecommunications, professional, 
travel, transportation and air cargo, information and 
information technology sectors. Included in the broader 
coalition of sectors with which we work are energy services, 
advertising, entertainment, retail distribution, and education.
    CSI has been active in multilateral trade negotiations 
since before the Uruguay Round and has played an aggressive 
advocacy role in writing the General Agreement on Trade in 
Services and obtaining successful WTO negotiations in 
telecommunications and financial services.
    Today I would like to address (1) the critical importance 
of services and services trade liberalization to the US trade 
balance, jobs, innovation and competitiveness, (2) the WTO 
``Services 2000'' negotiations as an exceptional opportunity 
for US services firms to expand their operations abroad, and 
(3) some recommendations for shaping the coming round in a way 
that will produce the greatest benefit for all key sectors of 
the US economy.

Importance of Services and Services Trade to the US Economy

    Because US trade policy has in the past been dominated by 
concerns about trade in goods, it is always useful to remind 
policymakers about the key role services play now and will play 
in the information-based global economy.
    In overall terms, the US service sector comprised 77.2 
percent of US GDP, and 78.8 percent of private sector.
[GRAPHIC] [TIFF OMITTED] T5092.002


    In 1998, the US created 2.9 million net new jobs, all in 
the service sector, only slightly fewer than the 3.2 million 
service sector jobs created in 1997.
[GRAPHIC] [TIFF OMITTED] T5092.003


    The US is the world's largest exporter and importer of 
services. In 1998, US services exports were $260.3 billion, 
while imports were $180.8 billion, producing a trade in 
services surplus of $79.4 billion. Services comprise nearly 30 
percent of US exports. The US recorded a services surplus of 
$6.9 billion in May of this year, exporting $23.0 billion while 
importing $16.1 billion.
    US service industries are among the most competitive in the 
world. Our competitive advantage is immeasurably strengthened 
by the US ability to enrich our service products with the 
latest information technologies. US services companies are 
technology leaders whose expertise and innovation have 
contributed to US productivity growth across a broad range of 
sectors. Engagement in diverse foreign markets provides new 
opportunities to develop innovative services products and new 
technologies.
    It is also important to remember that services are an 
integral component of trade in agricultural and manufactured 
products. It is up to the distribution sector to get goods from 
the seller to the buyer, up to the consumer credit sector to 
provide financing for the purchase of new goods, and up to the 
insurance sector to provide coverage for plants that 
manufacture everything from shoes to airplanes. These 
relationships make services important to the international 
competitiveness of many sectors of the US economy.
    We are entering the ``Third Wave'' information-based 
economy of the 21st Century as the world's strongest 
competitor. This does not, however, mean that we do not have 
formidable rivals. In insurance, banking, telecommunications, 
transportation and many other fields there are strong foreign 
companies aching to ``clean our clock.'' And, although the 
ready availability of information and the rapid growth of new 
technologies enhances the competitive position of our own 
companies, it also readily empowers our competitors from around 
the globe.
    This is why we need an aggressive US trade policy strongly 
led by both the Administration and Congress, and equally 
strongly supported by the business community.
    We need a trade policy clearly focussed on trade expansion, 
which means using the WTO and the next round to obtain 
meaningful liberalization. This means too, that we must pursue 
domestic tax and regulatory policies that promote the 
competitiveness of our companies so that they do not enter the 
international arena ring carrying a competitive burden of our 
own making.
    I would also like to point out that while U.S. trade policy 
has concentrated on opening world markets to U.S. companies, 
our tax policy has not always moved in the same direction. U.S. 
international tax laws are complex, cumbersome, and can stifle 
the competitiveness of U.S. companies doing business overseas. 
Because of this, international tax reform is a critical element 
of an effective U.S. trade policy.
    As trade policy moves into the 21 Century, it seems our 
international tax policy still reflects the business 
environment of the 1960's. That is why we are encouraged by the 
recent language on tax deferral in the Financial Freedom Act 
and its Democratic substitute--this is an important first step 
in rationalizing our US international tax rules. CSI has 
championed strongly the McCrery-Neal permanent active financing 
bill and the provisions in H.R.2018, the International Tax 
Simplification for American Competitiveness Act of 1999 that 
provide an exception to subpart F for financial services active 
business foreign earnings. CSI would like to thank Chairman 
Archer, Congressmen Rangel, McCrery, Neal, Houghton, Levin and 
other members of the committee who are helping to secure an 
extension of deferral for America's financial services 
industry; this extension will foster a more equitable and 
competitive environment for US business in the international 
marketplace.
    A word about jobs--US jobs. Services companies have mainly 
grown abroad by establishing operations in foreign markets (in 
GATS parlance this is Mode 3 or ``commercial presence''). This 
has been necessary because in most service sectors you can only 
sell and deliver services locally. Foreign operations do not 
cost jobs, in fact, they support thousands and thousands of new 
US jobs that wouldn't exist otherwise.
    In my own company, for example, we could not maintain our 
US employment base or survive long-term, if we were not 
expanding abroad. The US non-life insurance market is mature 
and its growth rate is low. We now generate almost 25% of our 
premium income from outside the United States, and I expect 
that figure to rise substantially in the future. But, our 
engagement abroad not only helps our business--it also serves 
as a bridge for many of our customers to export from the US or 
invest abroad.
    Here are a few examples illustrating the stake of US 
service industries in expanded global markets.
     Travel and tourism contributed over $25 billion to 
the services trade surplus in 1997. This is the largest 
sectoral contribution to the overall services surplus. In 
addition, travel and tourism are estimated to support over 
seven million direct jobs and generate roughly $71 billion in 
tax revenues for federal, state and local governments.
     Business, professional and technical services is a 
largely unrecognized powerhouse in American trade. In 1997, we 
exported more than $21 billion in these services and we had a 
$16 billion trade surplus. These data do not include the 
earnings from foreign investments and foreign affiliates, which 
are very substantial. Trade in business, professional and 
technical services--such as accounting, legal, engineering, 
architectural and consulting services--is especially important 
because it frequently paves the way for trade and investment in 
other service and manufacturing sectors.
     Telecommunications services are an integral 
component of operations of all businesses, and are essential in 
promoting domestic and global growth. Telecommunications 
services provide the necessary infrastructure for the 
development and continued expansion of the information society 
and electronic commerce. An estimated $725 billion in revenue 
was generated in 1997, and projections for the next five years 
indicate that traded telecommunications services will increase 
at about 20 percent annually for outbound calls from the US to 
foreign markets.
     The information technology industry is also 
dependent on trade and trade expansion. The WTO estimates that 
over the next five years, sales over the Internet will double 
each year.
     The US asset management industry is the largest in 
the world. It is estimated that by 2002, 51% of total asset 
management revenue of $160 billion will come from abroad, not 
the US. Today, US-domiciled investment managers manage 14% of 
the total of non-US retirement plan assets and 5% of non-US 
mutual fund assets.
     US law firms, when billing foreign clients, 
produce services exports. Overall US legal services exports 
approach $1.0 billion.
     Foreign students coming to American schools, net 
after scholarship and local assistance, spent $8.3 billion in 
the US, which is a US services export. We have a surplus in 
trade in education services of $7.0 billion.
     Although few doctors imagine themselves as US 
exporters, medical services rendered in the US to foreign 
citizens produced an export surplus of $0.5 billion.
     Air cargo transport accounts for well over a third 
of the value of the world trade in merchandise. However, 
restrictions on market access (including cabotage), ownership 
and control, the right of establishment, capacity, frequencies, 
intermodal operations in connection with air services, wet 
leasing, customs, groundhandling, the environment in particular 
local airport access times, all limit the ability of cargo 
carriers to plan their operations purely on the basis of 
commercial and operational considerations. A WTO framework 
could provide cargo carriers with clear rules addressing these 
problems and resulting in enhanced delivery options to the 
benefit of businesses, shippers and consumers worldwide.
     Energy services have received little attention in 
trade negotiations to date. But drastic changes in the 
international and domestic business climate for this industry--
which in the US accounts for 1.4 million jobs and about 7% of 
US GDP--have shown the need for global trading rules, which can 
provide new, common understandings on such key matters as 
monopoly power, anti-competitive practices and discrimination 
against new market entrants, including of course US companies. 
Thus the energy services industry looks to the coming round as 
a critically important opportunity to map out a blueprint for 
market access and free competition in energy services.
    The challenges facing many services sectors underscore the 
need for strong, united leadership as we enter the new round. 
It also means we must structure this round to make sure it is a 
success.

WTO ``Services 2000''--the Opportunity We've Been Waiting For

    The services sector has been working toward the Services 
2000 negotiations for 20 years. First came the effort to 
convince governments that services--like goods--could be part 
of a trade negotiation. CSI itself was founded on the 
conviction that services firms needed a place in the 
multilateral trading system, and our founding members worked 
hard on behalf of the entire sector to ensure that services 
were included in the Uruguay Round.
    In the coming negotiations, services will, for the first 
time, take a front seat in the negotiations as part of the 
required agenda. Virtually all of the services sectors can be 
subject to negotiation in this round. With 135 member 
governments now participating in its rules-based system, and 
with more accessions pending, the WTO and its mandated 
``Services 2000'' negotiations gives the US services industry 
an unprecedented opportunity to secure meaningful services 
trade liberalization from our trading partners.

``Services 2000'': Goals for US Industry

    While previous negotiations have produced important 
liberalizations for service industries, all industries in the 
service sector face uneven implementation of past commitments 
and continued foreign impediments to open markets.
    What the services sector wants is free, open, contestable, 
competitive markets for its products. These conditions can be 
obtained by getting our trading partners to commit to:
     Ensure the right of US companies to establish 
operations in foreign markets, including the right to wholly 
own these investments;
     Ensure that US companies get ``national 
treatment,'' so that foreign investors have the same rights as 
domestic companies in a given market;
     Promote pro-competitive regulatory reform focused 
on adequacy of appropriate and consistent rules as well as 
transparency and impartiality of regulatory administration;
     Remove barriers to greater cross-border trade; and
     Remove obstacles to the free movement of people 
and business information.
    CSI, along with a number of other organizations has 
submitted to the US Trade Representative more detailed 
objectives for removing trade barriers. I ask that these 
recommendations, covering 8 sectors, be included in the record 
of this hearing. These will soon be updated to include 
additional sections on air cargo and energy services.
    We believe the coming negotiation should be completed by 
January 1, 2003. In terms of trade negotiations, this is short. 
In terms of the realities of the marketplace, it is a long time 
for companies that are seeking to expand their business 
operations abroad.
    To make the most of the exceptional opportunity offered by 
Services 2000 it is essential that the content of the broader 
round be manageable so that there is a reasonable chance of 
completing the round by 2003. This means a negotiation focussed 
on the core built-in items, like services and agriculture, plus 
industrial products. Other elements, on which there is no 
broadly shared consensus among the WTO contracting parties, 
like an overarching agreement on international investment and 
competition policy, should not be attempted in this short 
round. Resolving these issues in the long run may well be 
important and useful, but they will require a different 
negotiating framework.
    There has been a good deal of comment about the concept of 
the ``single undertaking'' and early harvests or early 
agreements. On the possibly slim chance that an agreement could 
be quickly reached in a given sector, we believe that agreement 
should be allowed to come into force before 2003. It would be 
unfair to require such an agreement be held up until the 
completion of the entire round; this would simply deny the 
companies in question and their workers the benefits of the new 
business opportunities the agreement would create.

               Extending the Coverage of GATS Commitments

    The most telling criticism of the GATS is the lack of 
commitments to liberalize. The new negotiations must secure 
commitment to national treatment, market access, and cross 
border services in as many sectors as possible. Current 
exceptions are too broad, and must be honed so only the most 
sensitive issues are excluded.
    The need to improve commitments to open trade in cross 
border services (mode one) and consumption abroad (mode two) is 
even more important if electronic commerce is to achieve its 
full development. Electronic commerce as a technology for the 
supply of services cannot begin to reach its potential without 
significant new market-opening commitments in virtually all 
industry sectors. The ability to provide services across 
borders is a necessary prerequisite of the robust development 
of electronic commerce. If the cross border supply of services 
is not enabled by commitments in modes one and two, electronic 
commerce will be constrained to narrow national markets.

                   Innovative Negotiating Techniques

    We strongly encourage the effort to speed up negotiations 
in the service sector by finding alternatives to the 
inefficient, ``request/offer'' method of negotiations that has 
been used to date.
    One of these would be to adopt ``horizontal'' agreements 
that would apply to all sectors. For example, why not ask that 
our trading partners commit, across the board, to allow foreign 
companies to establish business operations freely, without 
special license and to permit them to be majority owned? 
Exceptions to this general rule would be allowed, but in 
attempting the general rule we would be setting a high 
benchmark that would take us a long way to a successful 
negotiation, that could be completed by the 2003 deadline.

                           Regulatory Reform

    Regulations are easily used to frustrate and nullify hard 
won market access and national treatment commitments. 
Regulatory reform that is ``pro-competitive'' should be a major 
focus of the new negotiations. For example, attention needs to 
be given to instances where incumbent producers have dominant 
positions because of outdated restrictions on market entrance, 
product innovation, and pricing flexibility.
    CSI is intent on pursuing pro-competitive regulatory reform 
in sectors where it makes sense, such as in insurance and 
perhaps other financial services sectors. This will require WTO 
members to make adjustments in their regulatory regimes. These 
changes should create a transparent framework of rules that 
will permit markets to operate as freely as possible while 
providing necessary protections, such as ensuring the safety 
and soundness of financial institution.

Creating an Open Environment for the Development of Electronic Commerce

    International trade in virtually all services sectors, 
particularly cross-border trade, will be conducted to an 
increasing extent by electronic means. Electronic commerce and 
the Internet are a new technology to facilitate trade, 
particularly from business-to-business. Our goal should be to 
preserve the free-est and most open applications of these 
technologies to the enhancement of all forms of trade.
    We believe that the cross-border supply of services by 
electronic means is covered by existing GATS commitments. 
Countries' commitments apply to transactions whether by 
digital, or traditional, forms of communication.
    We believe that at the Seattle Ministerial Meeting of the 
WTO, Governments should:
     Make permanent the moratorium on Customs Duties on 
Electronic Transmissions;
     Reaffirm that existing WTO disciplines and 
commitments apply to electronic commerce;
     Agree to refrain from enacting measures that would 
impede electronic commerce; and
     Agree to assess whether national measures 
affecting electronic commerce are pro-competitive, and 
eliminate regulations that impede it.

                               Conclusion

    The coming negotiations are an important milestone. They 
offer the opportunity to move considerably beyond the status 
quo to make progress in opening up trade in all service 
industry sectors. As an important step toward ``Services 
2000,'' CSI is organizing the first World Services Congress in 
Atlanta on November 1-3 of this year to provide strong support 
for the negotiations. It is important that the 2000 
negotiations not be hindered by the effort to negotiate issues 
that are too contentious and would make the round unmanageable. 
Finally, if the round is to succeed, it must have the full 
support of the Administration and the Congress.

                    Coalition of Service Industries

Response To

    Federal Register Notice of August 19, 1998 [FR Doc. 98-
22279]
    Solicitation of Public Comment Regarding U.S. Preparations 
for the World Trade Organization's Ministerial Meeting, Fourth 
Quarter 1999

                              Introduction

    The Coalition of Service Industries, in coordination with 
the Air Courier Conference of America, the Information 
Technology Association of America, the International 
Communications Association, and the United States Council for 
International Business is pleased to submit our recommendations 
to the United States Trade Representative (USTR) pursuant to 
the Federal Register Notice of August 19, 1998: Solicitation of 
Public Comment Regarding U.S. Preparations for the World Trade 
Organization's Ministerial Meeting, Fourth Quarter 1999. We 
appreciate the opportunity to provide these comments and look 
forward to continuing to consult with the USTR and all involved 
government agencies as we work toward launching and a 
successful conclusion of the negotiations.
    Organizations which assumed primary responsibility for the 
initial drafting of specific portions of this submission are as 
follows:
    I. General Issues--Coalition of Service Industries
    II. Distribution--National Retail Federation
    III. Express Delivery--Air Courier Conference of America
    IV. Financial Services--Coalition of Service Industries
    V. Health Care--U.S. Council for International Business
    VI. Information Technology--Information Technology 
Association of America
    VII. Professional and Business-Related Services--Coalition 
of Service Industries
    VIII. Telecommunications--International Communications 
Association
    IX. Travel and Tourism--Coalition of Service Industries
    Other associations that have been involved in the process 
of reviewing and commenting on this submission include the Air 
Transportation Association of America, the American Hotel and 
Motel Association, The Council of Insurance Agents and Brokers, 
the American Bar Association, the American Consulting Engineers 
Council, the American Institute of Architects, the American 
Institute of Certified Public Accountants, the American 
Insurance Association, the Consumer Bankers Association, the 
Investment Company Institute, the American Council on Life 
Insurance, the National Society for Professional Engineers, and 
the Securities Industry Association.

                           I. General Issues

A. Importance of the Services 2000 Round

    Multilateral trade negotiations in services are complex and 
have had a short history. The global trading community is only 
at the beginning of a process of removing complex barriers to 
free trade in services through negotiation.
    The Services 2000 Round is, therefore, a critical element 
in maintaining and expanding world prosperity--the first in 
which we can apply lessons learned about the structure of the 
GATS and the difficult specialized services negotiating 
process. In general, the overarching objective of the United 
States Government in the negotiations should be to both broaden 
and deepen the commitments made in the GATS. Contestable 
markets in every sector and in every WTO member is the ultimate 
goal.
    Trade liberalization through Services 2000 offers the main 
chance for a quantum leap in world prosperity. The new 
industrial revolution--the information revolution or the 
``Third Wave''--has made innovation and efficiency in the 
production of services integral to economic growth. Services 
inputs are now a central factor in competitive success in 
manufacturing and agriculture. Telecommunications, 
transportation, finance, insurance, distribution and 
information services underpin all forms of international trade 
and all aspects of global economic activity.
    To maximize opportunities of Services 2000 it is essential 
that the format for the broader negotiations permits sufficient 
allocation of resources to the GATS negotiation and does not 
hamper reaching substantive agreements on services in a short 
time frame.
    We believe that the following factors should come to bear 
toward a successful new effort in services.
     A sound basis for making substantial progress in 
services in the 2000 negotiations exists. Progress made in 
sectors such as telecommunications and financial services is 
due to the realization by developing economies that services 
are the basis for economic modernization.
     The tumultuous financial and economic stresses of 
the past year will lead not to retrenchment, but instead will 
further progress toward liberalization.
     Through several rounds of negotiations under the 
WTO, countries learned to negotiate within the complex GATS 
framework.

B. Structural and Negotiating Issues

    Since its conclusion in 1994 the GATS has drawn 
considerable criticism because of its complex structure which 
facilitates obfuscation, not liberalization. In this paper, we 
will not elaborate on the reasons for this. Instead, the 
primary issue for negotiators is whether in these negotiations 
the failings of the GATS architecture should be addressed.
    We believe the answer must be derived from the twin 
objectives of (1) obtaining maximum liberalization in (2) the 
shortest time. If improvements in the GATS structure can be 
made quickly and in a way that facilitates the liberalization 
process, then it is a worthwhile effort. Otherwise, trade 
liberalization should not be delayed by a concentration of 
resources on structural GATS reform. In our view, GATS reform 
is secondary to liberalization.

Classification and Dynamic Definition of Services

    The existing classification of services used in the GATS is 
outdated and inadequate. It omits certain services and 
inappropriately categorizes others. It should be revised to 
reflect accurately the real structure of services industries in 
order to facilitate the removal of barriers to trade in those 
services. We make specific recommendations with regard to 
classification in the sectoral sections of this submission. 
However, we feel that another useful exercise would be to 
review the classification scheme across sectors so as to 
rationalize the entire structure to reduce overlap and 
redundancy where appropriate. This has not been undertaken as a 
part of this submission.

Extending the Coverage of GATS Commitments

    Apart from the issues of GATS architectural reform is the 
need to broaden and deepen the substantive commitments to 
liberalization made within the GATS. The GATS lacks, for the 
most part, substantive commitments. The new negotiations must 
secure broader commitments to national treatment and market 
access in as many sectors as possible. Current scheduled 
exceptions are too broad, and must be honed so only the most 
sensitive issues are excluded.
Innovative Negotiating Strategies

    We urge negotiators to explore options in developing 
generic or formulaic approaches to negotiating the 
liberalization of market access barriers, including negative 
list schedules, sectoral commitments, horizontal commitments of 
revised modes of supply, and other approaches which can move 
beyond the traditional ``request-offer'' format and speed the 
conclusion of agreements.

C. Regulatory Reform

    In order to pursue meaningful services negotiations, WTO 
members will have to consider making adjustments to their 
regulatory regimes. ``Regulatory reform'' is a common set of 
principles that should be used as a guide or a test to 
regulations in individual sectors. Sometimes referred to as 
``pro-competitive'' regulatory principles, they create a 
transparent framework of rules that permit markets to operate 
as freely as possible while providing necessary protections--
for example in the case of the banking sector, ensuring safety 
and soundness.
    The ``Reference Paper'' negotiated as part of the WTO 
Agreement on Basic Telecommunications is a model that should 
guide the development of a framework for dealing with 
regulatory reforms in the Services 2000 Negotiations. The 
regulatory principles embodied in this paper have already had 
an important influence on reshaping national regulatory systems 
towards a more market-oriented approach. The key is effective 
implementation of those principles--in their common, pro-
competitive, open market interpretation and application. We 
must learn from experience. The Reference Paper, we are 
discovering, must be interpreted clearly and forcefully for 
dispute settlement to be effective in most instances. Similar 
initiatives in other sectors should attempt to include specific 
and targeted language where possible.
    Regulation should ensure that consumers (users) have access 
to quality, reasonably-priced services that are available from 
reliable producers. Government's role is to promote fair 
competition, protecting buyers from misleading, collusive, and 
other anti-competitive practices. Regulation should have four 
central attributes:
     Adequacy: it should be sufficient to rectify 
serious market imperfections and thus protect the public.
     Impartiality: governments should accord no one or 
no group of competitors, foreign or domestic, a more favorable 
position than accorded other competitors.
     Least intrusive: governments should apply 
regulation in ways that efficiently opens that market and that 
least disrupt the smooth functioning of markets once opened.
     Transparency: laws and regulations should be 
easily available to the public, and the processes for arriving 
at regulations should be open and accessible to the public for 
comment.
    There is a substantial basis of support in certain industry 
sectors for efforts to achieve ``regulatory reform.'' 
Regulations are easily used to frustrate market access and 
national treatment commitments. Regulatory conflicts are often 
a major source of trade disputes. Countries should have an 
interest in regulatory reform because it is a key to reviving 
high growth rates. This area should be a major focus of the new 
negotiations, especially where incumbent producers have 
monopoly or residual market power as a result of their 
incumbency or historic position.

D. Electronic Commerce

    International trade in services, particularly cross-border 
trade, is conducted to a large and increasing extent through 
electronic means. Computer technology has made many services 
tradable, which until recently were not. Electronic commerce 
and the Internet have thus added a new technological means of 
facilitating trade, adding digitized information flows to 
physical flows, much as ships increased trade over merely land-
based movement of goods.
    The supply of services by electronic means can take place 
in any of the four modes set out in the GATS framework, just as 
the supply of services by physical means can. Accordingly, the 
supply of services by electronic technology is covered by the 
GATS in the same way as all other means of delivery. Countries' 
commitments in the GATS apply to transactions whether by 
digital, or traditional, forms of communication.
    We reject the idea that there is a class of services that 
can be labeled electronic commerce and thus be negotiated 
separately. There may be services products that result from 
wholly new technological applications or inventions that might 
be identified as electronic commerce, but these are more 
appropriately labeled ``information technology services,'' or 
services within specific sectors. Barriers to these new forms 
of services can be negotiated by sector or in a separate 
information technology services sector.
    On the other hand, it is also necessary to recognize the 
relationship between electronic commerce and specific industry 
sectors. Electronic commerce as a means of delivery cannot 
reach its full potential without significant commitments in 
virtually every industry sector. The ability to provide 
services across borders is a necessary prerequisite for the 
robust development and growth of electronic commerce. If 
service provision across borders is not permitted, then the 
ability to deliver those services electronically will be 
constrained and fragmented in national markets.

E. Government Procurement

    Governments spend billions of dollars on procurement of 
services. In many countries this procurement is conducted in 
closed processes that work against foreign suppliers. A two-
pronged effort is now under way in the WTO. One prong of this 
effort is to achieve agreement on transparency measures so that 
all WTO members can commit themselves to transparent procedures 
without yet making new commitments to market access and 
national treatment. The other is to simplify the existing 
Agreement on Government Procurement which has 27 signatories, 
including the U.S., to increase its adoption by member 
countries. The core of this document would remain a commitment 
to permit foreign bidders to receive national treatment as they 
compete for government awards. We understand that government 
procurement is a sensitive subject and that commitments in this 
area may need to be phased over a period of time. However, we 
also feel it is an important area for progress to be made. The 
impact of governments being able to obtain services globally is 
quite substantial. The possibility is to dramatically improve 
the services which governments provide to their citizens, and 
to lower costs. This will have a beneficial effect on economies 
and society worldwide.
    We support the goal of the Quad to achieve a Transparency 
Agreement in 1999. In addition, we feel that there are a set of 
overall objectives for services which need to be achieved in 
this area. Whether these objectives can best be met through 
existing mechanisms or through the Services 2000 negotiations 
is of less consequence to us than the fact that they are 
actually achieved. Therefore, we believe that the objectives in 
this area should be the following:
     Insure transparency.
     Insure access to an independent appeals and 
dispute resolution process.
     Insure full market access and national treatment.

F. Conclusion

    The Services 2000 Negotiations, thus, are an important 
milestone. They offer the opportunity to move considerably 
beyond the status quo and to make progress in all service 
industry sectors. It is important not to be sidetracked by 
architectural and negotiating structure, rather all the effort 
should focus on achieving further liberalization of services 
and the inclusion of regulatory reform and government 
procurement.

                       II. Distribution Services

A. Sector Status

    The U.S. retail industry, represented by its trade 
association, the National Retail Federation (NRF), strongly 
supports negotiations at the World Trade Organization (WTO) to 
further liberalize trade in distribution services. A growing 
number of U.S. retailers recognize that there are many 
attractive business opportunities outside the United States. 
Many foreign countries have a growing middle class that 
increasingly demands the quality of service and broad selection 
of products that U.S. retailers can offer at competitive 
prices. At the same time, many of these countries have 
comparatively few retail outlets per capita.
    Retail opportunities abound even in mature markets where 
one increasingly sees the business signs of familiar U.S. 
stores in many downtown and suburban shopping areas. 
Notwithstanding the current global economic situation, many 
U.S. department, specialty, discount, and mass merchandise 
retail companies have opened stores abroad and are looking to 
expand their foreign operations to meet this growing consumer 
demand outside the United States.
    In the Uruguay Round General Agreement on Trade and 
Services (GATS), a number of countries agreed to include 
commitments in their GATS schedules to bind at least some part 
of trade in distribution services under the rules of the WTO. 
These countries include our largest trading partners--Canada, 
Mexico, the European Union, and Japan. Among the general 
categories included under distribution services:
     33 countries scheduled commitments on retail 
services.
     34 countries scheduled commitments on wholesale 
services.
     23 countries scheduled commitments on franchising.
     21 countries scheduled commitments on commercial 
agents.
     2 countries scheduled under ``other'' distribution 
services.
    In many instances, these scheduled concessions were rather 
modest and included broad exceptions.

B. Classification

    The WTO Services Sectoral Classification List defines 
``distribution services'' as encompassing retailing, 
wholesaling, franchising, and commission agents. This 
definition is, however, quite broad and somewhat vague. 
Therefore, negotiations at the WTO in this sector must take 
into consideration the entire network of activities that are 
necessary to support retail and other distribution services 
operations. For example, in the negotiations between the United 
States and China on China's accession to the WTO, the area of 
distribution services covers all activities that support retail 
and other distribution services operation, from the port of 
entry to the store, and ultimately to the customer--e.g., 
customs clearance, storage and warehousing services; road, 
rail, water, and air transportation services; marketing; after-
sales services and customer support; control of distribution 
networks and wholesale outlets; and protection of retail 
trademarks. It is necessary to recognize that barriers in any 
of these areas will disrupt the efficient operation of the 
distribution chain and, in order to support successful retail 
and other distribution services operations, barriers in all 
areas supporting distribution services operations must be 
addressed in some manner.

C. Barriers

    In many countries, opportunities for U.S. retailers and 
other providers of distribution services to establish and 
maintain and commercial presence are limited by various laws, 
regulations, and policies. Some countries have protected their 
small stores from competition by limiting the size of retail 
establishments and placing arbitrary and onerous restrictions 
on where they may locate, price they may charge, and how they 
may promote products. Restrictions imposed by countries to 
protect so-called `` cultural industries'' have significantly 
hindered the establishment of retail operations by large U.S. 
booksellers. U.S. direct sellers and other retail companies 
have been severely hampered in establishing and/or expanding 
business operations in countries as a result of local sourcing 
requirements, and tight limitations over ownership and control 
of distribution systems. Restrictions on investment, 
limitations on foreign ownership, restrictions on opening 
hours, constraints on the typesducts that may be sold to 
protect local monopolies, lack of adequate protection for 
retail trademarks, and the non-transparent and arbitrary 
application of commercial laws and regulations are further 
examples of barriers facing U.S. retailers. In addition, some 
countries have undermined the value of commitments they have 
already scheduled at the WTO on distribution services by 
including broad exceptions permitting restrictions to be 
imposed under a vague ``economic needs test.''
    The reduction of such barriers to trade in distribution 
services warrants greater attention through specific sectoral 
negotiations at the WTO for several reasons. Since trade in 
distribution services includes wholesaling, retailing, and 
franchising, this sector represents the last link in the trade 
chain to the consumer and is, therefore, essential to a well-
functioning free and open trading regime. Larger retail 
establishments are more likely to sell imported along with 
domestically-made products. Moreover, market access is only 
meaningful if goods can be effectively distributed at the 
retail level.

D. Negotiating Objectives

    The U.S. retail industry strongly urges U.S. negotiators to 
seek the elimination of foreign restrictions to trade in 
distribution services. Once negotiations are underway, the 
United States should focus generally on:
     Obtaining commitments from as many countries as 
possible to bind the distribution services sector in their GATS 
schedules.
     Limiting as much as possible the number of 
exceptions taken by countries in their schedule of commitments 
on distribution services.
     Persuading countries to refrain from general, 
open-ended exceptions in their schedule of commitments on 
distribution services.
     Broadening and deepening the commitments from 
countries that have already included distribution services in 
their GATS schedules.
     Obtaining commitments that allow for full market 
access for distribution services under the principle of 
national treatment, rather than merely enshrining the current 
status quo.
E. Economic Impact

    In order to achieve the goals listed above, U.S. 
negotiators should emphasize the economic and employment 
benefits that other countries would realize by opening up and 
liberalizing their distribution services sector. For example, 
the United States has no significant restrictions on the retail 
services. Nearly one in five American workers is employed in 
retail jobs that are well-paying and require a marketable set 
of skills. Moreover, the U.S. retail industry registered sales 
receipts in 1997 of more that $2.5 trillion and economic 
activity in the sector has a significant multiplier effect 
throughout the U.S. economy. Thus, the retail sector alone adds 
substantially to U.S. Gross Domestic Product (GDP), economic 
growth, higher employment, and lower inflation. In addition, 
the ability of the U.S. retailers to provide American consumers 
with a wide variety of reasonably-priced products is a 
substantial contributor to a high standard of living in the 
United States.
    U.S. negotiators should impress on their foreign 
counterparts that, as in the United States, an open and 
thriving retail industry and distribution services sector 
generally, will be an important factor in improving the 
standard of living of their citizens, expanding economic 
activity and growth, and developing a modern consumer society. 
Those benefits should not be taken lightly. When U.S. retailers 
establish commercial operations in a foreign country, those 
operations:
     Provide much needed local investment.
     Create jobs for many local people, not only in the 
retail establishment itself, but also in the warehouses, and 
transportation and advertising services that support those 
operations.
     Allow local workers to develop business expertise 
and a better understanding about proper business practices in 
the services sector.
     Provide local consumers with a better selection of 
goods at lower prices that will help improve the quality of 
their lives.
     Make their country's retail sector and the economy 
as a whole more efficient.

                     III. Express Delivery Services

A. Sector Status

    Express delivery service, as provided by companies such as 
DHL, Federal Express, TNT and United Parcel Service, is a 
relatively new and rapidly expanding industry, having evolved 
during the past two decades in response to the needs of global 
international commerce. The express transportation industry 
specializes in time-definite, reliable transportation services 
for documents, packages and freight. Express delivery has grown 
increasingly important to businesses needing to use time-
sensitive, ``just-in-time'' manufacturing techniques and 
supply-chain logistics in order to remain internationally 
competitive. The express industry has revolutionized the way 
companies do business worldwide, enabling businesses to rely on 
predictable, expeditious delivery of supplies. Producers using 
supplies from overseas no longer need to maintain costly 
inventories, nor do business persons need to wait extended 
periods of time for important documents. In addition, consumers 
now have the option of receiving international shipments on an 
expedited basis.
    Increased reliance on express shipments has propelled the 
industry to average annual growth rates of 20 percent for the 
past two decades. The industry's explosive growth is reflected 
in the rapid expansion of air cargo shipments: the expedited 
movement of cargo by air now accounts for 37 percent of the 
value of world trade, a share which is expected to continue to 
increase.
    The express transportation industry is essential to the 
future growth of world trade and commerce, as more and more 
trade is centered on the type of high-value goods that are 
carried by our industry, such as electronics, computers and 
computer parts, software, optics, precision equipment, 
medicine, medical supplies, pharmaceuticals, aircraft and auto 
parts, avionics, fashions and high-value perishables. In 
addition, the industry encourages small and medium-sized 
businesses to grow by enabling them to participate in 
international trade. The express transportation sector, with 
its integrated services that provide door-to-door delivery, 
frees small businesses from the burdensome and costly tasks of 
arranging for the transportation of their goods through a 
myriad of unrelated and often non-communicating parties.
    Express delivery operators, represented through their trade 
association, the Air Courier Conference of America (ACCA), 
strongly support free and open trade and investment worldwide. 
Express operators provide integrated, door-to-door delivery 
service for documents and packages, and customers expect value-
added services like time guarantees, electronic information, 
brokerage services and more. Express customers are not as 
concerned with how their documents or parcels are moved--just 
that they arrive on time. This could be by plane, train, truck, 
van, automobile, motorcycle, or even gondola. Consequently, a 
broad spectrum of issues affects the express industry, and 
includes laws and regulations in the areas of intermodal 
transportation, air auxiliary services, distribution, 
warehousing, customs, postal, telecommunications, logistics, 
brokerage, insurance, and freight forwarding. For this reason, 
barriers to international trade in the express industry can 
involve trade restrictions and trade distorting measures in any 
of these pertinent service sectors.

B. Classification

    Under the Uruguay Round's Services Sectoral Classification 
List, express delivery services are currently classified as 
``courier services''--a communications service (CPC 7512), 
along with postal, telecommunications and audiovisual services. 
This classification fails to reflect the true nature of express 
delivery services, which provide for regular exchange of 
physical items over a network of locations and, as described 
above, incorporate transportation, communications and other 
services.
    Express delivery services should be reclassified to more 
accurately reflect the nature of express operations which, at a 
minimum:
     Provide the business community and general public 
with regular (usually every business day), expedited and 
reliable collection, transport and delivery of physical objects 
across a network of geographic areas.
     have management and communication systems that 
monitor and ensure end-to-end quality of service; and
     Involve the operation of such offices, buildings, 
telecommunications facilities, computers, sorting equipment, 
automobiles, trucks, aircraft, and other vehicles as may be 
necessary to accomplish the basic function of express delivery.
    A reclassification of the industry would facilitate GATS 
2000 negotiations that are meaningful to the industry.

C. Barriers

    As described above, barriers in any of the numerous 
operational areas encompassed by express operators can hinder 
express delivery services. Among the most persistent problems 
faced by the industry are inconsistent customs clearance 
policies that add costs and delays to express services. These 
barriers include:
     Restrictions on the value and weight of express 
shipments.
     Delays, generally of at least one day and up to 96 
hours, from lengthy customs clearance procedures.
     Cargo handling restrictions that force express 
carriers to use local handling companies--rather than our own 
employees--to transport our express shipments from the baggage 
collection area to warehouses where they can clear local 
customs.
     Arbitrary revaluation of declared value of 
shipments by customs.
     Imposition of a variety of charges and fees for 
express shipments, including shipments that are transiting one 
country on their way to their ultimate destination.
    To eliminate these and other barriers, ACCA believes that 
the WTO should require all members to adopt and implement the 
express guidelines of the World Customs Organization.
    Because express operators provide integrated, door-to-door 
services, barriers to any element of transportation linked to 
these services pose a problem for the industry. Unfortunately, 
in markets worldwide ACCA members encounter a variety of 
transportation restrictions that limit--and increase the cost 
of--express service. For the express sector to achieve 
meaningful trade liberalization under the WTO, it must be 
accorded access to land, air and other transportation 
infrastructures in all markets. For Example, arbitrary 
operating restrictions on carriers to limit their market, such 
as types of equipment and vehicles that can be used, and weight 
or size of packages, must be prohibited.
    Firms also face anti-competitive practices in many markets, 
particularly with respect to postal operations. Because some of 
the industry's operations are postal-related (e.g., the 
delivery of documents and small packages), express operators 
are frequently affected by postal policies in foreign 
countries. In fact, throughout the world, countries exercise 
varying degrees of authority over the delivery of printed 
matter.
    Many countries have vested the national postal service with 
local monopolies over the pick-up and delivery of letters and 
documents. This often imposes unfair or unreasonable 
restrictions on international service, which limits the 
operations of international express service companies. While we 
are not advocating that U.S. policymakers seek the dissolution 
of national monopolies for domestic postal services, we do 
believe that the domestic monopoly claim should not be extended 
unfairly and unreasonably to encompass cross-border services. 
Unified, end-to-end administrative control makes rapid and 
reliable international express service possible.
    U.S. negotiators should seek WTO commitments that would:
     Prohibit a foreign government from determining 
unilaterally the basic conditions of express service to and 
from the United States (market entry, price regulation, 
operating restrictions, and extraordinary or discriminatory 
taxation).
     Ensure that a foreign postal monopoly does not 
have an outright prohibition against the provision of 
international service by U.S. express delivery providers.
     Prohibit profits derived from services provided by 
national postal authorities from subsidizing services that 
compete with foreign companies.
     Prohibit taxation of private sector companies from 
subsidizing a national postal administration's services.
     Ensure that national postal administration's 
parcel and non-monopoly document services that compete directly 
with foreign companies would be subject to effective and 
impartial regulatory scrutiny to protect against illegitimate 
cross-subsidy.
     Ensure that a postal administration's competitive 
services be subject to the same laws and regulations imposed on 
private companies.
     Prohibit a foreign country from unilaterally 
selecting the U.S. express carriers that may service an 
international market with restricted entry.
     Prohibit a tax on bilateral services that exceeds 
the net cost to a legitimate local monopoly carrier.
     Prohibit discriminatory treatment of U.S. 
carriers.

D. Negotiating Objectives

    With respect to the WTO negotiating agenda, we urge that 
express delivery services be a focus of the GATS 2000 
Negotiations. Specifically, we advocate the negotiation of pro-
competitive regulatory principles for the express sector. These 
principles should be legally binding on all WTO members, just 
as is the case for the telecommunications pro-competitive 
regulatory principles agreed to during the previous GATS 
negotiations.
    ACCA has detailed a proposed set of pro-competitive 
regulatory principles in a separate submission to USTR. These 
principles would encompass liberalized customs, postal, air 
cargo and other policies. We look forward to working with USTR 
throughout the GATS 2000 process to liberalize treatment of 
express delivery services, thereby expediting the flow of goods 
globally.

                         IV. Financial Services

A. Benefits

    Increasing competition in financial services markets through 
liberalization of restraints on foreign participation in financial 
services activities will enhance economic growth for all countries. 
Such liberalization will help provide developing countries with: (1) 
essential information and infrastructure to speed their modernization; 
(2) improved health, safety and retirement security for working people 
and; (3) the broadest range of products and services at the lowest cost 
for consumers. Additionally, it will help enhance investor confidence, 
and attract and retain private long-term direct investment. 
Liberalization promotes the development of modern, efficient, well-
regulated financial markets.

B. Sector Status

    WTO financial services negotiations provide an excellent 
opportunity to achieve meaningful liberalization on a global scale. By 
securing binding commitments by a significant number of countries of 
the right of foreign companies to establish and to own all or a 
majority share of their direct investments, the 1997 negotiations made 
important progress.
    Even though the 1997 agreement didn't include comprehensive 
agreements to reduce or eliminate investment barriers for foreign 
financial service providers, the agreement made major progress in a 
number of countries. Much remains to be done in the upcoming 
negotiations and the 1997 Agreement serves as a strong foundation to 
add truly liberalizing commitments.

C. Barriers

    The financial services 2000 negotiations offer an extremely 
important opportunity to build on this base in a number of ways:
     Further the scope of commitments by reducing the number of 
exceptions countries have written into their commitment schedules.
     Expand rights of establishment and ownership. While 
progress has been made in securing bindings of existing practice in 
regard to establishment and full or majority ownership, these rights 
should be expanded and secured from more countries that made no such 
commitments.
     Expand cross border trading rights. Little attention has 
been given to securing rights to sell financial services across borders 
in negotiations to date. WTO members should, where appropriate take 
into account the views and legitimate objectives of the regulators.
     Modernize and reform regulatory structures that frustrate 
trade commitment and competition. Regulatory regimes can be used to 
block gains made in trade negotiations by imposing unnecessary 
restraints on foreign financial services suppliers, and thus favoring 
local suppliers. Such practices prevent realization of the goal of 
national treatment. They are inherently anti-competitive and 
inefficient. These ``pro-competitive regulatory reforms'' should be 
directed at establishing fair, competitive markets by focusing on 
solvency and transparency to provide the most effective protection of 
consumers and markets.
     Achieve impartial administration of regulations. Article 
VI of the GATS, applying to Domestic Regulation, requires that ``in 
sectors where specific commitments are undertaken, each Member shall 
ensure that all measures of general application affecting trade in 
services are administered in a reasonable, objective, and impartial 
manner.'' It further requires each member to set up tribunals or 
procedures which provide prompt review and remedies for administrative 
decisions affecting trade in services, and it establishes that members 
must provide impartial review of these procedures. These requirements 
for reasonable, objective and impartial administration of regulations 
should be amplified by the establishment of principles against which 
regulations should be tested.
     Promote administrative and regulatory transparency. Clear 
and reliable information about a country's financial services laws and 
practices advances equitable trade and competition, reduces the 
possibility of manipulation, and is an essential component of a 
liberalizing agreement. Non-transparent regulations hamper foreign 
firms' ability to do business. Transparency requirements make countries 
more accountable for their actions and provide information needed to 
evaluate compliance with the agreement.
     Reduce and remove obstacles to the free movement of 
people. The temporary posting of key business personnel should be 
facilitated by creating a system of easily obtainable and renewable 
visas, and by easing or removal of other restrictions.

D. Classification

    Should include language necessary to provide for protection and 
applicability for pensions, long-term care, disability income and life 
insurance and reinsurance.

E. Negotiating Objectives

     Foreign investors should have the right to establish 
through a wholly owned presence or other form of business ownership, 
and to operate competitively through established vehicles available to 
national companies.
     Foreign investors should have the same access to domestic 
and international markets as domestic companies. They should be treated 
to regulatory and other purposes on the same basis as domestic 
companies.
     Unnecessary restrictions on cross-border financial 
services businesses and consumption of services abroad should be 
removed, to encourage trade without requiring establishment.
     Creating a system of easily obtained and renewable permits 
should facilitate the temporary posting of key business personnel.
     Existing investments should be grandfathered by Member 
countries that did not commit to do so in the 1997 Agreement.
     Countries wishing to accede to membership in the WTO 
should do so on the basis of commitments to substantial financial 
liberalization consistent with the 1997 Financial Services Agreement 
and the goals set forth above, resulting in commercially meaningful 
access. Countries should be permitted to participate in the 
negotiations in a way which encourages them to make such commitments.
     Financial regulation principles leading to the development 
of sound, more competitive markets should be negotiated. Such 
regulation will foster risk management standards, transparency, product 
diversification and consumer choice important for public policy 
purposes. It will also enhance financial security for citizens, nations 
and the global financial system.
     Transparent laws and regulations are necessary to 
liberalize financial services. Clear and reliable information about a 
country's financial services laws and practices promotes equitable 
trade and competition, and reduce the possibility of manipulation.
     A notification waiting period for all new national and 
sub-national taxation of financial services should be established to 
provide industry and governments with a minimum of one year to factor 
changing taxation rates in technical, solvency and pricing decisions.
     Nations should commit to lock in and improve pension 
policies that encourage private savings for retirement, in recognition 
of worldwide aging populations and related pressure on government 
social security systems.

                        V. Health Care Services

A. Sector Status

    There appears to be little coverage of healthcare services 
in current agreements between countries; therefore, these 
comments reflect preliminary thought process around GATS 
negotiations for health care services. We intend to continue to 
gather information and talk with businesses that are working 
throughout the world in the health care services sector to 
bring additional clarity to the submission.
    There are several emerging global trends that could benefit 
U.S. health care service suppliers in overseas markets 
including the rapid growth in health care expenditures in a 
large number of countries. Rapidly expanding health care 
expenditures in many developed countries are due to an increase 
in their aged populations, the demographic segment that uses 
health care services most intensively. The entire spectrum of 
geriatric services, both community and institutionalization, 
for senior citizens should be explored. Increased health 
expenditures in rapidly developing economies are occurring as 
newly emerging middle classes demand the levels of health care 
previously enjoyed only in more developed economies, such as 
the U.S. and Western Europe.
    We believe we can make much progress in the negotiations to 
allow the opportunity for U.S. businesses to expand into 
foreign health care markets. In the U.S. competition has 
provided reductions in the cost of health care as well as 
increased quality in the care that is being provided. Some 
types of services are consulting and training for local 
pharmacy management; consulting and training for health care 
including treatment of abusive behaviors; telemedicine; 
development of treatment protocols to enhance healthcare 
quality; sharing expertise on appropriate treatment; and, 
management of overseas health care institutions.
    According to official statistics from the U.S. Department 
of Commerce, in 1996 U.S. receipts of health care services 
amounted to $872 million. This number was 2 percentage points 
less than the average annual export growth rate of nearly 6 
percent for health care services during 1991-1995. U.S. cross-
border imports of health care services amounted to an estimated 
$550 million in 1996. U.S. receipts and payments for health 
care services accounted for less than 1 percent of such cross-
border trade in all service industries in l996. The U.S. cross-
border trade surplus in health care services was $322 million 
in 1996.

B. Classification

    Below are the health care entries from the WTO's Services 
Sectoral Classification List (W-120) with reference numbers to 
the UN's Central Product Classification (CPC) numbers. In 
current practice, many WTO members do not use the CPC 
references in their scheduled commitments; practices may vary 
per sector. While the W-120 and CPC classifications provide a 
reasonable start toward definition of the health care services 
that should be covered in this negotiation, we need 
flexibility. We do not want to be locked into only these 
specific existing classifications. For example, we need 
flexibility to include some services which may not be captured 
by these definitions. We also recognize that some of these 
services may be included as parts of goods negotiations or in 
the definitions of other service sectors. We will continue our 
work to provide negotiators with the most detailed and 
comprehensive description of the health care services we are 
now providing or which we will want to provide.

           WTO Services Sectoral Classification List (W-120)

Sectors and Sub-Sectors

    1. Business Services
    2. A. Professional Services
       h. Medical and Dental Services 9312
       i. Veterinary Services 932
       j. Services provided by midwives, nurses, physiotherapists and 
para-medical personnel 93191
    8. Health Related and Social Services
      A. Hospital Services 9311
      B. Other Human Health Services 9319

C. Barriers

    Historically, health care services in many foreign countries have 
largely been the responsibility of the public sector. This public 
ownership of health care has made it difficult for U.S. private-sector 
health care providers to market in foreign countries. In addition, 
there are substantive differences in emerging markets vs. OECD 
countries. In most emerging markets there are few barriers to these 
services but barriers can be erected in the future as laws and 
regulations are enacted absent commitments in writing. Existing 
regulations are by and large not a problem in emerging markets.
    However, existing regulations do present serious barriers in OECD 
countries, including:
     Restricting licensing of health care professionals.
     Excessive privacy and confidentiality regulations.
     Lack of transparency in the OECD countries' regulations.
     Difficulty processing permits for work and for facilities.

D. Negotiating Objectives

    Three general objectives are to encourage more privatization, to 
promote pro-competitive regulatory reform, and to obtain 
liberalization. Specific objectives are:
     Transparent licensing of health care professionals and 
facilities, which do not place unnecessary or discriminatory burdens on 
U.S. providers.
     Obtain market access and national treatment commitments 
allowing provisions of all health care services cross border.
     Allow majority foreign ownership of health care 
facilities.
     Obtain a commitment for the cross-border provision and 
transfer of health care information.
     Seek inclusion of health care in WTO government 
procurement disciplines.
     Strengthen international co-operation to promote pro-
competitive regulatory reform across countries.
     Negotiate Mutual Recognition Agreements (MRAs) for 
licensing of professionals and cooperative agreements on regulation of 
facilities.
     Develop principles to guide regulators so as to minimize 
unnecessary costs on trade and investment in the health care sector.
     Simplify regulations and provide transparency for movement 
of personnel, both professionals and patients.

                  VI. Information Technology Services

A. Sector Status

    The information services industry has a vital interest in the 
successful conclusion of the World Trade Organization (WTO) 2000 
Services negotiations. Information technology, while a service industry 
itself, is critical to the success of the other services industries, 
which, in turn provide a substantial market for information services. 
As the services sector thrives, so will the information services 
sector.
    While substantive commitments by many countries in the area of 
value-added services (information services) are included in the General 
Agreement on Trade in Services (GATS), some commitments are weak, while 
others are non-existent. The 2000 negotiations provide an opportunity 
to broaden and deepen the current commitments.
    Recent international agreements affecting information technology 
services have opened related sectors, such as basic and enhanced 
telecommunications and offered protection and trade liberalization in 
other sectors (Trade-related Intellectual Property--TRIPS, and the 
Information Technology Agreement--ITA).

GATS Annex on Telecommunications and the WTO Agreement on Basic 
Telecommunications Services

    The Enhanced Telecommunications Annex provides substantial 
commitments for information technology services and for access to 
telecommunications networks for the provision of such services. 
Examples of services covered under this Annex are electronic mail, on-
line information and database retrieval, code and protocol conversion, 
data processing, and electronic data interchange. While a number of 
countries listed significant limitations with regard to foreign 
ownership and the required use of public networks, on the whole, the 
provision of information technology services is relatively open and 
burden-free.
    The 1997 WTO Agreement on Basic Telecommunications Services (GBT) 
and its reference paper on pro-competitive regulatory principles is an 
integral element of providing a liberalized environment for trade in 
information technology services. Under a very broad and essentially 
open-ended definition employed for the negotiations, basic 
telecommunications are considered any telecommunications transport 
networks or services and the schedules of commitments cover a wide 
variety of services fitting this definition. Some examples of basic 
telecommunications include: voice telephone services, packet-switched 
data transmission services; circuit-switched data transmission 
services, telex, telegraph, facsimile and private leased circuit 
services, analog/digital cellular/mobile telephone services, mobile 
data service, paging, personal communications services, satellite-based 
mobile services, fixed satellite services, VSAT services, gateway 
earthstation services, teleconferencing, video transport and trunked 
radio system services. Categories of service included: local, long 
distance, international, wire-based, radio based, resale, facilities-
based, for public use, and for non-public use (closed user groups).
    The agreement, which opened trade in the $600 billion global basic 
telecommunications market, will promote competition in world 
telecommunications markets, spur innovation and competition-based 
pricing and speed the delivery of robust information products and 
services to consumers everywhere. Ultimately, we believe the agreement 
will expand the market not only for telecommunications, but for other 
information service providers as well.
    The GBT commitments are a key element in securing the 
infrastructure for trade in information services. Together with the 
agreement on enhanced telecommunications services, we believe many of 
the basic elements to secure access to infrastructure over which 
information technology services thrive, are subject to existing 
liberalization commitments. It is our understanding that the GATS Annex 
on Enhanced Telecommunications Services and the GBT cover the delivery 
of services electronically. We urge the USTR to enforce these existing 
commitments, expand commitments from those who made limited 
commitments, and seek new commitments from those who have not signed on 
to the GBT.

Information Technology Agreement (ITA)

    Concluded in December 1996, the ITA provides for the elimination of 
customs duties and other charges on information technology products 
through equal annual tariff reductions and covers five main categories 
of IT products: computers, telecommunications products, semiconductors, 
semiconductor manufacturing equipment, software, and scientific 
instruments. The tariff reductions, which are scheduled to begin on 
July 1, 1997 and to conclude on January 1, 2000, are to be implemented 
by signatories on a most-favored-nation (MFN) basis.
    The ITA will open up global trade in a wide array of information 
technology products, valued at over $500 billion, and spur growth of 
the global information infrastructure. The USTR estimates that the ITA 
will provide a competitive boost of 1.8 million jobs in the U.S.
    The agreement will bring significant benefits to software and 
telecommunications companies. The agreement includes a broad definition 
of software products, which covers multimedia and interactive software 
and ``Nuisance tariffs'' on software (tariffs below 3%) will be 
eliminated as soon as July 1, 1997. The agreement also covers a wide 
array of telecommunications equipment and products, including fiber 
optic cable.
    The ITA, while a goods-based (rather than services-based) 
agreement, is essential to the liberalization of trade in information 
technology services, as it provides the means to deliver IT services. 
We urge the USTR to work with its trading partners in the WTO to expand 
commitments made in the ITA.

Agreement on Trade-Related Aspects of Intellectual Property Rights 
(TRIPS)

    Adequate and effective protection and enforcement of intellectual 
property rights is a critical element in fostering the growth of IT 
globally. As electronic commerce continues to grow it will become 
increasingly important that commitments to protect intellectual 
property are enforced. In many countries, both developed and 
developing, civil and administrative procedures do not meet the 
enforcement standards set forth in Part III of the TRIPS agreement. As 
more and more software is being sold over the Internet, adequate and 
effective IPR enforcement becomes even more important.
    We recommend the USTR press other WTO members to meet the 
enforcement obligations outlined in Part III of the TRIPS Agreement.

B. Classification

Sector Classifications and Sub-Sectors (CPC Codes)

    The emerging convergence between telecommunications services, 
broadcasting, audiovisual services and information technology services 
has made clear distinctions between sector classifications increasingly 
difficult. For example, a barrier that restricts the number of foreign 
produced films from being broadcast or foreign publications from being 
distributed may affect both broadcasters who deliver films over the 
Internet as well as the Internet Service Provider who runs the network 
over which the films/publications are delivered.
    We strongly encourage the USTR to review these classifications in a 
dialogue with the various industry sectors involved. We also encourage 
the USTR to begin informal discussions on this topic with their trading 
partners.

Expanded Information Technology Services

    Information technology has become so prevalent in the provision of 
many services that the services themselves are being considered 
information technology services. Call centers, for example, are so 
dependent on the underlying information technology that they are 
provided by many information technology providers as a routine service 
offering. Customer loyalty programs, order fulfillment functions, 
remote monitoring services, remote inventory services and remote 
maintenance and repair services are examples of such services. Some 
involve physical functions while others such as remote monitoring are 
performed entirely electronically. Current computer and related 
services section of the CPC (listed immediately below) is somewhat 
limited given the rapid advances in this dynamic sector.

CPC Computer and Related Services:

     Consultancy services related to the installation of 
computer hardware (841)
     Software implementation services (842)
     Data processing services (843)
     Data base services (844)
     Other (845 + 849)
    The USTR should expand the definition of information technology 
services. We recommend a number of services be included and the 
category be changed to information technology services. We recommend 
the USTR consider the classification revised CPC scheme below.

Information Technology Services:

     Consultancy services related to the installation of 
computer hardware
     Software implementation services
     Data processing services
     Data base services
     Management consulting
     Services related to management consulting
     Customer services
     Other

C. Barriers

    The private sector has been the driving force behind the rapid 
growth, innovation, and development of information technology services, 
the Internet and electronic commerce. Despite this rapid growth, a few 
barriers remain. Elimination of these barriers must be industry led and 
market driven. Consistent with the U.S. Administration's Framework for 
Global Electronic Commerce, we strongly recommend that the USTR 
continue to recognize the course of industry leadership and self-
regulation
    Barriers also remain with regard to the current commitments of some 
countries. Restrictions on foreign ownership and requirements for local 
partners of varying descriptions hamper the ability to provide 
information technology services seamlessly. In addition, requirements 
to use public networks and restrictions on the use of leased lines also 
provide barriers to true global market access. Finally, national 
treatment is not a reality in every country.
    Practices in government procurement vary dramatically across the 
globe and offer considerable barriers to the provision of information 
technology services to governments. They range from many of the OECD 
nations which have, both on paper and in practice, highly organized and 
wholly transparent processes, to nations which conduct procurement 
entirely behind closed doors. Likewise, a number of nations have very 
open procurement markets while others are closed both to foreign firms 
and to those firms not in favor, regardless of capability. Finally, 
there is the same range of conduct regarding the ethics of procurement, 
with many ``clean'' systems and just as many in which bribery and 
corruption are the norm.
    The greatest barrier to the continued development of the 
information technology industry globally, however, is the lack of 
market access and national treatment in the industry sectors which 
information technology serves. If the financial services industry is 
not permitted to sell mutual funds across borders, then the capability 
of the information technology services industry to provide that service 
electronically is moot. For the information technology services 
industry to reach its full potential to deliver benefits to individuals 
as well as entire economies, the markets in every other industry sector 
must be opened and liberalized.

D. Negotiating Objectives

    We urge the USTR to set the following negotiating objectives:
     Expand the coverage of existing agreements in information 
technology related and enabling areas such as the Enhanced 
Telecommunications Annex, the Basic Telecommunications Services 
Agreement, and the Information Technology Agreement.
     Develop a consensual view of and acceptance of the modes 
of supply as applied to information technology services in the section 
above.
     Expand the definition of information technology services.
     Insure information technology services can be performed 
and delivered without establishment.
     Achieve full market access and national treatment for 
information technology services and for services in a broad range of 
other sectors.
     Seek commitments in government information technology 
services procurement for full market access, national treatment, 
transparency, access to independent appeals, and dispute resolution 
processes.

             VII. Professional & Business-Related Services

A. Sector Status

    Professional and business-related services are those 
services for which the provider requires specialized, technical 
knowledge--acquired through post-secondary education or 
equivalent training or experience--which is adapted and applied 
to the specific needs of business clients. Many of these 
services are performed by licensed professionals for which the 
right to practice is controlled by the government and/or 
professional bodies. These licensed professions tend to be more 
regulated than commercial services because the license holders 
are authorized to practice restricted activities in return for 
which they are expected to assume public interest 
responsibilities. Examples include accountancy, architecture, 
engineering and law. Other business-related services share 
common characteristics with the professions, such as high 
levels of human and intellectual capital input and close 
interaction between the provider and the client, but generally 
are not highly regulated or controlled by licenses granted by 
government or professional bodies. Examples include management 
and business, including computer-related, consulting services. 
Thus, this discussion topic overlaps, with some extent, with 
the section on information technology services. [Please note 
that this section addresses the licensed professions most 
closely associated with services provided to businesses and, 
thus, does not cover medical doctors, dentists, nurses, 
pharmacists, beauticians, etc. The medical professions are 
covered in the ``Health Services'' section].
    Statistics on trade in services are notoriously poor, so it 
is difficult to know the volume of trade in professional and 
business-related services worldwide. In the U.S. balance-of-
payments category of ``business, professional and technical 
services,'' U.S. providers exported $17.6 billion in 1996 and 
$21.3 billion in 1997. Imports were valued at approximately 
one-quarter of these amounts. There is reason to believe, 
however, that these numbers substantially understate the level 
of international business in this sector, because they do not 
include data on earnings from foreign investments and foreign 
affiliates, especially with respect to ``accounting'' firms and 
information technology companies. Nor do they include fees 
generated by mobile service providers, such as lawyers, 
architects, engineers and consultants, who serve temporarily in 
foreign countries but are paid at home.
    Professional and business-related services received 
substantial coverage in the schedules of commitments under the 
General Agreement in Trade in Services (GATS).
     More than 60 WTO member governments have made 
commitments in accountancy and related services, accounting for 
approximately 90 percent of the world market measured by gross 
revenues. Virtually all these commitments confirmed the status 
quo with respect to market access and national treatment.
     More than 40 WTO member governments made 
commitments on architectural services, and just fewer than 30 
made commitments on urban planning and landscape architectural 
services.
     More than 50 WTO member governments made 
commitments on engineering services.
     More than 40 WTO member governments have made 
commitments in one or more aspects of legal services. The 
commitments mostly cover advisory services on international and 
home country law. The commitments are mostly in the nature of a 
standstill and do not achieve the American bar's objectives on 
Foreign Legal Consultants or rules for examinations in foreign 
jurisdictions.
     More than 60 WTO member governments also made 
commitments in computer-related services an management 
consultancy, also accounting for about 90 percent of the world 
market measured by gross revenues. Again, the commitments 
largely confirmed the status quo, which for the most part is 
relatively free of trade restriction and discriminatory 
regulation.
    It should also be noted that the WTO and the GATS have 
created an international legal umbrella over substantial work 
initiated by the professions themselves in the areas of mutual 
recognition and standards. Two examples follow:
     The International Union of Architects (UIA) 
Professional Practice Commission has produced the ``UIA Accord 
on Recommended International Standards of Professionalism in 
Architectural Practice.'' The American Institute of Architects 
and the Architectural Society of China serve as the 
Commissions' joint secretariat. The document was initially 
adopted by the UIA's 91 national member sections in July 1996. 
A revised and expanded edition, including recommended policy 
guidelines, will be presented for adoption at the XXI UIA 
Assembly in June 1999 in Beijing. A primary objective of this 
document is to allow member sections to more easily negotiate 
bilateral mutual recognition agreements (MRAs).
     The American Institute of Certified Public 
Accountants (AICPA) strongly supports the work of the 
International Federation of Accountants and the International 
Accounting Standards Committee in developing a body of widely-
accepted international accounting and auditing standards and 
international guidelines on ethics. In addition, the AICPA has 
joined with the National Association of State Boards of 
Accountancy to complete MRAs with the Canadian Institute of 
Chartered Accountants and the Institute of Chartered 
Accountants in Australia. Additional discussions are continuing 
with other professional bodies in Australia, England, Ireland, 
Mexico and Scotland.

B. Classification

    The professional and business-related services covered by 
this paper are found in the following categories listed in the 
World Trade Organization's (WTO) ``Services Sectoral 
Classification List.''
      Business Services
      Professional Services
      Legal services
      Accounting, auditing and bookkeeping services
      Taxation services
      Architectural services
      Engineering services
      Integrated engineering services
      Computer and Related Services
      Consultancy services related to the installation of 
computer hardware
      Software implementation services
      Other Business Services
      Management consulting services
      Services related to management consulting

    CSI recommends that the U.S. Trade Representative seek the 
inclusion of several additional classifications of professional 
and business-related services in the specific commitments made 
by member governments. These are:

     Actuarial services.
     Counseling in business transactions.
     Participation in the governance of business 
organizations.
     Mediation, arbitration and similar non-judicial 
dispute resolution services.
     Public advocacy and lobbying.

    In the area of computer-related services, the ``Information 
Technology'' section of this paper makes a number of useful 
recommendations.
C. Barriers

    International trade in professional and business-related 
services in conducted both by individuals who have met 
specified professional qualification requirements or have 
specialized business knowledge and by firms owned by and/or 
employing these individuals. Professional and business-related 
services are rendered in all four modes of delivery 
contemplated by the GATS. They may be provided across borders 
by professionals travelling to another country or communicating 
electronically with clients there. More typically, the services 
are provided by locally-established firms affiliated with 
others abroad through ownership, contract or cooperative 
agreement. And in some cases they are provided to foreign 
consumers visiting the provider's home jurisdiction.
    The impediments to trade in professional and business-
related services stem from regulations intended to protect 
local providers from competition and, probably more 
importantly, from domestic regulations intended to protect 
defined national interests. Most professions are enveloped in 
national and/or sub-national systems of regulation, which were 
developed to respond to particular circumstances and political 
demands. These distinct systems have persisted even as the 
globalization of markets has accelerated and, thus, have given 
rise to trade and investment barriers.

Impediments to Professional Firms

     Restrictions on the movement of capital and 
investment, such as foreign equity limits, screening of 
investments and the application of economic needs tests, and 
reserving ownership to locally-qualified professionals.
     Restrictions on making current payments, such as 
profit remittances and the payment of royalties and fees across 
borders.
     Restrictions on the types of business structures 
permitted.
     Numerical, geographic or other restrictions on the 
establishment of branch offices.
     Requirements to employ only local people and 
professionals or the use of quotas to limit intra-firm 
transfers.
     Inadequate protection on intellectual property, 
such as software, practice methodologies and training 
materials, as well as restriction on the use of international 
firm names.

Impediments on Individual Professionals

     Onerous professional qualification requirements, 
such as citizenship, permanent and/or prior residency, local 
university degrees, and excessively long experience 
requirements, and administering qualification examinations in 
languages other than the WTO working languages.
     The use of different technical standards or 
standards of practice in each national and/or sub-national 
jurisdiction.
     Difficulties in obtaining visas and work permits.

Impediments Affecting both Firms and Individuals

     The lack of transparency in the regulatory 
process, including the failure to make laws and regulations 
available, closed decision-making processes, the lack of 
opportunity to comment before rules are adopted, and the 
absence of appeal processes.
     Local establishment requirements.
     Rules either requiring or prohibiting relationship 
between foreign and local professionals or professional firms.
     Customs duties on professional documents, project 
models, training materials, promotional publications, and 
software.
     Scope-of-practice limitations that may prohibit 
the provision of selected or multiple services to clients.
     The assignment of contract by government agencies, 
the mandatory rotation of providers, and ``Buy National'' 
policies.
     Prohibitions on advertising professional services.
     Reciprocity laws or regulatory requirements.

D. Benefits of Liberalization

    Professional and business-related services are part of the 
intellectual capital infrastructure essential to the operation 
of modern economies. For example:
     Accounting and auditing services are critical to 
management control of enterprises and provide the assurance 
that underlies efficient capital markets.
     Architectural and engineering services are 
essential to the creation of modern business structures and 
processes.
     Legal services make possible effective relations 
between buyers and sellers and among business partners, as well 
as help to protect the investments and property of national of 
one country transferred to another.
     Consulting services provide valuable management 
know-how, competitive insight, and advice on modernizing and 
reengineering business enterprises.
    Liberalization of trade and investment in this sector makes 
available to business users state-of-the-art inputs to their 
production processes. Moreover, the international operation of 
professional and business-related service providers are 
important conduits for transferring state-of-the-art technology 
and training, which has ripple effects throughout the host 
economies. And many professional services firms provide 
international networks by which host country services can be 
exported.

F. Negotiating Objectives

     U.S. negotiators should press governments that 
have not made specific commitments on professional services to 
do so. The goal should be that all 132 WTO member governments 
apply the GATS rules to professional and business-related 
services. Some significant markets, such as India, Indonesia 
and the Philippines, are now missing.
     U.S. negotiators should press other governments to 
remove as many of the ``exceptions'' in their scheduled 
commitments as possible. The aim should be full application of 
the market access and national treatment rules to professional 
services.
     U.S. negotiators should champion ``freedom of 
association'' for U.S. and foreign professionals, seeking to 
eliminate requirements or prohibitions of professional 
associations in partnership or in other forms of ``corporate'' 
practice.
     U.S. negotiators should work for an agreement on 
business mobility (temporary entry of business people), which 
would remove the visa requirements and red tape for qualified 
professionals entering another WTO member country for specific, 
temporary assignments.
     U.S. negotiators should work for horizontal 
disciplines on domestic regulation of professional and 
business-related services under GATS Article VI that go beyond 
the disciplines developed for the accountancy sector. In 
particular, they should seek a meaningful ``necessity test'' 
under which onerous regulations could be challenged as ``more 
burdensome than necessary, transparency rules that allow 
interested parties to comment in advance on proposed 
legislation, and pro-competitive regulatory structures.
     U.S. negotiators should seek an extension of the 
principles of the Agreement on Technical Barriers to Trade to 
service industries and professions.
     With respect specifically to legal services, U.S. 
negotiators should focus on two objectives: (1) adoption of the 
concept of ``foreign legal consultants'' whereby lawyers are 
permitted to practice their home country law (as well as third 
country and international law) in foreign jurisdictions; and 
(2) ``model rules'' on bar examinations that assure the exams 
are related the areas of law to be practices, follow 
transparent procedures, are based on information readily 
available (through training courses, etc.), and are 
administered in one of the working languages of the WTO.

                        VIII. Telecommunications

A. Sector Status

    As the new millennium fast approaches, it has become obvious that 
telecommunications networks provide the underlying infrastructure and 
services upon which most of the world's information and commerce 
depend. It is safe to say that without a robust telecommunications 
infrastructure, the global economy as we know it today would simply not 
exist. Vice President Gore has recently recognized that not only is the 
telecommunications-enabled Global Information Infrastructure a vital 
underpinning of world trade, the GII has the capacity ``to extend 
knowledge and prosperity to our most isolated inner cities, to the 
barrios, the favelas, the colonias and our most remote rural villages; 
to bring 21st Century learning and communication to places that don't 
even have phone service today; to share specialized medical technology 
where there are barely enough family doctors today; to strengthen 
democracy and freedom by putting it on-line, where it is so much harder 
for it to be suppressed or denied.''
    Privatization and liberalization of the world's telecommunications 
markets will provide the most efficient and effective means of insuring 
the global telecommunications infrastructure's growth and enhancement. 
As experience in a number of countries now amply demonstrates, a 
liberalized market leads to significant increases in infrastructure 
development, more and better services, and lower prices for consumers. 
Moreover, a liberalized, modern telecommunications system should 
increase capital investment, thereby strengthening and facilitating 
growth of a nation's economy.
    It now appears that much of the world's commerce in the future will 
be transacted over the Internet's network of networks. A good deal of 
the communications will be of the multimedia variety which will require 
advanced, broadband telecommunications services. Without liberalized 
open telecommunications markets, there will not be sufficient 
incentives to upgrade what is rapidly becoming in many parts of the 
world an inadequate, outdated telecommunications infrastructure.

WTO Agreement on Basic Telecommunications Services

    The 1997 WTO Agreement on Basic Telecommunications Services (GBT), 
with its accompanying Reference Paper, truly represents a watershed 
event not only for the telecommunications industry, but also for the 
entire world economy. Seventy countries participated and agreed to move 
in varying degrees toward full, technology-neutral, liberalization of 
their telecommunications sectors through market access, foreign 
investment and adoption of pro-competitive regulatory principles.
    The GBT was a landmark agreement in a number of ways. It was the 
first successful sectoral negotiation--the agreement dealt only with 
telecommunications. Changes in agriculture import quotas, for instance, 
could not be traded for concessions in telecommunications, insuring 
that all benefits of the agreement accrue to telecommunications alone. 
In addition, a Reference Paper containing pro-competitive regulatory 
principles was developed and was incorporated into a majority of the 
countries' offers. This Reference Paper legally binds the countries 
into ``how'' they will implement many parts of the agreement. Thus, 
promulgation of regulations in accordance with the Reference Paper's 
principles must be considered an integral part of a country's 
implementation of the GBT.
    Under a very broad and essentially open-ended definition employed 
for the negotiations, basic telecommunications was considered any 
telecommunications transport network or services and the schedules of 
commitments cover a wide variety of services fitting this definition. 
Some examples of basic telecommunications include: voice telephone 
services, packet-switched data transmission services; circuit-switched 
data transmission services, telex, telegraph, facsimile and private 
leased circuit services, analog/digital cellular/mobile telephone 
services, mobile data service, paging, personal communications 
services, satellite-based mobile services, fixed satellite services, 
VSAT services, gateway earth station services, teleconferencing, video 
transport and trunked radio system services. Categories of service 
included: local, long distance, international, wire-based, radio based, 
resale, facilities-based, for public use, and for non-public use 
(closed user groups). As discussed below, some rethinking of these 
categories of facilities and services may be in order.
    In sum, the GBT and accompanying Reference Paper represents a 
tremendous first step toward the ultimate goal of a fully open, 
competitive telecommunications market worldwide. A good deal of work 
remains to be done, however. In addition, it is important that new 
negotiations do not provide for countries to re-evaluate or back away 
from existing commitments. New negotiations should build on existing 
commitments.

B. Classification

    Sector Classifications and Sub-Sectors (CPC Codes):
    Clearly, telecommunications market developments of the past few 
years warrant a reexamination of the applicability of the Standard 
Classification System last revised in 1991. It may be appropriate for 
countries to agree to a standardized set of services that are 
independent of the particular technology used to provide those 
services.

C. Barriers

    Although a monopoly telecommunications environment provided a 
fairly reliable, working telephone system which served the world well 
for almost 100 years, most of the rapid technological developments of 
the past two decades have resulted from the increasingly competitive 
marketplace in a number of countries. Experience has shown that the 
more open the market, in terms of free entry and exit and the number of 
competitors present, the more robust the competition and the better the 
result for consumers.
    Unfortunately, even in the wake of the GBT, most of the world's 
telecommunications markets still contain barriers that restrict access, 
curtail the scope of the playing field, or tilt it in a variety of 
ways. In accordance with their GBT commitments, many countries already 
have privatized their national telecommunications carriers, and others 
plan to do so in the near future. Privatization is an important step 
toward introducing competition into markets, but privatization by 
itself will not produce an open and fair competitive environment. 
Whether the incumbent carrier is controlled by the government or is 
privately held, new entrants cannot effectively compete in the market 
without full liberalization. In order for competition to flourish, the 
regulator must be completely independent of the dominant carrier and 
must actively implement and enforce pro-competitive principles such as 
those enumerated in the GBT Reference Paper.
    Barriers remain even under the current commitments of some 
countries. Restrictions on foreign ownership and requirements for local 
partners of varying descriptions hamper the ability to provide 
telecommunications services seamlessly in these countries or worldwide. 
In addition, requirements to use public networks and restrictions on 
the use of leased lines provide barriers to true global market access. 
Nor is national treatment a reality in every country.
    The licensing schemes of many countries pose another significant 
barrier to the market and to full and fair competition. Restrictions on 
the number of licenses awarded per geographic area, onerous 
qualifications for licensees, exorbitant fees, and lack of transparency 
in the bidding and award process must be eliminated. In many cases, the 
totality of these requirements effectively limits participation to a 
handful of large carriers and prevents smaller, perhaps more responsive 
or innovative carriers from participating.
    Variations on the same theme are regulations which favor 
facilities-based providers over resellers. Many countries that have 
otherwise committed to liberalize their telecommunications in the GBT 
have adopted policies designed to encourage infrastructure investment. 
For example, carriers may be required to implement a certain number of 
switches before they are permitted to interconnect with the incumbent. 
These sorts of requirements, while attempting to achieve an arguably 
laudable goal, act as a barrier by depriving consumers in these markets 
of a very valuable source of supply--resellers.
    As experience has shown in this country, resellers continue to play 
a vital role in the telecommunications marketplace. There are literally 
hundreds of these entities, with their numbers increasing every month. 
These companies are usually small by comparison with the giant 
facilities-based carriers, but they are able to stay ahead of their 
much larger competitors by constantly introducing new pricing 
arrangements, new services, and innovations for consumers.
    Another barrier to competition in many countries is the lack of 
number portability. Number portability is essential in order for 
competition to develop because it allows customers to keep their 
telephone numbers when changing carriers. Where no number portability 
exists, residential consumers in particular are much more reluctant to 
shift their business away from the incumbent, even when they are 
offered a significant price break.
    Even in the business market, the lack of portability acts as a 
major deterrent to competition. Businesses must incur significant 
expenses to reprint stationery and business cards and to inform 
customers, suppliers, and others that they have changed telephone 
numbers. For example, before portability was implemented in the 
domestic 800 service market, some competition did exist. However, soon 
after the introduction of portability, overall demand rose and prices 
dropped.

D. Negotiating Objectives

    We urge the USTR to set the following negotiating objectives:
     Update the 1991 Standard Classification System to 
emphasize services rather than the technology employed to deliver the 
services.
     Expand and deepen the commitments of countries that agreed 
to partial liberalization in the GBT to include full liberalization and 
adoption of the Reference Paper, by a date certain in the near future.
     Schedule commitments to full liberalization and adoption 
of the Reference Paper, by a date certain in the near future, of 
countries that are WTO Members but have not made commitments under the 
GBT.
     Seek commitments to full liberalization and adoption of 
the Reference Paper by countries wishing to accede to the WTO.

                         IX. Travel and Tourism

A. Benefits of Liberalization

    The travel and tourism industry is the word's largest industry, 
employing over 230 million people worldwide, and is expected to grow to 
almost 320 million by 2010. The travel and tourism industry is growing 
faster than world GDP growth. Its share of gross domestic product is 
expected to increase from about 11.6 percent in 1998 to 12.5 percent by 
2010. The travel and tourism industry creates good jobs spanning the 
spectrum from entry level to executives. It is clearly a driver of 
economic growth in the world. Liberalization of the industry will lead 
to faster industry growth, which will not only spur direct growth in 
the industry, but growth in related industries such as manufacturing of 
transportation equipment, and building and related critical 
infrastructure development projects. Moreover, the travel and tourism 
industry represents sustainable and ecologically friendly development.

B. Sector Status

    In general, the tourism and travel related services sector tends 
not to be heavily regulated and competition tends to be vigorous. There 
are, however, some significant exceptions to this broad generalization.

C. Classification

    This sector includes hospitality, restaurants, travel agencies, 
tour operators, tourist guides services and other travel related 
services. The industry has developed since these classifications were 
drawn up, and the specific services covered under these broad 
categories need to undergo a thorough review and analysis to ensure 
that all services that should be covered are included. It should also 
be clarified that this sector includes travel reservation services and 
travel-related financial services, e.g. travelers checks and certain 
foreign exchange services, which are distinct from those covered under 
the banking, insurance and securities sector. (The tourism and travel 
related services sector does not include air or other transportation 
sectors, which are covered under the transport services sector.)

D. Barriers

    Two of the most prevalent types of barriers fall under the rubrics 
of competition and investment, which could be addressed either 
horizontally or on a sectoral basis. (Needless to say, this industry, 
like many others, has substantial investments in trademarks and 
intellectual property, and has an interest in the outcomes on these and 
other general business concerns.)

Competition

    Many countries impose significant restrictions, often only against 
foreign firms or enforce them in ways that favor domestic firms, on 
marketing and promotional initiatives, including loyalty reward 
programs.

Investment

    One hundred percent foreign ownership is often prohibited, and the 
form of doing business is commonly restricted or controlled. In 
addition, when operating through a franchise network, repatriation of 
profits, payment of royalties, and other similar issues frequently 
become problematic.

Movement of Personnel

    A third horizontal issue is of particular concern to the industry, 
and that regards the freedom of movement for business personnel. The 
ability of travelers to move freely around the world is the lifeblood 
of the travel and tourism industry. The industry has an abiding 
interest in liberalizing the restrictions, not only on tourists and the 
industry's own management, but generally on businesses' ability to 
locate the proper personnel in the locations where they are most 
needed.
    The other barriers are not covered in the general issues, though 
some do affect other sectors, as follows:

Privacy

    Many companies in the travel industry maintain records regarding 
customers' travel preferences in order to serve particular needs 
better. Many countries are proposing, or have already enacted, onerous 
restrictions on the flow of this type of information. Many countries 
also require the disclosure of overseas spending by customers, thereby 
discouraging foreign travel by their citizens.

Tourist Financial Services

    Many countries proscribe significant restrictions on the provision 
of financial services for travelers. Sale of travelers checks are often 
restricted to certain limited types of financial institutions, as are 
foreign currency exchange services even though they pose no risk to a 
country's financial system. Finally, access to local ATM networks is 
occasionally prohibited.
Taxes on Overseas Spending

    Some countries penalize their citizens when they travel abroad by 
imposing taxes on overseas spending, often in ways that unfairly 
discriminate among payment products. One large South American country, 
for example, imposes a 2 percent transaction tax on credit and charge 
card spending abroad, but imposes no special taxes on cash purchases. 
As a large proportion of spending by international travelers is 
transacted through credit card payment systems, this tax discourages 
international travel and tourism.

E. Negotiating Objectives

    The U.S. objective should be the removal of as many of these 
barriers as possible. Unfortunately, it is too early in the process to 
identify firm industry-wide priorities.
      

                                


    Chairman Crane. And next is Mr. Kleckner.

  STATEMENT OF DEAN KLECKNER, PRESIDENT, AMERICAN FARM BUREAU 
                FEDERATION, PARK RIDGE, ILLINOIS

    Mr. Kleckner. Thank you, Mr. Chairman and Members of the 
Subcommittee. I am Dean Kleckner, and while I office in Park 
Ridge, Illinois, I am a north Iowa farmer, raising corn, 
soybeans and hogs on that farm, and one of the four ACTPN 
members sitting at the table today. Now there are three of us 
left.
    Agriculture is one of the few industries that consistently 
runs a trade surplus. The United States along with agriculture 
must be at the negotiating table in the next WTO Round with 
trade negotiating authority to ensure that this trade surplus 
continues.
    U.S. agriculture is now reeling from low commodity prices. 
Given an abundant global supply and a stable U.S. population 
rate, the job of expanding existing markets and opening new 
export markets for agriculture is more important than ever. 
Agriculture's longstanding history of a trade surplus will not 
continue if agriculture is relegated to the sidelines as new 
negotiations commence.
    Personally, I am concerned that agriculture will be left 
behind if we do not structure the negotiations properly. The 
next round of negotiations should encompass all sectors as a 
comprehensive single undertaking. By this we mean all aspects 
of the negotiations should be concluded simultaneously in order 
to get the best results for all sectors. In other words, as was 
said in the Uruguay round, agreeing it should be here, too, 
nothing is agreed to until everything is agreed to.
    I have submitted for the record a copy of the Seattle Round 
Agriculture Committee's policy objectives for the next round. 
The Farm Bureau chairs this coalition, which consists of 80 
agriculture organizations representing producers as we are, 
also processors and agribusinesses. U.S. agriculture is united 
in its views for the next round through this coalition. The 
very first principle of this coalition is that of a single 
undertaking.
    The United States will have the greatest success in the 
next round of trade talks if negotiations are concluded as a 
single undertaking without the possibility of an ``early 
harvest'' or provisional implementation of early agreements. We 
are very concerned--very concerned about concluding early 
results for any sector, recognizing in doing so will require 
devoting substantial resources and will likely sidetrack the 
important structural issues that need to be addressed in order 
for this round to be completed in 3 years.
    Now, eight quick items. We have set a goal to complete the 
agriculture negotiations by the end of 2002, 3 years. Our 
producers need results in a timely manner. Two, we call for the 
elimination of export subsidies by all WTO members by a date 
certain and as soon as possible. Three, we believe that new 
negotiations must include a recommitment to binding agreements 
to resolve sanitary and phytosanitary issues based on 
scientific principles in accordance with the WTO Agreement on 
Sanitary and Phytosanitary Measures; that is, the SPS 
agreement. The provisions of the Uruguay round agreement are 
sound and do not need to be reopened, the SPS agreement.
    Four, the next round should result in tariff equalization 
and increased market access. By requiring our trading partners 
to eliminate tariff barriers within specified timeframes, we 
need to adopt a framework that was used in the Uruguay round 
wherein there are no product or policy exceptions to such 
tariff reductions. All WTO member countries should reduce 
tariffs, both bound and applied, in a manner that provides 
commercially meaningful access on an accelerated basis.
    Five, quickly here, regarding state trading enterprises, or 
STEs, we must impose disciplines on STEs that distort the flow 
of trade in world markets.
    Six, and very important, Mr. Pepper mentioned this, but we 
must ensure market access for biotechnology products produced 
from GMOs, genetically modified organisms. All WTO member 
countries should reaffirm the principles of the WTO SPS 
Agreement, provisions which we believe cover trade in GMOs. And 
I might say six ``a'' here, the United States should not agree 
to a Working Group on Bioengineered Products at the WTO. The 
formation of such a group will derail the resolution of trade 
issues concerning bioengineered product policy and not likely 
result in a consensus approach.
    Seven, we must end the use of all nontariff barriers to 
trade.
    And, last, eight, our negotiators must make changes to 
trading practices that would facilitate and shorten its dispute 
resolution procedures and processes.
    In summary, Mr. Chairman, we support liberalization of 
global agriculture markets that will result in the true reform 
of the current trading regime and bring about fair trade for 
our producers. This is our opportunity to address the trade 
imbalances that hamper our domestic producers from both an 
import and an export perspective. The U.S. must demonstrate 
leadership in setting the agenda for this round of trade talks 
and is submitting proposals for the structure of the 
negotiations.
    Mr. Chairman, I thank you.
    Chairman Crane. Thank you.
    [The prepared statement follows:]

Statement of Dean Kleckner, President, American Farm Bureau Federation, 
Park Ridge, Illinois

    Mr. Chairman, members of the Committee, I am Dean Kleckner, 
president of the American Farm Bureau Federation and a hog, 
corn and soybean farmer from Iowa. I appreciate the opportunity 
to testify before you today regarding negotiating objectives 
for agriculture in the next round of trade talks in the World 
Trade Organization.
    The American Farm Bureau is the nation's largest 
organization of agricultural producers. Farm Bureau represents 
over 4.8 million member families in the United States and 
Puerto Rico. Our members produce every commodity grown in 
America and depend on access to customers around the world for 
the sale of over one-third of our production. Agriculture is 
one of the few U.S. industries that consistently runs a trade 
surplus, posting a positive balance of trade every year since 
1960. The United States along with agriculture, must be at the 
negotiating table in the next WTO round in a meaningful way, 
with trade negotiating authority, to ensure that this trade 
surplus continues.
    The ability of U.S. agriculture to gain and maintain a 
share of global markets depends on many factors, including 
obtaining strong trade agreements that are properly enforced, 
enhancing the administration's ability to negotiate increased 
market access for U.S. agriculture and building in the 
necessary changes to the WTO dispute settlement process to 
ensure timely resolution of disputes.
    When Congress passed the 1996 Freedom to Farm Act, it 
phased out farm price supports, making U.S. agriculture more 
dependent on the world market. American farmers and ranchers 
produce an abundant supply of commodities far in excess of 
domestic needs and their productivity continues to increase. 
Exports are agriculture's source of future growth in sales and 
income.
    As you are well aware, U.S. agriculture is reeling from low 
commodity prices. Given an abundant domestic supply and a 
stable U.S. population rate, the job of expanding existing 
market access and opening new export markets for agriculture is 
more important than ever. Agriculture's longstanding history of 
a balance of trade surplus will not continue if we are 
relegated to the sidelines as new negotiations in agriculture 
commence.
    Moreover, global food demand is expanding rapidly and more 
than 95 percent of the world's consumers live outside U.S. 
borders. Despite significant progress in opening U.S. markets, 
agriculture remains one of the most protected and subsidized 
sectors of the world economy. In addition, U.S. agricultural 
producers are placed at a competitive disadvantage due to the 
growing number of regional trade agreements among our 
competitors.
    U.S. leadership of the global trade liberalization agenda 
has paid off for American agriculture. If the United States now 
leaves it to others to form new trade pacts and write future 
rules for trade, U.S. producers, processors, and exporters will 
be severely disadvantaged in the competitive marketplace of the 
21st century. We are counting on this administration and 
Congress to ensure that U.S. farmers and ranchers have a 
significant place at the negotiating table, armed with the 
tools they need, including trade negotiating authority.

                            WTO Ministerial

    As you know, the Seattle Ministerial Conference will serve 
as the kickoff for the new negotiations on agriculture and 
other sectors in the WTO. As the host country for this 
ministerial, the United States and its trade policies will be 
in the spotlight. Given the economic turmoil and technical 
barriers being experienced in many of our important export 
markets, the launching of new negotiations to further open 
markets has never been more important.
    The United States has an unprecedented opportunity to lead 
these negotiations to a successful outcome and should play a 
central role in influencing the debate early regarding the 
structure of the negotiations. Specifically, the administration 
should take a stand now on a number of different issues, 
including what sectors will be negotiated in this next round 
and what approach will be used for the negotiations (formula 
approach versus request-offer, or some combination thereof). 
These negotiations are too important to agriculture, and other 
sectors, to let other WTO member countries dictate the 
negotiating agenda.

                     Objectives for the Next Round

    Higher living standards throughout the world depend upon 
mutually beneficial trade among nations. We urge that trade 
policies be developed that promote the growth in world trade.
    To this end, U.S. negotiators must comprehensively address 
high tariffs, trade-distorting subsidies, and other restrictive 
trade practices in the new round of negotiations on 
agriculture.
    The American Farm Bureau Federation supports expediting 
action on the next round for agriculture in the WTO. Our market 
is the most open in the world. We cannot sit idly by while our 
competitors trade openly in our market, but deny us access to 
their markets on equal terms. We must begin the negotiations 
and conclude them as early as possible to put U.S. agricultural 
producers on a level playing field with the rest of the world. 
To this end, we have set a goal to complete the agricultural 
negotiations by the end of 2002 to ensure that our producers 
gain increased market access in a timely manner.
    First and foremost, the next round of negotiations should 
encompass all sectors as a comprehensive, single undertaking. 
By this we mean that all aspects of the negotiation should be 
concluded simultaneously in order to get the best results for 
all sectors. The United States will make the greatest gain in 
the next round of trade talks if negotiations are concluded as 
a single undertaking without the possibility of an ``early 
harvest'' or provisional implementation of early agreements. As 
you are aware, this issue has attracted significant attention 
in recent weeks given the administration's desire to achieve 
early tariff reductions for the eight Asia Economic Pacific 
Cooperation (APEC) sectors. We are very concerned about 
concluding early results for any sector recognizing that doing 
so will require a substantial devotion of resources to 
accomplish and will likely sidetrack the important structural 
issues that need to be addressed in order for this round to be 
completed in three years.
    Second, we must call for the elimination of export 
subsidies by all WTO member countries. Our producers cannot 
compete against the mountain of spending by our primary 
competitors, like the European Union (EU). The EU spends in 
excess of eight times the level of domestic and export 
subsidies as the United States. Data from the U.S. Department 
of Agriculture and the European Commission show that total EU 
domestic and export subsidy expenditures for 1997 exceeded $46 
billion compared to $5.3 billion spent by the United States. 
This level of spending distorts world trade and undermines U.S. 
producers' competitiveness in vital export markets.
    Third, we believe that the new negotiations must include a 
recommitment to binding agreements to resolve sanitary and 
phytosanitary issues based on scientific principles in 
accordance with the WTO Agreement on Sanitary and Phytosanitary 
Measures (SPS Agreement). The provisions of the Uruguay Round 
SPS Agreement are sound and do not need to be reopened. The 
United States has successfully litigated several SPS cases that 
underscore the strength of this agreement. Cases have now been 
tried that set precedence in each of the three areas of the SPS 
Agreement. For example, the successful U.S. litigation of the 
EU beef ban strengthens the provisions regarding human health, 
the Japan varietal testing case underscores aspects regarding 
plant health, and the Australia salmon case bolsters the animal 
health text of the SPS Agreement. Any change to the SPS 
Agreement would expose the sound scientific principles now 
embedded in its provisions--changes that the EU would relish 
making to restrict rather than facilitate trade.
    Fourth, the next round should result in tariff equalization 
and increased market access by requiring U.S. trading partners 
to eliminate tariff barriers within specified time frames. Our 
producers compete openly in their own domestic market with 
their foreign competitors, but are shut out of export markets 
due to prohibitively high tariffs. We need to correct this 
imbalance for our farmers and ranchers. All WTO member 
countries should reduce tariffs, both bound and applied, in a 
manner that provides commercially meaningful access on an 
accelerated basis.
    Fifth, we must impose disciplines on state trading 
enterprises (STEs) that distort the flow of trade in world 
markets. Every effort should be made to craft an agreement that 
sheds light on the pricing practices of STEs and ends their 
discriminatory practices. Our producers have lost too many 
sales in third country markets due to the noncompetitive, 
nontransparent operations of STEs.
    Sixth, we must ensure market access for biotechnology 
products produced from genetically modified organisms (GMOs). 
Significant delays and a lack of transparency in the regulatory 
approval process for GMOs in the EU have heightened the need 
for science based, transparent provisions governing 
bioengineered products. We cannot continue to be held hostage 
to the EU's nontransparent, discriminatory procedures that deny 
market access for our GMO products. All WTO member countries 
should reaffirm the principles of the WTO SPS Agreement, 
provisions which we believe cover trade in GMOs. Most 
importantly, the United States should not agree to a working 
group on bioengineered products in the WTO. The formation of 
such a group will derail the resolution of trade issues 
concerning bioengineered products and will not likely result in 
a consensus approach.
    Next, we must end the use of all nontariff barriers to 
trade. There are several practices that have been employed by 
our trading partners to shut out competition in their domestic 
markets. These practices include, but are not limited to, 
domestic absorption requirements, discriminatory licensing 
procedures, price bands, and the administration of tariff rate 
quotas that prevent true competition. Provisions to address 
these and other nontariff barriers should be written into the 
new agreement on agriculture.
    Finally, our negotiators must make changes to trading 
practices that would facilitate and shorten dispute resolution 
procedures and processes. The process for a WTO dispute 
settlement case typically runs three years, if the WTO ruling 
is implemented. We have seen in both the EU banana and EU beef 
cases that compliance is not always assured. Our trading 
partners cannot be allowed to unilaterally weaken the very 
principles that we negotiated in the Uruguay Round Agreement. 
The expedited dispute settlement process for perishable 
agricultural products outlined in the WTO Dispute Settlement 
Understanding should be modified to allow the procedure to be 
used if the aggrieved party requests it. Currently, the WTO 
requires that both parties in a case agree to use this 
procedure. As a result, it has never been used. This simple 
change should be enacted promptly. Doing so would address the 
fundamental problem of a dispute settlement procedure that 
requires too much time and prevents market access for several 
marketing seasons before a resolution is reached.
    Concerning environment and labor issues in the upcoming 
trade negotiations, we believe that such matters should only be 
addressed in a manner that facilitates rather than restricts 
trade. We cannot allow the economic prosperity of our nation, 
and that of our agricultural producers, to be used as a weapon 
for nations that disagree with our values.
    In summary, we support liberalization in global 
agricultural markets that will result in true reform of the 
current trading regime and bring about fair trade for our 
producers. The United States has a tremendous opportunity 
before it to shape the agenda for the next round and should 
seize this chance to demonstrate to the world that we are 
committed to opening new markets for U.S. agriculture. This is 
our opportunity to address the trade imbalances that hamper our 
domestic producers, from both an import and export perspective. 
Given the economic turmoil being experienced in many of our 
important export markets, the launching of new negotiations to 
further open markets has never been more important.

 Seattle Round Agricultural Committee (SRAC) 1999 WTO Policy Statement

    The U.S. agricultural and food sector supports the 
launching of a comprehensive round of multilateral trade 
negotiations that includes all goods and services, continues to 
reform agricultural and food trade policy, promotes global food 
security through open trade, and increases trade liberalization 
in agriculture and food. Policy and process objectives should 
include:
    Conclusion with a single undertaking that 
encompasses all sectors (i.e., no early harvest).
    Adoption of the Uruguay Round framework for the 
1999 agricultural negotiations to ensure that there are no 
product or policy exceptions.
    Establishment of a three-year goal for the 
conclusion of the negotiations (by December 2002).
    Elimination of export subsidies and tightening of 
rules for circumvention of export subsidies.
    Elimination of nontariff barriers to trade.
    Transitioning countries to provide an increasing 
portion of total domestic support for agriculture in a 
decoupled form, as the United States has already done under the 
FAIR Act.
    Commercially meaningful reduction or elimination of 
tariffs (bound and applied) and mutual elimination of 
restrictive tariff barriers on an accelerated basis. In 
addition, the administration of tariff-rate quotas (TRQs) must 
be improved.
    Elimination of State Trading Enterprises (STEs) or 
the adoption of disciplines that ensure operational 
transparency, the end of discriminatory pricing practices, and 
competition for STEs.
    Maintaining sound science and risk assessment as 
the foundation of sanitary and phytosanitary measures.
    Ensuring market access for products of 
biotechnology, with the regulation of these products based 
solely on sound science.
    Accelerating resolution of trade disputes and 
prompt enforcement of panel decisions.
    Providing food security for importing nations by 
avoiding sanctions on food exports combined with a WTO 
commitment not to restrict or prohibit the export of 
agricultural products.
    Addressing labor and environment issues in a manner 
that facilitates rather than restricts trade.
    Establishing WTO rules for developing countries to 
graduate to full WTO obligations using objective economic 
criteria.
Ag Processing Inc.                  National Chicken Council
Agricultural Retailers Association  National Confectioners Association 
                                    of the United States
American Cotton Shippers 
Association                         National Corn Growers Association
American Crop Protection 
Association                         National Council of Farmer 
                                    Cooperatives
American Farm Bureau Federation     National Cotton Council of America
American Feed Industry Association  National Food Processors 
                                    Association
American Potato Trade Alliance      National Grain and Feed Association
American Soybean Association        National Grain Sorghum Producers 
                                    Association
American Sugar Alliance             National Grain Trade Council
American Vintners Association       National Grange
Animal Health Institute             National Milk Producers Federation
Archer Daniels Midland Company      National Oilseed Processors 
                                    Association
Biotechnology Industry Organization National Pork Producers Council
Bryant Christie Inc.                National Renderers Association
Bunge Corporation                   National Sunflower Association
CF Industries, Inc.                 National Turkey Federation
California Table Grape Commission   North American Export Grain 
                                    Association
Cargill, Incorporated               North American Millers' Association
Chicago Board of Trade              Northwest Horticultural Council
Chocolate Manufacturers Association Pacific Northwest Grain and Feed
Coalition for a Competitive Food 
and                                 Pet Food Institute
Agricultural System                 Pioneer Hi-Bred International, Inc.
ConAgra, Inc.                       Ralston Purina Company
Continental Grain Company           Snack Food Association
Corn Refiners Association           Sunkist Growers
Distilled Spirits Council of the 
United States                       Sweetener Users Association
Farmland Industries, Inc.           The Fertilizer Institute
Florida Phosphate Council           The IAMS Company
Food Distributors International 
Association                         Transportation, Elevator, & Grain 
                                    Merchants Association
Gold Kist, Inc.                     USA Poultry & Egg Export Council
Grocery Manufacturers of America    USA Rice Federation
Independent Community Bankers of 
America                             U.S. Apple Association
International Dairy Foods 
Association                         U.S. Canola Association
Kraft Foods                         U.S. Grains Council
Louis Dreyfus Corporation           U.S. Dairy Export Council
Monsanto Company                    U.S. Meat Export Federation
National Association of Animal 
Breeders                            U.S. Poultry & Egg Association
National Association of State       U.S. Rice Producers Association
Departments of Agriculture          U.S. Wheat Associates, Inc.
National Association of Wheat 
Growers                             United Egg Association
National Barley Growers Association United Egg Producers
National Cattlemen's Beef 
Association                         Washington State Potato Commission
                                    World Perspectives Inc.
      

                                


    Chairman Crane. Mr. Dillon.

STATEMENT OF JOHN DILLON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, 
   INTERNATIONAL PAPER, PURCHASE, NEW YORK, ON BEHALF OF THE 
              AMERICAN FOREST & PAPER ASSOCIATION

    Mr. Dillon. Thank you, Mr. Chairman. I am John Dillon of 
International Paper, and I am pleased to be here today 
representing the American Forest and Paper Association.
    U.S. forest products industry accounts for $230 billion in 
annual sales and employs about 1.5 million Americans. 
Basically, as you know, wood and paper products are essential 
elements of our standard of living and are derived from a 
renewable resource, which we are committed to managing on a 
sustainable basis.
    For our industry, the WTO Ministerial represents the last 
opportunity to level the competitive playingfield for our 
products. The U.S. market has an open door to foreign 
competitors in forest products, while U.S. producers must scale 
high tariff walls and other barriers to compete abroad. 
Starting with the Uruguay round, we have sought to level the 
playingfield through reciprocal trade elimination agreements. 
That objective was only partially realized. Continued disparity 
in market access combined with foreign capacity growth and weak 
demand abroad have resulted in the actual deterioration in the 
trade balance of our sector since the Uruguay round.
    We are seeing explosive growth in forest products capacity 
in emerging economies like Indonesia, China, Korea and Brazil. 
They may claim to be developing economies, but the capacity 
they are building is world class, and, in fact, is finding its 
way in a major way into our markets.
    For instance, in 1998, paper imports from Asia increased by 
73 percent. In total, foreign imports of paper products 
increased by more than $1 billion in 1998, while U.S. exports 
declined by almost $350 million. This alarming trend of 
increase in imports has been evident throughout the decade of 
the nineties.
    Turning to wood products, since 1994, U.S. exports of wood 
products have dropped by 20 percent, while imports have 
increased by 33 percent. In total, between 1994 and 1998, the 
deficit in our sector has jumped from $3 billion to over $9 
billion, in excess of a tripling. The significance of these 
numbers is the effect on jobs. These jobs are some of the best 
paying in our communities. For instance, papermill jobs pay 
about $20 an hour, which is $7 an hour more than other 
manufacturing jobs. In 1998, a year of record demand for our 
products, paper industry employment declined by 18,000 jobs.
    Our industry has made substantial capital investments to 
modernize our operations and compete on a global scale. At the 
same time our relative cost position has changed in part due to 
public policy affecting fiber supply, environmental costs and 
taxes. For example, the U.S. tax rate on corporate forestry is 
55 percent compared to 22 percent in Finland and 7 percent in 
Indonesia.
    Clearly, the WTO will not change tax or environmental 
policy, but it can finish the job we started with the Uruguay 
round. The administration has proceeded on Congress' 
authorization to accelerate and expand reciprocal tariff 
elimination. Last November, and again last month, the APEC 
ministers agreed to work toward an agreement accelerating 
tariff reductions by the WTO Ministerial in November 1999. The 
accelerated trade liberalization proposal would eliminate 
tariffs on paper products between the years 2000 and 2002, and 
on wood products between 2002 and 2004. An agreement on the ATL 
package would boost global trade and benefit producers and 
consumers around the world. However, that objective is 
threatened by the Japanese Government's continued refusal to 
agree to trade elimination on wood products and by European 
resistance to conclude any agreement before launching a new 
round of negotiations.
    Immediate action in Seattle is essential. Delaying the 
results will mean continued erosion of our competitive position 
in world markets. With the APEC economies prepared to lead the 
way in advancing the pace of tariff liberalization, an 
agreement on the ATL at the outset of the new round would 
provide important momentum for further opening global markets. 
The WTO must demonstrate that it is capable of eliminating 
barriers to trade on a continuing basis and can do so by 
concluding the ATL agreement in Seattle.
    We urge your support and thank you for listening to our 
stories.
    Chairman Crane. Thank you.
    [The prepared statement follows:]

Statement of John Dillon, Chairman and Chief Executive Officer, 
International Paper Purchase, New York, on behalf of the American 
Forest & Paper Association

    Mr. Chairman, Members of the Committee:
    I am John Dillon, Chairman and CEO of International Paper, 
and I am pleased to be here today representing the American 
Forest and Paper Association. International Paper is the 
largest forest products company in the world with $24 billion 
in annual sales, operations in nearly 50 countries and close to 
100,000 employees. In addition, International Paper owns and 
manages nearly 7.5 million acres of forest land in the United 
States.
    The U. S. forest products industry, which accounts for $230 
billion in annual sales and employs 1.5 million American 
workers, comprises seven percent of manufacturing shipments. To 
put this in perspective, the U.S. forest products industry 
employs about as many people as the data processing and 
computer services industry. While Internet-based advertising 
totaled $1.9 billion in 1998, print-based advertising generated 
$111 billion in revenues. Basically, wood and paper products 
are essential elements of our standard of living--from paper 
for daily information to textbooks to decorative products; from 
packaging to keep products safe and prevent spoilage; and from 
lumber and panel materials used in over 90 percent of American 
homes to wood-based furniture and cabinetry. These products are 
derived from a unique renewable resource which the U.S. forest 
products industry is committed to managing on a sustainable 
basis.
    For our industry, the World Trade Organization (WTO) 
Ministerial meeting in Seattle represents the most significant, 
and possibly the last, opportunity to secure our ability to 
participate in fast-growing global markets from a U.S. 
manufacturing base. For too many years, the U.S. market has 
provided an open door to our foreign competitors, while U.S. 
producers have had to scale high tariff walls and other 
barriers to compete in foreign markets. Our foreign competitors 
have used those years and those barriers to create a 
substantial global advantage by increasing their productive 
capacity and exploiting our market while denying us equivalent 
market opportunities.
    For the last decade, beginning with the Uruguay Round, we 
have sought to level the playing field by pursuing a global 
free trade sector in forest products through reciprocal tariff 
elimination agreements. That objective was only partially 
realized in the Uruguay Round Agreement, as Japan blocked an 
agreement in wood products, and Europe delayed the phase-out on 
paper tariffs to ten years. These actions provided another 
decade of protection to some of our strongest competitors in 
global markets.
    As a consequence, we have actually seen the global trade 
balance in the forest products sector decline since the 
conclusion of the Uruguay Round Agreement. In total, between 
1994 and 1998 the trade deficit in our sector jumped from $3 
billion to $9.4 billion, a tripling in this short time period.
    On the solid wood side of the industry, global production 
of lumber and panel products grew about 5 percent between 1994 
and 1998, while U.S. production increased only about 3 percent. 
Thus, the U.S. share of global lumber production has declined 
by 1-2 percent since 1994. At the same time, U.S. exports of 
wood products have dropped from $7.2 billion to $5.8 billion, 
or a 20 percent decline; whereas imports of lumber and wood 
products have grown from $10 billion to $13.3 billion, or a 33 
percent increase.
    On the paper side, global production of paper and 
paperboard has increased about 12 percent since 1994, while 
U.S. production has increased just 6 percent. The U.S. share of 
world production of paper and paperboard has declined from 30.1 
percent to 28.5 percent. On a tonnage basis, U.S. exports of 
pulp, paper and paperboard grew 8.6 percent from 1994-1998, but 
dropped 9.3 percent in 1997-98, while imports increased 12 
percent.
    Just as we saw strong growth in European capacity in the 
early 1990s, we are now looking at explosive growth in forest 
products capacity in emerging economies such as Indonesia, 
China, Korea, and Brazil. And while these countries may claim 
to be developing economies, the capacity they are building is 
world-class--we are not talking about backyard paper and saw 
mills, but some of the largest, state-of-the-art mills in the 
world.
    The situation has become more acute in the last two years 
as a consequence of the Asian financial crisis. As Asian 
economic growth collapsed, the rapid buildup in capacity that 
was anticipated to serve the rapidly growing Asian economies 
has resulted in increased shipments to the U.S. market. Imports 
of paper from Indonesia, for example, increased by 1800 percent 
during 1998. Imports from all Asian countries have increased 73 
percent. At the same time, the reduction in demand in Asia, and 
lack of strong growth in the rest of the world, has resulted in 
diversions of products from other regions to the U.S. market--
European imports are up 12 percent; Canadian imports are up 5.3 
percent. In total, U.S. imports of paper and paperboard have 
increased by more than $1 billion in 1998, while U.S. exports 
have declined by $335 million.
    The result has been a significant erosion in prices and 
profitability for U.S. producers, and consequently a reduction 
in U.S. production. Since the beginning of 1998, the U.S. 
forest products industry has indefinitely or permanently 
shuttered 1.4 million metric tons of market pulp and 2.1 
million metric tons of paper and paperboard capacity.
    The real significance of these numbers is the effect on 
U.S. jobs. In 1998, total paper and allied products industry 
employment declined by 17,800 jobs, or 2.6%--the largest single 
year decline since 1983. These are higher paying jobs than the 
manufacturing average and are most often located in rural 
communities that are heavily dependent on the forest products 
industry. At an average wage of $20.41 per hour, paper mill 
workers earn nearly $7.00 an hour more than all other private 
sector production workers, whose average hourly wage is $13.14.
    Future growth opportunities for our products are highest in 
foreign markets where demand is expected to grow more rapidly 
than in the more mature markets in the U.S. and Europe. 
However, if we are unable to secure a market position in Asian 
and Latin American countries in the near future because of 
prohibitive market access barriers, those markets will be 
locked up by emerging competitors and our natural competitive 
advantage in this sector will have been sacrificed to unequal 
terms of trade set by governments.
    It is for this reason that we have been so insistent on 
accelerating and expanding the reciprocal tariff elimination 
agreement from the Uruguay Round and why we are so determined 
to see a global agreement reached at the Seattle Ministerial. 
Immediate action is essential to the future success and growth 
of the U.S. forest products industry.
    Six years ago, Fortune magazine evaluated U.S. industries 
on their ability to compete globally and gave only two ``A'' 
ratings: pharmaceuticals and forest products. Today, that 
competitive edge in the forest products sector is eroding as a 
consequence of public policy impacts on our domestic industry 
and because of the rapid expansion of foreign competitors, 
often with the active support of their governments.
    During the 1980s and early 1990s, our industry made 
substantial capital investments to modernize and upgrade our 
equipment and operations to ensure that we would be able to 
compete on a global scale. In fact, in terms of net value of 
plant and equipment per dollar of sales, the paper industry is 
more than twice as capital intensive as the all-manufacturing 
average.
    However, also during that time, our relative cost position 
changed, in part due to public policy actions. The 75 percent 
reduction in timber from public lands has resulted in increased 
fiber costs, which make up 30-70 percent of our production 
costs. At the same time, our foreign competitors often enjoy 
government-supplied timber concessions at below-market rates, 
or benefit from export restrictions which artificially reduce 
their cost of fiber.
    Environmental compliance costs have increased 
significantly, both for forest management and for manufacturing 
processes. Last year, the Environmental Protection Agency (EPA) 
imposed the most costly regulation ever on a single industry--
the Cluster rule--which will increase capital costs for the 
industry by nearly $3 billion. Costs for International Paper 
alone will exceed $500 million. Additional regulations which 
EPA is now considering for our industry could add another $10 
billion in capital costs over the next 10 years. AF&PA 
estimates that environmental expenses accounted for 13 percent 
of capital spending in the last decade, and will account for as 
much as 28 percent of capital spending in the next five years. 
Unfortunately, in many cases these expenditures produce little 
or no significant environmental improvement and certainly do 
not contribute to increased productivity or production. In 
addition, these costs are not shared equally by many of our 
foreign competitors, which face neither the scope of direct 
regulatory costs, nor the strict enforcement regime that exists 
in the U.S. We are proud of our environmental record, but there 
must be a reasonable balance between environmental costs and 
benefits, and we need to ensure that U.S. producers are not 
left at a competitive disadvantage because of disparate 
environmental requirements.
    We also face a cost disadvantage as a consequence of tax 
policy. A recent study of comparative tax rates revealed that 
the U.S. forest products industry has the second highest 
effective tax rate on corporate forestry and timber investment 
when compared with any of our major foreign competitors: The 
U.S. tax rate is 55 percent vs. Japan at 36 percent; Finland at 
22 percent; and Indonesia at 7 percent. Similarly, the 
effective tax rate on paper manufacturing in the U.S., at 62 
percent, compares unfavorably to Japan at 57 percent; Finland 
at 36 percent; and Indonesia at 33 percent. In both Finland and 
Indonesia, almost all reforestation and silvicultural costs 
currently may be deducted. In the U.S., most reforestation 
costs must be capitalized until harvesting begins. The tax bill 
that the House recently approved will help somewhat, but what 
would really help level the competitive field for us would be a 
significant reduction in the corporate capital gains rate 
applied to timber and a permanent lifting of the cap on the 
amortization of reforestation expenses.
    Of immediate interest to this committee and this hearing is 
the impact of trade policies on our industry and the 
opportunity presented by the upcoming ministerial to improve 
our competitive position. With our natural advantages in 
abundant fiber supply, developed infrastructure, skilled 
workforce, capital investments, and world-scale operations, we 
should enjoy a comparative, competitive advantage in world 
markets for our wood and paper products. However, while the 
U.S. market has been open to the rest of the world, the 
maintenance of foreign barriers to our products has 
significantly eroded our competitive position and threatens the 
future growth and success of this industry.
    In previous trade negotiations, U.S. tariffs on wood and 
paper products have been traded away for concessions in other 
sectors leaving us with a big market open to foreign 
competition and little leverage to gain equivalent access to 
foreign markets.
    During the Uruguay Round, we initiated and led the Zero-
for-Zero Tariff Initiative, designed to provide comparable 
global market access opportunities in several globally 
competitive sectors. As noted earlier, that initiative was not 
fully achieved in our sector: Japan blocked agreement on 
reciprocal tariff elimination in wood products and Europe 
delayed achievement of zero tariffs on paper products for 10 
years. Importantly, developing countries did not participate in 
the Zero-for-Zero Initiative. These countries represent the 
most rapidly growing markets for our products and have become 
significant competitors in our industry.
    The situation we faced then is now compounded. In short, 
the distortions in market access around the world and 
differences in government policies affecting forest products 
industries are leading immediately and directly to the transfer 
of U.S. production and jobs to other countries. If this 
situation is not reversed in the near term, the opportunity for 
our industry to export from the U.S. to growing economies in 
Asia and Latin America will be lost for good as those markets 
are claimed by low-cost, protected competitors.
    The Congress has authorized the Administration to continue 
to pursue acceleration and expansion of reciprocal tariff 
elimination in the zero-for-zero sectors as a priority matter. 
The Administration has worked with our trading partners in APEC 
to advance an accelerated tariff liberalization package for 8 
sectors--including forest products--first through the Asia 
Pacific Economic Cooperation (APEC) forum and now through the 
WTO. Last November, and again last month, APEC ministers agreed 
to work toward an agreement by the time of the WTO Ministerial 
in Seattle. The Accelerated Tariff Liberalization (ATL) 
proposal for forest products would eliminate tariffs on paper 
products between 2000 and 2002 and on wood products between 
2002 and 2004, with limited flexibility on end dates and end 
rates. In addition to forest products, the ATL package includes 
fish, chemicals, medical equipment, energy, toys, gems and 
jewelry, and environmental goods and services.
    It is significant that the APEC economies agreed on the 
importance of advancing liberalization in these sectors. It is 
also important to note that China, in the WTO accession 
negotiations, would significantly reduce tariffs on paper and 
wood products and, on acceding to the WTO, would participate in 
a WTO agreement on tariff elimination.
    An agreement in Seattle on the ATL sectors could produce a 
significant boost to global trade, benefiting producers and 
consumers around the world. However, that objective is 
threatened by the continued refusal of the Japanese government 
to agree to tariff elimination on wood products, and by 
European resistance to conclude any sectoral agreement in 
advance of launching a new round of multilateral trade 
negotiations.
    Delaying results in our sector until the conclusion of a 
new round, at best within three years and likely to be much 
longer than that, will mean continued erosion of our 
competitive position in world markets and continued transfer of 
forest products jobs to other countries. This is an 
unacceptable outcome. It is comparable to allowing a healthy 
patient with a flesh wound to bleed to death because the 
doctors cannot agree on whether to apply a tourniquet or suture 
the wound.
    We cannot allow the Japanese and Europeans to continue to 
defer results in sectors like forest products, where there is 
strong global competition. Both Europe and Japan have well 
developed forest products industries and world-class production 
is being built in emerging countries.
    There will be some vocal opposition from groups in Seattle 
about the impact of globalization and world trade on people's 
lives. We cannot stop globalization of the world economy; we 
have to recognize it and adapt to it to survive and prosper. We 
can, however, work to ensure that the terms under which 
globalization occurs are at least fair for American companies 
and workers and that domestic and foreign barriers to 
production, trade, and economic growth are eliminated.
    Artificial barriers that distort trade and economic 
development stifle not only competition, but also innovation 
and economically-sustainable growth, and lead to reciprocal 
barriers which further distort and stifle economic development 
and growth.
    Negotiations should be based on a recognition that 
reciprocal open markets create economic growth and new market 
and job opportunities for all participants. That is the 
challenge and the opportunity facing the trade ministers in 
Seattle.
    The WTO must demonstrate that it is capable of continuous 
progress in eliminating barriers to trade. The most tangible 
demonstration of that capability would be to conclude an ATL 
agreement at the Ministerial which would produce immediate 
benefits for producers and consumers around the world in these 
eight sectors. That would serve as a model and provide some 
important momentum for the launch of a new round of trade 
liberalization negotiations.
    Conversely, failure to conclude the ATL agreement in 
Seattle could lead to further loss of growth opportunities in 
important sectors of the U.S. economy and further erosion in 
public support for efforts to achieve a more open world trading 
system.
    I hope the trade ministers seize this opportunity to 
demonstrate the vitality and value of the World Trade 
Organization as a body which can and does produce meaningful 
economic results through eliminating trade barriers, beginning 
with an agreement in Seattle on the Accelerated Tariff 
Liberalization package.
      

                                


    Chairman Crane. And our last witness, Mr. Van Putten.

  STATEMENT OF MARK VAN PUTTEN, PRESIDENT AND CHIEF EXECUTIVE 
             OFFICER, NATIONAL WILDLIFE FEDERATION

    Mr. Van Putten. Thank you, Mr. Chairman and Members of the 
Subcommittee. I appreciate this opportunity to testify on 
behalf of the National Wildlife Federation, America's largest 
not-for-profit conservation advocacy and education organization 
with over 4 million members and supporters in 46 States and 
territorial affiliates.
    For nearly 10 years, NWF has been intimately involved in 
the development of U.S. trade policy. This makes sense to our 
members, who are mainstream and main street conservation 
activists. They understand the link between sustainable 
economic development and environmental protection.
    This hearing marks an important crossroads in America's 
trade history. For too long, trade and investment agreements 
have been treated as if they were independent from their impact 
on the environment, wildlife and natural resources. There has 
been an assumption that more trade is always better, leading to 
greater wealth and an improvement in the quality of life for 
all people.
    But we have come to learn that liberalizing trade does not 
come without costs to the environment. We now recognize through 
firsthand experience that trade rules may restrict our ability 
to protect sea turtles and other imperiled species, limit bulk 
water exports from the Great Lakes, and provide information to 
consumers about the environmental impact of the products they 
buy.
    This need not be so. The National Wildlife Federation 
believes that trade liberalization could be a means by which 
the goals of environmental protection and sustainable 
development are advanced, but this will require a change in the 
scope and direction of United States trade policy. Without this 
change, public confidence in trade policy will continue to 
erode.
    As host of the WTO Ministerial meeting in November, the 
United States has an unprecedented opportunity to demonstrate 
leadership in reviewing and reforming the international trade 
regime so it respects and promotes these core American values. 
We stand ready to assist Congress and the administration in 
developing a negotiating agenda which fully incorporates 
environmental priorities with specific proposals for WTO rule 
reform and clarification. At the same time, I must acknowledge 
the National Wildlife Federation's willingness to oppose the 
next round of WTO negotiations if protection of the environment 
and democratic procedural reforms of the WTO do not emerge as 
key components of the future trading system.
    The National Wildlife Federation has an agenda for 
harnessing trade liberalization in the service of advancing the 
American values of environmental protection, natural resource 
conservation, and process values such as openness and fairness 
in decisionmaking. In my written testimony I describe this 
agenda in detail, but I would just like to highlight a few of 
those points.
    First, we must improve the WTO's deference to national 
standards and multilateral environmental agreements. Second, we 
must address the WTO prohibition on distinctions in production 
and process methods. Third, we must make environmental impact 
assessments integral to trade negotiations. And fourth, we must 
reform WTO procedures, especially the dispute resolution system 
concerning transparency and public participation.
    As I said, these and other points are fully addressed in my 
written submission, and I welcome any questions you may have on 
that.
    We appreciate the administration's recent statements on its 
agenda for integrating trade and the environment, and we urge 
the United States to move forward and embrace the 
recommendations we have made. Unless WTO nations embrace an 
agenda for reform to address environmental concerns, they will 
not earn the public support necessary for further trade 
liberalization.
    Mr. Chairman and Members of the Subcommittee, for our 
members the question is not whether or not to trade, but how to 
craft trade and investment rules that promote a healthier 
environment. Trade is not an end in itself. It is a tool to 
achieve human aspirations, to improve standards of living and 
to enhance the quality of life. Trade rules are self-defeating 
if they force us to trade away those things we value most 
highly: Clean air, clean water, safe food, wildlife, and open 
and living places that give meaning to our lives. Trade should 
be an investment in a better way of life, not a license to 
degrade those things on which healthy life depends. Thank you.
    Chairman Crane. Thank you, Mr. Van Putten.
    [The prepared statement and attachments follow:]

Statement of Mark Van Putten, President and Chief Executive Officer, 
National Wildlife Federation

    I am Mark Van Putten, President and CEO of the National 
Wildlife Federation, the United States' largest not-for-profit 
conservation education and advocacy organization with over four 
million members and supporters, ten field offices and forty-six 
state and territorial affiliates. For nearly ten years, our 
staff has been involved in the development of United States 
trade policy. Our members are America's mainstream and main 
street conservation activists who understand the link between 
sustainable economic development and environmental protection.
    This hearing marks an important cross roads in American 
history. For years we have negotiated international trade and 
investment agreements as if they were independent from their 
impact on the wildlife and natural resources on which they 
often depend. We have assumed that ``increased trade is always 
better,'' because we believed that more trade lead to greater 
wealth and an improvement in the quality of life for all 
people. To that end, United States trade policy has 
traditionally been dedicated to securing greater market access 
for United States' goods and services through the elimination 
of national policies of our trading partners that stood in the 
way of efforts to trade more and more products and services.
    In many cases, increased trade is better, especially when 
we are talking about the needs of developing countries. 
Increased access to international markets allows developing 
countries to sell their goods and services to a growing global 
market. But as we better understand the impact living in a 
global society has on our efforts to protect the environment in 
a global society, we understand that liberalizing trade does 
not come without costs to the environment. We now understand 
that trade liberalization increases the pressure to turn wild 
spaces into farmland and, in a recent tragic example, can 
undermine efforts here at home to protect endangered sea 
turtles all over the world.
    The National Wildlife Federation believes that it is time 
to change the scope and direction of United States trade 
policy. We need a policy that will promote healthy economies 
and cleaner environments. Acting as host to the World Trade 
Organization's Third Ministerial in November, we believe that 
the United States has an unprecedented opportunity to 
demonstrate its leadership on this important matter, and show 
the world that economically sound trade policy must respect the 
environment and, the communities affected by the trend toward 
globalization.
    The WTO Ministerial represents a critical opportunity to 
review and reform the international trade regime so that it 
respects and promotes the core values of the American people. 
We stand prepared to assist Congress and the Administration in 
developing a negotiating agenda which fully incorporates 
environmental priorities within specific proposals for WTO rule 
reform and clarification. At the same time, we must 
respectfully acknowledge our willingness to oppose the next 
round of WTO negotiations if protection of the environment and 
democratic procedural reform of the WTO do not emerge as 
integral components of the future multilateral trading system.
    We acknowledge and appreciate the progress made by the 
United States in addressing environmental concerns at the WTO 
High Level Symposium on Trade and Environment in March 1999 and 
in the United States proposals for the Seattle Ministerial 
agenda presented before the WTO General Council in July 1999. 
We welcome the Administration's attempts to improve 
transparency and participation of civil society at the WTO and, 
to encourage the elimination of environmentally-damaging 
subsidies in the fisheries sector. We are also moderately 
encouraged that the WTO dispute settlement panel jurisprudence 
and, in particular, the Appellate Body rulings, have recently 
demonstrated an improved sensitivity to the merits of 
environmental policy.
    Despite the important United States proposals, we must 
reiterate our view that the positions articulated by the 
Administration as part of its Seattle Ministerial agenda are 
positive first steps. Clearly, the choice between awaiting 
improved jurisprudence and pursuing concrete rule reform is not 
necessarily an ``either/or'' proposition. If the widespread 
support of NWF members and the American people for further 
trade liberalization is to be achieved, United States 
leadership and more progress needs to be made in implementing 
the proposed initiatives and in clarifying and modifying the 
current trade rules to adequately reflect the integration of 
environmental concerns.

    I. The Relationship Between the International Trade Regime and 
                          Environmental Policy

A. Background--The Principles of the GATT/WTO Regime

    The core principles of the General Agreement on Tariffs and Trade 
(GATT 1947) \1\ and its recent successor, the World Trade Organization 
(WTO),\2\ have important implications for environmental protection. 
Generally speaking, WTO rights and obligations impose certain 
disciplines on its signatory parties--or member nations. The following 
principles represent GATT's core disciplines:
---------------------------------------------------------------------------
    \1\ General Agreement on Tariffs and Trade, Oct. 30 1947, 61 Stat. 
A3, 55 U.N.T.S. 187 [hereinafter GATT 1947].
    \2\ General Agreement on Tariffs and Trade--Multilateral Trade 
Negotiations (The Uruguay Round): Final Act Embodying the Results of 
the Uruguay Round of Trade Negotiations, Dec. 15, 1993, Multilateral 
Trade Negotiations (The Uruguay Round) Doc. MTN/FA, 33 I.L.M. 1 (1994) 
[hereinafter WTO Final Act].
---------------------------------------------------------------------------
    Article I of the 1947 original GATT text establishes the Most-
Favored-Nation principle (MFN). MFN aims to ensure that each member 
nation grant any privilege or advantage it provides to a product from 
one member immediately and unconditionally to ``like products'' from, 
or destined for, all WTO members. MFN effectively requires all member 
nations to treat products from all other WTO members in the same 
manner.
    Article III establishes the National Treatment Principle, which 
requires members to treat any imported ``like product'' in the same 
manner as they would treat domestic ``like products''. GATT/WTO dispute 
settlement panels have traditionally defined the term ``like product'' 
narrowly so as to prohibit distinctions in products based on the manner 
in which they were produced, or process and production methods (PPM). 
At its core, National Treatment is designed to prevent the 
discrimination of imported products in favor of domestic products.
    Article XI establishes a prohibition on quantitative restrictions 
and seeks to prohibit such trade actions as quotas, embargoes, and 
licensing schemes on imported or exported products. A WTO member 
country challenged with violating any of the above obligations has 
recourse to the GATT 1947 General Exceptions. Article XX(b) and (g) are 
the exceptions most frequently cited in trade disputes that involve the 
environment and natural resources.\3\ Article XX also allows exceptions 
from the WTO general obligations to, inter alia, protect public morals, 
distinguish products manufactured with prison labor, exclude commodity 
agreements that meet certain criteria, and meet emergency shortages of 
supplies.
---------------------------------------------------------------------------
    \3\ WTO Final Act, Article XX(b), Article XX(g)
---------------------------------------------------------------------------
    Thus, if the trade provisions of a WTO member's environmental 
policy are challenged as a violation of its WTO obligations, the 
defendant country may attempt to justify the measure as ``necessary to 
protect human, animal or plant life or health'' (Article XX(b)) or, 
``relating to the conservation of exhaustible natural resources if such 
measures are made effective in conjunction with restrictions on 
domestic production or consumption.'' (Article XX(g)).
    In addition to Article XX, the nexus between trade and the 
environment is frequently addressed within the context of the WTO 
Agreements on Technical Barriers to Trade (TBT Agreement) and the 
Sanitary and Phytosanitary Agreement (SPS Agreement)
    The TBT Agreement seeks to ensure that the nondiscrimination and 
national treatment provisions of the WTO as a whole are specifically 
applied to the adoption of technical regulations by members.\4\ The TBT 
Agreement emphasizes deference to international standards in the 
creation of regulations governing, among others, product 
characteristics, process and production methods, labeling, and 
packaging.\5\
---------------------------------------------------------------------------
    \4\ Agreement on Technical Barriers to Trade, GATT/WTO (1994). A 
technical regulation is defined as:
    Document which lays down product characteristics or their related 
processes and production methods, including the applicable 
administrative provisions, with which compliance is not mandatory. It 
may also include or deal exclusively with terminology, symbols, 
packaging, marking or labelling requirements as they apply to a 
product, process or production method.
    \5\ TBT Agreement, Article 2.
---------------------------------------------------------------------------
    The WTO SPS Agreement attempts to prevent non-tariff barriers to 
trade in the form of environment and health measures designed ``to 
protect animal or plant life or health within the territory of the 
Member'' through restrictions on invasive species, additives, 
pesticides, and other contaminants. In similar fashion to the TBT 
Agreement, the SPS Agreement places additional disciplines on WTO 
members so as to ensure that measures are not to be ``maintained 
without sufficient scientific evidence,'' nor be maintained ``if there 
is another measure, reasonably available. . . that achieves the 
appropriate level of protection and is significantly less restrictive 
to trade.'' \6\
---------------------------------------------------------------------------
    \6\ SPS Agreement, Article 3:2 (para. 6).
---------------------------------------------------------------------------
    If a dispute arises, a complaining party may request the 
appointment of a dispute panel to settle the disagreement. The panel 
hearings are between governments and are generally closed to the public 
and non-governmental organizations (NGOs). Panel reports are adopted 
within sixty days of their issuance unless a member initiates an appeal 
or it is the consensus of the other members not to adopt the report. If 
a member chooses to ignore the recommendations of a panel, the 
complaining member may seek compensation in the area of trade directly 
related to the dispute or, if necessary may cross-retaliate in another 
trade sector. As a result, a member country whose environmental 
regulation is found by a WTO dispute settlement panel to be 
inconsistent with WTO obligations is immediately susceptible to 
significant pressure to either alter the environmental law in domestic 
administrative processes or provide compensation to the complaining WTO 
member.

B. Implications for National and International Environmental Policy

    The GATT/WTO trade principles have direct implications for a host 
of environmental laws. Any national or multilateral environmental 
measures attempting to accomplish their environmental objective that 
results in the application of trade restrictions with disproportionate 
impacts on different WTO members runs the risk of being in violation of 
the MFN principle. The trade provisions of a multilateral environmental 
agreement (MEA), the Montreal Protocol on Substances the Deplete the 
Ozone Layer, that promote different trade restrictions among WTO 
members based on their status as parties or non-parties to the Protocol 
may violate the MFN principle. Similarly, an environmental measure that 
attempts to distinguish products based on the environmental 
consequences of their production (e.g. tuna caught in a manner that 
harms dolphins as opposed to tuna caught without producing dolphin 
mortality) may violate the national treatment principle. Finally, if an 
environmental regulation restricts the trade in a particular product 
via a trade ban, the regulation in question may be declared 
inconsistent with Article XI's prohibition on quantitative 
restrictions. For example, the United States' trade restrictions on 
shrimp products caught in a manner that harms sea turtles were recently 
found to be in violation of Article XI by a WTO dispute settlement 
panel.
    In addition to the core principles, WTO members are increasingly 
demonstrating a propensity to utilize the TBT and SPS Agreements to 
impose additional disciplines on national and international 
environmental policies. For example, WTO members continue to explore 
measures designed to discipline voluntary environmental labeling and 
certification programs by advocating not only adherence to the TBT 
Agreement but, also a list of additional principles requiring 
ecolabeling programs to be, inter alia, ``based on sound science'' and 
``no more trade restrictive than necessary''.\7\ Ecolabeling proponents 
remain concerned that the new disciplines inherent in the recent 
proposals and the principles of the TBT Agreement go well-beyond the 
requirements of MFN and national treatment obligations and may place 
WTO dispute settlement panels in the position of interpreting the 
substantive merits of individual and voluntary environmental labeling 
programs.
---------------------------------------------------------------------------
    \7\ See, e.g., Trade and Environment Bulletin, Committee on Trade 
and Environment (CTE), WTO, Press/TE 023, (May 14, 1998).
---------------------------------------------------------------------------
    Similarly, the SPS Agreement requires national environmental 
measures to adhere to additional trade-based disciplines and allows 
significant deference to international standards. As a result, many 
national environmental and health authorities remain concerned that the 
SPS Agreement will allow WTO dispute settlement panels to sit in 
judgment of societal policy choices such as determinations relating to 
appropriate levels of risk and/or may defer to occasionally weaker 
international standards in the interest of promoting trade.
    As noted earlier, when differences of opinion over national policy 
and its relationship to trade rules arise, member nations seek a 
resolution via the new dispute settlement system established in 
conjunction with the WTO. Thanks in large part to United States 
leadership in the post-WW II era, the use of tariffs to impede the flow 
of goods around the world has diminished considerably. As a by-product 
of this success in tariff reduction, the WTO dispute settlement system 
has increasingly been called upon to confront the trade-distorting 
effects of non-tariff barriers. Within the international trade regime, 
domestic and international environmental regulation is often suspected, 
rightly or wrongly, of rising to the level of an actionable non-tariff 
barrier to trade.
    The WTO Dispute Settlement Understanding encourages members to 
enter into informal negotiations in an effort to reach a mutually 
agreed solution.\8\ If a resolution of the matter is not forthcoming, a 
challenging member invoking the dispute settlement procedures is 
entitled to a prima facie assumption that the trade provisions of the 
environmental measure being challenged are inconsistent with the WTO 
rules. The burden of proof to rebut the charge is on the defendant 
member seeking to implement the environmental regulation.
---------------------------------------------------------------------------
    \8\ Understanding on Rules and Procedures Governing the Settlement 
of Disputes, WTO (1994).
---------------------------------------------------------------------------
    In response to the preceding trade and environment linkages and in 
the interest of forging a new consensus on United States trade policy 
as we work together to develop United States negotiating objectives for 
Seattle, the National Wildlife Federation proffers the following 
recommendations as potential objectives for future United States trade 
initiatives.

II. Establish Appropriate and Reasonable Limits to the WTO's Influence 
    on Legitimate National and International Environmental Measures

A. Improve WTO Deference to National Standards and Multilateral 
Environmental Agreements (MEAs)

    Trade rules must be crafted so they do not diminish the 
environmental protections that nations have provided for their 
citizens and their natural resources. As trade negotiations and 
trade institutions are increasingly faced with the challenge of 
distinguishing national standards adopted for legitimate health 
and environmental purposes from those regulatory standards 
enacted with protectionist intent, the need to ensure 
appropriate deference to national decisionmakers with 
environmental expertise acting at the behest of their citizens 
intensifies.
    As the recent WTO dispute settlement panel opinion 
regarding the United States' efforts to protect endangered sea 
turtles and several other environmentally-related dispute 
settlement decisions attest, the WTO's review of the trade-
related aspects of environmental policy tends to expand rapidly 
into a substantive review, from a trade perspective, of the 
overall effectiveness of a chosen environmental policy.\9\
---------------------------------------------------------------------------
    \9\ See United States--Import Prohibition of Certain Shrimp and 
Shrimp Products, Final Report, WTO, WT/DS58/R, (April 6, 1998). See 
also, United States--Restrictions on Imports of Tuna, GATT Doc. DS29/R 
(June 1994) (unadopted); United States--Restrictions on Imports of 
Tuna, GATT Doc. DS21/R (Sept. 3, 1991) (unadopted), 30 I.L.M. 1594 
(1991); Canada--Measures Affecting Exports of Unprocessed Herring and 
Salmon, GATT Doc. L/6268, GATT BISD 98 (35th Supp. 1988).
---------------------------------------------------------------------------
    In addition to endangered sea turtle regulations, the WTO 
and GATT dispute settlement bodies have recently issued rulings 
on domestic laws addressing appropriate levels of protection 
for growth hormones in beef,\10\ air quality,\11\ and fuel 
efficiency standards.\12\
---------------------------------------------------------------------------
    \10\ EC Measures Concerning Meat and Meat Products (Hormones), 
Final Report, WTO, WT/DS48/AB/R, (January 16, 1998).
    \11\ United States-Standards for Reformulated and Conventional 
Gasoline (AB-1996-1), (March 4, 1996).
    \12\ United States--Taxes on Automobiles, GATT Doc. DS 31/R, at 3-4 
(Sept. 29, 1994) (unadopted)

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1. Sanitary and Phytosanitary Measures

    WTO SPS negotiators are charged with the difficult 
responsibility and challenge of balancing the right of domestic 
regulatory authorities to determine their appropriate level of 
risk and the obligation to maintain measures consistent with 
their commitments under the WTO SPS Agreement. The next level 
of SPS negotiations at Seattle and beyond represent a 
significant opportunity for the United States and its fellow 
WTO partners to absorb the lessons of existing SPS Agreements 
in the NAFTA and Uruguay Round/WTO contexts and to create a 
much-improved agreement that ensures high levels of environment 
and health protection while facilitating trade.
    A failure to seize this opportunity to establish a well-
functioning SPS Agreement will undoubtedly lead to increased 
challenges to nondiscriminatory national environment and health 
protection laws which will in turn result in increased tension 
and instability in the international trading regime and an 
erosion of popular support within WTO countries for the WTO 
process. Accordingly, we recommend that the WTO negotiators 
seek to achieve an SPS Agreement consistent with the following 
principles:

Burden of Proof

    The WTO SPS Agreement should explicitly place the burden of 
proof in establishing a violation of the SPS Agreement on the 
challenging party throughout the length of a dispute involving 
a particular country's environment and health protection 
measure;

International Standards as Minimum Levels of Protection and the 
Precautionary Principle

    The WTO SPS Agreement should explicitly confirm that 
international standards are not to be considered maximum levels 
of protection in situations where a WTO country seeks to 
maintain a higher standard than an international standard.
    As a result, SPS Agreement negotiators should insist that, 
at minimum, an express statement acknowledging that 
international standards may not be invoked to weaken higher 
domestic standards should be inserted into the SPS text. If 
modest deference to international standards is to be 
maintained, deference to relevant international health and 
environmental standards and appropriate multilateral 
environmental agreements (MEAs) should be incorporated into the 
SPS Agreement. Indeed, the SPS Agreement should expressly 
acknowledge the right of WTO members to invoke the 
Precautionary Principle (the right to take action against a 
potential harm even if the scientific evidence linking an 
activity to the harm in question is inconclusive or uncertain) 
in determining their appropriate levels of risk.

Deference to National Regulatory Authorities

    The WTO SPS Agreement must allow for deference to national 
regulatory authorities in the assessment of risk and the 
determination of the appropriate level of SPS protection. As an 
appropriate starting point in considering modifications to the 
SPS Agreement, the United States should seek explicit language 
in the text of the WTO's Sanitary and Phytosanitary Agreement 
similar to the language contained in the Uruguay Round 
Statement of Administrative Action. The United States has 
stated that the SPS Agreement's definition of appropriate level 
of protection explicitly affirms the right of each government 
to choose its levels of protection, including a ``zero risk'' 
level if it so chooses. A government may establish its level of 
protection by any means available under its law, including by 
referendum. In the end, the choice of the appropriate level of 
protection is a societal value judgment. The Agreement imposes 
no requirement to establish a scientific basis for the chosen 
level of protection because the choice is not a scientific 
judgment.\13\
---------------------------------------------------------------------------
    \13\ The Uruguay Round Agreements Act, Statement of Administrative 
Action at 89.
---------------------------------------------------------------------------
    In addition, trade rules must explicitly ensure that 
sovereign nations may continue to adopt and maintain 
legitimate, nondiscriminatory protective standards for health, 
safety, and the environment.\14\ President Clinton has stated 
in an address marking the 50th Anniversary of the WTO 
``Enhanced trade can and should enhance--not undercut--the 
protection of the environment. [I]nternational trade rules must 
permit sovereign nations to exercise their right to set 
protective standards for health, safety and the environment and 
biodiversity. Nations have a right to pursue those 
protections--even when they are stronger than international 
norms.''
---------------------------------------------------------------------------
    \14\ Address By President Clinton to the World Trade Organization, 
Geneva, Switzerland, May 18, 1998.
---------------------------------------------------------------------------
    Accordingly, WTO negotiators should insist that an 
interpretative statement be incorporated into the SPS Agreement 
reflecting the above position so as to provide clear guidance 
to WTO dispute panels that any potential SPS Agreement 
requirement of scientific justification must not allow the 
substitution of a panel's scientific judgment for that of 
domestic regulatory authorities.

2. Allow Explicit Deference to Multilateral Environmental 
Agreements (MEAs)

    The potential conflict between existing WTO trade rules and 
the use of trade measures in MEAs has to be addressed. MEAs use 
trade measures to promote environmental cooperation and 
enforcement through the use of a variety of positive and 
negative incentives related directly to the environmental 
problem at issue.\15\ For example, MEAs utilize trade 
provisions to regulate the trade in a ``target'' product or 
substance primarily responsible for the environmental 
degradation--such as ozone depleting chemicals or trade in 
animal parts derived from endangered species.
---------------------------------------------------------------------------
    \15\ See generally, General Agreement on Tariffs and Trade, Trade 
and the Environment (Feb. 12, 1992), 30.
---------------------------------------------------------------------------
    Frequently, many of the trade provisions in MEAs require 
MEA parties to restrict trade in an environmentally damaging 
product with non-parties to the MEA. Under these circumstances, 
a non-party to the MEA that is a WTO member may allege a 
violation of their WTO MFN rights and obligations as a result 
of the differential treatment. In addition, trade restrictions 
in MEAs that encourage wholesale bans or embargoes of products 
may also be deemed inconsistent with Article XI's prohibition 
on quantitative restrictions.
    The National Wildlife Federation strongly supports global 
efforts to negotiate and implement MEAs. In general, MEAs 
encourage transparency and nondiscrimination, and 
simultaneously discourage alternative unilateral measures that 
may lead to further trade tensions. Traditionally, well-
supported MEAs provide certainty for business and discourage 
``free-riders'' from attaining competitive advantages over law 
abiding competitors. Negative economic consequences for 
products not related to the environmental harm at issue are 
rare and the WTO Secretariat has acknowledged that ``none of 
the existing MEAs contain provisions for discriminatory trade 
measures to be taken against unrelated products in the case of 
non-participation or defection.'' \16\
---------------------------------------------------------------------------
    \16\ Id.
---------------------------------------------------------------------------
    The United States needs to demonstrate leadership in 
working with other WTO members, MEA parties, and the 
international environmental NGO community to establish a 
framework in which the laudable goals of trade liberalization 
and multilateral environmental protection may co-exist. We 
pledge to work with Congress and the Administration to:

Build on the NAFTA model

    The United States' commitment to multilateral environmental 
solutions to international environmental issues as reflected in 
Article 104 of NAFTA made important strides towards increased 
deference for MEAs addressing shared international 
environmental issues such as the trade in endangered species, 
transboundary hazardous waste, and ozone depleting 
chemicals.\17\ We urge the United States to consider an 
expansion of the list of MEAs eligible to be ``grandfathered'' 
into existing trade agreements and to provide explicit guidance 
to WTO dispute settlement panels that trade rules should not 
inhibit the environmental objectives of MEAs;
---------------------------------------------------------------------------
    \17\ North American Free Trade Agreement (NAFTA), Dec. 17, 992, 
Can.-Mex.-U.S., 32 I.L.M. 296 and 32 I.L.M. 605.
---------------------------------------------------------------------------
    Article 104: Relation to Environmental and Conservation Agreements
    1. In the event of any inconsistency between this Agreement and the 
specific trade obligations set out in:
    a) the Convention on International Trade in Endangered Species of 
Wild Fauna and Flora, done at Washington, March 3, 1973, as amended 
June 22, 1979,
    b) the Montreal Protocol on Substances that Deplete the Ozone 
Layer, done at Montreal, September 16, 1987, as amended June 29, 1990,
    c) the Basel Convention on the Control of Transboundary Movements 
of Hazardous Wastes and Their Disposal, done at Basel, March 22, 1989, 
on its entry into force for Canada, Mexico and the United States, or
    d) the agreements set out in Annex 104.1,
    such obligations shall prevail to the extent of the inconsistency, 
provided that where a Party has a choice among equally effective and 
reasonably available means of complying with such obligations, the 
Party chooses the alternative that is the least inconsistent with the 
other provisions of this Agreement.
    2. The Parties may agree in writing to modify Annex 104.1 to 
include any amendment to an agreement referred to in paragraph 1, and 
any other environmental or conservation agreement.

Enhance WTO Deference to Legitimate MEAs

    The United States should seek clarification of WTO rules to 
allow explicit deference to the independent institutions of 
established environmental expertise on questions of appropriate 
environmental policy in the global commons. For example, the 
WTO should establish a formal link to the United Nations 
Environment Programme (UNEP) as an appropriate venue for 
providing initial arbitration and expertise services to the WTO 
in the face of a dispute involving an MEA and WTO rules.

     III. Harnessing Competitive Energy to Work for the Environment

    Manufacturers tend to operate using a simple but powerful 
logic---produce the highest quality product while minimizing 
costs and seeking to operate in a multilateral rules-based 
system that provides as much certainty and clarity in its 
applicable rules as possible. The vast majority of businesses 
abide by the existing rules and, seek competitive environments 
where they know their colleagues do the same. Regrettably, some 
businesses try to exploit loopholes in international trade and 
investment rules to cut costs and create competitive 
advantages. Trade rules that do not acknowledge limited 
distinctions in products based on the manner in which they are 
produced (PPMs) or fail to aggressively curtail the use of 
environmentally damaging subsidies perpetuate an uneven 
competitive playing field. From the perspective of law-abiding 
businesses, to ask producers, operating in compliance with 
domestic environmental laws, to compete against foreign-based 
companies that compete by polluting the environment or 
destroying natural resources is inadequate trade policy and is 
simply not fair.
    Trade rules can be written in a way to encourage 
environmentally responsible behavior, and to prohibit 
businesses from exploiting the loop holes that exist in the 
current international trade framework.
    The National Wildlife Federation recommends the following:

A. Address the Process and Production Methods (PPMs) Dilemma:

    To promote a competitive level playing field, Congress and 
the Administration should work diligently to adopt appropriate 
criteria to ensure that legitimate environmental policies 
regulating production process methods are preserved from 
challenge in a trade dispute. Initial criteria should allow WTO 
members to distinguish products based on the manner in which 
they are produced in limited and clearly defined 
environmentally-related circumstances. For example, 
distinctions in products made with environmentally adverse 
consequences for the global commons (e.g. products produced 
with ozone depleting substances) and in measures designed to 
protect threatened or endangered species should be deemed 
consistent with WTO rules.

B. Eliminate Environmentally Perverse Subsidies and Promote 
Trade in Environmental Technologies:

    Renewed attention and energy must be devoted to delivering 
eminently achievable ``win-win'' solutions in the trade and 
environment interface. For example, the elimination of perverse 
and environmentally damaging subsidies in natural resource 
sectors such as fisheries and forest products may result in 
positive gains for both the environment and trade. We commend 
the United States for its leadership in seeking enforcement of 
current WTO notification requirements and rules governing the 
elimination of subsidies in its 1999 WTO Ministerial 
negotiating agenda. In addition, the United States deserves 
credit for its efforts to place the facilitation of trade in 
environmental technologies on the Seattle Ministerial agenda. 
Admittedly, while the elimination of environmentally-damaging 
subsidies and improved trade in environmental clean 
technologies is not a panacea to the resolution of all trade 
and environment conflicts, progress in these areas does 
represent a positive step forward.

C. Conduct Environmental Assessments:

    A commitment to sustainability and access to information 
argue forcefully for the initiation of comprehensive 
environmental assessments of natural resource sector 
liberalizations in the early stages of the trade negotiating 
process and upon completion of trade negotiations. The United 
States should build on and strive to strengthen the positive 
experiences associated with environmental reviews prepared for 
NAFTA and the Uruguay Round Agreements establishing the WTO. In 
addition, the United States and our OECD trading partners have 
agreed that ``governments should examine or review trade and 
environmental policies with potentially significant effects on 
the other policy area early in their development to assess the 
implications for the other policy area and to identify 
alternative policy options for addressing concerns.'' \18\
---------------------------------------------------------------------------
    \18\ OECD Guidelines on Integrating Trade and Environment Policy, 
OECD, OCDE/GD(93)99, para. A, B, (June 1993).
---------------------------------------------------------------------------
    The National Wildlife Federation stands committed to 
working with members of the Committee and the Administration in 
developing specific and practical environmental assessment 
proposals. The goal of the assessment(s), and their open public 
review and comment process, should be to provide accurate 
information on the relative environmental impact of proposed 
liberalization in a variety of sectors under negotiation. In 
instances when a potential environmental harm is identified, 
the assessment should suggest mitigative measures such as 
staggered implementation schedules and/or technical assistance 
to lessen the impact on the environment.

D. Negotiate Environmentally Responsible Investment Agreements:

    Increased foreign investment built on a solid commitment to 
sustainable development can potentially lead to transfers of 
cleaner environmental technologies and improved capital 
expenditures in environmental protection infrastructure. At the 
same time, poorly crafted investment rules may exacerbate the 
exploitation of natural resources, contribute to environmental 
degradation and place downward pressure on national 
environmental laws and regulations through closed dispute 
settlement processes. As a result, NWF does not support the 
negotiation of investment rules beyond the current Agreement on 
Trade-Related Investment Measures (TRIMs) as part of the 
Seattle WTO Ministerial Agenda. The United States should 
maintain its current position of not seeking multilateral 
investment negotiations within the WTO. In the alternative, WTO 
investment negotiations should, at minimum, attempt to achieve 
the following:
     Seek mandatory, enforceable measures in the trade 
agreement to prohibit the lowering of environmental standards 
to attract investment and an active monitoring system to ensure 
compliance;
     Undertake a review of the traditional ``investor-
to-state'' principle found in numerous bilateral investment 
agreements with an emphasis on its compatibility with 
procedural openness, transparency and environmental protection 
efforts. Recently, in the NAFTA context, several private 
investors have attempted to use the investor-to-state 
provisions to challenge domestic regulations with potentially 
detrimental consequences for environmental laws. Indeed, we 
understand the NAFTA parties are presently engaged in such a 
review and we urge close coordination with WTO negotiators in 
this process with increased attention devoted to ensuring 
greater safeguards for environment and public participation in 
a WTO investment framework;
     WTO investment negotiations should include 
obligations allowing legitimate measures designed to conserve 
the environment, natural resources and the promotion of 
cooperative environmental programs to be maintained.

E. Slow Down Negotiation of the Forest Products Accelerated 
Tariff Liberalization (ATL) Initiative Pending the Conclusion 
of a Comprehensive Environmental Assessment.

    The United States has announced, as part of the Seattle 
Ministerial Agenda, its intention to pursue accelerated tariff 
liberalization (``zero for zero'' reciprocal tariff 
elimination) in the, inter alia, forest products, fisheries' 
products, environmental goods, and chemicals sectors. In the 
forest products sector, the proposed joint USTR and CEQ 
``written analysis'' of the forest products ATL presents a 
significant opportunity for the United States to pause and 
assess carefully and thoroughly the environmental impact of the 
current ATL initiative on global forests. We urge the United 
States to utilize this analysis to promote an open and frank 
discussion of the ATL initiative's direct effects on such 
factors as consumer demand and the efficient management of 
worldwide forest resources. Accordingly, we recommend that USTR 
and CEQ work diligently to ensure the ATL initiative properly 
addresses potential environmental concerns before proceeding at 
its current rate of negotiation and implementation.
    An enhanced commitment to sustainable development will 
require a comprehensive assessment of the potential impacts on 
sustainability of the proposed forest sector liberalization. We 
wish to emphasize that NWF has not drawn any premature 
conclusions to the ensuing results of a thorough assessment. 
Clearly, some tariff liberalization will be beneficial to the 
environment while tariff liberalization in other areas may 
produce negative consequences for the environment.
    The goal of the assessment should be to identify those 
liberalizations likely to be less-harmful and give them a 
higher priority than areas of liberalization identified as 
detrimental to the environment. In instances when an 
environmental harm is a likely outcome, longer implementation 
timetables, technical assistance, the establishment of 
preventive and mitigative measures, and proffering reasonable 
alternative actions may merit due consideration by 
policymakers. An environmental assessment will also strengthen 
public participation in trade negotiations by making the best 
use of NGO and other civil society inputs and experiences 
involving trade liberalization impacts in certain natural 
resource sectors.
    In addition to an assessment of the ``zero for zero'' 
reciprocal tariff elimination approach, a comprehensive 
analysis of the forest products ATL should explore the 
potential impact of experimenting with other aspects of the 
traditional tariff system, including inter alia:
     carefully amending the Harmonized Tariff System 
(HTS) to better reflect the sustainable harvesting of natural 
resource products. The HTS has the potential to act as an 
incentive to encourage the production of natural resource 
products in a sustainable fashion throughout the United States 
and the entire world;
     promote increased flexibility in the tariff system 
to potentially allow for a zero-tariff model in certain 
categories of forest products (e.g. finished wood products), 
while maintaining capacity to continue moderate tariffs in 
other categories (e.g. raw, unprocessed logs or wood chips) if 
they were clearly shown to have adverse environmental and/or 
economic consequences.

 IV. Support Cooperation on Environmental Matters Among Trading Nations

    As trade liberalization leads to increased market integration, the 
opportunities to foster a meaningful cooperative environmental agenda 
through parallel environmental institutions multiply. Our own 
experience working with government officials in Latin America and 
elsewhere has helped us understand that it is not improvements in 
environmental protection per se that governments are reluctant to 
pursue. On the contrary, most government officials are trying hard to 
develop and implement effective national environmental regimes. What 
concerns them are two factors:
     In the past, some governments have regarded a number of 
environmental laws and regulations as thinly guised protectionism. We 
recognize improperly crafted environmental policies can lead to 
unnecessary trade tensions;
     The fear that, above and beyond trade agreement 
commitments, they lack the political will and/or technical resources to 
fully implement their own environmental laws and regulations.

A. Promote Environmental Cooperation:

    The National Wildlife Federation supports the notion that trade and 
investment agreements create unique opportunities to further 
environmental cooperation among our trading partners that should not be 
ignored. The conceptual framework and cooperative mission of parallel 
environmental institutions associated with trade liberalization merits 
strong political and technical support in all of the United States' 
trade initiatives.
    In the NAFTA context, the Commission for Environmental Cooperation 
(CEC) is the trinational environmental institution created by the North 
American Agreement on Environmental Cooperation (NAAEC) (NAFTA's 
``Environmental Side Agreement'') to address continental environmental 
issues in the United States, Canada, and Mexico. The CEC attempts to 
facilitate cooperation and public participation among the NAFTA parties 
by addressing regional environmental concerns, helping to prevent 
potential trade and environmental conflicts, and promoting effective 
environmental enforcement in each of the NAFTA countries. To date, the 
CEC has been particularly effective in encouraging improved working 
relationships between the environmental ministers of the NAFTA parties, 
while at the same time, providing a valuable forum to address 
transboundary issues of shared environmental concern in North America.
    The Border Environmental Cooperation Commission (BECC) is the 
certifying entity responsible for developing and evaluating border 
water, wastewater, and municipal solid waste (MSW) projects. BECC has 
comprehensive criteria to which projects must adhere in order to be 
considered for BECC certification. These include a project's economic 
viability and its sustainable development components. The NADBank, now 
fully funded with $450 million in equal contributions from the United 
States and Mexico, is a binational financial institution that may use 
its funds to leverage additional capital but only for those projects 
certified by the BECC.\19\
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    \19\ Since its inception in 1994, the BECC has certified 26 water 
and wastewater projects to date, with 14 projects in U.S. and 12 
projects in Mexico. Of those projects, the NADBank has closed financing 
packages on six projects and has made recommendations for financing on 
another 8 projects. Total NADBank financial commitment is $408.4 
million (U.S.). Although few in number, these projects represent an 
exponential increase in water and wastewater system construction in the 
border region, particularly on the Mexican side.
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    The BECC/NADBank have been particularly effective in facilitating 
the development and adoption of sustainability criteria used to 
evaluate potential environmental infrastructure projects; transparent 
decision-making processes with public participation from both nations; 
and capacity building and technical assistance. Despite this progress, 
several issues which are beyond the scope of this hearing remain a 
concern for some border communities seeking environmental 
infrastructure funding, including: interest rates on loans are too high 
for some communities, particularly in Mexico; without a fee-based 
utility system, Mexican municipalities must pioneer rate structures and 
fee collection; border population growth rates have increased rapidly 
as project development has lagged behind.

V. Trade Negotiations and Trade Institutions Must Become More Open and 
                              Transparent

    As trade negotiations and trade institutions increasingly establish 
the terms of market integration and their attendant impacts on the 
environment, the need for meaningful public participation opportunities 
correspondingly increases. Public participation should be integral to 
any trade or investment negotiations. Such a linkage confirms the 
relationship between open markets and democratic principles, and 
provides citizens with the information they need to make sound and 
informed choices about policies that affect their future.
    The United States has adopted a very positive approach to improving 
access to WTO decision makers and, ensuring that people are able to 
hold the WTO accountable for its actions. The National Wildlife 
Federation urges Congress to support this effort to infuse the WTO with 
the same democratic rules of accountability enjoyed by American 
citizens.
    The National Wildlife Federation recommends:

A. Reform WTO Procedures Regarding Transparency and Participation to 
Ensure the WTO System Is Held Accountable to Democratic Principles:

    While the United States is to be commended for its efforts over the 
past two years to increase public participation and transparency in 
several trade negotiating fora, including as part of the 
Administration's Seattle Ministerial agenda, further progress is within 
reach. For example, the United States must work diligently to increase 
transparency in individual sectoral WTO negotiating groups in which the 
United States actively participates. In the context of the Seattle 
Ministerial agenda, the recently proposed rebirth of the Committee on 
Trade and Environment (CTE), ostensibly created as a forum to identify 
and discuss the environmental implications of issues under negotiation 
in a new round, must not simply become a ``mailbox'' repository of NGO 
issues with no significant corresponding influence, nor impact on the 
negotiating process. Clearly, the CTE's work program must avoid 
repeating its previous mistakes of conducting a one-sided and 
imbalanced review of the trade implications of environmental policy 
without addressing adequately the impact of trade policy on 
environmental measures. In addition to any proposed new role for the 
CTE, the WTO should establish, as a general matter, information 
disclosure policies and clear mechanisms for receiving and responding 
to NGO participation and comments.
    Improved access and accountability are especially important for 
people from developing countries, many of whose governments do not have 
permanent missions located in Geneva. Given the informal nature by 
which the WTO makes its decisions at present, ensuring that the 
interests of all people are represented at the WTO must be integral to 
the United States objectives for trade liberalization. For most of the 
world's population, the incredible acceleration of the global economy 
has also brought accelerated loss of wildlife and wild places. We urge 
the United States to devote its energy to ensuring that all future WTO 
procedures are open and accessible to all people.
    Finally, in the interests of promoting a more open and equitable 
procedure for establishing and negotiating trade and investment 
agreements, the National Wildlife Federation has co-authored a White 
Paper which proposes a new form of trade negotiating authority.\20\ We 
believe that the ideas represented in this White Paper will stimulate a 
public debate on how best to empower the United States government to 
bring home trade agreements that promote healthy economies and cleaner 
environments.
---------------------------------------------------------------------------
    \20\ Sierra Club and the National Wildlife Federation, White Paper 
on Alternative Trade Negotiating Authority.

---------------------------------------------------------------------------
B. Open the Dispute Resolution Process:

    In all trade regime dispute settlement fora, the United States 
should, at minimum, fulfill President Clinton's commitment at the WTO 
to open dispute settlement proceedings to public observation and pursue 
mandatory consideration of amicus briefs from interested NGO parties.

                               Conclusion

    Thank you again for the opportunity to present these views. 
Let me conclude by saying that, for the members of the National 
Wildlife Federation, the question is not whether to trade, but 
under what rules do trade and investment serve to promote a 
healthier environment. Trade is a tool to achieve human 
aspirations, to improve standards of living, to enhance the 
quality of life. Our environment, our wild places and wild 
things are part of humanity's quality of life. Diminish them 
and you diminish the human standard of living. Trade rules are 
self-defeating if they force us to trade away those things we 
value most highly--the clean air, the clean water, the open and 
living places that give quality to life. Trade should be an 
investment in a better way of life, not a license to degrade 
those things on which a healthy life depends. Unless WTO member 
nations embrace the agenda for WTO reform proposed by 
environmental organizations throughout the world, we believe 
that they will not earn the support they need to negotiate 
agreements that help to convince people that trade 
liberalization works for them.

Center for International Environmental Law, National Wildlife 
Federation Sierra Club, World Wildlife Fund, Friends of the Earth 
Natural Resources Defense Council, Greenpeace USA Defenders of 
Wildlife, American Lands Alliance, Consumer's Choice Council 
Earthjustice Legal Defense Fund, Pacific Environment and Resources 
Center Community Nutrition Institute, Institute for Agriculture and 
Trade Policy

    Dear Ambassador Esserman and Mr. Robertson:
    Our organizations are deeply concerned about the 
Administration's development of positions for the Third 
Ministerial Conference of the World Trade Organization 
scheduled for Seattle this fall. WTO rules and procedures have 
been used repeatedly to attack environmental laws that our 
organizations have worked for decades to create, strengthen and 
protect. Equally important, the continued pressure to expand 
trade through broadened and intensified application of trade 
policy, without an equal effort to ensure that the right 
framework of environmental law and policy are in place, 
threatens to impede the conservation of our natural resources 
and the maintenance and improvement of a healthy environment. 
Yet while the Administration has sometimes raised general 
environmental concerns about trade and trade rules at the WTO--
most recently at the March 1999 high level symposium on trade 
and environment in Geneva--it has failed to take the concrete 
actions needed to address those concerns effectively.
    As our groups have emphasized in past communications, the 
Administration can fulfill President Clinton's pledge to put a 
``human face'' on the global economy only if it combines its 
commitment to liberalizing trade with an equally strong 
commitment to environmental protection and sustainable 
development. We appreciate the Administration's call to improve 
public distribution of WTO documents, enhance public 
participation in WTO dispute settlement proceedings, and 
encourage reduction of fisheries subsidies that distort trade 
and encourage overfishing. These efforts fall far short, 
however, of the comprehensive reforms needed to ensure that the 
world trading system does not hinder sustainable development 
and environmental protection. For example, we have found 
unacceptable the Administration's inflexible position in recent 
months that no textual changes to the WTO Agreements are 
needed, as it indicates a reluctance to deal seriously with 
environmental concerns.
    The WTO Ministerial Conference offers an historic 
opportunity for the Administration to lead the review and 
reform that the international trade regime needs so that it 
will promote, rather than undermine, environmental protection 
and other core values of United States citizens. We stand 
prepared to help the Administration seize this opportunity by 
developing an agenda that fully recognizes environmental 
priorities. If, however, the Administration misses the chance 
to put the WTO on a course toward sustainable development, this 
will undermine support for subsequent negotiations at the WTO--
and for United States government authority to participate in 
those negotiations--and invite united environmental opposition 
to the results. To avoid this, the Administration must develop 
an environmentally beneficial agenda for the Ministerial 
Conference, and a comprehensive plan for environmental review 
and reform of the WTO, that go well beyond the proposals 
advanced to date.
    We recognize that the trade and environment issues 
confronting the WTO will not be resolved at a single 
ministerial meeting. What we do expect, however, is that the 
Administration formulate a plan for achieving solutions, and 
that it demonstrate a commitment to that plan through 
constructive, open engagement with the public, with Congress, 
and relevant agencies. Despite the complexity of the details, 
the outline of the plan we need to see has three simple themes, 
described below. Although not every one of our organizations 
endorses every detail in this letter or the accompanying 
attachment, we are united in support of the overarching 
principles expressed here. We will evaluate the outcome in 
Seattle on this basis.

1. Stop WTO Expansion.

    The Administration must avoid rushing into more 
negotiations on liberalization that would place the environment 
and environmental laws further at risk. In light of the 
potential for significant environmental impacts, this is not 
the time to embark on further expansion of the WTO's power or 
the scope of its rules. Thus, we oppose the launch of 
negotiations within the WTO on investment liberalization, 
government procurement or ``early harvest'' of tariff 
reductions.
    We oppose accelerated tariff reduction and other 
liberalization in selected sectors pending an open, 
participatory and balanced assessment that includes formulation 
of mitigating measures. Our concern is intensified with respect 
to environmentally sensitive natural resource sectors, such as 
forest and fish products. Forests and fisheries are in crisis 
both nationally and globally. Prioritizing liberalization in 
these sectors is reckless, when we know that regulations and 
incentives for sustainable harvesting and commerce are grossly 
inadequate around the world.
    Multilateral investment rules beyond the current Agreement 
on Trade-Related Investment Measures (TRIMs) should not be the 
subject of negotiations at the WTO. We are concerned that the 
United States government may be shifting its position to 
support partial negotiations on investment under WTO auspices.

2. Reform WTO Rules and Procedures.

    The WTO as it exists today urgently needs reform. The 
Administration must secure commitment to the reforms needed to 
ensure that existing WTO procedures and rules affirm, rather 
than hinder, environmental protection.
    In broad terms, the WTO's limits of jurisdiction need to be 
defined more clearly, so that the WTO stays within its 
recognized realm of trade policy, and does not stray into the 
field of environmental regulation. Equally important, the WTO's 
decision-making must be transparent and must involve public 
scrutiny and input. Achieving these goals will require major 
changes in both the rules and the procedures for formulating, 
interpreting, applying and enforcing those rules. These changes 
must also be reflected in any negotiations that are launched in 
Seattle.
    Substantively, both existing and future WTO rules must be 
written and interpreted so that they accord proper deference to 
national and international standards that serve legitimate 
environmental objectives. Procedurally, the terms of reference 
of each WTO working group or institutionalized body must 
provide for consideration of significant impacts on environment 
and sustainable development, and there must be mechanisms to 
ensure compliance.

3. Assess Impacts.

    The Administration must provide for an assessment of the 
environmental impacts of proposed multilateral trade and trade 
policy. The fundamental question is whether the framework of 
laws, policies and institutions is in place to ensure that 
additional multilateral steps to liberalize trade will lead to 
environmentally and socially beneficial outcomes. If not, then 
the assessment must formulate needed institutional, legal and 
policy changes before moving forward with further talks on 
liberalization.
    This assessment process must begin immediately. It must be 
open and transparent, global in scope, and conducted through a 
balanced, impartial process. It should be carried out in 
cooperation with our trading partners. A forward-looking review 
must be complemented by a retrospective review of past and 
current impacts of existing policy. The reference point for the 
assessment must be the procedures and criteria developed under 
the National Environmental Policy Act.
    The statement attached to this letter provides further 
details on our organizations' bases for our positions and our 
suggestions for addressing these areas of concern. We 
appreciate recent overtures from the Administration that 
indicate openness to a more substantive dialogue, and look 
forward to the chance to discuss our positions further with you 
and your staff.
    Sincerely yours,
                                   David R. Downes
                                           Center for International 
                                               Environmental Law
    On behalf of:
Jake Caldwell, National Wildlife Federation
Dan Seligman, Sierra Club
David Schorr, World Wildlife Fund
Andrea Durbin, Friends of the Earth
Justin Ward, Natural Resources Defense Council
Scott Paul, Greenpeace USA
Rina Rodriguez, Defenders of Wildlife and Community Nutrition Institute
Antonia Juhasz, American Lands Alliance
Cameron Griffith, Consumer's Choice Council
Martin Wagner, Earthjustice Legal Defense Fund
Kristin Dawkins, Institute for Agriculture and Trade Policy
Doug Norlen, Pacific Environment and Resources Center
    cc: Ambassador Stuart Eizenstat, Under Secretary for Economic and 
Business Affairs,Department of State
Frank E. Loy, Under Secretary for Global Affairs, Department of State
George T. Frampton, Jr., Acting Chair, Council for Environmental 
        Quality Frederick Montgomery, Assistant US Trade Representative 
        for Policy Coordination, Chairman of Interagency Trade Policy 
        Staff Committee
    Attachment

Center for International Environmental Law, National Wildlife 
Federation Sierra Club, World Wildlife Fund, Friends of the Earth, 
Natural Resources Defense Council, Greenpeace USA, Defenders of 
Wildlife, American Lands Alliance, Consumer's Choice Council, 
Earthjustice Legal Defense Fund, Pacific Environment and Resources 
Center, Community Nutrition Institute Institute for Agriculture and 
Trade Policy

  The World Trade Organization and Environment Technical Statement by 
               United States Environmental Organizations

    This statement provides further detail on the concerns and 
recommendations regarding environmental issues outlined in the 
July 16 letter from several United States environmental 
groups.\1\ Part I details our opposition to further expansion 
of the World Trade Organization (WTO) at this time. Part II 
identifies specific reforms needed to WTO rules and procedures. 
Part III outlines procedural and substantive elements of the 
environmental assessment of existing and proposed multilateral 
trade agreements.
---------------------------------------------------------------------------
    \1\ Several of our groups have elaborated our concerns in detail in 
a October 16, 1998 response to the USTR's Federal Register request for 
input regarding US preparations for the Seattle ministerial, as well as 
in the Transatlantic Environmental Dialogue statement delivered to 
governments at the recent G-8 summit. The comments in this document are 
intended to summarize and complement these earlier statements and 
express the collective views of our respective organizations; however, 
not every signatory necessarily subscribes to the details of each 
formulation.
---------------------------------------------------------------------------

                          I. No WTO Expansion

    The Administration must avoid rushing into more 
negotiations on liberalization that would place the environment 
and environmental laws further at risk. In light of the 
potential for significant environmental impacts, this is not 
the time to embark on further expansion of the WTO's power or 
the scope of its rules. Thus, we oppose the launch of 
negotiations within the WTO on investment liberalization, 
government procurement or accelerated sectoral liberalization, 
including ``early harvest'' of tariff reductions.
    We oppose the Administration's effort to accelerate 
liberalization, especially in environmentally sensitive sectors 
such as forest products, in the absence of a careful and public 
assessment of the potential environmental impacts (see Part 
III.3 below). Aiming to reach agreement on further 
liberalization at the Seattle meeting itself--as the 
Administration proposes to do with reduction of tariffs on 
forest products--flies directly in the face of the 
Administration's commitment to review the environmental impacts 
of liberalization, because the schedule is too short to do a 
thorough assessment of effects and policy alternatives.
    As we have repeatedly stated, multilateral investment rules 
beyond the current Agreement on Trade-Related Investment 
Measures (TRIMs) should not be the subject of negotiations at 
the WTO. Our objections to an investment agreement in the WTO 
go beyond the issues of establishing rights to sue for lost 
profits and investor-to-state dispute resolution. We are also 
concerned that enforceable rights to national treatment and 
most favored nation status could pry open environmentally 
sensitive sectors in markets where regulatory frameworks are 
inadequate to manage the increased environmental pressures that 
would result. If unaccompanied by strong frameworks of 
environmental and labor rights, application of the principles 
of national treatment and most favoured nation could also 
increase ``industrial flight'' by companies seeking to avoid 
costs of compliance with labor and environmental requirements.
    In light of these objections, we are concerned that the 
Administration seems to be considering support for partial 
negotiations under WTO auspices. Prior to the negotiation of 
any investment rules in any forum, an over-arching 
international framework is needed to ensure that international 
investments promote sustainable development consistent with the 
needs of host countries and to guarantee that the environment 
is protected. The development of such a framework and any 
subsequent investment agreement should take place within the 
United Nations system. Any such agreement must include investor 
obligations with respect to environmental and community 
protection.

                  II. Reform WTO Rules and Procedures

    In its Communiqué from Cologne in June, the G-8 
stated that ``environmental consideration should be taken fully 
into account in the upcoming round of WTO negotiations.'' We 
are pleased to hear the United States join other industrialized 
countries in this ambitious commitment. Unfortunately, the 
United States' proposals to date have been entirely inadequate 
to the task. To make significant progress, the Administration 
will need to make positive proposals on both substantive and 
procedural rules, including existing rules of the WTO as well 
as the terms of reference for any further negotiations launched 
at Seattle. The Administration will need to make a clear 
political statement that affirms environmental values and 
define a clear process involving the right mix of agencies and 
other partners for achieving progress on a range of issues.
    Substantively, the Administration will need to take action 
to ensure that the scope of WTO rules is limited to trade 
policy and does not intrude into matters that come under 
environmental law and policy. WTO rules must provide for 
deference to international and national environmental standards 
(Part II.1), and protect the consumer's right to know (Part 
II.2). At the same time, WTO rules can and should be applied so 
that they encourage the elimination of environmentally damaging 
subsidies that also distort trade (Part II.3). Procedurally, 
the Administration must take steps to ensure that all WTO 
forums take environmental implications of their work into 
account (II.4), and that their operations become transparent 
and accountable (II.5).

1. WTO Deference To International And National Environmental 
Standards And Institutions

    WTO rules need to be reformed so that they stay within the 
bounds of trade policy and do not intrude into areas within the 
jurisdiction of environmental institutions and regulations. We 
are pleased to learn that the Administration now seems to agree 
that ad hoc dispute settlement decisions alone are not a 
solution to the impact that WTO rules as currently interpreted 
may have on measures to protect the environment. United States 
leadership of a multilateral approach to a number of issues is 
needed to ensure that WTO forums--including the Dispute 
Settlement Body--and WTO rules consistently defer to 
regulations and other measures adopted by international and 
national institutions, including measures based on the 
precautionary principle.
    In the absence of such consistency, there is a serious risk 
that these institutions will be impeded from pursuing 
legitimate environmental objectives through negative 
interpretations advanced by trade policy-makers, ad hoc 
challenges, and the threat of adverse decisions in WTO dispute 
settlement. Of particular concern are the GATT, the TBT 
Agreement and the SPS Agreement; also relevant are the TRIPS 
Agreement as well as agreements on subsidies and agriculture.
    Seattle is a critical opportunity for the United States to send a 
clear signal that trade policy must be developed and applied 
consistently with environmental principles, and to define a process and 
terms of reference for achieving agreement on how to ensure that WTO 
rules do not interfere with environmental measures. That process should 
aim at the following specific outcomes.
    a. Burden and Standard of Proof. Ensuring that the complaining 
party in a WTO dispute settlement proceeding has the burden to show the 
lack of an adequate basis for challenged local or national 
environmental and health regulations, and that WTO decision-makers 
employ a deferential standard of review, perhaps along the lines of 
Article 17.6 of the Anti-Dumping Agreement.
    b. SPS. Ensuring that the provisions of the SPS Agreement:
i. Do not interfere with the right of national governments to develop 
        and enforce high environment and health standards at the level 
        they deem appropriate;
ii. Fully recognize the precautionary principle;
iii. Acknowledge clearly that international standards establish 
        minimum, not maximum standards for the levels of environmental 
        and health protection set by WTO Members.
    c. Acknowledge Multilateral Environmental Agreements (MEAs) in WTO 
Rules. Consistent with the recent G-8 Cologne Communique, there must be 
an affirmation that trade-related environmental measures (TREMs) 
authorized or required under multilateral environmental agreements or 
internationally recognized environmental principles are consistent with 
WTO rules, including Article XX of the GATT, the TBT Agreement and the 
SPS Agreement. Criteria should be defined indicating to the WTO how to 
recognize the types of agreements or principles that fit within the MEA 
category. Contrary to USTR's suggestion in the July 2 briefing, the 
concept is not to establish criteria for evaluating whether an MEA 
measure is legitimate. Rather, such measures will be deemed legitimate 
by virtue of their adoption under an MEA.
    d. Build Effectiveness of MEAs including Trade-Related Measures. 
The Administration needs to make it a positive priority to build 
effectiveness of MEAs. Where trade-related measures are appropriate 
means for addressing the environmental problem, the Administration 
should support their use. A WTO decision to defer to MEAs will do 
little good if MEAs are written to include ``carve-outs'' that ensure 
that WTO rules prevail over MEA obligations. Disputes over the 
implementation of MEAs should be resolved by MEAs, not by the WTO. 
Thus, we are also seeking a commitment from the Administration not to 
advocate the inclusion of ``savings clauses'' in future MEAs. The 
Administration should also work with other countries through 
appropriate environmental institutions such as the United Nations 
Environment Programme (UNEP) to develop principles of trade policy to 
which negotiators of MEAs can refer during negotiations.
    e. Production or Processing Methods (PPMs). Ensuring that 
distinctions between products based upon PPMs related to environment, 
human rights and internationally recognized labor standards are 
recognized as legitimate measures for promoting sustainable commerce 
that are consistent with WTO rules.
    f. Procurement. A clarification or amendment to the Agreement on 
Government Procurement ensuring that it recognizes the right of 
governments to use social and environmental criteria in making 
purchasing decisions. Several of our organizations provided further 
suggestions on this topic in comments submitted to USTR by the Consumer 
Choice Coalition in January.
    g. UNEP and other Environmental Institutions. Adoption of 
cooperative agreements between WTO and international environmental 
institutions, including UNEP, by which the WTO defers to the role of 
appropriate institutions in addressing environmental aspects of 
international decision-making. Specifically, institutions such as UNEP 
and the secretariats of relevant MEAs should have a role in the 
settlement of environment-related disputes under the Dispute Settlement 
Understanding (DSU) as well as the definition of key international 
environmental principles such as the precautionary principle. Deference 
to such outside expertise is necessary in light of the specialized 
nature of WTO as a trade policy institution with trade expertise.
    We will be happy to discuss the precise legal form that these steps 
might take at the appropriate time. For instance, a clarification could 
involve language in a statement adopted by a WTO Ministerial Conference 
or the WTO General Council, an agreed-upon interpretation formally 
adopted by the General Council, or an amendment to the text of the 
relevant agreement.
    As a general matter, we would like to emphasize that the use of 
trade measures that affect developing countries to accomplish 
environmental goals should be accompanied by assistance to those 
countries to help them achieve those goals. This is consistent with the 
Rio bargain that developed countries would assist developing countries 
in raising environmental standards and combating environmental 
problems, so that all could share in sustainable development and an 
improved global environment. The merit of this approach was recognized 
in the Appellate Body's Shrimp/Turtle decision. Unfortunately, 
developed countries have failed to carry out their end of the bargain, 
with foreign assistance budgets declining, and debt relief proposals 
still inadequate. A renewed political commitment from the United States 
and other industrialized countries would contribute significantly to 
multilateral agreement on the program outlined here, and would offer 
long term payoffs for the United States economy and environment.

2. Protection of the Consumer's Right To Know

    Markets can allocate resources properly only if consumers have the 
necessary information to make informed decisions. Unfortunately, some 
WTO Members--including the United States government itself--have 
advanced interpretations of WTO rules that threaten to restrict the 
power of governments and private organizations to provide consumers 
with information they want about the environmental and health aspects 
of products and their production. We urge the United States to work 
with other WTO Members to launch a process at Seattle that leads toward 
the following outcomes:
    a. Ensuring that the WTO Agreement on Technical Barriers to Trade 
(TBT) preserves the ability of governments and private organizations to 
protect the consumer's right-to-know and to promote sustainable 
consumption through open and transparent labeling programs, including 
genetically modified food;
    b. Ensuring that the TBT Agreement recognizes the legitimacy of 
regulations and standards that distinguish between products based on 
the environmental consequences of their manufacture, use and disposal; 
and
    c. Ensuring that the TBT rules do not conflict with speech 
protected under the U.S. Constitution, including third-party certified 
private labeling programs.
    As with the proposals in Part II.1 above, we are open to further 
discussion about the precise legal form that these assurances should 
take. Generally, however, the principle is that the WTO must recognize 
that the TBT Agreement effectively includes an exception along the 
lines of Article XX, to the extent it applies to ecolabeling.

3. Eliminate Environmentally Damaging Subsidies

    We welcome and support the Administration's willingness to push for 
the elimination of fishery subsidies that have contributed to the 
current global fisheries crisis. The Seattle ministerial should 
unambiguously place the fishery subsidies issue on the negotiating 
agenda, and should do so in the context of an open interdisciplinary 
and inter-organizational procedure that includes other institutions 
with relevant and needed expertise alongside the WTO. We urge the 
United States to push for a similar review of other environmentally 
damaging subsidies, such as those for forestry, fossil fuels and 
nuclear energy. At the same time, WTO Members must ensure that WTO 
rules allow governments to craft measures that reward the social and 
environmental values conferred by certain activities, such as adoption 
of environmentally responsible technologies, artisanal fishing and 
development of renewable sources of energy. The ability of the WTO to 
play a constructive role on subsidies will be a significant test of the 
organization's ability to produce the oft-promised ``win-win'' outcomes 
for trade and the environment.

4. Recognizing Environmental Aspects of WTO Decision-Making

    Another key question is how to reform the procedures and 
institutions of the WTO so that decision-making takes into account its 
environmental implications. The United States proposes to use the 
Committee on Trade and Environment (CTE) on a ``rolling basis'' and in 
an advisory capacity to address the environmental aspects of WTO 
decisions. But compartmentalizing environment in the CTE has not worked 
in the past and will not work in the future. The Administration has 
offered no concrete steps that would effectively link the CTE to the 
real decision-making forums at the WTO.
    In our view, much more is needed to ensure that the WTO takes 
environment into account in its decision-making. As a general matter, 
all relevant WTO bodies--including councils, committees, and working 
groups--must include reference to environmental protection and 
sustainable development among their objectives or terms of reference, 
consistent with the preamble of the WTO Agreement itself.
    The WTO will also have to adopt procedures that ensure that these 
forums take these objectives seriously. For instance, each forum could 
periodically consult with international environmental institutions with 
relevant expertise, report on the environmental implications of their 
work, and make recommendations on how to address environmental impacts 
of the trade policies with which they are concerned. The CTE might have 
a role through review and comment on that report. Another option is for 
the WTO's Director General to present a review of the WTO's record on 
environment and sustainable development in a section of the annual 
report. The United States itself could do a better job of integrating 
environment by including representatives from relevant agencies such as 
the EPA on delegations when forums such as the SPS or TBT Committees 
discuss environment-related issues.

5. Improved Transparency, Public Participation And Accountability At 
The WTO

    We very much appreciate the efforts made by the Administration to 
advance democratic reform of the WTO. We ask that the Administration 
continue to include increased transparency, participation and 
accountability as a priority on its negotiating agenda in Seattle. 
However, effective achievement in this area will require more actions 
in addition to broader and faster access to working documents and 
consideration of NGO submissions in dispute settlement. It will also 
require, at a minimum:
    a. opening of dispute settlement and appellate body proceedings to 
public observation;
    b. NGO participation in discussions of environment-related issues 
by other WTO decision-making forums, such as the SPS Committee, the TBT 
Committee, the TRIPS Council, the Agriculture Committee, the CTE, and 
relevant negotiating groups; and
    c. the development of a consultative process between the WTO, NGOs, 
member governments and businesses.
    We recognize the validity of concerns raised by developing 
countries that they may have fewer resources than do some NGOs. The 
United States and other developed countries should support fuller 
participation by poorer WTO Members, for instance through financial and 
technical assistance.
    A first step towards improved transparency of the WTO and trade 
policy must begin at home. We have indicated our willingness to work 
with the Administration to provide input into the negotiating agenda, 
yet little information and no documents have been shared with the NGO 
community as the Administration prepares its position for the WTO 
Ministerial. Only at the July 2 briefing did we hear any degree of 
detail about the Administration's proposed positions. We urge the 
Administration to be more transparent, to share information and 
documents, to engage the NGO community in a constructive dialogue, and 
to ensure balanced representation on advisory committees dealing with 
trade issues that have environmental implications consistent with the 
Federal Advisory Committee Act. Furthermore, we reiterate our request 
that the United States include NGOs on its delegation to the WTO 
Ministerial meeting, especially since other governments, such as 
Denmark, have already done so.

 III. Environmental Assessments of Current and Proposed Trade Policies

    We are pleased that President Clinton has committed the federal 
government to conducting an environmental review of the next round of 
talks at the WTO. However, the Administration needs to make significant 
progress in this area. We are concerned about the adequacy of the 
process and criteria for such an assessment. We believe that the 
assessment should include a review of both past and current impacts of 
existing trade policies on the environment and on environmental law and 
policy, a similar review of foreseeable impacts of proposals for 
negotiations, and consideration of policy alternatives. We remain very 
concerned about the conduct of assessments of proposed tariff 
reductions in environmentally sensitive sectors. Finally, we have 
concerns about certain process issues, including the roles of relevant 
agencies and cooperation with other governments.

1. Procedures and Criteria for Assessment

    We are concerned that the Administration has yet to suggest any 
procedures or criteria for the assessment, with Seattle less than six 
months away. In our view, there are some clear principles with which 
this assessment must comply. Many of these principles are found in the 
National Environmental Policy Act (NEPA). The starting point for this 
assessment must be NEPA's mandated procedures and methodologies, as 
elaborated through regulations of the Council on Environmental Quality, 
and enriched through decades of federal agency experience with 
implementation.
    At a minimum, the assessment must be comprehensive in scope, 
covering all Administration proposals for modifying or adding to 
existing trade policies embodied in the WTO Agreements. The assessment 
should be framed in terms of two basic questions. Is the framework of 
laws, policies and institutions in place to ensure that additional 
multilateral steps to liberalize trade will lead to environmentally and 
socially beneficial outcomes? If it is not, then what institutional, 
legal and policy changes must we make before we move forward with 
further liberalization?
    The assessment must involve the full participation of civil 
society. In light of the short time remaining before Seattle, the 
assessment procedure must begin immediately. It must consider 
reasonably foreseeable impacts on a global scale. It must continue 
until the conclusion of any new negotiating round, taking into account 
new knowledge as it accumulates, as well as evolving trade policy 
positions. It must identify areas in which existing WTO agreements and 
new negotiations have (or will have) significant environmental effects, 
and evaluate policy alternatives and mitigation measures, including 
reforms of existing agreements and modifications of proposed ones 
including the no-action alternative. And it must integrate social and 
development concerns.
    To ensure that the results are balanced and objective, the process 
should be overseen by the CEQ and conducted with the full and equal 
participation of affected federal agencies, state and local 
governments, and interested members of the public. Finally, we urge the 
Administration to take the lead in facilitating an assessment at the 
multilateral level by a balanced panel of experts drawn from the WTO 
Secretariat, international institutions with environmental and other 
relevant expertise, the scientific community, and the public.

2. Assessments of Existing Trade Policies

    A forward-looking assessment must be complemented by consideration 
of lessons learned. To date, unfortunately, governmental consideration 
of environmental impacts of trade policy have been inadequate. As a 
result, we urgently need to gain a better understanding of the impacts 
of past trade policies. Thus, the Administration should also conduct an 
assessment of the environmental impacts of the WTO Agreements adopted 
in the Uruguay Round, carried out consistent with the principles we 
have outlined for conducting an assessment.
    This review should cover all relevant WTO Agreements, such as the 
General Agreement on Tariffs and Trade (GATT), the Agreement on the 
Application of Sanitary and Phytosanitary Measures (SPS), the Agreement 
on Technical Barriers to Trade, the Agreement on Trade-Related Aspects 
of Intellectual Property Rights (TRIPS), and agreements on subsidies 
and agriculture. In relation to the TRIPS Agreement, we are concerned 
that the expanded scope and enforcement of intellectual property rights 
required under the WTO TRIPS Agreement may affect the transfer of 
technology required under multilateral environmental agreements (MEAs), 
the rights of farmers and indigenous peoples, and the equitable 
distribution of benefits required under the Biodiversity Convention.

3. Assessment of Proposals for Accelerated Sectoral Liberalization

    Beginning in the context of Asia-Pacific Economic Cooperation 
(APEC), and more recently in the WTO, the Administration has proposed 
accelerated reduction of tariffs, accompanied by examination of non-
tariff measures, of a number of sectors, including environmentally 
sensitive sectors such as energy, chemicals, fish and forest products. 
In light of the potential environmental impacts, we urge the 
Administration to assess carefully the environmental effects of 
accelerated liberalization in all sectors, and to define and implement 
policy measures to maximize environmental benefits and mitigate harmful 
impacts. The United States should not push for accelerated 
liberalization until full environmental assessments have been 
conducted--of the proposals for both tariff and non-tariff measures--
along the lines discussed in this letter. In light of the severe 
threats confronting forests and fisheries, and the demonstrably 
inadequate national and international frameworks for conserving them, 
this approach is particularly important with respect to the fish and 
forest product sectors.
    We appreciate the step in the right direction represented by the 
joint analysis of the economic and environmental effects of the forest 
product initiative to be conducted by CEQ and USTR. We are skeptical, 
however, whether the review as defined in the June 25, 1999 Federal 
Register notice will be an adequate basis for sound policy making. Even 
if it is, we are equally concerned that the review's results will not 
be taken into account in the ultimate decision. Thus, we call on the 
Administration to explain on the record the environmental basis for 
whatever policy decision it takes. As currently proposed, the review 
does not reflect key principles of NEPA. For instance, the Federal 
Register notice allows only 30 days for the public to provide input, 
and it is unclear whether there will be any other opportunities for 
public participation.

4. Assessment of the Built-In Agenda

    Services. We have concerns that negotiations on services could have 
some of the same far-reaching implications for domestic environmental 
and health regulation as would investment liberalization. Services, 
like investment, involve activities within a country's territory that 
relate to a host of regulatory functions performed by federal, state 
and local authorities. When it comes to trade liberalization, services, 
like investment, raise a host of concerns about community values, 
regulation and sovereignty that are not so directly posed by goods. We 
urge the Administration to assess environmental and social implications 
as it develops its positions.
    Agriculture. The United States has called on WTO members to carry 
forward with agricultural negotiations with the objectives of gaining 
``further deep reductions in support and protection, while encouraging 
non-trade distorting approaches for supporting farmers and the rural 
sector.'' We share the Administration's desire to reform policies and 
programs that encourage environmentally damaging expansion and 
intensification of production. At the same time, government 
agricultural policy can and must reflect the multiple environmental and 
social functions that agriculture plays. Support for environmentally 
responsible agriculture can help level the playing field for farmers 
who take responsibility for the impacts that production has on the 
environment of their neighbors, and at the same time have to compete 
with producers that externalize environmental costs onto society. 
Government policy also should take into account the social values that 
independent farmers provide to communities.
    We urge the Administration to make an effort to ensure that the 
United States approach to agriculture at the WTO strikes a better 
balance among these policy objectives than in the past. The United 
States continues to maintain direct and indirect subsidies and 
protections that distort agricultural markets and threaten our 
environment, such as below-market pricing for water from government-
funded projects and for grazing on public lands. The Administration 
should carry out a thorough review and restructuring of these policies 
and programs.
    The agricultural negotiations on the built-in agenda will offer 
governments a chance to develop a multilateral understanding of which 
policies and programs should be reduced, and which should be permitted, 
on environmental and social grounds. The assessment we are calling for 
will provide an opportunity for this. Governments should also explore 
how to help developing countries implement such support, whether 
through multilateral financial and technical assistance or through some 
system of preferences. We urge the Administration to provide leadership 
on the issue of food security in these talks. Governments must consider 
the impacts that dumping of food exports have on the productive 
capacity of countries whose populations suffer from chronic hunger, and 
take this into account in defining relevant trade policies.
          * * * * *
    Submitted by:
                                   David R. Downes
                                   Stephen Porter
                                           Center for International 
                                               Environmental Law
    On behalf of:
                                   Jake Caldwell
                                           National Wildlife Federation
                                   Dan Seligman
                                           Sierra Club
                                   David Schorr
                                           World Wildlife Fund
                                   Andrea Durbin
                                           Friends of the Earth
                                   Justin Ward
                                           Natural Resources Defense 
                                               Council
                                   Scott Paul
                                           Greenpeace USA
                                   Rina Rodriguez
                                           Defenders of Wildlife and 
                                               Community Nutrition 
                                               Institute
                                   Antonia Juhasz
                                           American Lands Alliance
                                   Cameron Griffith
                                           Consumer's Choice Council
                                   Martin Wagner
                                           Earthjustice Legal Defense 
                                               Fund
                                   Kristin Dawkins
                                           Institute for Agriculture 
                                               and Trade Policy
                                   Doug Norlen
                                           Pacific Environment and 
                                               Resources Center
      

                                


    Chairman Crane. Mr. Kleckner, is there room for a 
compromise between industry and service interests who advocate 
early harvests of trade liberalization measures and agriculture 
groups like the Farm Bureau who insist on the need for a single 
undertaking?
    Mr. Kleckner. Good question, Mr. Chairman. We need to keep 
talking about it. I talked to Sue Esserman during the break 
today when you went back to vote, and I talked to Charlene 
Barshefsky yesterday by telephone, and, John, you and I visited 
briefly early. We have to keep talking about that to see if 
there can be a meeting of the minds.
    I just believe that strongly, though, that if we solve some 
of the problems and leave the tough ones like agriculture to 
last, it is going to be very, very tough to get it done there. 
And that is not a new position for me or for us in the Farm 
Bureau. In Belgium, Mr. Chairman, in Brussels in 1990, when 
this Uruguay round was supposed to end, I chaired the American 
delegation of all segments that were there. When it looked as 
though agriculture was going to be able to get theirs done 
first, and I said to my cohorts--they were not there in person, 
but their companies were--that I did not favor that because I 
didn't think that they would get what they wanted at the end of 
the day if we got agriculture solved first.
    In the end it did not work that way, but we are all in it 
together, or we are not in it at all, it seems to me. I am 
willingly to talk to John and to the other ones, including 
Charlene and Sue Esserman, to see if there is somewhere that we 
could work it out, though.
    Chairman Crane. Have you got anything to add to that, Mr. 
Dillon?
    Mr. Dillon. I agree with Dean. Someplace there needs to be 
a coming together. I would only point out that part of the 
difference here is the issue on forestry and paper is old 
business that is carried over from the Uruguay round, and there 
were agreements on the part--or direction on the part of the 
Congress to the administration to move forward on those 
agreements in the zero-for-zero sectors from the Uruguay round 
and to do so, before the next round.
    On the other hand, these are tough issues, and if we are 
not together on them, the Japanese and the Europeans are going 
to look for any crack that they can find. And so I think, as 
Susan has said and as Dean said, there has got to be a way here 
that we can meet everybody's objectives and come out of this 
not with a split in our ranks, but a position that we can go 
forward on.
    Chairman Crane. Mr. Micek, I am intrigued by the broad 
coalition that you have put together in support of the food 
chain proposal which spans manufacturing and services in 
addition to agricultural interests. Is the proposal apt to 
appeal to lesser developed countries?
    Mr. Micek. Well, as a matter of fact, the proposal that we 
are advocating really is an extension of the open food system 
that is being advocated in APEC member countries. The open food 
system really is about bringing more and better food to more 
people at affordable prices. To do this, one of the key things 
we need to do is to deal with the issue of food security. If we 
can do that, we can deal with some of the issues that have been 
talked about, about some of the environmental concerns.
    For example, there is land in China that is being farmed 
agriculturally that should not be farmed, but one of the key 
reasons it is farmed today is because the Chinese are on a 
policy of 100 percent self-sufficiency. And if we can deal with 
some of these difficult issues, I think we can also find a way 
to deal with some of the environmental problems we have.
    Chairman Crane. Thank you.
    Mr. Van Putten, what types of improvements in the WTO's 
institutional operations are needed to ensure more transparency 
and accountability?
    Mr. Van Putten. Well, Mr. Chairman, we think the types of 
improvements include access to the decisionmaking panels, 
inclusion of friends of the court briefs, if you will, 
publication of panel decisions. Those types, sort of 
transparency values that we take for granted here in the United 
States are critical, we think, to the WTO taking into account 
values like the environment, but also gaining public confidence 
in the decisionmaking processes.
    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Thank you.
    Mr. Van Putten, I will start with you. Thank you. I think 
your testimony is constructive, and I think there is a spirit 
of willingness to look at issues together, and I hope everybody 
picks that up.
    Mr. Kleckner, I, for one, lean in your direction. I hope we 
can resolve in terms of this early harvest. Maybe--the Farm 
Bureau, you are not in favor of early harvest usually. It is 
not ripe. But, seriously, I trust we will work hard to work 
this out. It seems to me if you say in advance you will accept 
separation, you are likely to have people try to cherry-pick 
issues, while if you say you want to wait until it is all 
resolved before anything, there is a pressure to resolve 
everything. You can later modify that if you need to. That is 
the way I lean.
    First, service products. I remember when I was over for the 
Uruguay round talking to some Europeans, Mr. Dillon, but in 
those days--it was not that long ago--some of the countries 
have 14-percent tariffs, and we had much, much lower, as I 
remember it, and that struck me as unfair. And I think you are 
right to call for beginning to more level the playingfield, 
including the emerging economies.
    And I would just suggest to you that you look at the 
playingfield and that you take into account issues including 
environmental differentials, and we are not talking about 
having identical structures, but differentials as well as in 
the labor market. I mean, that is part of the difference in 
scales.
    In that regard I want to just say a word about the labor 
issues, because, Mr. Kleckner, you said we cannot allow 
economic prosperity of our Nation and that of our agricultural 
producers to be used as a weapon for nations that disagree with 
our values.
    I don't think that is, if I might say so, quite a fair way 
to say it, because in a sense our struggle on trade has been to 
convince people to abide by or incorporate our values in terms 
of free markets into their systems. And I think to separate out 
labor issues that way, labor market issues kind of misses the 
point. And the same with environmental issues.
    In that regard--and I am sorry that Mr. Pepper is not here, 
because I was struck by his testimony. I happened to be at an 
advisory Committee meeting where there was discussion and very 
open discussion. And I hope all of us will encourage ACTPN to 
continue these, and I wish Mr. Sweeney and Mr. Donahue good 
luck because we need to try to find common ground. If we do not 
find it, I think we are likely to have continued stalemate in 
straight issues here and possibly a blowup in Seattle, and that 
is not what we want.
    I finish, Mr. Micek, with your testimony because I am 
trying to persuade you, and I am hoping Mr. Pepper can persuade 
you, to discuss these issues. You say in your testimony that 
the agenda should avoid globally divisive issues such as 
nontrade-related labor or competition policies on which there 
is not yet a broad consensus within the WTO. That is not to say 
these issues are unimportant. It is merely to recognize that if 
contentious issues dominate the ministerial, confidence in the 
global trading system and U.S. leadership will be undermined.
    You know, I have not been a USTR negotiator, but I have 
been at a number of sessions, and they are nothing if not 
contentious. I mean, we cannot eliminate issues from the 
ministerial and the next round because they are contentious. 
Agriculture is sure--contentious, my lord, that understates it.
    And then you say on labor issues the U.S. is pursuing an 
appropriate course in increasing its support for the ILO and 
focusing its efforts to achieve a forum on global labor issues 
within that organization.
    I respect the ILO up to a point. It has been evolving some 
core labor standards, but its function is limited. It has no 
enforcement. There is nothing there except discussion and then 
unanimous agreement to accomplish something. And the question 
is how we take what they have evolved, and where they are part 
of the trade equation, how we work it out so they are 
meaningful. So it will not work to just say leave it to the 
ILO. And I think Mr. Pepper acknowledges that. And that is the 
basis for the discussions with Mr. Sweeney, how we are going to 
go try to find some common ground beyond that. And I just urge 
everybody in the business community, I urge everybody in the 
environmental community as well as the labor community these 
next weeks and months to work hard, because otherwise who knows 
what is going to happen?
    Thank you, Mr. Chairman.
    Chairman Crane. Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman, and let me say I 
appreciate this panel very, very much, and I would like to 
preface some things. My colleagues know I was here in Congress, 
and I left and I went back to Oklahoma, and then I came back. I 
was on that side of the aisle, and now I am back on this side 
of the aisle. So let me say I came back for two reasons: One, 
to balance the budget. I felt like I had not done justice by 
the future generation of our children and grandchildren, and I 
am very proud of the fact we have balanced the budget in this 
Congress and all.
    Second, I came back because I wanted to help shape a 21st 
century global competitive economy for this country. I hope--
you may say what is a 21st century global competitive economy? 
Let me say that I see it as one that we have got to have less 
taxation. Some of you have mentioned some countries do not have 
capital gains, but we do have a situation in this tax bill that 
we are going to vote right now on. We have got some great 
provisions that is going to allow us to be more competitive 
around the world, so we need you to go out and sell that to the 
American people, if we believe what we are talking about.
    The second thing we have got to have is less regulation if 
we are going to be competitive. About 7 percent overburden we 
have on our trade products because of regulations. We have got 
to try to continue to ratchet that downward.
    And third, we have got to have less litigation. I don't 
know about you, but in business I guarantee you I spend more 
money--or I did when I was in business--let me say, there is no 
one any more sincere in this Congress than I am about trying to 
have free and fair trade. I want us to succeed. I could 
probably not have come back to Congress. I could have probably 
shoved back and said this is not going to affect Wes Watkins, 
but my children and grandchildren have no way to go. They 
cannot. They have got to participate.
    What we do has got to lay that kind of foundation in this 
world in this global economy, and we are not going back, and we 
all know that. I was born and raised on a farm. I love 
agriculture. I lost everything to a drought, but I went on to 
Oklahoma State University and acquired two degrees in 
agriculture because I love it and know it is very important.
    I want to mention to Mr. Micek, could I ask you or maybe 
one of your individuals to come by the office. I would like to 
discuss the Emergency Committee on American Trade. And before 
Mr. Kleckner leaves right fast, Dean, if I could, before you 
take off, many of my farmers feel like that we are being traded 
down or we are traded out in agriculture because when we 
negotiate it away. I detect you have a concern, and we have got 
to have a package, but not trade us out; is that correct?
    Mr. Kleckner. Yes, sir, Mr. Watkins. You know, I talk to 
the same people you do, whether they are in Oklahoma, and the 
feeling is kind of general among farmers that we have not 
negotiated as well as we could have, or if we did, we have not 
enforced the agreements as well as we should have. And in the 
Farm Bureau, and your State president, Jack, in your State, and 
other people I talk to all around the country tell me 
consistently we have got to either do a better job of 
negotiating, be a little firmer or tougher. Our tariffs are so 
low, for example, that the average 50 percent we pay around the 
world, other countries send agriculture products in here at 5. 
What is fair about that? Bring them down a ways before we do 
anything else or very much of anything else.
    Mr. Watkins. In your testimony you say we are reeling out 
there in agriculture, and I know we are. And we are under a 
freedom to farm policy, but freedom to farm will not work 
unless we have freedom to the markets of the world, and we have 
to get rid of a lot of these sanctions out there. Literally, we 
are killing ourselves.
    Mr. Kleckner. Mr. Watkins, you recall when freedom to farm 
passed in 1996, we supported it. I still think it is a good 
bill, but there were certain things promised to us in return, 
including opening markets around the world, less regulation, 
reformed taxes, all of those things, so it went one way, it 
didn't come the other way.
    Mr. Watkins. That is correct. Thank you very much, and I 
look forward to having a follow-up. I meet with a lot of your 
people.
    And, chairman Micek, I appreciate what you are doing in 
those areas. I would like to follow up with you or your people 
about the emergency, and I will not belabor the Subcommittee by 
further questioning.
    Thank you, Mr. Chairman.
    Chairman Crane. Thank you.
    And I want to thank all of the members of the panel, and 
again, we apologize to you for this chaotic day, but it is 
going to get worse, not better. And with that, we are going to 
stand in recess subject to the call of the Chair.
    [Recess.]
    Chairman Crane. Folks, the place has cleared out as I 
indicated before. It is going to remain kind of chaotic this 
afternoon. But we will get under way here. Our next panel 
includes William Weiller, chairman and chief executive officer 
of Purafil Inc., in Atlanta, and he is here on behalf of the 
National Association of Manufacturers; Steven Warshaw, 
president and chief operating officer, Chiquita Brands Corp., 
Cincinnati; Charles Lambert, chief economist, National 
Cattlemen's Beef Association; Kathleen Ambrose, vice president, 
international affairs and co-leader of market access team, 
Chemical Manufacturers Association; and finally David Smith, 
director, Public Policy Department, American Federation of 
Labor and Congress of Industrial Organizations.
    If you folks will please proceed in the order in which I 
presented you, and try and keep your oral testimony as close to 
about 5 minutes as possible and then any printed statements 
will be made a part of the permanent record.
    And we will start out with you, Mr. Weiller.

 STATEMENT OF WILLIAM WEILLER, CHAIRMAN OF THE BOARD AND CHIEF 
 EXECUTIVE OFFICER, PURAFIL, INC., ATLANTA, GEORGIA, ON BEHALF 
          OF THE NATIONAL ASSOCIATION OF MANUFACTURERS

    Mr. Weiller. Thank you, Mr. Chairman. My name is Bill 
Weiller. I am the owner and president of Purafil, a leading 
manufacturer of air purification systems based in Atlanta, 
Georgia. I would like to thank you for the opportunity to 
testify before the House Ways and Means Committee on the 
upcoming World Trade Organization Ministerial and the impact of 
the WTO on small businesses like Purafil. I am here on behalf 
of the National Association of Manufacturers and obviously also 
Purafil.
    Many might be surprised that Purafil, a small American 
business, about 70 employees, is even remotely interested in 
the World Trade Organization and its objectives. In fact, we 
often encounter the notion that global free trade is good for 
big companies and bad for the little guy. Small--and medium-
sized businesses do not attract the headlines the 
multinationals do and often our success in a global economy go 
without notice. I am here to let you know that open trade is 
not only good for Purafil, it is the backbone of our business.
    In fact, Purafil is representative of many small 
businesses. I have attached a chart to my testimony which you 
may find interesting. In 1989 nearly half of the NAM's small--
and medium-member companies said they did not export. Today 
only 1 in 5 fall into that category.
    In other words, in the last 10 years the share of NAM's 
small--and medium-member companies that export has gone from 
half to more than three-quarters and it is a 50-percent 
increase. Let me just hammer the point home. In 1989 less than 
10 percent of NAM's small--and medium-member companies derived 
11 percent or more of their revenue from exporting. Today that 
share has grown, doubled to more than 20 percent. That is an 
important change that has taken place over the past decade and 
Purafil has been part of it.
    So let me tell you about Purafil. We manufacturer air 
quality systems that remove odorous, corrosive, and toxic gases 
from the air. In short, we sell clean air. Our customers 
include petrochemical companies like Saudi Aramco, Exxon, paper 
companies like International Paper, Stora, Weyerhaeuser, 
museums and archives such as the Sistine Chapel, the Holocaust 
Museum, da Vinci's Last Supper, or the U.S. National Archives. 
Despite our small size, Purafil is an industry leader in a 
niche market. Sixty percent of our sales are made outside of 
the United States. Exporting is vitally important to Purafil. 
It is the cornerstone of our coporpate strategy.
    We have recognized that in order to survive and grow we 
have to export and become experts in doing international 
business. The problems that we solve are the same worldwide. A 
refinery in Baton Rouge experiences the same hazardous 
emissions from manufacturing processes as does a refinery in 
Saudi Arabia. If Purafil were not present to solve these 
problems, the increased demand for a solution would result in 
someone else from our foreign competitors gaining the business. 
Right now Purafil is the best in the world at solving air 
purification problems. We have few viable U.S. competitors that 
serve all the applications in markets that we do. That someone 
else could likely be a company from outside the U.S.
    The trade barriers we come across when trying to export to 
some countries are beyond the ability of any individual 
business to change. For example, Mr. Chairman, the tariff for 
our equipment to South Africa is 19 percent. In response to 
this, we signed a licensing agreement with a local 
representative so they would build portions of our equipment in 
their country and remain competitive. That representative 
utilized the Purafil name and proceeded to dissolve the 
relationship and become a low-cost, Purafil-educated 
competitor, leaving us with little recourse.
    We are facing similar high tariff situations in India, 
Brazil, China, Russia and others. Purafil will continue to do 
everything in its power to remain competitive. I am here today 
to ask you to do your part. Level the playingfield so our 
people, our technology, our products can compete in a global 
market. Don't force us to compete with the lack of 
transparency, the lack of access, irregular rule of law and 
some of the trade barriers and tariffs currently in place.
    That is why we support the NAM's leadership role in 
organizing a coalition to support the upcoming WTO Ministerial 
in Seattle. The Alliance for U.S. Trade Expansion, commonly 
referred to as U.S. Trade, encompasses an impressive broad-
based group of agriculture, consumer, manufacturing, retailing 
and service organizations, representing $2 trillion in annual 
trade and over 150 million Americans.
    The coalition seeks to promote the benefits of economic 
growth, job expansion and higher living standards in the United 
States as a result of free trade and specifically U.S. 
participation in the WTO.
    And while Purafil is a small piece of the overall coalition 
we are participating because we will continue to be successful 
only if we maintain our international customer base. In order 
to do that, we will depend on the reduction of tariffs and 
other trade barriers. A multilateral rules-based approach to 
trade, negotiated through the WTO, is strongly supported by 
Purafil. The United States should take a leadership role in the 
pursuit of free and fair trade through the WTO in order to 
support American business.
    Thank you.
    [The prepared statement follows:]

Statement of William Weiller, Chairman of the Board and Chief Executive 
Officer, Purafil, Inc., Atlanta, Georgia, on behalf of the National 
Association of Manufacturers

    Good morning, Mr. Chairman. My name is Bill Weiller, I am 
the Chairman of the Board and CEO of Purafil, a leading 
manufacturer of air purification systems based in Atlanta, 
Georgia. I would like to thank you for the opportunity to 
testify before the House Ways and Means Committee on the 
upcoming World Trade Organization Ministerial and the impact of 
the WTO on small businesses such as Purafil. I am here on 
behalf of the National Association of Manufacturers (NAM), and 
obviously also for Purafil.
    Many might be surprised that Purafil, a small American 
business with about 70 employees, is even remotely interested 
in the World Trade Organization and its objectives. In fact, we 
often encounter the notion that global free trade is good for 
big companies and bad for ``the little guy.'' Small and medium-
sized businesses do not attract the headlines the 
multinationals do, and often our successes in the global 
economy go without notice. I am here to let you know that open 
trade is not only good for Purafil, it is the backbone of our 
business.
    In fact, Purafil is representative of many small 
businesses. I have attached a chart to my testimony, which you 
may find interesting. In 1989, nearly half of the National 
Association of Manufacturers' small and medium-sized member 
companies said they did not export. Today, only one in five 
fall into that category. In 1989, only 4 percent of those 
members earned more than 25 percent of their revenue from 
exporting and another 4 percent earned between 11 percent and 
25 percent. Today, those percentages have more than doubled to 
9 percent and 11 percent respectively. Let me just hammer that 
point home. Today, in NAM's surveys we're finding that 
exporting generates over 11 percent of the earnings for 1 out 
of every 5 exporters and over 25 percent for 1 out of every 10 
of these smaller manufacturers. That is an important sea-change 
that has taken place over the past decade and Purafil has been 
a part of it.
    I'd like to tell you a little bit about my company. Purafil 
manufacturers air quality systems that remove odorous, 
corrosive and toxic gases. In short, we sell clean air. Our 
customers include paper mills in Argentina, Oklahoma and North 
Carolina. We protect valuable artifacts in the Netherlands, the 
Sistine Chapel, and in Washington, DC. We service petrochemical 
refineries in Texas, Brazil, and Saudi Arabia. Despite our 
small size, Purafil is an industry leader in this niche market.
    Sixty percent of our sales are made outside of the United 
States. Exporting is vitally important to Purafil: it is the 
cornerstone of our corporate strategy. We are not a company 
that got into international sales by accident or solely as a 
reaction to market demand. We have recognized that in order to 
survive, to continue to provide jobs to our employees, and to 
continue to fund the R & D efforts necessary to our success, we 
have to export and become experts in doing international 
business.
    The problems that Purafil can solve are the same worldwide. 
A refinery in Baton Rouge experiences the same hazardous 
emissions from manufacturing processes as does a refinery in 
Saudi Arabia. The Sistine Chapel protects its artwork from 
environmental degradation, as does the U.S. National Archives 
in Washington. Our intellectual property, considering our size, 
is significant. We have worked hard to take a technology that 
was developed in the U.S. about 30 years ago and have 
constantly refined and improved it.
    If Purafil were not present to solve these problems, the 
increased demand for a solution would result in foreign 
competitors gaining the business. Right now, Purafil is the 
best in the world at solving air purification problems. We have 
a technology that cannot be matched. Purafil has worked hard to 
stay on top of our industry, and I fear that without exporting, 
someone else will take the lead. We have few viable U.S. 
competitors that serve all the applications and markets that we 
do. That ``someone else'' could likely be a company from 
outside the U.S.
    The trade barriers we come across when trying to export to 
some countries are beyond the ability of any individual 
business to change. For example, Mr. Chairman, the tariff for 
our equipment in South Africa is 19%. In response to this, we 
signed a licensing agreement with our local representative so 
they could build portions of our equipment in country and 
remain competitive. That representative utilized the Purafil 
name and proceeded to dissolve the relationship and become a 
low cost, Purafil-educated competitor, leaving us with little 
recourse. We are facing similar high tariff situations in 
India, Brazil, China and others. One solution is to form 
licensing agreements in these countries, but in doing so, we 
dilute our profit margins and make it easy for partners to 
eventually become competitors.
    Purafil will continue to do everything in its power to 
remain competitive. I am here today to ask you to do your 
part--level the playing field so our people, our technology and 
our products can compete in the global market. Don't force us 
to compete with the trade barriers and tariffs currently in 
place.
    I don't need statistics, studies or business experts to 
tell me that exporting creates jobs and is good for the 
economy. As a small business owner, I see it every day I go to 
the plant. I'm constantly reminded when I look at the shipments 
on our dock and see their final destinations.
    That is why we support NAM's leadership role in organizing 
a coalition to support the upcoming WTO Ministerial in Seattle. 
The U.S. Alliance for Trade Expansion, commonly referred to as 
``US Trade,'' encompasses an impressive broad-based group of 
agriculture, consumer, manufacturing, retailing and services 
organizations representing $2 trillion in annual trade and over 
150 million Americans. The coalition seeks to promote the 
benefits of economic growth, job expansion and higher living 
standards in the United States as a result of free trade and 
specifically U.S. participation in the WTO.
    While Purafil is a small piece of the overall coalition 
mentioned above, we are participating because we will continue 
to be successful only if we maintain our international customer 
base. In order to do that, we will depend on the reduction of 
tariffs and other trade barriers. A multilateral, rules-based 
approach to trade, negotiated through the WTO, is strongly 
supported by Purafil. The United States should take a 
leadership role in the pursuit of free and fair trade through 
the WTO, in order to support American business.
    Thank you.
    [GRAPHIC] [TIFF OMITTED] T5092.004
    

      

                                


    Chairman Crane. Our next witness, Mr. Warshaw.

 STATEMENT OF STEVEN G. WARSHAW, PRESIDENT AND CHIEF OPERATING 
 OFFICER, CHIQUITA BRANDS INTERNATIONAL, INC., CINCINNATI, OHIO

    Mr. Warshaw. Mr. Chairman, my name is Steve Warshaw. I am 
president and chief operating officer of Chiquita Brands 
International. Chiquita Brands brings a unique perspective to 
these issues, being one of a very small group of American 
companies to have experienced every step of the WTO process 
from beginning to an end that never occurs.
    In 1994, as Congress debated U.S. accession to the WTO, 
Undersecretary of Commerce Jeffrey Garten made the following 
statement: ``The new WTO dispute settlement process will be 
much more effective than that of the old GATT system. Whereas 
in the past, parties could interminably delay the resolution of 
disputes, dispute settlement procedures will now be subject to 
strict deadlines and the adoption of panel findings will be 
binding and all but automatic.''
    Clearly the banana and recent beef cases are proof that the 
dispute settlement process has not lived up to that promise. 
Injured parties can litigate for years, win their cases and 
still not be compensated for damages.
    The EU has lost two GATT rulings and four WTO rulings in 
the banana case, but its illegal banana trade practices remain 
in effect today. Chiquita Brands and Latin American economies 
continue to be harmed. The WTO calculated that Europe's illegal 
actions have cost U.S. interests alone $191.4 million annually, 
almost all of which has been borne by Chiquita Brands.
    When any company suffers annual losses of this magnitude, 
timely relief becomes essential. The WTO procedures alone took 
3\1/2\ years just to get to the point of retaliation and there 
is still no relief. After the U.S. won a favorable ruling in 
the banana case, Europe was entitled to continue its illegal 
practices for another 15 months. This 15-month grace period 
alone caused $270 million of additional injury to our 
interests. At the end of that period, the EU was able to claim 
that it was in compliance, even though it was not, as a way of 
further prolonging the procedures.
    Such a system provides absolutely no incentive for prompt 
compliance. In reality it rewards delays, obstruction and 
noncompliance. And so, Europe has delayed, blocked, evaded, 
argued, appealed, vetoed and repeatedly sought ways to avoid 
its obligations under international trade rules.
    The only tool for reversing noncompliance under the WTO is 
retaliation. In order to accomplish its objective of inducing 
compliance, it needs to be effectively applied. To date, the 
banana and beef retaliatory actions against Europe have been 
unsuccessful by any standard or measure. Five months after 
retaliation took effect in the banana case Europe is still 
proposing WTO inconsistent banana arrangements. In the beef 
case Europe is promising never to lift its ban.
    Their continuing obstruction has persuaded several U.S. 
farm groups that static retaliation is not sufficient leverage. 
In order to increase internal pressure to comply, we recommend 
that retaliation targets within Europe be rotated at regular 
intervals. We believe this so-called ``carousel retaliation'' 
approach would be entirely consistent with WTO law and urge the 
Trade Subcommittee to insist on its use to bring disputes to 
their proper conclusion.
    As this Subcommittee considers the critical issue of 
dispute settlement in the months leading up to the Seattle 
Ministerial, we urge you to examine the serious flaws that have 
emerged as a result of the banana and beef disputes. The banana 
case in particular offers several valuable lessons. This has 
become the most litigated trade issue in the history of dispute 
settlement. The United States and the Latin Americans have won 
every major round. The rulings have been unambiguous, decisive 
and precedent setting and still, despite more than 6 years of 
successful decisions in the GATT and WTO, Europe's illegal 
practices continue.
    If the shortcomings raised in the banana and beef disputes 
are resolved, the WTO can still live up to the promise that 
former Undersecretary Garten described and that Congress 
endorsed. But unless they are resolved and existing rulings and 
agreements are enforced, new agreements should not be pursued. 
Chiquita Brands is eager to assist the Trade Subcommittee in 
addressing these critical issues in the coming months.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Steven G. Warshaw, President and Chief Operating Officer, 
Chiquita Brands International, Inc., Cincinnati, Ohio

    Mr. Chairman and Members of the Committee, my name is Steve 
Warshaw. I am President and Chief Operating Officer of Chiquita 
Brands International.
    As this Committee knows, the Banana case--for reasons quite 
apart from bananas--has become important for what it says about 
the WTO system. The case makes clear the imperative for more 
effective, streamlined procedures; for good faith compliance on 
the part of all WTO members; for more effective application of 
retaliation; and, above all, for a system that delivers 
measurable relief to the injured U.S. commercial interests.
    Chiquita Brands brings a unique perspective to these 
issues, being one of a very small group of American companies 
to have experienced every step of the WTO process from 
beginning to an end that never seems to occur. It is my hope 
that our company's experience can contribute constructively to 
the national debate and congressional focus in the months 
leading up to the Seattle WTO Ministerial.

    The Need for More Effective, Streamlined Procedures

    More than five years ago, as Congress debated U.S. 
accession to the WTO, Under-secretary of Commerce Jeffrey E. 
Garten made the following statement:
    ``The new World Trade Organization dispute settlement 
process will be much more effective than that of the old GATT 
system. Whereas in the past, parties could interminably delay 
the resolution of disputes, dispute settlement procedures will 
now be subject to strict deadlines and the adoption of panel 
findings will be binding and all but automatic.''
    Clearly, the Banana case is proof that the WTO system and 
its dispute settlement process have not lived up to that 
promise described by former Undersecretary Garten. In fact, 
what this case--and the recent Beef case--show is that the WTO 
has a dispute non-settlement procedure. Injured parties can 
litigate for years, win their cases, and still not be 
compensated for damages as the illegal trade practices continue 
unimpeded.
    Let me briefly review the history of the six-year Banana 
case, which has taken away more than half of our 100-year-old 
European business, and inflicted serious economic injury on 
many of the poorer banana-producing nations of Latin America at 
a time when these developing countries were being required to 
open their markets and abide by new trade obligations.
     In 1993, the EU instituted an illegal banana 
policy that systematically and deliberately destroyed much of 
Chiquita Brands market share in Europe.
     In late 1993, the GATT ruled that the EU banana 
policy violated trade agreements. In response, the EU blocked 
the GATT ruling and maintained its illegal practices.
     In 1994, the GATT again ruled that the EU banana 
policy was illegal. In response, the EU again blocked this 
second GATT ruling and maintained its illegal practices.
     In May 1997, using new trade rules, the WTO found 
that the EU banana policy violated the WTO. In response, the EU 
appealed the ruling and continued its illegal practices.
     In September 1997, a WTO appeals panel reiterated 
the ruling that the EU banana policy contained more 
illegalities than virtually any other policy ever reviewed in 
dispute settlement. Having exhausted its appeal process, the EU 
finally changed its banana policy--by making it more illegal 
and more damaging to U.S. interests.
     In March 1999, at the request of the United 
States, the WTO determined that the EU's ``new'' banana policy 
also violated WTO rules. In response, the EU ignored the WTO 
and maintained its illegal practices.
     In April 1999, when the United States imposed 
punitive tariffs against Europe in retaliation, the EU ignored 
the action.
    To this day, Europe's illegal banana trade practices remain 
in effect. Chiquita Brands and Latin American economies 
continue to be harmed. The adverse impact to our business has 
been substantial.
    The WTO calculated that Europe's illegal actions have cost 
U.S. interests $191.4 million annually--almost all of which has 
been borne by Chiquita Brands. The U.S. government and our 
company believe that number, which was determined by an 
arbitration panel, is far below actual U.S. and Latin loses.
    When any company suffers annual losses of this magnitude, 
timely relief becomes essential. The WTO procedures alone took 
three and a half years just to get to the point of retaliation, 
and there is still not resolution or relief. This timetable is 
entirely too long when significant injury is compounded year 
after year. By authorizing prolonged delays, the WTO 
effectively legitimizes evasion, obstruction, and runaway 
injury to the prevailing party. How many American companies, 
farmers or industries could sustain that amount of injury for 
that amount of time?
    The delays are all the more frustrating because they arise 
for inequitable and illogical reasons. In the Banana case, for 
example, consistent with standard WTO procedures, even after 
the United States received a favorable ruling, Europe was 
entitled to continue its illegal, harmful practices for another 
15 months. To make matters worse, WTO rules prohibited the 
United States from scrutinizing Europe's so-called compliance 
or plans for a ``new'' banana policy during those 15 months. As 
a result, at the end of that period, the EU was able to claim 
that it was in compliance, even though it was not, as a way of 
further prolonging the procedures and its illegal trade 
practices.
    Using the WTO's own injury calculations, the aggregate harm 
done to our interests during the multi-year period from when 
the WTO procedures first began to the date retaliation took 
effect was $670 million. The EU's 15-month grace period--that 
is, the period after the favorable ruling--alone caused $270 
million of additional injury to our interests.
    Under present WTO rules, Chiquita Brands can never recover 
the damages incurred during those periods. Relief, if provided, 
will be strictly prospective, with no retroactive penalty 
imposed on Europe for the damage it has caused in the meantime. 
Such a system provides no incentive at all for prompt 
compliance and every incentive for protectionist member 
countries to gain a lasting commercial edge over U.S. interests 
without fear of penalty or economic consequence. In reality, 
the WTO procedures reward delays, obstruction and non-
compliance: European banana interests continue to earn 
illegally conceived profits. There is no mystery in why the EU 
continues to procrastinate and evade compliance with GATT and 
WTO rulings.

The Need for Good Faith Compliance

    Another major concern arising from the Banana case is one 
that Ambassador Barshefsky has described as Europe's ``30-year 
pattern of refusing to accept panel decisions.'' Nowhere is 
that pattern more apparent than in the Banana case.
    Under the old GATT, the EU blocked two banana panel 
rulings. New WTO rules were supposed to prevent such tactics. 
However, even under the WTO, the EU has continued to do 
everything possible to avoid compliance.
    For decades, the EU has demonstrated this pattern of 
protectionism and prevarication. In case after case, Europe has 
delayed, blocked, evaded, argued, appealed, vetoed and 
repeatedly sought ways to avoid obligations under international 
trade rules. It has happened on citrus, pasta, canned fruit, 
soybeans, beef, and bananas. The list goes on, and so do 
Europe's unlawful trade practices.
    For Chiquita, the problem of chronic non-compliance 
threatens our business. For the WTO system, the stakes are 
equally high. If Europe, the largest WTO member, continues its 
pattern of non-compliance, legitimate questions will be raised 
about the real value of the WTO.

The Need for More Effective Retaliation

    The only tool for reversing non-compliance under the WTO is 
retaliation. When WTO-sanctioned retaliation is imposed, it 
must be applied in a way that induces compliance as quickly as 
possible. If retaliation is the end-result, the injured 
petitioning interest gets no relief and the entire multi-year 
litigation process becomes futile.
    To date, the Banana and Beef retaliatory actions against 
Europe have been unsuccessful by any standard. Five months 
after retaliation took effect in the Banana case, Europe is 
still proposing WTO-inconsistent banana arrangements. In the 
Beef case, Europe is promising never to lift its ban.
    Europe's response to these retaliations has persuaded the 
American Farm Bureau, the National Cattlemen Beef Association, 
the American Meat Institute, the U.S. Meat Export Federation, 
the Hawaii Banana Industry Association and Chiquita Brands that 
static retaliation is not sufficient leverage. In order to 
increase internal pressure to comply, we recommend that 
retaliation targets within Europe be rotated at regular 
intervals. Because the overall level of retaliation against 
Europe would not change, we believe this so-called ``carousel 
retaliation'' approach would be entirely consistent with WTO 
law. We urge the Trade Subcommittee to insist on the use of 
carousel retaliation in order to bring these cases--and future 
disputes--to their proper conclusion.

The Need for Measurable Relief to the Injured U.S. Industry

    Ultimately, the proper and equitable conclusion of dispute 
settlement must be full WTO compliance and the delivery of 
quantifiable relief to the petitioning U.S. industry. Chiquita, 
like other U.S. companies and farmers, has availed itself of 
dispute settlement with that singular objective in mind. U.S. 
interests, particularly agricultural interests, have often made 
the point that if prominent cases like Bananas and Beef are not 
resolved in a way that produces a fair outcome and tangible 
relief, WTO dispute settlement will inevitably lose its appeal.
    This overriding imperative has not yet been grasped by the 
European Commission, which continues to propose certain new 
banana arrangements that would in fact increase injury to 
Chiquita Brands. Congress and the Administration need to 
reinforce in the clearest way possible the message to Europe 
that dispute settlement is intended to accord commercial relief 
from illegal practices and that outcomes that fall short of 
that objective will be unwelcome and of no help in lifting U.S. 
retaliation.

Conclusion

    America's agricultural sector is the most productive and 
competitive in the world. Despite this fact, some of our 
nation's most important export markets are being stolen away by 
illegal trade practices. We don't permit America's intellectual 
property, patents, or high technology industries to be 
subjected to such treatment, and we shouldn't allow it in 
agriculture.
    As this Subcommittee considers the critical issue of 
dispute settlement in the months leading up to the Seattle 
Ministerial, we urge you to examine the serious flaws that have 
emerged as a result of the Banana and Beef disputes. These 
cases provide concrete examples of the obstacles that any U.S. 
interest could encounter when taking on unfair practices by the 
EU.
    Unless solutions to these inadequacies can be found prior 
to the WTO Ministerial Meeting, many will question the value of 
new agreements, given that existing ones cannot be enforced. On 
the other hand, with proper attention to the concerns raised in 
the Banana and Beef disputes, the WTO can still live up to the 
promise that former Undersecretary Garten described and that 
Congress endorsed. Chiquita Brands is eager to assist the Trade 
Subcommittee in addressing these critical issues in the coming 
months.
      

                                


    Chairman Crane. Thank you.
    Our next witness, Mr. Lambert.

  STATEMENT OF CHARLES D. ``CHUCK'' LAMBERT, PH.D., AND CHIEF 
        ECONOMIST, NATIONAL CATTLEMEN'S BEEF ASSOCIATION

    Mr. Lambert. Thank you, Mr. Chairman and Members of the 
Subcommittee, for holding hearings on issues that are vitally 
important to American agriculture. I am Chuck Lambert, chief 
economist of the National Cattlemen's Beef Association. Exports 
of meat and grains are imperative for the United States. We 
have only 4 percent of the world's population but a large share 
of the world's production agriculture.
    One of the underlying premises of the 1996 Freedom to Farm 
bill was that aggressive pursuit of growing export markets 
would replace the safety net of traditional farm programs. 
There must be followthrough by Congress and the administration 
on this obligation.
    The Seattle Round of trade talks will be a defining moment 
for world agriculture trade. Success of the Seattle Round 
dictates that the U.S. take the high road to expanded exports 
and freer trade with less dependence on government assistance. 
The near agreement with China last April was a good one. 
Hopefully it will be completed and set the benchmark for tariff 
reduction and market access for WTO members to follow in 
November.
    NCBA supports three process objectives for the negotiations 
as follows. Set the 3-year time line for concluding the 
negotiations, no product or policy exemptions, and three, 
conclude with a single agreement that encompasses all sectors. 
There is a perception among many in agriculture that past 
negotiations often traded agricultural interests for other 
priorities. NCBA and other agricultural organizations strongly 
object to the finalization of agreements in any other sector 
until agreements in agriculture are concluded. From the 
parochial view of the beef industry, the overall objective of 
U.S. trade policy is to maintain and increase access to 
existing markets for U.S. beef and to gain access in emerging 
markets.
    NCBA supports addressing the specific points regarding the 
upcoming WTO negotiations. Prevent the EU from rolling back 
progress made during previous agreements. Ensure that science 
remains the only basis for resolving the SPS agreements. 
Protect science-based technologies and establish transparent 
science-based rules. Eliminate state trading entities. 
Negotiate reduction and eventually elimination of production-
distorting price supports, and I will add here including those 
that are currently insulated in the blue box, and eliminate 
export subsidy programs. Establish a target date for reducing 
all tariffs to zero, and until that elimination can take place, 
continue tariff reduction and expands tariff rate quotas to 
permit continued growth in exports.
    U.S. beef entering many Asian markets still faces close to 
a 40-percent tariff. In Europe, we face a 20-percent tariff and 
that is within a very small quota of 11,500 metric tons, even 
if we had all of our other issues resolved. Prices still drives 
the effective demand for our product, and tariffs increase 
price. Continued tariff reduction is critical.
    I am clearly aware of the administration and other sector 
positions regarding dumping. But the fact is the current 
definition of dumping does not make sense for many agricultural 
commodities. Cyclical commodities, including beef, have periods 
of low prices. Often those prices are below the cost of 
production for most of the industry. That is why our industry 
is cyclical. By WTO definition the beef industry may be 
considered to be dumping during periods of low prices, even in 
the absence of evidence of predatory behavior, intention to 
monopolize or other efforts to drive competitors out of 
business.
    Under the current definition, U.S. dumping suits were filed 
in 1998 against cattle from Canada and Mexico. In return 
Mexican feeders and processors filed a dumping case against 
beef and cattle from the United States. Mexico announced 
tariffs as high as 215 percent just last Monday for some 
exporters of some U.S. products.
    Among the strengths of the current WTO system is a well 
defined process for initiating a case for determining the final 
ruling. The current--the strict, science-based rules 
established for resolving these issues is another major 
strength. The primary weakness of the current system is the 
absence of an enforcement mechanism to assure compliance once 
the ruling is issued. Canada and the United States 
painstakingly followed the WTO dispute settlement process for 
changing regulations to come into compliance with the WTO 
ruling.
    No one wins in trade wars, and our preference is for 
access. All we ask is for Europe to give their consumers a 
choice. Our negotiators with our advice and consent have 
offered labeling beef as a product of the U.S. to the EU with 
no success.
    If Europe continues to thumb its nose at this science-based 
process, the WTO is in jeopardy of losing its credibility. 
Thank you for the opportunity to present this information.
    [The prepared statement follows:]

Statement of Charles D. ``Chuck'' Lambert, Ph.D., and Chief Economist, 
National Cattlemen's Beef Association

    Thank you Chairman Crane and the Subcommittee for holding 
hearings regarding issues to be addressed in the 1999 Seattle 
Ministerial meeting. NCBA commends your continuing efforts to 
improve the export outlook for U.S. agricultural products. I am 
Chuck Lambert, Chief Economist for the National Cattlemen's 
Beef Association,

                          Importance of Trade:

    Beef and pork producers have always avoided the traditional 
supply management and price support programs, and therefore, 
had the ``freedom to farm'' as well as ``freedom to fail.'' 
Livestock producers add value to grain produced by our 
neighbors by feeding it through our livestock.
    Livestock producers are becoming increasingly dependant on 
the rest of the world to buy our products. Exports of meat and 
grains make sense for the US, a country that has only 4 percent 
of the world's population, but a large share of the world's 
production agriculture. Exports of beef have helped to take up 
the slack of declining demand for beef at home. We, as an 
industry, have worked hard to promote beef exports which now 
account for over 12 percent of the value of wholesale beef 
sales. On a tonnage basis, we export 8-9 percent of what we 
produce.
    The 1998 calendar year--a year of recession in most Asian 
markets--was the first time that more than one million metric 
tons of US beef and beef variety meats have been exported. 
Compared to 1997, exports of beef and beef variety meats during 
1998 increased of 4.75 percent on a volume basis but declined 
5.44 percent on a value basis as U.S. beef prices declined and 
international customers shifted to a lower-price mix. As an 
industry, we have expanded exports of beef and beef variety 
meats from about one-half billion dollars twenty years ago, to 
approximately $3 billion today. During the first five months of 
1999, beef exports increased 6.43 percent on a volume basis and 
6.56 on a value basis compared to the same time in 1998.
    The Seattle Round of world trade talks will be the defining 
moment for world agricultural trade. The US beef industry has 
worked hard to expand sales of our product in the younger, fast 
growing, overseas markets. In spite of record US meat exports 
and efforts of most commodity organizations to expand exports, 
prices for nearly all US agricultural products remain very low.
    There is a perception among many in agriculture that past 
GATT and WTO rounds often traded agricultural priorities for 
other priorities and left US crop and livestock producers 
facing high tariffs and a host of non-tariff trade barriers in 
overseas markets while opening US markets to imports. One of 
the underlying premises of the 1996 ``Freedom to Farm Bill'' 
was that aggressive pursuit of growing export markets would be 
a critical strategy to replace the safety net of traditional 
farm programs. The pursuit of export markets includes 
eliminating trade barriers and this must be a successful part 
of the next round.
    Success of the Seattle Round means that the US must take 
the high road to expanded exports and free trade, with less 
dependence on government assistance. Failure to follow this 
course will take us down the road to protectionism--if not 
isolationism--trade wars and a return to costly government 
supply management and price support farm programs. The near-
agreement with China last April, if finalized, would set a good 
example for other countries for reducing trade barriers. If the 
agreement with China--which would be contingent upon approval 
of permanent Normal Trading Relations--can be finalized it will 
set the pace for all of the WTO countries to follow in 
November. The proposed China agreement would allow for:
     a bilateral Sanitary/Phytosanitary agreement for 
China to accept all USDA approved processing plants as eligible 
to ship to China. This bilateral agreement has been finalized, 
but its impacts will depend on finalization of the overall 
trade package with China. The proposed overall package would 
allow for the following with respect to the beef industry:
     duties on certain beef items to decline from 45 
percent to 12 percent over a five-year period
     a commitment not to subsidize domestic 
agricultural products
     US investment in distribution, wholesaling, 
retailing, and transportation

                Objectives For The 1999 WTO Negotiations

    NCBA, in conjunction with nearly 60 other agricultural and 
food sectors, expressed support for launching a comprehensive 
round of multinational trade negotiations in an April 1, 1999 
letter to President Clinton. The group specified three process 
objectives for the negotiations, as follows:
     Establish a three-year goal for concluding the 
negotiations.
     Adopt the Uruguay Round framework for the 1999 
agricultural negotiations so there are no product or policy 
exceptions.
     Conclude with a single undertaking that 
encompasses all sectors.
    NCBA and other agricultural organizations strongly object 
to the conclusion and implementation of agreements in any other 
sector until agreements in agriculture are finalized. Many 
other countries have remained very protectionist of agriculture 
while negotiating expanded trade in other sectors. Unless there 
is a reciprocal opening of agricultural markets there will be 
very little support within the agricultural community for these 
trade agreements in other sectors.
    NCBA and the U.S. beef industry believe that the overall 
policy objective for U.S. trade is to maintain and increase 
access to existing markets for U.S. beef, beef by-products and 
other industry-related products and to gain access in emerging 
markets for these products. NCBA and other meat industry groups 
support the following specific points to be addressed during 
the 1999 round of WTO negotiations:
     Prevent the EU from rolling back progress made 
during the previous GATT agreement. Enforcement of the strict 
science-based trading rules established in the Uruguay Round 
Agreement on Sanitary and Phytosanitary Measures (the SPS 
Agreement) is critical to continued expansion of U.S. beef 
exports.
     Ensure that science remains the only basis for 
resolving SPS issues. To ensure this outcome, the red meat 
industry does not support opening the SPS Agreement for further 
negotiation in the next trade round.
     Protect scientifically approved technologies, such 
as Genetically Modified Organisms (GMOs) and beef growth 
promotants that enhance production efficiency or food safety by 
establishing transparent, science-based rules.
     Eliminate State Trading Entities (STEs) and 
increased access to wholesale and retail trade in importing 
countries (especially relevant in China, Australia and Canada)
     Reduce and eventually eliminate production-
distorting price supports and export subsidy programs. In 
addition, stricter disciplines and tougher enforcement 
mechanisms should be established to prevent the emergence of 
new schemes to circumvent WTO rules.
     Continue to reduce tariffs and expand Tariff Rate 
Quotas (TRQs). Existing duties in key export markets such as 
Japan and Korea must be reduced to single digit levels and a 
target date must be established for reducing all tariffs to 
zero. Until elimination of duties can be accomplished, existing 
tariff rate quotas must continue to be expanded to permit 
continued growth in exports.
    From the beef industry perspective the last point may be 
the most crucial. US beef entering many markets for US beef in 
Asia (Japan, Korea, and China) still faces close to a 40 
percent tariff. Price still drives the effective demand for our 
product. If one looks at Mexico, you can see what the effects 
of eliminating tariffs of 20 to 25 percent did in that market 
after NAFTA was initiated--even with the 50 percent devaluation 
of the peso in late 1994. While we have done well in the Asian 
countries, tariff reduction must be one of the main keys to 
exporting more red meat to countries with high tariffs.
[GRAPHIC] [TIFF OMITTED] T5092.005


                         Definition of Dumping:

    The beef industry is driven by supply and demand and these 
forces determine the market price for beef. Market-driven 
industries traditionally run in cycles, and most beef producers 
periodically sell below the cost of production (at a loss) 
during the high production/low price periods of the cattle 
cycle. Indeed, it is these low prices and industry losses that 
result in herd reduction and declining supplies. These periods 
of cyclical low prices and producer losses in the beef industry 
meet the definition of dumping under current WTO rules--even in 
the absence of evidence of predatory behavior, intention to 
monopolize, or other intentional efforts to drive competitors 
out of business.
    Producer unrest has resulted from low prices for 
agricultural commodities and the threat of protectionism is 
rearing its ugly head. The storm clouds of unrest include calls 
for dumping lawsuits, blockading borders and other retaliatory 
measures to restrict trade. The current definition of dumping 
under WTO rules does not make sense for commodity markets like 
beef because one of the criteria to file a dumping case is that 
the commodity must be sold below the cost of production in the 
importing country.
    Under the current WTO definition of dumping, suits were 
filed against Canada and Mexico in 1998 and in return, Mexican 
feeders and processors filed a dumping case against the United 
States. Mexico announced tariffs as high as 215 percent just 
last Monday (August 2, 1999) for some exporters of some beef 
products. These cases were the fallout of cyclically low market 
prices related to supply and demand and had nothing to do with 
predatory behavior, monopoly practices or the intention of beef 
producers in one country to drive other producers out of 
business. The bottom line is that these cases will cost the 
beef industry scarce resources to defend without addressing the 
base cause of low prices. Ultimately, these cases will lead to 
less efficient trade patterns without significantly increasing 
producer profitability. During future negotiations NCBA 
supports changing WTO rules that define beef dumping to include 
factors other than selling below the cost of production.

            Maintain Integrity of the WTO--Fortress Europe:

    Existence of a well-defined process for initiating a case 
and for determining the final ruling
    is among the strengths of the current WTO system. The 
current system is much improved from its GATT predecessor in 
this respect. The strict science-based rules established for 
resolving these issues is another major strength of the current 
dispute settlement process. The primary weakness of the current 
system is the absence of an enforcement mechanism to assure 
compliance once the ruling is issued.
    The US has been unfairly locked out of the European beef 
market for more than 10 years by a thinly veiled trade barrier 
commonly referred to as the EU hormone ban. During the past 
decade, the EU has not been able to cite scientifically valid 
reasons for the ban. The U.S. filed its formal complaint with 
the WTO in January 1996, claiming the beef ban was a non-tariff 
trade barrier. Argentina, Australia, and New Zealand joined the 
United States in the action while Canada filed a separate case. 
Canada and the United States painstakingly followed the WTO 
dispute settlement process for three and one-half years before 
retaliation finally began on July 29, 1999. Negotiations 
continue.
    The objective of U.S. the beef industry has always been to 
re-gain access to the European beef market, not retaliation. No 
one wins trade wars and that the US beef industry preference is 
for access. All we ask is for Europe to give their consumers a 
choice. The industry has agreed to label US beef as a ``product 
of the US'' or as ``USDA inspected and approved'' as 
negotiating alternatives with no success. The same issues will 
be raised regarding BT corn, or Roundup-ready soybeans and 
other technologies that that have been proven safe.
    The European response raises the question, ``what do we do 
with a country that has agreed to a set of rules on trade, 
refuses to live by them, but expects other countries to 
comply?'' If Europe continues to thumb their nose at this 
science based process, the whole WTO may be in jeopardy of 
losing its credibility.
    Many U.S. cattlemen have a perception that the EU is 
undermining the current system and has perfected the stall and 
delay tactic with immunity. Many are asking why the U.S. 
continues to participate in a system that does not provide a 
clear and prompt resolution to trade disputes. This growing 
loss of confidence and increasing distrust has resulted in 
declining grassroots support for trade and trade negotiations 
in general.

              WTO Dispute Settlement Process Modification:

    Shortening the WTO dispute settlement process or providing 
for a mechanism that allows the winning party to be compensated 
while the losing party delays implementation may be 
alternatives. Perhaps some type of escrow account or bonding 
requirement could be established so the defending party would 
begin paying when the initial ruling is made. Alternatively, 
the amount of injury could be established at the time that the 
``reasonable period'' is determined with the amount of injury 
dependant on the length of time it takes for the losing party 
to come into compliance.
    Under the current system, compensation or retaliation only 
starts once the entire process is completed and the injured 
party is not reimbursed for losses incurred during or prior to 
the case. There is no incentive for early settlement by the 
losing party. In fact, the current system rewards blatant stall 
and delay tactics. The problem tends to be more with the 
current dispute settlement process because the losing party 
only has to pay for future losses and the payments won't begin 
as long as the process can be strung out.
    Another alternative supported by the beef industry and 
others is for the retaliation list to be revised periodically--
often referred to as carousel retaliation. Under the current 
system, the countries and the commodities that are not affected 
by retaliation breathe a sigh of relief and there is no further 
political pressure from these entities for change. If the list 
of affected commodities were subject to change on a random 
basis no countries or commodities would be exempt with 
certainty. Uncertainty would continue to generate pressure from 
all parties for changing regulations to come into compliance 
with the WTO ruling.

                             A Clear Plan:

    It is clear that Congress and the Administration do not 
have a unified strategy to systematically attack the trade 
problems of US agriculture as part of the upcoming 
negotiations. The inability to secure approval of ``fast 
track'' continued negotiating authority prior to the Seattle 
Ministerial meeting is testimony to this void. Agricultural 
producers are justifiably concerned about sending a team to the 
negotiating table that has a more consistent track record of 
in-fighting among Congressional and Administrative ranks rather 
than engaging the opposition.
    The U.S. must hold its trading partners to commitments 
agreed to in previous trade agreements or risk losing public 
support for additional trade negotiation authority. Without 
fast track authority, the U.S. will lose the initiative in 
gaining access to emerging markets and enforcing existing trade 
agreements.
    The National Cattlemen's Beef Association is prepared to 
participate in the process of evaluating critical trade issues 
within the beef industry. NCBA looks forward to providing 
additional input as the U.S. addresses other trade issues, 
including accession of China to the WTO and approving 
legislation to provide authority for negotiating additional 
trade agreements. Thank you for the opportunity to present this 
information.
      

                                


    Chairman Crane. Thank you Mr. Lambert. Our final witness, 
Ms. Ambrose.

STATEMENT OF KATHLEEN A. AMBROSE, VICE PRESIDENT, INTERNATIONAL 
     AFFAIRS, AND CO-LEADER, MARKET ACCESS TEAM, CHEMICAL 
         MANUFACTURERS ASSOCIATION, ARLINGTON, VIRGINIA

    Ms. Ambrose. Thank you, Mr. Chairman. I am Kathleen 
Ambrose, vice president for international affairs of the 
Chemical Manufacturers Association. I have spent more time 
sitting in the staff chairs behind you, Mr. Chairman, than I 
have on this side of the aisle but I appreciate the opportunity 
to testify today before this Subcommittee.
    CMA is a nonprofit trade association whose 190 members 
represent 90 percent of the productive capacity for basic 
industrial chemicals in the United States. If I leave you with 
any thought today, I would like to leave you the following 
thought, and the following information: The U.S. chemical 
industry is America's largest exporting sector. We, in 1998 
alone, contributed $13.4 billion to the positive trade surplus 
on our more than $68 billion in export sales. Therefore we have 
a large stake in the next round of trade negotiations.
    CMA and its member companies support the launch of a new, 
broad-based and flexible round of trade negotiations to be 
launched in Seattle and a negotiation process that allows for 
individual agreements to be implemented as they are completed. 
We are ``teed up'', as they say, as an accelerated tariff 
liberalization sector. We have worked with the other ATL 
sectors to offer a position that would bridge the gap that we 
have just been describing here today brought to you both by the 
USTR's office and by my counterparts even on this panel. We 
strongly believe that early results in the round will not 
jeopardize the concept of single undertaking and that the 
objectives of the round can be accomplished if we all work 
together.
    CMA's highest priority is increased country participation 
in the Chemical Tariff Harmonization Agreement. We have worked 
with USTR through the Early Voluntary Sector Liberalization 
process both in APEC and then as it became ATL to move to the 
WTO. It is designed to be building on our current agreement 
that was completed in the Uruguay round. Our view is that 
expanding the Chemical Tariff Harmonization Agreement to 
include additional countries that are chemical producers can be 
accomplished as an early result of the round and that at the 
end of the day, the single undertaking concept can be fully 
accommodated within the upcoming round.
    It is essential that the timing of achieving results during 
the negotiations not be confused with the objective of a single 
undertaking at the conclusion of the round. Use of a common 
crediting mechanism that keeps a running total of all 
liberalization and a provisional implementation schedule will 
enable us to recognize that all WTO members at the end of the 
day must take on the obligations of all WTO Agreements.
    Achieving results in the ATL sectors provisionally with 
binding results at the end of the negotiations increases rather 
than decreases the chance that all parts of the American 
business community will devote their energies toward completing 
a beneficial, broad-based round that is in the United States 
economy's interest.
    The worldwide chemical industry is united in its 
endorsement of a new WTO round through these mechanisms. In 
June, the International Council of Chemical Associations for 
which I serve as the Secretariat, a Coalition of Chemical 
Industry Associations of the United States, the European Union, 
Japan, Canada, Mexico, Argentina, Brazil, New Zealand, and 
Australia, endorsed the goal of elimination of all chemical 
tariffs in the next WTO round. It stated that new rounds should 
build on the sectoral negotiations that have been going on for 
the last 3 years in APEC. And, in addition, it supported the 
concept of early results so long as at the end of the day all 
WTO members assume the obligations of the round in the concept 
of single undertaking.
    In addition, the ICCA called for the establishment of a 
global balanced and beneficial investment regime, advocated 
rules under the WTO for trade facilitation and sought full 
implementation of the existing TRIPs agreement. The ICCA also 
urged clarification of the relationship between multilateral 
environmental agreements and the WTO rules.
    In summary, Mr. Chairman we support the launch of a new WTO 
round that will be broad-based and that will benefit the full 
American economy.
    Thank you for this opportunity today.
    [The prepared statement follows:]

Statement of Kathleen A. Ambrose, Vice President, International Affairs 
and Co-Leader, Market Access Team, Chemical Manufacturers Association, 
Arlington, Virginia

    Good morning. I am Kathleen A. Ambrose, Vice President, 
International Affairs and Co-Leader of the Market Access Team, 
of the Chemical Manufacturers Association (CMA).
    CMA is a non-profit trade association whose 190 member 
companies represent 90 percent of the productive capacity for 
basic industrial chemicals in the United States. The U.S. 
chemical industry is a keystone of the U.S. economy and 
America's largest exporting sector. In 1998 alone, the industry 
tallied a $13.4 billion trade surplus, generating more than $68 
billion in export sales. Chemical exports easily outpaced U.S. 
agricultural exports of $51 billion and aircraft and parts 
exports of $50 billion. U.S. chemical companies produce over 2% 
of America's Gross Domestic Product (GDP) and keep more than 1 
million Americans at work. The chemical industry's strong 
export performance directly supports 180,000 of these high-
tech, high-wage jobs.
    CMA and its member companies are committed to the 
multilateral liberalization of trade and investment underpinned 
by a framework of rules implemented through the World Trade 
Organization (WTO). We support the launch of a new broad-based 
and flexible round of trade negotiations at the WTO Ministerial 
Meeting in Seattle and a negotiation process that allows for 
individual agreements to be implemented as they are completed. 
We believe strongly that early results in the round will not 
jeopardize the ``single undertaking'' objective of the round, 
which requires all WTO members to implement all negotiated 
agreements.

Market Access and Accelerated Tariff Liberalization

    A significant achievement of the global chemical industry 
in the Uruguay Round was the Chemical Tariff Harmonization 
Agreement (CTHA), whereby 23 trading partners included the 
harmonization of tariffs on chemical products to rates between 
5.5 percent and 6.5 percent in their schedules of tariff 
concessions. Since the conclusion of the Uruguay Round, the 
number of countries joining the CTHA or applying CTHA rates has 
increased to 35.
    CMA's highest priority is increased country participation 
in the CTHA. We have worked with the Office of the U.S. Trade 
Representative to include the objective of harmonizing chemical 
tariffs as one of the ``early voluntary sectoral 
liberalization'' (EVSL) initiatives in the Asia Pacific 
Economic Cooperation (APEC) forum. We continued these efforts 
through the transfer of the EVSLs to the WTO as the 
``Accelerated Tariff Liberalization'' (ATL) process.
    The ATL in chemicals is designed to build on the results of 
the Uruguay Round by bringing important chemical-trading 
countries into the CTHA. U.S. negotiators have aided the 
industry's efforts by including chemical tariff harmonization 
in the market access requests of trading partners that are in 
the process of acceding to the WTO. For instance, Chinese 
Taipei has already incorporated chemical harmonization in its 
schedule of concessions for implementation upon accession, and 
China agreed to implement the chemical and other ATLs as part 
of its April 8th package of market access commitments for WTO 
accession, provided that others in the WTO also agree to do so. 
And, Indonesia announced recently that it would also begin 
lowering its tariffs on chemicals.

ATL and the New WTO Round

    CMA and its member companies firmly support broad-based and 
balanced results in the new round of WTO negotiations, and we 
support the ``single undertaking'' mechanism as a means to 
achieve such results that also reflect the interests of all 
parties. The single undertaking mechanism ensures that all 
elements of the negotiated results (except where explicitly 
exempted and agreed) are subject to unified dispute settlement 
and that all WTO members (developed and developing alike) agree 
to obligate themselves to all elements of the negotiations, 
without derogation, even though individual WTO members may be 
subject to differing timetables for implementation.
    Our view is that both early results, such as the ATL, and a 
``single undertaking'' can be fully accommodated within the 
upcoming round. It is essential that the timing of achieving 
results during the negotiations not be confused with the 
objective of a single undertaking at the conclusion of the 
round. Use of a common crediting mechanism that keeps a 
``running total'' of all liberalization, together with 
recognition by all WTO members that they must participate in 
all agreements in the final package, removes procedural 
impediments to begin implementing negotiated results in 
specific sectors or issue areas as agreements are achieved. 
Thus, the timing for reaching agreement on specific elements is 
far less important than ensuring that the final negotiated 
result is balanced, reflects outcomes of interest to all 
parties, and is mutually binding on all WTO members.
    As an incentive for participation in early tariff 
liberalization, WTO members can agree to provide countries with 
credit for guaranteed, bound trade liberalization enacted since 
the close of the Uruguay Round. The permanent binding of 
concessions can take place, as in the past, at the conclusion 
of the round, or a release from the provisional binding can be 
granted by the WTO should the round not reach a conclusion.
    Achieving early results in the multilateral negotiations 
adds to the credibility of the WTO process by showing that it 
is not necessary to wait seven or more years, as we did in the 
Uruguay Round, before tangible outcomes can be shown. Early 
results will help to keep the negotiating process manageable 
while also maintaining momentum toward further liberalization. 
We think it is far better to implement trade liberalization on 
a regular, ongoing basis than it is to force all issues and 
sectors to be held in reserve for one ``big bang,'' but 
agonizingly slow, result.

International Chemical Industry Supports New WTO Round and 
Chemical Tariff Elimination

    The worldwide chemical industry is united in its 
endorsement of a new WTO round and the elimination of all 
chemical tariffs by all WTO members. In June, the International 
Council of Chemical Associations (ICCA)--a coalition of the 
chemical industry associations of the United States, the 
European Union, Japan, Canada, Mexico, Argentina, Brazil, New 
Zealand, and Australia--stated that the new round should build 
on sectoral and trade liberalization undertaken since the 
Uruguay Round and stressed that final results of all 
negotiations must be adopted in their entirety by all WTO 
members. Specifically, the group called for worldwide 
elimination of chemical tariffs for all WTO members and 
proposed a phased approach based on the level of existing 
tariffs. Furthermore, the ICCA called for the elimination of 
non-tariff measures, such as export licensing, quotas, dual 
pricing and trigger price mechanisms, and discriminatory 
standards.
    In addition, the ICCA called for the establishment of a 
global, balanced and beneficial investment regime for all 
members of the WTO, advocated WTO rules for trade facilitation, 
supported current WTO disciplines for anti-dumping, and sought 
full implementation of the existing TRIPs agreement on 
intellectual property. The ICCA also urged clarification of the 
relationship between multilateral environmental agreements and 
WTO rules. We are attaching an overview of the ICCA statement 
on the new round.

Conclusion

    CMA looks forward to working with the Members of this 
Subcommittee as you develop negotiating objectives for the 
upcoming WTO Round. In particular, we urge you to consider 
approaches to renewing the President's trade negotiating 
authority so that ATL tariff reduction commitments and other 
early results can begin while the round continues.
    A new WTO round that combines early results with a single 
undertaking offers new opportunities for tariff liberalization, 
market expansion, and the guarantee of internationally accepted 
rules of fair trade. Without U.S. support of the WTO, its 
agreements, and its ongoing negotiations, the U.S. chemical 
industry will lose the benefits of free and fair trade, 
including export markets, and the U.S. economy will lose the 
chemical industry's significant contributions: export revenues, 
annual trade surpluses, and highly skilled jobs.

             International Council of Chemical Associations

Chemical Industry Strongly Supports New Trade Round, Tariff 
Elimination

    Geneva, Switzerland, June 23--Leading chemical trade 
associations today expressed strong support for a new round of 
multilateral negotiations in the World Trade Organization 
(WTO), including the elimination of all chemical tariffs by all 
WTO members.
    The International Council of Chemical Associations (ICCA) 
meeting in Geneva, urged that all chemical tariffs without 
exception be eliminated by all WTO members. The group proposed 
a phased approach to tariff elimination, according to the level 
of existing tariffs. Furthermore, ICCA called for elimination 
of non-tariff measures, such as import licensing, quotas, dual 
pricing and trigger price mechanisms, and discriminatory 
standards.
    ICCA said the new round should build on sectoral and 
regional trade liberalization undertaken since the end of the 
Uruguay Round, and stressed that final results of all 
negotiations must be adopted in their entirety by each WTO 
member. ICCA also expressed its strong support for the WTO as 
an institution, and welcomes the accession of new members to 
the WTO provided these countries adopt all the agreements 
required for entry to the organization.
    The ICCA hopes that the period leading up to the start of 
the new round will provide an opportunity to broaden tariff 
harmonization for chemicals through expanded product and 
country coverage of the Chemical Tariff Harmonization 
Agreement, or through other mechanisms which achieve at least 
the same results.
    In addition, the ICCA called for the establishment of a 
global, balanced and beneficial investment regime for all 
members of the WTO. The group advocated WTO rules for trade 
facilitation, supported current WTO disciplines for anti-
dumping, and sought full implementation of the existing TRIPs 
agreement on intellectual property. ICCA urged clarification of 
the relationship between multilateral environmental agreements 
and WTO rules.
    World chemical industry production exceeds US$1.6 trillion 
annually and almost 30% of this production is traded 
internationally. Within global trade in manufacturing, world 
trade in chemicals is second only to automobiles, far outpacing 
computers and related technology in third place. The 
International Council of Chemical Associations (ICCA) 
represents almost 80% of the world's chemical production. It is 
a coalition of the following chemical industry trade 
associations:
Asociacion Nacional de la Industria Quimica (ANIQ) [Mexico]
Canadian Chemical Producers' Association (CCPA)
Chemical Manufacturers Association (CMA) [USA]
Conselho das Industrias Quimicas do Mercosul (CIQUIM) [Argentina and 
        Brazil]
European Chemical Industry Council (CEFIC)
Japan Chemical Industry Association (JCIA)
New Zealand Chemical Industry Council (NZCIC)
Plastics and Chemicals Industry Association (PACIA) [Australia]
      

                                


    Chairman Crane. Thank you, Ms. Ambrose. And the advantage 
of being there rather than up here is you are stuck up here.
    Let me put my first question to you, Mr. Weiller. I was 
impressed with the statistics here on small business. We had a 
Trade Subcommittee hearing back in my district a couple of 
years ago, and Illinois is the fifth largest export state in 
the country. We have some giants there in my district like 
Motorola and Ameritech, Sears, United Airlines, but next door 
to me are ones like John Deere and Caterpillar down south. I 
always knew that they are very aggressively involved in 
exports. What was revealing was that better than 90 percent of 
the exports from our State of Illinois came from companies 
employing 500 or fewer. And what is striking is this top graph 
here of the increase, companies that do not export in 1989 were 
almost half of them, 48 percent, and that has dropped in 1998 
to 22 percent. And I am sure it is still going down.
    And the other thing is the revenues. I had no idea what a 
rich market that is out there, that 9 percent of those exports 
earned 9 percent--9 percent rather earned over 25 percent in 
profits and 11 percent earned between 11 and 25 percent. So it 
is a good market out there. And getting that word out is one of 
the problems frankly I think we have in trade in this country.
    When I say getting the word out, I think we have not 
effectively got our chief executive officers to communicate to 
their employees that the company's survival is dependent upon 
that world market out there, and that means their jobs, and 
getting them in turn to communicate that message to all of us, 
to our local district offices or send us postcards down here on 
these trade issues, whatever is involved. I was wondering if 
are there areas in the WTO negotiations that will be 
particularly important for small businesses such as your 
company? Have you got thoughts on that?
    Mr. Weiller. Well, thank you for the opportunity. What you 
were saying earlier about the percentage of business that is 
export, and it shows at 75 percent small- and medium-sized, I 
expect the number is actually larger. As an example, my company 
is an exporter, and we have about 70 employees. But we use, 
purchase services from other smaller companies sometimes, metal 
manufacturing, sometimes smaller electronics, circuit board 
manufacturers and so on. And they in effect export but they 
don't realize it. They think they are just selling to a local 
company in the same town. They don't realize that 100 percent 
of what they manufacturer gets assembled and shipped overseas 
as a export. So I suspect that some of these numbers by the 
time you really get through become much larger.
    If the question is what is it that can be done to help 
exporters, there are a number of things that are already being 
done. I recognized my testimony was focused really on the areas 
that are really impediments, the countries that are problem 
areas for everybody, China and so on which have very high 
tariffs and so on. The truth is that I really don't feel that 
negative. I think a lot has happened. I think it is very 
positive in the last 10 years. And in effect we have--we are 
enjoying some of the benefits of fair trade already. Again, 
focusing on those that I did in my conversation here, that we 
need some help there because those are markets that are 
growing, and if we don't get into them, I don't mean just the 
small companies, I mean the larger ones, we will lose, even 
after a trade agreement is reached.
    To give you a specific example, in some countries, for 
example, in India, American consulting engineers are not 
present. You have German consulting engineers. Well, once, if 
ever, India agrees to liberalize all the infrastructure, 
development will continue to be dictated by the German 
engineering companies. They will purchase German products and 
American companies will be out of that. This has happened in 
Vietnam from what I understand from other people. So some of 
the effects of this is going to be very long, much longer than 
after the trade barrier is officially opened.
    Chairman Crane. Thank you, Mr. Warshaw, and, Mr. Lambert, 
the U.S. Trade Representative has made proposals to make the 
dispute settlement process more transparent and streamlined, 
and in your view are these proposals, if enacted, 
satisfactorily, and what else should the U.S. propose in the 
way of changes to the dispute settlement process?
    Mr. Lambert. We strongly support any efforts to strengthen 
the dispute settlement mechanism. NCBA would also support 
consideration of the carousel approach to changing the 
retaliation list periodically to keep uncertainty in the 
system, to keep political pressure in the system within the 
European Union to bring resolution to this issue.
    Other areas that we have suggested are things perhaps like 
a bond or an escrow account to be set up when the initial 
ruling comes into effect so there is an incentive for early 
settlement rather than the premium on stall and delay, or 
possibly the amount of injury could be set at the time that the 
reasonable period is determined with some type of a plus or 
minus in that injury amount depending on the length of time 
that the process is dragged out.
    But we wholeheartedly support any efforts to strengthen 
that settlement process.
    Mr. Warshaw. And we generally agree with Mr. Lambert, the 
position of USTR right now is a good starting point. But the 
thing that is important to us after the experience that we have 
been through in the dispute settlement process is that each of 
the steps can be relatively fast. You know reflecting back on a 
point that I made before, remember in the case of the initial 
decision against the European regime, it had taken them 3 
months to put in place the illegal regime but the WTO granted 
15 months of, quote, ``reasonable'' period to conform their 
system with WTO laws.
    So as an example something that we would encourage of USTR 
is to have a more speedy process, a more thorough process, 
something that more parallels the kind of activity that puts 
into place the illegality. We would like to see fixed 
timeframes that are relatively inflexible. We remember that we 
were supposed to see a panel report most recently about 60 days 
before the final panel report was issued. And every month 
counts in a situation like this.
    And finally that in the situation where there is 
noncompliance, that there be additional consideration given to 
punitive damages. That would, in addition to the actual damage 
sustained, cause the offending nation to act a little bit 
faster in bringing the situation to its rectification.
    Chairman Crane. The most vexing thing about the first 5 
years of the WTO's operation has been the European refusal to 
respect the dispute settlement findings against their 
restrictions on bananas and beef, and you suggest a carousel 
approach to retaliation. Could you describe that in greater 
detail?
    Mr. Warshaw. Let me give a little bit more dimension as I 
do that to the reasons why we actually like the idea of the 
carousel retaliation. The plain fact is this: There has been a 
list of European products that there have been over $300 
million of 100 percent duties in place for some time now. It 
doesn't seem like Europe minds this very much. We think that 
Europe didn't mind it because a list like this has to be very, 
very carefully selected. It has to be targeted against 
constituents who care, who will go to their governments, their 
members states, and complain and say ``we can't live with this 
anymore.''
    If you look at the lists both in the beef case and the 
banana case, we haven't seen any evidence that the constituents 
really care at this point. So there is not an enormous pressure 
being borne by the member states, hence the EU commission can 
take its time.
    We think that the idea of carousel is effective because it 
affords the possibility of going to alternatives as soon as you 
realize that the selected products are not having the desired 
impact so that effective products can be targeted, the 
retaliation can be put in place so that we can get the 
retaliation over with as quickly as possible. That is the 
objective. Not to live with retaliation but to get it over. We 
see carousel as something that makes it move faster.
    Mr. Lambert. I think we would concur. Our objective has 
never been retaliation. That gains the beef industry nothing. 
It distorts trade, stops trade. Our objective is to bring 
enough pressure to bear within the community to bring about a 
change in the regulations and to gain access to that market.
    In our case, there was an initial list $900 million worth 
of products published. Our final retaliation is $116.8 million. 
If all of those commodities and all of the countries were 
uncertain if their commodities were next on the list, that 
would keep them in the game, keep their pressure in the system 
to bring about a change of policy.
    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman. I am sorry, I was in 
the Rules Committee for part of your testimony and I missed it. 
But we will review it carefully. And the next panel, Mr. 
Chairman, has been here a long time. So I will refrain from 
questioning, just to comment we should hear your urgings that 
the dispute settlement process be more effective and the WTO 
therefore be more effective and relevant.
    I only urge that when other sectors urge the same or when 
people want to bring in other related trade issues, you have 
the same open mind or better than that, encouragement. Any way, 
we welcome your testimony.
    Thank you very much, Mr. Chairman.
    Chairman Crane. Thank you.
    Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman. And thanks for the 
testimony today.
    In response to the Chairman's questions you have given me 
most of what I was going to look for in the question and answer 
period. So if I could delve a little deeper into the topic of 
why you think in this case, beef and bananas in this 
particular, that the Europeans have not been willing to comply 
with, in this case, very clear dictates from first GATT, we had 
two GATT decisions in the banana issue, and the beef case there 
was a clear and unequivocal legal decision, then several WTO 
decisions. And I guess rotating in carousel seems to make sense 
to me but I would wonder if we could step back and think why do 
you all believe they are not complying and then maybe we would 
know better whether carousel would be effective.
    Mr. Lambert.
    Mr. Lambert. I think in the case of beef and in agriculture 
in general, Europe is heavily subsidized. They do not want the 
competition. We feel that we could be very competitive in the 
market from a price standpoint and a quality standpoint. We 
have always viewed this as much more protection for the 
domestic industry in the European Union than a consumer 
concern.
    We are willing to label our product and let the consumer 
make the choice. So from our viewpoint it is the fact that they 
are heavily subsidized and any technology or any competition to 
that system just increases the cost of their subsidy system.
    Mr. Portman. So as an economist you would look at this as 
this is just the cost of doing business. In other words, they 
are already so heavily subsidized why not subsidize it a little 
more, which is in effect absorbing the retaliation.
    Mr. Lambert. We have said we would cash out the 
retaliation.
    Mr. Portman. Do you think rotation would be effective then 
in dealing with the problem given the fact they are willing to 
absorb these losses?
    Mr. Lambert. We feel that it would increase the political 
pressure within the system. Whether that would be adequate 
given all the constraints and the political system that they 
have to deal within the European Union, I am not sure. But we 
would like to give it a try.
    Mr. Portman. The American Farm Bureau has been supportive. 
I spoke to the Farm Bureau president after his testimony 
because I didn't have a chance to ask him questions, but he 
indicated that he thought carousel was a good idea. And his 
response was sort of one of frustration that, you know, how 
else are we going to be able to get at this without being able 
to rotate and find more politically sensitive industries and 
businesses.
    Mr. Warshaw.
    Mr. Warshaw. Well, first of all I concur with that point, 
Congressman, that the rotation is absolutely necessary. Until 
we target the right products it will not be effective. To get 
the retaliation over is the first thing that we want to do, as 
I mentioned.
    I think that you asked two questions. One is why the EU is 
not agreeing to a future implementation that is WTO compatible. 
I think the answer is that in the case of bananas at least we 
have a situation where it has been ruled on that this licensing 
system under the tariff rate quota that grants licenses 
illegally needs to be disbanded, that people who had the 
historical access to market under WTO rules must be given 
continued access under a licensing regime. So in fact why they 
don't want to come up with a system that is WTO compatible is 
that they lose their illegally gotten licenses and therefore 
the illegal profits that they carved out for European 
interests.
    Interestingly enough, the Europeans comment from time to 
time that the cocomplainants, the United States and the five 
Latin governments are not in agreement on a solution. In fact 
that is not the case, that if you interview each of the 
governments that were plaintiffs in the case, you would find 
that they all agree that a tariff rate quota that is properly 
constructed will conform with WTO's norms.
    The why are they not complying sooner aspect of the 
question is just simply that they are still making money and 
they don't have an incentive to stop making that money. And 
until someone clamps down, they will continue to earn those 
illegally conceived profits.
    Mr. Portman. When will they realize that? I guess my final 
question would be, and it is to both Mr. Lambert and Mr. 
Warshaw, do you think that the EU properly understands that 
retaliation will not be lifted until the U.S. industry receives 
some relief? Is that message clear to the Europeans? And if 
not, what can this Congress do to make that message very clear?
    Mr. Lambert. From our viewpoint I think it is clear, 
although they seem to hold out some false hope that they will 
offer some type of a compensation package that will be 
acceptable and will entice us to removing retaliation. So I 
think as much to the degree that we can send a united message 
from the Hill as well as from the administration, that it is 
very important that the European Union comply with the rulings, 
if for no other reason than for the sake of the WTO as a 
dispute settlement mechanism, and that sooner or later they 
will win a case and they would not want to be treated the way 
that we have been treated in this instance.
    Mr. Portman. Mr. Warshaw.
    Mr. Warshaw. I have been told by senior members of the 
European Commission that they understand that the retaliation 
will not be lifted and I will tell you that they don't seem to 
mind. They have taken their time. It is a deliberate schedule. 
The rulings came out as you know in April, and we are still 
sitting with the fact that the commission has said that come 
September 9 they will make a proposal and all of the proposals 
that they have made in the meantime, that they put out to the 
trade, and to us for that matter are illegal under WTO law.
    Mr. Portman. If there is anything we can do to make it 
clear that we in the U.S. Congress and the USTR and the 
industry are one with regard to this strong message that unless 
there is compliance there will not be backing down on 
retaliation, it would be helpful. So you need to let this 
Subcommittee know and this Chairman know.
    Thank you, Mr. Chairman.
    Chairman Crane. Mr. Becerra.
    Mr. Becerra. I want to just thank the witnesses and thank 
them for being so understanding of the time. And I will 
withhold on any questions. Yield back.
    Chairman Crane. Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman. Thank the panel. You 
know, Mr. Portman and I, banana and beef guy, it seemed like 
this was a threshold on some decisions and not getting things 
done under the WTO. Because WTO overall has ruled about 29 
times in our favor. So when you look at the overall situation, 
Mr. Portman, I don't know why they selected bananas and beef, 
not really put some teeth in it-- Mr. Warshaw, you are talking 
about--because they don't seem like they mind. And same thing 
with beef. They don't seem like they mind about that.
    So, it is going to be an interesting situation to see what 
WTO does. And let me just say, their credibility is at stake. 
We got to have and need a WTO, but I can say in the beef case, 
and I know Mr. Portman will speak more detail and knowledgeable 
about bananas, he and I have talked going back and forth lots 
of times about the bananas and about beef, but in the case of 
beef, it has been a disaster in my opinion. And I have talked 
to a lot of cattlemen. When you think 10 years ago they started 
banning beef, and the long delay. And then after that period of 
time, a lot of my cattle people felt like it was losing about a 
$500 million market. But they were also willing to come down 
and say well, hey, 250 million. And then we projected, say we, 
U.S. Trade Representative, projected $205 million dollar loss, 
and then by the time they got through the WTO settlement, out 
about $116 million.
    Rob, that is less than bananas. I didn't know that. But, 
you know, but look at that, and you think, my gosh, we are not 
very strong in trying to get our point across.
    And I hope Mike Moore will insist on a stronger following 
of the WTO rules and where we are. But, you know, this becomes 
quite alarming. We know there is a group in the Congress, they 
don't fast track, they don't want any kind--the fear is out 
there. You couple that with what has happened to bananas and 
beef, and putting some things in jeopardy, I think we have got 
to see a stronger position along the way there.
    Both have mentioned about subsidies. I totally agree. You 
know, it is subsidy structure in the European Union I think we 
need to go after a great deal. Now, a lot of people do not know 
we do not receive subsidies in the cattle industry. It does in 
the crops and things like that, but we do not have that subsidy 
in cattle, but yet you look around and you see the overall 
budget of ECU, 70 percent or so is utilized for agriculture, 
not only just to subsidize to production, but also in necessary 
taking losses in order to capture markets around the world. 
Somewhere we got to address that fact.
    And also, that doesn't count the subsidies from the 
individual countries within the ECU. So you look at that. And 
that is why I talk about fairness. We have got to get the teeth 
in that and I have a lot of high hopes and hope that we can do 
some things to reconcile that. But, right now, as one who has 
fought this battle and, like I say, it is not a fly by-night 
thing for me, and it is not a political thing. My roots go deep 
in agriculture, and the cattlemen are probably my closest 
friends in the State of Oklahoma. I know there is no--they are 
so independent. They stick it out through thick and thin, 
drought, everything else. And I just cannot sit idly by when 
they are really totally feeling the effects of it in a big way.
    So I just want to thank both of you for being here, all 
three of you for being here and presenting this case. I think 
it is so timely and important, and I guess I keep saying the 
credibility, it could be in jeopardy next spring with the 
resolution coming from Congress if things do not turn around. 
We need to make sure that we get out and try to see what we can 
get done. We got to have the fairness here.
    Mr. Chairman, I might just say one more thing. I have such 
strong feelings about trade and you and I have shared that. I 
was thinking a little earlier, back when I was a youngster in 
De Queen, Arkansas about 4 years of age I used to come to town 
with my grandpa, Grandpa Johnson in a wagon, we had a rick of 
wood in the back of the wagon, and he had a horse and a mule 
usually tied or a horse or mule or combination of them tied on 
the back of the wagon. It was always a big day, Mr. Portman, 
when we did that on Saturday because we always went to the 
square in De Queen, Arkansas.
    And I would sit there in under the shade trees with him as 
my grandpa would negotiate the trade of that mule and horse and 
selling or trading of that rick of wood for something else. And 
I always wondered about grandpa, because at home he had, Mr. 
Chairman, a box, a bolo knife. Any of you know what a bolo 
knife is? A bolo knife, that was the thing back then, but I was 
always so thankful when he got to the point of making that 
trade he would say, I will pitch in a bolo knife to boot to 
make it work. You may not have heard the word to boot in a long 
time. But I know that was going to sink that trade. And what it 
really meant was that grandpa was going to go by the drugstore 
and we were going to get root beer on our way back. Nary a 
nickel, all we could drink.
    I look back and I think we need some bolo knives. We need 
to get some teeth in finalizing some of these agreements to 
make sure we can make it happen for the United States of 
America. Our future is at stake. Our children's future is at 
stake. I want not only Oklahoma but I want the United States to 
be the leader in the world.
    Thank you, Mr. Chairman.
    Chairman Crane. Thank you, Mr. Watkins. And I want to thank 
our panel for their participation in this effort. And it will 
be ongoing. This is not the only day we are going to have 
hearings on this subject but your input is extremely valuable 
to us, and we would appreciate even when you are not here 
present, in person, please keep the chain of communication 
going to us. We need all the input we can get.
    And with that, this panel is in recess, and our next panel 
I hope is here. Let me call up first in the next panel though, 
David Smith, director, Public Policy Department of the American 
Federation of Labor and Congress of Industrial Organizations. 
David was tied up at another hearing where he was testifying, 
so we will have him as our first witness in the next panel. And 
then Charles Lake, vice president, American Family Life 
Insurance Co., on behalf of the American Council of Life 
Insurance; Gilbert Sandler, senior partner, Sandler, Travis & 
Rosenberg, on behalf of the Washington International Assurance 
Co., Itasca, Illinois; Rhett Dawson, president, Information 
Technology Industry Council; and Sheldon R. Jones, director, 
Arizona Department of Agriculture in Phoenix.
    We will proceed first with you, David, and then the other 
witnesses in succession.

 STATEMENT OF DAVID SMITH, DIRECTOR, PUBLIC POLICY DEPARTMENT, 
    AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL 
                         ORGANIZATIONS

    Mr. Smith. Mr. Chairman, Members of the Subcommittee, I 
apologize for not having gotten back here for the last panel. I 
thought everything would work perfectly, that I would testify 
at the Judiciary Committee and get back here. Of course I made 
a misjudgment and apologize.
    Chairman Crane. And in this town nothing works perfectly, 
David.
    Mr. Smith. Well, I appreciate your indulgence. Let me try 
to reciprocate by being brief. You have my written testimony 
and I would appreciate that it could be placed into the record.
    Chairman Crane. All oral testimony, if you can all try and 
keep it to about 5 minutes, all written testimony will be made 
a part of the permanent record.
    Mr. Smith. I will do that. On behalf of our 14 million 
members, we certainly appreciate the opportunity to testify 
today. The subject that you are talking about is of enormous 
importance. It is of enormous importance not simply to working 
people here but to working people around the world.
    The tone I want to set really has two dimensions. I want to 
talk specifically about the negotiating agenda. But we need to 
pay attention to a second point that Mr. Watkins was making as 
I was coming in I think it is a fundamental point. This system 
is not working well enough for us to have any assurance that it 
will endure, and we can't underscore that point too firmly. I 
think about the last 30 years, a period of enormous increase in 
global integration, trade has increased several times in orders 
of magnitude as a share of our GDP and others, but these last 
30 years have been marked by the slowest periods of growth 
internationally in the postwar era. They have been marked by 
increasingly violent and increasingly volatile financial 
crises, some of which we are still feeling the effects of. 
Income distribution has worsened, both inside of countries and 
among countries. This is hardly a track record which suggests 
that the evidence is unequivocal that greater global 
integration, more trade, more open markets, more financial 
integration is necessarily good for people.
    In the real world, in the world where people get up in the 
morning and go to work for a living, where people make a 
commitment to an employer and expect to have that commitment 
honored, in the world where developing countries are struggling 
to find a place in the international system, but see their 
currencies come under attack, their standards of living 
destroyed overnight, tens of millions of Indonesians thrust 
back into poverty, at the stroke literally of an arbitrageur's 
computer, we ought to be very cautious about whether or not the 
kind of support we need for an increasingly integrated global 
system will endure.
    Part of what is missing, part of what is missing from this 
system is decent and fully cognizant respect for the other half 
of the economic equation, the half that is provided by people 
who work for a living. We provided a lot of protection for 
people who own intellectual property, we provided a lot of 
protection and intend to provide more for people who trade 
financial instruments. We provided a lot of protection for 
people who own real property. But we failed to meet our 
obligation to people who work for a living.
    The WTO agenda needs to begin in Seattle by asking two 
questions. The first question that it ought to ask is: What 
have we learned during the last 30 years, not simply in the 5 
years since the WTO has been in existence, but what have we 
learned during the last 3 decades in which this grand project 
of global integration has proceeded so rapidly? How do we 
explain and understand and take measures that correct the fact 
that income distribution hasn't improved, it has deteriorated; 
that financial stability hasn't become the norm, in fact 
financial instability has become the norm. And how do we 
address the question facing many workers in this country, Mr. 
English and others raised it this morning, of the transmission 
belt of trade, transmitting our failures internationally, our 
failures in the international financial system into domestic 
labor markets, into domestic product markets and resulting in 
great disruption here in the steel industry, in the garment 
industry, and the electronics and auto parts industry.
    The WTO agenda ought to begin with saying let's take a deep 
breath, let's step back, let's take a look, let's try to 
understand what has happened.
    Second, the WTO ought in Seattle to build on a commitment 
it made at the last ministerial in Singapore regarding worker 
rights. The worker rights that I am talking about are what have 
come to be known as core worker rights. They are reflected in 
the ILO Declaration on Fundamental Principles and Rights at 
Work, adopted with the strong support of our government a year 
ago in Geneva. That establishes a set of not quantitative, not 
arithmetic rights, but a set of human rights.
    It argues that human beings ought to have the right to 
freedom of association, meaning that they ought to be able to 
join a trade union if they wish without interference either 
from an employer or a government; that they ought to have the 
right to collectively bargain; that we ought to outlaw child 
labor, that we ought to get kids, wherever they live, in school 
so that as they grow they can become real contributing members 
of their country's economy; that we ought not to use prison 
labor illegally producing goods at prices that obviously 
distort labor markets because the men and women who are 
incarcerated that are producing goods for the commercial 
marketplace aren't compensated; that these rights ought to be 
honored in our trading system because the absence of these 
rights is itself a distortion.
    We think about distortions as if they were only in the form 
of monetary distortions, subsidies on the one hand or some 
inappropriate set of nontariff barriers to the movement of 
goods in the economy. In fact, the denial of these basic human 
rights is a distortion and a distortion which creates severe 
consequences both for the people whose rights have been denied 
and those who are forced to compete against goods produced in 
countries where the comparative advantage is the increased 
ability to degrade labor or to despoil the environment.
    We ought to take another step in Seattle and we ought to 
take the step, and you discussed it a bit with Ambassador 
Esserman this morning, of making concrete the obligation for 
candidate members, those seeking accession to the WTO, making 
concrete what we said in Singapore in general, which is that 
all countries accept these standards and commit themselves to 
honoring them.
    I want to just briefly say the market access questions that 
you spent some time on this morning are things that we support. 
It is an agenda that we think ought to be pursued. But I want 
to emphasize the other things I have talked about, and, last, 
there is an enormous need in the dispute settlement mechanism, 
in the proceedings as the WTO considers both the built-in 
agenda and new items on the negotiating agenda, there is an 
enormous need for greater transparency and access for working 
people, for citizens' groups of all kinds.
    So that what--much too often in reality as well as in 
characterization, what is described as a closed club of 
international elites becomes an organization which people can 
understand, can get at, and can influence in the ways that mean 
so much to their lives. Thank you very much.
    Chairman Crane. Thank you.
    [The prepared statement follows:]

Statement of David Smith, Director, Public Policy Department, American 
Federation of Labor and Congress of Industrial Organizations

    Mr. Chairman, members of the Subcommittee, thank you for 
this opportunity to present the views of the AFL-CIO on this 
important topic. I will summarize my comments here and submit 
my written testimony for the record.
    As the 20th century draws to a close, the global economy is 
still reeling from the turmoil unleashed by a series of serious 
financial crises. A quarter of the world economy remains mired 
in recession, and sluggish growth in much of the rest of the 
world calls into question prospects for rapid global recovery 
and improving living standards for the majority of the world's 
workers. While increased global integration has brought growth 
and dynamism to some sectors and to some corporations, its 
downside has become more apparent and more troubling.
    Long-term trends toward growing global inequality continue, 
both between and within countries. In sub-Saharan Africa and in 
many other of the poorest countries, per capita incomes are 
lower today than they were in 1970. The gap between per capita 
incomes in countries with the richest fifth of the world's 
people to those with the poorest fifth widened from 30-to-1 in 
1960, to 60-to-1 in 1990 and to 74-to-1 in 1995. Meanwhile, the 
richest three people in the world have assets greater than the 
combined incomes of the 600 million people living in the 48 
poorest countries.
    Most American workers have not benefitted from global 
integration either. Real wages have stagnated or declined for 
the majority of American workers, while the wealthy few have 
reaped disproportionate gains.
    The economic and political power of transnational 
corporations has become increasingly concentrated, both through 
mergers and acquisitions and, in some industries, through rapid 
growth. Dramatically unequal access--between men and women, 
among English and non-English speakers and among countries--to 
technology, education, and Internet connections will exacerbate 
these trends.
    In the United States, fundamentally misguided trade 
policies have resulted in ballooning trade deficits, the loss 
of hundreds of thousands of high-paying manufacturing jobs and 
a system of international rules that has undermined domestic 
measures designed to protect human rights and the environment. 
Trade agreements have opened our markets while leaving in place 
other countries' barriers; they have empowered multinational 
corporate giants while leaving workers and communities to fend 
for themselves in an increasingly bitter global competition for 
scarce jobs and investment.
    Chronic and growing U.S. trade deficits have led to a 
massive international debt that is not sustainable in the long 
run. The underlying problems must be addressed, or these trade 
imbalances will bring the current economic boom to an abrupt 
halt.
    If we do not fundamentally change U.S. policies and the 
policies of the international institutions in which the U.S. 
government plays such an important role, we will continue to 
lose good jobs, our trade deficit will continue to soar, 
inequality will continue to grow, corporate power will become 
more concentrated and the world's poorest nations will fall 
further behind. The American people will--and should--reject a 
policy of global engagement that comes with these costs. There 
is an alternative.
    America's unions are committed to a new internationalism 
focused on building international solidarity around a 
progressive, pro-worker, pro-environment, pro-community 
international economic policy.

Global Turning Point

    The global community stands at an important turning point--
key decisions will be made in the near future, both in the 
global policy arena and by national governments. In November, 
the world's trade ministers will consider whether to launch an 
ambitious new round of negotiations and what such negotiations 
should address. The international financial institutions are 
under pressure to reevaluate the conditions they impose on 
developing countries in exchange for loans and financial 
assistance, in the wake of the Asian financial crises. The U.S. 
political system is stalemated with respect to new trade 
negotiating authority, unable to build consensus around 
traditional trade bills.
    We should use this moment to pause and take stock of 
globalization so we can begin to repair the damage that has 
been done by misguided and careless policies. After several 
decades of tearing down trade barriers and increasing the 
mobility and flexibility of direct investment as well as 
speculative capital, we need to take an honest and careful look 
at the results. What has been the impact of current trade and 
investment liberalization policies on development, income 
distribution, financial stability and American workers? Have we 
struck the right balance between the need for global rules and 
the scope of domestic regulation on public health, the 
environment and human rights?

Current Rules Have Failed

    We believe that the current framework of global rules has 
failed miserably on many crucial counts. The international 
financial system has promoted policies that left many 
developing countries vulnerable and unprepared in the face of 
currency volatility and unpredictable swings in speculative 
capital flows. The result was thousands of bankruptcies and 
suicides, and tens of millions of people losing their 
livelihood and falling into desperate poverty. The 
international financial institutions pressured crisis countries 
to export their way out of their problems--exacerbating 
deindustrialization and a rising trade deficit here in the 
United States.
    Trade and investment rules have focused on guaranteeing the 
mobility of goods, services and capital across borders without 
giving adequate attention to the social impact of 
liberalization. In doing so, they have strengthened the power 
of corporations bargaining with their workers, as well as with 
national and state governments.
    But these trade and investment policies have done nothing 
to discipline illegal and anti-social behavior by corporations 
and governments competing in a fiercely competitive global 
economy. As a result, American workers have found themselves 
increasingly in head-to-head competition with workers in other 
countries who lack basic human rights, and legitimate national 
regulations protecting the environment, consumer standards and 
workplace health and safety have been challenged as disguised 
restraints on trade.
    Development policy has been inadequate, inefficient and 
misguided. If the global economy does not generate more 
equitable outcomes in the developing world, then the entire 
global system will become increasingly unstable and 
unsustainable. We must use trade and investment agreements to 
reward those governments that respect workers' rights, protect 
the environment, and allow democracy to flourish, not those 
that create the most hospitable climate for foreign investment, 
regardless of social concerns.

WTO Priorities

    When the world's trade ministers gather in Seattle later 
this year, the U.S. government should insist that the WTO take 
concrete steps to achieve the following goals:
     Review the impact of trade liberalization on 
income distribution, economic development and financial 
instability before launching major new negotiations.
     Incorporate enforceable rules on core labor 
standards (including the freedom of association, the right to 
bargain collectively and prohibitions on child labor, forced 
labor and discrimination in employment).
     Establish accession criteria requiring that new 
WTO members are in compliance with core workers' rights.
     Overhaul existing rules to strengthen national 
safeguard protections in the case of import surges and ensure 
that trade rules do not override legitimate domestic 
regulations. It is essential that WTO rules not infringe on the 
ability of national or state governments to use their 
purchasing power to protect human and workers' rights.
     Ensure that WTO rules do not create pressure on 
governments to privatize public services.
     Carry out institutional reforms, enhancing 
transparency, accountability and access, so that citizens can 
understand the basis for WTO decisions, as well as provide 
meaningful input to this process.
     Provide more technical and legal support to 
developing countries so their participation in negotiations is 
not hampered by lack of resources or technical expertise.
    In addition, the AFL-CIO believes that new negotiations on 
investment and competition policy are headed in the wrong 
direction--toward shoring up the rights of investors at the 
expense of other members of civil society and U.S. laws.

Coordinating the Work of the International Organizations

    The AFL-CIO supports the International Labor Organization's 
(ILO) 1998 Declaration on Fundamental Principles and Rights at 
Work and urges the ILO to move forward speedily with a strong 
and energetic follow-up mechanism. Now that the ILO and the 
international community have succeeded in building consensus 
around the universality and importance of the core labor 
standards, it is crucial that these core standards be 
incorporated into the work of the other international 
organizations, including the WTO, the International Monetary 
Fund (IMF), and the World Bank
    The IMF, the World Bank and the regional banks must 
fundamentally rethink the conditionality they impose on 
developing countries. Rather than forcing austerity, 
privatization, deregulation, export-led growth, trade and 
investment liberalization and weakening of labor laws, the 
international financial institutions must emphasize domestic-
led growth, democratic institutions and the observance of core 
labor standards.
    The international financial institutions and the 
governments of the industrialized countries must take urgent 
steps to grant deep debt relief to the least developed 
countries that are in compliance with core labor standards so 
these countries can meet the basic human needs of their 
populations and lay the foundation for future growth.

The Economic Imperative

    The current regime of international trade and investment 
rules has failed on economic as well as moral terms. Aggregate 
global growth is slowing, not accelerating. Global inequality 
is growing. And many of the nations heralded in the recent past 
as stars of the global economy have found that repressing 
political dissent, stifling an independent labor movement and 
concentrating economic and political power in the hands of the 
corrupt few do not provide a basis for long-term growth and 
stability.
    The AFL-CIO is facing the challenges of the global economy 
in three ways: by building international solidarity, working to 
change the rules of the global economy and fighting on the home 
front to build strong, effective unions and ensure that workers 
have a voice in the national political debate.
    Thank you for your time and attention. I look forward to 
answering any questions you may have.
      

                                


    Chairman Crane. Mr. Lake.

 STATEMENT OF CHARLES LAKE, VICE PRESIDENT AND COUNSEL, AFLAC 
    JAPAN, ON BEHALF OF AMERICAN COUNCIL OF LIFE INSURANCE, 
AMERICAN INSURANCE ASSOCIATION, HEALTH INSURANCE ASSOCIATION OF 
 AMERICA, INTERNATIONAL INSURANCE COUNCIL, AND THE REINSURANCE 
                    ASSSOCIATION OF AMERICA

    Mr. Lake. Mr. Chairman, I am Charles Lake, vice president 
and counsel of AFLAC Japan. AFLAC is the largest foreign 
financial services company in Japan in terms of profits, and 
the second most profitable foreign company of any industry in 
Japan. AFLAC now insures almost 25 percent of Japan's overall 
population.
    My testimony is presented on behalf of the American Council 
of Life Insurance, the American Insurance Association, the 
Health Insurance Association of America, the Reinsurance 
Association of America, and the International Insurance Council 
where I serve on the board of directors. Collectively, these 
associations represent the major U.S. insurance and reinsurance 
companies with international operations.
    As a former USTR negotiator involved in the completion of 
the General Agreement on Trade and Services, I am very honored 
to appear in front of this distinguished Subcommittee to 
present the insurance industry's views regarding the 
negotiating objectives for the WTO Seattle Ministerial.
    U.S. insurance providers are among the most competitive in 
the world. Our cutting-edge products, services, and 
technologies allow us to offer customers the highest quality 
products in the world at competitive prices when the 
playingfield is even and a fair competition is permitted. Today 
I wish to address how our industry believes the WTO 2000 round 
of negotiations can enhance our ability to compete overseas 
while encouraging sound and consistent regulation that protects 
policyholders.
    In the upcoming WTO services negotiations, the insurance 
industry believes that all WTO countries should commit to 
procompetitive regulatory principles--sound insurance 
regulation that allows free and fair competition.
    GATS recognizes the right of its signatory jurisdictions to 
regulate their domestic service industries. Regulations should 
be justified by an objective and clearly defined need, not by 
whim or domestic political circumstances. Unfair and unequal 
regulatory requirements and restrictions often deny foreign 
firms the opportunity to compete on an equal basis with local 
firms. In addition, lack of transparency can provide the 
domestic industry with a distinct and unfair competitive 
advantage. A detailed explanation of all of our insurance 
regulatory principles is contained in my full written 
statement.
    With my remaining time I would like to highlight several 
key points that we feel are particularly timely and appropriate 
with our priority emerging markets.
    Solvency and prudential focus: Regulation should focus on 
ensuring that institutions meet reasonable solvency and 
prudential requirements as the primary means of protecting 
consumers. In most cases governments should allow the markets 
to determine the most effective products and pricing of those 
products in a competitive regulatory environment that 
encourages innovation and product diversity.
    A transparent legal, administrative and regulatory 
environment: Standards, requirements, and codes of practice 
need to be promulgated with consultation, full documentation 
and accessibility to all market participants. Regulators should 
be impartial and an independent government entity.
    Income security: The U.S. insurance industry supports the 
development of a WTO mechanism that encourages global pension 
reform based on free market principles with sound regulation 
and tax treatment that encourages citizens to offset the 
forecasted large gaps in public expenditures.
    Access to international reinsurance markets: All insurers, 
domestic and foreign, should have access to the international 
reinsurance market with cross-border transactions authorized 
and monopolistic mandatory cessation requirements prohibited.
    Taxation stability: The agreement should require the 
scheduling of all future taxation of insurance products.
    Improving definitions: USTR should determine the extent to 
which all United States insurance industry export product lines 
are currently covered by existing definitions.
    Dispute settlement: The U.S. should work to ensure that the 
WTO dispute settlement process provides a meaningful mechanism 
to challenge practices that are inconsistent with all current 
and future commitments.
    In conclusion, while these principles are ambitious, they 
are intended to build on the Financial Services Agreement so 
that the WTO 2000 negotiating objectives will not only improve 
traditional market access commitments, but improve regulatory 
standards to foster financially sound and competitive insurance 
markets worldwide.
    Our European insurance industry colleagues support these 
policy objectives. We are currently working with our Latin 
American and Asian counterparts to gain their support as well. 
Also we have begun consultations with U.S. State regulators and 
their international counterparts to seek their support for our 
mutual objectives. We believe we have a historic opportunity to 
improve our ability to provide our products and services to the 
people of the world, and we look forward to working with the 
Congress as well as international trade negotiators to 
achieving these objectives.
    I thank you, Mr. Chairman and Members of the Subcommittee, 
for this opportunity to outline our negotiating objectives for 
the WTO Seattle Ministerial, and I would be pleased to answer 
any questions you may have.
    Chairman Crane. Thank you, Mr. Lake.
    [The prepared statement follows:]

Statement of Charles Lake, Vice President and Counsel, AFLAC Japan, on 
behalf of American Council of Life Insurance, American Insurance 
Association, Health Insurance Association of America, International 
Insurance Council, and the Reinsurance Asssociation of America

    Mr. Chairman, I am Charles Lake, Vice President and Counsel 
of AFLAC Japan. AFLAC is the largest foreign financial services 
company in Japan in terms of profits, and the second most 
profitable foreign company of any industry in Japan. My 
testimony is presented on behalf of the American Council of 
Life Insurance, the American Insurance Association, the Health 
Insurance Association of America, the Reinsurance Association 
of America, and the International Insurance Council, where I 
serve on the Board of Directors. Collectively, these 
associations represent the major U.S. insurance and reinsurance 
companies with international operations.
    As a former USTR negotiator involved in the completion of 
the General Agreement on Trade in Services (GATS), I am very 
honored to appear in front of this distinguished committee to 
present the insurance industry's views regarding the 
negotiating objectives for the WTO Seattle Ministerial.
    U.S. insurance providers are among the most competitive in 
the world. Our cutting edge products, services and technologies 
allow us to offer customers the highest quality products in the 
world at competitive prices when the playing field is even and 
fair competition is permitted. AFLAC has built upon product 
knowledge and underwriting expertise learned in the U.S. and 
created in 1974 an entirely new category of products in Japan. 
AFLAC now insures almost 25% of Japan's overall population.
    AFLAC Incorporated is a Fortune 500 company which 
insures more than 40 million people worldwide. AFLAC was ranked 
as the top insurance company in Forbes Global Business & 
Finance magazine's ``A-plus'' list of the world's best 
companies. AFLAC's experience is often used in MBA curriculums 
as an example of what U.S. companies can do if they take their 
unique and innovative products overseas.
    When allowed to fairly compete in foreign markets, our 
industry provides substantial benefits to foreign consumers and 
economies, to domestic policyholders through increased 
financial resources and risk diversification, to stockholders, 
and the U.S. services trade surplus through return on 
investments. Since the U.S. market's ability to absorb our wide 
range of insurance products is limited, an increasing number of 
life pension and annuity, property and casualty, reinsurance 
and surety companies have significantly strengthened their 
commitment to conducting business overseas or have for the 
first time established an international presence to begin 
offering their products outside of the U.S. This trend will 
only intensify, in part because of the success of the upcoming 
WTO round. In that regard, we deeply appreciate the Committee's 
leadership in establishing tax policy that supports U.S. trade 
policy. The extension of the exemption from Subpart F for 
active financing income is crucial in allowing U.S. financial 
companies, in general, and insurance companies, specifically, 
to compete in the global marketplace.
    Today I wish to address how our industry believes the WTO 
2000 Round of Negotiations can enhance our ability to compete 
overseas while encouraging sound and consistent regulation that 
protects policyholders, and increases trust in the private 
insurance industry. In the upcoming WTO services negotiations, 
the insurance industry believes that all WTO countries should 
commit to pro-competitive regulatory principles--sound 
insurance regulation that allows fair and free competition.
    The December 13th 1997 WTO Financial Services Agreement, 
created the first multilateral, legally enforceable, and 
permanent agreement covering insurance trade and investment. 
The agreement is designed to reduce and/or eliminate 
governmental actions that prevent financial services, including 
insurance, from being freely provided across national borders 
or that discriminate against foreign-owned financial services 
firms. When it came into force on March 1, 1999, the agreement 
created a floor of specific insurance market access, national 
treatment, and transparency commitments, below which countries 
will not be able to act without facing binding adjudication and 
sanctions. However much more liberalization needs to occur.
    The WTO's GATS has a built-in requirement for progressive 
liberalization negotiations, the first of which must begin no 
later than January 1, 2000. In contrast to the 1997 
negotiations on basic telecommunications and financial 
services, these negotiations will cover a large spectrum of 
sectors. Since this is the beginning of a new round, the 
negotiating format and structure of the agreement are now open 
to redesign. My industry colleague, Dean O'Hare, Chairman of 
the Coalition of Services Industries, will address the overall 
services negotiations, so I will limit my comments to our 
insurance-specific objectives and consensus building activities 
to promote sound, pro-competitive insurance regulatory 
principles.
    GATS recognizes the right of its signatory jurisdictions to 
regulate their domestic service industries. Many services are 
regulated by governments to ensure the fundamental goals of 
consumer protection and guarantee the supply of services to 
consumers. These fundamentals are not disputed by the U.S. 
private sector, although there are different ways of ensuring 
such fundamental goals through regulation. Some of these ways 
will be more restrictive than others. Regulations should be 
justified by an objective and clearly defined need, not by whim 
or domestic political circumstances.
    An essential element of true financial services 
liberalization should be the global development of pro-
competitive regulatory principles. Open, well-regulated service 
markets are the necessary foundation for a country's ability to 
compete in global markets for goods, agriculture and services. 
Market access alone does not guarantee liberalization.
    We believe that the negotiations should continue to focus 
primarily on market access and national treatment needs. 
However, they should also focus on another significant barrier 
to trade that transcends both market access and national 
treatment objectives--burdensome regulatory systems that can 
serve as major impediments to free trade.
    While traditional market access and national treatment 
liberalization commitments are a significant step toward market 
liberalization, these principles alone do not assure fair 
competition. Unfair and unequal regulatory requirements and 
restrictions often deny foreign firms the opportunity to 
compete on an equal basis with local firms. In addition, a lack 
of transparency, combined with uneven enforcement of 
regulations, can provide the domestic industry with a distinct 
and unfair competitive advantage.
    Regulation of financial services markets must protect 
consumers; however, some regulatory systems may actually 
deprive consumers of better products, lower costs, and improved 
service. For example, restrictions on the types of products 
that can be offered by a company or unreasonably lengthy 
product approval procedures prevent firms from introducing new 
products or developing products that are tailored to the needs 
of local customers. Moreover, restrictions on the pricing of 
products limit the ability of companies that are run more 
efficiently to offer consumers better prices. Other types of 
regulations that prevent foreign firms from competing fairly 
with local businesses include: exchange controls, deposit and 
lending rate ceilings, investment restrictions, qualitative 
lending controls, privileged access to credit, and restrictions 
on business powers.
    Lack of regulatory transparency is another barrier to fair 
and open competition in financial services. In some countries, 
regulations are not published in a way that is easily 
accessible to all businesses. In other countries, the process 
for developing regulations is opaque and there is no 
opportunity for local private sector input. Even if the 
regulations are available, the inconsistency of enforcement (or 
even non-enforcement) against local firms can handicap foreign 
competitors. Financial services firms that dutifully comply 
with domestic regulations simply cannot compete fairly or 
successfully with local companies that can lower costs by 
ignoring those same regulations. Political interference in the 
development and implementation of regulations adds yet another 
impediment to fair competition as local leaders intervene on 
behalf of local businesses, often resulting in disparate 
regulatory treatment for a foreign firm.
    It is a difficult task to draw a clear line between market 
access issues, national treatment concerns and domestic 
regulation principles. Countries may disguise a market access 
issue, such as restricting new products under domestic 
regulation arguments, by characterizing it as consumer 
protection. It is the role of the private sector to assist 
government negotiators in assessing market situations, 
identifying protectionism and discriminatory regulations, and 
persuading countries to commit to regulation that allows fair 
and free competition.
    While considering areas of possible liberalization under 
the pro-competitive theme, we are conscious that as this is the 
beginning of a new round of negotiation it is now possible to 
address areas that have traditionally not been included in the 
WTO. Now is the appropriate time to consider building upon the 
Financial Services Agreement to create a second generation of 
trade agreements that will not only allow U.S. insurance 
providers to compete more effectively in international markets 
but which will continue the relevancy of the WTO in the future.
Solvency and Prudential Focus:

    Regulations should focus on insuring that institutions meet 
reasonable solvency and prudential requirements as the primary 
means of protecting consumers. In most cases, governments 
should allow the market to determine the most effective 
products and the pricing of those products in a competitive 
regulatory environment that encourages innovation and product 
diversity.
    Mechanisms to accelerate the licensing of new insurance 
products should be encouraged. Expedited licensing procedures 
should be available for those products, which already fit into 
the existing regulatory framework and are available in the 
market. No limits should be placed upon the number or frequency 
of new product introductions by a company.
    Appropriate rules and procedures that do not discriminate 
against foreign insurers and are consistently applied should be 
established and made public governing the identification and 
handling (including closure) of financially troubled 
institutions.

A Transparent Legal, Administrative, and Regulatory 
Environment:

    Standards, requirements, and codes of practice need to be 
promulgated with consultation, full documentation and 
accessibility by all market participants. Foreign insurers 
applying for authorization to do business should be provided a 
written statement, setting out fully and precisely the 
documents and information the applicant insurer must supply for 
the purpose of obtaining authorization. This statement should 
aim to simplify and accelerate, as appropriate, the explicit 
procedures to be followed.
    The regulatory body should be an independent government 
entity. Decisions regarding the procedures used by the 
regulators/supervisors should be impartial with respect to all 
participants and not supplant a competitive marketplace. The 
government should ensure that the financial services regulatory 
bodies have sufficient resources and trained personnel to 
effectively enforce the solvency, prudential and consumer 
protection laws and regulations.

Income Security:

    Supporting the ``three pillar'' pension system currently 
recommended by the World Bank and the Organisation for Economic 
Co-operation and Development, the U.S. industry supports the 
development of a WTO mechanism which encourages global pension 
reform based on free market principles, with sound regulation, 
and tax treatment that encourages citizens to offset the 
forecasted large gaps in public expenditures through either 
group or individual forms of savings and benefits.

Access to International Reinsurance Markets:

    International reinsurance market access is necessary in all 
product lines to better spread loss exposures, absorb 
catastrophes and marshal sufficient capacity to insure adequate 
market resources to avoid any crisis. Therefore, all insurers, 
domestic and foreign, should have access to the international 
reinsurance market, with cross-border transactions authorised 
and monopolistic mandatory cession requirements prohibited. 
Regulations should provide locally established direct insurers 
with the option to take credit for cross border reinsurance 
secured by either: letter of credit, reasonable trust fund 
deposit, or funds withheld.

Taxation Stability:

    The agreement should require the scheduling of all future 
taxation of life insurance pension and annuities, property and 
casualty insurance, reinsurance, long-term care, disability 
income and retirement security products, prior to entry into 
force via a biannual notification process.

Improving Definitions:

    USTR should determine and confirm with the WTO Secretariat 
the extent to which all U.S. insurance industry export product 
lines are currently covered by existing definitions. Industry 
suggested additions that are not currently explicitly covered 
include: life reinsurance, pension products and services such 
as plan administration, annuities, surety bonds and financial 
guarantees, disability income and long term care insurance, 
health care and medical insurance, as well as ancillary 
services such as pension fund management and related 
endeavours.
    Notwithstanding setting higher standards for 
liberalization, without a fundamental strengthening of the 
dispute resolution mechanism other changes will be largely 
pointless. The U.S. should work to ensure that the WTO dispute 
settlement process provides an effective and meaningful 
mechanism to challenge practices that are inconsistent with all 
current and future commitments.
    In conclusion, while these principles are ambitious, they 
are intended to build upon the 1997 WTO Financial Services 
Agreement so that the WTO 2000 Negotiation Objectives will not 
only improve traditional market access commitments, but improve 
regulatory standards to foster financially sound and 
competitive insurance markets.
    We have the support of our European insurance industry 
colleagues in promoting these policy objectives. We are 
currently working with our Latin American and Asian 
counterparts to gain their support as well. We have also begun 
consultations with U.S. State regulators and their counterparts 
in global markets to seek their support for mutual objectives
    We believe we have a historic opportunity to improve our 
ability to provide our products and services to the people of 
the world, and we look forward to working with the Congress as 
well as international trade negotiators to achieving these 
objectives.
      

                                


    Chairman Crane. Mr. Sandler.

   STATEMENT OF GILBERT LEE SANDLER, SENIOR PARTNER, SANDLER 
     TRAVIS & ROSENBERG, P.A., ON BEHALF OF THE WASHINGTON 
INTERNATIONAL INSURANCE COMPANY, ITASCA, ILLINOIS, ACCOMPANIED 
BY MICHAEL DAVENPORT, VICE PRESIDENT, WASHINGTON INTERNATIONAL 
                       INSURANCE COMPANY

    Mr. Sandler. Mr. Chairman, thank you very much. We 
appreciate the opportunity to be here. My name is Lee Sandler. 
I am an attorney with Sandler, Travis & Rosenberg, and I am 
here today representing Washington International Insurance Co., 
who is also represented today by Michael Davenport, their vice 
president, who is with me to participate in this hearing.
    Washington International is one of the largest suppliers of 
customs surety bonds in the United States. Approximately one-
third of the bonds currently on file with the Customs Service 
are Washington International-generated bonds. They have a 
wealth of experience and knowledge about how the bonding system 
facilitates trade, and that experience is the basis of this 
testimony today.
    There are two chief concerns that we have about the 
ministerial meetings: facilitating U.S. exports and expanding 
markets or U.S. surety companies. We have a simple request, and 
that is that a great priority be given to encouraging our 
trading partners to establish surety-based control and release 
systems. There are two benefits from this that are particularly 
significant. The first, of course, is that across the board, 
all types of goods exported from the United States can be 
facilitated by the use of a surety bond system. The second is 
that the surety bond industry in the United States can benefit 
by the expansion of that industry into a global environment, 
allowing them to compete in larger markets.
    You heard Chubb testify earlier today about the maturity of 
the American insurance market, the flatness of growth. Well, 
the global growth in this industry would be extremely important 
for the growth of U.S. industries.
    What does the bond system do? It completes the sale. Every 
export from the United States is a sale, but the sale is not 
consummated when the merchandise leaves our borders. It is only 
consummated when it gets into the hands of the customer in the 
foreign destination at the time he wants it and in the 
condition he wants it. That doesn't happen under current 
systems, where customs regimes and all the other government 
agencies who take a look at trade in a foreign country hold up 
the goods while they make all of their final decisions. Plants 
that could be producing in those countries and employing people 
in those countries lie idle while materials do not get there or 
while machinery doesn't get put in place on productionlines, 
and goods do not get to customers, so sales are not 
consummated.
    The surety bond system permits trade to take place in an 
efficient manner. It is a critical cornerstone of all the 
transparency and procedural issues that others have testified 
to today, and we would encourage that it be highlighted at 
these hearings.
    When you do not delay goods at the border, it lowers the 
possibilities of theft, of pilferage, of damage, of contraband. 
It lowers the possibility of corruption at borders, which has 
been such a major impediment to so many of our companies.
    This is not simply a benefit for the U.S. export community, 
it is also a benefit for the foreign countries seeking to 
compete globally as well. Increasingly, companies trying to 
make an investment decision whether to place a manufacturing 
operation abroad or regional distribution center abroad take a 
look at whether they have the capacity of moving cargo, moving 
goods, or moving machinery or equipment quickly into that 
commerce in predictable timeframes and under predictable 
conditions. The surety bond system is a cornerstone of that 
type of an investment regime, and our trading partners should 
embrace it just as the exporters would embrace it to encourage 
to their businesses.
    We know that there have been obstacles in discussing this 
type of system internationally, whether it is in the FTAA 
negotiations or before the WCO or the WTO. That reluctance in 
foreign countries to adopt a bonding system often has sprung 
from a traditional fear of importer fraud or from a traditional 
fear that customs service officials would not like to see 
integrity brought into their systems.
    So we have proposed five different approaches to make 
certain that this is something that we can bring home to the 
ministers in Seattle. First is to take a hard look at creating 
prototypes; defined test programs that can be established 
within our friendly trading countries that can serve as a model 
for others to achieve a level of comfort in the system and for 
them to copy.
    We have suggested that there be some imagination used in 
approaching this and not just use traditional bonding systems, 
including a bonding system which is not just a bond posted by 
the importer, but a bond posted by the exporter. This would 
work particularly well in related-party transactions, which 
comprise so much of our trade today. The related-party exporter 
bond gives the importing country the knowledge that it is 
recourse not just against the importer, but against the surety 
company and against the exporting parent company as well.
    Second, to make certain that we in our negotiations have 
demonstrated the importance of this type of a system to the 
investment programs in the foreign countries. Third, capitalize 
on the business facilitation process, the civil society process 
that is a companion to the ministerial meetings. Having the 
business community come forward and make it clear how important 
this is to their decisionmaking process can be critical to 
getting the ministers to embrace it.
    We know that the ICC has embraced this process, the U.S. 
Council for International Business and the U.S. Chamber of 
Commerce has, and we are certain that the business 
organizations outside the United States would as well.
    Fourth, tie the system to trade benefit promotion. The 
World Customs Organization now has the capacity to measure the 
length of time it takes to release cargo into the commerce of a 
foreign country. Take that measurement standard and establish 
it as you would a tariff level, and use that as a basis for 
negotiation and providing of benefits--trade benefits to our 
trading partners when they can demonstrate that they have put 
in place a process that lowers the length of time it takes to 
clear goods into the commerce. When clearance time drops, they 
would be eligible for additional benefits.
    and fifth is insist upon strict adherence to the customs 
avaluation code. Article 13 of that code states very 
specifically that there should be a bonding system in place to 
assure that the decisionmaking by the government agency takes 
place after the goods have been released into the commerce 
under bond and not hold up the goods at the border while they 
make prolonged decisions impeding commerce for no good reason. 
There is adequate security through an adequate bonding system.
    We think that these types of imaginative approaches can be 
very convincing and can move this issue forward to the benefit 
of our exporters, to the benefit of our surety industry, and, 
in fact, to the benefit of the foreign countries seeking 
investment opportunities.
    We thank you for the opportunity to testify today.
    Mr. Portman [presiding]. Thank you, Mr. Sandler.
    [The prepared statement follows:]

Statement of Gilbert Lee Sandler, Senior Partner, Sandler, Travis and 
Rosenburg, P.A., on behalf of Washington International Insurance 
Company

    We wish to thank the Subcommittee for holding this hearing 
and providing an opportunity for the business community to 
provide recommendations on the proposals and positions to be 
advanced by the United States at the Third Ministerial 
Conference. The World Trade Organization has taken on an 
increasingly important role in the world economy. Its rules and 
rulings directly affect the ability of United States companies 
to compete. Your efforts to obtain a wide range of suggestions 
from the business community to better craft United States 
objectives at the next Ministerial meeting is most welcome and 
appreciated.
    My testimony today is offered on behalf of Washington 
International Insurance Company (``WIIC''). WIIC is a United 
States insurance company with its headquarters office located 
outside Chicago in Itasca, Illinois. It is one of the many 
companies certified by the United States Treasury Department to 
secure government obligations; it is one of the smaller group 
of companies which writes substantial number of bonds securing 
United States Customs (and other agency) import obligations. In 
fact, WIIC is surety on approximately one-third of the bonds 
currently on file with the United States Customs Service.
    My testimony today also reflects important lessons learned 
in my law practice. I am a lawyer with thirty years experience 
in international trade regulation. My career began in the 
Department of Justice, defending decisions by the United States 
Customs Service affecting importations into the United States. 
After leaving government, my practice naturally focused upon 
representing United States companies seeking to cope with 
United States import laws. Over the last decade, those United 
States companies have increasingly come to us to assist with 
their exports which have been ensnarled or damaged by 
unforeseeable or unacceptable customs procedures administered 
by our trading partners throughout the world. Many of these 
problems are ones which can now be understood, anticipated and 
remedied--because so many of our trading partners have adopted 
the GATT Harmonized Tariff and Customs Valuation Codes.
    This testimony will focus upon another area in which United 
States companies can better compete by reform of a world-wide 
customs procedure: adoption of a surety-based system for 
control and early release of cargo, permitting release of goods 
to importers before completion of decision-making by the 
importing government agencies.

                          Summary of Statement

    In our experience, one of the greatest regulatory needs 
faced by United States companies seeking to compete in foreign 
markets is the need for a reliable system assuring the quick 
and timely release of goods into the commerce of the country of 
importation. The ``quick release'' of merchandise from the 
custody of all government agencies in the country of 
importation would allow United States exporters to meet 
customer demands and/or manufacturing and inventory schedules. 
It would also minimize the opportunities for damage, theft and 
corruption at the point of entry.
    Our trading partners should have a strong interest in the 
establishment of a customs bond system: the timely release of 
goods is a major factor when multinational companies make 
investment decisions on where to establish manufacturing and 
distribution centers outside the United States. A system that 
accommodates the needs of just-in-time inventories for 
manufacturing and distribution is essential to the success of 
any investment promotion program.
    The United States service industries also have a strong 
interest in establishment of customs bonding systems throughout 
the world. United States insurance and surety companies have 
the experience and capacity to serve this new marketplace. 
International negotiations in the services sector have created 
the possibility for our companies to compete; encouragement of 
new surety bond marketplaces will open new opportunities for 
United States companies in a field in which we are already more 
experienced than our foreign competitors.
    The United States has a long and successful history of 
relying upon a surety bond system to satisfy law enforcement 
interests of the government and the trade facilitation 
interests of importers. We urge that the strongest possible 
efforts should be taken to encourage the adoption of surety-
based control and release system by all of our trading 
partners.
    In addition, we urge that the GATT process reach out more 
systematically to the business community by establishing a 
consultation and negotiation mechanism similar to the business 
facilitation measures adopted in the Free Trade Agreement of 
the Americas (``FTAA'') negotiations. Long-term negotiations 
can be supplemented and enhanced with short-term objectives and 
accomplishments, focused upon identifying and targeting 
specific new approaches to facilitate trade.

                              The Problem

    Prolonged detentions or interminable release times for 
imported cargo are perennial problems for United States exports 
to foreign nations. Foreign customs regimes typically insist 
upon holding goods until they are satisfied that all 
requirements are met, including the full range of customs 
valuation and tariff classification decisions, quantity and 
labeling verifications and health and safety standards. This 
inherent delay imperils the ability of United States exporters 
to meet contract or production deadlines, raises the costs of 
our products and undermines our basic competitive position in 
foreign markets.
    In addition, prolonged periods of detention and inspection 
create an environment in which corruption can flourish. Delays 
in release, and the holding of goods in a detention facility or 
at the point of entry, render the goods vulnerable to theft and 
pilferage. The delays also subject the owners of the goods to 
solicitation of ``gratuities'' by government officials or third 
parties.
    This is also a problem which challenges the competitiveness 
of our trading partners. A surety-based quick release system, 
permitting release of cargo prior to completion of the 
administrative process, will enhance the ability of the 
importing country to collect revenues, improve its enforcement 
efforts and create the efficiencies needed to compete in a 
world economy which increasingly invests in countries which can 
support just-in-time manufacturing and distribution systems

One Solution: Traditional Import Bonds

    The United States and many of our major trading partners 
permit the posting of a bond written by a government-approved 
surety company in order to permit the immediate release of 
imported goods securing or guaranteeing all of the government 
obligations involved in the importations while the government 
agencies make their final determinations. This approach allows 
the importing country to make its final decision over a 
reasonable period of time, while permitting businesses to 
efficiently move goods into the foreign commerce. This system 
of customs surety bonds is approved by the Kyoto Convention and 
the Customs Valuation Code (Article XIII), but has gone largely 
unused.
    The role of the traditional surety is to guarantee the 
importer's obligations to pay duties, fees and taxes on the 
importation, and to comply with all other government 
obligations. The traditional bond would secure liquidated 
damages--but not fines and penalties for misconduct--assessed 
for failure to comply with a broad range of government 
obligations enforced at the border (i.e., all of the health and 
safety measures). The government would continue to look to the 
importer--at least initially--to fulfill its obligations under 
the law, but upon default by the importer, would have recourse 
against the surety to collect its revenues and enforce its 
laws.
    The traditional import bond is made available by the 
insurance or surety industry in the country of importation. Any 
country with a large pool of importers and an insurance or 
finance industry with access to information necessary to 
underwrite the risk of writing bonds for a particular company 
is capable of instituting a bond system very quickly and 
successfully.
    In addition, a sound surety system relies upon a national 
legal and judicial system which permits seeking reimbursement 
from defaulting or bankrupt bond principals (i.e., importers), 
and administrative and judicial procedures which allow the 
surety to evaluate, accept or contest demands made upon it by 
customs authorities.
    United States insurance and surety companies have long 
worked successfully in providing security for United States 
Customs obligations, and are likely to be able to participate 
in an expanded international marketplace for customs surety 
bonds. The efforts by the Administration to open the world's 
insurance markets to foreign investors provides an important 
platform for United States participation in an expanded use of 
the surety system to facilitate international trade.

Another Solution: Non-Traditional Bond

    It is recognized that a traditional import bond may not be 
a viable alternative in many of the developing counties due to 
the lack of the necessary industry and legal structures 
described in the preceding section of this statement. 
Accordingly, we urge consideration of new, non-traditional 
approaches to bonding systems which could establish ``quick 
release'' systems to complement or substitute for a traditional 
bonding system. One such Non-traditional system is an exporter 
bond.
    Under an exporter bond system, the importing country would 
agree to accept the bond written by a surety approved by that 
country and posted with it by the exporting company. The bond 
could also be signed by the importer. The bond could secure all 
(or designated) obligations to the importing country. It could 
provide recourse by the importing country against the 
exporter--with benefit of the surety obligations--while 
continuing its recourse against the importer. It would not 
alter the commercial terms of the transaction (e.g. title would 
pass wherever designated by the parties).
    The Non-traditional concept has many advantages. It serves 
the traditional roles of import bonds: immediate release of 
goods while customs authorities take additional time to make 
proper decisions; enforcement of laws against the importer with 
reliable security available from the bonding company to both 
satisfy the government obligation and to have private industry 
continue to pursue the importer-of-record.
    It has several added advantages over those available in a 
traditional bond program: it provides a unique assurance to the 
importing country that it has recourse against the exporter as 
well as the importer, and a better means to appreciate and 
evaluate the transaction value reported for the transaction. In 
related party transactions, validation of the transaction value 
is particularly significant--involvement of the exporter in the 
security arrangement could improve the possibility that related 
party transaction values will be more readily accepted by new 
signatories to the Customs Valuation Code. Further, the non-
traditional exporter bond would foster a favorable environment 
for foreign investment to build industrial capacity within the 
importing country by establishing a more reliable and 
predictable customs procedure for multinational companies.
    An exporting bond system could be established in developing 
countries much faster than a traditional bonding system. Since 
the bond principal is in the country of exportation, the surety 
need not rely upon the country of importation for the pool of 
companies needing bonds, access to underwriting information, 
and legal and judicial systems in place to permit seeking 
reimbursement from the principal. The importing country would 
be required only to establish procedures to certify companies 
eligible to write bonds, and to provide reasonable 
administrative and judicial procedures for evaluating and 
contesting demands made on the bonds by the customs 
authorities.

                         Summary and Conclusion

    One of the most significant regulatory impediments to 
United States competitiveness in worldwide product markets is 
the inability to have our exports released timely by foreign 
government agencies. We urge that this problem be attacked at 
the Ministerial Meetings by encouraging the adoption of surety-
based quick release procedures. We believe that such procedures 
are also important to the United States insurance and surety 
industries, as they seek to compete in worldwide markets, and 
to our trading partners as well, as a necessary part of their 
efforts to compete for foreign investment and a larger role in 
global manufacturing and distribution.
      

                                


    Mr. Portman. Mr. Dawson.

 STATEMENT OF RHETT DAWSON, PRESIDENT, INFORMATION TECHNOLOGY 
                        INDUSTRY COUNCIL

    Mr. Dawson. Mr. Chairman, I am Rhett Dawson, president of 
the Information Technology Industry Council, and I want to 
leave with you three thoughts today if I could. Information 
technology is one of the key sectors of the economy driving 
growth and increasing jobs. Second, we are delighted that we 
have been the recipient, the beneficiary of the past efforts to 
improve trade and eliminate barriers in information technology 
products and services. And we are happy that we have 
contributed to that success ourselves in our leadership.
    The third point I want to leave with you today is that in 
Seattle we hope that the ministers will kick off something we 
call the Trade Framework for the Information Economy. My 
organization, the Information Technology Industry Council, 
represents the leading providers of information technology 
products and services, and we have been very deeply involved in 
the past trade agenda, and we have a big stake in this one as 
well. Our members had worldwide revenues of $440 billion in 
1998, and we employ 1.2 million people in the United States.
    A recent administration report put it this way: Over the 
past 4 years, information technologies industry output has 
contributed more than one-third to the growth of real output of 
the overall economy.
    The ubiquity of the Internet is altering the way our 
economy operates. Growth in electronic commerce is astounding 
everyone, and it is not a sector of the economy that is 
reserved just for the so-called Internet companies. There is 
now recognition that to be competitive in any business, 
companies must understand how to effectively utilize 
information technology and the Internet.
    Let me give you a perspective on what is called the 
connected economy. The 1999 estimate is that 200 million PCs, 
in homes and businesses, are going to be connected worldwide. 
The number is going to double in 2 years. And, we are on our 
way to 1 billion connected personal computers worldwide.
    There is recognition that not only is this good for 
business, but it is also good for consumers. And it is also 
good for expressing where we are and what we stand for as a 
country. The information revolution makes freedom more 
attainable because it makes it more difficult for governments 
to control, censor and centralize the free flow of information.
    American consumers and businesses have benefited greatly 
from past successes on opening up global trade and information 
technology goods. Let me give you two conspicuous examples. 
First, of great significance to our country and our industry 
was the negotiation of 1996 Information Technology Agreement. 
The ITA currently has 44 signatory countries and represents 
well over 90 percent of the world market for IT products, and 
we are hopeful that we can add China to that list when they 
become a member of the WTO. Full implementation of the ITA next 
year will bring tariffs on a broad range of information 
technology products to zero. Already the information technology 
agreement has stimulated over $500 billion in trade.
    We also benefited from the 1998 WTO Ministerial agreement 
not to impose customs duties on electronic transmissions, the 
so-called duty-free cyberspace declaration. This gives us more 
breathing space in other countries to see the benefits of IT 
and better understand how electronic commerce is changing 
international business opportunities for our citizens.
    The Seattle Ministerial offers an opportunity to pull all 
of these elements together, recognize the role of electronic 
commerce in promoting and facilitating international trade, and 
articulate what I called before, the Trade Framework for the 
Information Economy.
    We propose that the WTO ministers when they meet in Seattle 
endorse this Trade Framework for the Information Economy and 
take on four commitments: First, to agree to continue the May 
20, 1998, moratorium on customs duties on electronic commerce--
that is duty-free cyberspace--and do that for the duration of 
the next round, and that applies to both the transmissions 
themselves and to their content.
    Second, we want the ministers to reaffirm that current WTO 
obligations, rules, disciplines and commitments, namely the 
GATT, GATS and TRIPS agreement, are technology-neutral and 
apply to e-commerce. We do not need to invent new trade rules 
when existing rules may serve.
    Third, we want ministers to commit to refrain from taking 
measures that would inhibit the growth of e-commerce and access 
to information technology. Forbearance is a very tough thing 
for governments to do, but that is what is needed and what we 
are seeking. But even when domestic measures in a country are 
taken, we think even when that happens, the measures should be 
such that they are the least trade-distortive as possible and 
subject to WTO principles.
    Fourth, we want ministers to begin work on the trade 
framework, but here we ought to be explicit. We are not 
proposing that the WTO embark on negotiations on issues that 
are not yet ripe for international agreement. There is a lot of 
work to be done to broaden the understanding of the connected 
economy and how it is changing business, and they should also 
examine how current trade rules apply and to assess whether new 
regimes are necessary to provide a strong underpinning for the 
global information economy.
    A political commitment to forbear from taking measures that 
would inhibit access to or use of the Internet would provide 
the measure of confidence that all businesses seek from every 
part of the globe.
    In the last several months, ITI has participated in 
seminars in Geneva to acquaint WTO representatives there from 
over 60 countries with the benefits of information technology 
and electronic commerce. We strongly encourage that the WTO 
work on e-commerce continue, and we are delighted to have an 
opportunity to have testified today. Thank you.
    Mr. Portman. Thank you, Mr. Dawson.
    [The prepared statement follows:]

Statement of Rhett Dawson, President, Information Technology Industry 
Council

    Thank you Mr. Chairman for inviting me to testify today on 
the upcoming World Trade Organization Ministerial and the 
agenda for the New Round.
    In my brief comments today, I want to leave you with three 
thoughts:
     Information technology (``IT'') is driving US 
economic growth, increasing productivity, creating better 
paying jobs and expanding opportunities for all Americans. A 
substantial part of the growth is due to strong exports of 
information technology products and services.
     The IT industry and consumers and businesses 
around the world have benefited from past successes to 
eliminate barriers to trade in IT products and services.
     In order to further extend the benefits of IT to 
developing countries in the 21st Century, we are putting 
forward an initiative we call the ``Trade Framework for the 
Information Economy''.
    First, though, a few words about the association I 
represent. The Information Technology Industry Council 
represents the leading U.S. providers of information technology 
products and services (a membership list is attached). We 
advocate expanding economic growth through innovation and 
support free-market policies. Our members had worldwide revenue 
of more than $440 billion in 1998 and employ more than 1.2 
million people in the United States.

     I. Information Technology's Contribution to US Economic Growth

    As Federal Reserve Chairman Alan Greenspan recently told 
the Joint Economic Committee, ``Something special has happened 
to the American economy \1\.''
---------------------------------------------------------------------------
    \1\ Testimony of Federal Reserve Chairman Alan Greenspan before the 
Joint Economic Committee, June 14, 1999.
---------------------------------------------------------------------------
     Information technology jobs are high paying jobs, 
averaging $53,000 per year, compared to an average of $30,000 
per year for all private sector jobs.\2\
---------------------------------------------------------------------------
    \2\ The Emerging Digital Economy II, US Department of Commerce, 
June 1999, page 39
---------------------------------------------------------------------------
     Technology has played a key role in restraining 
inflation. Price changes in IT-producing industries, compared 
with the rest of the economy, have resulted in a lowering of 
domestic inflation by one full percentage point per year during 
both 1996 and 1997.\3\
---------------------------------------------------------------------------
    \3\ Ibid., page 18
---------------------------------------------------------------------------
     Investment in computers and information 
technologies in the 1990s by every sector of our economy--from 
carmakers to farmers--has cut production costs and boosted 
output. The result has been to hold prices down and increase 
American competitiveness internationally.
     IT contribution to real domestic economic growth 
continues to increase. The Commerce Department's recent report, 
The Emerging Digital Economy II, put it this way: ``Over the 
past four years, IT industries' output has contributed more 
than one-third to the growth of real output for the overall 
economy.'' \4\
---------------------------------------------------------------------------
    \4\ Ibid., page 19
---------------------------------------------------------------------------
     Again, quoting Chairman Greenspan, ``The newest 
innovations, which we label information technologies, have 
begun to alter the manner in which we do business and create 
value, often in ways not readily foreseeable even five years 
ago.'' \5\
---------------------------------------------------------------------------
    \5\ Federal Reserve Chairman Alan Greenspan, May 6, 1999.
---------------------------------------------------------------------------
    The increasing ubiquity of the internet is promising to 
significantly alter the way our economy operates. Growth in 
electronic commerce is astounding--and this is not a 
specialized sector of the economy reserved for the so-called 
``internet companies.'' There is now recognition that to be 
competitive in any business, companies must understand how to 
effectively utilize information technology and the Internet.
    Some industry analysts estimate that e-commerce will 
generate more than $3 trillion in sales by 2003. This is due in 
large part to the United State's world leadership in the 
information technology sector as well as policies that promote 
minimal regulation and free trade.

                II. IT Has Benefited from Past Successes

    American consumers and business have benefited greatly from 
past successes to open global trade in information technology 
goods, establish ground rules for competitive 
telecommunications services, intellectual property protection, 
and the moratorium on customs duties on electronic 
transmissions. ITI and its member companies have been in the 
vanguard of these and other trade policies and intend to 
continue our leadership role.
    Let me give you two conspicuous examples:

The ITA

    Of great significance to our industry was negotiation of 
the 1996 Information Technology Agreement. The ITA currently 
has 44 signatory countries, representing well over 90% of the 
world market for IT products. We are hopeful that we can add 
China to the list of signatories when China becomes a member of 
the WTO.
    Full implementation of the ITA next year among the 
signatories will bring tariffs on a broad range of information 
technology products to zero. Already, the ITA has stimulated 
over $500 billion in trade, and facilitated access to state-of-
the-art information technology in both developed and developing 
countries.
    In addition to eliminating duties on IT products, the ITA 
has a built-in review mechanism that ensures it will be 
expanded over time to include other countries and products. 
This is a critical point for our industry. In just the past 
three years we have seen the convergence of computing, 
telecommunications and consumer electronics technologies, and 
the creation of a range of fascinating new products and 
applications. The ITA must be updated to include these new 
products. In addition, there is opportunity to further open 
trade at the level of parts, components and other inputs.
    We strongly advocate completion of the ITA II negotiations 
to expand product coverage and establishment of an aggressive 
work program to address trade issues arising from convergence 
and non-tariff barriers, particularly technical standards. In 
that respect we have been especially active in advancing an 
agenda to eliminate duplicative testing and certification 
requirements for IT products in foreign markets.

Trade and Electronic Commerce.

    Our industry benefited from the 1998 WTO Ministerial 
agreement not to impose customs duties on electronic 
transmissions, the so-called ``Duty-free Cyberspace 
Declaration.'' This action and the ensuing year-long work 
program have given countries ``breathing space'' to examine the 
benefits of IT, better understand how electronic commerce is 
changing international trade and business opportunities for 
their citizens, and think through appropriate next steps.
    Some have said that e-commerce is simply another form of 
trade. This is true, but that description does not go far 
enough. Information technology makes e-commerce possible, 
transforms old ways of doing business (including entire 
industries), and creates new economic opportunities. People all 
over the world are ``connected'' with one another like never 
before.
    Too often we have a tendency to think about and address 
each WTO agreement or work program in isolation from all of the 
others--the Information Technology Agreement separate from the 
Basic Telecom Agreement; the Agreement on Trade-Related Aspects 
of Intellectual Property separate from the Agreement on 
Technical Barriers to Trade; and so on. As we bore down even 
deeper into the details of each individual subject, we lose 
sight of the interrelationships between and among the 
agreements. For a cross-cutting industry like information 
technology, this approach often forces us to emphasize certain 
elements over others. We risk losing focus on the broader goal.
    The Seattle Ministerial offers an opportunity to pull all 
of these elements together, recognize the role of electronic 
commerce in promoting and facilitating international trade, and 
articulate what we call the ``Trade Framework for the 
Information Economy.''

              III. Objectives for the Seattle Ministerial

    We propose that the WTO Ministers, when they meet in 
Seattle, set forth the ``Trade Framework for the Information 
Economy'' through four related commitments. Taken together, 
these commitments provide a transparent, predictable, and 
technology-neutral international trade environment that will 
foster global economic growth and development.
    These commitments are political only, and by that I mean 
that they would not be legally binding or enforceable. They 
would reflect the ``best efforts'' of trade ministers to keep 
electronic commerce ``barrier-free.''
    The first commitment is to agree to continue the May 20, 
1998 Moratorium on Customs Duties on Electronic Commerce (for 
at least the duration of the New Round) and clarify that the 
exemption from tariffs applies both to the transmissions 
themselves and to their contents.
    Second, we want the Ministers to reaffirm that current WTO 
obligations, rules, disciplines and commitments (namely the 
GATT, GATS and TRIPS agreements) are technology-neutral and 
apply to e-commerce. We don't need to invent new trade rules 
when using the existing rules may serve us better.
    Third, we want Ministers to commit to refrain from taking 
measures that could inhibit the growth of e-commerce and access 
to IT. Forbearance is a tough thing for governments to do, but 
that is what is needed and what we are seeking. However, should 
domestic measures be deemed necessary, even then the measures 
should be the ``least trade distortive'' as possible and 
subject to WTO principles (in particular, national treatment, 
non-discrimination, transparency, notification, review and 
consultation).
    Fourth, we want Ministers to initiate the Trade Framework 
for the Information Economy. Let me be explicit: we are not 
proposing that the WTO embark on negotiations on issues that 
are not yet ripe for international agreement. But, there is 
much work to be done to broaden understanding of how electronic 
commerce is changing global business, to examine how current 
trade rules apply, and to assess whether new rules are 
necessary to provide a strong underpinning for the global 
information economy. The Seattle Ministerial offers an 
opportunity to initiate work on these critical issues.
    Let me underscore the importance we attach to a political 
commitment by ministers to refrain from taking measures that 
restrict or inhibit electronic commerce. In order for all 
countries--both developed and developing--to reap the benefits 
of the information age, electronic commerce must remain as 
unimcumbered as possible from regulation and trade barriers.
    One of the main reasons electronic commerce has grown so 
quickly is because the internet has not been singled out for 
regulation. We propose Ministers commit themselves to resisting 
imposing burdensome regulations that will inhibit the growth of 
electronic commerce and instead, when measures must be taken, 
make them the least restrictive.
    A political commitment to ``forebear'' from taking measures 
that would inhibit access to or use of the Internet would 
provide the measure of certainty that businesses all around the 
world seek. And it would set into motion a dialogue among 
countries on the trade-distortive effects of potential 
measures--again, to the benefit of all WTO members.
    In the last several months, ITI and its member companies 
have conducted four seminars in Geneva to acquaint WTO 
representatives from over 60 countries with the benefits of 
information technology and electronic commerce. We strongly 
encourage that the WTO's work on e-commerce include substantive 
dialogue with industry.
    ITI stands ready to provide whatever assistance we can to 
ensure that the Seattle Ministerial and the ensuing 
negotiations result in a transparent, predictable and 
technology-neutral trade environment that will foster global 
economic growth and development. This would be a ``win'' for 
all and another reason to celebrate the benefits of information 
technology as we reach the start of the 21st Century.
    Thank you Mr. Chairman and I would be happy to answer any 
questions you might have.
      

                                


    Mr. Portman. Director Jones.

STATEMENT OF SHELDON R. JONES, DIRECTOR, ARIZONA DEPARTMENT OF 
                 AGRICULTURE, PHOENIX, ARIZONA

    Mr. Jones. I am Sheldon Jones, director of the State 
Department of Agriculture for the State of Arizona in Phoenix. 
I am grateful to you and to the Subcommittee as a whole for 
giving me this opportunity to speak on behalf of the State of 
Arizona on why it is crucial that the United States continue 
its ambitious trade agenda.
    Now more than ever it is imperative that the United States 
negotiate and enforce agreements worldwide which will create 
open and fair markets for U.S. products and services. This 
process of engagement will ensure our continued growth and 
standard of living into the 21st century.
    Allow me to begin by stating that Arizona fully supports 
legislation providing the administration fast track trade 
authority. An export-dependent industry, U.S. agriculture must 
be able to compete in foreign markets on a level playingfield. 
Without authority to negotiate trade agreements, the 
administration cannot fully assure agriculture a place at the 
table in the international marketplace.
    Comprehensive negotiating authority is needed to address 
high tariffs, trade-distorting subsidies and other restrictive 
trade practices. Fast track is also needed to pursue promising 
new opportunities for market-opening trade agreements in Latin 
America, Asia and elsewhere. Passing fast track legislation 
will provide the administration with the necessary authority to 
assure the U.S. competitiveness in foreign markets does not 
continue to suffer.
    The United States has 4 percent of the world's population 
and controls 22 percent of the world's wealth. In the next 15 
years, the developing countries in both Latin America and Asia 
are expected to grow three times as fast as the United States, 
Europe and Japan. With this information, it is clear that if 4 
percent of the world's population is to maintain 22 percent of 
the world's wealth and create more wealth, we must open up the 
world's fastest-growing markets to U.S. products and services.
    The World Trade Organization today is the result of 50 
years of American leadership and the creation of an 
international trading system. This system is designed with the 
primary goal of tearing down foreign trade barriers and 
promoting a singular rule of law in the arena of international 
trade. The World Trade Organization has worked to cut tariffs 
and quotas on farm and ranch products worldwide. However, many 
will agree there is much more to be accomplished. I applaud 
both Ambassadors Barshefsky and Esserman for their commitment 
to address the concerns of the U.S. agriculture industry in its 
recent circulated objectives for the agriculture negotiations.
    While I fully support the four objectives to which the USTR 
has committed its attention, I believe the trade issues facing 
agriculture in America extend deeper and deserve further 
specific attention. Today, I will touch on five issues which 
the State of Arizona views as critical to the success of any 
international trade system for agricultural products.
    First, the State of Arizona supports the unilateral 
reduction of all foreign subsidies and tariffs on all 
agricultural products. Ample time has passed since WTO 
initiated agricultural trade reform, and it shouldn't be 
unrealistic to expect the WTO member countries to have 
significantly reduced agricultural dependence on government 
support. Arizona recognizes the prerogative of sovereign 
nations to support farmers and ranchers if they so choose; 
however, it is important that the WTO address the distortions 
these measures of support have caused to global production and 
trade.
    The 1996 farm bill clearly established the expectation of 
this government that the United States agricultural industries 
would learn to compete internationally with minimal 
subsidization in the field and in the marketplace. We, as a 
whole, recognized the need to redirect this sector of our 
economy to a self-sufficient, market-driven industry. The days 
of heavy governmental assistance for farming and ranching in 
this country were over. This, as we all know, is just not the 
case throughout the rest of the world.
    Without the elimination of unreasonable government field 
and market subsidization of WTO member countries' agricultural 
industries, U.S. farmers and ranchers cannot compete.
    Equally important is the issue of tariffs placed on 
agricultural products. The State of Arizona supports the 
reciprocal reduction of tariffs in WTO member countries on U.S. 
agriculture products.
    Second, the State of Arizona supports the implementation of 
rules for the trade of perishable and seasonal commodities. In 
fiscal year 1997, Arizona agricultural operations raising 
everything from artichokes to cotton lint, corn to honey, to 
tomatoes and watermelon generated nearly $2.2 billion in cash 
receipts from agriculture marketings. While Arizona produces a 
variety of crops, a great variety of commodities produced in my 
State are seasonal and perishable in nature. Presently no 
specific rules exist to deal with the trade of perishable and 
seasonal commodities. When asked if specific rules for 
perishable commodities were needed at the Agriculture Forum 
immediately preceding the Free Trade Area of the Americas 
Business Forum in Belo Horizonte, the head of the Uruguay round 
agriculture negotiating team agreed that the promulgation of 
such rules would be both helpful and advisable for all WTO 
member countries.
    Third, the State of Arizona supports the implementation of 
a workable and meaningful dispute resolution mechanism. 
Presently, Arizona believes the avenues for dispute resolution 
within the WTO inadequately suit the needs of perishable and 
seasonal commodities. By their very nature, these commodities 
require timely solutions to ensure that perishable shipments 
are not lost to bureaucratic or political mechanisms.
    In the new round of negotiations, Arizona recommends that 
the U.S. solicit clarification of the dispute settlement 
process with a strong enforcement mechanism, limited settlement 
appeals, and strict compliance deadlines.
    Fourth, the State of Arizona supports the Uruguay round 
agreement on sanitary and phytosanitary measures and does not 
support opening them for discussion. Despite the adoption of 
the Uruguay round agreement on SPS issues, a number of WTO 
member countries continue to impose sanitary and phytosanitary 
measures which are questionable at best in nature and sincerely 
lack a basis in sound science. These SPS measures create 
tremendous barriers to market access abroad for U.S. 
agricultural products.
    While some WTO member countries wish to reopen he SPS 
agreement for amendment, the State of Arizona believes that the 
WTO's strict enforcement and thorough implementation of the 
current SPS agreement is absolutely essential to the success of 
any international trade system.
    Fifth, the State of Arizona supports transparency and 
science in the genetically modified organism approval process 
and market access for GMOs. I support the administration's 
recently circulated position to the WTO entitled ``Measures 
Affecting Trade in Agricultural Biotechnology Products.'' as a 
representative of a $6.3 billion industry in Arizona, I am 
tremendously concerned that the European Union's approval 
system for biotechnology products is a process rooted in 
hysteria and lacking transparency.
    The State of Arizona continues to advocate for global 
market access for genetically modified organisms in all WTO 
countries. Further, we believe it is imperative that any 
process developed for approval of GMOs is fully transparent to 
all parties.
    In summary, the State of Arizona advocates for and urges 
you to support the unilateral reduction of foreign subsidies 
and tariffs, implementation of rules for the trade of 
perishable and seasonal commodities, clarification of existing 
dispute resolution mechanisms, adherence by all WTO member 
countries to the Uruguay round Agreement on Sanitary and 
Phytosanitary Measures, and transparent market access for 
genetically modified organisms.
    On behalf of the State of Arizona and Governor Hull and the 
agriculture industry, I thank you for this opportunity.
    Chairman Crane [presiding]. Thank you, Mr. Jones.
    [The prepared statement and attachments follow:]

Statement of Sheldon R. Jones, Director, Arizona Department of 
Agriculture, Phoenix, Arizona

    Thank you, Mr. Chairman, for inviting my testimony on the 
importance of strong U.S. negotiation objectives for the World 
Trade Organization Seattle Ministerial Meeting in November. I 
am grateful to you and to the Subcommittee as a whole for 
giving me this opportunity to speak on behalf of the State of 
Arizona on why it is crucial that the U.S. continue its 
ambitious trade agenda. Now, more than ever, it is imperative 
that the U.S. negotiate and enforce agreements worldwide which 
will create open and fair markets for U.S. products and 
services.
    This process of engagement will insure our continued growth 
and standard of living into the 21st Century. My testimony will 
touch on why an aggressive trade policy to open markets is 
important to the agricultural industries of Arizona's economy.
    Allow me to begin by stating Arizona fully supports 
legislation providing the Administration Fast Track trade 
authority. An export dependent industry, U.S. agriculture must 
be able to compete in foreign markets on a level playing field. 
Without authority to negotiate trade agreements, the 
Administration cannot fully assure agriculture a place at the 
table in the international market place.
    Comprehensive negotiating authority is needed to address 
high tariffs, trade-distorting subsidies, and other restrictive 
trade practices through further World Trade Organization (WTO) 
negotiations. Negotiating authority is also needed to pursue 
promising new opportunities for market opening trade agreements 
in Latin America, Asia and elsewhere.
    Equally important to nurturing existing trade alliances, is 
the commitment to ensure that trade liberalization continues so 
the agriculture industry can compete fairly in the global 
market place. As price supports continue to be phased out under 
the 1996 Farm Bill, international trade has become increasingly 
important to the stability of agriculture. Fast Track gives the 
U.S. the tools necessary to continue to play a role in the 
trade liberalization process and the opening of overseas 
markets to quality agricultural products.
    Passing Fast Track legislation will provide the 
Administration with the necessary authority to assure the U.S. 
competitiveness in foreign markets does not continue to suffer. 
The United States has 4% of the world's population and controls 
22% of the world's wealth. In the next fifteen years, the 
developing countries in both Latin America and Asia are 
expected to grow three times as fast as the United States, 
Europe and Japan. With this information it is clear to see that 
if 4% of the world's population wants to maintain 22% of the 
world's wealth, or grow more control, we must open up the 
world's fastest growing markets to U.S. products and services.
    Recently, the Arizona Department of Agriculture had the 
opportunity to participate in the formation of a coalition, 
known now as NFACT, with the departments of agriculture from 
New Mexico, Florida, California, and Texas. NFACT represents 
over 23% of total U.S. agricultural cash receipts, as well as 
25% of the entire U.S. Congressional Delegation. Agricultural 
exports from the states represented by NFACT in 1997 alone were 
estimated to be over $5 billion. Among the positions these five 
states gained consensus is the issue of international trade. 
While we represent varied constituencies, our concerns with 
fundamental agricultural trade issues are similar. My comments 
today will reflect many of the concerns the NFACT coalition has 
expressed to the Office of the United States Trade 
Representative, the United States Department of Agriculture, 
and to Members of Congress in recent visits.
    Arizona already benefits from a number of agricultural 
trade agreements. Since Arizona is the only documented fruit 
fly-free state in the United States, our citrus is in high 
demand throughout the world, especially Southeast Asia, China 
and Japan. With more than 25% of Arizona's farm receipts coming 
from cattle, our state benefitted from the significant 
reduction of beef export and slaughter tariffs by a number of 
countries following agreements reached at the Uruguay Round, 
including Korea, Japan, Mexico, and the European Union.
    According to the Arizona Department of Commerce, economists 
agree that Arizona's overall economy will remain strong 
throughout 1999, with job creation heading the list of positive 
indicators. Exports of Arizona based companies topped $11.4 
billion in 1998, a decline from the record-breaking total of 
$13.8 billion in 1997, but still the second most successful 
year in the state's history. Arizona exports topped $2.8 
billion for the first quarter of 1999, down 3.7% compared to 
the first quarter of 1998. This decline has been attributed to 
the effect of the ``Asian flu'' on Arizona-based companies. 
However, Arizona exports to North American Free Trade Agreement 
(NAFTA) member countries have increased dramatically since the 
negotiation of the Agreement.
    Western Blue Chip Economic Forecast (April), a consensus 
forecast of economists from 10 Western states, ranked Arizona 
#1 in the nation for nonagricultural job growth in 1998. With a 
4.7% increase, Arizona surpassed Nevada which had held the top 
position for the past four years.
    However, even with the tremendous job growth in urban 
populations of Arizona, my state's rural and chiefly 
agricultural communities are feeling the pinch. With sagging 
prices, labor shortages, increased costs and diminishing 
abilities to compete in domestic channels of trade, Arizona's 
farmers and ranchers are now, more than ever, looking to the 
global marketplace to earn their living. My testimony today 
will provide you with valuable insight to the concerns of 
Arizona's farmers and ranchers when faced with the challenge of 
gaining foreign market access.
    The World Trade Organization today is the result of fifty 
years of American leadership in the creation of an 
international trading system. This system was designed with the 
primary goal of tearing down foreign trade barriers and 
promoting a singular rule of law in the arena of international 
trade.
    The WTO has worked to cut tariffs and quotas on farm and 
ranch products worldwide. However, many will agree there is 
much more to be accomplished. I applaud both Ambassadors 
Barshefsky and Esserman for their commitment to address the 
concerns of the U.S. agriculture industry in its recently 
circulated ``Objectives for the Agriculture Negotiations.'' 
While I fully support the four objectives to which the USTR has 
committed its attention, I believe the trade issues facing 
agriculture in America extend much deeper and deserve further 
specific attention.
    Today I will touch on five issues which the State of 
Arizona views as critical to the success of any international 
trade system for agricultural products. Those issues are the 
Reduction of Foreign Subsidies and Tariffs, Implementation of 
Rules for Perishable and Seasonal Commodities, Dispute 
Resolution Mechanisms, Adherence to Sanitary and Phytosanitary 
Agreement, and Transparent Market Access for Genetically 
Modified Organisms.
     The State of Arizona supports the unilateral 
reduction of all foreign subsidies and tariffs on all 
agricultural products.
    Ample time has passed since WTO initiated agricultural 
trade reform and it should not be unrealistic to expect the WTO 
member countries to have significantly reduced agricultural 
dependence on government support. Arizona recognizes the 
prerogative of sovereign nations to support farmers and 
ranchers if they so choose. However, it is important that the 
WTO address the distortions these measures of support have 
caused to production and trade.
    The 1996 Farm Bill clearly established the expectation of 
this government that U.S. agricultural industries would learn 
to compete internationally without subsidization, in the field 
or the marketplace, or face going out of business. We, as a 
whole, recognized the need to redirect this sector of our 
economy to a self-sufficient market-driven industry. The days 
of heavy government assistance for farming and ranching in this 
country were over. This, as we all know, just isn't the case 
throughout the rest of the world.
    Without the elimination of government field and market 
subsidization of WTO member countries' agricultural industries, 
U.S. farmers and ranchers CANNOT COMPETE.
    Equally important is the issue of tariffs placed on 
agricultural products. The State of Arizona supports the 
reciprocal reduction of tariffs in WTO member countries on U.S. 
agricultural products.
    The tariffs on fruits and vegetables entering the United 
States, for example, are among the lowest in the world. 
Legitimately, the agricultural producers of Arizona believe 
that reciprocity should be granted and all such tariffs in WTO 
member countries be uniformly reduced. It also warrants 
clarification that true reductions in tariffs should be 
thorough in nature. That is, not only should the bound rate be 
addressed when reductions are made but, rather, the currently 
applied rate should be addressed simultaneously. If the applied 
rate is not addressed, often times the tariff reductions are 
meaningless and I applaud the USTR for recognizing the need to 
reduce the disparity between the applied and bound tariff 
rates.
     The State of Arizona supports the implementation 
of rules for the trade of perishable and seasonal commodities.
    In fiscal year 1997, Arizona agricultural operations, 
raising everything from artichokes to cotton lint, corn to 
honey, to tomatoes and watermelon, generated nearly $2.2 
billion in cash receipts from agricultural marketings. While 
Arizona produces a variety of crops, a great number of the 
commodities produced in my state are seasonal and perishable in 
nature. Presently, no specific rules exist to deal with the 
trade of perishable and seasonal commodities. When asked if 
specific rules for perishable commodities were needed at the Ag 
Forum immediately preceding the Free Trade Area of the Americas 
Business Forum in Belo Horizonte, the head of the Uruguay Round 
agriculture negotiating team agreed that the promulgation of 
such rules would be both helpful and advisable for all WTO 
member countries.
    Because Arizona and its NFACT counterparts produce a 
tremendous number of fruits and vegetable as well as live 
animal agriculture, I urge the USTR to develop immediately 
trade rules for these valuable perishable and seasonal 
commodities. Failing to do so guarantees the producers of non-
traditional crops in my state as well as those in other ``non-
Farm Belt'' states are being left behind.
     The State of Arizona supports the implementation 
of a workable and meaningful dispute resolution mechanism.
    Presently, Arizona believes the avenues for dispute 
resolution within the WTO inadequately suit the needs of 
perishable and seasonal commodities. By their very nature, 
these commodities require timely solutions to insure that 
perishable shipments are not lost to bureaucratic or political 
mechanisms. In the new round of negotiations, Arizona 
recommends the U.S. solicit clarification of the dispute 
settlement process with a strong enforcement mechanism, limited 
settlement appeals and strict compliance deadlines.
     The State of Arizona supports the Uruguay Round 
Agreement on Sanitary and Phytosanitary Measures.
    Despite the adoption of the Uruguay Round Agreement on 
Sanitary and Phytosanitary Measures (SPS), a number of WTO 
member countries continue to impose sanitary and phytosanitary 
measures which are questionable, at best, in nature and 
sincerely lack a basis in sound science. These SPS measures 
create tremendous barriers to market access abroad for U.S. 
agricultural products.
    While some WTO member countries wish to reopen the SPS 
Agreement for amendment, the State of Arizona believes the 
WTO's strict enforcement and thorough implementation of the SPS 
Agreement and adherence to these standards by all member 
countries is absolutely essential to the success of any 
international trade system.
    With an increased emphasis on international trade, Arizona, 
and its border state counterparts, has experienced significant 
increases in detections of plant and animal pests and diseases 
at our borders. These detections will have devastating economic 
impacts to U.S. agricultural producers if left unmanaged by the 
U.S. and trade alliances like the WTO. Unfortunately, U.S. 
Customs, the United States Department of Agriculture and the 
U.S. Food and Drug Administration have not been able to provide 
adequate border inspections and surveillance efforts due to 
budgetary and staffing constraints leaving the enforcement of 
federal inspections in large part to State governments.
    I urge the U.S. negotiators to address the SPS Agreement in 
their efforts to negotiate the objective of implementation. 
Focus must be made on the enforcement of legitimate science-
based sanitary and phytosanitary measures and not based on the 
non-tariff trade barriers promulgated by other nations.
     The State of Arizona supports transparency and 
science in genetically modified organism approval process and 
market access for genetically modified organisms
    I support the Administration's recently circulated position 
to the WTO entitled ``Measures Affecting Trade in Agricultural 
Biotechnology Products.'' As a representative of a $6.3 billion 
dollar industry in Arizona, I am tremendously concerned that 
the European Union's approval system for biotechnology products 
is a process rooted in hysteria and lacking transparency.
    The State of Arizona continues to advocate for global 
market access for genetically modified organisms in all WTO 
countries. Further, we believe it is imperative that any 
process developed for the approval of GMOs is fully transparent 
to all parties.
    In summary, the State of Arizona advocates for and urges 
you to support the unilateral reduction of foreign subsidies 
and tariffs; implementation of rules for the trade of 
perishable and seasonal commodities; clarification of existing 
dispute resolutions mechanisms; adherence by all WTO member 
countries to the Uruguay Round Agreement on Sanitary and 
Phytosanitary Measures; and transparent market access for 
genetically modified organisms.
    On behalf of the State of Arizona, the Arizona Department 
of Agriculture and the multi-billion dollar industries it 
supports, I want to thank you again for providing our local 
government the opportunity to share with you our concerns for 
the upcoming Ministerial meeting in Seattle.
                                                      July 17, 1999
The Honorable Charlene Barshevsky
U.S. Trade Representative
600 17th Street, N.W.
Washington, D.C.

    Dear Ambassador Barshevsky:

    Agricultural representatives of 44 states and provinces from the 
three NAFTA countries met at the States-Provinces Agricultural Accord 
in Salt Lake City, July 15-17, 1999. A key objective was to develop 
common positions for the upcoming WTO negotiations that will provide 
increased potential for the profitability and long-term viability of 
our producers.
    Our countries must adopt a negotiating strategy that makes 
agriculture the highest priority for the upcoming WTO round. 
Negotiating strategies that leave the difficult agricultural issues 
unresolved will be detrimental to the future growth and prosperity of 
our agricultural industries in all three countries. Any WTO agreement 
that does not include substantially improved rules in agricultural 
trade will be judged a massive failure by our farmers and ranchers.
    We urge you to utilize the following recommendations as you work to 
finalize your negotiating strategy.
    Sanitary/Phytosanitary Issues: The Sanitary/Phytosanitary (SPS) 
chapter should remain intact and closed to further negotiation. 
However, the process supporting the SPS chapter must be strengthened 
and effectively enforced in order to ensure WTO member compliance. 
Improvements in efficiency of the WTO Dispute Settlement Mechanism are 
required in order to ensure these issues are resolved and enforced in a 
timely manner. Too often, scientifically unfounded SPS and technical 
issues have been used to deny market access for our respective nations' 
agricultural products.
    Perishable and Seasonal Products: We urge the creation of specific 
rules and processes for trade in perishable and seasonal products that 
address the unique nature of these products.
    Export Subsidies: Continued excessive use of export subsidies by 
the European Union (EU) erodes the competitiveness and profitability of 
our agricultural industries. Therefore, we urge you to work towards the 
elimination of all direct export subsidies and pursue the substantive 
and progressive reduction of trade-and production-distorting supports 
worldwide. Current inequities in supports provided by the EU and other 
countries must be addressed through establishment of rules that will 
lead to faster downward adjustment by these countries.
    Food Safety: Food safety is of primary concern to the agricultural 
industries and consumers of the three countries. With this in mind, we 
urge intensified efforts to educate and inform consumers and regulators 
on the scientifically-based issues surrounding biotechnology. 
International regulatory measures must be based on sound scientific 
principles and approval procedures for genetically enhanced products 
must be effective in ensuring safety. These procedures must not be used 
as a trade barrier.
    Dispute Resolution Measures: Effective safeguard mechanisms and 
rapid dispute resolution measures that do not require expensive 
litigation are needed. This will provide another method to current 
anti-dumping laws which include, in part, ``cost of production'' and 
``market price'' tests.
    Harmonization of Standards: The international harmonization of 
pesticide and animal drug usage and standards must also be a priority. 
We must work to harmonize to the highest possible standards.
    The issues outlined above are paramount to the continued viability 
of our agricultural industries. As you finalize preparations for the 
WTO negotiations, it is critical that you extend every effort to 
improve our trading position and create an environment that affords 
increased market opportunities for our producers.
    Your immediate attention to these issues is requested and we look 
forward to your response.

    Sincerely,
     Cary Peterson,
     President,
     National Association of State Departments of Agriculture
     United States of America

     Jaime Rodriquez Lopez,
     President,
     Mexican Association of State Departments of Agriculture 
Development
     Mexico

     Eric Upshall,
     Chair,
     Provincial Ministers of Canada
     Canada

                                                      July 17, 1999
The Honorable Dan Glickman
Secretary
U.S. Department of Agriculture
Washington, D.C.

    Dear Secretary Glickman:

    Agricultural representatives of 44 states and provinces from the 
three NAFTA countries met at the States-Provinces Agricultural Accord 
in Salt Lake City, July 15-17, 1999. A key objective was to develop 
common positions for the upcoming WTO negotiations that will provide 
increased potential for the profitability and long-term viability of 
our producers.
    Our countries must adopt a negotiating strategy that makes 
agriculture the highest priority for the upcoming WTO round. 
Negotiating strategies that leave the difficult agricultural issues 
unresolved will be detrimental to the future growth and prosperity of 
our agricultural industries in all three countries. Any WTO agreement 
that does not include substantially improved rules in agricultural 
trade will be judged a massive failure by our farmers and ranchers.
    We urge you to utilize the following recommendations as you work to 
finalize your negotiating strategy.
    Sanitary/Phytosanitary Issues: The Sanitary/Phytosanitary (SPS) 
chapter should remain intact and closed to further negotiation. 
However, the process supporting the SPS chapter must be strengthened 
and effectively enforced in order to ensure WTO member compliance. 
Improvements in efficiency of the WTO Dispute Settlement Mechanism are 
required in order to ensure these issues are resolved and enforced in a 
timely manner. Too often, scientifically unfounded SPS and technical 
issues have been used to deny market access for our respective nations' 
agricultural products.
    Perishable and Seasonal Products: We urge the creation of specific 
rules and processes for trade in perishable and seasonal products that 
address the unique nature of these products.
    Export Subsidies: Continued excessive use of export subsidies by 
the European Union (EU) erodes the competitiveness and profitability of 
our agricultural industries. Therefore, we urge you to work towards the 
elimination of all direct export subsidies and pursue the substantive 
and progressive reduction of trade-and production-distorting supports 
worldwide. Current inequities in supports provided by the EU and other 
countries must be addressed through establishment of rules that will 
lead to faster downward adjustment by these countries.
    Food Safety: Food safety is of primary concern to the agricultural 
industries and consumers of the three countries. With this in mind, we 
urge intensified efforts to educate and inform consumers and regulators 
on the scientifically-based issues surrounding biotechnology. 
International regulatory measures must be based on sound scientific 
principles and approval procedures for genetically enhanced products 
must be effective in ensuring safety. These procedures must not be used 
as a trade barrier.
    Dispute Resolution Measures: Effective safeguard mechanisms and 
rapid dispute resolution measures that do not require expensive 
litigation are needed. This will provide another method to current 
anti-dumping laws which include, in part, ``cost of production'' and 
``market price'' tests.
    Harmonization of Standards: The international harmonization of 
pesticide and animal drug usage and standards must also be a priority. 
We must work to harmonize to the highest possible standards.
    The issues outlined above are paramount to the continued viability 
of our agricultural industries. As you finalize preparations for the 
WTO negotiations, it is critical that you extend every effort to 
improve our trading position and create an environment that affords 
increased market opportunities for our producers.
    Your immediate attention to these issues is requested and we look 
forward to your response.
            Sincerely,

     Cary Peterson Jaime Rodriguez Lopez
     President President
     National Association of State Departments of Agriculture
     United States of America

     Jaime Rodriquez Lopez,
     President,
     Mexican Association of State Departments of Agriculture 
Development
     Mexico

     Eric Upshall
     Chair
     Provincial Ministers of Canada
     Canada
      

                                


    Chairman Crane. Your testimony basically supports all the 
positions of our U.S. Trade Representative and I am wondering 
if there is any area where your perspective differs from the 
administration's views on these issues?
    Mr. Jones. Mr. Chairman, we have worked real hard with 
Ambassador Barshefsky and Sue Esserman specifically on the 
seasonal and perishable commodities. And uniquely enough we do 
see eye to eye on a lot of those issues, and we appreciate 
their support.
    Chairman Crane. Well, I think you have profound insights 
down there, especially based upon your legislative liaison 
behind you, Nicole Waldron, who used to be an intern in my 
office. And she and I are alumni of the same little college up 
in Michigan, Hillsdale, so you are privileged, Mr. Jones, to 
have her on your staff.
    I want to ask Mr. Lake a question. What does AFLAC stand 
for?
    Mr. Lake. American Family Life Assurance Co. of Columbus.
    Chairman Crane. Assurance.
    Mr. Lake. Yes.
    Chairman Crane. Not insurance.
    Mr. Lake. Yes, that is correct.
    Chairman Crane. Because I have seen it American Family Life 
``Insurance'' Co., which would be AFLIC, and that is why I was 
curious, because my staff does not have the answer to why it is 
called AFLAC sometimes and I have never see it as AFLIC.
    Mr. Lake. Right.
    Chairman Crane. I just want to make sure that you are using 
the right acronym there.
    At any rate, I congratulate you on the comprehensive nature 
of your proposal for achieving the regulatory reform in the 
service negotiations and also for working to build support for 
it among European companies. Has USTR been receptive to your 
approach?
    Mr. Lake. Yes. I think they are studying the paper that was 
provided to them, and we are working as an industry--the 
associations that are listed in our submission are working very 
closely with the USTR. We hope to move forward on that basis.
    Chairman Crane. And, Mr. Smith, past attempts to bring 
labor issues into the WTO have met with virulent opposition 
from less developed countries who believe it will establish a 
pretext for protectionist trade restrictions. Is there a way to 
assure them otherwise so that the Seattle Ministerial doesn't 
become a standoff between the U.S. and LDCs on labor issues 
like what happened in Singapore?
    Mr. Smith. Mr. Crane, I don't know the answer to that. The 
question of labor rights, we believe, is one where both the 
developed and the developing world have common cause; that the 
absence of robust democratic civil society institutions, 
including trade unions, is part of what sets the stage for some 
of the disasters like we saw in East Asia over the last years, 
the absence of a society that could function at all levels.
    It is also important, I think--and we have an important job 
to do, all of us, in talking to our brothers and sisters in the 
developing world--it is important to make the point that in the 
absence of widely agreed upon and widely adhered-to standards, 
we do encourage a race to the bottom. We do pit precisely those 
countries who can least afford it, whose people can least 
afford it, who most need standards which begin to harmonize 
incomes upward and deal with income inequality--those countries 
do not need to be fighting with each other, and fighting in the 
way that is most difficult for their citizens. Pitting the poor 
people of eastern Africa against the poor people of Southeast 
Asia is a crazy way for the world to pursue international 
trade.
    Chairman Crane. What is the AFL-CIO's key objective in the 
Seattle Ministerial?
    Mr. Smith. Our key objective is to make substantial 
progress on the question of incorporating enforceable labor 
rights and other social standards in the WTO regime. The most 
important step in Seattle would be to begin down that road in 
the creation of a working group toward that end.
    Chairman Crane. Mr. Levin.
    Mr. Levin. It is the end of the day, but in some respects I 
think we have touched on one of the more important issues in 
your answer, Mr. Smith, to Chairman Crane. I hope everybody 
will hear. You say that we meaningfully need to begin to go 
down the road. I think people should understand no one is 
expecting overnight transformations. One is hopeful, and one 
can expect a structure that assures meaningful movement.
    I kind of chuckled, Mr. Dawson, when you described so 
effectively what is at stake with information technology. There 
will be controversy about some of these issues. An earlier 
panelist suggested we shy away from controversy at Seattle. 
Lord, there has never been a meaningful trade negotiation that 
was not embedded in controversy.
    It is going to be difficult. On environmental issues we 
face a real struggle over the Kyoto agreement as to the extent 
to which evolving economies participate in the evolution--not 
the revolution, the evolution of environmental standards. And 
until that is resolved, I don't think the Kyoto agreement will 
ever get the votes in the Senate.
    I think the same is true of labor market issues and with 
information technology. You are cautious, you do not want us to 
push issues before they are ripe, but I take it you want us to 
press issues to help make them become ripe. I think we need to 
do exactly that at Seattle to set the stage.
    You know, the issue of taxation in terms of the Internet is 
a controversial issue internally within this country, and you 
can just imagine what is going to happen as we confront it 
internationally. And it will be controversial, but we in this 
country have certainly faith in the evolution of free markets, 
and I think they should include all kinds of market, capital 
markets and labor markets, and I think increasingly that will 
have to be true of information technology.
    And I think we will expect some resistance, right?
    Mr. Dawson. I did not mean to paint a picture that was 
without controversy.
    Mr. Levin. I am agreeing. I think it will be controversial.
    Mr. Dawson. We are not cattle or bananas yet, though, I 
must admit.
    Mr. Levin. No, but it could happen quickly.
    Mr. Dawson. Yes.
    Mr. Levin. I am not sure of that analogy, but we are having 
immense trouble with bananas and cattle, and I suspect the 
notion we had trouble at Singapore, so do not even unfold our 
tent, that is nonsense in the labor market issues. And the same 
is going to be true of the burgeoning information technology 
issues. They are doomed to be controversial because they are 
meaningful, right? And we have to figure out how far we want to 
go at Seattle. Expect resistance. But we have in mind the 
evolution of markets in terms of information technology.
    But I need to go and leave and see if I can get a ticket 
for my grandson on the Internet so I can take him back to 
Michigan. Through a travel agency.
    But anyway, Mr. Chairman, this has been a very useful 
hearing, and I think this last panel has really raised some 
vital issues, and we need to be in much further discussion.
    Mr. Pepper, while he was here, talked to Mr. Smith about 
this group within ACTPN chaired by Mr. Sweeney, Mr. Donahue, 
and we wish them the best.
    Mr. Smith. Controversy is never very far away, but we are 
working at it hard.
    Mr. Levin. Good luck.
    Chairman Crane. Could I add one quickie to some of Sandy's 
inquiries? Is there a chance that our trading partners will 
seek to define electronic commerce as a service rather than a 
good in order to escape the more rigorous guidelines and 
requirements?
    Mr. Dawson. Yes. We are trying to lead them down a track 
that is difficult because we are describing it as being 
neither. Actually it is something quite different. And so that 
in and of itself is a substantial part of our educational 
effort, that things can be a medium, a product, a good at one 
point, and they can be converted in commerce to a service. And 
it is a more exotic existence than what we are used to in this 
kind of binary world of goods and services.
    Chairman Crane. Well, there are more rigorous disciplines 
that apply to goods. That is why I was curious.
    Well, gentlemen, I want to thank you all for your 
participation. And as I told an earlier panel, please keep the 
channels of communication going, because this is an ongoing 
battle, and it is not even going to be totally resolved in 
Seattle come the end of November or early December. But at 
least, God willing, and thanks to your input, we will make 
progress. Thank you all.
    [Whereupon, at 3:40 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

              AD Hoc WTO Round Processed Food Coalition    
                                       Washington, DC 20006
                                                     August 4, 1999

A.L. Singletion, Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, DC 20515

                      Re: WTO Seattle Ministerial

    Dear Mr. Singleton:
    On behalf of the Ad Hoc WTO Round Processed Food Coalition, the 
following July 22, 1999 letter was sent to Ambassador Charlene 
Barshefsky relevant to the Seattle Ministerial and forthcoming 
multilateral trade negotiations. This letter is provided the 
Subcommittee on Trade in response to its July 8, 1999 request for 
private sector views relevant to the captioned subject.

              Ad Hoc WTO Round Processed Food Coalition    
                                       Washington, DC 20006
                                                      July 22, 1999

Honorable Charlene Barshefsky
U.S. Trade Representative
Office of the U.S. Trade Representative
600 17th Street, N.W.
Washington, DC 20508
    Subject: Ad Hoc WTO Round Processed Food Coalition/ Recommendations 
for the Seattle Ministerial and New Round of WTO Negotiations.

    Dear Ambassador Barshefsky:
    We, the undersigned trade associations and food companies, are 
writing to underscore the priority that should be given at the Seattle 
Ministerial and forthcoming World Trade Organization (``WTO'') 
negotiations to liberalizing trade in the processed food sector. 
Further, this letter provides specific recommendations with respect to 
the scope, structure, and negotiating modalities that should be pursued 
in this important export sector to U.S. farmers, workers, and the 
American economy overall.

                Trade Liberalization in the Food Sector.

    The U.S. food processing sector recognizes that the major 
achievement of the Uruguay Round was to introduce fundamental 
trade disciplines into the agriculture and food processing 
area. These new disciplines included the conversion of non-
tariff measures to tariffs, the binding of tariffs at maximum 
levels, and rules on the use of sanitary and phytosanitary 
(SPS) measures.
    However, only minimal improvements in market access were 
actually achieved in the Uruguay Round. In some cases, 
conversion of non-tariff measures to tariffs actually increased 
the degree of protection provided to processed foods. The 
complex tariff formulas adopted by some countries, particularly 
the nations of the European Union, impose high, variable 
tariffs based on standard ``recipes'' that may bear little 
resemblance to the actual composition of a processed food 
product.
    Despite the existence of significant market access 
barriers, world trade in processed food products is increasing 
twice as fast as trade in primary commodities. By 2000, trade 
in processed and value-added products is predicted to account 
for 75 percent of global agrifood trade. A range of economies, 
including net food importing countries, now export processed 
foods.
    Value-added consumer-ready food exports have a greater 
positive impact on the U.S. economy than bulk commodity 
exports. In 1998, U.S. consumer-ready processed food exports to 
the world accounted for 39 percent of the total $51 billion of 
``agricultural'' exports. For the first, time, the value of 
consumer-ready exports was equal to that of bulk agricultural 
commodities.
    Further processed products create high-paying jobs and 
value in the United States. Seven of the largest 10, and 22 of 
the largest 50, food processing firms in the world are 
headquartered in the United States. U.S. farmers and their 
families are a major beneficiary of increased exports of 
processed food products, both through farm sales and off-farm 
employment opportunities. For example, 1.9 billion pounds of 
U.S.-grown potatoes were purchased and further processed into 
exports of $286 million in french fries in 1997.
    U.S. exports of processed foods would be even higher but 
for market access barriers. Globally, tariffs on processed 
foods remain higher than those on basic agricultural 
commodities, and higher than those on industrial products. 
Bound agricultural tariffs average over 40 percent ad valorem, 
and tariff bindings on processed foods average significantly 
more than 40 percent.

   Recommendations for the Seattle Ministerial and WTO Negotiations.

    The next round of trade negotiations will provide an 
opportunity to capitalize on the fundamental restructuring of 
the trade rules for food and agriculture. Strong opposition to 
lowering trade barriers is already apparent, and countries such 
as Japan and Norway--which fear low incomes and declining 
employment in agriculture--have positioned themselves to fight 
against further liberalization. The United States must take the 
lead in combating this opposition and insisting that further 
liberalization take place.
    The highest priority for the United States should be 
commercially meaningful reductions (including zero-for-zero in 
certain tariff lines) in tariffs and further disciplines on 
non-tariff measures (NTMs) facing U.S. exports of highly 
competitive processed food exports. Such products include 
processed cereal products (e.g., cookies, crackers and snack 
foods); pet food; processed vegetable and fruit products (e.g. 
soups, french fried potatoes, juices and sauces); processed 
meat and poultry products; and certain miscellaneous food 
preparations (e.g. formulated protein mixes and nutritional 
supplements).

1. Tariffs.

     The United States should insist on a formula that 
will lead to significant reductions in tariff peaks, rather 
than a simple percentage reduction across the board. There is 
ample precedent for formula cuts in the industrial product 
area. The so-called ``Swiss formula'' \1\ was used for 
industrial goods during the Tokyo Round. There are any number 
of other ways in which such reductions can be achieved, 
including the harmonization of tariffs at certain levels or in 
certain bands.
---------------------------------------------------------------------------
    \1\ The ``Swiss formula'' is new tariff=(old tariff * agreed 
coefficient)/(old tariff +agreed coefficient). Such a formula not only 
reduces the highest tariffs the most, but it also establishes an upper 
bound on all tariffs (depending on the coefficient chosen).
---------------------------------------------------------------------------
     A formula approach that cuts high tariffs more 
than low tariffs will help address ``tariff escalation.'' 
Tariff escalation occurs where tariffs for processed products 
are high compared to the primary products from which they are 
derived. Tariff escalation still prevails in important product 
chains in many countries, impeding imports of processed 
products.
     Reducing high tariffs more than low tariffs will 
also help reduce the gaps and address the distortions that are 
created when countries have very high bound tariff rates, but 
apply actual tariff rates below the bindings. Countries often 
adjust these applied rates to protect domestic production from 
market price signals.
     The United States should argue strongly for the 
simplification of tariff structures. Complex formulas and 
tariffs based on ``standard recipes'' should be eliminated and 
replaced by straightforward ad valorem tariffs which are fair 
and consistent with free trade principles.
     Countries must not be permitted to ``average'' 
tariff reductions in specific food and agricultural commodities 
to achieve agreed reductions. Averaging allows countries to 
make high percentage reductions on already low tariffs, and 
lower percentage reductions on lines with higher tariffs. In 
order to achieve meaningful improvements in trading 
opportunities, the reverse should occur: the greatest 
reductions in tariffs must occur where tariff levels are the 
highest.
     Request-offer negotiations are not an acceptable 
negotiating option. In past negotiations, such an approach 
resulted in little improvement in overall market access or in 
disciplining trade barriers. Request-offer negotiations do not 
systematically address the problems of tariff escalation nor do 
they assure that very high tariffs will be reduced at all. 
However, should the United States ultimately find it necessary 
to engage in request-offer negotiations, efforts should be 
concentrated on processed food product commitments by nations 
in the Asia Pacific and South American regions. Despite recent 
economic difficulties, these regions show the greatest promise 
for intermediate-term processed product export opportunities.
     The focus of U.S. negotiations should be to obtain 
significant multilateral commitments for food and agriculture 
as a whole. However, the Ad Hoc Coalition would also support a 
``zero-for-zero'' \2\ approach for specific product sectors 
such as soups, french fried potatoes, biscuits and snack foods, 
and pet food.
---------------------------------------------------------------------------
    \2\ The ``zero-for-zero'' approach is one in which countries agree 
that all tariffs on a group of specific products will be reduced to 
zero. During the Uruguay Round, such an agreement was successfully 
concluded for beer.
---------------------------------------------------------------------------
     ``Nuisance Tariffs'' (e.g. below 2 percent) should 
be eliminated. The Administrative costs to collect these 
tariffs exceed the revenue generated and are a hindrance to 
commerce.
     The next Round of multilateral negotiations should 
eliminate all tariff-rate-quotas on agricultural products. This 
would complete efforts achieved in the Uruguay Round to 
progressively liberalize and limit the use of tariff-rate-
quotas. However, the process of converting tariff-rate quotas 
to tariff equivalents should not result in a reduction in 
market access.

2. Non-Tariff Barriers to Trade.

     The WTO Agreement on Sanitary and Phytosanitary 
(``SPS'') Measures--which insists on sound science and risk 
assessment--should not be open for negotiation in the new 
Round.
     However, the Agreement on Technical Barriers to 
Trade should ensure that standards for biotechnology be based 
on sound science and not used as a disguised non-tariff trade 
barrier.
     The U.S. government should support technical 
assistance to developing countries, many of which lack the 
expertise to comply with SPS measures, labeling and technical 
standards of trade.

3. Key Participation by Developing Countries.

     Developing countries such as India must 
participate fully in the negotiations and provide improved 
access opportunities for processed food products. Consideration 
might be given, e.g., to modified tariff reduction commitments 
and extended implementation periods, but exemptions should not 
be permitted.

4. Services, Investment and Intellectual Property.

     The Ad Hoc Coalition also supports renewed 
negotiations in the areas of services, investment and 
intellectual property. Enhanced agreements should guarantee 
freedom of sale, transport, and all forms of distribution 
(including direct selling); protect U.S. investments in the 
food processing, distribution and sales sectors of other 
nations; and protect U.S. brands and trademarks. Without such 
guarantees, improvements in market access will be meaningless.
     Moreover, as famous U.S. brands become more 
globally dominant in the 21st century, we will witness an 
increase in efforts by developing countries to unfairly tax 
U.S. brands at higher rates than local brands and competing 
products. Such discriminatory taxation is a particularly 
serious problem facing the U.S. soft drink industry and should 
be addressed in the next Round of WTO negotiations.
    We look forward to working with you as we approach the 
Seattle Ministerial and begin negotiating in 2000. With your 
support and leadership, the upcoming negotiations will at long 
last result in meaningful benefits for the U.S. food sector. We 
stand ready to provide whatever assistance might be 
appropriate.

            Sincerely,

Bestfoods                           Oregon Potato Commission
Campbell Soup                       Pepperidge Farm
ConAgra                             PepsiCo
General Mills                       Pet Food Institute
Herbalife International             Procter & Gamble
J. R. Simplot Co.                   Ralston Purina
Lamb-Weston                         Tricon Global Restaurants
National Food Processors 
Association                         Welch's
National Potato Council             Wm. Wrigley Jr. Company
Nestle USA

    Respectfully submitted on behalf of the Ad Hoc WTO Round Processed 
Food Coalition,
                                           John F. McDermid
                                               President, IBC, Inc.
      

                                


Statement of the Aluminum Association, Inc.

    Mr. Chairman and Members of the Trade Subcommittee:
    The Aluminum Association appreciates the opportunity to 
present its views on the U.S. negotiating objectives for the 
WTO Seattle Ministerial Meeting.
    The members of The Aluminum Association are domestic 
producers of primary and secondary ingot, aluminum mill 
products and castings. Mill products include sheet and plate, 
foil, extrusions, forgings and impacts, electrical conductor, 
and wire, rod and bar. The membership also includes producers 
of master alloys and additives and aluminum pigments and 
powders.
    The association is a primary source for statistics, 
technical standards and information on aluminum and the 
aluminum industry in the United States. Member companies 
operate approximately 300 plants in 40 states.

                                Overview

    The members of the Aluminum Association are fully committed 
to a fair and open world market for aluminum. We believe 
strongly that tariff elimination or reduction should occur only 
as the result of the mutual agreement of all the parties to a 
tariff negotiation, such as the up-coming WTO Seattle Round, 
and only over a multi-year phase-in period.

                               Background

    The aluminum industry is global. The largest aluminum 
producers are multinational companies production, fabricating 
and distribution facilities around the world. During 1998, 
world aluminum production totaled an estimated 22.1 million 
metric tons.
    The leading producing countries include the United States, 
Russia Canada, the European Union, China, Australia, Brazil, 
Norway, South Africa, Venezuela, the Gulf States (Bahrain and 
United Arab Emirates), India and New Zealand; together they 
represent more than 90 percent of the world primary aluminum 
production.
    The major uses for aluminum are transportation, packaging 
and building and construction and the largest markets are North 
America, Europe and East Asia.
    The U.S is both a major importer and exporter of aluminum. 
Approximately 31 percent of the U.S. supply of aluminum was 
imported from foreign producers in the in the form of primary 
ingot and scrap from Canada, Russia, Venezuela and Mexico and 
mill products from Canada and the EU. U.S. exports amounted to 
13 percent of U.S. producer shipments in the form of ingot, 
scrap and mill products primarily to Canada, Mexico and East 
Asia including Japan and Latin America.
    Excluding NAFTA trade, the EU accounted for approximately 
55 percent of U.S. mill products imports and only 17 percent of 
U.S. exports. East Asia (China, Hong Kong, Japan, Korea and 
Taiwan) accounted for 15.5 percent of U.S. imports and consumed 
30 percent of U.S. exports. Latin America accounted for 10 
percent of U.S. imports and 40 percent of U.S. exports.
    A substantial part of U.S. exports to the EU are shipments 
which are duty free under the Civil Aircraft Agreement.
    The attached tables provide comparisons of U.S. aluminum 
imports and exports for 1998 by region.

                                Analysis

    The members of The Aluminum Association are firm believers 
in the objective of trade liberalization. They have long 
supported open and fair trade. They have seen the benefits from 
the elimination of tariffs and non-tariff measures under NAFTA 
and from the decision by the government of Japan in 1987, to 
achieve parity with U.S. tariffs on aluminum ingot, scrap and 
sheet and plate.
    The members of the association fully understand that the 
Agreement on Civil Aircraft, which provides for duty free 
access to the EU for aircraft parts, has enabled them to 
compete for business in the EU aircraft market.
    The potential growth of markets in Asia and Latin America 
promises opportunities now and, even more so, in the future. 
The realization of that potential can only be redeemed when 
tariffs and other impediments to access to those markets have 
been significantly reduced or eliminated.
    As circumstances now stand, that realization will be 
delayed as long as high tariffs are maintained on aluminum and 
products made with aluminum.
    U.S. tariffs range from zero on ingot and scrap to 2.7 to 
6.5 percent on most mill products. The tariff on aluminum can 
sheet, which is the largest single aluminum mill product 
consumed in the U.S. is three percent. By contrast EU aluminum 
tariffs are six percent on ingot and 7.5 percent on mill 
products. Tariffs in Japan are zero on ingot, the same as the 
U.S. for some categories of sheet and plate and 7.5 percent or 
more on all other mill products. For most developing countries 
aluminum tariffs are in excess of 10 percent with many 
significantly higher than that.

                               Conclusion

    It is highly unlikely that any of our trading partners will 
voluntarily reduce their bound aluminum tariffs, except as the result 
of an agreement reached during trade negotiations. Therefore, we 
recommend that, with respect to aluminum, the objective of the WTO 
Seattle Ministerial Meeting be to achieve:
          an agreement by all major aluminum producing and consuming 
        countries to eliminate tariffs and other impediments to trade 
        in aluminum
          by phasing out those tariffs or other impediments, over a 
        reasonable period of time, by a date certain, to be determined 
        through multilateral negotiations.
    We thank you for this opportunity to express our views.

    ATTACHMENT

                  U.S. Aluminum Exports by Region--1998
                          (Millions of Pounds)
------------------------------------------------------------------------
                                                   Scrap, &      Mill
           Region               Total     Ingot      Dross     Products
------------------------------------------------------------------------
North America                    2,328       445         480       1,404
Latin America                      320         6           3         311
European Union                     143         8           5         131
Other Europe                        12         *           *          11
East Asia                          834       146         457         231
Other Asia                          86         3           9          74
Oceania                             13         1           *          12
Africa                               5         *           *           5
    Total                        3,743       610         954       2,179
------------------------------------------------------------------------
 ASource: U.S. Department of Commerce


                  U.S. Aluminum Imports by Region--1998
                          (Millions of Pounds)
------------------------------------------------------------------------
                                                   Scrap, &      Mill
           Region               Total     Ingot      Dross     Products
------------------------------------------------------------------------
North America                    5,043     3,177         794       1,072
Latin America                      604       389         139          75
European Union                     469        37          58         374
Other Europe                     1,679     1,541          73          65
East Asia                          164        49          10         105
Other Asia                         180        79          69          33
Oceania                            151       144           1           6
Africa                              52        34           2          16
    Total                        8,342     5,449       1,146       1,747
------------------------------------------------------------------------
 ASource: U.S. Department of Commerce

      

                                


Joint Statement of the American Crop Protection Association; American 
Forest and Paper Association; American Plastics Council; Biotechnology 
Industry Organization; Chemical Manufacturers Association; Chemical 
Specialties Manufacturers Association; Coalition for Truth in 
Environmental Marketing Information; National Association of 
Manufacturers; National Fisheries Institute; National Foreign Trade 
Council; Soap and Detergent Association, New York, NY; and U.S. Council 
for International Business, New York, NY; joint statement and 
attachments

    The undersigned business organizations welcome the 
opportunity to share our thoughts with the House Ways and Means 
Trade Subcommittee on an important trade and environment issue 
likely to arise in the forthcoming WTO negotiations, namely the 
``Precautionary Principle.'' The Subcommittee has invited such 
comments in the context of your review of the objectives for 
the Seattle WTO Ministerial and the outlook for a successful 
meeting. We applaud the Subcommittee for reaching out to the 
private sector, and hope these comments will be helpful to your 
work.
    We expect the Precautionary Principle will be a topic of 
discussion at the WTO Ministerial, given, among other things, 
the European Union's announced intention to seek ``a 
clarification of the relationship between multilateral trade 
rules and core environmental principles, notably the 
Precautionary Principle.''
    It is important to note at the outset that the business 
community supports the use of caution and sound science in 
developing health and environmental standards. Indeed, the risk 
assessment principles and risk management that U.S. authorities 
apply to food, finished products, and other goods are extensive 
and include many types of precaution. The critical factor is 
that such standards are risk-based and justified by sound 
science.
    The business community supports sound science and risk 
based precautionary measures which are cost effective, in line 
with the Principles of the Rio Declaration agreed at the Earth 
Summit in 1992. That Declaration also stated that unilateral 
trade measures should be avoided, and international consensus 
should be sought (Rio Declaration Principles 12 and 15 attached 
as Annex 1).
    Since 1992, multilateral agreements such as the Convention 
on Prior Informed Consent, the Sanitary and Phyto-Sanitary 
(SPS) Agreement and the Plant Protection Convention have been 
put in place precisely to provide the kind of foresight 
envisioned by the Precautionary Principle, but with the power 
of international consensus and systematic processes to better 
enable broad, global protections.
    The undersigned groups are concerned that the Precautionary 
Principle--as it is being applied in Europe and advocated by 
activist groups--is both a misinterpretation of the principle 
and a radical departure from science and risk-based regulation 
which could impede innovation and progress. Under such an 
interpretation, any assertion of harm or hazard--however remote 
the potential for harm or however flimsy the evidence to 
support the assertion--justifies restricting or eliminating the 
use of a product. Meanwhile, certain industry sectors would be 
unfairly obliged to bear the resulting added costs of 
disproving alleged risks. If adopted, such a policy would cause 
the elimination of many beneficial products based solely on a 
mere assumption of hazard. Sound science and risk-based 
decision making would be crowded out.
    Against that background, a number of U.S. business and farm 
groups joined to express their concerns about international 
developments regarding the Precautionary Principle in an April 
14 letter to Ambassador Barshefsky (Annex 2). That letter asked 
the U.S. government to reject any version of the principle that 
does not rely on a risk assessment-based, science-justified 
approach, both in the WTO and in specific agreements and forums 
such as the SPS Agreement and the Biosafety Protocol of the 
U.N. Biodiversity Convention.
    In that letter, business and farm groups stated:
    ``We recognize that uncertainty and risk are inherent in 
policymaking, and we support cooperative international efforts 
involving both the public and private sectors to develop 
scientific data that would improve the accuracy and relevance 
of risk assessments and harmonize methodology and quality 
assurance.''
    We have seen U.S. products that have been thoroughly 
assessed as safe by U.S. regulatory authorities, among the most 
highly developed and stringent in the world, rejected by other 
countries because of claimed and often unsubstantiated 
environmental and health concerns about the alleged absence of 
sufficient science, while citing the Precautionary Principle as 
justification.
    Business is deeply concerned that a number of groups and 
countries seek to invoke a misconstrued version of the 
Precautionary Principle as an absolute standard, overriding all 
others, to prevent well-justified human activities wherever any 
vestige of risk can be asserted, even speculatively. This abuse 
of the principle is counter to longstanding public policy, past 
human accomplishment and future human aspirations.
    The Precautionary Principle is but one of a number of well-
recognized principles and factors that must be considered in 
uncertain situations that credible scientific evidence shows 
could pose a risk of serious or irreversible damages. These 
include consideration of the degree of uncertainty, the 
magnitude and possible consequences of risk, the ability to 
manage the risk, and analysis of whether or not proposed 
precautionary responses are effective, feasible, cost-
effective, and fair.
    In Seattle, the U.S. government delegation should advocate 
the essential importance of a sound risk and scientific 
foundation for environmental standards and environmentally-
based restrictions on trade. Application of the Principle must 
recognize the science that is available even where 100% 
scientific certainty is not and may never be. Efforts to invoke 
the Precautionary Principle in the absence of any scientific 
information, or worse yet, with selective avoidance of 
scientific information, can only invite unnecessary conflict. 
Those who misuse the Precautionary Principle to add to public 
fears about product safety, without credible and widely 
recognized scientific evidence, mislead consumers, waste public 
resources and increase trade tensions.
    Therefore, the U.S. government should oppose strongly any 
effort to redefine the Precautionary Principle in a way that 
permits the circumvention of sound scientific and risk 
information and international consensus. In particular, the 
U.S. should block any effort to accept or codify the misuse of 
the Precautionary Principle, as the European Union is doing in 
the case of products containing Genetically Modified Organisms. 
The U.S. government should emphasize that application of the 
Precautionary Principle must be structured around:
          1. Sound Science, International Dialogue and Mutual 
        Recognition of Standards;
          2. Sound Risk Assessment, Management, and Communication;
          3. Timely, Transparent and Non-Discriminatory Regulatory 
        Procedures which are responsive to new scientific developments;
          4. Credible Sources of Environmental and Health Information;
    U.S. business has consistently called for multilateral, cooperative 
approaches to international environmental issues, and warned that 
unilaterally imposed trade restrictions endanger economic prosperity, 
human health and environmental protection. That position also has the 
full support of bodies such as the International Chamber of Commerce, 
the voice of international business.
    The Seattle WTO Ministerial offers a valuable opportunity to 
reaffirm the importance of sound science and risk assessment in a 
rules-based trading system. Decisions to apply the Precautionary 
Approach will then be made in the best interests of the environment and 
the public in ways that are cost effective and consistent with 
international trade disciplines.
    Trade and environmental policies should be rooted in sound science 
and risk assessment and not be driven by unsubstantiated allegations, 
scare tactics, and political gamesmanship, as has been the case too 
often outside the U.S., and especially in Europe. It is our hope that 
the U.S. government delegation in Seattle will use this opportunity to 
ensure that the inappropriate application of the Precautionary 
Principle does not spread throughout the WTO.
    We understand that USTR made a statement last week pertaining to 
these issues. We encourage USTR and the Administration to consult with 
business on how to address the role of the Precautionary Principle in 
international trade policy and hope the Congress will support a 
transparent and balanced discussion of the U.S. government position on 
this question as is warranted by its economic and environmental 
impacts.
    Endorsed by :
          American Crop Protection Association
          American Forest and Paper Association
          American Plastics Council
          Biotechnology Industry Organization
          Chemical Manufacturers Association
          Chemical Specialties Manufacturers Association
          Coalition for Truth in Environmental Marketing Information
          National Association of Manufacturers
          National Fisheries Institute
          National Foreign Trade Council
          Soap and Detergent Association
          U.S. Council for International Business
      

                                


The Rio Declaration on Environment and Development

                              Principle 12

    States should cooperate to promote a supportive and open 
international economic system that would lead to economic 
growth and sustainable development in all countries, to better 
address the problems of environmental degradation. Trade policy 
measures for environmental purposes should not constitute a 
means of arbitrary or unjustifiable discrimination or a 
disguised restriction on international trade. Unilateral 
actions to deal with environmental challenges outside the 
jurisdiction of the importing country should be avoided. 
Environmental measures addressing transboundary or global 
environmental problems should, as far as possible, be based on 
an interesting consensus.

                              Principle 15

    In order to protect the environment, the precautionary 
approach shall be widely applied by States according to their 
capabilities. Where there are threats of serious or 
irreversible damage, lack of full scientific certainty shall 
not be used as a reason for postponing cost-effective measures 
to prevent environmental degradation.

                                                     April 14, 1999

The Honorable Charlene Barshefsky
United States Trade Representative
600 17th Street, N.W.
Washington, DC 20508

    Dear Madam Ambassador:

    The United States Council for International Business (USCIB) and a 
number of the other under-signed organizations were pleased to attend 
the recent World Trade Organization's (WTO) High-Level Symposium on 
Trade and Environment. Governments, business, and non-governmental 
organizations that participated had a useful exchange of views on a 
wide range of issues relating to the interface between environment and 
trade issues and policies.
    While we found the Symposium worthwhile, we were concerned by the 
U.S. Government (USG) delegation's statements on the Precautionary 
Principle and non-product related Processing and Production Methods 
(PPM's). First of all, both in the March 15-16 Statement (attached) and 
in other discussions, the USG seemed to endorse a broader application 
of the Precautionary Principle, even if the Principle itself was not 
always explicitly mentioned. Secondly, USG statements also appeared to 
signal a blanket acceptance of the use of non-product related PPM's in 
environmental labels in a way that would set the stage for trade 
discrimination. In our view, these statements raise considerable doubt 
about the consistency of U.S. trade policy, especially in light of the 
government's strong stance in the beef hormone case and in other 
current trade disputes and international negotiations. Let us address 
these two issues in greater detail.

Precautionary Principle

    We recognize that uncertainty and risk are inherent in 
policymaking, and we support cooperative international efforts 
involving both the public and private sectors to develop scientific 
data that would improve the accuracy and relevance of risk assessments 
and harmonize methodology and quality assurance. We believe the USG 
should reject any interpretation of the Precautionary Principle that 
does not rely on a risk-based, science-justified approach in the WTO 
and in specific agreements and forums such as the Sanitary and Phyto-
Sanitary (SPS) Agreement and the Codex Alimentarius. We are concerned 
that the U.S. government's characterization of the Precautionary 
Principle at the High-Level Symposium would seemingly undermine the 
fundamental importance of sound science as a basis for environment and 
other regulation.
    As you well know, U.S. trade has suffered substantially from trade 
restrictive measures by other countries which have based their actions 
on unacceptable interpretations of the Precautionary Principle, as 
Europe has done in the beef hormone case. Similar challenges face U.S. 
business in trade of biotechnology products with Europe, in the 
Biosafety Protocol negotiations, and in European environmental labeling 
programs. These examples demonstrate all too clearly how 
interpretations of the Precautionary Principle which neglect scientific 
considerations can prevent legitimate trade in products whose risks can 
be identified and managed.

PPM's and Environmental Labeling

    The 1995 Report on Trade and Environment to the OECD Council at 
Ministerial Level made several important points relating to PPM's, 
which we believe are still appropriate. That report stated explicitly 
that:
    ``When PPM's affect the characteristics of products, existing trade 
rules clearly permit the use of PPM-based trade measures, subject to 
agreed disciplines. However, multilateral trade rules and disciplines 
make no provision for, and have been interpreted not to allow for, 
import restrictions based on characteristics which are not physically 
embodied in the imported products and therefore do not impact on the 
environment in the importing country.''
    The report had two specific findings or recommendations with 
respect to PPM's:
      OECD Governments agree that environmental concerns 
related to PPMs that have transboundary or global environmental effects 
are best addressed through international cooperation.
      A further examination of the appropriate and effective 
role of PPM-based trade restrictions in MEAs is necessary.
    Given that no such study has taken place and no international 
consensus exists on the proper role of non-product related PPM's within 
the international trading system, any USG position which condones their 
use outside of MEAs founded on established trade disciplines, as 
implied by USG statements at the High-Level Symposium, would be 
premature and create a dangerous precedent.
    Regarding environmental labeling, we believe that such labels can 
provide factual information which enables consumers to make informed 
purchasing decisions. Regrettably, most environmental labeling programs 
take the form of multi-criteria labels, developed and awarded through a 
non-scientific, largely political process. In the absence of an 
accepted scientific methodology that can fairly distinguish and justify 
the overall environmental preferability of individual products within 
entire categories, such labels have questionable environmental 
benefits. While voluntary, they can still create unfair competitive 
advantage and pose discriminatory trade barriers, especially when the 
labels' criteria are based upon PPM's. Therefore, we believe that the 
Agreement on Technical Barriers to Trade (TBT) should emphasize sound 
science and transparency and discourage non-product related PPM's as a 
component of environmental labeling. These recommendations also pertain 
to any consideration of labeling for products derived from 
biotechnology.
    In conclusion, we believe the USG should advocate and pursue sound-
science based multilateral responses to international environmental 
challenges, including PPM's, without restricting trade. The USG views 
expressed at the Symposium appear to represent a major shift in U.S. 
policy away from these important principles. We would appreciate 
confirmation that the U.S. government's statements should not be read 
to detract from our strong support for the trading system and strict 
adherence to the principles of the WTO.

            Sincerely,
                                    The American Bakers Association
                                    The American Farm Bureau Federation
                                    The American Forest and Paper 
                                    Association
                                    The Biotechnology Industry 
                                    Organization
                                    The Chemical Manufacturers 
                                    Association
                                    The Grocery Manufacturers 
                                    Association
                                    The National Association of 
                                    Manufacturers
                                    The National Fisheries Institute
                                    The National Foreign Trade Council
                                    The National Mining Association
                                    The United States Council for 
                                    International Business

    Encl.

    CC:  Madeleine K. Albright, Secretary of State
    William M. Daley, Secretary of Commerce
    Daniel R. Glickman, Secretary of Agriculture
    Carol M. Browner, Administrator, Environmental Protection Agency
      

                                


Linkages Between Trade and Environmental Policies

                     Statement of the United States

    As we noted in our earlier intervention, in the WTO's 
Preamble, Members recognize that trade is not an end in itself 
and that sustained economic growth must be pursued in the 
broader context of sustainable development, which integrates 
economic, social and environmental policies. Moreover, the 
linkages between trade and environmental policies are 
multifaceted. Nevertheless, we believe that economic 
development and stronger protection of the environment go 
together. Experience has shown that greater attention to 
environmental concerns is directly correlated with better 
economic results at the national, industry and company levels.
    The relationship between the trading system and 
environmental regulations is an issue of particular importance 
to environmental policymakers and regulators in our respective 
countries. Modern trade agreements, of course, apply to 
domestic heath, safety, and environmental regulations in many 
ways. Also, we must recognize that regulatory choices often 
involve difficult judgement calls on complex matters as to 
which particular environmental policy tool is most appropriate 
in achieving a society's desired environmental policy 
objective. Not only the science but the analysis of different 
regulatory alternatives is complex. In the United States, this 
process of choosing a regulatory tool generally includes an 
extensive process of public participation and political 
accountability at the domestic level.
    In view of all of this, it is essential that WTO rules 
recognize and are fully consistent with the needs of
    regulators to take action to stringently protect health, 
safety and the environment. It is necessary to ensure that 
obligations under international trade agreements do not hamper, 
but rather are supportive of, the ability of governments, at 
central and sub-central level, to maintain and enforce high 
levels of domestic protection that they deem appropriate.
    As President Clinton said at last May's WTO Ministerial 
Conference, ``International trade rules must permit sovereign 
nations to exercise their right to set protective standards for 
health and safety, the environment and biodiversity. Nations 
have a right to pursue these protections, even when they are 
stronger than international standards.''
    We note that WTO Agreements specifically recognize the 
sovereign rights of Members to determine the level of 
protection that their standards are designed to achieve. This 
is important and must be maintained. In order to adequately 
protect the health of our citizens, we must maintain our right 
to ensure that products that enter our country meet our 
requirements.
    One agreement of particular importance to health, safety 
and environmental policy makers is the Agreement on Sanitary 
and Phytosanitary measures. Again, there are a number of 
provisions in this agreement that are particularly important to 
regulators. This includes the Agreement's provisions 
recognizing the rights of countries to maintain pre-approval 
requirements. As a matter of U.S. law and practice, for 
example, certain products (e.g., pesticides) must be approved 
before they can be marketed. We have adopted this approach in 
recognition of the fact that pesticide residues on foods may 
pose risks to health or the environment. In order to obtain 
approval to sell or distribute a pesticide, pesticide producers 
must provide sufficient data to enable regulators to determine 
that there are no unreasonable adverse effects on public health 
or the environment.
    It is also important that the SPS Agreement recognizes the 
right of countries to take provisional measures in cases where 
relevant scientific information is insufficient. This point is 
particularly important as policy makers often operate at the 
cutting edge of scientific information. To achieve our health, 
safety, and environmental objectives, it is a reality that we 
must be able to make decisions and take environmentally 
protective actions in the absence of full scientific certainty.
    The need to fully address regulators' needs and concerns 
does not, of course, mean that we condone trade protectionist 
measures that are disguised as environmental measures--indeed, 
such measures would have the effect of casting doubt upon, and 
even undermining, environmental as well as trade policy 
objectives.
    Turning to the issue of the relationship between WTO rules 
and multilateral environmental agreements, or MEAs, our point 
of departure is that all WTO members are committed to 
multilateralism. As stated in the report of the CTE to the 
Singapore Ministerial Conference, ``WTO Agreements and 
multilateral environmental agreements (MEAs) are representative 
of efforts of the international community to pursue shared 
goals, and in the development of a mutually supportive 
relationship between them due respect must be afforded to 
both.'' There can be no doubt that the relationship between the 
WTO and MEAs is a partnership of equals.
    Clearly, it is important that MEAs be able to achieve their 
objectives, including through the use of trade measures, while 
at the same time being mindful of multilateral trade 
disciplines. To date there has never been any dispute 
concerning the provisions of an MEA. The past is not always a 
reliable predictor of the future. However, we believe that 
there is substantial flexibility under WTO rules to address 
environmental challenges through MEAs. Also, we believe that 
the possibility of conflict can be substantially reduced 
through policy coordination at the national level. 
Nevertheless, we must be sure that there is no doubt that we as 
WTO members support the efforts of environmental negotiators in 
cooperating to address environmental challenges of common 
interest.
    Turning to ecolabeling, it is broadly recognized that 
ecolabels can be an important tool for engaging consumers in 
environmental protection. At the same time, from both an 
environmental and trade perspective, it is important that such 
measures not be misused as a hidden form of protectionism. We 
believe that the WTO rules provide sufficient flexibility to 
permit all forms of ecolabeling, including those involving 
criteria based on processes and production methods, subject to 
appropriate trade disciplines of the multilateral trading 
system, including in particular transparency and non-
discrimination. More generally, we think it is clear that the 
rules of the multilateral trading system can permit the 
application of innovative environmental policy tools.
    One way of helping to ensure that ecolabels meet their 
environmental objectives in a way that is mutually supportive 
of trade objectives is to provide transparency in the design of 
ecolabeling programs, the selection of products to be covered 
by ecolabeling, the selection of criteria for receipt of an 
ecolabel and the design of any conformity assessment procedure. 
That means there should be full transparency with an 
opportunity for public input at each critical stage of the 
program's development.
    The issue of measures based on processes and production 
methods (PPMs) has been an important and controversial issue on 
the trade and environment agenda. We would note that the 
Appellate Body report in the Shrimp/Turtle dispute belies the 
notion that such measures are a priori out of bounds under WTO 
rules. However, that report also makes clear that such measures 
must meet the rules of the trading system which guard against 
abuse. Without arguing the pros and cons of the specific 
measures at issue in the dispute, we wish to point out that the 
Appellate Body has helped shed important light on the 
application of WTO rules in this area.
    Looking towards the future, we must look for innovative 
ways to ensure that WTO rules strike the right balance---
promoting free trade in a manner consistent with and supportive 
of high environmental standards. As we noted earlier, we 
believe that as we embark on the next round of WTO 
negotiations, it would be useful to provide a forum where WTO 
members can identify and discuss links between elements of the 
negotiating agenda and the environment. While negotiations on 
these issues would be the responsibility of the relevant 
negotiating groups, the proposed forum would help ensure that 
these links receive the attention that they deserve during the 
negotiations and help delegations to look at what they are 
negotiating from a broader perspective. We believe that the CTE 
could play this role. It has already shown its capability to 
take on work along these lines through its work in analyzing 
the potential environmental benefits of trade liberalization in 
various sectors.
    The idea would be for the CTE to look systematically and 
transparently at all the various areas of negotiation on a 
rolling basis. After an initial run through of all the areas 
under negotiation, the CTE would continue to look at all of the 
issues so that the work of the CTE could evolve as the 
negotiations evolve. The CTE would identify and discuss issues, 
but not try to reach conclusions or negotiate these issues in 
the CTE itself. Rather, it would provide a report of its 
discussions to Members and the relevant negotiating groups. We 
would expect that the CTE's work would play a valuable role in 
providing input to deliberations at the national level on 
positions to be taken in the actual negotiating groups. Of 
course, we would have to be absolutely clear that the CTE's 
role in identifying issues would not detract from, or interfere 
with, in any way the responsibilities of negotiating groups for 
addressing issues that are raised by Members on these or any 
other issues.
      

                                


Statement of the American Free Trade Association (AFTA), Miami, Florida

    This testimony is offered on behalf of the American Free Trade 
Association (AFT). The American Free Trade Association is a not-for-
profit trade association of independent American importers, 
distributors and wholesalers, dedicated to preservation of the parallel 
market as a source of genuine and legitimate brand-name goods at 
reasonable cost to American consumers. The parallel market embraces a 
broad range of products, but AFTA's members are primarily involved in 
sale and distribution of fragrance, cologne, health and beauty aid 
(e.g. shampoo, soap, etc.) products.
    AFTA has been an active advocate of parallel market interests for 
over fifteen years. It has appeared as amicus curiae in the two leading 
Supreme court cases affirming the legality of parallel market trade 
under the federal trademark, customs and copyright acts (the 1986 Kmart 
case and the 1998 Quality King case) and in numerous lower court 
decisions. The Association regularly addresses regulatory and 
legislative challenges to the parallel market through meetings and 
petitions with government offices.
    Because AFTA, and others, believe the preservation of the parallel 
marketplace is paramount to the goals and objectives of the WTO, it 
submits this written testimony in response to the Committee's request 
for comments on the specific objectives of the upcoming WTO 
Ministerial. The parallel marketplace is an industry serving the 
interests of the international consumer and trader. Accordingly, we 
urge that the Administration give a priority to assuring that the 
Ministerial Meetings do not advance any principles which would curtail 
or diminish the legality of parallel market trade throughout the world.

               The Importance of the Parallel Marketplace

    Parallel Imports are genuine trademarked consumer products, such as 
fragrances, 35 mm cameras, electronic products and watches which are 
manufactured abroad and imported by independent American importers 
rather than by ``authorized'' U.S. importers and distributors. Parallel 
imports exist primarily because the manufacturers, for reasons of their 
own, seek significantly higher prices for their products in the United 
States than elsewhere in the world. They do this by creating wholly-
owned or controlled subsidiaries in this country, designating those 
companies as the exclusive ``authorized'' importers and distributors 
for their products here, and refusing to sell to retailers who will not 
maintain the higher prices for the products.
    The obvious result in a free enterprise, free trade market is that 
independent American importers can purchase the same products overseas 
at the world price, often directly from the manufacturers' 
``authorized'' distributors abroad. The foreign manufacturers' price 
differential for the U.S. market is often so great that, even after 
paying shipping costs and U.S. Customs duties, the parallel importer 
can offer the identical articles for twenty to forty percent less than 
the U.S. ``authorized'' distributor.
    The result is a saving to American consumers amounting to billions 
of dollars a year. Another result is the availability of popular 
products to a much wider spectrum of Americans who do not live in the 
large cities where the exclusive authorized stores are generally 
located. The parallel import trade has also served as an independent 
bulwark against unrestrained increases on the domestic price of 
imported consumer goods as compared to prices available worldwide.

                           The WTO Objective

    On August 5, 1999 Lori Wallach of Global Trade Watch presented oral 
testimony to the Committee detailing how governments are utilizing 
international trade agreements to promote corporations' needs over the 
needs and benefits of consumers and citizens. As stated by Ms. Wallach, 
parallel importing is a practice opposed by some manufacturers who seek 
to engage in significant price discrimination by geographic area. This 
practice of price and distribution discrimination undermines the very 
intention of the WTO which is to help trade flow as freely as possible 
and to achieve further trade liberalization.
    The Trade Related Aspects of Intellectual Property Rights Agreement 
(TRIPS) is administered by the WTO. The goal of TRIPS is the reduction 
of distortions and impediments to international trade, promotion of 
effective and adequate protection of intellectual property rights, and 
ensuring that measures and procedures to enforce intellectual property 
rights do not themselves become barriers to legitimate trade. All of 
these objections are hindered, if not prevented, by national 
legislation banning, preventing or discouraging parallel imports. As 
can be seen in the present South African conflict, global recognition 
of the right of the parallel marketplace to exist is of paramount 
importance to any ongoing consideration of global economic and consumer 
rights. If citizens cannot be protected by international trade 
agreements, they serve no purpose whatsoever. If sick people are 
prevented access to cheaper pharmaceuticals in the guise of advancement 
of international trade and intellectual property considerations, we, as 
a global community, are failing our obligations to our citizens. If the 
fear of competition from parallel imports is so great that WTO dispute 
mechanisms are relied upon to protect manufacturers from this type of 
free trade, then the very ideal by which the WTO was established is 
necessarily threatened.

                      International Considerations

    In South Africa, parallel importation of generic drugs is being 
opposed by the U.S. government because drug manufacturers feel 
threatened by the competition of cheaper imports. This is despite the 
fact that these drugs may assist tremendously in curbing the rising 
rate of the spread of AIDS in that country. In New Zealand and Israel, 
the U.S. has threatened trade sanctions for repealing their bans on 
parallel imports--even though the repeal was based on funded economic 
studies proving that consumers would benefit tremendously from the 
increased competition and lower prices. In the United Kingdom, 
manufacturers are struggling to maintain their historic ability to 
charge British consumers much higher prices than other consumers in 
other countries pay for the identical goods and the Ministers are 
urging the repeal of trademark laws heretofore interpreted to deny 
parallel imports. In Japan, recent case law limits the prevention of 
parallel patented imports and recent studies clearly show that the 
practice is fully supported, albeit silently, by the manufacturers 
themselves. Summarily, the international community is struggling to 
regulate, or deregulate, parallel market trade.
    In July 1998, in ``Parallel Importing: A Victory for the Consumer'' 
Garreth Morgan, a respected New Zealand columnist, reviewed the 
arguments submitted by opponents of New Zealand's repeal of its 
prohibition against parallel imports. ``The staunchest objection is 
that an owner of copyright should have the right to control 
distribution of the copyrighted product--that without it they cannot 
maximize the return from their investment. Conferring sole rights of 
control over these functions (distribution, service and warranty) would 
generate unnecessary market power and with that monopolistic pricing 
and production practices would proliferate--along with a reduction in 
consumer benefit. So long as copyright law ensures that the owner of 
the brand is able to levy purchasers a royalty at one stage of the 
production or distribution chain, then they can get a return for their 
intellectual product. There is no case that they should control all 
steps in the chain from producer to consumer. Next, it's been suggested 
that ownership of the New Zealand-registered trademark can prevent 
others from using it. Again, to the extent that trademark law enables 
its owner to limit competition beyond that necessary to ensure the 
owner has an opportunity to charge a royalty for use of that ownership, 
it should be modified. Similarly the privilege that New Zealand-
registered patents or registered designs confer should be limited to 
ensure that offshore owners aren't prevented from having their products 
distributed here--so long as they're not passed off as something 
they're not. It is therefor totally unnecessary for the government to 
provide them additional protection on distribution--and indeed to do so 
harms purchasers. A presence in manufacture and distribution is fine, 
but using one activity to dominate the market in the other, similarly 
compromises consumer sovereignty.
    The opinion of the Arbeitsgemeinschaft de Verbraucherverbande, the 
federal organization of the German consumer associations, echoes the 
sentiments that free trade can only be accomplished through the 
international legalization of parallel importation. ``From the consumer 
associations' point of view it is completely unreasonable that, in a 
context of increasingly global economic and trade relations, legal 
regulations can be in force which make it possible to artificially keep 
prices high and for manufacturers to block or considerably control 
distribution pathways for their products which were legally brought on 
the market. For consumers, this casts doubt on the advantages of free 
world trade. Consumer organizations all over the world already 
justifiably fear that continuing liberalization in world trade could 
also result in reduction of hard-gained national consumer protection 
standards.''
    And, Japan, which recently held that parallel imports of patented 
products was permissible (BBS Kraftverzueg Technik AG v. K.K. Racimex & 
K.K. Jap-Auto Proucts, Supreme Court of Japan 1988), has consistently 
held that parallel importing is generally considered to promote price 
competition in a market. Accordingly, restrictions on parallel 
importing are viewed with scrutiny under the Antimonopoly Law of Japan 
(the ``Antimonopoly Law''). The guidelines to the Antimonopoly Law 
concerning Distribution Systems and Business Practices in Japan 
specifically address forms of restrictive conduct with respect to 
parallel importing which are deemed to the violations of the 
Antimonopoly Law.
    Throughout the World, government and courts permit and advocate 
parallel importation and the secondary marketplace. It is imperative 
that the global community not protect manufacturers at the cost of its 
citizens. Intellectual property laws must not be utilized to prevent 
free trade practices and parallel importation must be evaluated as a 
means to protect against monopolistic trade practices.

                         The Domestic Situation

    In the United States, the parallel marketplace has long been 
sanctioned by federal law. It is based in United States Customs and 
trademark laws and regulation (The Tariff Act, 199 U.S.C. 1526; The 
Lanham Act (15 USC 1051, et.seq.)). It has repeatedly been upheld as a 
legitimate industry by the United States Courts, including decisions by 
the Supreme Court over a decade ago (Kmart v. Cartier;) and as recently 
as February 1998 (Quality King V. L'Anza International). The Congress 
has not been asked to reconsider or revise the law in the United 
States, although legislation which failed in the last Congress (H.R. 
3891) but has been reintroduced in this Congress (H.R. 2100) would 
effectively eliminate the benefits of parallel trade in the United 
States. Neither bill invited Congressional evaluation of the benefits 
of parallel market to United States trade and consumers, as the bills 
were caste as intellectual property and health and safety measures, not 
as anti-parallel market bills.
    The Administration's actions regarding the parallel market create a 
great fear that it might very well take a position at the Ministerial 
meetings contrary to United States law and contrary to the interests of 
United States consumers and trade community. As reported in the New 
York Law Journal May 11, 1998 article ``U.S. Government in Tough Stand 
to Enforce Rights'' by Catherine Curtiss, Edwin C. Bullock and Thomas 
P. Newman, The United States government has made a commitment to help 
United States trademark and copyright owners stop the importation of 
gray market goods, despite it legality and its benefit to the consumer. 
This article describes the Quality King v. L'Anza ResearchSupremen 
Court decision and notes the Supreme Court's objection to the 
Government's position that to allow parallel importation would be 
``inconsistent with a number of international trade agreements 
concluded by the United States.'' The Supreme Court, in its decision, 
declared the government's ``international trade agreements'' argument 
to be ``irrelevant'' to interpretation of statutory language enacted 
many years before the earliest of those agreements was made. 
Nevertheless, the Administration continues its efforts to force other 
countries to prohibit parallel trade, if not through express agreement, 
then via threats of economic trade sanctions.i11For example, the United 
States' Trade Representative, convened a special review of New 
Zealand's repeal of their prohibition of parallel imports, stating that 
the action would have ``sever consequences'' extending ``far beyond the 
New Zealand market.'' However, New Zealand only changed its laws 
concerning parallel imports after extensive government funded research 
into the possible consequences on consumers and manufacturers. Based on 
these studies, the government determined that removing the ban would 
benefit consumers through lower prices and wider availability of goods, 
which are currently limited through exclusive franchise networks. In 
addition, even New Zealand's Manufacturer's Federation said the 
``advantages would outweigh the drawbacks'' as manufacturers would be 
able to buy cheaper machinery and equipment. Nevertheless, for fear of 
its impact on international manufacturer monopolies and claiming the 
need to protect the integrity of intellectual property rights, the U.S. 
felt compelled to chastise New Zealand for its actions and threaten to 
place the country on the Special 301 Watchlist.
    In 1997, the Special 301 watchlist, the USTR' annual review of 
intellectual property rights protection in more than 70 countries and 
identification of countries which are being ``watched'' by the U.S. 
intellectual property objectives and evaluated for possible sanctions 
should those objectives not be met, included the following countries: 
Argentina, because, among other things, ``there is no provision for 
protection from parallel imports; Venezuela because, among other 
things, there is a ``lack of protection against parallel imports; and 
Colombia because, among other things, there is a ``lack of protection 
against parallel imports.''
    The secondary marketplace employs hundreds of thousands U.S. 
citizens and engages small, tax-paying businesses throughout the 
country. The parallel marketplace thrives because of the global 
marketplace and its continued operation necessarily depends upon equal 
treatment between trading partners. Parallel imports are products 
manufactured in one country and imported into another. The imported 
product, pursuant to the WTO, must not be discriminated against in 
favor of the domestic product. Accordingly, the U.S. parallel 
marketplace, like the industry in other countries, depends upon 
international adherence to the provisions set forth in the WTO. If 
these provisions are adhered to the recognized, even the United States 
government will have no choice but to advocate the parallel 
marketplace.
    The TRIPS Agreement is silent on the issue of parallel market trade 
legality. At the Ministerial meetings, the United States should make 
certain that the Agreement remains neutral on this issue--and certainly 
should not promote negotiations to render parallel market trade 
illegal. The Courts and the Congress have supported parallel market 
trade in this country; the Administration should not be taking a 
contrary position in the international arena.

                               Conclusion

    In comments made to South Africa's parliament, in October 1997, Mr. 
James Love of the Consumer Project on Technology (CPT) (a non-profit 
organization, created by Ralph Nader, located in the United States) 
stated the following: ``Parallel imports can be an important source of 
price competition for many goods. recent decisions by the European 
Court of Justice and the Supreme Court of Japan clearly state that 
parallel imports of patented and trademarked goods are not contrary to 
international law. National legislation regarding parallel imports 
varies from country to country. In many nations, parallel imports are 
not only permitted, but national antitrust authorities actively take 
steps to prevent manufactures from discouraging or impeding parallel 
imports. This is the case, for example, in the European Community and 
In Japan. There is clearly no worldwide consensus about the exhaustion 
of IP rights. The older IP agreements, such as the Paris Convention and 
the Berne Convention, do not touch upon this issue at all. The most 
recent global IP agreement, TRIPS, carefully circumvents this issue; 
TRIPS Article 6 states that, for the purpose of dispute settlement, 
nothing in the agreement shall be used to address the issue of the 
exhaustion of IP rights. Legislation and jurisprudence on this topic is 
varied from country to country, with countries taking different and 
nuanced positions on exhaustion of rights patents, copyrights and 
trademarks.''
    The Journal of International Economic Law, Volume 1, Issue 4, pp. 
607-636, includes the First Report (final) to the Committee on 
International Trade Law of the International Law Association on the 
subject of parallel importation by FM Abbott, Professor of Law, 
Chicago-Kent College of Law. The Report approaches the exhaustion/
parallel imports question in broad economic terms, asking whether there 
may be an economic and social welfare benefit to permitting IPR holders 
to black parallel imports that outweighs the potential harm to liberal 
trade. The Report observes the most objective which IPR holders seek to 
achieve by the allocation of geographic markets can be attained through 
less trade restrictive means, namely through the vertical allocation of 
distribution territories by contract and that developing and developed 
countries are better served by open markets and the operation of 
comparative advantage. The Report recommends that the WTO adopt a rule 
precluding governments from blocking parallel imports save in certain 
exceptional cases
    We believe it is imperative that the global community not protect 
manufacturers at the cost of its citizens. Intellectual property laws 
must not be utilized to prevent free trade practices and businessmen 
throughout the World must believe they are free to compete in the 
international marketplace. the health and safety of sick patients must 
not be compromised because manufacturers fear the importation of 
cheaper drugs and consumers' rights must not be sacrificed in order to 
allow manufacturers to discriminately distribute and price their 
products in order that they may unilaterally gain unjustifiably rich 
rewards.
    The American Free Trade Association believes that the international 
community is best served by a global consensus on parallel trade. this 
must be made a priority during the upon coming WTO Ministerial 
conference in Seattle. As economists reports are studied, as other 
countries' decisions are evaluated and when consumers' interests are 
held higher than the corporation's, AFTA is certain that even the 
United States' government will support what its court system has 
already held--parallel importation is a legitimate, beneficial industry 
that must be supported, advocated and favored within the international 
marketplace.
      

                                


Statement of the American Iron and Steel Institute (AISI)

    AISI is pleased to submit testimony on U.S. objectives for 
the Seattle Ministerial and a new round of WTO talks. The 
following statement is submitted on behalf of AISI's U.S. 
member companies, who together account for approximately two-
thirds of the raw steel produced annually in the United States.

    Need to Achieve Continued Progress in the WTO's Built-in Agenda

    As the Seattle Ministerial prepares for a new round of multilateral 
trade negotiations, the main focus should be on achieving progress in 
the WTO's ``built-in agenda'' of existing rules on agriculture, 
services and intellectual property. Such progress can only be made if 
the United States resists efforts by other WTO members to reopen a 
counterproductive debate over the WTO's antidumping and anti-subsidy 
rules.

   Need to Maintain Effective WTO Antidumping and Anti-Subsidy Rules

    It is the failure to counter injurious dumping and other 
unfair trade practices that undermines public confidence in 
free trade and public support for further multilateral trade 
liberalization. For more than 50 years, international trade 
rules (first the GATT, now the WTO) have allowed the U.S. and 
other countries to counter injurious dumping. The reason: there 
is clear recognition that, in the real world, there can be no 
free trade unless it is rule-based and fair. As soon as the 
public believes that existing trade rules are ineffective or 
are not being enforced, support for free trade begins to 
erode--and support for more restrictive, less transparent 
solutions inconsistent with international trade rules starts to 
grow. This is what has occurred in the United States in recent 
years, and the only way to reverse this trend is to ensure 
prompt and strict trade enforcement of more effective U.S. laws 
against unfair trade.
    To quote from the July 1998 U.S. submission to the WTO 
Working Group on the Interaction between Trade and Competition 
Policy, the antidumping remedy is:
          ``necessary to the maintenance of the multilateral trading 
        system. Without this and other remedial safeguards, there could 
        have been no agreement on broader GATT and later WTO packages 
        of market-opening agreements, especially given the 
        imperfections which remain in the multilateral trading system. 
        . . . [T]he antidumping rules represent an effort to maintain a 
        ``level playing field'' between producers in different 
        countries . . . [and] are a critical factor in obtaining and 
        sustaining necessary public support for the shared multilateral 
        goal of trade liberalization.''
    In recent years, AISI and its U.S. member companies have 
supported virtually every major initiative to liberalize 
international trade, including:
     renewal of U.S. traditional trade negotiating 
authority (``fast track'');
     the North American Free Trade Agreement 
(``NAFTA'');
     the GATT Uruguay Round (UR) results;
     the process of Asia-Pacific Economic Cooperation 
(``APEC''); and
     negotiations to achieve a Free Trade Area of the 
Americas (``FTAA'').
    At the same time, the revitalized, world class U.S. steel 
industry has confronted, and continues to face, long-standing, 
injurious and pervasive foreign unfair trade practices. 
Accordingly, AISI's U.S. members have used antidumping (AD) and 
countervailing duty (CVD) laws to counter:
     closed foreign markets;
     foreign private anticompetitive practices;
     foreign dumping; and
     foreign government trade-distorting subsidies.
    This experience has made clear that effective rules against 
dumping and trade-distorting subsidies are what makes trade 
liberalization possible.

 Need to Prevent Any Reopening of the WTO's Antidumping Agreement and 
   the WTO's Agreement on Subsidies and Countervailing Measures (SCM)

    With much of Asia and Latin America in recession and Russia 
in collapse, the steel industry in the United States and 
throughout North America experienced the greatest surge of 
injurious dumped and subsidized imports in its history in 1998. 
Unfortunately, America's steel trade crisis continues in 1999 
in the form of loss of orders, sales and revenue; severe price 
depression; cutbacks in production and operating rates; lost 
jobs; sharp declines in profitability and liquidity; reduced 
investment; depressed stock prices; and five bankruptcies. 
Therefore, AISI's U.S. members have a particular interest in 
avoiding any efforts by foreign governments to use the WTO 
process to try to weaken further international and U.S. 
disciplines against trade-distorting practices. This is a goal 
strongly shared by AISI's entire North American membership.
    The Committee on Ways and Means, in its 1997 markup of fast 
track bill legislation, approved by voice vote--without 
dissent--a provision instructing U.S. negotiators to reject any 
agreement that would weaken existing disciplines against 
dumping and subsidies. The Committee stated that USTR:
          ``shall--... preserve the ability of the United States to 
        enforce rigorously its trade laws, including the antidumping 
        and countervailing duty laws, and avoid agreements which lessen 
        the effectiveness of domestic and international disciplines on 
        unfair trade, especially dumping and subsidies. . ..''
    Unfortunately, a number of foreign governments have 
recently made clear that they would like to reopen these rules 
as a top priority--in order to weaken them. Therefore, the 
absolute top priority for the U.S. government should be to 
oppose any foreign government efforts to reopen the WTO 
Antidumping and SCM Agreements. Whatever WTO members do agree 
to add to the list of agreed post-1999 WTO negotiations, 
reopening the WTO Antidumping and SCM Agreements should not be 
on the list.
     First, there have been no major problems with WTO 
members' implementation of the new AD/CVD rules, so reopening 
these agreements is unnecessary. The only unresolved AD issue 
is circumvention and, while AISI supports adding further 
clarity to WTO rules and improving U.S. law in this area, this 
neither requires nor justifies reopening the WTO Antidumping 
Agreement. On the issue of subsidies, there is a need for more 
notification by governments, but this does not require or 
justify reopening the SCM Agreement. Likewise, the only SCM 
issue in need of near-term attention is the pending expiration, 
unless extended by Ministerial decision, of the ``greenlight'' 
(Arts. 8 and 9) and ``dark amber'' (Art. 6.1) provisions, and 
this issue, too, neither requires nor justifies reopening the 
SCM Agreement.
     Second, there has been little testing to date of 
the new AD/CVD rules. Many developing countries have not even 
come into full compliance with the GATT Uruguay Round's trade 
law changes. The world trading system has not had sufficient 
time to digest the UR's changes to dumping and anti-subsidy 
rules. A period of stability and certainty is in order. 
Continued change and uncertainty in the WTO's fair trade rules 
would actually impede world trade.
     Third, the new AD/CVD rules are weaker than the 
pre-GATT Uruguay Round rules. In the antidumping area, as a 
result of the UR's stricter standing requirements, changes in 
how margins are calculated, higher de minimis standards and new 
``sunset'' provision, U.S. cases will be (1) harder to bring, 
(2) more difficult to win, (3) provide less relief for a 
shorter period of time and (4) cost more money for injured 
American industries and workers. In the anti-subsidy area, 
while the new SCM Agreement has a somewhat expanded ``red'' 
list of prohibited subsidies and a new deep amber definition 
for ``serious prejudice,'' the U.S. in the UR lost the ability 
to pursue private subsidies, and also had to accept three new 
loopholes in the form of greenlights that make non-actionable 
subsidies for research and ``pre-competitive development,'' 
regional development and environmental equipment.
     Fourth, the new AD/CVD rules are not the problem 
in international trade. The real problems continue to be the 
trade-distorting practices of foreign countries (closed 
markets, cartel behavior, massive subsidies) that facilitate 
dumping and make it so necessary for the United States to 
maintain and enhance effective AD/CVD rules.
     Fifth, any reopening of the WTO Antidumping and 
SCM Agreements would only lead to a further weakening of AD/CVD 
rules. This, in turn, would further perpetuate uneconomic 
excess capacity abroad and foreign trade-distorting practices. 
This would not serve the U.S. national economic interest.
     Sixth, a highly divisive fight over reopening the 
Antidumping and SCM Agreements would make it all but impossible 
to achieve progress in key areas and conclude a new round of 
trade talks in a timely fashion. It could prevent progress on 
all of the important issues that comprise the agreed built-in 
agenda for the next round.
    In sum, the U.S. government should continue to resist by 
whatever means necessary any foreign government efforts to 
reopen these agreements. As AISI's President and CEO Andrew G. 
Sharkey, III said recently:
          ``In the (President's new) Action Plan (for steel), in 
        testimony (on August 5) before the House Ways and Means 
        Committee and in many other settings, the resolve of the 
        Administration is unmistakably strong. We plan to support our 
        negotiators in every way possible, because our trading partners 
        have made no secret of their intent to use the Seattle Round to 
        cripple our defenses against unfair trade.''

       Need to Implement the GATT Uruguay Round's Existing Rules

    AISI also supports U.S. efforts to ensure that the existing 
UR antidumping and anti-subsidy rules are effectively 
implemented, e.g., through continued monitoring by the WTO's 
Committee on Antidumping. This, however, is very different from 
renegotiating those rules.
    In addition, two Marrakesh Ministerial decisions have not 
yet been properly implemented. The first calls for an 
examination of the Antidumping Agreement standard of review to 
determine broader application in WTO dispute settlement 
proceedings. The second makes it clear that the WTO standard of 
review in AD disputes should apply equally to WTO panel reviews 
of CVD disputes. Both of these Ministerial decisions should be 
addressed and resolved as part of the pending WTO Dispute 
Settlement Understanding (DSU) review, and neither provides a 
reason to reopen the substantive WTO Antidumping or SCM 
Agreements.

       Need to Continue the Progress in WTO-Mandated Negotiations

    With respect to the concluded UR agreements where there was 
an express agreement to conduct further negotiations, AISI 
would hope that any negotiations in the services area would 
include a major focus on distribution services. Such a focus is 
warranted because distribution barriers are a main method used 
in other countries to limit imports of steel and other 
manufactured products. This, of course, impairs U.S. exports 
and diverts foreign exports of steel and steel-intensive 
products to the United States.

       Need to Reform the WTO's Dispute Settlement Understanding

    The DSU review is to be concluded by year-end 1998 and, 
thus, technically is not part of the post-1999 negotiating 
agenda. AISI believes that U.S. support for continuing WTO 
dispute settlement rules should be conditioned on additional 
improvements and reforms. Among key and necessary reforms would 
be:
     to permit enhanced participation by private 
counsel ``in the development of U.S. positions and in the 
preparation for consultations and dispute settlement 
proceedings'' as called for in the FY 1998 appropriations bill 
funding USTR;
     to limit the WTO's focus to legitimate dispute 
settlement functions, e.g., to prohibit WTO panels from 
reevaluating factual findings made by national authorities in 
CVD, as well as in AD, cases; and
     to increase the fairness, transparency and 
openness of WTO dispute resolution decision making.
    In addition, AISI's U.S. members support continued U.S. 
efforts to:
     defend sovereignty--the WTO must continue to 
provide flexibility to allow a country to maintain practices 
that violate the WTO as long as that country is willing to 
compensate injured trading partners or accept retaliation;
     maintain Section 301--the U.S. should keep 
stressing that, in areas where there are currently no WTO 
disciplines, Section 301 will continue to be available and will 
continue to be used to reduce and eliminate foreign market 
barriers; and
     establish a WTO oversight commission--one way to 
enhance the credibility of the WTO and its new DSU rules would 
be to enact the WTO judicial oversight bill sponsored in the 
last Congress by Representatives Benjamin Cardin (D-MD), Ralph 
Regula (R-OH) and others in the House and Senate. This WTO-
consistent proposal would help ensure that, in future AD/CVD 
appeals, WTO panels do not exceed or abuse their authority.

 Need to Continue Progress on the Singapore Ministerial's Work Program

    With respect to next steps on issues raised in the context 
of established WTO working groups, AISI believes that:
     the current discussions in the trade and 
competition policy working group should conclude by year's end; 
and
     any report from this working group to the WTO 
General Council should omit any references to antidumping law, 
which is a totally extraneous issue.
    While the U.S. Administration deserves much credit for 
resisting foreign government efforts to weaken U.S. AD law by 
trying to link antidumping to competition policy, the potential 
for WTO mischief making in this area has not diminished. 
Indeed, WTO Secretariat officials continue to engage in 
unfounded attacks on the GATT Article VI antidumping remedy 
through so-called ``objective'' studies on competition policy.
    Once again, the international trade problem is 
anticompetitive practices, not antidumping law. U.S. steel 
companies and employees continue to suffer serious damage from 
foreign steel cartel behavior.
    The WTO could provide useful insights into this problem if 
future work were to focus solely on the serious market access 
issues related to anticompetitive practices. Any future 
educational work in this area, however, would need to steer 
absolutely clear of any discussion or review of AD law and 
rules. It would need to confine itself to exploring the problem 
of private (and joint public-private) anticompetitive practices 
and other trade restraints. It would need to look seriously at 
the damaging effects of closed markets and private 
anticompetitive practices abroad, including foreign 
governments' support for, and toleration of, cartel behavior. 
To that end, AISI's U.S. members would also like to see an 
official U.S. government study on the problem of foreign 
anticompetitive practices.

           Need to Enact WTO-Consistent U.S. Trade Law Reform

    WTO-consistent provisions to improve the effectiveness of 
U.S. trade laws are among the most important pieces of trade 
legislation that Congress could enact this year. Since the 
conclusion of the GATT Uruguay Round, which itself resulted in 
a net weakening of U.S. trade laws, America's antidumping and 
countervailing duty laws have been further weakened by court 
decisions and sophisticated efforts at trade law evasion and 
circumvention. In addition, economic crises abroad have 
resulted in unprecedented, injurious surges of dumped, 
subsidized and disruptive imports, to which our existing trade 
laws have not provided adequate remedies.
    The United States is heading toward a record $300 billion 
merchandise trade deficit in 1999. In some cases, U.S. trade 
laws make it more difficult to obtain relief from injurious 
imports than the WTO requires. As a result, public faith in 
free trade is eroding, and public support for new multilateral 
trade liberalization is being undermined.
    Therefore, as the United States prepares for a new round of 
multilateral trade negotiations, we must ensure that WTO-
consistent U.S. trade laws (1) enhance U.S. leverage and 
credibility at the negotiating table and (2) reassure the 
American public that multilateral trade rules and national 
trade laws will be effectively enforced. The best way to 
achieve these goals is to enact WTO-consistent trade law 
strengthening proposals of the kind contained in The Fair Trade 
Law Enhancement Act (H.R. 1505) and the Continued Dumping and 
Subsidy Offset Act (H.R. 842).

      Need to Pursue Other Key WTO Goals in the National Interest

    While ensuring that a new WTO round does not result in any 
weakening of AD/CVD laws remains AISI's top priority, we also 
support the following WTO-related objectives:
     Need to Achieve Steel Tariff Elimination Globally. 
The GATT Uruguay Round already provides for a 10-year phase-out 
of U.S. steel tariffs. All normal U.S. duties on steel imports 
are scheduled to reach zero on January 1, 2004. Unfortunately, 
the GATT UR led to only some countries going to zero tariffs on 
steel. Many steel-producing and trading countries in Asia, 
Central Europe, Latin America and elsewhere did not agree to go 
to zero tariffs in the UR. Therefore, it is imperative in any 
new WTO Round that governments work together to ensure that all 
steel producing and trading nations go to zero on steel tariffs 
as soon as possible. Achieving zero tariffs on steel by all 
major steel producing and trading nations is in the interest of 
both steel producers and consumers globally, and is needed to 
level the playing field in international steel trade.
     Need to Pursue Simpler, More Transparent 
Government Procurement Rules. AISI's U.S. members support 
enhanced foreign procurement opportunities for steel's U.S. 
customers. They therefore support continued U.S. government 
efforts to: (1) simplify and improve the World Trade 
Organization (WTO) Government Procurement Agreement (GPA); (2) 
update the GPA to take account of the growing role of 
electronic commerce in the government procurement area; (3) 
encourage developing countries and other non-signatories to 
sign the GPA; (4) encourage non-signatories to assume 
equivalent commitments to promote transparency and open access 
to ``covered entities"; and (5) encourage greater transparency 
and compliance by GPA signatories of the commitments they have 
already agreed to.
     Need to Prevent Any Weakening of Steel Buy 
American Rules. At the same time, in any new negotiations in 
the government procurement area--whether under the auspices of 
the WTO, the FTAA or the Transatlantic Economic Partnership--
AISI's U.S. members remain strongly opposed to any weakening of 
steel Buy America rules or any expansion of ``covered 
entities'' affecting steel. In particular, insofar as Congress 
only recently reaffirmed, once again, its strong support for 
leaving steel Buy American rules totally intact in the 
reauthorized ISTEA bill, there should be no weakening of Buy 
American preferences in the Highway Bill. The problem is, 
AISI's U.S. members remain highly skeptical of expanding market 
access coverage at this time in areas affecting steel, because: 
(1) the U.S. has not achieved anything close to equitable 
results in terms of currently covered entities; and (2) many 
foreign governments have not lived up to their existing WTO GPA 
obligations and commitments. If Buy American provisions were 
weakened without reciprocal access to foreign markets, U.S. 
steel producers, workers, customers, the U.S. economy and U.S. 
trade policy would be the loser. At a time of steel trade 
crisis in the United States, it should not even need saying 
that, in any procurement-related negotiations in the near 
future, steel Buy American rules should be left fully intact.
     Need to Ensure WTO Accessions for China and Russia 
on Commercially Viable Terms. AISI's entire North American 
membership agrees that China (the world's number one steel 
producing nation), Russia (the world's number one steel 
exporting nation) and other countries in the Commonwealth of 
Independent States (CIS) should accede to the WTO--but only on 
commercially viable terms. They agree in particular that: (1) 
WTO members should be allowed to continue to apply nonmarket 
economy antidumping methodology until steel and other key 
sectors of the Chinese and CIS economies are no longer under 
government regulation or control; (2) China and the CIS 
countries should end subsidies now to the steel sector and 
adhere as soon as possible to the WTO Subsidies Code; (3) China 
should eliminate immediately all trading rights and other 
discriminatory barriers to steel imports; and (4) there should 
be a special safeguard in the Chinese and CIS accession 
protocols that enables other WTO members to address the 
possibility of import market disruption from China and the CIS.
     Need to Be Cautious on the New Issue of Trade and 
the Environment. One ``new'' WTO issue is trade and the 
environment. On this issue, unlike some other segments of U.S. 
industry, AISI's main concern is not that NAFTA-type 
environmental provisions might find their way into additional 
trade agreements. Rather, AISI's concern is that unilateral 
U.S. efforts to implement certain international environmental 
accords could end up causing substantial harm to the trade and 
competitiveness position of U.S. manufacturers--without in any 
way solving the global environmental problems at hand. The 
steel industry's most immediate concern in this regard is 
global climate change policy. Simply put, the goal of reducing 
the world's ``greenhouse'' gasses and global warming will not 
be achieved if the U.S. and other developed countries are 
forced to live under strict new environmental standards, while 
other major steel industries in the world are exempted as 
``developing'' countries.

                            Main Conclusions

    At a time when the U.S. steel industry continues to confront a 
trade crisis of historic proportions, AISI remains greatly concerned by 
ongoing foreign government efforts to reopen the current WTO dumping 
and anti-subsidy rules. Such a reopening would only further erode 
current remedies to unfair trade. If that were to occur, the support of 
steel and many other key U.S. industries for the WTO could turn to 
opposition. Therefore, Congress should continue to oppose foreign 
government efforts to reopen and weaken WTO antidumping and anti-
subsidy rules.
    In response to this latest trade law weakening push by foreign 
governments, AISI's U.S. member companies support:
     more effective U.S. AD/CVD laws and enhanced Department of 
Commerce trade law enforcement;
     an intensified commitment by the Administration that it 
will vigorously enforce U.S. trade law rights when they are challenged 
by foreign governments in the WTO; and
     continued, close congressional oversight of WTO matters to 
ensure that the WTO Antidumping and SCM Agreements do not get reopened.
    AISI, on behalf of its U.S. members, appreciates this 
opportunity to provide a written statement to the Trade 
Subcommittee on U.S. objectives for the third WTO Ministerial 
Conference in Seattle and for a new round of WTO trade 
negotiations.
      

                                


Statement of Antonia Juhasz, Director, International Trade and Forests 
Program, American Lands Alliance, and Dr. Faith Campbell, Director, 
Invasive Species Program, American Lands Alliance

                        American Lands Alliance

    ``I think trade has divided us, and divided Americans 
outside this chamber, for too long. Somehow we have to find a 
common ground on which business and workers and 
environmentalists and farmers and government can stand 
together.'' President William Clinton, State of the Union 
Address, January 19, 1999
    We joined with millions of Americans on January 19, 1999 to 
hear President Clinton speak these words. We admit that we 
listened with some scepticism, but we also accepted the 
President at his word. As Directors of the International Trade 
and Forests and Invasive Species Programs at American Lands 
Alliance, an organization that works with forest protection 
activists and organizations from across the country, we looked 
forward to a year of increased participation in our 
government's trade policy agenda.
    So, it was with considerable disappointment that we 
returned to work and learned in increasing detail of the 
Administration's agenda for the third Ministerial meeting of 
the World Trade Organization.
    Rather than use this meeting as an opportunity to use trade 
policy to promote greater protections for the world's embattled 
forests, the Administration is spear-heading efforts that will 
threaten forests, biodiversity and eco-systems.
    Given the multiple threats and abuses placed on the world's 
dwindling native forests, now is not the time to advocate trade 
policies that threaten to increase these pressures. Rather, it 
is time to assess the impact of past international trade 
agreements on forests and other non-renewable resources in an 
attempt to protect these resources in the future.
    There are several elements of the agenda for the 
Ministerial meeting that could have a deleterious impact on 
forests. However, there are just three key issues that we would 
like to bring to the attention of the Subcommittee today: the 
Global Free Logging Agreement, the threat of invasive species 
invasion from the Sanitary and Phytosanitary Standards 
Agreement and the potential inclusion of investment provisions 
similar to the Multilateral Agreement on Investment.

                 The ``Global Free Logging Agreement''

    On February 11, 1999, less than one month after the State 
of Union Address, United States Trade Representative Charlene 
Barchefsky, stated that trade liberalization of forest products 
is a priority of the Administration and part of an ``early 
harvest'' agenda--negotiations that will occur prior to the 
Ministerial meeting so that a final agreement can be reached in 
November. The so called ``Advanced Tariff Liberalization'' 
(ATL) initiative would eliminate tariffs on all forest products 
by the year 2000 for developed countries and 2003 for 
developing countries.

Tariff Elimination on Forest Products

    According to the American Forest and Paper Association, 
tariff elimination could generate three to four percent 
additional growth in consumption of forest products 
worldwide.\1\
---------------------------------------------------------------------------
    \1\ ``Forest Industry Leader Urges Worldwide Tariff Elimination,'' 
American Forest and Paper Association, April 28, 1999.
---------------------------------------------------------------------------
    This finding is troubling because increased consumption of 
forest products will lead to an increase in production. 
Increased production means increased logging--making the ATL a 
virtual ``Global Free Logging Agreement.'' Without the 
appropriate environmental protections to ensure that logging 
takes place in unthreatened forests and will not cause 
environmental harm, increased logging will mean increased 
destruction of the world's forests, biodiversity and eco-
systems.
    Current logging practices have decimated the world's 
forests. According to the World Resources Institute (WRI), 
nearly one-half of the world's original forest cover is gone. 
Of the remaining original forests, most is severely degraded, 
while only 22 percent remains as large tracts of relatively 
undisturbed primary or ``frontier'' forests. WRI and other 
organizations have named commercial logging as the greatest 
threat to frontier forests. According to World Wildlife Fund 
mapping projects, in North America, all but about five percent 
of the forests in the lower 48 states have been logged at least 
once. Following logging, replanted areas typically lack the 
biodiversity and ecological functions present in the original 
forest. The World Conservation Monitoring Center considers this 
type of habitat loss to be the biggest current threat to 
biodiversity. An increase in unsustainable logging practices by 
the ATL would exacerbate this already tenuous situation.
    In response to the concerns raised by environmental 
organizations and others, the Office of the U.S. Trade 
Representative has argued that tariff elimination is a win-win 
scenario for the environment and industry because the increased 
consumption it generates will be met by more efficient 
production.\2\ Unfortunately, the Administration has yet to 
cite evidence in support of this contention.
---------------------------------------------------------------------------
    \2\ Letter to Paige Fischer and Jim Jontz from Don Phillips, 
Assistant U.S. Trade Representative for Asia and the Pacific, July 27, 
1998.
---------------------------------------------------------------------------
    Written testimony by Earthjustice Legal Defense Fund and 
Defenders of Wildlife \3\ demonstrates the hollowness of the 
Administrations argument. First, the most economically 
efficient way to log a forest is to clear cut. Clear cutting 
also happens to be the most environmentally harmful method. 
Second, the organizations cite a U.S. Department of Commerce 
finding in a countervailing duty investigation of softwood 
lumber imports from Canada that as costs of producing timber 
decrease (in this case through decreasing stumpage rates), 
logging increases. The Administration can not have it both 
ways.
---------------------------------------------------------------------------
    \3\ ``Conditions of Competition in the U.S. Forest Products 
Trade.'' Investigation 332-400, United States International Trade 
Commission. Hearing testimony submitted by Earthjustice Legal Defense 
Fund and Defenders of Wildlife, May 26, 1999.
---------------------------------------------------------------------------
    The ATL would accelerate and expand a tariff schedule 
agreed to at the Uruguay Round of the WTO. Given the status of 
the world's forests, there simply is not enough information 
available at this time to know exactly what the impact of 
accelerated tariff elimination of all forest products world-
wide would mean to endangered forests, biodiversity and fragile 
eco-systems. Therefore, until such information is available, 
and--if necessary--the appropriate environmental protections 
put into place, it is fool-hearty to rush forward with these 
negotiations.

Non-Tariff Barriers to Trade: A Threat to Domestic 
Environmental Protections

    In addition to tariff elimination, it is possible that the 
WTO will consider non-tariff barriers to trade in the forest 
products sector. At least one nation, Japan, has proposed the 
inclusion of non-tariff barriers to trade such as export bans 
on raw logs for discussion at the Ministerial meeting.\4\
---------------------------------------------------------------------------
    \4\ ``Preparations for the 1999 Ministerial Conference.'' 
Communication from Japan. July, 1999.
---------------------------------------------------------------------------
    The agreement on forest products was transferred to the WTO 
from the Asian Pacific Economic Cooperation (APEC). APEC is 
negotiating a similar agreement that includes the voluntary 
elimination of laws that are considered to be ``unjustified'' 
non-tariff barriers to trade.
    We find the potential negotiation of the elimination of 
non-tariff barriers to trade troubling because such 
negotiations amount to a virtual attack plan on the forest 
protection laws that American Lands Alliance cares about the 
most.
    A 1997 paper by the WTO's Committee on Trade and the 
Environment \5\ describes in detail non-tariff barriers to 
trade on forest products that could be considered inconsistent 
with WTO rules. These non-tariff barriers include export 
controls, including export taxes; restrictions and bans on 
certain products such as unprocessed logs; recycled content 
requirements on paper products; regulations specifying types of 
allowable packaging materials; percent of packaging material 
acceptable in relation to product size and weight; packaging 
reuse and recycling targets; recovery or return schemes and 
certification and labeling of forest products.
---------------------------------------------------------------------------
    \5\ WT/CTE/W/67, 7 November 1997
---------------------------------------------------------------------------
    We worry that negotiations of forest products at the WTO 
Ministerial and subsequent round will attempt to treat 
legitimate conservation measures as ``unjustified'' non-tariff 
trade barriers. Numerous U.S. laws designed to protect forests, 
the environment and domestic workers could be challenged and 
potentially eliminated if they were no longer considered 
justified, and therefore illegal, barriers to trade.
    Examples of U.S. laws that could potentially be challenged 
by the WTO as illegal non-tariff barriers to trade include the 
1990 Forest Resources Conservation and Shortage Relief Act that 
permanently banned the export of unprocessed logs from federal 
and most state lands. The law was created to protect domestic 
workers, mills and forests.
    President Clinton's Executive Order 12995 which establishes 
specific recycled content requirements for paper and paper 
products used by the federal government is a non-tariff barrier 
to trade that could be considered ``unjustifiable'' at the WTO. 
The same is true of laws enacted by every state except Alabama, 
Delaware and Wyoming to purchase recycled products including 33 
states with preferences for recycled materials generally, 
twenty states with separate purchasing preferences for recycled 
paper, and several addressing other recycled materials.
    Arizona, New York and Tennessee have passed eco-labeling or 
certification laws that limit the purchase of wood from 
tropical rainforests, only buying tropical timber that is 
harvested using ecologically sound management practices. Such 
certification programs are gaining in popularity around the 
country and the world. When used by governments, these programs 
could be considered non-tariff barriers to trade subject to WTO 
disciplines.
    The vital environmental and labor protections created 
through these laws would be eliminated if these laws were 
challenged and removed as illegal non-tariff barriers to trade.
    The WTO has a perfect record when it comes to environmental 
protection laws: every environmental protection law that has 
been challenged at the WTO has fallen.
    Given this record, the Clinton Administration should be 
using the Ministerial meeting of the WTO to assess the threats 
currently faced by legitimate conservation laws at the WTO 
rather than discussing proposals that put such laws into even 
greater jeopardy.

                     Administration Analysis of ATL

    Under growing pressure from environmental organizations and 
citizens to assess the environmental impacts of the proposed 
liberalization initiatives for forest products at the WTO, the 
Administration has initiated a limited analysis of the 
potential ``economic and environmental impacts'' of the ATL. 
Unfortunately, this analysis falls well short of what would be 
necessary to provide an adequate basis for policy decision-
making. Specifically, the reference point for such an 
assessment must be the National Environmental Policy Act's 
(NEPA) mandated procedures and methodologies, as elaborated 
through regulations of the Council on Environmental Quality 
(CEQ). Because the analysis proposed by USTR and CEQ does not 
follow nor even come close to reflecting these guidelines, it 
does not provide for the appropriate depth, public 
participation nor evaluation of alternatives necessary to serve 
as a satisfactory source of information.

American Lands finds the study to be inadequate for the 
following reasons:

    1. The time-frame is too short for adequate public input 
and for completion of a comprehensive assessment. While the 
Federal Register requests ``specific information regarding, or 
empirical studies of, the economic and environmental impacts of 
past trade liberalization in this sector,'' the thirty day 
comment period does not provide adequate time to compile this 
or other meaningful information. In addition, thirty days does 
not provide adequate time to notify the broader ``non-beltway'' 
public of the request period such that they have to time to 
prepare a response. Finally, the time-frame for completion of 
the study (USTR and CEQ stated that the study would be 
completed in September \6\) is too short for a comprehensive 
analysis of both economic and environmental impacts.
---------------------------------------------------------------------------
    \6\ USTR and CEQ briefing for NGOs on the ATL, June 3, 1999.
---------------------------------------------------------------------------
    NEPA COMPARISON: the NEPA process specifies that no final 
decision will be made until at least 90 days after publication 
of a notice of a draft Environmental Impact Statement (EIS) and 
30 days after publication of a final EIS.
    2. The scope of the analysis is too limited. The proposed 
analysis includes only tariff elimination and does not include 
non-tariff barriers to trade. As discussed above, it is most 
likely that the WTO discussions will include non-tariff 
measures. Non-tariff measures are a vital part of the answer to 
the study's question of how forest product trade liberalization 
efforts relate to ``other U.S. government goals and objectives 
in the forest policy arena.'' As listed above, there are many 
U.S. government policies intended to protect forests that could 
be considered non-tariff barriers to trade. The analysis is 
incomplete without an investigation in to this area.
    3. The proposed analysis does not include an exploration of 
alternatives, including the ``no action'' alternative. The 
analysis does not even consider the possibility of achieving 
the trade goal with an environmentally justifiable alternative. 
Without a thorough investigation of alternatives to the ATL, 
the agreement appears to be a ``fait accompli'' and the 
analysis nothing more than a gesture to the environmental 
community rather than a meaningful process.
    NEPA COMPARISON: the NEPA EIS must include a comparison of 
the potential environmental impacts of the proposed action to 
the impacts of alternatives (including no-action alternative) 
including appropriate mitigation measures.
    4. The analysis does not include a study of the state of 
the world's forests today nor the adequacy of current forest 
protection laws. A comprehensive environmental assessment must 
take into account the environmental status of the natural 
resource in question and the laws intended to protect that 
resource. The proposed analysis, on the other hand, fails to 
ask the basic question ``are the world's forests able to 
sustain an ATL in forest products given current national and 
international frameworks for forest conservation?''
    NEPA COMPARISON: the NEPA EIS must include a description of 
the affected environment and the environmental consequences--
including direct and indirect effects, possible conflicts with 
other federal, state and local policies governing the affected 
areas, impacts of alternatives and the impacts on depletable 
resources and on conservation.
    5. The concerns raised by other agencies and the public are 
not being investigated. While the Federal Register notice 
states that previous testimony submitted on this topic will be 
made a part of the record, it does not say that USTR and CEQ 
will respond to these comments nor the comments being requested 
in the current notice. There is also no explanation given as to 
how comments will be included in the process nor how the 
recommendations of the public will be rejected or accepted. 
Finally, nowhere does it say that an explanation will be 
provided as to why certain recommendations were rejected or 
accepted.
    NEPA COMPARISON: under NEPA guidelines, the government is 
required to assess and respond to public comments. In addition, 
the EIS must cover areas of controversy, including issues 
raised by agencies and by the public, and issues to be resolved 
(including alternatives).
    Each of the five points provided above would be addressed 
if the Administration had agreed to cease negotiation of forest 
product liberalization efforts at the WTO and begin an 
assessment consistent with NEPA disciplines. Unfortunately, the 
proposed analysis follows none of these guidelines and 
therefore will be an inadequate assessment on which to base 
policy decisions about the ATL or any other trade 
liberalization initiatives in the forest products sector.

                  Public and Congressional Opposition

    On July 19, 1999, in a letter to United States Trade Representative 
Charlene Barshefsky, sixteen of the nations leading environmental 
organizations expressed their opposition to the forest product 
liberalization plans at the WTO. Groups as diverse as the World 
Wildlife Fund, the Wilderness Society and Greenpeace wrote that the ATL 
``would not correct, and could very well compound, worldwide forest 
destruction.'' They urged the Administration to ``promptly suspend 
further promotion of the current U.S. position'' and ``begin 
development of an alternative trade policy that demonstrably enhances 
forest conservation and sustainable development.''
    On the topic of non-tariff barriers to trade, the groups ``reject 
any forest products negotiations that threaten to treat legitimate 
conservation measures as illegal `non-tariff trade barriers.' '' They 
urged the Administration to ``make clear that it would vigorously 
oppose any negotiations that could lead to restrictions on legitimate 
third party certification and ecolabeling of forest products, or 
otherwise on the consumer's right-to-know about the environmental 
conditions under which wood products are logged and produced.''
    On July 28, 1999, 48 bi-partisan Members of Congress wrote 
President Clinton demanding that he withdraw from negotiations of the 
Global Free Logging Agreement, saying that it would increase 
unsustainable logging practices, threaten domestic forest protection 
laws, and jeopardize the world's remaining native forests. The letter 
was spearheaded by George Miller (D-CA) and Merrill Cook (R-UT). House 
Minority Leader Richard Gephardt (D-MO) also signed the letter.
    The Representatives addressed the topic of non-tariff barriers by 
expressing their concern that the ``Administration is negotiating non-
tariff barriers in other fora and has not committed to rejecting such 
discussions at the WTO in the future.''
    Unfortunately, the Administration ignored these concerns and 
announced on July 30, 1999, that the ATL remained on the agenda of the 
Administration for signing at the Ministerial in November. Furthermore, 
the Administration did not reject the negotiation of non-tariff 
barriers to trade at the Ministerial or in the subsequent round.

                             Recommendation

    American Lands asks Subcommittee members to recommend that 
the Administration support the removal of all discussions of 
forest product trade liberalization from the Ministerial 
meeting and subsequent round of the WTO. Rather, the 
Administration should initiate a NEPA-style assessment of the 
impact of previous WTO trade agreements, and the potential 
impact of proposed WTO trade agreements, on forest protection 
and biodiversity.

        The SPS Agreement: Opening The Door to Invasive Species

    Scientists and conservationists are increasingly concerned 
that the World Trade Organization Agreement on the Application 
of Sanitary and Phytosanitary Standards (SPS Agreement) will 
block the U.S. Department of Agriculture from imposing 
sufficiently effective phytosanitary safeguards to minimize the 
risk that harmful exotic or alien species will be introduced in 
the course of international trade. As now written, the SPS 
Agreement requires the U.S. Department of Agriculture (USDA) to 
justify its phytosanitary safeguards in risk assessments that 
demand far greater quantities of information, and in far 
greater detail, than scientists can provide. In the face of 
these demands, the USDA must either
     adopt ``provisional'' regulations and expend 
scarce resources trying to obtain the missing information 
needed to make them final; or
     play ``Russian roulette'' by choosing to apply 
phytosanitary regulations only to known pests--when the vast 
majority of potentially damaging organisms have not been 
identified by science.
    Furthermore, even when the USDA has sufficient information 
to designate particular species of insect, nematode, fungal 
pathogen, or plant as a ``quarantine pest,'' the SPS Agreement 
still limits the types of measures that the USDA can enact to 
try to prevent those organisms' introduction. Because the SPS 
Agreement forces the USDA to rely on resource-intensive and 
error-prone processes of inspection, detection, and evaluation, 
it virtually guarantees that additional pests will be 
introduced.
    The result of the SPS Agreement's misguided provisions is 
that American agriculture, horticulture, and natural 
environment--and the taxpayer--will be exposed to greater 
damage than necessary resulting from the introduction of exotic 
pests and weeds.

         Summary of Losses Caused by Introduced Pests and Weeds

    According to Dr. David Pimentel and colleagues at Cornell 
University, introduced or exotic species cost the American 
economy more than $123 billion annually. Exotic pests and weeds 
subject to the SPS Agreement make up at least $80 billion of 
that total. Examples of exotic pests and weeds already wreaking 
havoc in the United States include Formosan termite, fire ant, 
gypsy moth, Melaleuca, water hyacinth, ``Dutch'' elm disease, 
pine shoot beetle, yellow starthistle, and giant reed. These 
and other exotic species have completely transformed the 
forests of the east and are destroying the ecological and 
economic value of grasslands and wetlands across the continent.
    Even greater losses could be caused by introduction of 
additional exotic species not yet established in America. Just 
two of the recent pest risk analyses completed by the USDA put 
potential losses at $94 billion. These analyses considered just 
a few species known to pose great risk to forests and related 
industries; pests threatening other resources would raise the 
cost considerably. Furthermore, ecologists assure us that many 
species that could devastate our ecosystems are at present 
completely unknown to science or are ``cryptic''--that is, 
since they are not considered to be pests in their native 
environments, their pest potential here has been 
underestimated. We can predict that future losses could rise to 
several hundred billion dollars--but we cannot predict which 
introduced species will contribute most to such a nightmare.

                    How Exotic Species Reach America

    Exotic species reach America in the course of international 
trade. Most come in as unintended ``hitchhikers'' or 
``stowaways''--organisms that found homes in the commodity 
being traded, or in the packaging containing the commodity, in 
the ballast water, even in or on the structures of the ships 
and planes themselves. Insects, fungal pathogens, weed seeds, 
brown tree snakes, even mammals have survived long-distance 
transport inside the holds of ships or planes. Once on our 
shores, the organism may escape into suitable habitats, become 
established, and start to reproduce and spread.
    As America's imports increase--according to the General 
Accounting Office, they have expanded by more than 50 percent 
just since 1990, so do the opportunities for hitchhiking 
organisms. Unfortunately, virtually all ship-based transport 
ranks as a high risk of introducing exotic species because both 
ballast water and solid wood packaging--the crates, pallets, 
etc., that contain many products, and the wood blocks 
(``dunnage'') placed between containers to prevent their 
shifting--provide suitable habitats for a myriad of species. If 
the United States is to protect itself from being overrun with 
exotic species and the hundreds of billions of dollars in 
associated control costs and losses, it must impose stringent 
phytosanitary safeguards aimed at ballast water, wood 
packaging, a wide variety of commodities, and other 
``pathways'' of introduction.

                 Summary of Faults in the SPS Agreement

A) The Right of a Country to Set its Own ``Appropriate Level of 
Risk":

    The SPS Agreement explicitly allows a country to set its 
own ``appropriate level of risk'' or protection (Article 3.3). 
However, this right is circumscribed. First, the country must 
be consistent--that is, apply comparable levels of protection 
in comparable situations (Article 5.5). To satisfy this 
requirement, countries must close any existing loopholes in 
``comparable'' measures--both other phytosanitary measures 
applied to imports and domestic measures intended to prevent 
the spread of ``comparable'' organisms within the country (or 
the absence of such measures). This step will be politically 
difficult, may interfere with interstate trade, and will demand 
expenditure of significant resources at a time of stringent 
budgetary limits.
    Second, the ``appropriate level of protection'' must be 
justified by risk assessments pointing to a specific--not a 
generalized--threat. However, scientists' knowledge about the 
ten million or more species of insects, fungi, and disease 
pathogens living in our trading partners' habitats is far too 
limited to enable them to predict which foreign species might 
cause devastating damage if introduced to a new ecosystem. For 
example, neither the chestnut blight nor the fungus which 
causes ``Dutch'' elm disease is considered to be a damaging 
pest in their native Asia. The more specific the information 
demanded by the SPS Agreement, the greater the number of poorly 
understood exotic organisms that will not qualify for 
exclusion--and the risk that some of those species will prove 
to be highly damaging pests once introduced.

B) Risk Assessments

    The WTO Appellate Body has required that the risk 
assessment for phytosanitary measures be very specific. The 
types of species and impact-specific information demanded just 
cannot be obtained for most potential phytosanitary pests. 
George Carroll, President of the Mycological Society of 
America, has said:
        Current regulations are based in part on pest risk assessments 
        ... However, most of the fungi that have caused devastating 
        epidemics upon introduction to North America were previously 
        unknown as significant pathogens and indeed were not 
        significant pathogens in their native habitat. Today, it is 
        estimated that 95% of fungal species in the world remain 
        undescribed, let alone understood in terms of ecological 
        function. We do not believe that pest risk assessments can 
        adequately identify organisms which may cause severe damage in 
        North America.
    America's ecosystems will not be protected by phytosanitary 
measures targeted on the few individual species for which 
sufficient data exist to meet this standard. Yet, the SPS 
Agreement prohibits the USDA from acting to prevent the 
introduction of species that are not determined, in the risk 
assessment, to be ``quarantine pests'' under SPS standards--
again, a decision dependent upon the error-prone process of 
evaluating the potential impacts of individual taxa.

C) ``Provisional'' Measures Adopted Under the Terms of Article 
5.7

    The only way a country can escape the obligation to define 
the problem and its solution with such specificity is through 
adoption of ``provisional'' measures under the terms of Article 
5.7. A country's right to adopt ``provisional'' measures is 
often said to be the Agreement's acceptance of the 
``precautionary principle.'' However, the text and a third 
decision by the Appellate Body make it clear that 
``provisional'' measures are expected to be short-term and the 
exception rather than the rule. Furthermore, the country must 
be seeking the additional information--a task that will 
certainly consume scarce governmental resources and may be 
completely fruitless.
    As we said initially, the USDA has two choices:

    1) play Russian roulette--let in the thousands of taxa for 
which it lacks sufficient information to prepare an acceptable 
risk assessment--and hope that none of them turns out to be the 
bullet in the chamber, or
    2) issue numerous ``provisional'' regulations and waste 
scarce resources seeking additional information and reviewing 
its decisions.

           D) Pests and Weeds Already Present in the Country

    The SPS Agreement severely restricts the U.S.' right to 
protect itself from continued introduction of pests and weeds 
that are already present in the country. The SPS Agreement 
allows a country to erect phytosanitary barriers for pests 
already in the country only when:
     the species is not widespread and an ``official 
control program'' targets the species; or
     the newly introduced organism differs genetically 
from its relative in the United States in a way that 
demonstrates the potential to cause greater damage.
    At least 400 species of exotic insects and 500 species of 
alien plants already threaten natural ecosystems in the United 
States; additional pests and weeds threaten agriculture. 
Allowing more individual organisms belonging to these species 
into the country presents the following risks: the added 
numbers enable the species to reproduce more rapidly; the new 
imports may establish a population in an area not previously 
infested: and the organisms may introduce a genetic variety 
that is harder to control.
    Yet the U.S. lacks the resources to maintain ``official 
control programs'' for a significant number of these 
established pests and weeds--especially when the principal 
reason for doing so is not to improve control over the invader 
within our borders, but only to meet the conditions for 
preventing further introductions.
    Scientists cannot meet the second condition--analyzing the 
genetic makeup of these organisms and predicting that any 
differences may result in the species showing greater virulence 
or resistance to control--because they do not have sufficient 
information about the species' genetic makeup.

    The Type of Phytosanitary Program the SPS Agreement Should Allow

    A truly ``science-based'' phytosanitary program should 
reflect the serious threat posed by exotic species to 
agriculture, horticulture, forestry and to the myriad natural 
ecosystems and biotic communities found from Alaska to Florida, 
Maine to Hawaii.
    It should also reflect practical realities, including gaps 
in scientists' knowledge about both species that inhabit our 
trading partners' habitats and the vulnerability of American 
ecosystems; and limits on funding, control technologies, etc. 
that impede efforts to control introduced organisms once they 
are in the country. Indeed, biological invasions are usually 
irreversible given today's level of scientific knowledge, 
limited funding, and the ever-rising number of pests that must 
be addressed. For this reason, scientists strongly recommend 
focusing efforts on preventing introductions.
    It follows that a sound phytosanitary program should have 
as its premise the goal of keeping out--``excluding''--all 
exotic organisms that have not been evaluated and determined 
very unlikely to be invasive.
    In other words, ``If in doubt, keep it out''; or ``guilty 
until proven innocent''
    Exclusion is most effectively and efficiently done by 
utilizing the best technologies and regulations to ensure that 
each of the many introduction ``pathways'' will be as 
inhospitable to any insect, fungus, virus, weed, or other 
potential pest organism as is technically possible. This 
approach solves several problems; it:
     reduces the burden on USDA port inspectors who 
otherwise must search millions of shipments for tiny, even 
microscopic, organisms; and
     reduces the risk that an error in identifying and 
assessing the potential impacts of an organism that is detected 
by inspectors will result in a decision to allow entry of a 
species that turns out to be highly damaging.
    Unfortunately, the SPS Agreement does not allow this 
sensible, science-based approach.

                             Recommendation

    American Lands asks Subcommittee members to recommend that 
the Administration seek amendment of the SPS Agreement so that 
the United States and other countries can institute effective 
phytosanitary safeguards to prevent irreversible damage to our 
environment and losses in the hundreds of millions of dollars.

          The Multilateral Agreement on Investment at The WTO

    We appreciate that the Administration's proposed agenda for 
the Ministerial does not include negotiation of investment 
provisions such as those found in the Multilateral Agreement on 
Investment (MAI). However, because at least one negotiating 
body, the European Union, did include such discussions in their 
proposal, we ask that the U.S. government explicitly state its 
opposition to such negotiations at the Ministerial and the 
subsequent round.
    The MAI is an international economic agreement that was 
originally negotiated at the Organization for Economic 
Cooperation and Development (OECD). The MAI would make it 
easier for individual and corporate investors to move assets--
whether money or production facilities--across international 
borders by limiting the ability of governments to regulate 
their activities. While negotiations of the MAI were scheduled 
for completion in May, 1998 at the OCED, overwhelming public 
and some governmental opposition forced the OECD to cease these 
negotiations. Since this time, WTO members such as the European 
Union, have suggested that MAI-like investment provisions be 
included in the WTO Ministerial round negotiations.
    The inclusion of MAI-like investment provisions in the WTO 
would threaten forest protection laws across the United States 
and the world.

The MAI: A Threat to Forests Everywhere

    The MAI would increase access to foreign markets to 
multinational timber companies while at the same time limiting 
the ability of governments to regulate the activities of those 
companies. In fact, governments would be forced to grant 
foreign-owned companies special rights over domestic companies.
    WTO rules currently apply primarily to the movement of 
goods and services. If investment was included, WTO rules would 
be expanded to apply to the movement capital and production 
facilities, such as factories, around the world.
    These rules include:

    National Treatment (NT). NT requires countries to treat 
foreign investors and investments no less favorably than 
domestic ones. Under NT, governments can not favor domestic, 
locally owned timber companies (even if these companies are 
proven to operate the most sustainably) with tax breaks, 
special subsides or contract preferences; nor can governments 
reserve publicly owned forests for local economic use: foreign 
corporations must be given an equal right to bid for 
concessions.
    Most Favored Nation (MFN). MFN requires governments to 
treat all foreign countries and investors the same with respect 
to regulatory laws. Laws prohibited by MFN would include laws 
that restrict trade with specific foreign-owned companies known 
for their unsound environmental production practices and laws 
that restrict trade with companies that do business in 
countries with especially threatened forests.
    The MAI included the following provisions which could also 
be introduced at the WTO:
    Limitations on Performance Requirements (PR). PRs are laws 
that require investors to meet certain conditions if they want 
to establish an enterprise in a particular location. Such laws 
were banned outright at the OECD, even if they did not 
discriminate against foreign investors. Therefore, laws 
designed to ensure that local communities benefit from the 
economic activity of foreign-owned timber companies could be 
banned. For example, requirements to: take a local partner, 
hire local people, make a specific level of investment--
including local benefit or assistance packages, or requiring 
the transfer of environmentally beneficial technology.
    A Ban on the Uncompensated Expropriation of Assets. The MAI 
required governments, when they deprive foreign investors of 
any portion of their property, to compensate the investors 
immediately and in full. Because this provision is defined so 
broadly, it has the effect of essentially threatening the 
ability of governments to write any regulatory laws because 
these laws could be argued to reduce the value of an 
investment. For example, it could be argued that a ban on 
clear-cutting or other land use restrictions limits the ability 
of timber companies to get the full value of their investment 
and therefore is an ``expropriation of their assets.'' Under 
MAI rules, the company would have to be compensated for their 
``lost profits'' by the government.
    Investor-to State Dispute Resolution (ISDR). Currently, the 
WTO does not allow for ISDR. However, the member nations could 
agree to institute it at the WTO. Under ISDR, individual 
investors and corporations are given the right to enforce the 
MAI by suing national governments directly if they believe that 
their rights, as established by the MAI, have been violated. 
The implications are enormous. Rather than go through the 
``political filter'' of governments suing governments--as is 
the standard for all international trade agreements other than 
the North American Free Trade Agreement (NAFTA)--the only 
filter keeping corporations from suing governments is the size 
of the corporations legal budget. Using the ISDR mechanism in 
NAFTA, a Canadian environmental and health law has been struck 
down and a California environmental and health law is the 
subject of a $1 billion suit.
    A Ban on Restrictions on the Repatriation of Profits or the 
Movement of Capital. Under this provision, countries can not 
prevent an investor from moving profits from the operation or 
sale of a local enterprise to that investor's home country. Nor 
can countries delay or prohibit investors from moving any 
portion of their assets, including financial instruments like 
stocks or currency. Many experts blame the recent East Asian 
financial crisis on just this type of capital flow 
liberalization.
    Investment provisions at the WTO modeled after those in the 
MAI would force governments to abandon laws that protect 
forests and the environment in order to grant increased rights 
to foreign corporations.

                             Recommendation

    American Lands asks Subcommittee members to recommend that 
the Administration explicitly oppose the negotiation of MAI-
like investment provisions at the WTO Ministerial meeting or 
the subsequent round.

                               Conclusion

    Free trade in forest products is not like free trade in 
other areas. Unlike radishes, when you pick a 4000 year old 
Chilean Alerce tree out the ground, it is gone for ever, it 
will not grow back. Unlike aluminum cans, when you crush 
millions of life-forms as yet to be identified while clear-
cutting a forest, they can not be recycled. Therefore, it is 
fool-hearty to proceed with agreements to increase trade in 
non-renewable resources without in-depth analysis of the 
environmental consequences.

American Lands would like to make four specific requests to the 
members of the Subcommittee for their recommendations to the 
Administration:

    1) The Administration should oppose all discussions of 
forest products trade liberalization at the Ministerial meeting 
and subsequent round of the WTO. Rather, the Administration 
should initiate an assessment of the impact of previous WTO 
trade agreement, and the potential impact of proposed WTO trade 
agreements, on forest protection and biodiversity. This 
assessment should be conducted with the reference point being 
NEPA's mandated procedures and methodologies, as elaborated 
through regulations of CEQ.
    2) The Administration should seek amendment of the SPS 
Agreement as defined in detail above such that the United 
States and other countries can institute effective 
phytosanitary safeguards to prevent irreversible damage to our 
environment and losses in the hundreds of millions of dollars.
    3) The Administration should explicitly state its 
opposition to negotiations of MAI-like investment provisions at 
the Ministerial and subsequent round of negotiations of the 
WTO.
    4) The Administration should heed the demand reflected in a 
letter which this organization helped draft and which has been 
signed by over 700 organizations world-wide demanding that the 
Ministerial meeting in November be an assessment round. The 
current Agreements of the GATT and WTO would be assessed for 
their impacts on the environment and other social and economic 
areas at such a round. This assessment must be conducted with 
the direct input of qualified experts from non-governmental 
organizations and institutions and in an open and transparent 
manner
    Thank you for the opportunity to address this Subcommittee 
in written testimony.
      

                                


Statement of James Wm. Johnson, Jr., President, United States Beet 
Sugar Association, and Chairman, American Sugar Alliance

                              Introduction

    Thank you for the opportunity to submit testimony in 
conjunction with this important hearing. I am the president of 
the United States Beet Sugar Association, which represents 
American sugarbeet processing companies. I am also honored to 
serve as chairman of the American Sugar Alliance (ASA). The ASA 
is the national coalition of growers, processors, and refiners 
of sugarbeets, sugarcane, and corn for sweetener.
    The ASA has long endorsed the goal of global free trade 
because U.S. sugar and corn sweetener producers are efficient 
by world standards and would welcome the opportunity to compete 
on a genuine level playing field. Until that free trade goal is 
achieved, however, the United States must retain at least the 
minimal sugar policy now in place to prevent foreign 
subsidized, dump market sugar from unfairly displacing 
efficient American producers. This policy was substantially 
modified by Congress in the 1996 Farm Bill, but remains highly 
beneficial to American taxpayers and consumers.
    While the ASA supports the goal of free trade, we have 
serious concerns about past agreements and about the structure 
of future multilateral or regional trade agreements. Listed 
below are our specific recommendations regarding negotiations 
of the World Trade Organization, followed by some background on 
the United States' role and standing in the world sugar economy 
and our evaluation of the effects of past multilateral and 
regional trade agreements on the world sugar market and on our 
industry.
    U.S. agriculture is extremely vulnerable as we approach the 
next trade round. If we are reckless, we risk converting 
American agriculture into a Rust Belt. If we negotiate 
carefully and rationally, however, there is enormous potential 
for responsible American producers to compete and prosper in a 
genuine free trade environment, free from the need for 
government intervention.

              Recommendations for Future WTO Negotiations

    The 1999 World Trade Organization (WTO) Ministerial will play a 
pivotal role in establishing the scope, parameters, and goal of the 
next multilateral trade round. Shaped by our experience and by the 
specific failures of past agreements, described later in this paper, 
the following are the ASA's recommendations for the Ministerial.

Compliance.

    Compliance with past agreements, in particular, the Uruguay Round 
Agreement (URA) of the WTO and the North American Free Trade Agreement 
(NAFTA), must be achieved before the United States forges any new 
agreements. The United States, and any other country that has surpassed 
its URA commitments, should be given credit for doing so before being 
required to make further cuts in the next trade round.

2. Catch-up.

    The United States must not reduce its support for agricultural 
programs, particularly for import-sensitive crops such as sugar, any 
further until other countries have reduced their support to our level.

3. Export subsidies/STE's.

    Elimination of export subsidies, the most trade distorting of all 
practices, and of state trading enterprises (STE's), which were ignored 
previously, must be given top priority in the next trade round.

4. Labor and environmental standards.

    The wide gap in labor and environmental standards between developed 
and developing countries must be taken into account in the next trade 
round, to provide both incentives and penalties that ensure global 
standards rise to developed-country levels, rather than fall to 
developing-country levels. Nearly three-quarters of the world's sugar 
is produced in developing countries.
5. Negotiating strategy.

    With regard to future tariff reductions, the traditional, flexible, 
``request/offer'' type of negotiating strategy must be followed in the 
next trade round, rather than the rigid, across-the-board, formula 
approach that was used in the URA. This is the only way to recognize 
the enormous diversity, and varying sensitivities, among agricultural 
industries and commodity markets.

               Background on U.S. Sugar Industry, Policy

Size and Competitiveness.

    Sugar is grown and processed in 17 states and 420,000 
American jobs, in 40 states, are dependent, directly or 
indirectly, on the production of sugar and corn sweeteners. The 
industry generates an estimated $26.2 billion in economic 
activity annually. A little more than half our sugar is 
produced from sugarbeets, the remainder from sugarcane. More 
than half our caloric sweetener consumption is in the form of 
corn sweeteners.
    The United States is the world's fourth largest sugar 
producer, trailing only Brazil, India, and China. The European 
Union (EU), taken collectively, is by far the world's largest 
producing region. It benefits from massive production and 
export subsidy programs.
    Sugar is an essential food ingredient and the U.S. sugar 
producing industry is highly efficient, highly capitalized, and 
technologically advanced. It provides 260 million Americans 
most of sugar they demand, in 45 different product 
specifications and with ``just-in-time'' delivery that saves 
grocers and manufacturers storage costs.
    Roughly 15-20% of U.S. sugar demand is fulfilled by duty-
free imports from foreign countries, making the U.S. one of the 
world's largest sugar importers. Many of the 41 countries 
supplying our sugar are developing economies with fragile 
democracies and they depend heavily on sales to the United 
States, at prevailing U.S. prices, to cover their costs of 
production and generate foreign exchange revenues.
    Despite some of the world's highest government-imposed 
costs for labor and environmental protections, U.S. sugar 
producers are among the world's most efficient. According to a 
study released in 1997 by LMC International, of England, and 
covering the 6-year period ending in 1994/95, American sugar 
producers rank 19th lowest in cost among 96 producing 
countries, most of which are developing countries. According to 
LMC, fully two-thirds of the world's sugar is produced at a 
higher cost per pound than in the United States.
    During the last three years studied, 1992/93-94/95, the 
United States became the lowest cost beet sugar producer in the 
world. American corn sweetener producers are also the lowest 
cost of all caloric sweeteners in the world, and always have 
been the lowest cost producer of corn sweetener.
    Because of their efficiency, American sugar farmers would 
welcome the opportunity to compete against foreign farmers on a 
level playing field, free of government subsidies and market 
intervention. Unfortunately, the extreme distortion of the 
world sugar market makes any such free trade competition 
impossible today.

            Unique Characteristics of the World Sugar Market

    There are a number of unique characteristics to the world sugar 
market, which trade negotiators must take into account in future 
multilateral deliberations.

World Dump Market.

    More than 100 countries produce sugar and the governments of all 
these countries intervene in their sugar markets and industries in some 
way. These unfair trading practices have led to the distortion in the 
so-called ``world market'' for sugar, and to a disconnect between the 
cost of production and prices on the world sugar market, more aptly 
called a ``dump market.'' Indeed, for the period of 1984/85 through 
1994/95, the most recent period for which cost of production data are 
available, the world average cost of producing sugar is over 18 cents, 
while the world dump market price averaged barely half that--just a 
little more than 9 cents per pound raw value.

Volatility.

    Furthermore, its dump nature makes sugar the world's most volatile 
commodity market. Because it is a relatively thinly traded market, 
small shifts in supply or demand can cause huge changes in price.
    During the period 1965-95, the average deviation from trend for raw 
sugar prices was nearly 50 percent, more than double the average 
deviation for corn and almost double that of wheat. Just in the past 
two decades, world sugar prices have soared above 60 cents per pound 
and plummeted below 3 cents per pound.

Other Factors.

    Aside from the highly residual and volatile nature of the world 
sugar price, there are a number of factors that set sugar apart from 
other program commodities. These unique characteristics should be taken 
into account before sugar is lumped in with other commodities for 
across-the-board policy reforms.
      Lack of Concentration. World grain exports are 
overwhelmingly dominated by a small number of developed countries, but 
sugar exports are far more dispersed, and dominated by developing 
countries. This makes the playing field among major grain exporters 
comparatively level and policy reform relatively less complicated than 
for sugar.
       The world wheat and corn markets, for example, are heavily 
dominated by a handful of developed-country exporters--the United 
States, the European Union, Australia, and Canada are four of the top 
five exporters of each. The top five account for 96% of global corn 
exports and 91% of wheat exports.
       The top five sugar exporting countries, on the other hand, 
account for only two-thirds of global exports and three of these are 
developing countries. The top 19 sugar exporters account for only 85% 
of the market, and 16 of these are developing countries.
      Developing Country Dominance. Developing countries 
account for 73% of world sugar production, and 69% of both exports and 
imports. Developing countries were virtually ignored in the Uruguay 
Round of reductions in barriers to agricultural trade, and impose far 
lower costs on their producers for labor and environmental protections.
      Grower/Processor Interdependence. Grain, oilseed, and 
most other field-crop farmers harvest a product that can be sold for 
commercial use or stored without any further processing. Sugarbeet and 
sugarcane farmers harvest a product that is highly perishable and of no 
commercial value until the sugar has been extracted. Farmers cannot, 
therefore, grow beets or cane unless they either own, or have 
contracted with, a processing plant. Likewise, processors cannot 
function economically unless they have an optimal supply of beets or 
cane. This interdependence leaves the sugar industry far less flexible 
in responding to changes in the price of sugar or of competing crops.
      Multi-Year Investment. The multimillion-dollar cost of 
constructing a beet or cane processing plant (approximately $300 
million), the need for planting, cultivating, and harvesting machinery 
that is unique to sugar, and the practice of extracting several 
harvests from one planting of sugarcane, make beet or cane planting an 
expensive, multiyear investment. These huge, long-term investments 
further reduce the sugar industry's ability to make short-term 
adjustments to sudden economic changes.
      High-Value Product.
    While the gross returns per acre of beets or cane tend to be 
significantly higher than for other crops, critics often ignore the 
high cost associated with growing these crops. Compared with growing 
wheat, for example, USDA statistics reveal the total economic cost of 
growing cane is nearly seven times higher, and beet is more than five 
times higher. With the additional cost for processing the beets and 
cane, sugar is really more of a high-value product than a field crop.
      Inability to Hedge. The 1996 Freedom to Farm Bill made 
American farmers far more dependent on the marketplace. Growers of 
grains, oilseeds, cotton, and rice can reduce their vulnerability to 
market swings by hedging or forward contracting on a variety of futures 
markets for their commodities. There is no futures market for beets or 
cane. Farmers do not market their crop and can neither make, nor take, 
delivery of beet or cane sugar. The hedging or forward contracting 
opportunities exist only for the processors--the sellers of the sugar 
derived from the beets and cane. These marketing limitations make beet 
and cane farmers more vulnerable than other farmers to market swings.

                 U.S. Sugar Industry's Free Trade Goal

    Because of our competitiveness, with costs of production 
well below the world average, the American Sugar Alliance 
supports the goal of genuine, global free trade in sugar. We 
cannot compete with foreign governments, but we are perfectly 
willing to compete with foreign farmers in a truly free trade 
environment.
    We were the first U.S. commodity group to endorse the goal 
of completely eliminating government barriers to trade at the 
outset of the Uruguay Round, in 1986. We understand we are the 
first group to endorse this same goal prior to the start of the 
1999 multilateral trade round.
    The ASA does not endorse the notion of free trade at any 
cost. The movement toward free trade must be made deliberately 
and rationally, to ensure fairness and to ensure that those of 
us who have a global comparative advantage in sugar production 
are not disadvantaged by allowing distortions, exemptions, or 
delays for our foreign competitors, as we are experiencing 
under the current agreement.

                 Sugar and the Uruguay Round Agreement

Little Effect on World Sugar Policies.

    More than 100 countries produce sugar and all have some 
form of government intervention. Unfortunately, these policies 
were not significantly changed in the Uruguay Round Agreement 
(URA) of the WTO.
    The URA inadequately addressed, or ignored:
      Compliance. Many countries have evaded or not yet 
even complied with their URA agricultural commitments. In 
sugar, for example, the EU has managed to isolate most of its 
sugar export subsidy program from URA disciplines. The 
Philippines has yet to meet its requirements for increasing 
minimum access levels to its sugar market.
       It was revealed at a WTO Analysis and Information 
Exchange Group meeting Geneva in September 1998, nearly four 
years since the inception of the URA, that a mere 17 of the 132 
member nations have fulfilled all their notification 
requirements on domestic support, export subsidies, and market 
access. One must wonder how we can monitor compliance with WTO-
mandated reductions in agricultural policies when the vast 
majority of countries will not even acknowledge which policies 
they have in place.
      Export Subsidies. The most distorting practice in 
world agricultural trade is the export subsidy. Export 
subsidies provide countries the mechanism to dispose of 
surpluses generated by high internal production subsidies. In 
the absence of export subsidies as a surplus-removal vehicle, 
countries would have to reduce their production supports. With 
export subsidies in place, countries can move surpluses into 
markets where they do not belong and depress market prices. 
Other countries are forced to respond with import barriers. In 
the world sugar market, subsidized exports by the EU alone 
amount to about a fifth of all the sugar traded each year.
       The URA did not significantly reduce the amount of sugar 
sold globally with export subsidies. The agreement failed to 
reduce the European Union's generous price support level and 
requires only a tiny potential drop in its substantial export 
subsidies.
      State Trading Enterprises (STE's). STE's are 
quasi-governmental, or government-tolerated organizations that 
support domestic producers through a variety of monopolistic 
buyer or seller arrangements, marketing quotas, dual-pricing 
arrangements, and other strategies. These practices were 
ignored in the Uruguay Round, but are, unfortunately, common in 
the world sugar industry. Major producers such as Australia, 
Brazil, China, Cuba, and India have sugar STE's, but were not 
required to make any changes in the URA.
      Developing-Country Producers. Developing 
countries, which represent nearly three-quarters of world sugar 
production and trade, have little or no labor and environmental 
standards for sugar farmers, have no minimum import access 
requirements, and often have high import tariffs. Nonetheless, 
developing countries were put on a much slower track for 
reductions, or, in the case of the least developed countries, 
were exempted altogether from URA disciplines.
      WTO Non-Members. Important sugar-producing and 
importing countries such as China and the former Soviet 
republics are not WTO members, and need to do nothing under the 
URA. Yet, these countries represent some 40% of global sugar 
imports and 20% of production.
      Labor and Environmental Standards. The gap in 
government standards--and resulting producer costs--between 
developed and developing countries is well documented and 
immense, but was ignored in the URA. In sugar, the gap is 
particularly pronounced because, while the EU and the U.S. are 
major players, production and exports are highly dominated by 
developing countries, especially in the cane sector.

Social Standards Gap.

    The differences in labor and environmental standards 
between developed and developing countries are wide. American 
sugar producers operate with the highest possible regard for 
workers and the environment. But we should not be penalized in 
multilateral trade negotiations for providing these costly 
protections. Foreign countries that do not provide such 
protections should not be rewarded. If we are attempting to 
globalize our economy, we should also globalize our worker and 
environmental protection responsibilities. If markets are to be 
liberalized, standards must be harmonized.
    In the next trade round, access to developed countries 
should be conditioned on developing countries' achievement and 
enforcement of higher labor and environmental standards. Such 
an incentive system could help ensure that the next trade round 
results in a race to the top, in protection of workers and the 
environment, rather than a race to the bottom.

Widely Varying Levels of Support.

    Unilateral reforms to U.S. agriculture policy in the 1996 
Farm Bill far exceeded U.S. commitments made the year before in 
the Uruguay Round. Furthermore, developing countries, which 
dominate world agricultural trade and particularly sugar trade, 
were subject to a slower pace of reductions, if any.
    As a result, the United States is way out in front of the 
rest of the world in removing its government from agriculture 
and has placed its farmers in a domestic free market situation. 
This gap makes American farmers uniquely vulnerable to 
continued subsidies by foreign competitors.
    It is key that American farmers not be penalized for 
attempting to lead the rest of the world toward free 
agricultural trade. American farmers must be given credit for 
the reforms they have endured.

U.S. Sugar Surpasses URA Requirements.

    The United States is one of only about 25 countries that 
guarantees a portion of its sugar market to foreign producers 
and it has far surpassed its URA commitment on import access. 
The URA required a minimum access of 3-5% of domestic 
consumption. The United States accepted a sugar-import minimum 
that amounts to about 12% of consumption. In practice, U.S. 
imports in 1994/95 and 1995/96 averaged 24%--double the promise 
we made in the URA, and about six times the global URA minimum.
    All this sugar imported from 41 countries under the tariff-
rate quota (TRQ) enters the United States at the U.S. price, 
and not at the world dump price. Virtually all this sugar 
enters duty free. Just five countries (Argentina, Australia, 
Brazil, Gabon, and Taiwan) that lack Generalized System of 
Preferences status pay a minuscule duty of 0.625 cents per 
pound.
    The United States calculated its above-quota tariff rate in 
the manner dictated by the URA. These tariff levels are totally 
WTO consistent, and are dropping by 15% over the 6-year 
transition period, as we promised they would in the Uruguay 
Round. This duty is frozen in the year 2000 and must not be 
reduced further until foreign countries have complied with 
their URA requirements, as the U.S. has done.

U.S. Sugar Policy Reforms.

    U.S. sugar policy was unilaterally and substantially 
reformed in the 1996 Farm Bill, far in excess of URA 
commitments. The key reforms: 1) Production controls 
(``marketing allotments'') were eliminated. 2) Government-
provided non-recourse loans, or a government-guaranteed minimum 
price, are conditional and no longer guaranteed--unlike all 
other U.S. program commodities. This ensures long-standing 
Congressional intent that U.S. sugar policy be run at no cost 
to the U.S. Treasury. 3) The minimum import level, already 
about four times the minimum required by the URA, was 
effectively raised another 20%. 4) Sugar producers' burdensome 
and discriminatory marketing assessment tax was raised 25%. 5) 
A 1-cent per pound penalty was established to discourage 
government loan forfeitures. 6) The U.S. committed to further 
support price reductions when other countries surpass their URA 
requirements, as the U.S. has done, and achieve levels equal to 
ours.
    The reformed sugar policy of the 1996 Farm Bill does retain 
the Secretary of Agriculture's ability to limit imports, and 
also provides a price support mechanism, though only when 
imports exceed 1.5 million short tons. The 1998/99 sugar import 
quota is already below that critical trigger level.

Playing Field Lower, But Not More Level.

    The URA's formula-based approach called for across-the-
board percentage reductions, regardless of the original level 
of price support, import barrier, or export subsidy. Countries 
with the most egregious barriers can maintain their advantage 
throughout the transition process. For example, if one 
country's price support were 40% higher than another's, and 
both reduced by the URA-mandated 20%, the 40% advantage would 
remain in place--the playing field has been lowered, but not 
leveled.
    Furthermore, the United States far surpassed its URA 
commitments, unilaterally dismantling its already minimal 
commodity program in the 1996 Farm Bill, while many other 
nations with higher levels of government intervention have yet 
to even minimally comply. This has tilted the playing field 
even further to the disadvantage of efficient American farmers.

Formula Driven Trade Strategy.

    For the many reasons outlined above, the rigid, formula-
driven, or one-size-fits-all, approach for trade concessions 
does not work for agriculture in general, or for sugar in 
particular. Pursuing this approach would: 1) Fail to reduce the 
gap in supports between countries--lowering the playing field, 
but not leveling it; 2) Again give developing countries 
virtually a free ride; 3) Further diminish U.S. negotiating 
leverage, which was severely reduced through our unilateral 
concessions in the 1996 Farm Bill.
    To date, U.S. agriculture has led the world in trade 
barrier reductions and we are disadvantaged as long as the rest 
of the world fails to follow our example.

Special Import Safeguards.

    The URA did provide some special import safeguards for 
sugar in the event of a world price collapse. Such a price 
collapse has occurred--current world prices are at a 14-year 
low of less than 5 cents--and these price-triggered safeguards 
are proving valuable to prevent dump market sugar from entering 
the U.S. market. These safeguards must be retained, and should 
be strengthened, in the next trade round.

                          Sugar and the NAFTA

    The ASA is concerned that before the United States embarks on 
another multilateral trade round we must be cognizant of serious 
problems that remain with our primary regional trade agreement, the 
North American Free Trade Agreement (NAFTA). Evasion of NAFTA rules and 
violation of international trade rules by our North American trading 
partners have left many American sugar producers with a distrust of 
trade agreements and a serious reticence about entering into new ones.

Canada.

    Sugar trade between the United States and Canada, which imports 
about 90% of its sugar needs, was essentially excluded from the NAFTA. 
U.S.-Canadian sugar trade is governed mainly by the U.S.-Canada Free 
Trade Agreement and by the WTO.
    Currently, entrepreneurs based in Canada are threatening the 
integrity of U.S. sugar policy by circumventing the tariff-rate quota 
with a new product referred to in the trade as ``stuffed molasses''--a 
high-sugar product not currently included in U.S. sugar TRQ 
classifications. USDA has estimated imports of this product could add 
about 100,000 tons of non-quota sugar to the U.S. market per year. That 
amount could grow if this loophole is not closed, further harming U.S. 
sellers of refined sugar and possibly threatening the no-cost operation 
of U.S. policy.

Mexico.

    Mexico had been a net importer of sugar for a number of years prior 
to the inception of the NAFTA. Nonetheless, the NAFTA provided Mexico 
with more than three times its traditional access to the U.S. sugar 
market during the first six years, 35 times its traditional access in 
years 7-14, and virtually unlimited access thereafter.
    These provisions were negotiated by the U.S. and Mexican 
governments and contained in President Clinton's NAFTA submission to 
the U.S. Congress, which Congress approved in November 1993.
    The sugar provisions, as altered from the original NAFTA text, were 
critical to the narrow Congressional passage of the NAFTA.
    Nonetheless, Mexico is now undermining the integrity of the NAFTA 
by claiming the sugar provisions are somehow invalid. This questioning 
by Mexico has bred deep feelings of distrust in trade agreements among 
many American sugar producers.
    In addition, Mexico has not complied with a NAFTA requirement to 
phase out its tariffs on U.S. high-fructose corn syrup (HFCS). Instead, 
Mexico raised its tariffs on HFCS imports to levels approaching 100%. 
Mexico may also be violating international trade rules by sanctioning a 
restraint of trade agreement among Mexican sugar producers and soft 
drink bottlers to slow the pace of substitution of HFCS for sugar in 
Mexican soft drinks. (The ASA has filed a paper with USTR on this 
subject, ``Initiation of Section 302 Investigation on Mexican Practices 
Affecting High Fructose Corn Syrup,'' June 19, 1998.)
      

                                


Statement of the American Textile Manufacturers Institute (ATMI)

    ATMI's member companies range from small, specialized 
family-owned enterprises to diversified, multi-billion dollar 
public corporations. They and ATMI believe that United States 
negotiating objectives in the upcoming World Trade Organization 
(WTO) Seattle Ministerial meeting and subsequent ``Millennium 
Round'' should be focused on completing the job that was begun 
but not finished during the Uruguay Round negotiations. Full 
stop.
    Key objectives of the Uruguay Round, as is well known, were 
to bring international trade in services, agriculture and 
textiles/apparel under GATT (the precursor of the WTO) 
disciplines and to forge international agreement on measures 
granting intellectual property protection. Negotiations to 
achieve these highly, worthwhile ends were scheduled to last 
four years and no more. Finally, after seven years, only one of 
these objectives was realized: that with respect to textiles/
apparel. In services, agriculture and intellectual property, 
only ineffectual half measures and agreement to continue 
negotiations as part of a ``built-in agenda'' in these sectors 
were adopted. The Uruguay Round, though resulting in nearly a 
thousand pages of text ratified on April 15, 1994, remains an 
unfinished work.
    With regard to trade in textiles and apparel, profoundly 
far-reaching decisions were taken in the Uruguay Round. 
Agreement was reached to gradually phase out quantitative 
restraints on imports of textiles and apparel which were 
maintained since 1974 pursuant to the GATT-sanctioned 
International Arrangement Regarding Trade in Textiles (the 
``MFA''). All such restraints are to be gradually phased out 
over a ten-year ``transition period'' and completely eliminated 
as from January 1, 2005. It is difficult to overstate the 
magnitude of this concession by the United States and the other 
textile/apparel importing countries. In dollar terms, it is 
probably worth more to the exporting countries than all the 
other Uruguay Round Agreements. Combine, in addition, other 
concessions were made and gifts bestowed on the exporting 
countries in the form of ever higher annual growth rates for 
those restraints which do remain in place until 2005 and 
greatly increased ``flexibility'' provisions which allow 
countries to exceed the annual limits to which they agreed 
until 2005. As a result of these measures, U.S. imports of 
textiles and apparel, not including imports from free trade 
partners Canada, Mexico and Israel, increased $13.3 billion or 
36.5 percent in just the four years since the Uruguay Round 
Agreements went into effect (1995) through last year.
    And, to further liberalize its contribution to world trade, 
the United States agreed to tariff cuts on essentially all 
textile and apparel products.
    It is safe to say that no other sector of U.S. industry was 
required to make as many concessions in the Uruguay Round 
Agreements as the domestic textile and apparel industries. But 
there was supposed to be at least partial recompense in the 
form of market opening initiatives by the exporting countries 
who, for two generations, have kept their domestic markets 
closed to foreign competition * while cheerfully exporting over 
$100 billion worth of textiles and apparel annually (1997). 
Indeed, Article 1 of the Uruguay Round Agreement on Textiles 
and Clothing (ATC) states ``Members should allow for . . . 
increased competition in their markets.'' This is reinforced by 
language in Article 7: ``. . . all (emphasis added) Members 
shall take such actions as may be necessary to abide by GATT 
1994 rules and disciplines so as to:
---------------------------------------------------------------------------
    * Except, of course, Hong Kong and Singapore, which somehow manage 
to export increasing quantities of textile products despite rapidly 
declining employment in the sector. It is possible that the openness of 
their markets plays a role in the growth of their exports by 
facilitating illegal transshipments.
---------------------------------------------------------------------------
        a) achieve improved access to markets for textile and clothing 
        products. . .''
    There can be no question but that the United States has 
fulfilled not only the spirit, but the letter of this 
requirement (and has a $13.3 billion increase in textile and 
apparel imports to prove it). Most regrettably, however, many 
of the large textile and apparel exporting nations have ignored 
their commitments under the Agreement and have utterly failed 
to provide meaningful, real market access. (In this context, 
Pakistan's removal of knitted ski suits from its list of banned 
imports is not meaningful market access). A list of import 
barriers still maintained by the non-compliant exporting 
countries and the results thereof are attached as Exhibits A & 
B.
    Until the major textile and apparel exporting nations 
provide a degree of access to their domestic markets comparable 
to what the United States has provided, no further concessions 
should be made by the U.S. The United States' negotiating 
objective in the Millennium Round should be, clearly and 
simply, to require these recalcitrant exporting nations to 
abide by the ATC--five years after the fact--and provide real 
access to their domestic markets. Should they fail to do so, 
the United States should then move to deny them further trade 
liberalizing elements (Article 2) of the ATC. What the United 
States should not do, what it must not do, in the Millennium 
Round, is to agree to further reduce U.S. apparel and textile 
tariffs. Not only would doing so damage U.S. production and 
investment and destroy U.S. textile jobs, any further tariff 
cuts would also undermine the preferential access to the U.S. 
which Mexico, Canada, and Israel enjoy under our free trade 
agreements, as well as any future benefits which may be 
realized under CBI enhancement legislation.

Exhibit A

                Balance of Trade in Textiles and Apparel
                          Billion U.S. $--1997
------------------------------------------------------------------------

------------------------------------------------------------------------
India.............................................  (a.) 9.15       Neg.
                                                            3
Pakistan..........................................      6.399       Neg.
Indonesia.........................................      5.159  (b.) 1.15
                                                                       2
Thailand..........................................      5.695  (b.) 1.24
                                                                       9
Malaysia..........................................      3.616  (b.) 1.21
                                                                       0
Philippines.......................................      2.590  (b.) 1.17
                                                                       5
Egypt.............................................       .792  (b.) .300
------------------------------------------------------------------------
Neg: neglibile; not reported
a.) 1996
b.) nearly all textiles imported into export processing zones.
Source: World Trade Organization.

[GRAPHIC] [TIFF OMITTED] T5092.006


      

                                


Statement of Association of International Automobile Manufacturers, 
Inc., Arlington, Virginia

    The Association of International Automobile Manufacturers, 
Inc. (AIAM), is the trade association representing U.S. 
subsidiaries of international automobile companies doing 
business in the United States. Member companies distribute 
passenger cars, light trucks, and multipurpose passenger 
vehicles in this country and export them outside the United 
States. Nearly two-thirds of the vehicles they distribute here 
are manufactured in the New American Plants. International 
automakers support American jobs in manufacturing, supplier 
industries, ports, distribution centers, company headquarters, 
research and development centers, and automobile dealerships. 
AIAM also represents manufacturers of tires and other original 
equipment with production facilities in the United States and 
abroad. AIAM submits this written statement for record of the 
hearing held by the Subcommittee on Trade on August 5, 1999, on 
the subject of U.S. Negotiating Objectives for the WTO Seattle 
Ministerial Meeting.

          1. Reduction of Tariffs on Motor Vehicles and Parts

    The rates of duty on passenger vehicles exported to the 
United States, the Europe Union, Japan and Korea now generally 
range from zero to 10 percent. However, in many countries the 
rate is 20, 30 or even 40 percent. Rates of duty on vehicle 
parts vary widely and in many cases are unnecessarily high. 
Automobile manufacturing is now a global industry which has 
experienced dramatic restructuring in recent years. The high 
costs of research, engineering, manufacturing technology, and 
marketing, among other factors, have influenced the industry to 
become truly international, with worldwide companies that 
source parts from across the globe and assemble vehicles in 
many countries. The notion of a national car or a strictly 
domestic automobile manufacturing industry does not square with 
modern economic reality. Protecting a national industry that is 
not competitive does little good for the citizens of any 
country. In the near term, at least for the developed world, 
progress toward a zero duty rate would be an excellent goal for 
the new WTO round. It would encourage competition and lead to 
lower prices, higher quality, and wider consumer choice. For 
less developed countries, such a goal may take longer to 
achieve, but it should nonetheless be an objective advanced by 
the WTO.

                       2. U.S. Light Truck Tariff

    A particularly severe and unjustifiable barrier to trade is 
the 25% ad valorem duty that the United States imposes upon 
light trucks. This duty is an obsolete remnant of the so-called 
Chicken War between the United States and then-European 
Economic Community in the early 1960's. It has no economic 
justification and restricts trade unnecessarily.
    This duty has been the subject of long-standing controversy 
and political debate. It has generated strong feelings within 
the United States and intense discussions with our trading 
partners. Abolishing the 25 percent duty should be the long-
term goal of the United States. In the short term, action by 
the United States to reduce it to a level such as 4 percent, 
which is now the duty on trucks between five and twenty metric 
tons in gross vehicle weight, would be a very positive step 
that would serve U.S. interests. It would lower consumer costs 
and stimulate competition. Light trucks have become extremely 
popular in the United States. For many families, they fill the 
role of a second car. American consumers would benefit 
significantly from the increased competition and lower prices 
that should result from eliminating the Chicken War tariff.
    This anachronism is an example of the lasting negative 
effects of retaliatory tariffs. While the United States may 
wish to accomplish a tariff reduction in the context of 
bilateral or multilateral concessions, U.S. negotiators will 
have to take some initiative for American consumers to gain 
this benefit. That is because the circumstances and interested 
parties involved have changed since 1963. The variable levy 
imposed by the EEC on imports of frozen poultry from the United 
States (an effective embargo of such imports) has been 
eliminated. Changes have also taken place in the structure and 
locations of light truck manufacturing. What has not changed 
are the artificially higher prices paid by American consumers 
for these popular vehicles.

                     3. Technical Barriers to Trade

    Article II of the Agreement on Technical Barriers to Trade 
(Agreement) lays down certain basic principles concerning the 
use of technical regulations. For example, such regulations 
must satisfy the principle of most-favored-nation treatment. 
They must conform as much as possible to international 
standards when such standards exist. They must abide by the 
principle of transparency, so that other countries may readily 
become acquainted with them.
    Perhaps most importantly, the Agreement provides that 
technical regulations are not to be prepared, adopted, or 
applied with a view to, or with the effect of, creating 
unnecessary obstacles to international trade. Technical 
regulations shall therefore not be more trade-restrictive than 
necessary to fulfill a legitimate objective, taking account of 
the risks non-fulfillment would create.
    Especially if tariffs on motor vehicles are to be further 
reduced or eliminated, AIAM urges that special attention be 
paid to the technical regulations in the automotive sector. 
U.S. exports of motor vehicles are increasing, and it is 
therefore important that they encounter no unjustifiable non-
tariff barriers like protectionist technical regulations.
    If such regulations are identified, their elimination 
should be a condition of the U.S. willingness to reduce or 
eliminate its tariffs on motor vehicles. At the very least, 
such regulations should be amended to conform to international 
standards.

                       4. Add and CVD--Causation

    At present, both U.S. and international laws provide that 
the imposition of antidumping (ADD) and countervailing duties 
(CVD) requires a determination that the dumped or subsidized 
imports are causing material injury or the threat of such 
injury to a domestic industry. But neither U.S. nor 
international law specifies the degree of causation that must 
be found to justify the imposition of ADD or CVD.
    The pertinent U.S. law is the Tariff Act of 1930, as 
amended. Section 731(2), in the case of ADD (19 U.S.C. 
Sec.1673(2)), and Section 701(a)(2) in the case of CVD (19 
U.S.C. Sec. 1621(a)(2)), both provide that the U.S. 
International Trade Commission (ITC) shall determine whether a 
U.S. industry is materially injured or threatened with material 
injury (by reason of imports) of the merchandise in question. 
Likewise, Article 3.5 of the Agreement on Implementation of 
Article VI (ADD Agreement) and Article 15.5 of the Agreement on 
Subsidies and Countervailing Measures (CVD Agreement) both 
provide that,''It must be demonstrated that the dumped [or 
subsidized] imports are, through the effects of dumping [or 
subsidies], causing injury within the meaning of the 
Agreement.''
    The absence of a specification of the degree of causality 
has allowed the ITC to take one of two approaches. The first is 
not to address the issue and simply assume that the test of 
causation is met. The second is to address the issue but dilute 
the test so that any causal connection is deemed sufficient. In 
either case, the test of causality is rendered insignificant, 
thereby allowing the imposition of ADD and CVD without 
objective justification.
    The result of doing so is, at one and the same time, to 
give the domestic industry a remedy it does not need and to 
impose upon consumers a measure that unnecessarily hurts them. 
The ADD and CVD laws thereby become contrary to the national 
interest, since the costs are not offset by any benefits.
    Accordingly, AIAM proposes that both the U.S. laws and the 
international agreements be amended to provide that the dumped 
or subsidized imports must be a cause greater than any other 
cause of material injury or the threat thereof to the domestic 
industry. If one or more causes are each greater than the 
dumped or subsidized imports, imposing ADD or CVD is not 
justified, since they will not address the more significant 
cause or causes of the domestic industry's injury.

                       5. Agreement on Safeguards

    The Agreement on Safeguards (``SG Agreement'') should be 
amended to establish that, in order to justify the imposition 
of safeguard measures, increased imports must be a 
``substantial cause'' of serious injury or threat. 
``Substantial cause'' should be defined to mean a cause that is 
important and not less than any other cause. Such an amendment 
would be consistent with the nature and purpose of the SG 
Agreement, and would make the SG Agreement consistent with U.S. 
law.
    The SG Agreement sets forth the rules for applying 
safeguard measures pursuant to Article XIX of GATT 1994. 
Safeguard measures are ``emergency'' actions that permit WTO 
members to suspend WTO concessions in cases in which increased 
imports of particular products are causing or threatening to 
cause serious injury to the importing Member's domestic 
industry. Such safeguard measures can take the form of 
quantitative import restrictions or of duty increases to 
higher-than-bound rates.
    Since safeguard measures are exceptions to WTO negotiated 
concessions, they should only be taken in extraordinary 
circumstances. This is reflected in part in the current 
requirements of the SG Agreement that there be increased 
imports that cause or threaten ``serious injury.'' The SG 
Agreement defines ``serious injury'' as significant impairment 
in the position of a domestic industry. ``Threat of serious 
injury'' is threat that is clearly imminent as shown by facts, 
and not based on mere allegation, conjecture or remote 
possibility. Safeguard measures are not to be adopted lightly, 
since they are exceptions to the general rule of trade 
liberalization that form the basis of the WTO.
    The current causation standard in the SG Agreement, 
however, is inconsistent with the exceptional nature of 
safeguard provisions. The SG Agreement only requires that there 
be a causal link between serious injury and imports, and that 
injury caused by other factors should not be attributed to 
imports. The SG Agreement would, therefore, apparently permit 
the imposition of extraordinary emergency measures when 
increased imports may only be a cause, however insignificant, 
of injury. It could be argued that the latter provision--that 
injury caused by other factors should not be attributed to 
imports--is meant to imply that imports have to be more than an 
insignificant cause of serious injury to justify safeguard 
measures. Such a reading would be consistent with the purpose 
of the SG Agreement. A literal reading of this provision, 
however, does not support this interpretation.
    The U.S. version of the SG Agreement is section 201 of the 
Trade Act of 1974, as amended. Section 201 adopts a standard 
for causation that is consistent with the extraordinary, 
emergency nature of section 201. Section 201 requires that 
increased imports be a ``substantial cause'' of serious injury 
or of threat thereof. ``Substantial cause'' is defined by 
section 201 as a cause that is both important and not less than 
any other cause.
    This is a causation standard that makes sense and is 
consistent with the purpose of the SG Agreement. In the United 
States, this causation standard has not prevented section 201 
relief when it was warranted. It has however, prevented the 
imposition of anti-import measures when causes other than 
imports were more important causes of injury than imports. In 
the 1980 automobile section 201 investigation, for instance, it 
would have been counterproductive to impose import restraints 
on automobiles when the more important cause of injury was the 
recession taking place at that time. To do otherwise would have 
been to scapegoat imports, undermine GATT commitments, hurt 
both consumers and the economy, and do little to help the 
domestic industry.
    In the next WTO round, the U.S. should push to change the 
causation standard of the SG Agreement to require that imports 
be a ``substantial cause'' of serious injury or threat, and 
that ``substantial cause'' be defined to mean a cause which is 
important and not less than any other cause.

                  6. Dispute Settlement Understanding

    There are several ways in which the WTO's dispute 
settlement understanding can be improved.

Transparency:

    The U.S. should encourage WTO members to take steps to 
ensure that the WTO decision-making process is open and 
transparent. First, all submissions made in connection with a 
dispute that do not contain confidential information should be 
made available publicly when they are filed. This includes 
submissions and reports of the parties and any experts selected 
by the dispute settlement panel, as well as requests for the 
formation of a panel and notices of appeal. Second, public 
versions of confidential reports and submissions should be 
submitted and made available to the public within a reasonable 
time--no more than 2 days--after the confidential reports and 
submissions are filed. There should be a strong presumption 
against redacting information in the public version, and 
confidential information should only be redacted if it meets 
certain narrowly defined criteria. Third, decisions of the 
Dispute Settlement Panels should be made available to the 
public at the same time they are released to the parties to a 
dispute. Finally, hearings before dispute settlement panels and 
before the appellate body should be open to the public, unless 
a request is made by a party for in camera treatment of certain 
portions of the proceeding, due to the confidential nature of 
the information being discussed.

Public Participation:

    The DSB should encourage and accept amicus curiae briefs 
from the public in dispute settlement proceedings, as permitted 
by Article 13.2 (which provides that the DSB may seek 
information from non-parties to assist in the settlement of 
disputes). This may be of particular significance in cases 
involving complex technologies and issues. Further, upon 
request by an NGO amicus party, the dispute settlement panels 
and appellate body should permit oral presentations at hearings 
by that party or by their attorneys. Finally, the DSB should 
allow parties, including NGO amicus parties, at least 30 days 
in which to comment on any reports submitted by experts 
selected by the WTO panel.

                     7. Rules on Country of Origin

    The Agreement on Rules of Origin (Agreement) begins to lay 
down the rules of general application for determining the 
country of origin of goods that are traded among countries. The 
Agreement further establishes a Committee and a Technical 
Committee on Rules of Origin, charged with the task of 
formulating a definitive set of rules. These Committees have 
not yet finished their work.
          Article 9 of the Agreement sets forth certain principles to 
        guide the work of the Committees. The most important principle 
        is that
    rules of origin should provide for the country to be 
determined as the origin of a particular good to be either the 
country where the good has been wholly obtained or, where more 
than one country is concerned in the production of the good, 
the country where the last substantial transformation has been 
carried out.
    The question is how ``substantial transformation'' should 
be defined. Article 2 sets forth three possible criteria. The 
first is a change in tariff classification. The second is the 
addition of value added. The third is the specification of a 
manufacturing or a processing operation.
    AIAM urges that the first criterion--a change in tariff 
classification--be adopted. This criterion operates in the 
following way. Assume the following facts. Steel plate is made 
in Country A and is imported into Country B. In Country B, the 
steel plate is manufactured into parts of the body for 
passenger vehicles. The body parts are then imported into 
Country C. If the tariff classification of the body parts is 
sufficiently different from the tariff classification of the 
steel plate, the body parts are deemed to be the product of 
Country B. Country B is therefore the country of origin.
    Although prepared for use in administering a preferential 
regime, the North American Free Trade Agreement (NAFTA) 
includes a comprehensive set of rules that determine whether or 
not a change in tariff classification is sufficient to meet the 
test of substantial transformation. The NAFTA rules therefore 
provide a good start in establishing a set of rules for general 
application.
    AIAM believes that such rules would provide both 
objectivity and predictability in determining the country of 
origin. The second criterion--based on a stipulated addition of 
value added in Country B--is less workable than the first 
criterion. The choice of the requisite amount of value added is 
arbitrary, and its calculation can raise accounting problems. 
The third criterion is even less workable. It involves the 
preparation of countless specifications to cover manufacturing 
and processing operations used by industries throughout the 
world.

                          8. Customs Valuation

    Article 1 of the Agreement on Implementation of Article VII of the 
General Agreement on Tariffs and Trade 1994 (Agreement) deals with 
customs valuation. It provides that transaction value shall be the 
preferred basis for determining the dutiable value of goods. The 
transaction value is defined as the price actually paid or payable for 
the goods when sold for export to the country of importation.
    Article 1 also deals with the question whether the price paid by a 
buyer to a related seller may be accepted as the transaction value. It 
provides that the price will qualify if an examination of the 
circumstances surrounding the sale establishes that the relationship 
did not influence the price.
    The U.S. valuation statute contains similar provisions (19 U.S.C. 
Sec. 1401a). But neither the Agreement nor U.S. law sets out the 
criteria by which to determine whether the relationship did or did not 
influence the price. This has created considerable uncertainty.
    A large percentage of international trade is conducted between 
related parties. In the automotive sector, in particular, most imports 
into the United States are made by companies that are related to the 
foreign manufacturers. There is therefore a conspicuous need to develop 
the appropriate criteria and thereby reduce the uncertainty surrounding 
the acceptability of the price between related parties.
    AIAM therefore proposes that both the Agreement and the U.S. law be 
amended to provide that the price between related parties shall be 
acceptable as transaction value if the following circumstances exist 
and no other contradictory circumstances exist:
          1. The parties engage in arm's-length negotiations concerning 
        the price and other elements of the transaction.
          2. The foreign manufacturer's price is adequate to ensure 
        recovery of all costs plus a reasonable profit.
          3. Each party is a principal in its own right, operating as a 
        separate profit center and having its own separate management.
          4. The related importer buys from the foreign manufacturer, 
        takes title to the goods, and is free to resell at its own 
        price.
          5. The related importer takes all the proceeds of its sales 
        and does not remit any part of its profit to the foreign 
        manufacturer.

                       9. Environmental Standards

    Article XX of GATT 1994 provides for ``General Exceptions'' 
to the general GATT rules, stating that GATT 1994 does not 
prevent a Member from adopting measures, among other things, 
related to conservation of exhaustible natural resources or 
necessary to protect human, animal, or plant life or health, 
``subject to the requirement that such measures are not applied 
in a manner which would constitute a means of arbitrary or 
unjustifiable discrimination between countries where the same 
conditions prevail, or a disguised restriction on international 
trade.'' This provision has given rise to disputes as to what 
are and are not ``GATT-'' or ``WTO-legal'' environmental 
measures. The general statement of principle in Article XX 
appears inadequate to the task of resolving these disputes. 
This has caused some experts to question whether the WTO is the 
appropriate forum to resolve trade-related environmental 
disputes. AIAM submits that environmental measures that have 
trade implications are appropriately analyzed under the 
principles of the WTO. The answer is not to defer such trade-
related environmental disputes to other agreements or other 
fora, but to develop more detailed and clearer rules in the WTO 
as to when trade-related environmental measures are consistent 
with the WTO. AIAM suggests that the next ministerial undertake 
to define such rules in the context of a specific agreement 
interpreting Article XX of GATT 1994.

                               Conclusion

    AIAM appreciates this opportunity to offer suggestions as 
the United States prepares for the WTO ministerial meeting in 
Seattle and for the next round of multilateral trade 
negotiations. We would be pleased to provide further 
information to the Subcommittee at any time. 
[GRAPHIC] [TIFF OMITTED] T5092.007


      

                                


Statement of the Business Roundtable

                           Executive Summary

    The Business Roundtable believes strongly that it is in the 
national interest for the United States to lead in launching, 
and to participate aggressively in, new WTO negotiations. We 
present this paper to make the case for pursuing such 
negotiations and to recommend specific objectives for the U.S. 
government.
    The United States has been the leader in working for open 
markets because we know that, with our market the most open in 
the world, and with our companies, workers and farmers the 
world's most competitive, we have the most to gain from 
removing foreign barriers to our goods and services through 
trade agreements, and the most to lose if such barriers 
persist. For example, inadequate intellectual property 
protection, investment distortions, customs red tape, and other 
regulatory barriers have emerged as major problems for U.S. 
exporters and their workers. Our agricultural exports continue 
to face a raft of tariff and nontariff barriers.
    Some interest groups have argued that given the 
deterioration in the U.S. trade balance, this is no time to 
begin new liberalization initiatives. But this is the wrong way 
to look at the question. Commencing new trade negotiations has 
the potential to stimulate economic growth in those countries 
suffering weak economies. That will boost the demand for 
American exports.
    Trade is good for our economy, good for business, good for 
workers, good for farmers and good for consumers. U.S. exports 
continue to rise at an impressive rate--in 1996-1998, real 
exports were up 30 percent from the 1993-1995 period. These 
exports are the engine driving economic growth and job creation 
in the United States. American workers also benefit from 
greater trade. Approximately 12 million U.S. jobs are supported 
by exports.
    With the opportunities presented by the global economy come 
fears. It is, therefore, important to look closely at some of 
the charges being leveled about international trade and lay 
these fears to rest. To start with, there is no simple direct 
linkage between imports and lost jobs. It should also be 
recognized that the trade deficit emanates from many factors; 
any simple linkage to trade policies is misleading.

Moving Ahead with Trade Negotiations

    To guide U.S. policymakers, The Business Roundtable has 
developed four fundamental principles.
      The United States need trade and investment 
policies to ensure that trade achieves its intended purpose--to 
raise American and global living standards.
      U.S. leadership is critical to continued trade 
liberalization.
      The rules-based trading system is the foundation 
of the global economy and enforcement of the rules is the basis 
for public trust and support for U.S. participation.
      Business is a key driver in the global economy 
and must be a force for developing and implementing better 
trade policy.
    Improving the world trading system is vital for the United 
States and the global economy. It is important to launch new 
world trade negotiations in 1999 and not to let differences in 
economic performance among countries, or election cycles, delay 
their start. Americans can be confident that new trade 
negotiations will make the United States more prosperous, 
because the Uruguay Round has delivered, and continues to 
deliver, a boost to economic growth. The WTO Ministerial to 
begin in Seattle on November 30 provides an opportunity for the 
U.S. government to promote the launching of new WTO 
negotiations. To assist trade negotiators in crafting an agenda 
for new WTO negotiations, we offer several recommendations for 
how U.S. interests can be best advanced.
    In considering what a new WTO negotiation should 
accomplish, it is helpful to divide the issues into two 
categories:
      the built-in agenda that carries forward ongoing 
negotiations, and
      review and strengthening of various WTO 
agreements.
    By distinguishing these two categories, it may become 
clearer to policymakers and the public that much of what needs 
to be done within the WTO at this time is not the development 
of new rule-based agreements, but rather the continuation of 
the unfinished business of the Uruguay Round. The improvement 
of current WTO agreements is especially important to preparing 
the world trading system for the 21st century.

The built-in agenda includes services, agriculture, and 
tariffs. The Business Roundtable makes the following 
recommendations:

    1. Services. Agreements to open services markets and to 
grant national treatment to providers should be pursued on the 
most comprehensive basis possible. The WTO needs to begin by 
ensuring that governments ratify both the Financial Services 
and Basic Telecommunications agreements and fulfill their 
commitments. Negotiations should also be launched to expand 
liberalization commitments under these two agreements.
    2. Agriculture. This sector is important for American 
exporters and for securing developing country participation. 
Agricultural tariffs and tariff-rate quotas should be 
negotiated down, perhaps using a formula approach. Domestic 
farm programs should be reformed to use fewer trade-distorting 
instruments and to limit domestic subsidies. Market access 
should be improved for biotechnology goods.
    3. Tariffs. Negotiations should consider new steps to 
address tariffs. This could involve tariff harmonization 
agreements and/or zero-for-zero proposals. When such agreements 
already exist, all governments should be urged to sign on. In 
addition, WTO Members should agree to a permanent ban on 
customs duties on electronic transmissions.

Review and strengthening of WTO Agreements should be the other 
major focus of new negotiations. Our principal recommendations 
include:

    4. Intellectual Property. The built-in reviews of TRIPs may 
make it premature to present a comprehensive negotiating agenda 
for new WTO negotiations. If new intellectual property 
negotiations are launched, they should address the significant 
gaps remaining in the protection and enforcement of 
intellectual property. These negotiations should also be 
structured to prevent any weakening of the protection included 
in TRIPs. WTO members also need to assure that developing 
countries honor their TRIPs obligations following the 
termination of the transition periods establish by TRIPs.
    5. Subsidies. The WTO Agreement on Subsidies was an 
important achievement of the Uruguay Round, and trade 
negotiators should resist proposals to weaken it. New actions 
should include, for example, phasing out the toleration of 
developing country export subsidies and considering a work 
program on the way that WTO rules treat different tax systems.
    6. Customs-Related Issues. Customs regulations can have a 
significant impact on business costs and trade flows. Ongoing 
efforts to harmonize rules of origin should be given a high-
level push. For all issues of trade facilitation, the WTO 
should have procedures whereby the private sector can submit 
recommendations.
    7. Sanitary Measures. The WTO has gotten off to a 
constructive start in implementing the new sanitary 
disciplines. But the WTO will need to be vigilant in enforcing 
dispute decisions. In addition, more attention should be given 
to the Uruguay Round provision calling for governments to base 
their sanitary measures on international standards.
    8. Technical Barriers to Trade. Conformity assessment 
procedures often remain onerous. The WTO Committee on Technical 
Barriers to Trade should, therefore, consider how this process 
can be expedited, perhaps with a supplier's declaration of 
conformity. The adequacy of rules to address labeling and 
product seals also needs clarification.
    9. Government Procurement. The Agreement on Government 
Procurement is not part of the WTO single undertaking. The 
upcoming negotiation should review this status to see if 
Procurement can be fully brought into the WTO. If Procurement 
retains its à la carte character, then governments 
should consider negotiating a Procurement Transparency 
Agreement.
    10. Trade-Related Investment Measures. The WTO Agreement on 
Trade-Related Investment Measures is the thinnest WTO 
Agreements and attention should be given to strengthening its 
provisions. One of the critical areas for discipline is the 
imposition of mandatory technology transfer requirements on 
foreign investors.
    11. Antidumping. The WTO Anti-Dumping Agreement is designed 
to provide protection against unfair practices by exporters. 
The Uruguay Round negotiations struck a proper balance and, 
while there may be ways to improve the Agreement, it would be a 
mistake to reopen the Agreement when there are so many other 
trade issues of more pressing importance.
    12. Textiles and Clothing. The WTO should evaluate the 
extent to which countries are adhering to their market access 
obligations under the Agreement on Textiles and Clothing. In 
addition, the United States should continue to seek future 
liberalization in this area.
    13. E-Commerce. The importance of this sector to economic 
efficiency and growth, requires the WTO to ensure that 
countries do not adopt trade-related barriers that will inhibit 
e-commerce's global expansion. The top priority for the 
Ministerial should be to make permanent the standstill 
regarding tariffs on electronic transmissions.
    14. Transparency of Government Policies. The WTO should 
consider the negotiation of a general transparency agreement. 
Such an agreement should provide for clear publication of 
government rules and notice before such rules are changed. It 
should also affirm the value of private sector participation in 
the rules-setting process.
    15. Dispute Settlement. Experience with the WTO dispute 
process has revealed several areas where improvements are 
needed. First, trade negotiators should consider whether the 
timetable for the panel process can be substantially 
streamlined, perhaps by cutting down the time by fifty percent. 
Second, the WTO needs to address ``gaming'' by governments that 
drags out compliance with adverse panel reports. Third, 
hearings by WTO panels should, in general, be open to the 
public.
    16. Nullification and Impairment. The WTO Dispute 
Settlement Understanding renders unusable the non-violation 
nullification and impairment provisions in the GATT because 
there is now no obligation to withdraw a measure found to 
nullify the benefits under a WTO agreement. This problem needs 
to be addressed by the WTO.
    17. WTO Institutional Improvements. Although the WTO has 
made great strides in institution building over the past few 
years, more efforts are needed. The 1999 Ministerial should be 
seized as an opportunity to catalyze accession negotiations so 
that countries that remain outside of the WTO can be brought in 
as members on appropriate terms. The WTO also needs to do more 
to assist the least developed countries in improving their 
trade policies. Furthermore, the WTO should continue to 
increase its own transparency.
    18. Improving WTO Cooperation. The WTO needs to strengthen 
its cooperation with the World Bank and the International 
Monetary Fund, and with other multilateral organizations where 
such coordination can improve international economic 
policymaking.
    19. WTO Consultations with Stakeholders. The WTO is making 
progress on dialogues with stakeholders in trade, but further 
steps are needed. Once a year, the WTO might convene a meeting 
of various groups such as consumers, business, environment, and 
labor. This would not be a negotiation, but an opportunity for 
exchange of information.
    20. Trade and Environment. The WTO is not the right forum 
to negotiate international environmental policy and attempting 
to do so would distract trade ministers from their primary 
objective. Nevertheless, on a few issues, the WTO can take 
action. For example, the status of multilateral environmental 
agreements under trade rules needs to be clarified so that the 
WTO is not perceived in some quarters as an impediment to 
environmental protection.
    21. Labor Issues. The WTO should not be oblivious to the 
problem of forced labor and exploitative child labor. One 
constructive step that can be taken is to have the WTO 
Secretariat analyze whether the GATT Article XX(e) exception 
for goods made by prison labor can be used to justify a ban on 
imports produced using forced labor. Consideration should also 
be given to expanding GATT Article XX to deal with products 
made using child labor.

A number of new rule-based WTO initiatives have been proposed 
such as investment and competition policy.

    These issues are important to the international economic 
system, and careful consideration should be given to determine 
whether these issues are ripe for WTO negotiations. Adding new 
agreements does not necessarily strengthen the WTO. If 
governments are not ready for the WTO to absorb such 
responsibilities, or if the potential new agreements are not 
well thought out, or if a constructive foundation has not be 
established for the negotiations, then the negotiations may 
flounder or result in counterproductive agreements.
    The globalization of business activities raises important 
questions about the extent to which foreign anticompetitive 
practices may undermine market access opportunities. Yet at 
this time, there are huge uncertainties as to the proper goals 
for a competition policy negotiation and whether the WTO is the 
optimal forum. Under these circumstances, it is premature to 
launch a WTO negotiation on competition policy. A more 
constructive approach would be to establish a new WTO work 
program that will assist governments in thinking through the 
competition policy issues and in exchanging information.
    Achieving disciplines on how governments regulate foreign 
investment is important to gaining the full benefits of the 
international economic system. Many key developing countries 
have indicated they are not, at this time, prepared to make 
commitments on investment in the WTO. In addition, the 
Multilateral Agreement on Investment negotiations in the OECD 
revealed substantial differences of opinion between the 
industrialized countries on a wide range of investment issues. 
These factors clearly reveal that an international consensus on 
the negotiation of a multilateral investment agreement is still 
evolving. The importance of international investment to the 
global economy requires that the WTO members to commit 
themselves to developing a consensus on how to move forward as 
soon as possible. In the event the WTO Ministerial does not 
launch comprehensive international investment negotiations, a 
constructive interim course would be (1) to strengthen the WTO 
Agreement on Trade-Related Investment Measures by expanding it 
to include additional trade distorting investment measures, and 
(2) to establish a WTO work program to help governments 
understand how to establish investment regimes that will 
effectively provide economic growth.

     Preparing for New WTO Trade Negotiations to Boost the Economy

    The Business Roundtable believes strongly that it is in the 
national interest for the United States to lead in launching, 
and to participate aggressively in, new WTO negotiations.
    This paper has five sections. Section I explains why the 
United States needs to negotiate new trade agreements in order 
to prosper in the global economy. Section II highlights why 
success in the global economy is critical for the American 
economy and companies, workers and farmers. Section III 
discusses why the critics of trade are off-the-mark. Section IV 
explains why there is an urgent need for new WTO negotiations. 
Finally, Section V outlines a suggested agenda for new WTO 
negotiations.

 I. To Prosper in the Global Economy, The United States Must Reach New 
                            Trade Agreements

    Over the last several decades, successive Congresses and 
Administrations have made significant and admirable progress in 
breaking down foreign trade barriers, benefitting our companies, 
workers, farmers and the country as a whole. However, the ever-changing 
global economy continually presents new opportunities and challenges. 
The United States must reach out for these opportunities and meet these 
challenges. In order to do so, the United States must continue to 
pursue trade liberalization, especially through new international 
agreements. If we are not in the vanguard, we risk falling behind other 
countries that are pursuing their own agendas.

International trade agreements are needed to open foreign markets for 
American companies, workers and farmers.

    The United States has been the leader in working for open markets 
because we know that, with our market the most open in the world, and 
with our companies, workers and farmers the world's most competitive, 
we have the most to gain from removing foreign barriers to our goods 
and services through trade agreements, and the most to lose if such 
barriers persist.
    However, despite recent trade agreements and improvements in world 
trade rules, foreign barriers remain and new ones continue to be 
erected. Many countries still impose significant tariffs on our 
exports. In an increasingly competitive global economy, these ``taxes'' 
can make the difference between success and failure in foreign markets.
    Moreover, as tariffs and traditional non-tariff barriers to our 
goods and services exports have fallen, new problems have emerged. For 
example, inadequate intellectual property protection, investment 
restrictions, customs, and standards-related and other regulatory 
barriers have emerged as major problems for U.S. exporters and their 
workers. Our agricultural exports continue to face a raft of tariff and 
nontariff barriers. Recent agreements have gone part of the way toward 
resolving some of these problems, but more progress is needed 
multilaterally, regionally, bilaterally and sectorally.
    Some interest groups have argued that given the deterioration in 
the U.S. trade balance, this is no time to begin new liberalization 
initiatives. But this is the wrong way to look at the question. 
Commencing new trade negotiations has the potential to stimulate 
economic growth in those countries suffering weak economies. That will 
boost the demand for American exports.
    To guide U.S. policymakers, The Business Roundtable has developed 
four short principles which we note below. Broadening the consensus on 
these principles beyond the business community is one of our goals in 
the coming year.

                 Principles to Guide U.S. Trade Policy

In planning for new trade talks, U.S. policymakers should be guided by 
the following four principles:

    1. Given the reality of the global economy, the United States needs 
trade and investment policies to navigate through the complexities of a 
global system and ensure that trade achieves its intended purpose--to 
raise American and global living standards. The U.S. Government needs 
to continue to be a powerful advocate for U.S. exports, both in terms 
of political support and programs to support U.S. exports. At the 
international level, there is a need for effective global financial 
institutions to promote international economic stability. Within the 
United States, there is a need for periodic review of U.S. laws and 
regulations--including sanctions and trade statutes to ensure that they 
do not unnecessarily impede the ability of U.S. agriculture, industry, 
and their workers to compete in world markets.
    2. U.S. leadership is critical. For the last 50 years, the United 
States has led the effort to liberalize trade, and the United States 
and our trading partners have benefited both economically and 
strategically. Continued efforts to liberalize trade will require U.S. 
leadership.
    3. The rules-based trading system is the foundation of the global 
economy and enforcement of the rules is the basis for public trust and 
support for U.S. involvement in the global economy. The strength of the 
rules-based WTO system also lies in its inclusiveness and transparency. 
Compliance with, and enforcement of, the rules governing trade is key 
to sustaining support for further trade liberalization. This applies to 
the WTO as well as bilateral rules under agreements negotiated between 
the United States and other countries. Furthermore, given the 
importance of the rules-based WTO system, aggressive efforts should be 
made to incorporate into the system trading partners that have 
demonstrated a commitment to WTO principles and trade liberalization.
    4. Business is a key driver in the global economy and must be a 
force for developing and implementing a trade policy that is no longer 
viewed as a zero sum game. Nations pursue trade to benefit their 
citizens. Business must work with governments to create a global 
trading system that provides benefits to more individuals in society 
and accommodates the interests of a broader range of stakeholders. 
Business must also ensure that the stakeholders clearly understand the 
importance of trade to their future. The best way to assure that trade 
is a win-win for a broader group of Americans is by training and 
upgrading the skills of the workforce, enforcing international trade 
rules and, when necessary, ensuring that companies and workers have 
access to appropriate import relief procedures and remedies.

II. Success in the Global Economy is Critical for the American Economy 
                   and Companies, Workers and Farmers

    The United States must lead in promoting trade 
liberalization around the world because the U.S. economy has 
become internationalized. The United States cannot hide from 
the reality of globalization, and cannot afford to turn its 
back on the opportunities it presents. The United States is the 
strongest country in the world economically, politically and 
militarily. However, the United States cannot maintain that 
strength if it does not continue to engage fully the world 
outside its borders.
    International trade is increasingly important for the world 
as a whole. Since 1990, world exports have grown an average of 
6.5 percent a year. This is a little more than three times as 
fast as growth in world GDP and world merchandise production.
    The world at large is more important to the U.S. economy 
than ever before. We remain the world's largest exporter--our 
total exports were $931 billion in 1998 ($671 billion of goods 
and $260 billion of services). Total trade--imports plus 
exports--accounted for over $2.0 trillion in business activity, 
equal in magnitude to nearly 24 percent of the size of the U.S. 
economy as a whole. Over 95 percent of the world's consumers--
5.6 billion people--live outside the United States, and the 
world's fastest-growing and most promising new markets are 
spread across the globe. There is no way the United States can 
have a bright economic future if we do not actively pursue 
these foreign customers and markets.
Trade is good for our economy, good for business, good for 
workers, good for farmers and good for consumers.

    American companies, workers and farmers have worked hard to 
compete and win in the global economy, and the United States 
has seen the positive results. U.S. exports continue to rise at 
an impressive pace--in 1996-1998, real exports were up 30 
percent from the 1993-1995 period. These exports are the engine 
driving economic growth and job creation in the United States. 
Export growth has accounted for about 27 percent of the 
nation's overall economic growth over the past ten years, 
during which time export growth outpaced the growth of the 
economy as a whole. In 1998, however, exports slowed due to the 
ongoing Asian economic crisis. (The impact of the Asian 
economic crisis on U.S. businesses, workers and farmers 
highlights the reality that U.S. economic growth and stability 
depends in large measure on international markets.)
    Trade is not just good for big companies. First of all, 
small and medium sized companies are active exporters. In 1992 
(the latest available data) companies employing fewer than 500 
employees exported $103 billion in goods, about 29% of U.S. 
goods exports. Many small and medium-sized companies also 
supply large companies with products and services that are used 
in the production of the large companies' exports. Big 
companies recognize that smaller companies are the backbone of 
their business--big companies need smaller companies to 
survive, and vice versa. Trade benefits all in the supply 
chain.
    Trade is good for American workers. Approximately 12 
million U.S. jobs are supported by exports. Export-related jobs 
account for one out of eight jobs created in the United States, 
according to the most recent study. Exports account directly or 
indirectly for about one in ten civilian jobs in the nation and 
about one in five manufacturing jobs.
    Export-related jobs are also higher-wage jobs. They 
typically pay 13 to 16 percent more than the average 
compensation. Moreover, a lot of our export growth is in high-
wage, high-tech sectors. These are clearly the types of jobs we 
want to promote for this and future generations.
    Exports are particularly important for the nation's 
farmers--the U.S. agricultural sector is more than five times 
as reliant on foreign trade as the U.S. economy as a whole. 
U.S. agriculture exports hit a record $60 billion in 1996, but 
have fallen since then due to economic crises and recessions in 
Asia and Latin America. Agricultural exports support about 
900,000 full-time jobs. One out of every three farm acres in 
America, and 44 percent of U.S. wheat output, 45 percent of 
U.S. rice output, and 37 percent of U.S. soybean output, are 
utilized for exports. Last year, U.S. agriculture had a trade 
surplus of about $13 billion. This is smaller than in previous 
years because of weak international markets.
    Imports are also important to consumers by maintaining a 
vibrant, competitive economy and high standards of living. 
Imports can help keep inflation in check which translates into 
low interest rates, high investment, and hence high job 
creation. Imports also give consumers a greater choice of goods 
and services, including those not available domestically. They 
create jobs in areas such as retailing, distribution, ports and 
transportation. Imports allow U.S. companies and workers to use 
the best technology from around the world, increasing their 
productivity and competitiveness and therefore leading to 
higher wages and creation of more U.S. jobs. Moreover, imports 
encourage competition and innovation.

International investment is also a crucial part of competing 
and winning in the global economy.

    In order to seize the opportunities presented by the global 
economy, companies must be able to invest in other countries 
when this makes sense for their businesses. Such investment 
creates new markets and customers for U.S. companies and their 
workers and boosts the U.S. economy.
    One of the primary goals of foreign investment is the 
desire to serve businesses and consumers in the country in 
which the investment occurs. In 1996 (the latest available 
data), about 66 percent of total sales by U.S. companies' 
majority-owned foreign affiliates were sold in the affiliate's 
country of location; another 24 percent were sold in other 
foreign countries. So, a total of 90 percent of U.S. companies' 
foreign-made goods and services are sold outside the United 
States. This makes sense because customers demand prompt and 
reliable service from their suppliers; it is frequently 
difficult to meet those needs from thousands of miles away.
    Investment abroad brings back significant benefits here at 
home. Because U.S. companies invest overseas to stay 
competitive and win new customers, their foreign investments 
help boost U.S. exports, creating American jobs. Exports follow 
investment--in 1996 (the latest year for which data is 
available), exports of goods by U.S. companies to their foreign 
affiliates totaled $162 billion, 26 percent of all U.S. goods 
exports. Moreover, U.S. companies' trade with their foreign 
affiliates generated a $26 billion trade surplus. The result is 
jobs here at home. According to the latest available figures 
(1996), U.S. companies that invest overseas employed 19 million 
U.S. workers--15 percent of all private sector jobs.
    U.S. companies' overseas operations also generate income 
that can come back to the United States to be reinvested in 
U.S. operations to the benefit of the local economy and U.S. 
workers. In 1996, this income was almost $135 billion. 
Moreover, overseas investments are often needed to keep U.S. 
companies competitive. Foreign investment allows companies to 
enjoy greater economies of scale and scope as well as access to 
important foreign technologies.
    It is also important to understand that foreign investment 
by U.S. companies is concentrated in developed countries. If 
foreign investment were motivated by a search for low cost 
inputs, developing countries would be the predominant location 
for foreign investment. But 68 percent of U.S. companies' 
foreign investment is in developed countries, some of which 
have more stringent labor and environmental laws and higher 
labor costs than the United States.

Because the United States is the world's most competitive 
nation, it has the most to gain from the global economy and 
from trade liberalization.

    In the 1980s and early 1990s, conventional wisdom held that 
the United States had been overtaken by Japan and Germany and 
might never regain its place as an economic leader. Today, the 
United States is back on top. Our economy has been growing 
faster than those in Europe and Japan. We are the world's 
biggest exporter of both goods and services. We have the 
highest budget surplus (as a percentage of gross domestic 
product) of any G-7 economy except Canada. We have created more 
net jobs in the past few years than all other G-7 nations 
combined, and our unemployment rate is below that of every 
other major industrial economy except Japan.
    The United States has the world's largest economy, the most 
productive workers, the best technology, and the most 
innovative people. That is why it is considered to be the most 
competitive large country in the world, as recently confirmed 
by the Global Competitiveness Report from the World Economic 
Forum. The United States is highly competitive in a range of 
important industries, such as: semiconductors, computers, 
computer software, aerospace equipment, applied materials, 
biotechnology, construction equipment, telecommunications and 
other information-based equipment and services, financial 
services, information services and entertainment. These are the 
technologies of today--and of the 21st century.
    The United States has done so well because its companies 
and workers have aggressively sought out the opportunities 
presented by the global economy. The U.S. government needs to 
continue negotiating new international trade agreements and 
enforce existing agreements to ensure that U.S. companies and 
workers, and the products and services they produce, are given 
the opportunity to compete fairly and to prosper in the global 
economy. The United States has nothing to fear from a rules-
based trading system.
    The United States also needs to ensure the continued 
competitiveness of the nation, its companies, and its workers. 
In a world of increasing technological innovation, U.S. 
companies simply cannot succeed without educated, trained and 
skilled workers, scientists and technicians. U.S. companies are 
doing their part to help ensure that our workers remain the 
best in the world.
    Each year, companies in the United States spend an 
estimated $30 billion on formal training and $180 billion on 
informal on-the-job training of their employees. Each year, 
U.S. companies make huge investments in plants, equipment and 
research & development (over $930 billion on capital 
investments and over $155 billion on research & development) to 
ensure that their workers can benefit from the best technology 
and equipment.
    U.S. companies are also working to improve the quality and 
performance of the nation's K-12 education system, including a 
state-by-state initiative to achieve comprehensive education 
reform across the nation. Forty-three states now have business-
led education reform coalitions that encourage governors, state 
legislators and state departments of education to support 
fundamental changes in their schools. With improved education 
and training and wise governmental policies, the United States 
will remain highly competitive.

                 III. Critics of Trade are Off the Mark

    With the opportunities presented by the global economy come 
fears. It is, therefore, important to look closely at some of 
the charges being leveled about international trade and lay 
these fears to rest.

There is no simple direct linkage between imports and lost 
jobs.

    Some have argued that trade costs U.S. jobs because of 
imports. It is obvious that U.S. exports generate U.S. jobs 
because someone has to make those goods or produce those 
services. But if we look at the reality of imports, it is not 
obvious that they translate into lost U.S. jobs and, in fact, 
often they do not. Some imports, such as the $51 billion of 
petroleum/fuel and $3.5 billion of coffee we are importing, are 
products that are simply not available or are in short supply 
in the United States. Other imports, by providing a competitive 
input into a production process for example, complement U.S. 
production and support rather than displace U.S. jobs by 
enabling U.S. companies to be competitive at home and abroad. 
Such imports include U.S. components, and production of these 
components supports U.S. jobs. Imports also create jobs in such 
areas as ports, distribution, wholesaling and retailing.
    It is true that some jobs are displaced by imports. This is 
a particular problem in cases involving unfair trade. In these 
cases, it is especially important for the United States to 
strongly enforce its unfair trade laws. However, when unfairly 
traded goods are not at issue, trade is only one factor that 
impacts the job market; technological change, for example, is 
far more significant. In fact, recent studies, including from 
the Organization for Economic Co-operation and Development and 
the International Monetary Fund, find that trade is not a major 
factor behind any job or wage loss that may exist in 
industrialized countries. These studies found other factors, 
including technological change, to be much more important. 
Moreover, jobs displaced by imports are more than offset by 
other jobs created by imports and exports and the other 
benefits of trade to the U.S. economy.
    The United States cannot and should not ignore the real 
effects of job loss for individuals, regardless of the cause. 
However, trying to freeze the U.S. economy is not in the 
interest of this or future generations of companies and their 
workers. The national and world economies are seeing a shift of 
jobs from low-productivity, low-skill jobs to high-
productivity, high-skill jobs. These job shifts are to be 
expected and welcomed as we approach the 21st century; they 
will lead to a better future for today's and tomorrow's 
workers. The U.S. work force is one of the most diversified and 
capable in the world, and as a very large and flexible economy, 
the United States has the ability to absorb workers into 
productive and well-paying jobs. As noted above, the United 
States needs to ensure that all Americans get the education and 
learn the skills they need in order to be as competitive as 
individual citizens as we are now as a nation. In addition to 
government and private sector education and training 
initiatives, the United States must also use trade negotiations 
and the resulting agreements to break down foreign barriers so 
that we can win new customers abroad and boost American 
incomes.

Trade deficits result from many factors and simple linkage to 
trade policies is misleading.

    Some have pointed to the U.S. trade deficit as evidence 
that trade is bad for the United States. Actually, the trade 
balance is determined by macroeconomic factors, such as saving 
and consumption rates, currency values and growth rates. 
Moreover, trade deficits result in part from our growing 
economy, employment that is on the upswing, and our consumers 
and businesses having more money to spend on both domestic 
goods and imports. At the same time, many of our trading 
partners are in recession or growing only slowly.
    The trade deficit has also fallen significantly in the last 
decade when compared to the size of our economy. Moreover, a 
large portion of our trade deficit consists of petroleum 
imports, which is not a job-displacing commodity--our deficit 
in petroleum products was $43 billion in 1998. Another huge 
chunk, about $34 billion, was the auto and auto parts deficit 
with Japan, which is due to special, unique bilateral problems. 
It is also important to note that, compared to the size of its 
economy, the United States imports far less than every other 
developed country except Japan.
    When discussing the trade deficit, the United States should 
be addressing the macroeconomic factors it can try to control, 
such as the low saving rate in the United States and government 
spending, while continuing to focus on tearing down foreign 
barriers to our exports. Resorting to isolationism and 
protectionism to ``solve'' the trade deficit problem will not 
help.
International investment, as with trade, benefits the economy 
and workers.

    There are also those who argue that international 
investment is bad. The facts noted earlier prove that this is 
not true.
    It is important to recognize that the decision to invest is 
a very complex one, involving many factors, not just low 
production costs. The United States is endowed with numerous 
advantages that make it a very attractive place for U.S. 
companies and foreign companies to invest, including a highly 
productive work force, state of the art communications networks 
and computer systems, technologically advanced production 
facilities, a well-developed transportation infrastructure, and 
stable and sophisticated legal and financial systems. These 
advantages provide the reason why the U.S. economy attracts so 
much new investment. If low wages were the main determinant of 
investment decisions, our principal foreign direct investments 
would be in less developed countries rather than in highly 
industrialized, developed countries where, in fact, our 
principal investments are made.
    Contrary to irresponsible statements by some, U.S. 
companies are not pulling up their stakes in the United States. 
U.S. companies' direct investments overseas were $115 billion 
in 1997, only 13 percent of non-housing domestic investment in 
the United States. Fifty percent of that foreign investment did 
not even come from the United States, but from the earnings of 
the companies' foreign operations themselves. As for Mexico, 
U.S. companies' investment there is small and, in many 
instances, are in niche markets like telecommunications. U.S. 
foreign direct investment in Mexico was only 0.5 percent of 
U.S. total investment in 1997, or about $5.9 billion.

Trade agreements do not threaten health and safety.

    Another favorite of trade skeptics is to raise the specter 
of unsafe food. This is nothing but scare tactics--trade 
agreements do not hamper our ability to protect ourselves from 
any of these problems. Trade agreements do not result in 
unregulated trade--the United States is always able to enforce 
our laws and close our border to any product that could 
legitimately result in harm to our citizens. As recent problems 
with domestically-produced food demonstrate, ensuring the 
safety of the U.S. food supply is not a trade issue.

                  IV. The Urgency of WTO Negotiations

    Initiating new multilateral trade negotiations in the WTO 
is vital for the United States and the global economy. Since 
the Uruguay Round negotiations were completed in 1993, the 
benefits of open trade for consumers and workers have been 
amply demonstrated. The new World Trade Organization (WTO) has 
provided a framework for carrying on negotiations in selected 
sectors, for settling disputes, and for promoting communication 
between governments and stakeholders in the private sector. 
This record demonstrates that the trading system works. Now it 
is time to begin new negotiations to remove remaining barriers 
to trade and investment. Efforts are also needed to improve the 
WTO's rules and its dispute resolution process.
    It is important to launch new world trade negotiations in 
1999 and not to let differences in economic performance among 
countries, or election cycles, delay their start. The world 
waited seven years between the GATT Tokyo Round and the Uruguay 
Round. But today economic change is much more rapid. Because 
markets respond so quickly in our global economy, trade 
negotiations begin to generate economic benefits very quickly. 
Thus, further delay in starting new negotiations will postpone 
the economic stimulus that successful trade negotiations can 
deliver. Even worse, a lack of momentum for new trade talks may 
lead some governments to renege on previous liberalization 
commitments.
    Americans can be confident that new trade negotiations will 
make the United States more prosperous, because the Uruguay 
Round has delivered, and continues to deliver, a boost to 
economic growth. Recent studies suggest that economic growth 
would have been much less robust without the stimulus of trade 
liberalization. There are many explanations for why the U.S. 
economy has been so strong in the past few years, but surely 
one of them is that reduced trade barriers around the world are 
expanding opportunities for American businesses, workers, and 
farmers.
    Although some interest groups vilify the WTO, the fact is 
that the WTO is just an organization of governments who 
cooperate to reduce trade barriers and eliminate improper trade 
discrimination. A strong, successful WTO is in the U.S. 
interest because this rules-based system can be used to 
confront governments that discriminate against Americans who 
export goods, services, and capital investments. The recent 
actions by the WTO to increase its own transparency and to 
release more documentation have contributed to a better 
understanding of the WTO by the public.
    The Preamble to the Agreement Establishing the WTO 
recognizes that trade relations should be conducted with a view 
to raising standards of living, ensuring full employment, and 
expanding the production of trade in goods and services while 
allowing for the optimal use of the world's resources in 
accordance with the objective of sustainable development. This 
is common ground among governments as well as among major 
stakeholders in world trade. Of course, there are differences 
between stakeholders as to the most effective way to achieve 
such community goals. But there is no reason to assert that the 
WTO, or economic globalization generally, hinders the 
achievement of human resource or environmental objectives.
    The WTO Ministerial to begin in Seattle on November 30 
provides an opportunity for the U.S. government to promote the 
launching of new WTO negotiations. This is the right moment to 
start new talks because the experience of the last few years 
shows several areas in which current WTO agreements can be 
built upon and improved. To assist trade negotiators in 
crafting an agenda for new WTO negotiations, we offer several 
recommendations for how U.S. interests can be best advanced.

              V. Suggested Agenda for New WTO Negotiations

    In considering what a new WTO negotiation should 
accomplish, it is analytically helpful to divide the issues 
into two categories:
      the built-in agenda that carries forward ongoing 
negotiations, and
      review and strengthening of various WTO 
agreements.
    By distinguishing these two categories, it may become 
clearer to policymakers and the public that much of what needs 
to be done within the WTO at this time is not the development 
of new rule-based agreements, but rather the continuation of 
the unfinished business of the Uruguay Round. This requires the 
completion of current negotiations and the adjustment of 
Uruguay Round agreements based on the experience of the first 
five years of operation.
    The improvement of current WTO agreements is especially 
important to preparing the world trading system for the 21st 
century. Although the Uruguay Round included a number of trade 
agreement milestones, the full potential of these agreements 
has not yet been achieved. Rather than devoting resources to 
the negotiation of entirely new WTO agreements, it may will be 
better for governments to focus on improving existing 
disciplines.
    Governments should aim to keep the overall negotiating 
process flexible regarding the implementation of new decisions. 
In the past, the operating procedure in trade negotiations was 
that nothing is decided until everything is decided. Yet the 
more structured WTO decisionmaking mechanisms provide a way to 
implement agreements in individual areas as they are agreed. 
Requiring all agreements to be finalized at the same time would 
likely draw out the negotiating process, with no concrete 
results attainable for several years. Given the growing 
importance of trade to the United States and world economies, 
the United States should not have to wait over seven years (as 
in the Uruguay Round) before a package of agreements is 
finalized.
    An important precondition for successful trade negotiators 
is that all WTO members should agree to a standstill on trade-
restrictive measures in advance of the Ministerial and 
throughout the negotiations. Such a standstill would ensure 
that governments do not modify their laws in order to gain 
bargaining advantage. The standstill should not interfere with 
the continued use of trade remedy laws consistent with WTO 
rules.
    It is important that WTO agreements apply to the largest 
possible number of large countries. So the WTO should intensify 
its efforts to achieve the accession of China and other 
countries seeking accession on commercially acceptable terms. 
Strengthening the WTO will also underline for China and other 
non-WTO-countries the value of being part of the multilateral 
trading system.
    Below we discuss actions that the WTO might take with 
respect to the built-in agenda and the strengthening of 
existing WTO agreements. Following that, we discuss the topic 
of new issues for the trade round. One common theme in this 
paper is the need to improve enforcement of existing WTO 
obligations. Doing so would make the WTO a more effective 
institution and boost support for it in the United States.

                          The Built-in Agenda

1. Services

    Because world trade in services is increasing at a faster 
rate than trade in goods, the expansion of the Services 
Agreement should be a top priority in the next round. The 
problem in services is that, at present, the General Agreement 
on Trade in Services provides only minimal disciplines. The 
substantive commitments come in sectoral agreements on a 
plurilateral basis, but so far only a few sectors have been 
covered in detail.
    Agreements to open services markets and to grant national 
treatment to providers should be pursued on the most 
comprehensive basis possible. The WTO needs to begin by 
ensuring that governments ratify both the Financial Services 
(which covers insurance, securities and banking) and Basic 
Telecommunications agreements and fulfill their commitments. 
Negotiations should also be launched to expand liberalization 
commitments under these two agreements. Among the high priority 
sectors for obtaining new services agreements are: all levels 
of distribution, transportation, construction, tourism, 
information technology, health care, advertising, express 
delivery, and business professional services.
    Governments should also consider new modalities of 
negotiation that would accelerate market opening for services. 
For example, a negative list approach would commit a government 
to liberalize all service sectors unless a government takes a 
specific exemption for the sector as a whole or for a 
particular law or regulation. The WTO should also insist that 
applicants for WTO membership make commitments under the 
Financial Services and Basic Telecommunications agreements.
    Negotiations on services should entail discussion of 
regulatory barriers which are increasingly a source of trade 
disputes. Regulations should be substantively responsive, 
impartial, minimally intrusive, and transparent. A framework 
for developing principles to guide regulatory behavior should 
be pursued as well as promotion of mutual recognition and 
harmonization of standards.
    The WTO should also try to address the problem of 
regulations that manifest favoritism to incumbent suppliers. 
Private practices--for example, when providers of essential 
services charge unreasonable fees to foreign entrants--should 
also be discussed. In addition, negotiators should seek 
commitments against allocating ``trading rights'' on a 
discriminatory basis.

2. Agriculture

    The Uruguay Round made progress in reducing agricultural 
trade barriers and making import protection more transparent. 
But there is far more to do in addressing policies that impede 
trade. The WTO Agreement on Agriculture already commits 
governments to commence negotiations to seek further progress 
on this same agenda. Negotiations on agriculture are especially 
important because the prospects for developing countries of 
obtaining greater market access can encourage responsive 
commitments by these countries not only on agriculture, but 
also on other sectors of interest to industrial countries.
    Significant negotiating goals should be put on the 
negotiating table. Among these goals are:
      Agricultural tariffs and tariff-rate quotas 
should be negotiated down, perhaps using a formula approach. 
Whenever possible, zero-for-zero agreements should be pursued.
      Domestic farm programs should be reformed to use 
fewer trade-distorting instruments and to limit domestic 
subsidies. To complement these initiatives, the WTO should look 
for ways to provide incentives for market-oriented actions.
      Export subsidies should be targeted for 
elimination.
      When governments persist in relying upon state 
trading entities, the market share earmarked for such entities 
should be reduced.
      Market access should be improved for 
biotechnology goods, including through the mutual recognition 
of health-related tests.

3. Tariffs

    Although average tariff levels have fallen as a result of 
trade negotiations, tariffs remain significant barriers in some 
industrial sectors and for trade with developing countries. The 
upcoming trade negotiations should consider steps to address 
tariffs, such as the following:
      High tariffs should be put on a timetable for 
reduction.
      Approaches such as tariff harmonization 
agreements or zero-for-zero proposals should be aggressively 
pursued. When such agreements already exist, all governments 
should be urged to sign on.
      ``Nuisance'' tariffs--those under 5 percent--
should be eliminated.
      WTO Members should agree to a permanent ban on 
imposing customs duties on electronic transmissions.
      For any Harmonization Agreement, such as Chemical 
Tariffs, the number of government participants should be 
expanded as broadly as possible.
      The Information Technology Agreement should be 
expanded to cover additional products and participation should 
be mandatory for all WTO Members.
      The recent decision in the Asia-Pacific Economics 
Cooperation forum to move the Early Voluntary Sectoral 
Liberalization talks to the WTO presents an opportunity to the 
WTO to make progress on these sectors at the Ministerial 
quickly.
      Special consideration should be given to the 
elimination of tariff discrimination caused by countries 
lowering their tariffs on a non-most-favored-nation basis in 
anticipation of joining a customs union or negotiating a free 
trade area.

               Review and Strengthening of WTO Agreements

    The WTO is a new institution and many of the provisions 
written in the early 1990s now need to be updated to reflect 
actual experience with their operation. Using the upcoming 
negotiations to improve the effectiveness of existing 
agreements is the best way to strengthen the WTO for the 
challenges of the 21st century. Showing that the WTO works will 
also help draw the public support necessary to defend the world 
trading system.
    There are a number of provisions in WTO Agreements that 
call for review or reconsideration within a specified period. 
Many of these reviews are now ongoing. In presenting the issues 
below, we note that some of them might have handled through the 
new WTO decisionmaking procedures.

4. Intellectual Property

    Even after the improvements achieved in the Uruguay Round 
Agreement on Trade-Related Aspects of Intellectual Property 
(TRIPs), significant gaps remain in the protection and 
enforcement of intellectual property rights. This can impede 
innovation and unsettle trade relations. The built-in WTO 
reviews of TRIPs may make it premature to present a 
comprehensive negotiating agenda for new WTO negotiations. If 
new intellectual property negotiations are launched, they 
should address the significant gaps remaining in the protection 
and enforcement of intellectual property. These negotiations 
should also be structured to prevent any weakening of the 
protection included in TRIPs intellectual property protection. 
Thefollowing proposals are among the possible objectives for 
strengthening intellectual property protection.
      For patents, there should be an agreement to 
eliminate the TRIPs provision (Article 27.3) allowing 
governments to exclude from patentability plants and animals 
other than micro-organisms. Governments should also incorporate 
new provisions in TRIPs to restore time in patent terms lost 
due to lengthy delays in obtaining patents or in obtaining 
marketing approval from a government. In addition, governments 
should agree to prohibit international exhaustion.
      For trademarks, there should be an agreement to 
enhance protection through better regulation of domain name 
allocation on the Internet.
      For trade secrets, there should be an agreement 
to include a linkage between the marketing approval of generic 
copies and any underlying patents to ensure that existing 
products are not being infringed by the marketing of generic 
copies. In addition, a ``negligence'' standard should be 
substituted for the ``gross negligence'' standard currently 
required in TRIPs. The obligation on data exclusivity should be 
classified to ensure that it includes non-reliance by 
governments on the data for a fixed period of time, such as the 
ten years currently required by the European Union.
      For industrial and layout designs, there should 
be an agreement to increase the minimum term of protection, now 
ten years from date of registration or first commercial 
exploitation.
    The WTO should also consider how TRIPs can be adapted 
quickly to respond to new and emerging technologies and new 
methods of transmitting and distributing products embodying 
intellectual property.
    Governments also need to focus on ensuring the enforcement 
of TRIPs obligations. Some elements of such a strategy might 
include:
      Assuring that developing countries honor their 
TRIPs obligations following the termination of the transition 
periods established by TRIPs.
      Taking no action to renew the five-year 
moratorium (Article 64.2) on the use of ``nullification and 
impairment'' complaints with regard to TRIPS commitments.

5. Subsidies and Countervailing Measures

    The WTO Agreement on Subsidies and Countervailing Measures 
(SCM) was an important achievement of the Uruguay Round and 
should not be weakened. U.S. negotiators should also ensure 
that the SCM continues to be applied to civil aircraft, and 
should continue to adhere to the negotiating objectives for 
civil aircraft established by the Uruguay Round Agreements Act. 
In addition, negotiators should consider the following 
objectives:
      The toleration of developing country export 
subsidies should be phased out so that the same disciplines 
against export subsidies apply to all countries.
      The mandated review of the discipline on Non-
Actionable (green light) subsidies should be commenced soon so 
that the findings can inform WTO negotiations.
      A work program should be considered on whether 
current WTO rules are neutral with respect to whether a 
government relies on direct taxes (like the income tax) versus 
indirect taxes (like the value-added tax).

6. Customs-Related Issues

    Although often technical, national regulations regarding 
rules of origin, pre-shipment inspection, import licensing, and 
valuation can have a significant impact on business costs and 
trade flows. The new WTO negotiations should give attention to 
these issues, including the following:
      The WTO Agreement on Preshipment Inspection 
provides for a review by the Ministerial Council every three 
years, but contains no mechanism for ongoing evaluation. 
Negotiators should establish a working group to consider on a 
regular basis any needed changes to this Agreement.
      The Uruguay Round provides for a work program on 
the harmonization of rules of origin. These efforts have been 
slow going. The trade ministers should renew their efforts to 
achieve harmonization this year.
      Further effort is needed to assure that 
governments are implementing the WTO Agreement on Customs 
Valuation. The WTO should also consider ways to address the 
misuse of valuation methodologies without having to invoke 
dispute settlement procedures.
    For all issues of trade facilitation, the WTO should have 
procedures whereby the private sector can submit 
recommendations regarding ways in which customs regulations can 
be improved.

7. Sanitary and Phytosanitary Measures

    The WTO Agreement on Sanitary and Phytosanitary (SPS) does 
not prevent governments from enforcing legitimate food safety 
and public health regulations. What SPS is designed to do is to 
assure that governments do not block imports through 
unnecessary or unjustifiable regulations either intentionally 
or through inadvertence. Any attempt to water down these 
requirements should be opposed.
    The WTO has gotten off to a constructive start in 
implementing the SPS disciplines. Dispute panels and the 
Appellate Body are giving fair interpretations to the new 
requirements to assure that regulations have a scientific 
justification and are based on a risk assessment. We expect 
that the SPS Agreement will continue to be tested as 
governments, such as the United States, complain about import 
barriers based on a bogus health rationale.
    More attention should be given to the provision calling for 
governments to base their SPS measures on international 
standards except when those standards fail to provide a high 
enough level of health protection. Greater harmonization or 
mutual recognition of food safety standards will lead to a 
safer world food supply and will help achieve the dual goals of 
fewer trade restrictions and the avoidance of episodes in which 
protectionists blame tainted food on free trade. Developing 
countries will need more extensive technical assistance in 
improving their food safety standards.

8. Technical Barriers to Trade

    As tariff barriers fall, some governments and standard-
setting organizations will be tempted to use technical and 
certification standards as a substitute for tariffs in order to 
protect national industry. Recognizing this possibility, the 
Uruguay Round produced a new Agreement on Technical Barriers to 
Trade (TBT). This Agreement requires that technical regulations 
not be more trade-restrictive than necessary to fulfill a 
legitimate objective--such as prevention of deceptive 
practices, health, safety, and the environment. Under the 
Agreement, governments are encouraged to use international 
standards as a basis for their technical regulations. When a 
technical regulation seeks to achieve one of the listed 
objectives and is in accord with international standards, the 
TBT Agreement provides that such regulation will be presumed 
not to create an unnecessary obstacle to trade.
    These new disciplines have not yet been tested in WTO 
dispute settlement. Nevertheless, a number of concerns have 
arisen:
      The TBT Agreement accords deference to all 
international standards and provides no avenue for withdrawing 
deference for standards that are outdated or that were adopted 
through flawed procedures.
      For standards seeking to fulfill health, safety, 
or environmental objectives, TBT lacks a requirement that such 
standards be based on scientific principles.
      For those industries, such as biotechnology, that 
come under both the SPS and TBT Agreements, two different rules 
may apply.
      Conformity assessment and certification 
procedures often remain onerous (e.g., pharmaceuticals). The 
WTO Committee on Technical Barriers to Trade should consider 
how this process can be expedited, perhaps with a supplier's 
declaration of conformity or expanding existing regional mutual 
recognition agreements or common dossier procedures.
      The adequacy of TBT rules to address labeling and 
product seals remains uncertain. New rules may be needed to 
assure that ``independent'' labeling schemes do not become 
trade barriers.

9. Government Procurement

    The Agreement on Government Procurement is not part of the 
WTO single undertaking but rather is a ``plurilateral'' 
agreement comprising only 26 of 133 WTO member countries. The 
upcoming trade round should review this status to see if 
Procurement can be fully brought into the WTO. This is a huge 
sector totaling over $3 trillion a year worldwide.
    For those governments that do participate in the 
Procurement Agreement, efforts should be made to strengthen the 
Agreement by: (1) expanding coverage of subnational governments 
and government-controlled enterprises; (2) inclusion of 
additional service sectors; and (3) lowering the threshold for 
obligations to apply. The issue of developing country 
participation in the Procurement Agreement should also be 
discussed. These countries may have the most to gain from 
transparent and fair procurement processes that make best use 
of their limited resources.
    If Procurement trade commitments retain their à la 
carte character, then governments should consider negotiating a 
Procurement Transparency Agreement that would become a 
requirement of all WTO members. Such an agreement would help 
provide a fairer process for competitive bidding and help to 
curtail bribery and corruption.

10. Trade-Related Investment Measures

    The WTO Agreement on Trade-Related Investment Measures is 
the thinnest of the WTO Agreements. Attention should be given 
to strengthening its provisions. One of the critical areas for 
discipline is the imposition of trade-related investment 
measures, such as mandatory technology transfer requirements on 
foreign investors. Such requirements are trade distortions and 
can often render new investment impossible.

11. Antidumping

    The WTO Anti-Dumping Agreement is designed to provide 
protection against unfair practices by exporters. The Uruguay 
Round negotiations struck a careful balance and, while there 
may be ways to improve the Agreement, it would be a mistake to 
reopen the Agreement when there are so many other trade issues 
of more pressing importance. By keeping Anti-Dumping off the 
table, the WTO can avoid reconsideration of very controversial 
matters that would distract negotiators from a consensus 
building process.

12. E-Commerce

    E-Commerce does not necessarily require unique trade rules, 
but because of the importance of this new sector to economic 
efficiency and growth, the WTO should give specific attention 
to it. A top priority at the Ministerial should be to make 
permanent the standstill regarding tariffs on electronic 
transmissions. Another objective should be to ensure that MFN 
and national treatment are accorded to foreign providers of 
Internet and interactive services. A third objective should be 
to ensure that government policies facilitate interoperability. 
For all WTO initiatives regarding E-Commerce, there should be 
significant coordination with relevant intergovernmental 
organizations and with the business community.

13. Textiles and Clothing

    The Agreement on Textiles and Clothing (ATC) reflects 
carefully and strategically crafted compromises. The ATC 
requires certain undertakings and commitments by countries to 
provide market access. The WTO should undertake an assessment 
of individual nation's compliance with those agreed upon 
commitments. Any such review should include an assessment and 
reaffirmation of the signatories' adherence to the phase-out 
schedule for quotas and non-tariff barriers and rates agreed to 
as part, of the Uruguay Round, adherence to which several of 
our trading partners have already breached. The U.S. should 
also continue to seek further liberalization in this area.

14. Transparency of Government Policies

    Transparency requirements are currently spread throughout 
the WTO Agreements. The WTO should consider the negotiation of 
a general transparency agreement that would encompass tariffs, 
internal taxes, standards, sanitary measures, domestic 
regulations, subsidies and export incentives, export controls, 
procurement, agricultural policies, rules of origin, and other 
customs practices. Such an agreement could provide for clear 
publication of government rules and notice before such rules 
are changed. It could also affirm the value of private sector 
participation in the rules-setting process.

15. Dispute Settlement

    The WTO's Dispute Settlement Understanding (DSU) is the key 
to effective enforcement of WTO agreements. However, experience 
with the WTO dispute process has revealed several areas where 
the procedural rules need improvement:
      Trade negotiators should consider whether the 
timetable for the panel process can be substantially 
streamlined, perhaps by cutting down the time by fifty percent. 
Attention should be given to the steps involved in convening a 
panel and the steps taken by a panel once it is selected.
      The Secretariat's current responsibility for 
assisting panels on the legal, historical and procedural 
aspects of matters should be reviewed. Panel reports should not 
be drafted by WTO Secretariat staff.
    The biggest problem lies in the slow implementation of 
panel and Appellate Body reports. The Dispute Settlement 
Understanding (DSU) suggests that a ``reasonable time'' for 
implementation is 15 months. While this period may already be 
too long, ``gaming'' by governments may drag out the compliance 
process even longer. Gaming refers to the tactic of making a 
minor change in the practice declared to be a WTO violation, 
and then self-certifying it as WTO-complaint. The WTO needs to 
address this tactic in order to retain public confidence in the 
dispute settlement system.
    One possible solution is to revise the text of the DSU to 
make clear that all steps necessary to bring the law into 
compliance should be completed during this time period. For 
example, if a defendant government that loses an SPS dispute 
wants to undertake a new risk assessment, that study should be 
completed and submitted to the original panel well inside the 
15-month period. The expectation should be that the original 
panel will have time to pass judgment on whether the losing 
defendant government has corrected its WTO violation during the 
15-month period. The responsibility should be on the defendant 
government to secure this certification of compliance. If such 
a certification has not been issued during the ``reasonable 
period,'' the complaining country should be able to request 
retaliatory authority immediately.
    Looking ahead, another problem in dispute settlement could 
arise as the various WTO transition periods and dispute 
moratoria expire. For example, the TRIPS Agreement gives 
developing countries five years to adhere to the new 
disciplines. It would be abusive if a developing country does 
little to comply during those five years with the expectation 
that if it loses a dispute settlement after 1999, it would 
still get 18 months to implement an adverse panel report.
    Another problem with the DSU is the lack of openness in the 
panel process. Hearings by WTO panels and the Appellate Body 
should, in general, be open to the public. Panels now have the 
option of accepting amicus briefs from any source. The Dispute 
Settlement Understanding (DSU) rules might be changed to 
instruct panels to accept such briefs and to place them in a 
public comment file. The public should have access to the 
briefs filed by governments, with mechanisms to protect 
business confidential information. This would improve public 
understanding of the dispute process and help the private 
sector provide information.

16. Nullification and Impairment

    The WTO Dispute Settlement Understanding renders unusable 
the non-violation nullification and impairment provisions in 
the GATT because there is now no obligation to withdraw a 
measure found to nullify the benefits under a WTO agreement. By 
permitting WTO members to take domestic actions that nullify 
negotiated concessions, the WTO has engendered new compliance 
problems. Experience during the past four years has shown that 
an effective nullification and impairment provision is needed 
to address, for example, restrictive business practices and 
government-created barriers that impede market access.

17. WTO Institutional Improvements

    Although the WTO has made great strides in institution 
building over the past few years, more efforts are needed. The 
November Ministerial should be seized as an opportunity to 
catalyze accession negotiations so that countries that remain 
outside of the WTO can, be brought in as members on appropriate 
terms. The WTO also needs to do more to assist the least 
developed countries in improving their trade policies.
    The WTO has made enormous progress in enhancing the 
transparency of its operations and should be commended. Its web 
page is state-of-the-art for an international organization. The 
WTO should continue to increase its transparency by taking the 
following actions:
      Proposed agendas for meetings and individual 
countries' contributions to meetings should be made public 
unless the author government specifically requests that its 
document be confidential.
      Minutes of all WTO meetings should be made 
public.

18. Improving WTO Cooperation with Other International 
Organizations

    One way in which the WTO improved upon the General 
Agreement for Tariffs and Trade (GATT) is that the WTO 
Agreement contains a provision directing the WTO General 
Council to ``make appropriate arrangements for effective 
cooperation with other intergovernmental organizations that 
have responsibilities related to those of the WTO.'' This 
provision has been implemented to some extent, but more 
cooperation can be effectuated with, for example, the World 
Bank and the International Monetary Fund. These two financial 
institutions can support the WTO by reviewing trade policies of 
governments receiving loans to assure that commitments made in 
WTO negotiations are being fulfilled. The World Bank can also 
help developing countries invest in human capital so that they 
gain more from the global economy.
    Beyond the Bank and Fund, the WTO should develop closer 
relations with other multilateral organizations where such 
policy coordination can improve international economic 
policymaking. This is already occurring with the World 
Intellectual Property Organization.

19. WTO Consultations with Stakeholders

    Although the Organization for Economic Co-operation and 
Development (OECD) has always had a formal process for 
consultation with business and labor groups, the WTO has not 
yet set up such a process. To date, the WTO has held 
``Symposia'' to promote dialogue with non-governmental 
organizations (NGOs) and the Director-General has met with 
small groups of NGOs (including business groups).
    A new process should build upon these prior initiatives. 
Once a year, the WTO might convene a meeting of various groups 
such as consumers, business, environment, and labor. 
Participation by governmental representatives would be up to 
each government. The consultations would not be a WTO 
negotiation and would not have direct input into any committee 
of the WTO. The purpose would be to improve two-way 
communication between the trade regime and non-governmental 
stakeholders.
    Another initiative that could be taken is to encourage 
other governments to improve consultations with their domestic 
stakeholders in trade policy.

20. Trade and Environment

    In 1994, trade ministers planning for the WTO created a 
Committee on Trade and Environment. The WTO renewed that 
mandate in 1996. The Committee has held numerous meetings, but 
has made very limited progress. In March, the WTO is sponsoring 
a high-level meeting on Trade and Environment to review the 
issues and to stimulate new proposals.
    The WTO is not the right forum to negotiate international 
environmental policy. Attempting to do so would distract trade 
ministers from what should be their primary objective which is 
to open markets, prevent export subsidies, and stop trade 
discrimination. Recognizing, however, that unmanaged 
transborder environmental problems can sometimes become trade 
issues, governments, working with interested stakeholders, 
should improve the effectiveness of multilateral environmental 
institutions and agreements.
    There are a few environment-related issues that need to be 
addressed in the WTO and governments should strive to make 
greater progress. For example, the status of multilateral 
environmental agreements under trade rules needs to be 
clarified so that the WTO is not perceived in some quarters as 
an impediment to environmental protection. The problem of 
subsidies that harm the environment deserves more attention and 
the Trade Policy Review Mechanism might be used to cast a 
spotlight on such practices.
    It is also important to remind environmentalists that trade 
promotes economic growth which will enable countries to invest 
more toward improving environmental quality. This is not to 
suggest that there is any one-to-one relationship between trade 
and growth but only that economic growth may be a positive 
environmental factor.

21. Labor Issues

    The issue of trade and worker rights has engendered so much 
controversy that it has eclipsed the real issue which is 
obtaining more respect for worker rights around the world. 
During 1998, significant progress was made in Geneva when the 
International Labor
    Organization (ILO) adopted a Declaration on Fundamental 
Principles and Rights at Work. This was a landmark achievement 
for the ILO and was an exemplification of what the Roundtable 
called for in 1995 when The Business Roundtable urged that ILO 
programs be improved.
    An important labor right is freedom from forced labor 
practices. The WTO is not oblivious to this heinous problem. 
Article XX(e) of the General Agreement on Tariffs and Trade has 
always allowed governments to ban imports of products made with 
``prison labor.'' At this time, the applicability of this 
exception to products of forced labor remains uncertain. It may 
be timely for the WTO to clarify this ambiguity by affirming 
that governments may ban products made using forced labor. 
Doing so might help governments combat forced labor, a practice 
that is anathema to free market principles.
    Consideration should also be given to expanding GATT 
Article XX to deal with products made using child labor. This 
year, the ILO will complete a new Convention on exploitative 
child labor, and the definitions employed in this Convention 
might be utilized in modifying Article XX. It should be noted 
that Article XX would not permit punitive trade sanctions on 
unrelated products; rather, Article XX would only permit an 
import ban on the product made using child labor.
    During both the Tokyo Round and the Uruguay Round, the U.S. 
government sought unsuccessfully to address labor issues. These 
frustrated efforts demonstrate the difficulty of convincing 
other countries that the trading system can play a constructive 
role in addressing a problem, like the denial of worker rights, 
that may be only loosely connected to trade. Many developing 
countries and business groups were concerned about the vague 
proposals for linking a wide range of labor issues and the 
GATT, and the uncertainty as to where such initiatives would 
lead.
    Governments should pursue multilateral efforts to promote 
worker rights regarding freedom of association, abolition of 
forced labor, non-discrimination, and child labor that exploits 
children. The organization of primary responsibility should be 
the ILO, but complementary activities in other organizations 
should not be ruled out, or insisted upon. To assist 
governments in achieving better consensus policies, the 
Roundtable supports more active dialogues among the major 
stakeholders concerning the relationship between global markets 
and social and employment objectives.

                            New Initiatives

    A number of new rule-based WTO initiatives have been 
proposed such as investment and competition policy. These 
issues are important to the international economic system, and 
careful consideration should be given to determine whether 
these issues are ripe for WTO negotiations. Adding new 
agreements does not necessarily strengthen the WTO. If 
governments are not ready for the WTO to absorb such 
responsibilities, or if the potential new agreements are not 
well thought out, or if a constructive foundation has not be 
established for the negotiations, then the negotiations may 
flounder or result in counterproductive agreements. Under these 
circumstances, WTO may be weakened, rather than strengthened.

1. Competition Policy

    The globalization of business activities raises important 
questions about the extent to which foreign anticompetitive 
practices may undermine market access opportunities created by 
bilateral and multilateral trade and investment agreements. 
However, at this time, there are huge uncertainties as to the 
proper goals for a competition policy negotiation and whether 
the WTO is the optimal forum.
    Among the many issues that need more thorough analysis 
before launching any WTO negotiations on competition policy 
are: (1) what are the specific market access problems that need 
to be addressed by an international competition policy 
agreement (and cannot be addressed by existing trade agreements 
or trade initiatives currently underway), (2) whether any such 
problems are the result of inadequate competition laws or 
regulations, inadequate enforcement or lack of harmonization, 
(3) what elements should be addressed in an international 
agreement (e.g., harmonization of competition policy standards 
and/or procedures, per se violations, elimination or cartels, 
dispute settlement procedures), (4) what would be the most 
appropriate forum or fora for negotiating an international 
agreement (e.g., the WTO, the OECD, bilateral or regional 
initiatives), (5) what U.S. laws and practices would be 
affected by an international agreement and whether the impact 
would have a positive or negative effect on U.S. domestic and 
international competitiveness, (6) what are the downsides and, 
conversely, the upsides of addressing market access problems 
through an international competition policy agreement in the 
WTO or other fora, and (7) are there other international 
antitrust issues that should be addressed in addition to or in 
lieu of direct trade-related market access problems (e.g., 
merger and acquisition procedures).
    Under these circumstances, it is premature to launch a WTO 
negotiation on competition policy. A more constructive approach 
would be to establish a new WTO work program on competition 
policy that will assist governments in thinking through the 
competition policy issues and in exchanging information about 
the development and enforcement of appropriate antitrust laws.

2. Investment

    Achieving disciplines on how governments treat foreign 
investment is important to gaining the full benefits of the 
international economic system.
    Many key developing countries have, however, indicated they 
are not, at this time, prepared to make comprehensive 
liberalization commitments on investment in the WTO. In 
addition, the Multilateral Agreement on Investment negotiations 
in the OECD also revealed substantial differences of opinion 
between the industrialized countries on a wide range of 
investment issues. There were sharp differences of opinion on 
(1) the scope of the MAI's provisions on expropriation, 
especially when combined with investor-to-state dispute 
procedures, (2) the definition of what constitutes an 
investment, (3) the extent to which a government's right to 
regulate should be limited, (4) whether exceptions for culture 
and regional economic integration organizations should be 
included, and (5) how to address labor and environment issues.
    These factors clearly reveal that an international 
consensus on the negotiation of a multilateral investment 
agreement is still evolving. The importance of international 
investment to the global economy requires WTO members commit 
themselves to developing a consensus on how to move forward as 
soon as possible. In the event the WTO Ministerial does not 
launch comprehensive international investment negotiations, a 
constructive interim course would be (1) to strengthen the WTO 
Agreement on Trade-Related Investment Measures by expanding it 
to include additional trade distorting investment measures, 
such as technology transfer requirements, and (2) to establish 
a WTO work program on investment that will focus on the 
exchange of information on how to establish investment regimes 
that will effectively promote economic growth. The work program 
should also consider the feasibility of expanding the WTO's 
Trade Policy Review mechanism to consider the broad-range 
investment issues.
      

                                


Statement of Robert W. Holleyman, II, President and Chief Executive 
Officer, Business Software Alliance (BSA)

    Thank you, Mr. Chairman, for giving me the opportunity, on 
behalf of the member companies of the Business Software 
Alliance (BSA), to provide testimony on the upcoming World 
Trade Organization Ministerial and the agenda for the New 
Round.
    In late November 1999, the World Trade Organization (WTO) 
will hold a meeting in Seattle, bringing together Trade 
Ministers from around the world. The member companies of the 
Business Software Alliance look to this Ministerial meeting as 
an opportunity to further strengthen international trade law.
    Since 1988, the Business Software Alliance (BSA) has been 
the voice of the world's leading software developers before 
governments and with consumers in the international 
marketplace. Our members represent the fastest growing industry 
in the world. BSA educates computer users on software 
copyrights; advocates public policy that fosters innovation and 
expands trade opportunities; and fights software piracy. BSA 
worldwide members include Adobe Systems Incorporated, 
Attachmate Corporation, Autodesk, Inc., Bentley Systems, Inc., 
Corel Corporation, Lotus Development Corp., Macromedia Inc., 
Microsoft Corp., Network Associates Inc., Novell, Inc., 
Symantec Corporation and Visio Corporation. Additional members 
of BSA's Policy Council include Apple Computer, Inc., Compaq 
Computer Corporation, IBM, Intel Corporation, Intuit Inc., and 
Sybase. BSA can be found on the worldwide web at www.bsa.org 
and www.nopiracy.com.
    The software industry depends on trade. More than 50 
percent of the revenues of our members are generated by 
overseas sales. With the establishment of on-line electronic 
commerce, we expect that even more of our companies' sales will 
be to foreign customers.
    The software industry has been a consistent advocate of 
international trade liberalization. The Uruguay Round results 
have made a meaningful and lasting contribution to our ability 
to compete in the international marketplace. For example, when 
the Uruguay Round of negotiations was launched in 1986, most 
countries did not provide explicit legal protection for 
computer programs under their national laws. Piracy of software 
was rampant. The Trade-Related Intellectual Property Rights 
(TRIPs) Agreement, however, has brought about significant 
improvements. Today, most countries provide substantial and 
meaningful legal protection of software. While software piracy 
remains a serious threat to the health of the industry, today 
we have the ability, unlike in the 1980s, to bring legal action 
against those who steal our products.
    As we look forward, three aspects of international trade 
stand out as having substantial implications for the software 
and computer industry. While I would like to devote the bulk of 
my comments to trade policy issues raised by electronic 
commerce, I would like to say a few words first about the TRIPs 
agreement and tariff liberalization.
    As I stated earlier, the establishment of the TRIPs 
Agreement was a watershed event in the development of the 
global software industry. TRIPs provides us with a solid 
framework upon which to build, promote, and defend strong 
intellectual property protection for copyrighted works, 
including computer software. Of course, there are areas where 
TRIPs could be strengthened and improved, particularly with 
regard to the Agreement's obligations on enforcement of rights, 
and perhaps also in the area of domain names.
    We would certainly welcome such improvements, but we do not 
advocate specific negotiations at this time. We recognize that 
the TRIPs Agreement will be subject to review in 2002; once all 
WTO members have implemented their obligations, and based on 
their experiences in obtaining and enforcing rights under the 
Agreement, that may be the time to consider strengthening 
TRIPs. Since many countries have yet to implement their TRIPs 
obligations under the existing Agreement, we feel that new 
negotiations at this time would be premature.
    Perhaps the most significant recent international 
development in the area of intellectual property is the 
conclusion of the World Intellectual Property Organization's 
(WIPO) Copyright Treaty and Performances and Phonograms Treaty. 
These Treaties make substantial improvements in the legal 
rights afforded to software developers, especially in terms of 
improving their ability to attack on-line piracy. The United 
States implemented the Treaties last year through the enactment 
of the Digital Millennium Copyright Act. We believe that WTO 
Ministers should declare that national implementation of these 
treaties is an urgent matter, with a substantial trade 
promoting impact.
    Our member companies also support further reductions of 
tariffs on computers and peripherals. In particular, we 
support: the tariff liberalization that has been achieved thus 
far through the ITA; concluding the ``ITA II'' product 
expansion talks; and clarifying coverage to include all aspects 
of electronic devices (information technology products) and 
media (whether pre-recorded or blank) necessary to successfully 
conduct e-commerce. Since the focus of the ITA is technology, 
it may also be appropriate to consider tariff treatment of 
computer programs as part of a further work program.

    Turning now to electronic commerce issues, we believe that 
the most promising international commercial development since 
the conclusion of the Uruguay Round has been the emergence of 
network-based (Internet) trade. Today, all BSA member companies 
sell software on-line. These transactions benefit both 
consumers and software developers because they are faster and 
cheaper than traditional, over-the-counter retail sales. We 
expect these sales to more than double annually for the 
foreseeable future.
    Thus, we believe that a key priority for trade negotiations 
should be to ensure that impediments to e-commerce are not put 
in place, and that existing impediments are reduced or 
eliminated. We recognize that this goal may not be amenable to 
a single set of undertakings. Because the Internet continues to 
evolve as a business, the trade aspects of the Internet are not 
now fully apparent.
    But we do believe that Ministers can make a good start.
    An excellent fist step was taken in May 20, 1998, when the 
WTO's Ministers agreed that WTO ``. . .Members will continue 
their current practice of not imposing customs duties on 
electronic transmissions.'' This commitment is not now 
permanent, and it applies only to electronic transmissions. We 
would support making permanent this commitment, as well as 
clarifying that it applies regardless of the form of 
transmission (wired or wireless) and that it applies both to 
the transmission and to its contents.
    In addition, the work over the past year by the TRIPs, GATS 
and GATT Councils on e-commerce constitutes an excellent 
foundation for the work program that should follow. It is our 
understanding that each Council has determined that the current 
WTO obligations apply to transactions conducted over networks. 
They have also concluded that certain areas of these Agreements 
need to be updated to more accurately reflect the nature of e-
commerce. We agree with their conclusions that e-commerce 
constitutes an evolutionary step in trade regimes and does not 
require wholesale changes to existing obligations. Recognizing, 
however, that a single e-commerce transaction may implicate 
rules applicable to services, goods and intellectual property, 
we believe that a horizontal approach in the future work 
program of the WTO may be best.
    We believe that the Seattle Ministerial provides an 
opportunity that must not be missed to set the right parameters 
for future WTO work. Key among these, we believe, is a 
commitment by Ministers to refrain from enacting measures that 
could have an actual or potential trade distortive effect on e-
commerce. Such a commitment would underscore that the goal of 
the future work program is to seize and ensure the 
possibilities of e-commerce by keeping it barrier-free. 
Recognizing that, in some rare instances, domestic imperatives 
may necessitate the enactment of measures that could have a 
negative effect on e-commerce, Ministers should further declare 
that they would seek to adopt only those measures which have 
the least trade restrictive effect.
    There is one aspect of the current WTO debate that concerns 
our industries. Much of the discussion in Geneva, as we 
understand it, has focused on whether e-commerce should be 
classified as simply a service, or whether it implicates goods 
as well as TRIPs obligations. It is our view, as noted above, 
that e-commerce is much more than just a set of services. Thus, 
we would urge a horizontal work program---that is, work in each 
of the Councils at the direction of the General Council, while 
giving the General Council the discretion to establish 
additional work programs on issues which affect trade in goods, 
services and intellectual property.
    What concerns us most, however, is that if e-commerce is 
treated as just a service, it could have serious implications 
for the software industry. Such an approach would have 
immediate and negative implications for software companies as 
well as other industries. It is our understanding that the 
European Union takes the position that a computer program fixed 
on a disk ordered on-line and delivered in physical form (e.g., 
by postal service) is subject to WTO obligations under the 
GATT. By sharp contrast, it is our understanding that they 
believe that the very same software program ordered on-line and 
delivered on-line, should be classified as an ``electronic 
delivery'' subjects only to GATS obligations.
    The trade implications of such a view are potentially very 
serious. Software as such, other than repair and maintenance of 
software, does not seem to be explicitly covered under software 
services and is not now subject to GATS. Thus, the 
reclassification of software from a good to a service could 
deny software basic market access and national treatment 
benefits. Perhaps more importantly, in most countries, subject 
to a 1984 WTO/GATT understanding, duty on software is now 
assessed on the basis of the carrier medium (e.g., the value of 
the diskette), and not the value of its contents (the 
intellectual property contained in the medium). The issue of 
reclassification could open the door to applying duties on the 
value of the software itself, rather than its physical medium. 
The consequences for traded software would be horrendous, as 
they would make the value of the product subject to a duty, in 
stark contrast to the situation in many (if not most) countries 
today. In addition, such reclassification would deprive trade 
in software of its current unqualified MFN and national 
treatment benefits.
    In essence, we believe that to treat e-commerce as merely a 
service would be to ignore the true nature of this form of 
trade. In addition, it could have a serious and immediate 
negative impact on the sale of computer programs by means of 
the Internet.
    Mr. Chairman, the WTO Seattle Ministerial and the 
subsequent New Round of negotiations offer not only the U.S. 
economy, but indeed the global economy, tremendous 
opportunities as we head into the new millennium. The 
unparalleled growth of electronic commerce means economic 
possibilities that we could not even imagine just a few years 
ago. Your Subcommittee and the Committee on Ways and Means have 
an extremely important role to play in seizing these 
opportunities and making them a reality. The Business Software 
Alliance stands ready to assist you in this critical endeavor.
    We thank you again for this important hearing and for the 
opportunity to present our views.
      

                                


Center for International Environmental Law, National Wildlife 
Federation, Sierra Club, World Wildlife Fund, Friends of the Earth, 
Natural Resources Defense Council, Greenpeace USA, Defenders of 
Wildlife, American Lands Alliance, Consumer's Choice Council, 
Earthjustice Legal Defense Fund, Pacific Environment and Resources 
Center, Community Nutrition Institute, Institute for Agriculture and 
Trade Policy

                                                      July 16, 1999
Ambassador Susan G. Esserman
Deputy United States Trade Representative
600 17th Street, N.W.
Washington, DC. 20508

Peter D. Robertson
Acting Deputy Administrator
United States Environmental Protection Agency
401 M. Street, S.W.
Washington, DC. 20460

    Dear Ambassador Esserman and Mr. Robertson:
    Our organizations are deeply concerned about the Administration's 
development of positions for the Third Ministerial Conference of the 
World Trade Organization scheduled for Seattle this fall. WTO rules and 
procedures have been used repeatedly to attack environmental laws that 
our organizations have worked for decades to create, strengthen and 
protect. Equally important, the continued pressure to expand trade 
through broadened and intensified application of trade policy, without 
an equal effort to ensure that the right framework of environmental law 
and policy are in place, threatens to impede the conservation of our 
natural resources and the maintenance and improvement of a healthy 
environment. Yet while the Administration has sometimes raised general 
environmental concerns about trade and trade rules at the WTO--most 
recently at the March 1999 high level symposium on trade and 
environment in Geneva--it has failed to take the concrete actions 
needed to address those concerns effectively.
    As our groups have emphasized in past communications, the 
Administration can fulfill President Clinton's pledge to put a ``human 
face'' on the global economy only if it combines its commitment to 
liberalizing trade with an equally strong commitment to environmental 
protection and sustainable development. We appreciate the 
Administration's call to improve public distribution of WTO documents, 
enhance public participation in WTO dispute settlement proceedings, and 
encourage reduction of fisheries subsidies that distort trade and 
encourage overfishing. These efforts fall far short, however, of the 
comprehensive reforms needed to ensure that the world trading system 
does not hinder sustainable development and environmental protection. 
For example, we have found unacceptable the Administration's inflexible 
position in recent months that no textual changes to the WTO Agreements 
are needed, as it indicates a reluctance to deal seriously with 
environmental concerns.
    The WTO Ministerial Conference offers an historic opportunity for 
the Administration to lead the review and reform that the international 
trade regime needs so that it will promote, rather than undermine, 
environmental protection and other core values of United States 
citizens. We stand prepared to help the Administration seize this 
opportunity by developing an agenda that fully recognizes environmental 
priorities. If, however, the Administration misses the chance to put 
the WTO on a course toward sustainable development, this will undermine 
support for subsequent negotiations at the WTO--and for United States 
government authority to participate in those negotiations--and invite 
united environmental opposition to the results. To avoid this, the 
Administration must develop an environmentally beneficial agenda for 
the Ministerial Conference, and a comprehensive plan for environmental 
review and reform of the WTO, that go well beyond the proposals 
advanced to date.
    We recognize that the trade and environment issues confronting the 
WTO will not be resolved at a single ministerial meeting. What we do 
expect, however, is that the Administration formulate a plan for 
achieving solutions, and that it demonstrate a commitment to that plan 
through constructive, open engagement with the public, with Congress, 
and relevant agencies. Despite the complexity of the details, the 
outline of the plan we need to see has three simple themes, described 
below. Although not every one of our organizations endorses every 
detail in this letter or the accompanying attachment, we are united in 
support of the overarching principles expressed here. We will evaluate 
the outcome in Seattle on this basis.

1. Stop WTO Expansion.

    The Administration must avoid rushing into more negotiations on 
liberalization that would place the environment and environmental laws 
further at risk. In light of the potential for significant 
environmental impacts, this is not the time to embark on further 
expansion of the WTO's power or the scope of its rules. Thus, we oppose 
the launch of negotiations within the WTO on investment liberalization, 
government procurement or ``early harvest'' of tariff reductions.
    We oppose accelerated tariff reduction and other liberalization in 
selected sectors pending an open, participatory and balanced assessment 
that includes formulation of mitigating measures. Our concern is 
intensified with respect to environmentally sensitive natural resource 
sectors, such as forest and fish products. Forests and fisheries are in 
crisis both nationally and globally. Prioritizing liberalization in 
these sectors is reckless, when we know that regulations and incentives 
for sustainable harvesting and commerce are grossly inadequate around 
the world.
    Multilateral investment rules beyond the current Agreement on 
Trade-Related Investment Measures (TRIMs) should not be the subject of 
negotiations at the WTO. We are concerned that the United States 
government may be shifting its position to support partial negotiations 
on investment under WTO auspices.

2. Reform WTO Rules and Procedures.

    The WTO as it exists today urgently needs reform. The 
Administration must secure commitment to the reforms needed to ensure 
that existing WTO procedures and rules affirm, rather than hinder, 
environmental protection.
    In broad terms, the WTO's limits of jurisdiction need to be defined 
more clearly, so that the WTO stays within its recognized realm of 
trade policy, and does not stray into the field of environmental 
regulation. Equally important, the WTO's decision-making must be 
transparent and must involve public scrutiny and input. Achieving these 
goals will require major changes in both the rules and the procedures 
for formulating, interpreting, applying and enforcing those rules. 
These changes must also be reflected in any negotiations that are 
launched in Seattle.
    Substantively, both existing and future WTO rules must be written 
and interpreted so that they accord proper deference to national and 
international standards that serve legitimate environmental objectives. 
Procedurally, the terms of reference of each WTO working group or 
institutionalized body must provide for consideration of significant 
impacts on environment and sustainable development, and there must be 
mechanisms to ensure compliance.

3. Assess Impacts.

    The Administration must provide for an assessment of the 
environmental impacts of proposed multilateral trade and trade policy. 
The fundamental question is whether the framework of laws, policies and 
institutions is in place to ensure that additional multilateral steps 
to liberalize trade will lead to environmentally and socially 
beneficial outcomes. If not, then the assessment must formulate needed 
institutional, legal and policy changes before moving forward with 
further talks on liberalization.
    This assessment process must begin immediately. It must be open and 
transparent, global in scope, and conducted through a balanced, 
impartial process. It should be carried out in cooperation with our 
trading partners. A forward-looking review must be complemented by a 
retrospective review of past and current impacts of existing policy. 
The reference point for the assessment must be the procedures and 
criteria developed under the National Environmental Policy Act.
    The statement attached to this letter provides further details on 
our organizations' bases for our positions and our suggestions for 
addressing these areas of concern. We appreciate recent overtures from 
the Administration that indicate openness to a more substantive 
dialogue, and look forward to the chance to discuss our positions 
further with you and your staffQ04
    Sincerely yours,

    David R. Downes, Center for International Environmental Law

    On behalf of:

                                   Jake Caldwell
                                    National Wildlife Federation
                                   Dan Seligman
                                    Sierra Club
                                   David Schorr
                                    World Wildlife Fund
                                   Andrea Durbin
                                    Friends of the Earth
                                   Justin Ward
                                    Natural Resources Defense Council
                                   Scott Paul
                                    Greenpeace USA
                                   Rina Rodriguez
                                    Defenders of Wildlife and Community 
                                    Nutrition Institute
                                   Antonia Juhasz
                                    American Lands Alliance
                                   Cameron Griffith
                                    Consumer's Choice Council
                                   Martin Wagner
                                    Earthjustice Legal Defense Fund
                                   Kristin Dawkins
                                    Institute for Agriculture and Trade 
                                    Policy
                                   Doug Norlen
                                    Pacific Environment and Resources 
                                    Center

    cc: Ambassador Stuart Eizenstat, Under Secretary for Economic and 
Business Affairs, Department of State, Frank E. Loy, Under Secretary 
for Global Affairs, Department of State, George T. Frampton, Jr., 
Acting Chair, Council for Environmental Quality, Frederick Montgomery, 
Assistant US Trade Representative for Policy Coordination, Chairman of 
Interagency Trade Policy Staff Committee,
    Attachment

         Statement by United States Environmental Organizations

    This statement provides further detail on the concerns and 
recommendations regarding environmental issues outlined in the 
July 16 letter from several United States environmental 
groups.\1\ Part I details our opposition to further expansion 
of the World Trade Organization (WTO) at this time. Part II 
identifies specific reforms needed to WTO rules and procedures. 
Part III outlines procedural and substantive elements of the 
environmental assessment of existing and proposed multilateral 
trade agreements.
---------------------------------------------------------------------------
    \1\ Several of our groups have elaborated our concerns in detail in 
a October 16, 1998 response to the USTR's Federal Register request for 
input regarding US preparations for the Seattle ministerial, as well as 
in the Transatlantic Environmental Dialogue statement delivered to 
governments at the recent G-8 summit. The comments in this document are 
intended to summarize and complement these earlier statements and 
express the collective views of our respective organizations; however, 
not every signatory necessarily subscribes to the details of each 
formulation.
---------------------------------------------------------------------------

                          I. No WTO Expansion

    The Administration must avoid rushing into more 
negotiations on liberalization that would place the environment 
and environmental laws further at risk. In light of the 
potential for significant environmental impacts, this is not 
the time to embark on further expansion of the WTO's power or 
the scope of its rules. Thus, we oppose the launch of 
negotiations within the WTO on investment liberalization, 
government procurement or accelerated sectoral liberalization, 
including ``early harvest'' of tariff reductions.
    We oppose the Administration's effort to accelerate 
liberalization, especially in environmentally sensitive sectors 
such as forest products, in the absence of a careful and public 
assessment of the potential environmental impacts (see Part 
III.3 below). Aiming to reach agreement on further 
liberalization at the Seattle meeting itself--as the 
Administration proposes to do with reduction of tariffs on 
forest products--flies directly in the face of the 
Administration's commitment to review the environmental impacts 
of liberalization, because the schedule is too short to do a 
thorough assessment of effects and policy alternatives.
    As we have repeatedly stated, multilateral investment rules 
beyond the current Agreement on Trade-Related Investment 
Measures (TRIMs) should not be the subject of negotiations at 
the WTO. Our objections to an investment agreement in the WTO 
go beyond the issues of establishing rights to sue for lost 
profits and investor-to-state dispute resolution. We are also 
concerned that enforceable rights to national treatment and 
most favored nation status could pry open environmentally 
sensitive sectors in markets where regulatory frameworks are 
inadequate to manage the increased environmental pressures that 
would result. If unaccompanied by strong frameworks of 
environmental and labor rights, application of the principles 
of national treatment and most favoured nation could also 
increase ``industrial flight'' by companies seeking to avoid 
costs of compliance with labor and environmental requirements.
    In light of these objections, we are concerned that the 
Administration seems to be considering support for partial 
negotiations under WTO auspices. Prior to the negotiation of 
any investment rules in any forum, an over-arching 
international framework is needed to ensure that international 
investments promote sustainable development consistent with the 
needs of host countries and to guarantee that the environment 
is protected. The development of such a framework and any 
subsequent investment agreement should take place within the 
United Nations system. Any such agreement must include investor 
obligations with respect to environmental and community 
protection.

                  II. Reform WTO Rules and Procedures

    In its Communiqué from Cologne in June, the G-8 
stated that ``environmental consideration should be taken fully 
into account in the upcoming round of WTO negotiations.'' We 
are pleased to hear the United States join other industrialized 
countries in this ambitious commitment. Unfortunately, the 
United States' proposals to date have been entirely inadequate 
to the task. To make significant progress, the Administration 
will need to make positive proposals on both substantive and 
procedural rules, including existing rules of the WTO as well 
as the terms of reference for any further negotiations launched 
at Seattle. The Administration will need to make a clear 
political statement that affirms environmental values and 
define a clear process involving the right mix of agencies and 
other partners for achieving progress on a range of issues.
    Substantively, the Administration will need to take action 
to ensure that the scope of WTO rules is limited to trade 
policy and does not intrude into matters that come under 
environmental law and policy. WTO rules must provide for 
deference to international and national environmental standards 
(Part II.1), and protect the consumer's right to know (Part 
II.2). At the same time, WTO rules can and should be applied so 
that they encourage the elimination of environmentally damaging 
subsidies that also distort trade (Part II.3). Procedurally, 
the Administration must take steps to ensure that all WTO 
forums take environmental implications of their work into 
account (II.4), and that their operations become transparent 
and accountable (II.5).

1. WTO Deference To International And National Environmental 
Standards And Institutions

    WTO rules need to be reformed so that they stay within the 
bounds of trade policy and do not intrude into areas within the 
jurisdiction of environmental institutions and regulations. We 
are pleased to learn that the Administration now seems to agree 
that ad hoc dispute settlement decisions alone are not a 
solution to the impact that WTO rules as currently interpreted 
may have on measures to protect the environment. United States 
leadership of a multilateral approach to a number of issues is 
needed to ensure that WTO forums--including the Dispute 
Settlement Body--and WTO rules consistently defer to 
regulations and other measures adopted by international and 
national institutions, including measures based on the 
precautionary principle.
    In the absence of such consistency, there is a serious risk 
that these institutions will be impeded from pursuing 
legitimate environmental objectives through negative 
interpretations advanced by trade policy-makers, ad hoc 
challenges, and the threat of adverse decisions in WTO dispute 
settlement. Of particular concern are the GATT, the TBT 
Agreement and the SPS Agreement; also relevant are the TRIPS 
Agreement as well as agreements on subsidies and agriculture.
    Seattle is a critical opportunity for the United States to 
send a clear signal that trade policy must be developed and 
applied consistently with environmental principles, and to 
define a process and terms of reference for achieving agreement 
on how to ensure that WTO rules do not interfere with 
environmental measures. That process should aim at the 
following specific outcomes.
    a. Burden and Standard of Proof. Ensuring that the 
complaining party in a WTO dispute settlement proceeding has 
the burden to show the lack of an adequate basis for challenged 
local or national environmental and health regulations, and 
that WTO decision-makers employ a deferential standard of 
review, perhaps along the lines of Article 17.6 of the Anti-
Dumping Agreement.I11b. SPS. Ensuring that the provisions of 
the SPS Agreement:
    Do not interfere with the right of national governments to 
develop and enforce high environment and health standards at 
the level they deem appropriate;
    Fully recognize the precautionary principle;
    Acknowledge clearly that international standards establish 
minimum, not maximum standards for the levels of environmental 
and health protection set by WTO Members.
    c. Acknowledge Multilateral Environmental Agreements (MEAs) 
in WTO Rules. Consistent with the recent G-8 Cologne 
Communiqué, there must be an affirmation that trade-
related environmental measures (TREMs) authorized or required 
under multilateral environmental agreements or internationally 
recognized environmental principles are consistent with WTO 
rules, including Article XX of the GATT, the TBT Agreement and 
the SPS Agreement. Criteria should be defined indicating to the 
WTO how to recognize the types of agreements or principles that 
fit within the MEA category. Contrary to USTR's suggestion in 
the July 2 briefing, the concept is not to establish criteria 
for evaluating whether an MEA measure is legitimate. Rather, 
such measures will be deemed legitimate by virtue of their 
adoption under an MEA.
    d. Build Effectiveness of MEAs including Trade-Related 
Measures. The Administration needs to make it a positive 
priority to build effectiveness of MEAs. Where trade-related 
measures are appropriate means for addressing the environmental 
problem, the Administration should support their use. A WTO 
decision to defer to MEAs will do little good if MEAs are 
written to include ``carve-outs'' that ensure that WTO rules 
prevail over MEA obligations. Disputes over the implementation 
of MEAs should be resolved by MEAs, not by the WTO. Thus, we 
are also seeking a commitment from the Administration not to 
advocate the inclusion of ``savings clauses'' in future MEAs. 
The Administration should also work with other countries 
through appropriate environmental institutions such as the 
United Nations Environment Programme (UNEP) to develop 
principles of trade policy to which negotiators of MEAs can 
refer during negotiations.
    e. Production or Processing Methods (PPMs). Ensuring that 
distinctions between products based upon PPMs related to 
environment, human rights and internationally recognized labor 
standards are recognized as legitimate measures for promoting 
sustainable commerce that are consistent with WTO rules.
    f. Procurement. A clarification or amendment to the 
Agreement on Government Procurement ensuring that it recognizes 
the right of governments to use social and environmental 
criteria in making purchasing decisions. Several of our 
organizations provided further suggestions on this topic in 
comments submitted to USTR by the Consumer Choice Coalition in 
January.
    g. UNEP and other Environmental Institutions. Adoption of 
cooperative agreements between WTO and international 
environmental institutions, including UNEP, by which the WTO 
defers to the role of appropriate institutions in addressing 
environmental aspects of international decision-making. 
Specifically, institutions such as UNEP and the secretariats of 
relevant MEAs should have a role in the settlement of 
environment-related disputes under the Dispute Settlement 
Understanding (DSU) as well as the definition of key 
international environmental principles such as the 
precautionary principle. Deference to such outside expertise is 
necessary in light of the specialized nature of WTO as a trade 
policy institution with trade expertise.
    We will be happy to discuss the precise legal form that 
these steps might take at the appropriate time. For instance, a 
clarification could involve language in a statement adopted by 
a WTO Ministerial Conference or the WTO General Council, an 
agreed-upon interpretation formally adopted by the General 
Council, or an amendment to the text of the relevant agreement.
    As a general matter, we would like to emphasize that the 
use of trade measures that affect developing countries to 
accomplish environmental goals should be accompanied by 
assistance to those countries to help them achieve those goals. 
This is consistent with the Rio bargain that developed 
countries would assist developing countries in raising 
environmental standards and combating environmental problems, 
so that all could share in sustainable development and an 
improved global environment. The merit of this approach was 
recognized in the Appellate Body's Shrimp/Turtle decision. 
Unfortunately, developed countries have failed to carry out 
their end of the bargain, with foreign assistance budgets 
declining, and debt relief proposals still inadequate. A 
renewed political commitment from the United States and other 
industrialized countries would contribute significantly to 
multilateral agreement on the program outlined here, and would 
offer long term payoffs for the United States economy and 
environment.

2. Protection of the Consumer's Right To Know

    Markets can allocate resources properly only if consumers 
have the necessary information to make informed decisions. 
Unfortunately, some WTO Members--including the United States 
government itself--have advanced interpretations of WTO rules 
that threaten to restrict the power of governments and private 
organizations to provide consumers with information they want 
about the environmental and health aspects of products and 
their production. We urge the United States to work with other 
WTO Members to launch a process at Seattle that leads toward 
the following outcomes:
a. Ensuring that the WTO Agreement on Technical Barriers to Trade (TBT) 
        preserves the ability of governments and private organizations 
        to protect the consumer's right-to-know and to promote 
        sustainable consumption through open and transparent labeling 
        programs, including genetically modified food;
b Ensuring that the TBT Agreement recognizes the legitimacy of 
        regulations and standards that distinguish between products 
        based on the environmental consequences of their manufacture, 
        use and disposal; and
c. Ensuring that the TBT rules do not conflict with speech protected 
        under the U.S. Constitution, including third-party certified 
        private labeling programs.
    As with the proposals in Part II.1 above, we are open to further 
discussion about the precise legal form that these assurances should 
take. Generally, however, the principle is that the WTO must recognize 
that the TBT Agreement effectively includes an exception along the 
lines of Article XX, to the extent it applies to ecolabeling.

3. Eliminate Environmentally Damaging Subsidies

    We welcome and support the Administration's willingness to push for 
the elimination of fishery subsidies that have contributed to the 
current global fisheries crisis. The Seattle ministerial should 
unambiguously place the fishery subsidies issue on the negotiating 
agenda, and should do so in the context of an open interdisciplinary 
and inter-organizational procedure that includes other institutions 
with relevant and needed expertise alongside the WTO. We urge the 
United States to push for a similar review of other environmentally 
damaging subsidies, such as those for forestry, fossil fuels and 
nuclear energy. At the same time, WTO Members must ensure that WTO 
rules allow governments to craft measures that reward the social and 
environmental values conferred by certain activities, such as adoption 
of environmentally responsible technologies, artisanal fishing and 
development of renewable sources of energy. The ability of the WTO to 
play a constructive role on subsidies will be a significant test of the 
organization's ability to produce the oft-promised ``win-win'' outcomes 
for trade and the environment.

4. Recognizing Environmental Aspects of WTO Decision-Making

    Another key question is how to reform the procedures and 
institutions of the WTO so that decision-making takes into account its 
environmental implications. The United States proposes to use the 
Committee on Trade and Environment (CTE) on a ``rolling basis'' and in 
an advisory capacity to address the environmental aspects of WTO 
decisions. But compartmentalizing environment in the CTE has not worked 
in the past and will not work in the future. The Administration has 
offered no concrete steps that would effectively link the CTE to the 
real decision-making forums at the WTO.
    In our view, much more is needed to ensure that the WTO takes 
environment into account in its decision-making. As a general matter, 
all relevant WTO bodies--including councils, committees, and working 
groups--must include reference to environmental protection and 
sustainable development among their objectives or terms of reference, 
consistent with the preamble of the WTO Agreement itself.
    The WTO will also have to adopt procedures that ensure that these 
forums take these objectives seriously. For instance, each forum could 
periodically consult with international environmental institutions with 
relevant expertise, report on the environmental implications of their 
work, and make recommendations on how to address environmental impacts 
of the trade policies with which they are concerned. The CTE might have 
a role through review and comment on that report. Another option is for 
the WTO's Director General to present a review of the WTO's record on 
environment and sustainable development in a section of the annual 
report. The United States itself could do a better job of integrating 
environment by including representatives from relevant agencies such as 
the EPA on delegations when forums such as the SPS or TBT Committees 
discuss environment-related issues.
5. Improved Transparency, Public Participation And Accountability At 
The WTO

    We very much appreciate the efforts made by the Administration to 
advance democratic reform of the WTO. We ask that the Administration 
continue to include increased transparency, participation and 
accountability as a priority on its negotiating agenda in Seattle. 
However, effective achievement in this area will require more actions 
in addition to broader and faster access to working documents and 
consideration of NGO submissions in dispute settlement. It will also 
require, at a minimum:
a. opening of dispute settlement and appellate body proceedings to 
        public observation;
b. NGO participation in discussions of environment-related issues by 
        other WTO decision-making forums, such as the SPS Committee, 
        the TBT Committee, the TRIPS Council, the Agriculture 
        Committee, the CTE, and relevant negotiating groups; and
c. the development of a consultative process between the WTO, NGOs, 
        member governments and businesses.
    We recognize the validity of concerns raised by developing 
countries that they may have fewer resources than do some NGOs. The 
United States and other developed countries should support fuller 
participation by poorer WTO Members, for instance through financial and 
technical assistance.
    A first step towards improved transparency of the WTO and trade 
policy must begin at home. We have indicated our willingness to work 
with the Administration to provide input into the negotiating agenda, 
yet little information and no documents have been shared with the NGO 
community as the Administration prepares its position for the WTO 
Ministerial. Only at the July 2 briefing did we hear any degree of 
detail about the Administration's proposed positions. We urge the 
Administration to be more transparent, to share information and 
documents, to engage the NGO community in a constructive dialogue, and 
to ensure balanced representation on advisory committees dealing with 
trade issues that have environmental implications consistent with the 
Federal Advisory Committee Act. Furthermore, we reiterate our request 
that the United States include NGOs on its delegation to the WTO 
Ministerial meeting, especially since other governments, such as 
Denmark, have already done so.

 III. Environmental Assessments of Current and Proposed Trade Policies

    We are pleased that President Clinton has committed the 
federal government to conducting an environmental review of the 
next round of talks at the WTO. However, the Administration 
needs to make significant progress in this area. We are 
concerned about the adequacy of the process and criteria for 
such an assessment. We believe that the assessment should 
include a review of both past and current impacts of existing 
trade policies on the environment and on environmental law and 
policy, a similar review of foreseeable impacts of proposals 
for negotiations, and consideration of policy alternatives. We 
remain very concerned about the conduct of assessments of 
proposed tariff reductions in environmentally sensitive 
sectors. Finally, we have concerns about certain process 
issues, including the roles of relevant agencies and 
cooperation with other governments.

1. Procedures and Criteria for Assessment

    We are concerned that the Administration has yet to suggest 
any procedures or criteria for the assessment, with Seattle 
less than six months away. In our view, there are some clear 
principles with which this assessment must comply. Many of 
these principles are found in the National Environmental Policy 
Act (NEPA). The starting point for this assessment must be 
NEPA's mandated procedures and methodologies, as elaborated 
through regulations of the Council on Environmental Quality, 
and enriched through decades of federal agency experience with 
implementation.
    At a minimum, the assessment must be comprehensive in 
scope, covering all Administration proposals for modifying or 
adding to existing trade policies embodied in the WTO 
Agreements. The assessment should be framed in terms of two 
basic questions. Is the framework of laws, policies and 
institutions in place to ensure that additional multilateral 
steps to liberalize trade will lead to environmentally and 
socially beneficial outcomes? If it is not, then what 
institutional, legal and policy changes must we make before we 
move forward with further liberalization?
    The assessment must involve the full participation of civil 
society. In light of the short time remaining before Seattle, 
the assessment procedure must begin immediately. It must 
consider reasonably foreseeable impacts on a global scale. It 
must continue until the conclusion of any new negotiating 
round, taking into account new knowledge as it accumulates, as 
well as evolving trade policy positions. It must identify areas 
in which existing WTO agreements and new negotiations have (or 
will have) significant environmental effects, and evaluate 
policy alternatives and mitigation measures, including reforms 
of existing agreements and modifications of proposed ones 
including the no-action alternative. And it must integrate 
social and development concerns.
    To ensure that the results are balanced and objective, the 
process should be overseen by the CEQ and conducted with the 
full and equal participation of affected federal agencies, 
state and local governments, and interested members of the 
public. Finally, we urge the Administration to take the lead in 
facilitating an assessment at the multilateral level by a 
balanced panel of experts drawn from the WTO Secretariat, 
international institutions with environmental and other 
relevant expertise, the scientific community, and the public.

2. Assessments of Existing Trade Policies

    A forward-looking assessment must be complemented by 
consideration of lessons learned. To date, unfortunately, 
governmental consideration of environmental impacts of trade 
policy have been inadequate. As a result, we urgently need to 
gain a better understanding of the impacts of past trade 
policies. Thus, the Administration should also conduct an 
assessment of the environmental impacts of the WTO Agreements 
adopted in the Uruguay Round, carried out consistent with the 
principles we have outlined for conducting an assessment.
    This review should cover all relevant WTO Agreements, such 
as the General Agreement on Tariffs and Trade (GATT), the 
Agreement on the Application of Sanitary and Phytosanitary 
Measures (SPS), the Agreement on Technical Barriers to Trade, 
the Agreement on Trade-Related Aspects of Intellectual Property 
Rights (TRIPS), and agreements on subsidies and agriculture. In 
relation to the TRIPS Agreement, we are concerned that the 
expanded scope and enforcement of intellectual property rights 
required under the WTO TRIPS Agreement may affect the transfer 
of technology required under multilateral environmental 
agreements (MEAs), the rights of farmers and indigenous 
peoples, and the equitable distribution of benefits required 
under the Biodiversity Convention.

3. Assessment of Proposals for Accelerated Sectoral 
Liberalization

    Beginning in the context of Asia-Pacific Economic 
Cooperation (APEC), and more recently in the WTO, the 
Administration has proposed accelerated reduction of tariffs, 
accompanied by examination of non-tariff measures, of a number 
of sectors, including environmentally sensitive sectors such as 
energy, chemicals, fish and forest products. In light of the 
potential environmental impacts, we urge the Administration to 
assess carefully the environmental effects of accelerated 
liberalization in all sectors, and to define and implement 
policy measures to maximize environmental benefits and mitigate 
harmful impacts. The United States should not push for 
accelerated liberalization until full environmental assessments 
have been conducted--of the proposals for both tariff and non-
tariff measures--along the lines discussed in this letter. In 
light of the severe threats confronting forests and fisheries, 
and the demonstrably inadequate national and international 
frameworks for conserving them, this approach is particularly 
important with respect to the fish and forest product sectors.
    We appreciate the step in the right direction represented 
by the joint analysis of the economic and environmental effects 
of the forest product initiative to be conducted by CEQ and 
USTR. We are skeptical, however, whether the review as defined 
in the June 25, 1999 Federal Register notice will be an 
adequate basis for sound policy making. Even if it is, we are 
equally concerned that the review's results will not be taken 
into account in the ultimate decision. Thus, we call on the 
Administration to explain on the record the environmental basis 
for whatever policy decision it takes. As currently proposed, 
the review does not reflect key principles of NEPA. For 
instance, the Federal Register notice allows only 30 days for 
the public to provide input, and it is unclear whether there 
will be any other opportunities for public participation.

4. Assessment of the Built-In Agenda

    Services. We have concerns that negotiations on services 
could have some of the same far-reaching implications for 
domestic environmental and health regulation as would 
investment liberalization. Services, like investment, involve 
activities within a country's territory that relate to a host 
of regulatory functions performed by federal, state and local 
authorities. When it comes to trade liberalization, services, 
like investment, raise a host of concerns about community 
values, regulation and sovereignty that are not so directly 
posed by goods. We urge the Administration to assess 
environmental and social implications as it develops its 
positions.
    Agriculture. The United States has called on WTO members to 
carry forward with agricultural negotiations with the 
objectives of gaining ``further deep reductions in support and 
protection, while encouraging non-trade distorting approaches 
for supporting farmers and the rural sector.'' We share the 
Administration's desire to reform policies and programs that 
encourage environmentally damaging expansion and 
intensification of production. At the same time, government 
agricultural policy can and must reflect the multiple 
environmental and social functions that agriculture plays. 
Support for environmentally responsible agriculture can help 
level the playing field for farmers who take responsibility for 
the impacts that production has on the environment of their 
neighbors, and at the same time have to compete with producers 
that externalize environmental costs onto society. Government 
policy also should take into account the social values that 
independent farmers provide to communities.
    We urge the Administration to make an effort to ensure that 
the United States approach to agriculture at the WTO strikes a 
better balance among these policy objectives than in the past. 
The United States continues to maintain direct and indirect 
subsidies and protections that distort agricultural markets and 
threaten our environment, such as below-market pricing for 
water from government-funded projects and for grazing on public 
lands. The Administration should carry out a thorough review 
and restructuring of these policies and programs.
    The agricultural negotiations on the built-in agenda will 
offer governments a chance to develop a multilateral 
understanding of which policies and programs should be reduced, 
and which should be permitted, on environmental and social 
grounds. The assessment we are calling for will provide an 
opportunity for this. Governments should also explore how to 
help developing countries implement such support, whether 
through multilateral financial and technical assistance or 
through some system of preferences. We urge the Administration 
to provide leadership on the issue of food security in these 
talks. Governments must consider the impacts that dumping of 
food exports have on the productive capacity of countries whose 
populations suffer from chronic hunger, and take this into 
account in defining relevant trade policies.

    Submitted by:
                                   David R. Downes,
                                    Stephen Porter, Center for 
                                    International Environmental Law;
    On behalf of:

                                   Jake Caldwell, National Wildlife 
                                       Federation;
                                   Dan Seligman, Sierra Club;
                                   David Schorr, World Wildlife Fund;
                                   Andrea Durbin, Friends of the Earth;
                                   Justin Ward, Natural Resources 
                                       Defense Council;
                                   Scott Paul, Greenpeace USA;
                                   Rina Rodriguez, Defenders of 
                                       Wildlife and Community Nutrition 
                                       Institute;
                                   Antonia Juhasz, American Lands 
                                       Alliance;
                                   Cameron Griffith, Consumer's Choice 
                                       Council;
                                   Martin Wagner, Earthjustice Legal 
                                       Defense Fund;
                                   Kristin Dawkins, Institute for 
                                       Agriculture and Trade Policy;
                                   Doug Norlen, Pacific Environment and 
                                       Resources Center.
      

                                


Statement of Benjamin Cohen, Senior Staff Attorney, Center for Science 
in the Public Interest

    The Center for Science in the Public Interest \1\ 
(``CSPI'') welcomes this opportunity to present its views on 
United States negotiating objectives for the World Trade 
Organization (``WTO'') Ministerial conference to be held in 
Seattle from November 30 through December 4, 1999. Our 
testimony focuses on the Agreement on the Application of 
Sanitary and Phytosanitary Measures (``SPS Agreement''), which 
was negotiated as part of the Uruguay Round of Trade Agreements 
and ratified by Congress in 1994.
---------------------------------------------------------------------------
    \1\ CSPI, a nonprofit organization based in Washington, DC., is 
supported by approximately one million members who subscribe to its 
Nutrition Action Healthletter. CSPI has been working to improve the 
nation's health through better nutrition and safer food since 1971.
---------------------------------------------------------------------------
    As a founding member of the International Association of Consumer 
Food Organizations--along with the Japan Offspring Fund and the Food 
Commission UK--CSPI participated as an observer at both the June 1999 
meeting and the 1997 meeting of the Codex Alimentarius Commission.
    Let me state at the outset that we support expansion of 
international trade and recognize the benefits that it may 
bring. We also recognize that international harmonization of 
food safety standards facilitates trade. The benefits of 
promoting trade through harmonization, however, must be 
balanced against the possible harm to consumers that 
harmonization entails.
    The international harmonization process will only benefit 
consumers if national regulatory standards are harmonized in an 
upward manner that provides the public with the greatest degree 
of protection from unsafe foods and deceptive trade practices. 
Unfortunately, the SPS Agreement, as it has been interpreted 
and applied during the last five years by the WTO, threatens 
United States regulatory requirements because it is leading to 
just the opposite, i.e., to ``downward harmonization.'' \2\ We, 
therefore, urge Congress to support reforms to the SPS 
Agreement that would protect United States food safety and 
deception safeguards from being weakened in the name of 
facilitating international trade.
---------------------------------------------------------------------------
    \2\ As President Clinton put it in a speech to the WTO last year, 
``We should level up, not level down.''
---------------------------------------------------------------------------
    One of the primary purposes of the SPS Agreement is to 
promote trade by encouraging countries to develop and rely on 
international regulatory standards for food. The SPS Agreement 
specifically refers to standards set by a United Nations 
(``UN'') affiliated organization called the Codex Alimentarius 
Commission (``Codex''), which was established in 1962 by the UN 
World Health Organization and Food and Agricultural 
Organization.
    Prior to 1995, national governments were free to accept or 
reject Codex standards. However, with the ratification of the 
SPS Agreement, Codex's role has changed greatly. Article 3.2 of 
the SPS Agreement provides that a country employing a Codex 
``standard, guideline or recommendation'' is presumed to be in 
compliance with its WTO obligations. Article 3.3 of the SPS 
Agreement provides that a country that has a regulatory 
requirement resulting in a higher level of protection than a 
Codex ``standard, guideline, or recommendation'' is presumed to 
have erected a barrier to international trade unless the 
country can show that its standard has a ``scientific 
justification.''
    A country that the WTO finds has erected such a barrier 
must either lower its regulatory requirement to comply with the 
Codex standard or pay an international penalty. This penalty 
can take the form of either compensating the foreign government 
whose exports to the country have been limited or permitting 
that country to impose trade restrictions on imports from the 
country that maintained the higher food safety standard.\3\
---------------------------------------------------------------------------
    \3\ For example, last month the United States announced it would 
impose 100 percent tariffs on $117 million of imports from Europe 
because the European Union (``EU'') has refused to repeal its ban on 
hormone-treated beef after the WTO ruled in 1998 that the ban as 
applied to imports violated the SPS Agreement. In 1988 the EU adopted 
the ban on hormones in cattle for growth promotion purposes in both 
domestically produced and imported meat.
---------------------------------------------------------------------------
    The Codex Alimentarius Commission has had three meetings 
since the SPS Agreement was ratified in 1994. In 1995 Codex--by 
a vote of 33 to 29 with seven abstentions--approved the use of 
growth hormones for cattle. This Codex decision helped the 
United States government win a legal battle at the WTO to 
either sell hormone-treated beef in the European Union or 
receive financial compensation.\4\ However, since that time the 
United States has not fared well. At the 1997 Codex meeting the 
United States lost two key votes. Codex
---------------------------------------------------------------------------
    \4\ The United States' legal victory at the WTO has not, of course, 
led to any United States exports of hormone-fed beef to the EU. The 
United States has rejected EU offers of either expanding exports of 
non-hormone fed beef or having a label on the beef saying that it is 
from hormone-fed cattle. The EU has rejected the United States' offer 
to label the beef as coming from the United States.
---------------------------------------------------------------------------
      adopted--by a vote of 33 to 31 with 10 
abstentions--an international safety standard for natural 
mineral waters that permits higher levels of lead and other 
contaminants than the Food and Drug Administration (``FDA'') 
now allows; and
      also adopted--by a vote of 46 to 16 with seven 
abstentions--an international standard for food safety 
inspection systems that permits self-evaluation by the 
companies or nongovernmental third-parties even though in the 
United States such food safety inspections are the 
responsibility of the United States Department of Agriculture 
(``USDA''), the FDA, and State governments.\5\
---------------------------------------------------------------------------
    \5\ This 1997 Codex decision may partially explain why the United 
States Department of Agriculture (``USDA'') is permitting imports of 
meat and poultry from 32 foreign countries even though the USDA does 
not yet have enough information from any of these foreign governments 
to determine whether its salmonella testing system provides a level of 
safety ``equivalent'' to that provided by the salmonella testing 
requirements that large United States meat and poultry plants have had 
to comply with since January 1998. USDA's regulations, announced in 
July 1996, require that in the United States salmonella samples be 
taken by government inspectors and analyzed in government laboratories. 
In many foreign countries--including the five (Canada, Australia, New 
Zealand, Denmark, and Brazil) that account for about 94 percent of our 
imported meat and poultry--these salmonella tests are done privately.
    On June 8, 1999 the House of Representatives adopted, by voice 
vote, Representative Meek's floor amendment to H.R. 1906, the FY 2000 
appropriations bill for the Agriculture, Rural Development, Food and 
Drug Administration, and Related Agencies, that cuts off USDA funds for 
the processing of imports of meat and poultry from any foreign country 
for which USDA has not decided by March 1, 2000 that the foreign meat 
and poultry inspection system provides a level of safety equivalent to 
that provided by the domestic meat and poultry inspection system.
---------------------------------------------------------------------------
    The United States avoided losing any recorded votes at this 
year's Codex meeting by acquiescing to numerous Codex standards 
that provide less protection to consumers than the United 
States now requires. At its June 1999 meeting Codex:
      approved pesticide residue levels that do not 
take into the account the health effects of pesticides on 
children, as mandated under United States law; \6\
---------------------------------------------------------------------------
    \6\ See section 405 of the Food Quality Protection Act of 1996, 
P.L. 104-170, amending section 408(b) of the Federal Food, Drug, and 
Cosmetic Act, 21 U.S.C. Sec.  346a(b).
---------------------------------------------------------------------------
      approved an amended standard for natural mineral 
waters that still permits higher levels of lead and other 
contaminants than the FDA now allows; \7\
---------------------------------------------------------------------------
    \7\ Codex approved a level for lead of .01 mg/l, a level for 
nitrate of 50 mg/l, and a level of 3 mg/l for nitrite. The FDA's 
ceilings are .005 mg/l for lead, 10 mg/l for nitrate, and 1 mg/l for 
nitrite. 21 C.F.R. Sec. 165.110(b)(4)(iii)(A).
---------------------------------------------------------------------------
      approved a safety standard for dairy products 
that does not require pasteurization even though pasteurization 
of dairy products is generally required by the FDA; \8\
---------------------------------------------------------------------------
    \8\ The Codex provision applies to butter, milk fat products, 
evaporated milks, sweetened condensed milk, milk powders and cream 
powders, cheese, whey cheese, and cheeses in brine. The FDA requires 
pasteurization for milk and all milk products sold in interstate 
commerce unless the FDA has by regulation exempted the product from 
pasteurization. 21 C.F.R. Sec. 1240.61. The FDA has exempted certain 
cheeses--such as asiago fresh and soft, blue, brick, caciocavallo 
siciliano, cheddar, colby, edam, gorgonzola, gouda, and hard--from 
pasteurization. 21 C.F.R. Sec. Sec.  133.102, 133.106, 133.108, 
133.111, 133.113, 133.118, 133.138, 133.141, 133.142, and 133.150.
---------------------------------------------------------------------------
      sanctioned the use of five food additives which, 
while presumably safe, have not been formally approved by the 
FDA for use in the United States; and
      defeated attempts to strengthen current Codex 
nutrition labeling requirements to make them more akin to 
United States law.\9\
---------------------------------------------------------------------------
    \9\ The current Codex standard on nutrition labeling requires that 
when nutrition labeling is provided, the amount of calories, fat, 
protein, and carbohydrate be listed. The U.S. proposed that saturated 
fat, sugar, sodium, and fiber to be added to the list to make the Codex 
standard more compatible with U.S. requirements. Several governments 
objected to this proposed amendment, and it was not adopted.
---------------------------------------------------------------------------
    The United States presumably acquiesced to these weak Codex 
standards because it believed that it would not prevail if it 
insisted on a recorded vote.\10\
---------------------------------------------------------------------------
    \10\ For example, the United States had lost a recorded Codex vote 
(33 to 31 with 10 abstentions) on mineral water standards in 1997 and 
had lost the pasteurization issue in a Codex committee.
---------------------------------------------------------------------------
    The United States' acquiescence to these Codex standards 
means that it may be only a matter of time before current FDA 
and USDA regulations are challenged as trade barriers by 
countries invoking the Codex standards as evidence that United 
States regulatory requirements are unreasonably high. This 
process is unacceptable. Food safety and consumer protection 
must not be sacrificed in the name of harmonizing regulatory 
requirements and facilitating trade.
    Accordingly, at the Ministerial Meeting in Seattle, the SPS 
agreement should either be interpreted \11\ or renegotiated so 
as to give the United States the ability to prevent a downward 
harmonization of food safety standards. Requiring that Codex 
decisions should become the presumptive international food 
safety standard only if they are virtually unanimous would 
permit the United States to protect domestic regulatory 
requirements by insisting on a recorded vote even when its 
views are shared by only a minority of national governments.
---------------------------------------------------------------------------
    \11\ As a technical matter, this could be done by interpreting the 
phrase in Article 3.3 of the SPS Agreement ``international standards, 
guidelines or recommendations'' to refer only to those decisions made 
by a virtually unanimous Codex. Other Codex decisions would be 
considered as merely ``advisory.''
---------------------------------------------------------------------------
Another portion of the SPS Agreement that should be renegotiated deals 
        with situations where nations may maintain regulatory 
        requirements when the relevant scientific evidence to assess 
        the need for the requirement is uncertain. Article 5.7 of the 
        SPS Agreement says
    ``In cases where relevant scientific evidence is insufficient, a 
Member may provisionally adopt sanitary or phytosanitary measures on 
the basis of available pertinent information, including that from the 
relevant international organizations as well as from sanitary or 
phytosanitary measures applied by other Members. In such circumstances, 
Members shall seek to obtain the additional information necessary for a 
more objective assessment of risk and review the sanitary or 
phytosanitary measure accordingly within a reasonable period of time.'' 
(emphasis added).
    At its meeting in Brussels, Belgium in April 1999, the 
Transatlantic Consumer Dialogue \12\ (``TACD'') unanimously recommended 
that the word ``provisionally'' be deleted from Article 5.7.\13\ 
``Provisionally'' suggests a relatively short period of time. But it 
may take decades to collect enough data for a government to determine 
whether, say, a particular food additive causes cancer in people. 
``Provisionally'' should be replaced in Article 5.7 with ``a reasonable 
period of time.''
---------------------------------------------------------------------------
    \12\ The TACD was established in 1998 to provide consumer input 
into United States-European Union trade relations in various areas, 
including food and agriculture policy, and to counterbalance the work 
of the Transatlantic Business Dialogue. About 60 consumer leaders from 
16 countries--including CSPI--agreed on 20 resolutions that could 
affect critical trade issues.
    \13\ There is only one WTO decision interpreting Article 5.7, and 
it did not deal with the issue of what ``provisional'' means. Japan--
Measures Affecting Agricultural Products (February 22, 1999). Instead, 
in that decision the WTO Appellate Body focused on the phrase 
``reasonable period of time'' in Article 5.7 and said (at 25) that 
``what constitutes a 'reasonable period of time' has to be established 
on a case-by-case basis and depends on the specific circumstances of 
each case, including the difficulty of obtaining the additional 
information necessary for the review and the characteristics of the 
provisional SPS measure.''(emphasis in original). The WTO held that 
Japan had not reviewed within a reasonable period of time its 1987 
varietal testing requirements for imported apples, cherries, peaches, 
walnuts, apricots, pears, plums, and quince that Japan asserts are 
designed to protect Japan from the codling moth.
---------------------------------------------------------------------------
    In conclusion, almost five years of experience with the SPS 
Agreement indicates that it jeopardizes FDA and USDA regulations 
protecting consumers from unsafe food and misleading trade practices. 
This Committee should take the lead in telling the Administration that 
the SPS Agreement should be changed to make it clear that food safety 
and consumer protection are not negotiable items in the quest for free 
trade.
      

                                


Statement of Stephen G. Lodge, Director, Legislative Affairs, National 
Confectioners Association, McLean, Virginia, and the Chocolate 
Manufacturers Association, McLean, Virginia

    Mr. Chairman and members of the subcommittee, thank you 
very much for allowing us the opportunity to testify before 
your panel regarding the United States negotiating objectives 
for the Seattle Ministerial meeting of the World Trade 
Organization (WTO), due to start in November. In particular, 
our associations are eager to share with you our suggestions on 
specific objectives for the negotiations and our comments on 
the anticipated impact of these WTO negotiations on jobs, 
economic opportunity and the future competitiveness of U.S. 
manufacturers in our industries.
    My name is Stephen Lodge and I am the Director of 
Legislative Affairs for the Chocolate Manufacturers Association 
(CMA) and the National Confectioners Association (NCA). CMA and 
NCA together represent 270 companies that manufacture over 90% 
of the chocolate and confectionery products in the United 
States, and another 250 companies that supply those 
manufacturers. The industry generated $22.7 billion in sales 
last year. Approximately 65,000 jobs in the US are directly 
involved in the manufacture of confectionery and chocolate 
products. Member companies are located in 34 of the 50 states, 
with a particularly large presence in California, Illinois, New 
Jersey, New York and Pennsylvania.
    The industry is the second largest consumer of refined 
sugar and other sweeteners in the US; the second largest user 
of peanuts; and uses nearly $400 million worth of dairy 
products.
    Last year the industry exported more than $600 million in 
chocolate, chocolate confectionery, and sugar confectionery 
products to more than 50 countries around the world.

                           Executive Summary

    We urge that the mandate for the new round of trade 
negotiations include the following:
    1. The comprehensive negotiation and elimination of the 
high level of global agricultural protection that remained 
after the Uruguay Round. All agricultural products should be 
included. The confectionery industry's priorities are sugar, 
peanuts, and dairy.
    2. The treatment of processed foods, including products of 
Chapters 17 and 18 of the Harmonized System, as a distinct 
agenda item in the negotiations separate from agricultural 
commodities.
    3. The elimination of all tariff and non-tariff barriers to 
processed foods, including chocolate and confectionery.
    4. The creation of opportunities for accelerated 
liberalization in certain sectors such as the elimination of 
duties on cocoa products and cocoa containing products 
classified in Chapter 18 of the Harmonized System.
    5. The on-time implementation of existing WTO agreements, 
in particular the Customs Valuation Agreement, by all countries 
who have committed to do so by 2000. The Valuation Agreement is 
important because non-compliance can undermine or completely 
nullify WTO Members' tariff reduction commitments. The 
comprehensive use and correct application of the provisions of 
this Agreement by all existing and acceding WTO members are an 
essential foundation on which to build additional market 
liberalization undertakings in the new round.

                              Introduction

    The US confectionery industry has made free trade and the 
maintenance of an open US market an operating principle for 20 
years. US duties on chocolate and confectionery products were 
reduced to 5% and 7% in the Tokyo Round and further reduced as 
a result of Uruguay Round negotiations. The final bound tariff 
rates on categories of concern to the industry are shown below:

------------------------------------------------------------------------
   HS No.             Description                 Bound rates -2000
------------------------------------------------------------------------
    1704.10  Gum..........................  4%.
    1704.90  Sugar confectionery..........  4.5%.
    1806.20  Bulk chocolate (certain sub-   0% -4.3%+52.8c/kg
              categories may be subject to
              quota).
    1806.31  Chocolate, filled............  5.6%.
    1806.32  Chocolate, unfilled..........  4.3%.
    1806.90  Chocolate, other.............  6%.
    1905.30  Sweet biscuits...............  0%.
------------------------------------------------------------------------
Note: Products packaged for consumption at retail as candy or
  confectionery are not subject to sugar or dairy quotas

    The industry has maintained this free trade stance in spite 
of excessively high raw materials costs for sugar, dairy and 
peanuts which result from US domestic price support programs 
and tariff and non-tariff barriers that block US industry 
access to these commodities at world prices. Our industry pays 
2-3 times the world price for these key ingredients, incurring 
millions of dollars in additional costs each year. Despite 
this, we have never asked for import protection, preferring 
instead to compete with imported confectionery on the basis of 
price and product quality.

                             Market Access

    US manufacturers of chocolate and non-chocolate 
confectionery products exported over $667 million worth of 
these goods in 1997. This represented 6% of total production, 
and asignificant increase over just 1% in the mid-1980's. This 
growth demonstrates our members growing interest in, and 
reliance on, foreign markets to achieve their revenue and 
profitability goals. Market access improvements achieved via 
the upcoming round of negotiations will be critical if our 
members are to take advantage of new export opportunities in 
expanding overseas markets.
    US tariffs on chocolate and non-chocolate confectionery 
products, which today range from 4.1% to 6.2%, are among the 
lowest in the world. In addition, more than 140 developing and 
least developed countries enjoy duty free access to the US 
confectionery market through the Generalized System of 
Preferences (GSP), which expired on June 30 but is expected to 
be renewed.
    Unfortunately, the US industry does not enjoy the same 
level of access to most foreign markets. The attached survey of 
global tariffs on the industry's products highlights the 
substantial barriers that still exist for our member companies. 
Tariff rates are above US rates in almost every market, and in 
some cases exceed 35%, such as Hungary (37%), Poland (45%), 
Dominican Republic (35%), Egypt (40%), India (40%) and Vietnam 
(50%). Clearly, substantial progress must be made in the new 
round in order to achieve the level of access already available 
to foreign companies exporting to the US market.

The industry's objective is the total elimination of tariffs on 
chocolate and non-chocolate confectionery products around the 
world. Toward this objective we urge that the US agenda include 
the following.

    First, processed foods should be seen as the catalyst for 
agricultural growth and every possible restraint to their 
movement among global markets removed. Processed food 
production and trade not only adds value to agricultural 
commodities but creates demand by stimulating consumer interest 
and expanding markets. Keep in mind too that American jobs are 
retained and even increased with the continued development of 
processed foods in the United States. The new WTO round 
presents an opportunity to begin this process. Therefore, one 
objective must be to de-couple processed food tariff 
negotiations from those for agricultural commodities.
    By separating processed foods from commodities it may be 
possible to achieve the level of liberalization we seek. We ask 
that the US Government formally support proposals such as the 
APEC Early Voluntary Sectoral Liberalization (EVSL) on 
processed foods. Whether by that name or any other, the goal 
should be to remove all tariff barriers to processed foods 
including chocolate and confectionery. It is estimated that 
full tariff liberalization of the processed foods sector within 
APEC countries alone would result in economic gains of US$32 
billion. The global benefits would equal many times that 
amount.
    Second, the US should support the elimination of duties on 
all cocoa and cocoa-containing products which are classified in 
Chapter 18 of the Harmonized System. Duty elimination for these 
products would benefit many of the cocoa producing countries in 
Asia and South America still suffering from recent financial 
crises, and would support other multilateral efforts to rebuild 
these economies. Such trade liberalization could also 
ultimately lead to lower prices and increased consumer demand 
for chocolate and non-chocolate confectionery products around 
the world, creating new opportunities for US exporters.

                              Agriculture

    The industry urges a comprehensive negotiation that includes all 
agricultural products and all countries including the US and the 
European Union. US leadership for this round is essential, and to hold 
certain commodities such as peanuts and sugar outside the scope of 
negotiations would be disingenuous and potentially destructive of 
progress. Similarly, the European Union should not be allowed to divert 
attention from the changes needed to reform their domestic sugar and 
dairy regimes.
    A comprehensive negotiation should also mean that all mechanisms of 
agricultural support are on the table including quotas and quota 
allocations, in-quota and out-of-quota tariff rates, and licensing 
regimes. The industry asks that the US agenda include preparedness to 
reform the peanut, sugar and dairy programs in response to this 
multilateral opportunity.

                                Peanuts

    The confectionery industry estimates that in 1998 member companies 
spent $226 million for raw and roasted peanuts. The industry ranks as 
the second largest US industrial consumer.
    Neither the Uruguay Round nor the Freedom to Farm bill resulted in 
reform of the US peanut program. US producers remain protected from 
international competition, and continue to benefit from domestic prices 
nearly twice the world price. The Uruguay Round Agriculture Agreement 
(URAA) established a small tariff-rate-quota of 56,938 metric tons for 
peanut imports. However, it also set out-of-quota tariff rates at 
163.8% for in-shell peanuts and 131.8% for shelled peanuts--levels much 
higher than those agreed to for most other US commodities. The table 
below provides detail:

------------------------------------------------------------------------
                                                               Uruguay
                                                                round
              Product                  Bound tariff rate      reduction
                                                              (percent)
------------------------------------------------------------------------
Peanuts, in shell, over-quota        163.8% ad val........          15.
Sugar, refined, over-quota           $0.3574/kg (141.3% ad          15.
                                      val.).
Peanuts, shelled, over-quota         131.8% ad val........          15.
Peanut butter and paste              131.8% ad val........          15.
Butter, over-quota                   $1.541/kg (90.6% ad            15.
                                      val.).
Cheddar cheese, over-quota           $1.227/kg (61.35% ad           15.
                                      val.).
Boneless beef, over-quota            26.4% ad val.........          15.
Rice, in the husk                    $0.018/kg (10.9% ad            36.
                                      val.).
Wheat                                $0.0035/kg (3.78% ad           55.
                                      val.).
Corn, yellow dent                    $0.0005/kg (0.6% ad            75.
                                      val.).
Beer                                 Duty free............         100%
Soybeans                             Duty free............          N/A
Pasta, uncooked, not prepared        Duty free............          N/A
Hams, fresh, unprocessed             Duty free............          N/A
------------------------------------------------------------------------

    The Freedom to Farm bill subsequently required most US 
agricultural producers to make historic shifts toward the free 
market. Unfortunately, the peanut program remained virtually 
unchanged, with only a slight decrease in the support price and 
a continuation of its outdated quota requirements.
    In fact, since the US peanut program is so out of line with 
most other FAIR Act reforms, it has become a target for 
countries wishing to use examples of US protectionism to avoid 
liberalizing their own markets. The most difficult aspect of 
the peanut program is its two-tier pricing mechanism, which 
works much like an export subsidy. Canada recently used the 
program to justify its two-tier dairy pricing system, but a WTO 
panel ruled that this system violates Canada's Uruguay Round 
commitments. Reform of the peanut program is therefore 
essential if the US is to achieve its stated goal of 
eliminating export subsidies in the next round of negotiations.
    These negotiations provide an historic opportunity to 
achieve real reform of the US peanut program by reducing its 
trade distorting effects and increasing competition. CMA and 
NCA encourage US negotiators to ensure that peanuts remain on 
the table throughout the next round, and to agree to the 
following reforms of the peanut program:
      a substantial reduction in out-of-quota tariff 
rates or increase in the quota amount,
      an immediate opening of the import quota to all 
suppliers (countries), and
      elimination of the import quota by 2008 to 
correspond with the NAFTA.

                                 Sugar

    The Uruguay Round agreements and Freedom to Farm bill also made 
only minor changes to the US sugar program. Imports continue to be 
tightly restricted through the use of tariff-rate-quotas for both raw 
and refined sugar and on products containing sugar. As a result 
domestic prices typically average 2-3 times the world price.
    Our industry is the second largest user of sugar in the US. The 
industry spends millions of dollars each year in sugar-related raw 
materials costs. Further, US jobs are being lost to foreign 
manufacturers with access to world priced sugar. Only a substantial 
reform of the US sugar program will allow our members to compete on an 
equal basis with their foreign competitors in the US and foreign 
markets.
    The sugar program also costs US consumers in the form of higher 
prices paid for sugar and sugar-containing products. A 1995 US 
Department of Agriculture (USDA) study entitled Sugar: Background for 
the 1995 Farm Legislation stated that consumers paid $178 million for 
each cent per pound that the sugar program pushes US prices above the 
world price. Recent estimates \1\ based on that USDA study conclude 
that US consumers pay $1.8 billion in additional costs per year for 
their purchases of sugar and sugar-containing products.
---------------------------------------------------------------------------
    \1\ Updated estimates produced by Public Voice for Food & Health 
Policy, Washington, DC
---------------------------------------------------------------------------
    The U.S. is admittedly not the only WTO member that contributes to 
the distortion of world trade in sugar. The European Union does so by 
fixing the intervention price for white sugar at approximately three 
times the world price, controlling production through national quotas, 
and subsidizing refined sugar exports in order to compete on the world 
market and clear the internal market of excessive inventories. Although 
internal efforts to reform the regime have thus far failed, the 
combination of the EU's planned enlargement and the new round of WTO 
negotiations provides an opportunity to exert multilateral pressure to 
achieve change.
    In order to do so, U.S. negotiators must be willing to 
substantially reform the U.S. sugar regime. Therefore, as part of the 
upcoming negotiations, CMA and NCA urge that the U.S. sugar program and 
all of its implementing mechanisms be fully on the table for 
negotiation. Similar to our comments regarding peanuts, we also ask 
that out-of-quota tariff rates be substantially reduced or that the 
quota amount be increased, that the import quota be opened up to all 
countries and that the import quota be eliminated by 2008 to correspond 
with NAFTA.

                                 Dairy

    It is estimated that the U.S. confectionery industry consumed 
nearly $400 million in milk products in 1998.
    Government programs in the US and the EU continue to protect 
domestic dairy producers from foreign competition and distort world 
trade. These interventionist programs result in millions of dollars in 
unnecessary raw materials costs for our members each year, and 
ultimately lead to higher prices on dairy products for consumers.
    The 1996 Farm Bill mandated an end to US price supports, replacing 
them with a recourse loan program, but the industry continues to be 
protected by a restrictive tariff-rate-quota system with very high out-
of-quota duty rates. Importing dairy products into the US is further 
complicated by an import licensing system that is often manipulated by 
non-users, making it even more difficult for our members to obtain 
their raw materials at reasonable prices.
    The EU regime aims at supporting the whole milk price paid to 
farmers by fixing intervention prices for butter and skim milk powder 
(SMP) which are more easily stored. The EU's structural surplus in 
milk, and, in particular butter, led to the establishment of production 
quotas in 1984 in an attempt to stabilize the market. These price 
supports and limits on production have forced the EU to rely heavily on 
subsidies to facilitate dairy exports, which severely distort world 
trade in these products.
    While the limited reforms put in place by the US Farm Bill are 
unlikely to have much impact on domestic dairy prices while import 
restrictions remain in place, it does leave US producers in a slightly 
different position than their European competitors entering the next 
round of WTO negotiations. The EU failed to achieve real reform of its 
dairy program as part of the recently adopted Agenda 2000 package, so 
it will continue to rely on subsidies to export its surplus production. 
US negotiators should take advantage of the opportunity the next round 
provides to level the playing field for US and EU dairy producers while 
giving our members access to these raw materials at reasonable prices.

                               Conclusion

    To summarize our remarks, the National Confectioners Association 
and the Chocolate Manufacturers Association urge US negotiators to take 
advantage of the opportunity presented by the upcoming round to:
    1) achieve the elimination of all tariff and non-tariff barriers to 
trade in processed foods, including chocolate and confectionery, and
    2) reform the trade distorting sugar, dairy and peanut programs in 
the US that force our members to pay two-three times the world price 
for these essential raw materials. These programs must remain on the 
negotiating table in the next round of trade talks.
    Again, Mr. Chairman, our associations appreciate having the chance 
to present these comments regarding this very important round of 
upcoming trade negotiations. We would be very pleased to provide 
further information in this regard to your subcommittee if there are 
any questions.
      

                                


Statement of Edward J. Black, President, Chair, Computer & 
Communications Industry Association, and Pro Trade Group

    The Pro Trade Group is pleased to have the opportunity to 
provide testimony to the Subcommittee on the U.S. Agenda for 
the World Trade Organization (WTO) Ministerial, which will meet 
in Seattle, Washington, beginning on November 30, 1999. We also 
will make some comments on certain issues of importance to the 
Pro Trade Group \1\ that were not discussed in detail at the 
hearing.
---------------------------------------------------------------------------
    \1\ The Pro Trade Group (WTO) is a coalition of multinational 
corporations and trade associations founded in 1987 which represents 
agricultural, consumer, industrial, retail, and consumer interests. The 
PTG pursues an open-trade, export-oriented trade policy. These comments 
reflect a consensus of PTG views rather that the views any particular 
PTG member.
---------------------------------------------------------------------------
    We commend the Subcommittee for conducting this hearing, as 
the November, 1999 WTO Ministerial is anticipated to represent 
the largest trade event in U.S. history and, more important, an 
opportunity to launch a new round of multilateral trade 
negotiations that will establish rules for trade in the 
millennium and beyond.

                           I. Overall Agenda

1. Consensus Issues

    1. At the Subcommittee's hearing, industry testimony evidenced a 
degree of consensus on certain issues and disagreement on other issues.
    There appears to be broad industry support for liberalizing 
industrial tariffs; further liberalizing agricultural policies 
(especially in the biotech area); liberalizing government procurement 
and services; and for enforcing more aggressively intellectual property 
rights. These goals which were discussed in detail at the hearing by 
Deputy USTR Esserman, are generally supported by the PTG.
    Another issue of particular importance to the PTG on which there 
appears to be some consensus is the issue of regulation of electronic 
commerce. We concur in the testimony of ACTPN to the effect that 
electronic commerce should not be classified as a good or service. We 
also concur in the testimony of ECAT that a top priority for the 
Ministerial should be to ensure that the current standstill regarding 
tariffs on electronic transmission becomes permanent. Our detailed 
comments on this issue are set forth below, in the section on ``Pro 
Trade Group Priorities.''

2. Non-Consensus Issues

    Several areas of disagreement emerged at the hearing. The first is 
the issue of whether or not the Ministerial, and a possible new round 
of trade negotiations, should address labor and environmental issues. 
This debate is well known to the Subcommittee, in particular due to the
    failure in 1997 of Congress to approve fast-track negotiating 
authority. Generally, industry appears to prefer that a new round of 
trade negotiations focus on such market access issues as tariffs, 
subsidies and investment. But opponents of fast-track authority and 
some others insist that a new round also address such issues as 
workplace standards, child labor and the relationship between trade and 
the environment.
    At the Subcommittee's hearing, ECAT called for the United States to 
avoid globally divisive issues such as non-trade related labor, 
environmental matters and competition policy. And the American Farm 
Bureau took the position that environmental and labor issues should be 
addressed only in a manner that facilitates, rather than restricts, 
trade.
    Our view is that the principal focus of the Administration's 
efforts should be to conclude unfinished business from the Uruguay 
Round and attempt to advance trade liberalization into other areas, 
without becoming unnecessarily diverted by potential controversies. 
However, realistically, without fast-track authority, the 
Administration cannot expect to achieve maximum concessions from a new 
round of trade negotiations. We also think there are important issues 
that ought to be addressed even if controversial. Accordingly, we 
concur in the attention paid to these issues by Ms. Esserman in her 
testimony. Further, we generally support the conclusions of the 
Economic Strategy Institute in its June, 1999 paper ``Setting U.G. 
Goals for WTO Negotiations,'' regarding these issues. Specifically, 
failure to address the international consequences of environmental 
standards can create artificial cost advantages that distort trade. 
Similarly, cost advantages to producers from child labor and violation 
of basic worker rights can result in unfair trade. Accordingly, we urge 
the Administration to explore the possibility of multilateral 
agreements on trade related consequences of the environment and labor 
standards at the Ministerial.
    Another area of potential controversy relates to the issue of 
whether or not competition policy should be a focus of the Ministerial. 
We believe that private interference with trade remains one of the most 
important areas largely outside current WTO rules that distorts trade 
and acts as a barrier to investment. One major undertaking of PTG last 
year related to a series of corrupt judicial awards in Ecuador that 
unfairly resulted in a total of $150 million in judgments against a 
series of U.S. multinationals. Working effectively with the 
Administration, the PTG was able to save one such multinational about 
$50 million. Our views on this subject are described in detail under 
PTG Priorities, below. Generally, we support a WTO policy that provides 
that WTO-anticipated market access benefits may not be limited or 
impeded by unfair governmental or private practices.

                     II. Pro Trade Group Priorities

    Beyond the issues generally discussed at the Subcommittee's 
hearing, and commented on above, there are a number of additional WTO-
related issues which are important to the PTG and to some of its 
members. These are discussed below.

A. International Harmonization of Manufacturing Standards

    1. Since late 1995, U.S. and European business executives, under 
the auspices of the Trans-Atlantic Business Dialogue, have promoted the 
promulgation by U.S. and European Governments of ``mutual recognition 
agreements'' (MRAs), related to manufacturing. The goal of this effort 
is to harmonize manufacturing standards and so to reduce manufacturing 
costs. Similar goals have been pursued within Asia.
    2. While the PTG strongly supports international efforts to lower 
manufacturing costs, we believe that these efforts have the potential 
for placing manufacturers from outside the regions negotiating MRAs at 
a competitive disadvantage. Accordingly, in 1996 we successfully 
lobbied for this issue to be addressed within the WTO's Technical 
Barriers to Trade Committee. Given the progress since then resulting 
from the TABD, UN Working Party 29 and others, we urge the 
Administration to seek a review of this issue at the Ministerial.

B. Technology Issues


Internet

    1. Similarly, we urge the Administration to seek at the WTO 
Ministerial recognition by our trading partners that national laws 
attempting to regulate the Internet are difficult to enforce and that 
relying on self-regulation to the maximum extent possible is the 
preferred way to respond to Internet issues.
    2. The specter of Federal Trade Commission attempts to regulate the 
Internet in the United States has already been raised. The potential 
for Internet regulation is equally great abroad:
      The European Parliament has approved a proposal that 
would hold ISPs liable for the transmissions of ``illegal'' web 
content.
      At a recent international symposium on ``Hate on the 
Internet,'' one speaker called for imposing liability on ISPs and 
payment of fines for the dissemination of ``hate propaganda.''
    3. The Internet related technology industry hopes to rely on 
industry self-regulation. To be sure, while there are legitimate policy 
issues to address, the explosive growth of the Internet, as a provider 
of information, recreation, goods and services is really less than five 
years old and still evolving. We all expect that use of the Internet 
will continue to grow significantly, and the creators of websites, 
gateways and portals are confronting these issues for the first time, 
along with the policymakers.
    4. We are witnessing proposals that create new regulatory schemes, 
and in some cases, more burdensome schemes for Internet activity as 
opposed to the same actions taken offline. But the nature of the 
Internet as a global medium is unique. This makes national laws 
difficult to enforce because the material can originate outside of the 
borders of the nation that seeks to restrict the flow of information. 
Further, in the United States, there is certainly no suggestion that 
the government become the only ISP and filter out objectionable or 
illegal material. ISP regulation would be virtually unworkable and 
extremely costly, and the net effect would be to damage the emerging 
promise of the Internet.
    5. There are no ready-made answers in this debate. However, to the 
extent possible, socially responsible self-regulation is the preferable 
option and may actually prove to be more effective than statutory 
enactment. Second, in areas where formal regulation may occur, we 
strongly believe that, at a minimum, Internet activity should be 
regulated with no greater burdens than those imposed on offline 
activities.

E-Commerce

    1. As discussed above, the PTG feels that the current standstill on 
tariffs on Electronic Commerce (``E-Commerce'') should become permanent 
and that E-commerce should not be classified as a good or services.
    2. There has been widespread and enthusiastic support in the 
private sector, and on a bipartisan basis in Congress, for the goals 
and objectives of government re-engineering and reinvention. Indeed, 
the drive toward streamlining functions has led to the concept of 
``electronic government'' with an eye to enhanced accessibility to 
citizens. These are worthy objectives which the PTG strongly supports.
    3. However, in pursuing the goal of achieving electronic 
government, a growing number of public sector agencies are seeking 
authority to enter the world of electronic commerce as well, with 
intentions of offering competitive products and services in the open 
commercial market place. These plans and initiatives raise many 
profound public policy issues and concerns.
    4. In its landmark policy initiative ``A Global Framework for 
Electronic Commerce'' the White House has appropriately championed the 
simple policy principle that the government's role in the Internet and 
electronic commerce should be limited, and that industry should lead. 
We agree and believe that the proper approach is reflected in the long 
standing executive branch policy directive ``OPM Circular A-76,'' which 
has been promulgated by the last eight Presidents, going back to 
Eisenhower. The core policy principle is clear: ``In the process of 
governing, Government should not compete with its citizens.''
    Nevertheless, plans are proliferating throughout government to 
launch competitive electronic commerce service offerings in the private 
market place, in direct contravention of these established policies to 
the contrary.
    5. The PTG is deeply concerned at the economically disruptive and 
inappropriate role governing agencies are seeking to establish for 
themselves in electronic commerce. OMB Circular A-76 is correct: 
government should not compete with its citizens. These well-considered 
and long-standing policy principles should be established with clarity 
in law and regulation so that the monopoly role of government in free 
enterprise which has plagued other western democracies does not become 
the defining flaw of the New Economy in the United States, and does not 
become a new form of market barrier in overseas markets to U.S. 
technology and software companies. We believe that these principles 
should be discussed at the Ministerial.

C. Timely Implementation of Customs Valuation Code

    1. By January 1, 2000, WTO members are required to meet Uruguay 
Round commitments under the Customs Valuation Code. Yet, due to the 
Asian financial crisis beginning in 1997, a number of countries reneged 
on their scheduled implementation of this Code.
    2. We anticipate an effort by some WTO members to attempt to 
postpone this deadline for implementation. We strongly urge the 
Administration to resist any such effort.
    3. Arbitrary uplifts to customs valuation are common in certain 
developing countries. Such uplifts distort trade and discourage 
investment. Accordingly, the PTG strongly supports full implementation 
of this Code on schedule.

D. Judicial Reform

    1. WTO rules related to trade in goods provide only limited 
guidance regarding regulation of foreign investment. Further, the 
Agreement on Trade-Related Investment Measures fails to address a 
variety of issues necessary to ensure fair market access and proper 
treatment of foreign investment.
    2. In this environment, trade and investment problems are 
compounded by judicial corruption, as noted above. Accordingly, we urge 
the United States to use the WTO Ministerial as a forum for discussing 
this problem, as well as ongoing efforts by such groups as the World 
Bank and the Inter-American Development Bank.

E. WTO Reform

    1. The Administration should consider a number of reforms to the 
WTO. First, WTO National Trade Policy Reviews should be made more 
complete, and non-confidential versions of submissions should be 
required and made available to interested parties. Second, reforms 
should be considered to accelerate and strengthen WTO enforcement.
    2. Furthermore, the WTO Dispute Resolution mechanism should be 
reformed in several respects. First, Dispute Resolution Panelists 
should be directed to draw adverse inferences from the non-cooperation 
of interested parties. Second, transcripts of panel hearings should be 
published and comments sought from interested parties.
    3. Finally, we urge the Administration to aggressively pursue the 
accession to the WTO of such countries as China, Ukraine, Russia, and 
other trading partners.
    We welcome the opportunity to work with this Administration to meet 
these goals.
      

                                


Statement of Arthur S. Jaeger, Assistant Director, Consumer Federation 
of America

    I am pleased to present views on behalf of the Consumer 
Federation of America, a nonprofit association of more than 260 
pro-consumer groups, with a combined membership of more than 50 
million people.
    Many highly publicized trade issues affect consumers. I 
wish address one that is often overlooked. It is trade 
restrictions erected under the federal sugar and peanut 
programs. These two antiquated farm programs cost consumers 
hundreds of millions of dollars a year in higher prices for 
sugar, peanuts, and processed foods.
    The sugar and peanut programs have their roots in the 
1930s, when federal farm programs were seen as a temporary 
means to get family farmers through hard times. They have long 
since outlived their usefulness. But when Congress recently 
pushed many other farm subsidies in a free-market direction, 
the sugar and peanut programs were barely touched.
    Today, these programs largely benefit wealthy growers and 
agribusinesses, who help perpetuate the programs in Congress 
with generous campaign contributions. They are corporate 
welfare at its worst. As CFA's chairman, former Ohio Senator 
Howard Metzenbaum, put it in 1995, these programs 
``systematically transfer hundreds of millions of dollars a 
year from consumers who need help to wealthy producers who 
don't. This is money consumers could use to buy additional food 
or clothing, help pay the mortgage and supplement savings.'' 
The sugar program is also environmentally harmful, helping to 
pollute the Everglades by encouraging the overproduction of 
cane sugar in Florida.
    Both programs rely on systems of price supports, production 
limits, and import restrictions to keep prices paid to U.S. 
producers well above the world market. For sugar, the domestic 
price is now more than four times the world price, or about 22 
cents per pound for sugar cane. For peanuts, the support price 
of $610 per ton is $260 per ton more than the world price.
    The manufacturers who pay these inflated prices typically 
pass on their costs to consumers in the retail prices of their 
products. The consumer tab for the sugar and peanut programs 
approaches $2 billion annually--$1.4 billion for sugar \1\ and 
$300 million to $500 million for peanuts. Those aren't my 
estimates; they're from the U.S. General Accounting Office in 
the early 1990s. Consumers pay this hidden subsidy each time 
they buy a food product containing peanuts or sugar at the 
grocery store. It amounts to a regressive, hidden food tax, 
hitting poor Americans the hardest.
---------------------------------------------------------------------------
    \1\ The world price for sugar has dropped four cents per pound 
since late 1997. This may have increased the consumer cost of the sugar 
program.
---------------------------------------------------------------------------
    In recent years, the sugar and peanut programs have also 
cost the U.S. economy thousands of jobs, as dozens of sugar 
refineries and peanut shelling plants across the nation have 
closed. High prices have lowered demand and stimulated 
production of alternative products. Since 1981, 12 out of 23 
U.S. cane sugar refineries--or 40 percent of capacity--have 
closed. At least 3,300 refinery workers lost jobs in these 
closures. Other refineries have cut their workforce to survive. 
C&H Sugar Co., outside Sacramento, for example, employed 1,400 
workers in 1987. Today, the workforce is less than 600. 
Likewise, in the last five years, nine peanut processing and 
shelling plants, eight manufacturing plants and seven storage 
operations have closed. Other food processing plants have quit 
manufacturing peanut butter or have started importing it from 
other countries. Some sugar and peanut processing plants have 
simply relocated outside the United States, where prices are 
significantly lower.
    The beneficiaries of these programs are more likely to be 
wealthy growers than struggling family farmers. Under the sugar 
program, more than 40 percent of the benefits go to only one 
percent of the growers. Some reap benefits in excess of a 
million dollars a year. Under the peanut program, more than 
half the benefits go to less than 10 percent of the eligible 
growers. Two out of three peanut program beneficiaries don't 
even farm their own land. Rather, they rent to others and 
collect the subsidy as absentee landlords.\2\
---------------------------------------------------------------------------
    \2\ Nonetheless, the loss of family farms is a particular concern 
of the Consumer Federation of America. Small farms add much to the 
economic and social fabric of the nation and efforts should be made to 
save the remaining family farms. CFA stands ready to work with all 
sides to find a solution to this problem and would not rule out a 
means-tested program to support small family farms.
---------------------------------------------------------------------------
    All Americans will benefit from reform of these two 
programs, and a good place to start is by phasing out the 
import protections that are a cornerstone of both. Tariffs on 
most major agricultural commodities entering this country are 
negligible. For soybeans, corn, wheat and rice, for example, 
tariffs are either nonexistent or under 20 percent. Those on 
sugar and peanuts, on the other hand, range anywhere from 100 
percent to 170 percent. They are designed solely to protect 
small segments of the economy.
    Some contend that reforming these programs would force 
most--if not all--sugar and peanut producers out of business. 
Clearly, if the sugar and peanut programs were eliminated, some 
inefficient growers would go out of business or switch to other 
crops. But reductions would not necessarily be severe. A 1995 
analysis by the respected Food and Agricultural Policy Research 
Institute estimated that, if both the sugar program and the 
related tariff protections were eliminated, production would 
decline only slowly--by about 11 percent over five years for 
sugar cane and less than that for sugar beets.
    At the Seattle trade talks, the United States should 
propose major reductions in tariffs on sugar and peanut 
imports, phased in over several years. If there is no agreement 
on phasing out tariffs, import quotas should be raised 
substantially, to allow more imports at the world price. These 
reforms complement legislation now pending in Congress to 
reduce sugar and peanut price supports.
    I am not a trade expert. But it doesn't take a Ph.D. to 
realize that, in addition to hurting consumers, U.S. 
restrictions on sugar and peanut imports limit our ability to 
open markets for other agricultural commodities. When this 
country condemns foreign agricultural subsidies while 
maintaining blatant protections at home, the hypocrisy is hard 
to miss.
    A recent ruling from a World Trade Organization dispute 
settlement panel is a case in point. The United States 
challenged Canadian import restrictions on milk and complained 
that Canada's two-tiered milk pricing system amounts to an 
export subsidy. The WTO panel ruled in our favor, setting an 
important precedent.
    While the parallels are not exact, Canada's dairy policy 
includes production quotas, support prices and border 
protections similar to those in our own sugar and peanut 
programs. How can we criticize our neighbors for agricultural 
trade policies that closely mimic our own? Quite simply, we 
can't--at least not with a straight face.
    The United States rightly has ambitious goals for 
agriculture in the coming round of trade talks. Many small 
farmers in this country are hurting, in part from a drop off in 
exports. Opening up agricultural trade is a key to helping 
them. If the sugar and peanut programs aren't reformed, it will 
be next to impossible to open new markets so U.S. farmers can 
sell more abroad. Like those who raise wheat, corn and other 
crops, sugar and peanut producers need to begin adapting to the 
world marketplace.
    The federal sugar and peanut programs have been picking the 
pockets of U.S. consumers for decades. Now these programs are 
undermining our trade objectives and colliding with efforts to 
help small farmers. Beginning now to dismantle these programs 
by phasing out the import protections both commodities enjoy 
would be an unqualified step in the right direction.
      

                                


Statement of DaimlerChrysler Corporation

    DaimlerChrysler has a strong interest in free and fair 
world trade. Expanded trade and investment opportunities 
benefit our worldwide activities and global production, 
assembly, sales and financial services network, as well as our 
employees who gain from job creation and increased living 
standards. Consequently, DaimlerChrysler strongly supports a 
new round of WTO negotiations to continue the process of trade 
and investment liberalization. Once begun, this round should be 
completed as quickly as possible and preferably within a 3-year 
timeframe in order to keep pace with business developments. 
Within this context, it is essential that fast track authority 
be renewed.
    DaimlerChrysler believes in the importance of a world 
trading system. We also recognize that public support for 
further trade liberalization is dependent on the credibility of 
that system. There are areas within international commerce that 
are not adequately covered by existing WTO rules. Where these 
deficiencies are used as ways of impeding access to markets, 
they should be addressed.
    Following is a preliminary list of issues that have been 
identified by the company as priorities for the New Round. They 
are divided into two sections--priority issues to be addressed, 
and institutional issues which are also of great importance in 
order to ensure that the priorities, if achieved, are fully 
implemented.

                            Priority Issues

Elimination of Non-tariff Barriers

    As tariff barriers are gradually reduced and agreements to 
eliminate trade-related investment measures are implemented, 
non-tariff barriers such as import quotas, licensing 
requirements, and technical barriers to trade including 
standards, labeling, testing and certification become the 
principal means of restricting imports and protecting local 
industries. These practices can far outweigh the significance 
of any reduction or elimination of tariffs, in some cases 
nullifying or impairing the expected benefit of tariff 
concessions. It is crucial that the trade opening effect of 
tariff reductions not be outweighed by maintaining or 
increasing non-tariff barriers. Examples of effective non-
tariff barriers include barriers to setting up effective 
distribution networks, continuously changing or non-transparent 
regulations, expensive and time-consuming certification or 
testing processes unique to importers, and restricting 
availability of registration information to foreign companies 
for marketing purposes. The new round must place increased 
emphasis on the elimination and prevention of non-tariff 
barriers and work should continue in all appropriate fora on 
standards harmonization.

WTO Investment Rules 

    Increasingly, access to markets involves investment, but 
there are no WTO rules that address foreign direct investment 
in non-service sectors. For example, WTO rules would not 
prohibit Chinese restrictions on equity in automobile 
manufacturing (maximum 50% ownership of a joint venture). New 
WTO rules are necessary to address such investment-related 
issues to ensure fair and open investment opportunities. Within 
an economy there should be no discrimination between domestic 
and foreign-owed companies in the application of national law, 
regulations, or taxes. Such a National Treatment clause should 
be binding on all levels of government. National investment 
provisions should be transparent and all liberalization 
commitments should be bound to ensure predictability. A 
foreign-owned company should be free in all entrepreneurial 
decisions such as the repatriation of funds, employment of 
personnel of its choice, sourcing and use of profits. 
Protection of foreign investors against expropriation or 
nationalization should also be included.

WTO Environment Rules

    There is a major link between trade issues and 
competitiveness, including issues related to trade and 
environment. Consequently, environmental regulatory proposals 
should be developed in a way to ensure that competitiveness is 
impaired to the least possible extent and should apply to all 
WTO members. Furthermore, policies intended to achieve 
environmental objectives should not be misused for 
protectionist purposes. Consequently, the new round should 
develop WTO-consistent criteria for the use of trade measures 
contained in multilateral environmental agreements.

Trade Facilitation

    Trade facilitation must be moved into the new WTO round 
since customs procedures and lack of transparency are among the 
most significant non-tariff barriers to trade. Compliance with 
procedural requirements may represent from 2% to 10% of overall 
product cost. As such, both business and governments can 
achieve long term benefits as a result of increased 
efficiencies. In order to reduce procedural obstacles, 
divergent and/or unclear documentation requirements, arbitrary 
enforcement of rules and procedures, delayed clearance of 
goods, and continuously changing rules, WTO agreement is 
necessary. The new round should develop comprehensive and 
multilateral rules to simplify and modernize trade procedures; 
regulations and documentation must be made as transparent as 
possible and procedures and documents must be simplified and 
harmonized. Procedures for combating corruption and fraud 
should be mandated.

Tariff Measures

    Reduction of Tariff--DaimlerChryler does not view this as 
the most important priority because non-tariff barriers often 
are far more onerous, and duties can be replaced by national 
levies. However, in countries with excessive duties, which 
render imports financially impossible, these duties should be 
substantially reduced.
    Tariff Binding--While the applied vehicle tariffs in the US 
and EU are bound at that level, many countries have not bound 
their tariffs at the current levels applied. This provides the 
opportunity for increasing tariffs from current levels, thus 
impairing trade predictability and reliability. As tariffs are 
reduced, they must be bound at the new levels.

                          Institutional Issues

Implementation of Existing Commitments

    A primary objective of the Seattle Ministerial should be an 
increased emphasis on the implementation of existing WTO 
commitments. The promise of new agreements is less appealing if 
existing agreements are ignored. Emphasis on implementation 
becomes even more important as many commitments negotiated 
during the Uruguay Round, for example the agreement to 
eliminate trade-related investment measures, take effect on 
January 1, 2000 after significant transition periods. Another 
priority for the new round is full and timely implementation of 
the TRIPs (trade related intellectual property) agreement.

Commercially Meaningful Dispute Settlement

    The dispute settlement understanding negotiated in the 
Uruguay Round was intended to provide a means of enforcing WTO 
agreements. While it gave the WTO much more authority than its 
predecessor, the GATT, recent experience has proven that it 
still has significant weaknesses. First, the process from 
beginning to end can take up to three years. This is much too 
long given the fast pace of international business. Second, 
even after a decision is passed down, a country may fail to 
implement a solution to fully resolve the complaint, thereby 
forcing the initiation of a second complaint and extending the 
period during which the offending behavior continues. A process 
should be developed for expedited consideration of such cases. 
This process should also be used for failure to implement WTO 
agreements that include substantial transition periods for 
implementation, such as the TRIMs agreement. It should not be 
necessary to file a WTO case on January 1, 2000, taking up to 
three years to resolve, in order to find a country in violation 
of a TRIMs commitment made in 1995 (with a 5-year transition 
period). This would, in effect, add another three years to the 
transition period. In the interim, a cease-and-desist process 
should be established so that the practices do not continue, so 
as not to reward the outlying countries with a de facto 
extension of the deadline.
      

                                


Statement of Defenders of Wildlife

    Defenders of Wildlife (Defenders) is a non-profit 
conservation organization with over 300,000 members and 
supporters dedicated to the protection of all native wild 
animals and plants in their natural communities. Defenders 
welcomes the opportunity provided by the Subcommittee on Trade 
of the Committee on Ways and Means to provide written testimony 
for the public record on U.S. negotiating objectives for the 
1999 World Trade Organization (WTO) Ministerial meeting.
    We applaud the commitment of the Office of the United 
States Trade Representative (USTR), in its statement by 
Ambassador Esserman, to sustainable development, including 
protection of the environment, and to institutional reform that 
can strengthen transparency and ensure citizen access to the 
WTO. However, we are dismayed by the U.S. government's lack of 
progress in recent years to back up these stated commitments. 
We are also deeply disappointed with the limited scope of the 
Administration's recently announced objectives with respect to 
the environment for Seattle. Repeated requests by the 
environmental community to the Administration to seek 
meaningful institutional reform of the WTO go well beyond 
transparency and improved means for stakeholder contacts with 
delegations and the WTO. We therefore would like to reiterate 
some of those requests today.
    We urge the U.S. to seek meaningful institutional reforms, 
in addition to increased transparency and increased citizen 
access, that ensure that existing WTO rules and procedures 
affirm, rather than hinder, environmental protection. Examples 
include commitments to secure: more clearly defined limits to 
WTO jurisdiction so that it does not delve into the field of 
environmental regulation; deference to national and 
international standards that serve legitimate environmental 
objectives in existing and future rules; and a meaningful, 
transparent assessment of the environmental impacts of proposed 
multilateral trade and trade policy developed according to 
principles of the National Environmental Policy Act; criteria 
for trade measures based on unsustainable production and 
process methods, and others. Without these and other previously 
suggested reforms of the WTO, its policies will continue to 
place at risk the environment and the sovereign right of all 
governments to regulate in the public interest and to protect 
the environment.
    Defenders has also recently joined others in the 
environmental community to oppose expansion of the WTO that 
would further jeopardize the environment. Today, we reiterate 
our request that the U.S. withdraw its support for accelerated 
phase-out of tariff and non tariff barriers for forest products 
at the WTO, and we urge the U.S. to develop an environmentally 
justifiable alternative that has been subject to thorough 
environmental impact analysis, and that gives priority to 
conserving forests, and not simply treating them as commodities 
for exploitation.
    The proposed Accelerated Tariff Liberalization (ATL) of the 
forest-products sector for the timber industry, which is part 
of the ``early harvest'' agenda for completion at Seattle, 
carries highly uncertain and potentially damaging consequences 
for the environment. Logging often destroys natural habitats, 
resulting in the loss of biodiversity and sometimes leading to 
the local, and possibly global, extinction of species. See e.g. 
United States Forest Service, Rocky Mountain Research Station 
The Scientific Basis for Conserving Forest Carnivores: American 
Martin, Fisher, Lynx, and Wolverine in Western United States, 
GTR. RM-254, September 1994. Although estimates of the rates of 
loss vary, few can deny the reality of the current losses of 
both flora and fauna. The World Conservation Monitoring Center 
considers this type of habitat loss to be the biggest current 
threat to biodiversity. An increase in unsustainable logging 
practices through industrial logging will only perpetuate these 
problems and accelerate the deforestation of the world's 
forests and increase threats to biodiversity.
    The American Forest and Paper Association has predicted 
that ATL in the forest products sector will lead to the 
increased consumption of wood products world-wide. Increased 
consumption will undoubtedly lead to increased logging. Tariff 
elimination will also decrease the costs of production, cost 
reductions which can often lead to increase logging rates, 
according to previous studies by the U.S. Department of 
Commerce. By extension, increased logging will only serve to 
perpetuate the already well documented negative environmental 
and social impacts of industrial logging operations.
    Defenders would like to reference its written and oral 
testimony submitted to the International Trade Commission (ITC) 
on Public Investigation No. 332-400 as part of this testimony. 
The pre-hearing brief submitted by Defenders and Earthjustice 
Legal Defense Fund includes findings by the Commerce Department 
that show a decrease in stumpage fees in Canada increased 
harvest levels. This data supports our concern that tariff 
liberalization will indeed increase harvest levels worldwide. 
The Administration's claim that removing tariffs will have no 
significant effects on the environment cannot possibly be 
squared with these findings made in 1992 and again in 1993. Our 
post-hearing brief submitted to the ITC, ``Addressing the 
Underlying Causes of Deforestation,'' further addresses the 
issue of global deforestation. This report, available on the 
world-wide web at ``http://www.bionet-us.org/,'' concludes that 
trade and consumption, including the current trade 
liberalization process and rising consumer demands, as well as 
international economic relations and financial flows, including 
the regulation of transnational companies, are two of the four 
major categories leading to deforestation and degradation of 
the world's forests.
    Our forests can not afford further liberalization. 
According to the World Resources Institute (WRI), nearly one-
half of the world's original forest cover is gone. Of the 
remaining original forests, most is severely degraded, while 
only 22 percent remains as large tracts of relatively 
undisturbed primary or ``frontier'' forests. WRI and other 
organizations have named commercial logging as the greatest 
threat to frontier forests. According to World Wildlife fund 
mapping projects, in North America, all but 5% of the forests 
in the lower 48 states have been logged at least once. For all 
of the above-mentioned reasons, Defenders of Wildlife can not 
support any liberalization of trade in the forest products 
sector.
    Thank you for the opportunity to voice some of our 
recommendations for a U.S. government agenda at the WTO that 
fully incorporates environmental priorities. We offer our 
further assistance to members of the Subcommittee on Trade in 
support of such objectives.
      

                                


Statement of Distilled Spirits Council of the United States, Inc.

    The following statement is submitted on behalf of the 
Distilled Spirits Council of the United States, Inc. (DISCUS), 
for inclusion in the printed record of the hearing on United 
States Negotiating Objectives for the WTO Seattle Ministerial 
Meeting. DISCUS is the national trade association representing 
U.S. producers, marketers and exporters of distilled spirits.

                              I. Overview

    DISCUS enthusiastically supports efforts within the WTO to 
further liberalize international trade and to strengthen the 
multilateral trading system. The U.S. distilled spirits 
industry has greatly benefitted from the tariff elimination 
commitments secured during the Uruguay Round negotiations and 
in subsequent negotiations under the WTO's auspices. In 
addition, on behalf of our industry, the United States has 
utilized the WTO's dispute settlement mechanism to successfully 
challenge discriminatory liquor tax regimes maintained by Japan 
and Korea. The elimination of Japan's discriminatory treatment 
of imported spirits has lead to an increase of nearly 25 
percent in U.S. spirits exports to Japan, while saving U.S. 
companies nearly $100 million in taxes and tariffs annually. 
Discussions with Korea on its plans for complying with the 
recent WTO ruling are now underway, and we look forward to 
competing on an equal tax basis in this important market in the 
near future.
    The improved market access conditions secured under the WTO 
have been a major factor in the doubling of U.S. exports of 
distilled spirits since 1990. In 1998, exports of U.S. 
distilled spirits grew to $528 million, a record high. They now 
account for over 25 percent of our members' total sales, 
compared to 11 percent at the beginning of the decade. More 
importantly, for U.S. distilled spirits companies, the 
continued growth of exports in the years ahead holds the key to 
their commercial well-being.
    While the recent growth in U.S. distilled spirits exports 
has been significant, the majority of our trade is destined for 
developed and relatively mature markets, such as Europe and 
Japan, where tariffs already are low and will soon be 
eliminated. Developing countries, particularly in Asia and 
Latin America, offer tremendous market potential for U.S. 
distilled spirits, but most of them have resisted meaningful 
liberalization of their relatively high tariffs and other 
market access barriers to imports of distilled spirits. The new 
round of trade negotiations to be launched at the WTO 
Ministerial Meeting in Seattle in November offer an excellent 
and timely opportunity to tackle these barriers and create new 
export opportunities for U.S. distilled spirits companies.

            II. Priority Objectives for the New Trade Round

    After careful review and consideration, DISCUS has 
identified the following six areas as its priority objectives 
for the upcoming negotiations:

A. Tariffs

    The most pervasive barrier to U.S. distilled spirits 
exports continues to be high tariffs. Numerous developing 
country members of the WTO maintain tariffs on distilled 
spirits in the double digit range, and some maintain 
prohibitive tariffs. India, for example, assesses an exorbitant 
tariff of 230 percent, while Indonesia's tariff is 160 percent 
and Poland's tariff is 105 percent. Several regional groups 
within Latin America and the Caribbean also maintain high 
common tariffs which significantly inhibit the ability of 
imported distilled spirits to compete with national products.
    In the Uruguay Round negotiations, other than the ``Quad'' 
countries, only twelve countries agreed to tariff reduction 
commitments which resulted in actual reductions in the tariffs 
they imposed on imported distilled spirits. In all other 
instances, the concessions agreed to by Uruguay Round 
participants, when fully implemented in 2004, will continue to 
exceed current applied rates. Thus, while the negotiations were 
enormously successful in eliminating tariffs maintained by the 
``Quad'' countries, U.S. exporters of distilled spirits were 
not able to secure improved terms of access to many other 
important markets.
    The new negotiations should give priority attention to 
further reducing and where possible eliminating tariffs on 
distilled spirits, particularly with respect to those 
developing countries maintaining tariff peaks in the sector. 
The application of a tariff cutting formula would appear to be 
the most promising approach for securing the elimination of 
these high tariffs. It also is extremely important that the 
tariff commitments agreed to in the negotiations pertain to 
applied as well as bound rates. Ideally, the negotiations 
should be based on applied rates. However, if this does not 
prove possible, the formula chosen should be designed to 
require reductions in applied rates proportionate to those 
agreed to for bound rates.

B. Nontariff Measures

    U.S. distilled spirits products are subject to thorough 
testing and control procedures in the United States, yet many 
WTO members continue to maintain redundant testing and 
certification requirements. A number of WTO members also 
continue to impose restrictive import licensing, registration 
and state trading requirements in the distilled spirits sector. 
We urge the United States to place a high priority on securing 
the elimination of these unwarranted nontariff barriers in the 
upcoming negotiations.

C. Services Barriers to Trade

    While U.S. distilled spirits companies may export their 
products to most countries, a number of WTO members limit the 
ability of U.S. companies to import, distribute and advertise 
their own products within their markets. These restrictions 
limit the ability of U.S. distilled spirits companies to build 
their brands in these markets and to compete effectively with 
national products. We recommend that the United States use the 
upcoming services market access negotiations to secure 
appropriate commitments providing for the elimination of 
restrictions on U.S. companies' access to distribution and 
advertising services in these markets.

D. Trade Facilitation

    The upcoming negotiations also provide an excellent 
opportunity to liberalize and, where possible, eliminate 
procedural and regulatory obstacles to the movement of 
distilled spirits in international trade, particularly in the 
area of customs procedures. Trade facilitation measures which 
would benefit U.S. exporters of distilled spirits include the 
simplification and harmonization of customs procedures, the 
elimination of excessive and often redundant certification and 
documentation requirements, and the provision of enhanced 
regulatory transparency.

E. Intellectual Property

    U.S. distilled spirits companies are interested in securing 
improvements to the protection provided for geographical 
indications and trademarks under the WTO TRIPs Agreement in 
order to ensure the integrity of the content and presentation 
of their products in foreign markets. Accordingly, we recommend 
that the United States utilize the mandated review of the TRIPS 
Agreement to clarify and strengthen the protection provided for 
geographical indications for distilled spirits and to expand 
the protection for trademarks provided under the Agreement to 
include trade dress and other distinctive forms of packaging.

F. Dispute Settlement

    The U.S. distilled spirits industry's experience with the 
WTO dispute settlement mechanism has been extremely positive. 
The system has produced clear cut rulings against the 
discriminatory liquor tax practices maintained by Japan and 
Korea and a third, equally strong, ruling against Chile is 
expected to be announced shortly. These rulings have provided 
the basis for securing the elimination of these longstanding 
barriers to U.S. distilled spirits exports. Nevertheless, 
despite this very positive experience, DISCUS believes that the 
Dispute Settlement Understanding (DSU) can and should be 
improved upon. In particular, we recommend that the United 
States seek to strengthen those provisions of the Understanding 
pertaining to compliance with panel rulings and recourse to 
retaliation, in order to ensure that the WTO continues to 
provide an effective means for enforcing the market access 
commitments secured in the negotiations.

                  III. Parameters for the Negotiations

A. Scope

    DISCUS's priority objectives, as outlined above, fall within the 
scope of the additional negotiations mandated by the various Uruguay 
Round agreements. Accordingly, at the Seattle Ministerial meeting, we 
would urge the United States to take whatever steps are necessary to 
ensure that these negotiations are initiated, as previously agreed, by 
no later than January 1, 2000. The United States should steadfastly 
oppose any and all efforts to introduce procedural obstacles to the on-
time launch of these mandated negotiations.
    We understand that it will be necessary to add additional subjects 
to the agenda for the negotiations. Adding a limited number of 
additional subjects is likely to increase the prospects for success, by 
establishing a broader basis for the political tradeoffs necessary to 
allow the negotiations to produce a package of agreements acceptable to 
all participants. Negotiations on market access barriers to 
manufactured goods would be, in our view, the most appropriate subject 
to be added. However, adding numerous additional subjects, particularly 
controversial ones such as trade and the environment, workers rights, 
and competition policy, is likely to complicate and protract the 
negotiating process. We strongly recommend that the United States work 
with other like minded countries to limit the number of additional 
subjects added to the agenda to only those which are truly ripe for 
negotiation and absolutely necessary to a successful outcome.

B. Time Frame

    In order to maximize the benefits for U.S. exporters of enhanced 
access to foreign markets and to maintain the credibility of the WTO 
itself, it is absolutely essential that the negotiations are completed, 
and the results fully implemented, within the shortest possible time 
period. We urge the United States to secure a binding commitment at the 
Seattle Ministerial to complete the negotiations within three years--
i.e., by January 1, 2003--and to ratify and fully implement the results 
within no more than five years thereafter. Of all the decisions to be 
taken at Seattle, this is the most important one. We recognize that 
multilateral trade negotiations involving more than 130 countries will 
be complicated and difficult. However, without a tight and enforceable 
deadline, it will be nearly impossible to bring the negotiations to a 
successful conclusion within a time frame in which the results will 
still be relevant to U.S. exporters.

C. Participation

    We recall that countries in the process of acceding to the GATT 
were allowed to participate in the Uruguay Round negotiations. Many of 
these countries offered only minimal concessions, and some have not yet 
completed the accession process nor fully adhered to the agreements 
reached in the Round. Yet all of these countries received the benefits 
of the market access concessions agreed to by WTO member countries in 
these negotiations.
    To avoid this problem of ``free riders,'' DISCUS believes that 
participation in the upcoming negotiations should be limited to only 
those countries which are members of the WTO as of January 1, 2000. 
Countries which are in the process of acceding to the WTO, but have not 
yet completed their accession negotiations, should not be permitted to 
participate until they have done so. Such a policy has and will 
continue to create an added incentive for the various acceding 
countries to complete the accession process this year. It also would 
ensure that the acceding countries are required to make market access 
commitments in the new round of negotiations, in addition to those 
agreed to as part of their terms of accession.

                       IV. Negotiating Authority

    Although not directly related to the scope and agenda for 
the Ministerial Conference, the mere fact that the United 
States will host and chair the Conference creates an imperative 
and offers an excellent opportunity for the Administration and 
Congress to forge a new political consensus in support of 
further trade liberalization within the WTO framework. In order 
to shape the preparations for the Ministerial Conference and 
influence the decisions taken at the Conference, it is simply 
essential that the United States be fully authorized to 
participate in the negotiations and the work program which 
emerges from the Ministerial meeting. Without such authority, 
it will be extremely difficult for the United States to ensure 
that the decisions taken at the Ministerial Conference fully 
address the interests of U.S. exporters.
    Accordingly, we would urge the Congress to work with the 
Administration and provide the leadership required to enact 
``fast track'' legislation or, in the short term, to issue a 
clear and unambiguous mandate that will demonstrate to the WTO 
membership that the United States Congress fully supports the 
active participation of the United States in the new round of 
negotiations within the WTO. Such action by the Congress is 
essential to prevent other WTO members from using the absence 
of ``fast track'' legislation as and excuse to block efforts 
within the WTO to further trade liberalization. DISCUS has 
strongly supported renewal of ``fast track'' negotiating 
authority and approval procedures in the past and we stand 
ready to work with the Congress once again to achieve this goal 
as soon as possible.

                               V. Summary

    DISCUS strongly supports the launch of new multilateral 
trade negotiations within the WTO. Such negotiations offer an 
excellent opportunity to further open markets, particularly 
those of developing countries, for U.S. distilled spirits 
exports. Our priority objectives for these negotiations are:
      reduction/elimination of tariffs on both a bound 
and applied basis;
      liberalization of non-tariff trade barriers;
      liberalization of restrictions on access to 
services, including distribution and advertising;
      enhanced measures to facilitate trade in 
distilled spirits;
      stronger protection of geographical indications 
and trademarks; and
      a strengthened WTO dispute settlement mechanism.
    These negotiating objectives can be pursued within the 
context of the mandated negotiations provided for under the 
Uruguay Round agreements. We support the inclusion of a limited 
number of additional subjects in order to ensure that the 
negotiations produce a package of agreements acceptable to all 
participants. However, the various additional subjects included 
should not undermine the more important goal of completing the 
negotiations and implementing the results within the shortest 
possible time frame. Participation in the negotiations should 
be limited to WTO members in order to provide an added 
incentive for acceding countries to complete the accession 
process quickly, and to ensure that all participants in the 
negotiations make appropriate market opening commitments.
    In addition, we would urge the Congress to mount a renewed 
effort, together with the Administration, to enact ``fast 
track'' legislation or, in the short term, to develop an 
alternative mandate. Such action is essential to prevent other 
WTO members from using the absence of ``fast track'' as an 
excuse to block efforts towards further trade liberalization 
within the WTO.
      

                                


Statement of Dresser-Rand Company, The Woodlands, Texas

                            I. Introduction

    These comments are submitted on behalf of the Dresser-Rand 
Company pursuant to the Honorable Philip M. Crane's July 8, 
1999, announcement of a public hearing on the U.S. negotiating 
objectives for the WTO Seattle Ministerial Meeting. Dresser-
Rand is a leading supplier of energy conversion solutions 
worldwide. The Dresser-Rand Company is a partnership between 
Dresser Industries, Inc. of Dallas, Texas and Ingersoll-Rand 
Co. of Woodcliff Lake, New Jersey. Dresser-Rand combines the 
facilities and expertise of these two companies, along with 
that of Worthington Steam Turbine Division, Turbodyne, and 
Terry Corporation, in the design, manufacture, sale, and 
servicing of power equipment, such as turbines and compressors. 
Dresser-Rand's headquarters are located at 1 Baron Steubon 
Place, Corning, New York 14830 (tel. 607-937-6441).\1\
---------------------------------------------------------------------------
    \1\ The primary manufacturing facilities for turbines and 
compressors are located in the state of New York (Olean, Painted Post, 
Wellsville) with additional facilities in Broken Arrow, Oklahoma. 
Electronic control systems for these products are manufactured by 
Dresser-Rand in Houston, Texas. The company manufactures electronic 
motors for use in turbo-compressor trains and generators for turbine-
generators in Minneapolis, Minnesota. Dresser-Rand's international 
operations include compressor and turbine manufacturing facilities in 
LeHavre, France; Kongsberg, Norway; and Oberhaussen, Germany.
---------------------------------------------------------------------------
    Dresser-Rand has a keen interest in increasing access to 
potential export markets. Dresser-Rand's exports accounted for 
over half of company sales for the past several years. Dresser-
Rand equipment is used principally in the petroleum, petro-
chemical and chemical industries and in electric power 
generation. Dresser-Rand businesses and affiliates are also 
service providers, providing service and maintenance for our 
turbines and compressors, as well as providing engineering and 
construction services. Dresser-Rand employs over 7,500 people 
worldwide. The company has ten manufacturing and testing 
facilities, over twenty service centers, and seventy regional 
offices around the world, as well as three joint ventures.
    The May 1998 WTO Ministerial Declaration invited 
recommendations concerning the negotiation of issues related to 
existing agreements as well as other possible future work.\2\ 
Dresser-Rand supports the U.S. negotiating objectives 
identified by Ambassador Esserman at the August 5, 1999 hearing 
and suggests including the following additional objectives that 
would benefit the energy sector in the areas of services, 
technical barriers to trade, antidumping, government 
procurement, competition policy, and industrial market access.
---------------------------------------------------------------------------
    \2\ Ministerial Declaration adopted on 20 May 1998, WT/MIN(98)/DEC/
1 (May 25, 1998).
---------------------------------------------------------------------------

                       II. Mandated Negotiations

A. General Agreement on Trade in Services (GATS)

    Article XIX of the General Agreement on Trade in Services requires 
Member States to enter into successive rounds of negotiations, 
beginning not later than five years after the date of entry into force 
of the WTO Agreement and periodically thereafter. The negotiations will 
focus on achieving a progressively higher level of liberalization. As 
an exporter of pre-sale and after-sale services in the areas of 
engineering and technical support, as well as project construction, 
installation and repair, Dresser-Rand fully supports WTO efforts to 
liberalize the service sector.
    In order to go beyond the outline of a global regime to promote 
trade in services as established in GATS, the United States advocates 
the development of more specific negotiating objectives, including 
possible ``sectoral'' negotiating modalities. The United States has 
identified the energy services sector as a sector of potential export 
interest.\3\ Dresser-Rand strongly agrees and is itself a significant 
exporter of services in the energy sector. We support the development 
of sectoral negotiating modalities that focus on liberalizing measures 
to increase market access for energy-related services.
---------------------------------------------------------------------------
    \3\ Further Negotiations as Mandated by the General Agreement on 
Trade in Services (GATS): Communication from the United States, WT/GC/
W/295 (Aug. 5, 1999).
---------------------------------------------------------------------------
    Such services include engineering, equipment installation and 
start-up (and the associated temporary entry of technicians and 
equipment), on-site performance testing, and repair services. In the 
context of procurement of such services, Dresser-Rand submits that the 
WTO Agreement on Basic Telecommunications and its associated Reference 
Paper include model provisions that would be usefully engrafted onto a 
multilateral agreement on procurement of services. That model provides 
fair rules to prevent unfair competition in energy goods and services 
trade through pro-competitive regulatory principles, disciplines on 
suppliers, and protection of the procurement process.
    Finally, the United States should be careful in its approach to 
liberalization in the GATS to take into account the overlap with any 
other areas under negotiation, including market access, non-tariff 
measures, standards and licensing, and government procurement.

                   III. Review of Existing Agreements

A. Technical Barriers to Trade (TBT)

    Dresser-Rand supports efforts by the United States to harmonize 
technical standards in the energy sector on a multilateral basis. The 
Second Joint Status Report on the U.S.-Japan Enhanced Initiative on 
Deregulation and Competition Policy, issued on May 3, 1999, reported 
that Japan has now accepted the American Society of Mechanical 
Engineers standards as equivalent to its domestic technical standards 
for compressors and other equipment under its High Pressure Gas law. In 
addition, Japan has simplified the application requirements for 
compliance with the High Pressure Gas law requirement governing 
imported compressors and other equipment. The Japanese Government has 
also submitted a bill which would revise the Electric Utility Industry 
Law to address issues concerning welding and inspection requirements in 
power facilities.\4\ Dresser-Rand applauds this success in reducing 
technical barriers in the energy sector in Japan.
---------------------------------------------------------------------------
    \4\ Second Joint Status Report on the U.S.-Japan Enhanced 
Initiative on Deregulation and Competition Policy (May 3, 1999).
---------------------------------------------------------------------------
    The progress made with respect to Japan in the Second Joint Status 
Report should be used to encourage other countries to adopt similar 
domestic legislation as part of the effort to harmonize technical 
standards. Dresser-Rand urges the United States to seek greater 
participation, pursuant to Article 2.6 of the TBT Agreement, in 
international standards organizations. Dresser-Rand believes that 
energy standards should be pursued as a priority sector to achieve 
harmonization. With a multitude of national standards comes greater 
potential for discriminatory, trade-restrictive regulations. Dresser-
Rand agrees with the United States that the TBT Committee can make 
significant improvements without the necessity of negotiating a new 
agreement.\5\
---------------------------------------------------------------------------
    \5\ General Council Discussions on Implementation Issues on 26 
October 1998: Communication from the United States, WT/GC/W/107 (Nov. 
3, 1998).

---------------------------------------------------------------------------
B. Antidumping Agreement

    Article 14 of the Agreement on Implementation of Article VI of the 
General Agreement on Tariffs and Trade 1994 (Antidumping Agreement) 
permits countries to address third-country dumping complaints. Third-
country dumping occurs when an industry producing an exported product 
in one country is being injured by imports from another country to the 
same ultimate market. Article 14 permits the exporting country to 
petition the importing country for relief. The procedure for obtaining 
relief, however, is not automatic or readily available. Dresser-Rand 
remains concerned that discriminatory pricing will affect competition 
for steam turbines and turbo-compressors in the absence of stronger 
rules against third-country dumping.
    Therefore, to ensure a fair and expeditious review of third country 
dumping petitions, the United States should negotiate for stronger 
third-country dumping provisions in the Antidumping Agreement that 
clearly provide for (1) an investigation upon request of a complaining 
country that has adjudge the petition to state a prima facie case, and 
(2) relief whether or not there is a local producer in the importing 
country.

   IV. New Issues for a New Round of Multilateral Trade Negotiations

A. Government Procurement

    Much of the plant construction and heavy equipment procurement in 
the energy sector is the result of projects undertaken by state-owned 
energy companies or utilities. Government procurement figures large in 
this sector because in many countries the state owns or operates 
utilities as well as petroleum production and refining.
    Article XXIV(7)(b) of the Government Procurement Agreement requires 
Member States to undertake further negotiations not later than the end 
of the third year from the date of entry into force of the Agreement 
and periodically thereafter. The goal of additional negotiations should 
be to improve the Agreement and to achieve greater possible extension 
of its coverage among all Parties on the basis of mutual reciprocity. 
To this end, Member States have drafted a multilateral transparency 
agreement. Dresser-Rand supports the promise of an agreement to be 
signed at the Ministerial.\6\ Dresser-Rand would support inclusion of 
the following principles in its negotiating position with respect to 
any agreement on government procurement practices:
---------------------------------------------------------------------------
    \6\ General Council Discussion of Singapore Work Program Issues and 
Other Issues of Concern to Members Pursuant to Paragraphs 9(b) and (d): 
Communication from the United States, WT/GC/W/139 (Jan. 27, 1999); The 
WTO's Contribution to Transparency in Government Procurement: 
Communication from the United States, WT/GC/W/289 (Aug. 4, 1999); see 
generally Annual Report on Discrimination in Foreign Government 
Procurement Pursuant to Executive Order 13116 (``Title VII''), 64 Fed. 
Reg. 25,525 (USTR May 12, 1999).
---------------------------------------------------------------------------
      An agreement on transparency in government procurement 
practices should be multilateral, not plurilateral.
      As a general principle, an agreement should require 
procuring entities at all levels of government (i.e., central, sub-
central, government-owned or influenced enterprises) to assure that all 
relevant and sufficient information is made available to all potential 
suppliers in a timely manner through broadly and freely accessible 
media.
      An agreement should require that all of the laws, 
regulations, administrative and judicial decisions, guidelines, and 
policy statements that directly affect or relate to government 
procurement practices by parties should be transparent.
      An agreement should require that procurement 
opportunities be transparent. Procurement opportunities should be 
published in a known and accessible medium (i.e., an official journal, 
designated journal or newspaper, internet, etc.).
      An agreement should state that open competitive tendering 
is the preferred method of procurement.
      An agreement should specify the limited circumstances in 
which single tendering is permitted, and provide for at least a minimum 
level of transparency in single tendering.
      An agreement should provide that all relevant information 
that a potential supplier needs to assess its interest and determine 
whether to submit a bid should be transparent and made freely available 
to potential suppliers.
      An agreement should require parties to make transparent 
the criteria employed to assess and select contract bids (e.g., price 
preferences or qualification requirements favoring domestic suppliers) 
in the awarding of contracts.
      In the case of contract challenges, an agreement should 
provide for due process and transparent complaint procedures.
    The issue of whether to require domestic review mechanisms to 
address supplier complaints has been raised in the context of drafting 
the transparency agreement.\7\ Those discussions have highlighted the 
fact that some, but not all, participants in the Working Group on 
Transparency in Government Procurement already maintain domestic review 
mechanisms, either administrative or judicial or both, to resolve 
suppliers' complaints.\8\ As a result, the United States has pressed 
for a provision in the transparency agreement that includes a 
requirement that signatories ensure that there are transparent, timely 
and independent decisions on complaints or appeals relating to the 
transparency of procuring entities' actions and procedures. The United 
States has proposed the following draft language:
---------------------------------------------------------------------------
    \7\ Review Mechanisms: Communication from the United States, WT/
WGTGP/W/15 (Feb. 19, 1998); Report (1998) To The General Council, WT/
WGTGP/2 (Nov. 17, 1998); Domestic Review Mechanisms: Submission by the 
United States, WT/WGTGP/W/23 (June 24, 1999).
    \8\ Domestic Review Mechanisms: Submission by the United States, 
WT/WGTGP/W/23 (June 24, 1999).
---------------------------------------------------------------------------
        Members shall maintain judicial, arbitral or administrative 
        tribunals or procedures for the purpose of the prompt review 
        and correction of procurement actions that may be inconsistent 
        with the requirements of this Agreement, as implemented in 
        Members' law. Such tribunals or procedures shall be independent 
        of the agencies responsible for procurements covered under this 
        Agreement and shall provide for rapid decisions that, as 
        appropriate, can effect the modification or reversal of any 
        inconsistent actions.\9\
---------------------------------------------------------------------------
    \9\ Id.
---------------------------------------------------------------------------
    Dresser-Rand supports inclusion of a domestic review provision in 
any government procurement agreement. In addition, anti-competitive 
behavior in the context of the procurement process should be actionable 
under the domestic review mechanism. As suggested by the United States 
in February 1998, any domestic review provision should require remedial 
relief, whether in the form of retendering procurements or damages to 
cover legitimate claims.\10\
---------------------------------------------------------------------------
    \10\ Review Mechanisms: Communication from the United States, WT/
WGTGP/W/15 (Feb. 19, 1998).

---------------------------------------------------------------------------
B. Competition Policy

    Dresser-Rand supports the U.S. position to discuss and pursue 
competition policy coordination on a bilateral basis. The U.S.-Japan 
Enhanced Initiative on Deregulation and Competition Policy addresses 
the deregulation of the Japanese energy sector and related competition 
issues. To the extent that the Enhanced Initiative can serve as a model 
for dealing with such issues as cartels, exclusive dealing arrangements 
and similar anti-competitive practices in the new Round, Dresser-Rand 
generally supports the review of competition policy to improve market 
access in Japan and elsewhere.
    One area of particular concern to Dresser-Rand is the lack of an 
effective review mechanism for anti-competitive behavior exhibited when 
competing in the bidding process for government or private jobs in the 
energy sector. Just as a review mechanism would improve the grovernment 
procurement process, so, too, it would provide a built-in forum to 
address complaints with respect to private procurement.
    The United States, however, has made it clear that the work of the 
Committee on Trade and Competition Policy is not sufficiently well-
developed to serve as the basis for multinational negotiation.\11\ 
There is no consensus among WTO Members on what the principles of 
``fair'' competition should be. Nor is it clear that the WTO is the 
appropriate forum for a negotiation on competition policy. Moreover, 
some nations have attempted to undermine the Antidumping Agreement or 
to re-open matters resolved in the Uruguay Round, by ``merging'' anti-
dumping and competition policy. This has been unacceptable to the 
United States and should not be allowed. There are many activities of 
the WTO that serve important purposes, but many of these are arguably 
inconsistent with competition theory, such as, special and differential 
treatment, subsidies, balance of payments exceptions, national 
security, even MFN and national treatment. Dresser-Rand urges the 
United States to prevent efforts to tie competition policy to other 
areas.
---------------------------------------------------------------------------
    \11\ General Council Discussion of Singapore Work Program Issues 
and Other Issues of Concern to Members Pursuant to Paragraphs 9(b) and 
(d): Communication from the United States, WT/GC/W/139 (Jan. 27, 1999).

---------------------------------------------------------------------------
C. Industrial Market Access

    The United States has identified market access for industrial 
products as a prime negotiating area for the new Round.\12\ 
Specifically, the United States hopes to build upon the Accelerated 
Tariff Liberalization Initiative, begun in APEC and including the 
energy sector, by maximizing the opportunities for more broad-based 
market-opening. To that end, the United States has identified the 
following objectives:
---------------------------------------------------------------------------
    \12\ Statement Circulated by the U.S. Delegation of Ambassador 
Susan Esserman, Deputy U.S. Trade Representative (July 29, 1999).
---------------------------------------------------------------------------
      reduce existing tariff disparities;
      provide recognition to Members for bound tariff 
reductions made as part of recent autonomous liberalization measures, 
and for WTO measures;
      use of applied rates as the basis for negotiation, and 
incorporation of procedures to address non-tariff measures and other 
measures affecting conditions for imports; and
      improve market access for least-developed WTO Members by 
all other Members through a variety of means.\13\
---------------------------------------------------------------------------
    \13\ Id.
---------------------------------------------------------------------------
    Dresser-Rand supports a request/offer approach generally for tariff 
and non-tariff trade liberalization. In the context of new round 
negotiations, Dresser-Rand would also support zero-for-zero tariff 
elimination.

                             V. Conclusion

    Dresser-Rand generally supports the U.S. negotiating objectives 
identified at the August 1999 hearing. In addition, Dresser-Rand urges 
the United States to: (1) negotiate liberalization of the services 
sector on a sectoral basis; (2) incorporate protections found in the 
WTO Agreement on Basic Telecommunications and its associated reference 
paper in the context of any improvement in government procurement rules 
or in the context of any bilateral agreements concerning competition 
policy for the energy goods and services sector; (3) extend the 
progress in the Second Joint Status Report on U.S.-Japan Enhanced 
Initiative on Deregulation and Competition Policy to harmonize 
technical standards in the energy sector in other countries; (4) 
strengthen the third-country dumping provisions; (5) conclude a 
multilateral transparency agreement for government procurement 
practices that includes a domestic review provision; and (6) extend any 
domestic review mechanism or panel to anti-competitive behavior in both 
public and private sector contract negotiations for power equipment and 
associated services.

                                    Respectfully submitted,
                                               Dresser-Rand Company
                                                Woodlands, TX 77380
      

                                


Statement of Federal Express Corporation, Memphis, Tennessee

                            I. Introduction

    This statement for the written record is submitted by Federal 
Express Corporation (``FedEx'') in connection with the hearing held on 
August 5, 1999, by the Subcommittee on Trade of the House Ways and 
Means Committee on the U.S. negotiating objectives for the WTO Seattle 
Ministerial Meetings.
    In its July 8, 1999 notice concerning the hearing, the Subcommittee 
noted that it was interested in examining ``specific objectives for the 
negotiations,'' as well as the ``anticipated impact of launching a new 
round of WTO negotiations on jobs, wages, economic opportunity, and the 
future competitiveness of U.S. manufacturers and services.'' FedEx 
appreciates the opportunity to address the issues identified by the 
Subcommittee.
    FedEx previously has commented on issues related to those addressed 
in this statement in a number of contexts. FedEx provided oral 
testimony and written briefs in the U.S. International Trade Commission 
(``ITC'') investigations on the GATS specific commitments undertaken by 
our major trading partners (Canada, the EU, Japan, and Mexico) (Inv. 
No. 332-358, USITC Pub. 2940 (1996)), Latin American countries (Inv. 
No. 332-367, USITC Pub. 3007 (1996)), and APEC countries (Inv. No. 332-
372, USITC Pub. 3101 (1998)). FedEx filed extensive information with 
the Office of the United States Trade Representative (``USTR'') in 
response to its request for comments on preparations for the Third WTO 
Ministerial Conference. See 63 Fed. Reg. 44,500 (USTR 1998). Most 
recently, FedEx submitted testimony and briefs in relation to the 
USTR's request for comments published in the Federal Register on April 
14, 1999. See 64 Fed. Reg. 18,469 (USTR 1999).
    In this statement, among other things, FedEx addresses three 
primary negotiating objectives that the U.S. administration should 
pursue in the context of GATS negotiations on express delivery 
services. In general, these objectives concern sector-specific 
negotiations for express delivery services, trade facilitation 
measures, and electronic commerce. The information contained in this 
statement is provided in two parts. The first part is an overview of 
FedEx and the express delivery services sector, and demonstrates the 
key role the sector plays in trade facilitation and global economic 
development. In the second part, FedEx outlines major negotiating goals 
for the express delivery services sector in the next round of WTO 
negotiations, which, if achieved, would result in meaningful trade 
liberalization and a quantifiable, positive economic benefit to the 
U.S. exporting sector.

     II. Overview of Fedex and the Express Delivery Services Sector

A. FedEx

    FedEx is the world's largest express all-cargo integrated 
transportation company. FedEx specializes in fast, reliable 
transportation services for documents, packages, and freight of all 
sizes and weights. FedEx offers seven international document and 
package delivery services and four international freight services, most 
of which include customs clearance services. FedEx operates 625 planes 
and 42,500 vehicles, and relies on over 145,000 employees to deliver 
more than 3.2 million items every day in over 210 countries around the 
world.

B. The Express Delivery Services Sector

    The U.S. express delivery services sector provides fast, efficient, 
and reliable pick-up, transport, and delivery of a wide variety of 
goods of all sizes, shapes, and weight. The distinguishing 
characteristic of the service provided by the sector is the just-in-
time shipment of goods and services. The ``just-in-time'' concept not 
only implicates the timely delivery of goods to production facilities, 
it also encompasses the ``time-definite'' needs of the customer--either 
the shipper, the recipient, or both. Every day in the United States and 
around the world, consumers determine for a variety of reasons to pay a 
premium for either shipping or receiving goods or services on a just-
in-time basis. Express delivery companies transport and deliver on a 
time sensitive basis such items as business, commercial, educational 
and official documents; packages; finished goods; parts and components 
necessary for the manufacture of industrial goods; raw materials; high-
value items; perishable goods; and emergency supplies and medical 
equipment.
    The U.S. express delivery sector is a key contributor to the 
economic prosperity of the United States. The sector employs more than 
400,000 people and has a combined annual revenue of more than $45 
billion. One express delivery company is the fifth largest private 
employer in the United States. The sector operates more than 1,000 
aircraft and 184,000 vehicles in providing express delivery services. 
On a daily basis, they deliver more than 4.1 million packages by air to 
more than 211 countries. The sector also significantly contributes to 
the economies of other countries. The two largest companies employ more 
than 50,000 people outside the United States.
    In addition, U.S. express delivery companies doing business 
overseas expand the economies of those countries through the local 
sourcing of goods and services, e.g., fuel, equipment, 
telecommunications, and technical labor. Hence, the sector is important 
because it does more than just facilitate trade, it also acts as an 
expander and promoter of international trade. Consequently, the 
elimination and reduction of trade impediments and other measures 
restricting the services provided by the express delivery sector should 
be a primary objective in the next round of WTO negotiations.

C. The Benefits of Liberalization in Trade in Express Delivery Services

    The services provided by the express delivery services sector are a 
key facilitator to international trade. The world trading community is 
increasingly bound together by international aviation. Projections 
forecast that by 2015 thirty-seven percent (37%) by value of all 
international freight and cargo will be moved by the express delivery 
services sector. Excluding bulk commodities (oil, grains, etc.), by 
that date nearly fifty percent (50%) of the value of all global trade 
will be transported by the sector. Industry analysts have estimated 
that the growth rate for air cargo (measured in revenue ton miles) will 
exceed the growth rate of world passenger traffic (measured in revenue 
passenger miles) over the next twenty years.
    As the world advances into the twenty-first century, more and more 
of world trade will be represented by the kind of goods transported by 
express delivery companies, high-value items such as electronic goods, 
computers and computer parts, optics, precision equipment, medicine and 
medical supplies, pharmaceuticals and chemicals, aircraft and auto 
parts, avionics, fashions, high-value agricultural and perishable 
goods, and intellectual property. Thus, the services provided by the 
sector are vital to trade liberalization and trade expansion in the 
Western Hemisphere and throughout the world, and will be increasingly 
essential to the future growth of international trade and commerce.
    Unfortunately, the ability of the express delivery sector to 
provide efficient and reliable service is impeded and adversely 
affected by a large number of governmental measures applied to express 
delivery services. To provide its service, the sector integrates, i.e. 
performs, a large number and variety of services including pick-up of 
the item, ground and air transport, delivery, warehousing, 
distribution, customs brokerage and customs clearance, and the 
completion of all types of required administrative, commercial, and 
customs procedures. Effective trade liberalization for the sector 
necessarily involves the reduction or elimination of all trade 
restrictions and trade-distorting measures applied to the various 
services required to be performed in the performance of express 
delivery services.
    The removal of trade barriers and other impediments to the 
efficient operation of express delivery services will stimulate trade 
expansion and have a dynamic effect on all international business 
sectors. In particular, meaningful trade liberalization in the express 
delivery sector will act as a catalyst in encouraging small and medium-
sized businesses to grow through expanded exports by freeing them from 
the burdens associated with otherwise arranging for the transport and 
delivery of their goods in international trade. For these reasons, the 
achievement of meaningful trade liberalization in express delivery 
services should be a primary goal of the United States in the next 
round of WTO negotiations.

     III. Major Goals for Federal Express in the Next Round of WTO 
                              Negotiations

    In the aforementioned submissions to the USTR concerning the 
upcoming GATS negotiations, FedEx made the following recommendations.
     Sector-specific negotiations: negotiations related to the 
express delivery services sector should be conducted on a sector-
specific basis.
     Electronic commerce: electronic transmissions should 
remain free from the establishment or application of government 
measures that restrict and distort electronic commerce trade.
     Trade facilitation: GATS negotiations should include a 
focus on trade facilitation measures, an area in which ``early 
harvest'' can be achieved in the GATS negotiations, and result in 
immediate economic benefits to the U.S. trading community.
     Down payment: all service sectors and subsectors should be 
inscribed in the WTO National Schedules of Specific Commitments of 
respective WTO Members at the start of negotiations. Negotiations could 
then proceed on basis of limitations and reservations.
     Down payment: use of the ``unbound'' classification should 
be eliminated from negotiations on specific commitments.
     Negative list approach: the Uruguay Round results 
demonstrate that a negative list approach is warranted for trade in 
services negotiations, or, in the alternative, a negative-positive 
hybrid approach.
     Standstill: formal adoption of a standstill obligation at 
the outset of the negotiations.
    FedEx believes that the Administration should pursue, for purposes 
of the WTO Ministerial Meeting, the following three negotiating 
objectives.

A. U.S. Negotiating Objective: That Negotiations concerning Express 
Delivery Should be Undertaken on a Sector-Specific Basis (Approach).

    Except as noted below with respect to air traffic rights, the WTO 
negotiations should address all measures that affect trade in express 
delivery services. GATS Article XIX envisions successive rounds of 
negotiations with the aim of achieving progressively higher levels of 
liberalization for trade in services. The objective of such 
negotiations is to provide effective market access through the 
reduction or elimination of measures that adversely affect trade in 
services. For the following reasons, meaningful liberalization for the 
express delivery services sector only can be achieved through a sector-
specific approach.
     Express delivery services are not adequately classified 
within any single sector or subsector contained in the sector 
classification list used in the Uruguay Round negotiations for 
negotiations on specific commitments. A sector-specific approach would 
require that all express delivery services be addressed in a single 
context/ classification.
     In order to achieve meaningful trade liberalization, 
negotiations in express delivery services must address all applicable 
services, and all applicable governmental measures, in a single 
undertaking. This can only be done under a sector-specific approach. 
Governmental measures that restrict trade in express delivery services 
are of such a diverse and complex nature that meaningful trade 
liberalization will occur only to the extent that sector specific rules 
and principles are developed for the express delivery sector. This 
means that the sector must receive sector specific treatment/
examination during the negotiations.
     Liberalization for express delivery services would result 
in enhanced cross-border movement of components, materials, goods, and 
finished products, and would facilitate international trade in many 
services. A sector-specific approach in the negotiations for express 
delivery services would ensure that such maximum trade benefits for 
goods and services are achieved in the next round of negotiations.
     Given the complex and technical nature of the sector, the 
development of rules and obligations would require participation by 
applicable non-governmental organizations and representatives of the 
private sector. A sector-specific approach is required to address all 
applicable trade and industry issues in a cohesive and focused manner.
    The GATS Annex on Air Transport Services (``Annex'') requires the 
Council for Trade in Services to review, at least every five years, the 
operation of the Annex and developments in the air transport sector, in 
order to consider the application of the GATS to the air transport 
sector. FedEx believes that the application and operation of the Annex 
should be subject to review early in the prospective GATS negotiation 
process.
    In prior submissions, FedEx has demonstrated that the Annex should 
remain in effect with respect to air traffic rights. Air traffic rights 
were excluded from GATS coverage on the basis of a number of legitimate 
reasons based on international trade law, rules, and principles. That 
basis has not changed. In addition, developments in air transportation 
since the entry into force of the GATS do not warrant altering the 
application of the Annex with respect to air traffic rights. The 
following table reflects some of the principal basis that warrant the 
continued exclusion of air traffic rights from GATS coverage.
     It is unlikely that negotiations on air traffic rights 
under the current structure of the GATS legal framework would result in 
meaningful trade liberalization.
     There continues to exist an international organization 
that provides a high level of specialized expertise and regulation in 
air traffic rights.
     Air traffic rights are intertwined with national and state 
concerns regarding national sovereignty, national security, and other 
activities traditionally reserved to the state under international 
trade arrangements.
     The application of traditional trade rules and principles 
to air traffic rights is inherently difficult, and in some instances 
impractical, due to the nature of air transport services and the manner 
in which the sector operates.

B. U.S. Negotiating Objective: That Trade Facilitation Measures Be 
Established for the Express Delivery Services Sector.

    Trade facilitation measures include measures that facilitate trade 
in goods, such as simplifying customs and transportation procedures to 
speed up the import, export, and trade of goods. According to the WTO, 
``trade facilitation is a concept that can cover a broad range of 
activities'' which cut across any and all sectors of economic and 
commercial activity. WTO Doc. G/C/W/70, Trade Facilitation, Background 
Note by the Secretariat, Mar. 11, 1997, at 3. This includes trade in 
services. Almost any measure taken to facilitate the cross-border 
transaction of business would qualify as a trade facilitation measure 
for purposes of international trade negotiations.
    There is logic to addressing trade facilitation measures at the 
outset of the next round of WTO negotiations, including in trade in 
services. Allowing the negotiations to address less divisive trade 
facilitation issues at the outset could give them needed momentum. In 
addition, without trade facilitation advances, market access gains may 
be diluted if trade is otherwise frustrated by non-tariff barriers.
    Trade facilitation should be adopted as a trade concept applicable 
to all efforts to liberalize trade, and not as a stand alone 
responsibility of a particular group. Trade facilitation efforts should 
be undertaken by all WTO Working Groups and subcommittees in review of 
the operation and implementation of the WTO Agreements, and should be 
made part of the negotiation process of successive trade negotiations, 
including those of the GATS.
    FedEx believes that early trade facilitation progress can be had in 
the area of customs related measures. Customs related measures often 
adversely affect the provision of express delivery services. Customs 
related difficulties for express delivery services have been discussed 
within the WTO discussions on preparations for the 1999 Ministerial 
Meetings. WTO Doc. G/C/W/70, Trade Facilitation: Background Note by the 
Secretariat, Feb. 28, 1997, at para.  1, citing WT/MIN(96)/DEC.
    Initial trade facilitation work for the express delivery services 
sector could be based on the Guidelines Which May Be Applied to 
Simplify and Harmonize Customs Formalities in Respect of Consignments 
for Which Immediate Clearance is Requested (hereafter referred to as 
the ``WCO Guidelines on Express Shipments''). The establishment of the 
WCO Guidelines on Express Shipments was initiated during the 1980's by 
the ``rapid growth in air traffic, and more particularly the problems 
raised by on-board courier and fast parcel services.'' Id. at para.  1. 
The WCO Guidelines on Express Shipments offers a range of solutions to 
customs officials with respect to efficient and expedited processing of 
express shipments. They address a wide range of issues with respect to 
the efficient movement of cargo, including documentation, low-value 
consignments, immediate and conditional clearances, transport costs, 
examination of shipments, and cooperation between customs and shippers.
    The WCO Guidelines on Express Shipments offer an excellent starting 
point for advancing trade facilitation efforts under the WTO and, in 
particular, the GATS. Given the role of the express delivery services 
sector as a trade facilitator, the adoption and implementation of 
guidelines on express shipment would enhance export promotion and 
facilitate the cross border movement of all goods and services. Since 
the WCO Guidelines on Express Shipments are cognizable under the WTO 
(vis-a-vis the WCO and its predecessor the CCC), and have been adopted 
on an international basis by the express delivery services sector, the 
WCO Guidelines on Express Shipments represents a viable prospect for 
trade facilitation efforts.

C. U.S. Negotiating Objective: That the Current Standstill Obligation 
on Customs Duties on Electronic Commerce Remain in Effect.

    A chief element of express delivery services is heavy reliance upon 
advanced information technologies, the Internet, and E-commerce. In the 
WTO Ministerial Declaration on Global Electronic Commerce (May 1998), 
WTO Members agreed to refrain from applying measures to electronic 
commerce that are more trade restrictive than those in place on May, 
1998. In particular, WTO Members agreed not to apply duties to 
electronic transmissions.
    The governing principle in future negotiations should be that the 
imposition of customs duties where such duties do not currently exist 
is contrary to trade expansion under conditions of progressive 
liberalization. Indeed, WTO Members should formally recognize that such 
duties constitute barriers to trade in services and have the potential 
to dilute the trade promotion and facilitation benefits of electronic 
commerce. The GATS most-favored-nation and national treatment 
principles should have unconditional application to the provision of 
internet access and to other forms of electronic commerce, such as 
processing data telephonically.
    In addition, WTO Members should ensure that all measures affecting 
electronic commerce are administered in a reasonable, objective, and 
impartial manner. The trend towards applying internationally recognized 
and accepted commercial legal standards to electronic commerce should 
continue, and the application of country specific, non-transparent laws 
should be discouraged. Strong disciplines must be developed to prevent 
domestic service suppliers from adopting or engaging in practices 
relative to electronic commerce which would reduce the competitiveness 
of foreign service suppliers.

                            VIII. Conclusion

    FedEx appreciates the opportunity to present this statement of its 
views and recommendations to the Subcommittee on Trade with respect to 
the progress and potential impact of the 1999 WTO Ministerial Meeting 
in Seattle.

                                    Respectfully submitted.
                                     By: M. Rush O'Keefe, Jr., Esq.
                                              Vice President, Legal
                                        Federal Express Corporation
      

                                


Statement of Floral Trade Council, Haslett, Michigan

    The Floral Trade Council (FTC) submits these comments for 
inclusion in the record of the Subcommittee on Trade's hearing 
of August 5, 1999, on U.S. negotiating objectives for the World 
Trade Organization (WTO) Seattle ministerial meeting. The 
Floral Trade Council (FTC) is a U.S. trade association composed 
of growers and/or wholesalers of fresh cut flowers. The FTC is 
based in Haslett, Michigan, and its members are located 
throughout the United States.
    The FTC follows international trade negotiations closely. 
The FTC submitted comments to the Committee on Ways and Means 
in 1993 and 1994 during the Uruguay Round, and it appreciates 
the opportunity to participate in the Committee's preparation 
for the upcoming WTO ministerial meeting.\1\
---------------------------------------------------------------------------
    \1\ See Uruguay Round of Multilateral Trade Negotiations, Hearings 
Before the Subcomm. on Trade of the Comm. on Ways and Means, 103rd 
Cong., 1st Sess. 315 (1993) (Written Statement of the Floral Trade 
Council). Trade Agreements Resulting from the Uruguay Round of 
Multilateral Trade Negotiations, Hearings Before the Comm. on Ways and 
Means, Subcomm. on Trade, 103rd Cong., 2nd Sess. 776 (1994) (Written 
Statement of the Floral Trade Council).
---------------------------------------------------------------------------
    The FTC's close interest in WTO negotiations derives from 
the international nature of the fresh cut flower industry. 
Despite their high perishability, cut flowers are a heavily 
traded product in the international market. Through modern 
transportation, growers in Kenya supply florist shops in 
Germany, Dutch grown flowers are sold in the United States, 
Colombian flowers are shipped to Russia, and fresh cut flowers 
from the United States are exported to Taiwan.\2\
---------------------------------------------------------------------------
    \2\ Markus Frimmersdorf, U.S. Department of Agriculture, Foreign 
Agricultural Service, Germany: Cut Flowers and Ornamental Plants at 12, 
AGR Number: GM6052 (August 15, 1996); Chris J.M. Langezaal, U.S. 
Department of Agriculture, Foreign Agricultural Service, The 
Netherlands: Cut Flower Production and Trade at 1, AGR Number: NL6114 
(August 8, 1996); John Helmer, Russia's Airline Fills Unusual Niches in 
International Cargo Transport, JOURNAL OF COMMERCE (August 4, 1998); 
David Hill, U.S. Department of Agriculture, Foreign Agricultural 
Service, Taiwan Market Brief: Cut Flowers at 2, AGR Number: TW5322 
(July 31, 1995).
---------------------------------------------------------------------------

          International Trade and the U.S. Cut Flower Industry

    As we enter the next millennium, the future of the domestic fresh 
cut flower industry is uncertain. In recent years, U.S. producers have 
suffered severe economic hardship. Between 1996 and 1997, employment 
figures for growers of four varieties of cut flowers tracked closely by 
the FTC--standard carnations, miniature carnations, standard 
chrysanthemums, and pompom chrysanthemums--declined collectively by 
12.5 percent.\3\ This comports with the general trend of the past 
several years of the U.S. industry losing approximately 10 percent of 
its growers annually.\4\
---------------------------------------------------------------------------
    \3\ Source: U.S. Department of Agriculture, Floriculture Crops: 
1997 Summary (April 1998) at 14, 16, 18, and 20.
    \4\ Everything's Coming Up Roses for Firms on Valentine's Day, 
JOURNAL OF COMMERCE (February 14, 1996).
---------------------------------------------------------------------------
    Of the world's major fresh cut flower consuming countries, the 
United States has the most open market. The United States imposes no 
duties on the importation of flowers from some of the world's largest 
flower producing countries, e.g., Colombia, Ecuador, Israel, and 
Mexico, while producers in other major exporting countries, e.g., the 
Netherlands, pay nominal tariffs upon entry into the United States. 
Meanwhile, the world's other major country markets for fresh cut 
flowers maintain stricter import policies, in the forms of tariffs and 
non-tariff measures, than does the United States.
    This situation adversely affects U.S. producers in two ways. First, 
barriers abroad hinder the ability of U.S. growers to export. Second, 
and perhaps most harmful to producers in the United States, protected 
markets abroad have resulted in the world's excess flower production, 
often by default, entering the United States and saturating the 
domestic market.
    To address economic distortions that currently exist in the 
international market for fresh cut flowers, the FTC requests that the 
United States adopt the following policies in preparation for the 
upcoming round of multilateral trade negotiations.

                    Zero-for-Zero Tariff Elimination

    The FTC requests that the United States pursue a policy of zero-
for-zero tariff elimination during upcoming WTO talks. In other words, 
the FTC requests that the United States offer duty-free treatment for 
all imports of fresh cut flowers.\5\ In return, the United States 
should insist upon the same treatment for U.S. grown flowers sold in 
other markets and see that unnecessary non-tariff barriers to U.S. 
flower imports are removed.
---------------------------------------------------------------------------
    \5\ Fresh cut flowers are classified in the U.S. Harmonized Tariff 
Schedule under 0603.00.
---------------------------------------------------------------------------
    While such a policy would call for zero tariffs around the world, 
the FTC seeks, at the minimum, tariff elimination in all member 
countries of the Organization for Economic Cooperation and Development 
(OECD) and all major flower producing and consuming countries. This 
would permit U.S. growers to compete better internationally and to 
capture a larger share of the global market.
    Zero-for-zero tariff elimination, contingent upon the removal of 
certain non-tariff barriers, would result in a true international free 
market for cut flowers. Such a policy would end inequities in tariff 
levels that give our foreign competitors unfair advantages. For 
example, U.S. growers currently exporting to the European Union (EU) 
from November 1 to May 31 must pay tariffs ranging from 9.9 to 11.3 
percent;\6\ when exporting between June 1 and October 31, a period of 
high productivity and low demand in the international flower market, 
they pay even higher tariffs of 14 to 16 percent.\7\
---------------------------------------------------------------------------
    \6\ OJ No L 292, 30.10.98, p. 85.
    \7\ Id. at 84.
---------------------------------------------------------------------------
    In contrast, EU flower growers exporting to the United States pay, 
throughout the year, an average tariff of only 5.6 percent.\8\ As such, 
zero tariff levels would put U.S. and EU growers on an even footing.
---------------------------------------------------------------------------
    \8\ U.S. Harmonized Tariff Schedule 0603.10.30 to 0603.90.00.
---------------------------------------------------------------------------
    Zero-for-zero tariff elimination would change the current situation 
in which a large number of the world's cut flower producing countries 
enjoy unfettered access to the U.S. market, unencumbered by tariffs, 
through the Andean Trade Preference Act,\9\ the North American Free 
Trade Agreement, the Caribbean Basin Economic Recovery Act, the United 
States-Israel Free Trade Area Agreement, and the Generalized System of 
Preferences program, while at the same time the markets of other 
countries remain relatively closed.
---------------------------------------------------------------------------
    \9\ The FTC recognizes that the European Union (EU) operates a 
special GSP program for imports of products from the Andean countries 
(Bolivia, Colombia, Ecuador, and Peru), including imports of fresh cut 
flowers. See Council Regulation (EEC) No 3835/90 of 20 December 1990, 
OJ No L 370, 31.12.90, p. 126. This program, like the Andean Trade 
Preference Act (ATPA) of the United States, was designed to encourage 
the cultivation of non-illicit crops in those countries. However, 
unlike with the ATPA, it appears that the EU's special GSP exemption 
from import duties can be suspended if production is damaged in one of 
the EU member states. According to a press report, import duties of 70 
percent were imposed on imports of carnations from Colombia in 1992 
following complaints that Greek growers were being harmed by such 
imports. 1992--The European Community Roundup Week of Nov. 16, JOURNAL 
OF COMMERCE (November 18, 1992).
---------------------------------------------------------------------------
    Zero-for-zero tariff elimination would also enable producers in 
other countries to sell more of their products in third markets, thus 
relieving pressure on U.S. growers who compete with imported flowers in 
the United States.\10\
---------------------------------------------------------------------------
    \10\ See Flower Growers Applaud GATT, JOURNAL OF COMMERCE (December 
16, 1993).
---------------------------------------------------------------------------
    While the FTC strongly supports further trade liberalization 
through zero-for-zero tariff elimination, this support is predicated 
upon the increased harmonization of pesticide usage and the elimination 
of unfounded phytosanitary barriers by certain countries, e.g., Japan, 
as discussed below.
    In addition, the policies advocated by the FTC in this submission, 
including tariff elimination, should be applied as soon as possible to 
countries seeking membership in the WTO if they do indeed become 
members. Such countries include Taiwan--a relatively large flower 
producing and consuming country,\11\ China--a potentially large 
exporter and/or importer, and Russia--currently a very large 
market.\12\
---------------------------------------------------------------------------
    \11\ See David Hill, U.S. Department of Agriculture, Foreign 
Agricultural Service, Taiwan Market Brief: Cut Flowers at 3 and 5, AGR 
Number: TW5322 (July 7, 1995).
    \12\ See Russia a Growing Market for Fresh Flower Industry, JOURNAL 
OF COMMERCE (June 23, 1998).
---------------------------------------------------------------------------

                             Market Access

    If zero-for-zero tariff elimination cannot be accomplished during 
the upcoming negotiating round, the FTC requests, at the least, that 
U.S. officials pursue increased access abroad for U.S. grown flowers in 
particular markets.
    With its large population, a culture that appreciates flowers, and 
zero tariffs on flower imports, U.S. growers see Japan as a major 
potential market for their products.\13\ U.S. producers have made 
attempts to enter Japan, but due to overly strict phytosanitary 
regulations and exceedingly expensive requirements to comply with such 
regulations, they have been unable to do so. U.S. negotiators should 
seek a commitment that Japan permit pre-clearance inspections at the 
principal ports of export in the United States in lieu of recognizing 
the integrity of domestic inspections. Preferably, in order to reduce 
costs, pre-clearance inspections would not require the direct 
involvement of Japanese officials. Instead, the U.S. Department of 
Agriculture would certify the shipments.
---------------------------------------------------------------------------
    \13\ Tariff Schedule of Japan at 0603.00.
---------------------------------------------------------------------------
    U.S. growers, many of whom are located in California, would welcome 
the opportunity to sell their products in other countries in Asia, such 
as Korea. But with a tariff on fresh cut flowers of 25 percent, and 
Korea's phytosanitary policies that appear specifically to target 
imports, the FTC recognizes that it will be difficult to gain access to 
that market.\14\ Regardless, the FTC requests that U.S. trade 
negotiators attempt to reach a commitment with Korea on market access 
for U.S. fresh cut flowers.
---------------------------------------------------------------------------
    \14\ Tariff Schedule of Korea at 0603.00. U.S. Trade 
Representative, 1999 NATIONAL TRADE ESTIMATE REPORT ON FOREIGN TRADE 
BARRIERS at 278.
---------------------------------------------------------------------------

                              Antidumping

    As noted above, distortions in the international fresh cut flower 
market have resulted in the world's excess flower production often 
flooding the U.S. market, in part due to closed markets in third 
countries. These conditions have caused U.S. growers to resort 
frequently to our country's antidumping laws. Without these laws, the 
domestic flower industry would have suffered even greater harm over the 
years.
    As the WTO Antidumping Agreement and the changes it brought to U.S. 
antidumping law, such as sunset reviews, are still in the process of 
implementation, the FTC strongly urges U.S. negotiators to oppose the 
reopening of this agreement during upcoming negotiations.

                               Subsidies

    The U.S. fresh cut flower industry, which receives no subsidies, 
has suffered as a result of artificial advantages provided to its 
competitors through governmental support. The FTC has resorted to the 
countervailable subsidy laws to address injurious foreign 
subsidization, and it encourages the United States to strengthen these 
laws.
    With regard to export subsidies, the FTC asks U.S. negotiators to 
propose an end to all such government programs. The international 
floricultural market today may be distorted in part through such 
subsidies. For example, Israel's government provides grants to cover up 
to forty percent of investment costs in export oriented ``high tech 
agriculture'' industries, and the flower industry is given priority in 
this program.\15\ As the vast majority of Israeli grown flowers are 
exported, flowers benefiting from these grants compete directly with 
U.S. products in the international market. Consequently, Israel's 
program makes it more difficult for U.S. flowers, and flowers from 
other countries currently entering the United States, to be sold 
outside of our borders, namely in Europe.
---------------------------------------------------------------------------
    \15\ Tully Friedgut, U.S. Department of Agriculture, Foreign 
Agricultural Service, Israel: Review of Flower Production and Exports 
at 1, AGR Number: IS6018 (August 6, 1996).
---------------------------------------------------------------------------

                        Pesticide Harmonization

    U.S. growers are perhaps the most heavily regulated flower 
producers in the world. The federal and state governments are 
increasingly banning the use of certain pesticides, fungicides, and 
herbicides of great importance to the domestic industry. At the same 
time, however, our competitors in other countries are not necessarily 
constrained by such laws. This situation results in significant cost 
and quality advantages for growers outside of the United States.
    The FTC strongly encourages U.S. negotiators to advocate increased 
international harmonization of the use of pesticides, fungicides, and 
herbicides. Such harmonization could occur within the framework of 
Article 3 of the Agreement on the Application of Sanitary and 
Phytosanitary Measures (SPS Agreement).

                             Patent Rights

    The United States is an international leader in plant breeding, so 
the FTC is concerned about the failure of foreign growers to pay 
royalties to patent holders. Plant breeders suffer when they are 
unjustly denied royalties. According to some estimates, U.S. developers 
of cut flower varieties have lost up to $30 million annually in 
royalties on flowers imported into the United States.\16\
---------------------------------------------------------------------------
    \16\ S. African Grape Ruling a Landmark, JOURNAL OF COMMERCE 
(January 8, 1997).
---------------------------------------------------------------------------
    U.S. cut flower growers suffer from the current situation as they 
pay full patent royalties--but their competitors often don't. According 
to the National Association of Plant Patent Owners, foreign exporters 
of roses to the United States save up to 75 to 85 cents per plant by 
not paying royalties.\17\ With more countries increasingly developing 
cut flower industries, this problem can be expected to worsen in the 
future unless adequate measures are taken soon at the multilateral 
level.\18\
---------------------------------------------------------------------------
    \17\ U.S. Grower Renews Patent Battle, JOURNAL OF COMMERCE (May 22, 
1996).
    \18\ See id.
---------------------------------------------------------------------------
    The FTC would like to express its gratitude to Congress for the 
passage in the 105th Congress of H.R. 1197, the Plant Patent Amendments 
Act of 1998, which was signed into law. Prior to passage of this law, 
the U.S. Customs Service was only able to seize full plants propagated 
without the authorization of the patent holder, and not parts of 
plants, like flowers.\19\
---------------------------------------------------------------------------
    \19\ S. African Grape Ruling a Landmark, JOURNAL OF COMMERCE 
(January 8, 1997).
---------------------------------------------------------------------------

                             SPS Agreement

    The FTC is generally pleased with the SPS Agreement as written. 
While the FTC is concerned that U.S. growers have faced unjustified 
phytosanitary barriers when attempting to export to certain markets, 
e.g., Japan, the FTC believes that the SPS Agreement provides the 
appropriate mechanism for addressing such barriers. In addition, U.S. 
greenhouses are occasionally threatened by invasive pests and diseases, 
and the FTC is confident that the SPS Agreement provides the right 
balance between protecting from true risks and facilitating trade.
    Consequently, the FTC asks that the United States oppose efforts to 
make any major changes to the SPS Agreement. Above all, science must 
remain the basis for this agreement.
    While the FTC does not seek modification of the SPS Agreement, it 
does request that U.S. officials discuss with their foreign 
counterparts the development of financially viable means of countries 
self-certifying cut flower exports. (see above discussion of Japan)

                               Conclusion

    The FTC appreciates the opportunity to present these comments to 
the Subcommittee on Trade. The FTC's members look forward to working 
further with the Congress during the upcoming WTO trade round.
            Sincerely,
                                             Kenichi Bunden
                              President of the Floral Trade Council
      

                                


Statement of Bob Crawford, Commissioner of Agriculture, State of 
Florida

    Thank you for the opportunity to present to you our 
comments and our interests on the agenda to be discussed at the 
third Ministerial conference of the World Trade Organization 
(WTO) and on the importance of international trade and 
equivalencies for our agricultural products. These multilateral 
negotiations are exceedingly important to our state and we 
agree with USTR that it is a high honor for the U.S. to host 
the first meeting of this next round. We appreciate Ambassador 
Sue Esserman's comments that we want ``assurance that the WTO 
is transparent, accessible and responsive to concerns of 
citizens.'' This opportunity today, as well as the listening 
sessions just recently held by USTR and USDA, are excellent 
examples of such responsiveness. We hope that the input 
provided to USTR, USDA, and Congress will be incorporated into 
the upcoming agenda.
    International trade in perishable and seasonal agricultural 
products as well as animal agriculture, timber, nursery, 
foliage and aquaculture products are all important to the State 
of Florida. Florida agriculture is second in the nation in cash 
receipts for vegetable crops with total agricultural crop cash 
receipts of over $6 billion, $2 billion in forest receipts and 
a $54 billion impact to our state's economy. Approximately 19% 
of our agricultural production is exported.
    I offered testimony at the first hearing by Congress on the 
WTO Ministerial when the House Agriculture Committee 
Subcommittee came to Palm Beach, Florida last year. On June 4, 
Florida was pleased to host the first USTR/USDA listening 
session for agriculture on the WTO Ministerial. In addition, 
the Florida Department of Agriculture and Consumer Services 
(FDACS) submitted comments to the U.S. Trade Representative on 
October 16, 1998, regarding the upcoming WTO ministerial and on 
January 8, 1998, relating to the triennial review of the 
Agreement on the Application of Sanitary and Phytosanitary 
Measures (SPS Agreement) of the WTO. We have provided comments 
through our agricultural coalition, NFACT, representing 
agriculture in the states of New Mexico, Florida, Arizona, 
California and Texas. These five states produce mainly 
specialty crops and livestock and account for 23% of the U.S. 
cash receipts for total agriculture. On a trilateral basis, at 
the recent National Association of State Department's of 
Agriculture Accord of all Commissioners, Secretaries and 
Directors of Agriculture in Mexico, Canada, and the U.S., the 
WTO Ministerial was recognized for its significant importance 
to our three countries' agriculture and a consensus letter on 
important agricultural issues for the upcoming ministerial has 
been sent to both trade and agriculture officials in all three 
NAFTA countries.
    Florida's agricultural industry and our agency will be 
present and as proactive as permitted at the upcoming WTO 
Ministerial in Seattle. We realize the globalization of 
commerce. We must work to gain appropriate access to allow 
trade in our agricultural products as well as to work with USTR 
and our trading partners for fairness and equivalency in trade 
matters. The major issues we feel should be addressed include 
the following items.

         Perishable and Seasonal Agriculture and General Issues

    Issues important to seasonal and perishable or specialty 
agriculture were not fully addressed during the last round of 
multilateral trade negotiations. We have requested that these issues be 
addressed on the agenda in the upcoming Ministerial Round. We must have 
some mechanism to address price collapses in perishable commodities. We 
desire specific rules to deal with seasonal and perishable agricultural 
products, as well as enforcement of scientifically based sanitary and 
phytosanitary issues, workable and timely safeguard mechanisms, rapid 
dispute settlement resolutions, open market access, and elimination of 
tariff and non-tariff barriers to trade. We, along with other states 
with similar interests, pledge to work with USTR, USDA and our 
Congressional Delegation to affect policy matters both in the 
international WTO Ministerial negotiations and to forge needed changes 
in domestic law to gain a conducive situation to trade in our 
agricultural products.

                             Market Access

    We are pleased that recent statements from Ambassador Sue Esserman 
have focused on the need for market access for our U.S. products. The 
lack of reciprocal free market access for the U.S. to the nations who 
freely trade their agricultural products in the U.S. is a pervasive and 
highly significant issue. Five years have elapsed since the signing of 
the North American Free Trade Agreement yet not one Florida orange has 
been able to be shipped to Mexico. Chile is one of the major 
agricultural trading partners of the U.S. with a whole host of fruits 
and vegetables freely sold in our markets in increasing quantities each 
year with $628 million imported by the U.S. last year in the consumer 
agriculture category. Yet, the U.S. was denied the right to export 
similar products to Chile and we exported only $38.9 million in the 
same category. Other nations denying access to our commodities include 
Australia, New Zealand, Argentina and China. The USDA statistics for 
Mexico, Chile, Australia, New Zealand and Argentina show that we 
imported $6.35 billion to exports of $2.12 billion in the consumer 
agricultural product category which includes meat, dairy, and fresh 
fruits and vegetables.
    We applaud the recent efforts of the USTR and USDA to gain an 
agreement on citrus, meat and wheat with China. We look forward to the 
finalization of this process by visits of inspecting officials from 
China so that the door can finally be legally opened to citrus 
shipments. Although concentrated efforts by both USTR and USDA in the 
past two years opened Japan to trade in U.S. tomatoes, many other 
commodities remain restricted. Even trade in tomatoes remains difficult 
as Japan continues to request specific varietal testing, an issue which 
was resolved with WTO by your office for apples.
    The United States has permitted free market access for many nations 
around the world. It is unacceptable that a large number of these 
nations do not allow any reciprocal marketing of U.S. agricultural 
products. Any further multilateral negotiations need to make clear 
market access for U.S. products a mandatory provision of the 
agreements.
    Market access is denied for a host of reasons. The most frequent 
reason we experience for denying market access for our products is 
scientifically unfounded sanitary and phytosanitary reasons. This 
constitutes the most flagrant non-tariff trade barrier. The lack of 
rapid dispute settlement mechanisms exacerbates the denial of market 
access for phytosanitary reasons.

                General Rules for Perishable Commodities

    No specific rules exist to deal with general trade or dispute 
resolution involving perishable and seasonal commodities. The former 
head of the Uruguay Round agriculture negotiating team when asked, at 
the Ag Forum immediately preceding the FTAA Business Forum in Belo 
Horizonte, if specific rules for perishable commodities were needed, 
agreed that specific rules could be helpful and may be advisable. 
Florida has sought recognition that trade remedies should be available 
on perishable and seasonal agricultural products that reflect the 
commercial realities of these products. The Agreement on Agriculture 
already recognizes the need for separate treatment or timelines. We 
request that the U.S. consider adding discussion of the need for rules 
for perishable and seasonal commodities as an item on the agenda for 
the upcoming ministerial in Seattle. Similarly, the U.S. should include 
in the negotiations consideration of what, if any, special rules may be 
needed to cope with commodity price collapses such as have been 
experienced in livestock and grain.

                   Sanitary and Phytosanitary Issues

    The SPS and market access issues are intertwined, and the SPS issue 
becomes both an import and export issue. When we attempt to address 
market access issues, often, before we can even confirm the absence of 
such a problem in our state, we detect another pest or disease entry 
that must be immediately addressed with intensity of personnel and 
capital investment.
    The prevention, control and eradication of introduced plant and 
animal pests and diseases is a dramatic budget burden on our states. 
From 1995 through 1998, Florida spent over $140 million in state funds 
to eradicate new plant and animal pests and disease introductions 
including many detected for the first time in the continental U.S. 
Since this list was compiled, additional species of foreign ticks as 
well as the African hive beetle that is decimating the honey bee 
industry have been detected in Florida for the first time in the 
continental U.S.
    The budgets and staffs of the Customs, USDA and FDA for border 
inspections and surveillance have not kept pace with the increased 
volume of trade across our U.S. borders. The inadequate budgets of U.S. 
agencies is a domestic issue, but it can not be fully remedied by 
Congressional appropriations. We must have full implementation of the 
SPS Agreement by all trading partners, along with tighter domestic 
measures for pest and disease prevention in the nations with whom we 
trade, and increased resources for federal agencies for prevention, 
early detection and eradication of pest and disease introductions to 
not only reduce our resource demand but to aid market access.
    With all SPS matters, the critical factor is a strict adherence to 
sound science. Recognition of sound science will allow free market 
access in many instances. We appreciate the sanitary and phytosanitary 
concerns of our trading partners. However, if we clearly demonstrate 
scientifically the absence of hazard and if, in addition, we accept 
products from pest free zones or certified product from our trading 
partners, we must demand their reciprocity and open doors to our 
products.

                 Request-Offer Approach to Negotiations

    As differences exist within product categories as to what makes 
sense for market access abroad, the formula approach for negotiations 
can sometimes be harmful to U.S. commercial interests. Thus, the 
Florida agricultural community supports the request-offer approach, 
coupled with negotiations for subsidy and non-tariff barrier reforms, 
in upcoming WTO negotiations.

                           Dispute Resolution

    We appreciate the commitment USTR made to focus on dispute 
resolution, and we would ask that you include in that discussion rapid 
provisions to deal with perishable products. The U.S. has utilized the 
dispute settlement process many times in the WTO. Yet, dispute 
settlement with perishable commodities is fundamentally more difficult 
due to the perishable nature of the traded item and the very lengthy 
process of resolution. We request that some consideration be made for a 
more rapid dispute settlement process to be accessed when a perishable 
commodity is involved.

            Compliance with WTO Dispute Settlement Findings

    A goal of U.S. negotiators during the Uruguay Round was to increase 
access for U.S. agricultural products into markets that were already 
relatively closed. For this reason, U.S. agricultural producers were, 
overall, supportive of the implementation of these agreements by the 
United States. However, four years after the conclusion of the Uruguay 
Round, some of Florida's agricultural producers question the success of 
the trade agreements that resulted from it. Namely, Florida's farmers 
and ranchers are disappointed that other countries have failed to abide 
by the decisions, most recently the beef hormone panel and Appellate 
Body decisions against the EU's actions, that have resulted from the 
WTO's dispute settlement process.
    Florida's farmers and ranchers are wary of negotiations that will 
result in a further decline in the modest protection afforded to them 
while our trading partners do not abide by their current obligations. 
The failure of the European Union, a major agricultural producer, to 
come into compliance with decisions of the Appellate Body of the WTO is 
especially troubling.

                          Workable Safeguards

    Currently, we believe that no workable safeguard mechanisms exist 
for perishable commodities. Although previous agreements attempted to 
utilize Tariff Rate Quotas and snap back provisions, these have not 
proved effective in use and we hope that this issue can be discussed at 
the upcoming Ministerial.

                      Equivalency of Requirements

    Lack of harmonization and equivalency regarding chemical usage, 
pesticide registrations, and food safety standards place an unnecessary 
burden upon U.S. industry, are sometimes used as non-tariff trade 
barrier reasons to deny market access and should be addressed. 
Differing pesticide regulations with Canada frequently leads to 
unresolved trade issues. Lack of equivalency in chemical requirements 
also places our Florida and U.S. growers at a competitive disadvantage. 
For instance, while some amelioration of the U.S. phase-out of methyl 
bromide occurred, our producers still face competitive disadvantage 
with many of our trading partners who will be permitted extended usage. 
Research has still not identified nor approved effective alternatives. 
Those alternatives that partially replace methyl bromide present 
environmental contamination concerns that offset their benefits. The 
lack of equivalency in the environmental and labor arena as well as 
currency devaluation problems represent difficult issues to address yet 
do not allow our producers to be competitive.

     FTAA versus WTO Ministerial Consideration of Agriculture Items

    Negotiations have been ongoing for the Free Trade Area of the 
Americas (FTAA) Agreement. Although these negotiations are continuing, 
we believe that many of the agricultural issues are broad, world wide 
issues that would be better addressed in the upcoming round of 
multilateral negotiations instead of finalizing the issue in the FTAA 
negotiations.

                Antidumping and Countervailing Duty Laws

    The FDACS supports the ability of the United States to maintain 
strong antidumping and countervailing duty laws. Without these laws, 
Florida's farmers and ranchers would be even more vulnerable to unfair 
trade practices of producers in other countries. As such, the FDACS 
does not favor the reopening of these laws for negotiation during the 
next round of the WTO.
    If negotiations on the Antidumping Agreement of the WTO are 
reopened, the FDACS requests that the USTR examine possible changes to 
the WTO Antidumping Agreement that could benefit Florida's specialty 
crop growers. In particular, the FDACS would like to see the definition 
of industry clarified to provide for separate industries for perishable 
products grown in particular seasons. Such a definition would aptly 
describe Florida's fresh winter vegetable industry, which, during the 
winter months, produces the vast majority of vegetables grown in the 
United States. We would also like to see the definition clearly permit 
livestock producers and other agricultural producers to bring cases on 
products sold at retail. To the extent such changes can be done at the 
national level without WTO modifications, we urge the Congress to make 
such changes promptly.

                           Tariff Rate Quotas

    Tariff rate quotas (TRQs) provide a modicum of protection for 
producers of import-sensitive agricultural products who must compete in 
world markets characterized by price distortions. The TRQ on beef 
provides the United States with a limited ability to protect Florida's 
ranchers from distortions in the international beef market, and a major 
goal of the United States during upcoming WTO negotiations should be to 
maintain the right to impose TRQs on these types of product.
    Similarly, Florida's sugar industry is efficient and cost-
competitive in the international market. But the support of domestic 
sugar producers by other governments results in a world dump market 
price for sugar. Some foreign sugar producers receive not only massive 
governmental support, but also have highly protected domestic markets. 
For example, the average EU tariff on imported sugar in 1997 was 61.8 
percent. The distorted and volatile international sugar market results 
in a very import-sensitive sugar industry in Florida and other states. 
To alleviate the effects on Florida farmers caused by distortions in 
the international price of sugar, the FDACS encourages the USTR not to 
negotiate away the ability of the United States to maintain this TRQ at 
current levels prior to the elimination of all export and domestic 
subsidies on sugar.

                            Export Subsidies

    The United States should negotiate for an end to all export 
subsidies in upcoming WTO talks. In doing so, the United States should 
address practices that in effect permit countries to avoid export 
subsidy commitments, such as pooling arrangements and dual pricing 
systems, which, by creating artificially low export prices for many 
foreign producers, undercut U.S. products in the world market.

                       State Trading Enterprises

    State trading enterprises (STEs) provide support to domestic 
producers through a variety of arrangements. Their presence in 
agricultural trade has greatly facilitated the ability of foreign 
countries to restrict trade from the United States. Efforts to date in 
the GATT and now the WTO to ensure compliance with Article XVII 
principles have been fruitless. The FDACS suggests that the United 
States advocate the elimination of STEs during upcoming WTO 
negotiations.

                                Summary

    International trade in perishable and seasonal specialty crops as 
well as animal agriculture is very important to the State of Florida. 
We request that you consider for the agenda for the WTO Ministerial the 
need for rules for perishable and seasonal agriculture, enforcement of 
sanitary and phytosanitary provisions, market access, workable 
safeguards, equivalency of requirements, antidumping and countervailing 
duty measures, tariff rate quotas, export subsidies, state trading 
enterprises, and workable dispute settlement provisions. We urge the 
U.S. Trade Representative to negotiate actively for increased market 
access for Florida's agricultural products, preferably through the 
request-offer approach. We appreciate the opportunity to provide you 
our position as the U.S. prepares for discussions in Seattle in 
November.
    [Attachments are being retained in the Committee files.]
      

                                


Statement of Mary Sophos, Senior Vice President, Government Affairs, 
Grocery Manufacturers of America

    My name is Mary Sophos and I serve as Senior Vice President 
of Government Affairs for the Grocery Manufacturers of America 
(or ``GMA''). GMA welcomes this opportunity to present our 
views on US negotiating objectives for the WTO round to be 
launched this November in Seattle, Washington. GMA is the 
world's largest association of food, beverage and consumer 
product companies. With US sales of more than $450 billion, GMA 
members employ more than 2.5 million workers in all 50 states. 
Led by a board of 42 Chief Executive Officers, GMA speaks for 
food and consumer product manufacturers at the state, federal 
and international levels on legislative and regulatory issues. 
GMA also leads efforts to increase productivity and efficiency 
in the food industry.
    GMA views the upcoming WTO Ministerial in Seattle as a 
crucial opportunity for the United States to continue its 
agenda of pressing for trade liberalization through market 
access measures, reduced tariffs and the dismantling of 
disguised (and, frankly, not so disguised) barriers to trade. 
Increased market access is a vital issue for our members both 
with respect to processed food products and primary 
agricultural commodities. Given the importance of the food and 
agricultural sector, increased access is also critical for the 
US economy.
    Processed food products now account for a higher percentage 
of US agricultural exports than primary agricultural 
commodities. In 1998 consumer food exports accounted for 39% of 
all US agricultural exports, while bulk commodities represented 
38%. Together, consumer and intermediate products (which have 
also undergone some processing) now account for 62% of total 
exports. These figures represent a significant change--only 25 
years ago, consumer food exports constituted just 10% of the 
total US agricultural exports pie, while bulk commodities 
accounted for 76%. Not surprisingly, the bulk of this growth 
has come from Mexico and Canada, where tariff and non-tariff 
barriers are being successfully dismantled under the NAFTA 
agreement. Globally, however, processed food exports still face 
tariff barriers that are, on average, five times the U.S. rate.
    GMA respectfully offers its initial views on four important 
issues we face as the US prepares for the next Ministerial:
      First, we believe it is essential to improve 
market access for processed food products and primary 
agricultural commodities through reduced tariffs, elimination 
or further liberalization of TRQs and other mechanisms;
      second, GMA recommends that the elimination of 
agricultural export subsidies should be priority for the 
upcoming negotiations;
      third, state trading enterprises need to be 
opened to public scrutiny and we must ensure that their 
commercial activities are market based; and
      fourth, the Sanitary and Phytosanitary (``SPS'') 
Agreement and the reliance of SPS measures on scientific 
principles has been an important check on limiting disguised 
trade barriers--we should not reopen the Agreement at this time 
lest its integrity be compromised.

  Expanding Market Access for Processed Food and Primary Agricultural 
                                Products

    The tariffication and commitment to reduce tariffs by 36% on a 
simple average basis that occurred in the Uruguay Round was a critical 
first step in improving market access. We must now build on that 
foundation by achieving a significant expansion of market access in the 
upcoming negotiations. We recognize that the most effective mechanism 
for achieving increased market access may vary from product to 
product--therefore, the US should consider and pursue several 
mechanisms in the next Round. Application of a formula tariff cut that 
would result in major overall reductions in tariff levels, substantial 
reduction in tariff peaks, and, where appropriate for specific 
products, a zero-for-zero tariff agreement would contribute 
significantly to increasing market access for agricultural commodities 
and processed food products. Current tariff rates are too high--as the 
USDA's Economic Research Service has reported, agricultural tariffs now 
average over 40%, while average industrial tariffs have declined to an 
estimated 4%.
    GMA also recommends that the U.S. seek a significant expansion of 
the minimum market access commitment for processed food and primary 
agricultural products achieved during the Uruguay Round. Quotas also 
represent a major barrier and, as a result, the US should pursue 
substantial increases in applicable quotas, significant decreases in 
out of quota tariff rates and elimination of in-quota duties.
    Lastly, if our commitment to expanding market access abroad for US 
products is to be taken seriously by our trading partners, domestically 
favored industries and products must not be excluded from the upcoming 
negotiations. Tariffs and quotas on sugar, peanuts and dairy products 
must be liberalized. The US must not shy away from helping lead the way 
in that liberalization. Simply put, our negotiators will have a much 
stronger position in world trade talks once they are able to 
demonstrate serious resolve to open markets by further opening of the 
American market for sugar, peanuts and dairy products. We strongly 
recommend that sugar, peanuts and dairy products be kept on the table 
in the negotiations.

                    Elimination of Export Subsidies

    Let me now turn to the issue of subsidies. If we are to ensure a 
level playing field for agricultural commodities and processed food 
products, the massive export subsidies provided by many of the US' most 
important trading partners must be eliminated. Our goal is to see 
export products compete on their quality, merit and consumer interest, 
not the degree to which they have been subsidized. Therefore, the 
elimination of export subsidies on all primary agricultural commodities 
and processed food products should be an important US objective in the 
upcoming negotiations.
    While we are also concerned about achieving a reduction in domestic 
support for agricultural commodities and processed food products, we 
believe the most effective means to ensure a lessening of this support 
is to focus on increasing market access and eliminating export 
subsidies. Working together, these two tools provide the needed 
discipline in the marketplace and will inevitably result in the desired 
reduction of domestic support.

                       State Trading Enterprises

    With regard to State Trading Enterprises (or ``STEs''), greater 
openness and stricter disciplines are needed. STEs play a significant 
role in agricultural trade, and we must ensure that their commercial 
activities are market based and their actions open to public scrutiny. 
STEs should not be a vehicle to evade previous (and future) trade 
liberalization commitments. Greater transparency will help ensure that 
import STEs do not inhibit market access and export STEs do not engage 
in trade-distorting practices.

                           The SPS Agreement

    GMA strongly urges the US to exclude the Agreement on Sanitary and 
Phytosanitary Measures (SPS) from the scope of the talks at the 
upcoming third Ministerial Conference. The SPS currently requires that 
any measures taken with respect to the Agreement be based on scientific 
principles. SPS' reliance on scientific and international standards is 
essential if we are to ensure that arbitrary health and safety 
regulations are not used as disguised trade barriers. The SPS agreement 
also does nothing to hinder the right of countries to determine the 
appropriate level of protection from any genuine risk. In fact, Article 
3.3 of the Agreements states that countries can maintain health and 
safety measures that result in a higher level of protection than would 
be achieved by adherence to an international standard, provided that 
the higher level of protection is the result of a risk assessment.
    New negotiations regarding the SPS Agreement are neither mandated 
nor warranted in the present circumstances. Further experience with the 
Agreement is needed before sound judgments can be made as to whether 
the Agreement requires any substantive revision. Any reopening of the 
Agreement at this time could lead to a weakening of its provisions--a 
result which GMA strongly opposes and which would represent a 
significant step backwards in eliminating unwarranted restrictions on 
trade.

                               Conclusion

    We are encouraged that USTR has tabled proposals in Geneva with 
very similar negotiating objectives for agriculture to the ones 
presented above. In the coming months, however, more specific proposals 
will need to be carefully developed and concrete negotiating objectives 
set. On behalf of GMA, let me pledge our full cooperation in doing 
everything we can to ensure that the Seattle Ministerial Conference and 
the next Round are successful in liberalizing trade in agricultural 
commodities and processed food products. We look forward to working 
closely with you in the months ahead. Thank you for this opportunity to 
share our initial views.
      

                                


Statement of the Intellectual Property Committee

    The Intellectual Property Committee (IPC) is pleased to 
provide its views to the Subcommittee on Trade of the Committee 
on Ways and Means on the US objectives for the 1999 WTO 
Ministerial meeting. The IPC will focus its comments on issues 
related to intellectual property protection and enforcement, 
namely, the importance of the proper and timely implementation 
of the WTO TRIPS Agreement; the built-in agenda for further 
intellectual property negotiations that is already called for 
by the TRIPS Agreement; and the appropriate timing for the 
launch of any negotiations for higher levels of intellectual 
property protection that may result from the Seattle 
Ministerial meeting.
    The views of the IPC on the need for the highest standards 
of intellectual property protection and enforcement worldwide 
and, in particular, on the proper and timely implementation of 
the TRIPS Agreement are well known to the Subcommittee. IPC 
representatives have appeared before this Subcommittee on 
numerous occasions over the course of the Uruguay Round 
negotiations and since the completion of the Round. Most 
recently, in September 1997, the IPC provided its views on the 
role that the WTO Singapore Ministerial could play in meeting 
US policy objectives of the proper and accelerated 
implementation of the TRIPS Agreement.
    The IPC, which was formed in March 1986--six months before 
the Punta del Este ministerial meeting that launched the 
Uruguay Round--is the only business group that has as its 
specific mission the mobilization of domestic and international 
support for improving the protection of intellectual property. 
The members of the IPC--General Electric, Johnson & Johnson, 
Merck, Monsanto, Pfizer, Rockwell International, Texas 
Instruments and Time Warner--represent the broad spectrum of 
private sector US intellectual property interests.
    The IPC achieved a significant milestone in 1988 when it 
developed a US-European-Japanese industry consensus in support 
of inclusion of intellectual property in the Uruguay Round of 
multilateral trade negotiations. The 100-page report defined in 
detail the minimum standards for ensuring fundamental 
protection for all categories of intellectual property and 
proposed procedures for enforcing that protection. Over the 
course of the ensuing GATT intellectual property (TRIPS) 
negotiations, the IPC managed the trilateral industry 
consensus, which ensured that industry's view shaped the final 
TRIPS Agreement. The IPC continues to collaborate closely with 
our private sector counterparts abroad in support of our mutual 
objective of strong worldwide intellectual property protection.
    The IPC's long support and continuing search for improved 
worldwide intellectual property protection stem from the 
inexorable link between intellectual property protection and 
American competitiveness and job growth. America's competitive 
edge rests ultimately on our creativity and resourcefulness--
the unique ability of Americans to generate new ideas and 
develop new ways of looking at the world. Our most 
internationally-competitive industries depend on intellectual 
property protection: for example, the computer software, motion 
picture, sound recording, pharmaceutical, chemical and 
electronic industries are among the largest and fastest growing 
segments of the US economy. Employment in these industries is 
growing at a faster rate than employment in the economy as a 
whole. Furthermore, the foreign sales of these industries make 
major positive contributions to the US balance of payments.

 The TRIPS Agreement as a Baseline for Intellectual Property Protection

    Any discussion of the treatment of intellectual property at 
the Seattle Ministerial must begin with a snap shot of where we 
are today with respect to implementation of the obligations 
contained in the TRIPS Agreement.
    The TRIPS Agreement, as the first internationally 
negotiated agreement that contained minimum standards for both 
the protection and enforcement of a broad range of intellectual 
property elements, represented a major advance in the field of 
intellectual property protection. The IPC, therefore, believes 
that it is critical that the United States make it clear at the 
Seattle Ministerial that the TRIPS Agreement provides a 
baseline for the protection and enforcement of intellectual 
property rights and that the United States will not be a party 
to any weakening of the agreement. In this regard, we welcome 
the recent Communication of the European Commission that ``any 
initiative for future negotiations should not lead to a 
lowering of standards'' and that the ``present achievements and 
current transitional periods must not be reopened on the 
occasion of new negotiations.''

              Experience to-date with TRIPS Implementation

    A pattern of TRIPS implementation has emerged since January 
1, 1996, when the TRIPS Agreement went into effect for the 
developed countries. As a result of the efforts of the 
countries themselves to pass the necessary conforming 
legislation, the subsequent review of their TRIPS 
implementation in the WTO TRIPS Council and the launch of 
consultations and dispute settlement cases when needed to fill 
in the gaps in national protection, the level of protection in 
those countries has moved towards the levels required by the 
TRIPS Agreement.
    Whether this pattern can be successfully duplicated when 
the TRIPS Agreement goes into effect for the developing 
countries on January 1, 2000 is, however, an open question. 
While there is evidence that a number of developing countries 
have begun the process of conforming their laws to the TRIPS 
Agreement and may well meet the January 1, 2000 deadline, many 
others will not be in a position to do so. Many of these 
countries will not have generated the necessary domestic 
political consensus to pass strengthened intellectual property 
protection. If Argentina's current refusal to provide exclusive 
marketing rights, as required by TRIPS Article 70.9, is any 
indication of the attitude of certain key developing countries 
to TRIPS implementation, the next phase of TRIPS implementation 
will require a greater use of the WTO dispute settlement 
process than was the case with respect to TRIPS implementation 
in the developed countries.
    In this regard, the IPC supports the emphasis placed on 
TRIPS implementation in USTR's April 30th announcement of the 
results of its 1999 Special 301 Annual Review and the out-of-
cycle review of developing countries that will take place in 
December 1999. The IPC expects that the out-of-cycle review 
will result in US action, including the possible launch of 
dispute settlement cases, against those developing countries 
that will have failed to meet their TRIPS obligations by then.
    The proper and timely implementation of the TRIPS Agreement 
on January 1, 2000 by the developing countries remains the 
highest priority for industry and cannot be compromised. The 
proper and timely implementation of the TRIPS Agreement will 
not only benefit US rights holders in the developing countries 
but also rights holders in our Quad partner countries. As such, 
TRIPS implementation should be of concern to the other Quad 
countries. The IPC urges the Administration to encourage its 
Quad partners to take a more active approach in ensuring proper 
and timely TRIPS implementation in a manner similar to the 
program currently underway in the United States. Only through 
worldwide TRIPS implementation can industry receive the 
benefits of what we negotiated in the Uruguay Round.

              TRIPS Implementation as the Highest Priority

    The IPC urges the United States and our trading partners 
not to fall into the trap of thinking that the negotiation of 
the TRIPS Agreement has by itself solved the intellectual 
property problems that we are facing today. The translation of 
the TRIPS Agreement into improved intellectual property 
protection on the ground--TRIPS implementation--is the critical 
issue. Included in the concept of TRIPS implementation is not 
only the proper and timely implementation of the intellectual 
property standards currently found in the agreement but also 
the effective enforcement of these standards.
    TRIPS implementation is neither part of the ``built-in 
agenda'' nor among the ``new'' issues of an expanded trade 
agenda. A common pitfall associated with the launch of a new 
round of negotiations is to launch new issues before the 
results of the previous negotiations are fully implemented. 
Because of the long and discriminatory transition periods and 
uneven national implementation for intellectual property, we 
need a Seattle Ministerial meeting that will make certain that 
the trade momentum in favor of strong worldwide intellectual 
property protection that we achieved over the last thirteen 
years is not dissipated. Trade Ministers in Seattle should 
commit their governments to the proper and timely 
implementation of the already-completed Uruguay Round 
agreements before agreeing to any new negotiating objectives 
for the trade agenda. The necessity of strengthening the TRIPS 
Agreement was foreseen in the agreement itself and is an 
integral element of TRIPS implementation. Under the procedures 
outlined in Article 71.1, the TRIPS Council will review both 
TRIPS implementation beginning in 2000 and the agreement itself 
in 2002.
    Our pursuit of the proper and timely implementation of the 
TRIPS Agreement may appear to the Subcommittee to be single-
minded, and to a large extent, it is. While the successful 
negotiation of the TRIPS Agreement was a testament to the joint 
efforts of US industry and government, industry's participation 
in that effort was motivated by the expected commercial 
benefits from the improved intellectual property protection 
that would result from the TRIPS Agreement. Until industry 
begins to realize those commercial benefits, some elements of 
the TRIPS Agreement remain only promises. The value of the 
TRIPS Agreement is in its timely and proper implementation.
    The resistance to TRIPS implementation is already evident. 
While many developing countries have recognized the need to 
take the necessary steps to meet their TRIPS obligations by 
January 1, 2000, others are seeking to push off the inevitable. 
For example, this past June, the Dominican Republic, Egypt and 
Honduras joined Cuba in proposing that the Seattle Ministerial 
Declaration extend the TRIPS transition period for the 
developing countries beyond its originally scheduled expiration 
date of January 1, 2000. We can probably expect additional 
proposals aimed at reopening the TRIPS Agreement from the 
developing countries in anticipation of the upcoming Seattle 
Ministerial.
    The failure of developing countries to comply with their 
minimum obligations under the TRIPS Agreement in a proper and 
timely fashion will have three detrimental results: 1) the 
delayed commercial gains for WTO members that have already met 
their TRIPS obligation will not be realized, effectively 
extending the bargained-for transition periods beyond that 
allowed by the TRIPS Agreement; 2) the WTO's dispute settlement 
process could very well be inundated with intellectual property 
complaints on January 1, 2000, possibly overloading the system; 
3) the legitimacy of the WTO as a body that establishes and 
enforces international rules will seriously be called into 
question.
    In order to ensure that US industry receives the commercial 
benefits of what we negotiated in the Uruguay Round, the IPC 
believes that the Seattle Ministerial Declaration should state 
in strong terms that the effective and timely implementation of 
the TRIPS Agreement is a priority and the responsibility of all 
WTO members. The Seattle Ministerial Declaration should also 
call for the completion of the review of TRIPS implementation 
that is contained in TRIPS Article 71.1 by December 31, 2001, 
at which time the Ministers should consider whether to launch 
new negotiations. Should the Ministers decide at that time to 
launch intellectual property negotiations, the IPC believes 
that it will be important at that time to examine and ensure 
(i) that standards and principles concerning the availability, 
scope, use and enforcement of intellectual property rights are 
adequate, effective and keeping pace with changing technology, 
including the further development of the Internet and digital 
technologies; and (ii) that Members have fully attained the 
commercial benefits the TRIPS Agreement intended to confer.

                     The Built-in Agenda for TRIPS

    The IPC believes that it is not necessary to launch 
immediate intellectual property-related trade negotiations at 
the upcoming Seattle Ministerial to ensure continued progress 
in gaining improved worldwide intellectual property protection. 
The built-in agenda for the TRIPS Agreement already provides a 
program, in and of itself, for the timely and proper 
implementation of the agreement and for the strengthening of 
some of the protection currently found in the agreement of 
interest to US intellectual property right holders. Moreover, 
the TRIPS built-in agenda provides a timeline and focus that 
accommodate the need to move forward on outstanding WTO issues. 
The WTO agenda includes:
      The review, mandated by TRIPS Article 27.3(b), of 
the exclusions from patentability for certain plants and 
animals--the so-called ``biotech exclusion''--which is to occur 
``four years after the date of entry into force of the WTO 
Agreement,'' that is, in 1999;
      The review by the TRIPS Council, mandated by 
Article 71.1, of TRIPS implementation in the year 2000 (``after 
the expiration of the transitional period referred to in 
paragraph 2 of Article 65''). This review, when coupled with 
the results of the review already undertaken by the TRIPS 
Council of TRIPS implementation by the developed countries, 
should serve to identify those countries that have not met 
their TRIPS obligations;
      The Council's review in 2002 of the TRIPS 
Agreement itself, also mandated by TRIPS Article 71.1 and which 
is to have ``regard to the experience gained in its 
implementation.'' Such a review could serve the purpose of 
identifying improvements that should be made in the TRIPS 
Agreement;
      The option provided by TRIPS Article 71.1 to the 
TRIPS Council to ``also undertake reviews in light of any 
relevant new developments which might warrant modification or 
amendment of this Agreement"; and
      The launch of dispute settlement cases against 
countries that fail to properly implement their TRIPS 
obligations and the resultant development of WTO jurisprudence 
on the interpretation of the obligations found in the TRIPS 
Agreement.

  Other Intellectual Property-related Issues that May Come Up at the 
                          Seattle Ministerial

    Expiration of the Nullification and Impairment Moratorium 
on January 1, 2000. The IPC believes that the WTO dispute 
settlement mechanism that was negotiated in the Uruguay Round 
is central to the enforcement of the TRIPS Agreement. As such, 
the IPC is very concerned with ensuring that dispute settlement 
meets the objectives set out for it in the TRIPS Agreement.
    The minimum standards contained in the TRIPS Agreement seek 
to ensure that WTO Members provide for both the availability 
and enjoyment of intellectual property rights. Without the 
ability to reap the commercial benefits from an intellectual 
property right, the right itself does not have any value. Even 
though the developing countries still have more than four 
months to go before they must implement the TRIPS Agreement, 
some are already seeking to circumvent the intent of the TRIPS 
Agreement by enacting legislation that negates the value of the 
protection contained in the TRIPS obligations. For example, the 
Philippines and Israel have implemented laws and are proposing 
regulations that effectively seek to nullify the commercial 
benefits that flow from intellectual property protection. The 
WTO nullification and impairment provisions are intended to 
deal with these types of indirect attacks on the intellectual 
property protection and enforcement required by TRIPS. The IPC 
believes, therefore, that the ability to bring nullification 
and impairment cases under the TRIPS Agreement is as important 
as the ability to bring direct violation cases.
    The application of the Dispute Settlement Understanding 
(DSU) to nullification and impairment cases involving the TRIPS 
Agreement was, however, severely circumscribed in the closing 
stages of the Uruguay Round negotiations. Article 64.2 imposed 
a five-year moratorium on the application of the DSU to such 
cases. While Article 64.3 calls for an examination by the TRIPS 
Council of the ``modalities'' for nullification and impairment 
cases and submission of its recommendations to the Ministerial 
conference for approval, it also requires a consensus--that is, 
a unanimous vote--by the Ministerial Conference to approve the 
recommendations and extend the moratorium. Absent such a 
consensus, the moratorium will expire on January 1, 2000.
    The IPC applauds the current US opposition to efforts 
spearheaded by Canada and Hungary, among others, and we now 
understand, endorsed by the European Commission, that are 
currently underway in the TRIPS Council to continue the 
moratorium for such cases. The United States should continue to 
make it clear that the extension of the moratorium is not 
acceptable and that the moratorium should expire as scheduled.
    Cooperative Efforts to Build Intellectual Property-related 
Infrastructure. The IPC urges that the Ministerial declaration 
also underscore the importance of providing special training 
facilities and assistance to the developing countries, and 
especially to the least developed countries, to ensure that 
they build the needed intellectual property-related 
infrastructure for the proper and timely implementation of the 
TRIPS Agreement.
    The forms of technical cooperation (assistance in preparing 
legislation, training, institution-building and in modernizing 
intellectual property systems and enforcement) included in the 
joint initiative announced by the WTO and WIPO last July, are 
currently geared to those developing countries that are facing 
the January 1, 2000 deadline, but are also applicable to the 
situation facing the least developed countries. Such assistance 
should be provided not only through such multilateral 
institutions as the WTO, WIPO and the World Bank but also as 
part of the bilateral assistance programs of the individual WTO 
member countries.

                   Summary of Position and Conclusion

    To summarize, the IPC believes that the Seattle Ministerial 
Declaration should:
      Emphasize implementation of the TRIPS Agreement 
by all members of the WTO.
      Support, where appropriate, the provision of 
special training facilities and technical assistance to 
developing and least developed countries in order to ensure the 
proper development of the necessary infrastructure for the 
enforcement of the standards contained in the TRIPS and other 
intellectual property agreements.
      Ensure that the review of the implementation of 
the TRIPS Agreement that is called for in TRIPS Article 71.1 is 
completed by December 31, 2001, at which time the Ministers 
should consider whether to launch negotiations on intellectual 
property.
      Encourage worldwide ratification of the WIPO 
Copyright Treaty and WIPO Performances and Phonograms Treaty 
and prevent any attempts to delay the current ratification by 
folding the treaties into the WTO.
      Ensure, as provided in the TRIPS Agreement, that 
the Nullification and Impairment Moratorium expires on January 
1, 2000.
    The Seattle Ministerial will set the agenda for a new round 
of trade negotiations. It would be unfortunate if the United 
States and the other Quad countries, out of a desire to appear 
forward looking, were to inadvertently pull the rug out from 
under the implementation of the Uruguay Round results we all 
worked so hard to achieve.
    A disproportionate focus on new intellectual property-
related issues for the Seattle Ministerial would perpetuate a 
misperception that the developed countries are ambivalent about 
the proper and timely implementation of the TRIPS Agreement. A 
strong Ministerial statement in Seattle on intellectual 
property along the lines that the IPC has proposed would 
highlight the importance of TRIPS implementation, boost US 
efforts to gain effective intellectual property protection and 
enforcement around the world and ensure that, if warranted, 
intellectual property negotiations can be launched at the 
proper time.
      

                                


Statment of Pharis J. Harvey, Executive Director, International Labor 
Rights Fund

    Mr. Chairman and Members of the Subcommittee:
    Thank you for the opportunity to offer testimony in these 
proceedings. My name is Pharis Harvey, and I am Executive 
Director of the International Labor Rights Fund. The ILRF is a 
non-profit organization that has worked for many years for the 
adoption and enforcement of domestic and international 
mechanisms to promote and enforce workers fundamental human 
rights. We have been particularly active in campaigns to 
establish and to monitor the link between international trade 
and labor standards.
    My comments therefore are addressed to the issues of:
      Trade and Labor Standards,
      Access and Transparency,
      Assessment, and
      Need for Bilateral Discussions
    Although neither of these issues is, as yet, a part of the 
agenda for this year's Ministerial Meeting, each is an issue 
which the United States should strive to ensure is included on 
the WTO's post-1999 agenda for negotiations and further work.

                      I. Trade and Labor Standards

    With regard to Trade and Labor Standards, my comments are 
directed to the issues of evidence to be drawn from existing 
trade and labor linkages, re-visiting the Singapore 
declaration, ILO-WTO relations, and the efforts of the 
Administration to build support for these issues.
    The United States should press for a new Ministerial 
Declaration on trade and labor standards, to be adopted in 
1999, based on a re-consideration of the 1996 Singapore 
Declaration; request regular reports from the WTO on its 
efforts to collaborate with the ILO; and strive for the 
adoption of a formal ILO role at the forthcoming WTO 
Ministerial Meeting.
    In December of 1996, the United States failed in its 
efforts to have the WTO create a working party to examine the 
relationship between trade and labor. The issue did appear as 
part of the final communiqué from the Ministerial, 
although in a one-sided way; the Singapore Declaration 
recognizes that economic growth contributes to compliance with 
core labor standards, but it does not refer to the prospect 
that observance of core labor standards might be a positive 
influence on economic growth as the OECD reported in May 1996.
    The Singapore Declaration called for the ILO and the WTO to 
continue their cooperation in their fields of mutual interest, 
but here also the effort appears to have been one-sided. While 
the ILO's Governing Body Working Party on the Social Dimensions 
of the Liberalization of Trade regularly publishes studies and 
updates on the issues and assesses the activities of other 
international actors, the WTO appears not to undertake any 
activities in this area at all. The ILO conference in June 1998 
adopted a new Declaration on fundamental principles and rights 
at work reaffirming the rejection of labor standards as a means 
of protectionism and including a follow-up reporting mechanism. 
We are unaware, however, of any activities in this field by the 
WTO or any reports on the collaboration of these two 
organizations in the intervening period. The United States 
should demand that the two organizations publish a joint report 
on their collaborative activities.
    The United States should press for a new Ministerial 
Declaration on trade and labor standards to be adopted at the 
1999 Ministerial. The new declaration should refer both to the 
Singapore Declaration and the new ILO Fundamental Declaration. 
It should address the question of whether observance of core 
labor standards can make a positive contribution to economic 
growth and international trade. It should also set a broad 
program of work for the WTO and its negotiations on trade and 
labor in the next millennium.
    Previous Declarations have acknowledged the ILO's leading 
role in the field of labor standards. A new declaration should 
require that the ILO be given an acknowledged role at the WTO 
in its discussion of trade and labor issues. In this regard, we 
propose that the United States press for the inclusion of the 
ILO as a formal participant at the 1999 Ministerial.

                      II. Access and Transparency

    The United States should press the WTO to adopt a high degree of 
transparency, both in access to its documents and in the conduct of its 
dispute settlement. The WTO oversees the rules regulating the 
international trading system. Both the rules and the system itself are 
intended to increase the economic participation of all people and the 
benefits they derive from economic growth and trade. Under the 
circumstances, the greatest possible degree of openness, transparency, 
and accountability to the people ultimately intended to benefit from 
WTO activities is nothing short of essential. The United States should 
take every opportunity to press the WTO to become more transparent in 
two vital areas: access to documents, and dispute settlement.
    Access to information is crucial. Accordingly, the WTO should take 
steps to ensure that greatest possible access to its official 
documents, in the shortest possible time frame. As a base line, the 
presumption should be that all WTO documents would be publicly 
available. Relevantly this includes draft agendas, WTO secretariat 
working documents, official minutes, and the formal contributions of 
WTO members. All documents in these categories should be made publicly 
available as soon as they are available in all of the WTO's official 
languages. Since confidentiality may be necessary for some documents, 
standing guidelines for confidentiality should be promulgated after 
negotiation of their content with NGO and civil society 
representatives. The WTO should carry out strict oversight to ensure 
that confidentiality guidelines are being met, and that documents on 
topics that are no longer confidential are released publicly as soon as 
possible. The WTO should take the lead on devising appropriate means of 
disseminating all publicly available documents, including via 
libraries, electronic media, and document depositories. Naturally, it 
will be necessary for the WTO to take into account the varying 
capacities of some NGOs to gain access to material, particularly those 
that do not have access to electronic media.
    The Dispute Settlement Process should be as open and transparent as 
possible, exempting only genuinely confidential information. As 
President Clinton suggested in his speech to the WTO Ministerial in 
May, civil society should have the opportunity to participate in the 
dispute settlement procedures. It could do this by means of briefs 
submitted amicus curiae. It may be appropriate to empower or require 
the dispute settlement panels to consult directly with NGOs as 
independent experts in particular fields.

                            III. Assessment

    The United States should conduct and/or participate in 
studies of existing US and EU trade and labor linkages to 
determine the legitimacy of the opposition's claims. Opposition 
to any linkage between trade and labor standards in the WTO 
takes several forms. Among the objections is that any mechanism 
for enforcement of core labor standards through trade remedies 
would become (or is intended to be) a means for protectionism, 
disguised or otherwise. Another ground of opposition from some 
quarters is that the WTO and its rules-based system are 
inherently biased against the interests and cultural 
perspectives of developing countries. In our view, the 
operation of certain of the existing international trade and 
labor linkages provides fertile ground for study to determine 
whether these fears are well founded.
    We propose that the United States press for the conduct of 
an independent study of the application of certain existing 
trade and labor linkages. The United States should offer as a 
subject of study its own experience with the North American 
Agreement on Labor Cooperation, the United States' GSP program, 
and the OPIC worker rights linkage. The European Union should 
be encouraged to offer as a fourth subject of study the 
administration of the worker rights linkage in its GSP program. 
A small international team should conduct the study, with 
involvement from relevant governments, civil society and 
international organizations. As to the latter, obviously the 
WTO and the ILO would need to be key participants.

                   IV. Need for Bilateral Discussions

    Finally, the United States should work actively to build 
bilateral support for these initiatives. Now is the right time 
for the Administration to begin work to build the necessary 
political support to move these issues onto the WTO agenda. 
Several Heads of State and Heads of Government, including 
President Nelson Mandela and Prime Minister Tony Blair, adopted 
positions at last year's WTO Ministerial which were supportive 
of President Clinton's proposals for consideration of trade and 
labor issues, and for dialogue between the WTO and civil 
society. The United States must press at every opportunity for 
commitments from its many friends in the field of trade to use 
their best efforts to achieve these goals at this year's 
Ministerial. We have no doubt that the Administration's efforts 
to obtain the support of those governments presently opposed to 
any linkage, or even to a discussion of the issue, will be 
considerably enhanced by the evidence of the study we have 
already proposed on the application of existing trade and labor 
linkages.
    In its ongoing bilateral relationships, the United States 
should strive for constructive dialogue on the issue of trade 
and labor standards, particularly with those developing nations 
that have been stridently opposed to any link. The 
Administration should discuss with these countries their ideas 
on possible measures in a trade-labor linkage to safeguard 
against protectionism and cultural domination. The 
Administration should also consider development initiatives 
that could be pursued in tandem with efforts to seek support 
for a trade and labor link, including the important issue of 
debt relief. There is an obvious relationship between this 
issue and the trade and labor link, given the pressure that 
foreign debt puts on developing countries to pursue export 
oriented development policies.
    Members of the Subcommittee, I am certain that each of you 
is aware of the significance of this hearing today. The United 
States is in a unique position to advance debate within the WTO 
on the issue of Trade and Labor Standards and to press for 
better mechanisms for transparency and accountability in WTO 
operations. It is my sincere hope that the proposals and 
suggestions I have made here today will help USTR to move 
forward in achieving these important goals. Thank you.
      

                                


Statement of International Mass Retail Association, Arlington, Virginia

    I am writing on behalf of the International Mass Retail 
Association (IMRA) to provide the mass retail industry's 
viewpoint on U.S. preparations for the World Trade 
Organization's 1999 Ministerial meeting, and specifically on 
agenda issues that we believe the United States should include 
in the next multilateral round of trade negotiations.
    By way of background, IMRA represents the mass retail 
industry--consumers' first choice for price, value and 
convenience. Its membership includes the fastest growing 
retailers in the world--discount department stores, home 
centers, category dominant specialty discounters, catalogue 
showrooms, dollar stores, warehouse clubs, deep discount 
drugstores and off-price stores--and the manufacturers who 
supply them. IMRA retail members operate more than 106,000 
American stores and employ millions of workers. One in every 
ten Americans works in the mass retail industry, and IMRA 
retail members represent over $411 billion in annual sales.
    Increasingly, IMRA's members are operating stores in more 
than one market. As part of our industry's global expansion, 
our members face some important barriers to investment and 
trade. These barriers pose a significant problem, not only for 
our members, but for the many product suppliers with whom they 
work in strategic alliances. IMRA strongly believes that the 
United States should make distribution services, including 
retailing, a prime focus of the upcoming GATS 2000, ``built-
in'' services agenda.

                 Description of the Distribution Sector

    Retailing, wholesaling, franchising and commission agents' services 
are traditionally considered the prime elements of the distribution 
service sector in the General Agreement on Trade in Services (GATS). 
While IMRA believes this is essentially a correct view, we also feel 
that distribution services should be viewed quite broadly as the 
unfettered ability to move merchandise through a supply chain. These 
activities include not only retailing, wholesaling, franchising and 
commission agents' services, but many additional ancillary activities 
and services.
    The traditional distribution sector, which moves products through 
the supply chain to the ultimate individual consumer, is also 
characterized by additional activities including, but not limited to, 
inventory management, direct contracting for production of merchandise 
domestically and internationally, customs brokerage activities, 
consolidation and deconsolidation of merchandise, delivery and 
transportation services, storage services, garage services and fleet 
maintenance, sales promotion, marketing, advertising, installation and 
product service.
    We have urged the United States government to take this broad view 
of distribution services as they move into the next round of service 
negotiations. It is absolutely essential that negotiations do not view 
sectors narrowly, because oftentimes service providers work in 
strategic partnerships. This is especially true with distribution 
services.

      Importance of the Distribution Sector to National Economies

    Supply chain issues have become an integral part of consumer 
product manufacturing and marketing. No economy can be truly modern if 
it imposes barriers that slow the movement of goods between and among 
manufacturers, wholesalers, retailers and the consuming public. The 
most efficient economies-where consumers enjoy a high standard of 
living, a wide array of consumer goods, and low consumer prices-are 
those in which the distribution economy has been left relatively free 
of government regulation and barriers to investment and market entry.
    Retailers and product manufacturers, working together in strategic 
alliances, have increasingly re-engineered the supply chain in 
industrialized nations. These technological advances have resulted in 
the emergence of large-scale mass retailing, which is capable of 
providing consumers large quantities of mass-produced products and 
exceptionally low prices. Mass production and mass retailing are 
important factors in the quality of life in the United States. Finally, 
these sectors consistently produce large numbers of jobs both directly 
and in ancillary services such as the transportation sector. Retailers 
are the largest private-sector employers in the United States economy.
    Supply chain reengineering will continue to be a key element in 
global expansion of the retailing industry. Today the number of global 
retailers--those operating in more than one market--is expanding at a 
very rapid rate. What's more, these international businesses are 
growing faster than their domestic-only counterparts. These companies 
are radically changing the nature of retailer-supplier alliances. As 
these companies become truly multi-national, they will create vast new 
market opportunities for consumer product brands and manufacturers. 
Their relationships with product producers will be global, not local. 
These companies will become, over time, the export facilitators for 
most small and medium-sized product producers, regardless of their 
geography. These companies will create consumer markets where there 
were, here-to-fore, none at all, and they will be one of the main 
facilitators in creating international brands. Their role in supporting 
merchandise exporting can be critical to long-term U.S. trade and 
economic policy.
    Consequently, IMRA strongly believes that the United States should 
focus on achieving market access improvements in distribution services 
as one of the primary agenda items of the next WTO round. Achievements 
in this sector can have important side benefits for U.S. merchandise 
exports.

Specific Objectives of the Distribution Sector--Barriers and Regulatory 
                               Challenges

    Retailers face a number of barriers to market entry, including the 
following:
    Local equity requirements in excess of 49 percent, which require 
retailers to take a minority interest in joint-ventures.
    Licensing requirements that, in addition to local equity, require 
approval of the store or facility's location and joint-venture partner. 
Often these requirements make it difficult for retailers to reach 
``critical mass'' with respect to the number of local outlets. Mass 
retailing requires high sales volumes, in order to achieve profits. The 
mass retail model cannot be achieved in countries that require store-
by-store licensing.
    Competitive needs testing that allows domestic competitors a veto 
power over investments. Often times retailers are subject to review 
processes that allow competing local and domestic businesses the 
opportunity to disapprove a new store location or new investment.
    Zoning and store-size restrictions and hours of operation 
restrictions, which although not trade-distorting, make investment 
unattractive in some markets.
    Merchandise availability and import restrictions. High tariffs and 
local quota regimes are the chief culprits affecting retailers. Because 
retailers resell merchandise, any restrictions that affect the 
availability or price of merchandise are problematic. Import 
restrictions are not only a problem with our trading partners, but with 
the U.S. as well. The United States maintains high import barriers in 
some consumer products such as textiles, apparel and footwear.
    Transportation barriers. Retailers depend upon the ability to move 
merchandise quickly from the manufacturer (domestic) or the port of 
entry (imports), in just-in-time supply chains. Restrictions on the 
free movement of goods or non-transparent customs procedures that delay 
importation of goods have an impact. In addition, some retailers and 
many wholesalers need the ability to deliver goods directly to the 
consumer. Restrictions on air couriers or other modes of direct 
delivery have a critical impact on the ability to conduct retailing and 
wholesaling in some markets.
    Standards. Retailers deal in a wide-variety of consumer products. 
Conflicting and overlapping product standards and testing methods make 
it difficult to integrate global or regional operations. In addition, 
testing and certification practices can and do become non-trade 
barriers.

                IMRA Recommendations for the WTO agenda

GATS Agenda--Services 2000 Negotiations

    Because of the critical role that distribution services play in 
promoting exports and building consumer markets, IMRA strongly urges 
the United States to make the distribution sector a prime focus for the 
GATS 2000, ``built in'' WTO agenda. We urge the United States to:
    Obtain the broadest possible global GATS commitments on 
distribution services. In particular, IMRA urges the United States to 
seek a cap on local equity requirements for distribution sector 
investments of 49%, and the elimination of competitive needs or 
investment screening tests.
    Obtain broad commitments to achieve open trade and investment 
policies in the telecommunications sector. Retailers need to have a 
choice of suppliers and services, and have the option of building their 
own private data communications networks.
    Obtain broad commitments to achieve more open trade and investment 
policies in the multi-modal transportation sector, and direct delivery 
services. Retailers require the ability to choose transportation 
suppliers and services, and have the option of building their own, 
private trucking fleets for local product delivery, or to contract with 
private delivery services for direct product delivery to customers.
    Begin work on regulatory issues that affect retailing, including 
store size regulations and hours of operation that, while not 
necessarily trade-distorting, affect the ability of large scale 
retailing to achieve operating efficiencies.

Other WTO Agenda Items

    IMRA also urges the United States to pursue other negotiating 
objectives, as follows:
    Reduce barriers to consumer products. IMRA supports efforts to 
lower import tariffs on all consumer products and to eliminate any 
quotas that may exist on such products. Modern and efficient 
distribution of goods requires the elimination of barriers at the 
border. Quotas drive up costs and add non-transparent administrative 
burdens. ISAC 17's interests in lowering tariffs and eliminating quotas 
is strong and deep, and applicable as much to U.S. tariffs and quotas 
as to those maintained by our trading partners. For this reason IMRA 
urges the United States to:
      Seek broad and meaningful market access negotiations on 
the widest array of consumer goods possible, including the reduction of 
U.S. peak tariffs on products such as textiles, apparel and footwear.
      Reaffirm the global commitment to ending textile and 
apparel quotas by 2005, as part of the review required by the Agreement 
on Clothing and Textiles.
      Work to eliminate quotas on consumer products maintained 
by our trading partners in countries such as India.
      Work to eliminate and discipline gray area measures, 
including U.S. measures like the Softwood Lumber Agreement, which are 
clearly outside the basic rules contained in the General Agreement on 
Tariffs and Trade.
    Support efforts to improve trade facilitation, specifically in the 
customs area. Transparent customs administration that facilitates 
rather than hinders the movement of trade across national boundaries is 
absolutely essential to a modern distribution economy.
    Work to achieve reciprocity or mutual recognition of testing and 
certification for national standards. Currently, many countries require 
importers to conduct their testing, certification and documentation for 
regional or country-specific standards, within the country or region. 
Such a requirement presents a non-tariff barrier. Retailers should have 
the ability to use authorized domestic testing labs for certifying 
compliance with national or regional standards of the destination 
market.
    Maintain tariff neutrality for electronic commerce goods. 
Currently, the United States is pursuing a position that electronic 
transmissions associated with e-commerce should remain tariff free. 
ISAC 17 supports this objective, however we urge the United States to 
maintain tariff neutrality for products that can be delivered via the 
Internet, by pursuing a zero tariff strategy across the board for such 
products.
    Certain products, most notably books, videos, software, and musical 
performances, can be delivered both in the physical world and also 
electronically via the Internet. Eliminating tariffs on the 
electronically transmitted products, without also eliminating the 
tariff on the physically delivered products would upset tariff 
neutrality. It makes no sense to impose a tariff on a physical product 
and not on its cyber counter part. Such a policy would exacerbate 
intellectual property difficulties that already exist in the 
marketplace for videos, music and software. Consequently, IMRA urges 
the United States to seek zero tariffs on all books, videos, musical 
recordings and software, regardless of the mode of delivery.

                               Conclusion

    The distribution economy is an enormous facilitator of 
international trade and U.S. exports. Retailers who purchase or develop 
operations in foreign consumer markets tend to take their supply chain 
relationships with them, providing many new export opportunities for 
U.S. brands and small U.S. manufacturers. The United States should 
recognize this key and emerging role of the industry by making 
distribution services one of the primary focus industries for the next 
WTO round.
      

                                


Statement of Wingate Lloyd, ITT Industries, White Plains, New York, on 
behalf of the U.S. Chamber of Commerce

                              Introduction

    I am Wingate Lloyd, consultant with ITT Industries. I am 
pleased to testify on behalf of the U.S. Chamber of Commerce, 
the world's largest business federation, representing nearly 
three million companies, 3000 local and state chambers of 
commerce, 775 business associations, and 85 American Chambers 
of Commerce abroad.
    The World Trade Organization (WTO), consisting of 135 
member states, is responsible for the administration of 
existing trade agreements and serves as a forum for the trade 
liberalization negotiations that benefit millions of Americans. 
Liberalized trade ensures that American businesses, farmers, 
workers and consumers are able to trade their products under 
conditions that are fair and beneficial. Under the rules of the 
WTO, foreign markets are made more accessible to American 
producers, and American consumers are afforded a wider choice 
of products and services. As the largest economy in the world, 
the United States has the most to gain from an organization 
that works to reduce or eliminate tariffs, quotas, and 
subsidies, expand trade, and monitor participating nations to 
ensure that the rules of fair trade are being observed. Given 
that 96% of the world's consumers live outside the United 
States, foreign trade is vital to our future economic growth 
and prosperity.
    Allow me to state at the outset that the Chamber strongly 
supports the productive, broad-based multilateral talks in the 
WTO and wants these upcoming negotiations to achieve specific 
commercial benefits as expeditiously as possible. These 
negotiations should aim at assuring more complete 
implementation of existing commitments under the WTO, further 
reducing trade barriers, and strengthening multilateral 
disciplines on unfair trade practices. The Chamber strongly 
supports the WTO and its objectives in creating an open and 
free global trading system, and is determined to maintain open 
markets, resist protectionism, and sustain the momentum of 
liberalization. We support the elimination of protectionist 
measures and support strong dispute settlement mechanism. We 
strongly favor opening service markets in the developing world 
and dismantling obstacles to agricultural trade. Specifically, 
the Chamber would like the Seattle Ministerial meeting to 
address:

                      The Built-In Uruguay Agenda

Services

    International trade in services presents challenges to the 
multilateral trading system that equal in importance and 
complexity those challenges facing trade in goods. The WTO 
should remain the primary focus for services trade 
negotiations, with bilateral and regional cooperation playing a 
supporting role. The following broad principles should be 
applied in future services negotiations:
      The General Agreement on Trade in Services (GATS) 
2000 negotiations should seek to achieve much broader coverage 
of services sectors through new or improved national schedules 
of commitments and should go well beyond the standstill 
agreements which characterize many of the Uruguay Round 
commitments.
      The importance of enlisting domestic regulators 
in the process of services sector liberalization needs to be 
recognized. Reference principles should be adopted that move 
regulatory regimes to adopt a more competitive approach to 
their rule-making.
      The ministers should closely monitor ratification 
and implementation of both sectoral agreements already signed 
and new agreements negotiated in the GATS 2000 talks.
      Countries that are candidates for WTO membership 
must make strong commitments to services liberalization as part 
of their accession process.
      The WTO should guarantee foreign service 
providers the right to service their distributed products 
before and after the sale, and to sell on a wholesale or retail 
basis using direct selling methods.

Agriculture

    The goal is an agriculture trading system free of 
restrictions and distortions on trade in processed and 
unprocessed foodstuffs. Such a system should include further 
reductions and the scheduled elimination of tariffs and tariff 
rate quota expansions; the elimination of export subsidies, 
tighter disciplines on state trading enterprises; full 
participation by developing countries in the negotiations; 
tighter disciplines on technical measures; and insistence on 
science based regulation, especially as it pertains to 
biotechnology (e.g. genetically modified organisms (GMOs) and 
beef hormones). Regulatory inconsistencies among developed 
countries, particularly with respect to GMOs, place U.S. 
foodstuff companies at a severe disadvantage with respect to 
their competition. The U.S. Chamber opposes increasing attempts 
to apply the ``precautionary principle'' to various sectors of 
trade. If left unchecked this will constitute a major new non-
tariff trade barrier.

      Implementation of Member Commitments from the Uruguay Round

a) Intellectual Property Rights and E-Commerce

    U.S. business assigns high priority to adequate and effective 
enforcement of intellectual property rights by WTO members. Foreign 
intellectual property rights violations continue to cost U.S. firms 
billions of dollars annually. At the Seattle Ministerial and beyond, 
actions should be taken to ensure prompt and full implementation of 
commitments undertaken by WTO members under the Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPs). Substantial 
resources should be committed to monitoring compliance by signatories. 
U.S. business is concerned that many developing countries which were 
given transition periods in which to comply with TRIPS are not 
adequately preparing for full implementation of the Agreement by agreed 
deadlines. Compliance with those deadlines should not be reopened in 
future WTO negotiations.
    U.S. business supports a market-driven approach to electronic 
commerce that promotes private investment and that continues a no 
tariff policy. We favor minimal government intervention in the 
regulations of this industry.

b) Tariff Liberalization

    WTO members are committed to reducing or eliminating tariffs and 
non-tariff barriers on a wide range of industrial and agricultural 
goods. Tariffs and non-tariff barriers continue to restrict trade flows 
around the world and the ability of U.S. business to compete fairly in 
international markets. In an effort to protect infant or developing 
industries, many developing countries continue to maintain very high 
tariffs on a number of significant U.S. exports. Other barriers include 
import permits, duties, domestic content requirements, and sanitary/
phytosanitary restrictions.
    The WTO should build on the results of Uruguay Round tariff 
liberalization. The U.S. government should urge that the WTO take a 
more aggressive role in promoting further tariff reductions. In 
particular, the U.S. government should assign high priority to 
increasing the number of signatories to existing Uruguay Round tariff 
elimination agreements. The U.S. government should make vigorous 
efforts to extend reciprocal tariff elimination to other product 
sectors. Steps taken at the Seattle Ministerial should include
    (i) Adoption of reciprocal tariff cuts proposed in the Accelerated 
Tariff Liberalization (ATL) considered at the last APEC summit;
    (ii) Conclusion of the second International Technology Agreement 
(ITA II) negotiations by the end of the Seattle Ministerial; and
    (iii) Initiation of liberalization in additional sectors.

Government Procurement

    WTO members should commit to more open and transparent government 
procurement.Host government preferences for local companies, and non-
transparent contract award processes have effectively shut U.S. 
companies out of lucrative markets. The Chamber supports the 
continuation of the dialogue on measures in WTO to combat corruption, 
as well as broader public dissemination of procurement information.
Expanded Market Access

    WTO negotiations should focus on liberalizing industries, such as 
energy, telecommunications, and utilities that are heavily regulated in 
many countries.

Subsidies

    U.S. business objects to the necessity of competing in many foreign 
markets with companies receiving government subsidies and preferential 
financing. U.S. business supports an expedited subsidy notification 
procedure. The U.S. government should continue to monitor closely 
operation of the WTO Subsidies agreement. U.S. business supports 
continuation of the Agreement's ``dark amber'' category, which is 
scheduled to expire this year.

Anti-Dumping

    The proliferation of newly established anti-dumping regimes in a 
number of WTO member states is a growing concern for U.S. business. The 
WTO should monitor these regimes to ensure that they are implemented 
and administered in a consistent and professional manner and in full 
compliance with WTO standards.

                          Unfinished Business

a) Trade and Investment.

    U.S. business seeks a set of legally binding multilateral 
rules which establish the highest standards for the liberalized 
treatment and full protection of investment. The WTO Trade-
Related Investment Measures (TRIMs) agreement represents a 
useful step forward in multilateral cooperation but does not 
address numerous other important investment issues. The WTO 
rules and agreements pertaining to investment should be further 
strengthened.

Trade, Labor and Environment

    U.S. business is facing an increasing threat of non-tariff 
barriers to trade which incorporate measures affecting 
``production of process methods'' (PPMs), i.e., using how a 
good is made, as criteria for entry of goods or qualification 
for foreign ecolabels. Such measures would bar exports to a 
country if environmental or labor standards of production in 
the country of origin did not comply with the environmental or 
labor laws of the export destination. U.S. business strongly 
opposes such application of PPM criteria to trade. Further, the 
WTO must clarify how multilateral environmental agreements 
(MEAs) relate to the WTO system. To avoid creation of 
potentially significant new trade barriers, strict guidelines 
for the application of trade measures under MEAs must be 
established.
    U.S. business reiterates its support of multilateral 
cooperation on labor and environmental issues, but stresses 
that these important issues should not be addressed in trade 
negotiations, whose intended purpose is to remove barriers to 
global trade and investment Pursuing labor and environmental 
goals in multilateral trade negotiations creates a serious risk 
that U.S. commercial competitiveness will be held hostage to 
non-commercial objectives. Many developing countries strongly 
oppose using trade negotiations to address labor and 
environmental issues. However, the use of trade sanctions to 
enforce labor and environmental agreements would have a 
seriously disruptive impact on the global trading system. As an 
example of constructive international cooperation, the U.S. 
Chamber welcomes the adoption by the International Labor 
Organization (ILO) of the 1998 Declaration of Fundamental 
Principles and Rights at Work and urges governments to 
cooperate in the implementation of follow-up procedures.

                     Functioning of the WTO System

    The next round of WTO negotiations should focus firs and 
foremost on expanding market access. However, WTO member states 
should also make needed improvements in the functioning of the 
WTO system as soon as possible, including:

a) Strengthening Dispute Settlement

    The WTO Dispute Settlement Mechanism (DSM) represents a 
major improvement over the dispute settlement process provided 
under GATT. Nevertheless, there are deficiencies in the WTO DSM 
that need to be addressed. U.S. companies rely heavily upon the 
DSM to ensure that WTO member states implement their 
obligations in a timely and complete manner. Therefore, 
improvements to the operation of the DSM are a matter of 
priority concern to U.S. business and should be expeditiously 
addressed. Such improvements should include:
      Greater Transparency. Action should be taken to 
ensure that the business community has greater access to the 
factual situations and arguments submitted to the WTO Dispute 
Settlement Body, as well as to the final reports of the panels 
and the Appellate Body.
      More Expeditious Procedures. U.S. business favors 
changes to the DSM which would (a) avoid delays in the 
establishment and operation of panels and changes and (b) 
encourage speedier implementation of panel results. The 
slowness of dispute settlement rewards WTO members who have not 
complied with their obligations by giving them the opportunity 
to delay implementation and then renegotiate earlier 
commitments. The U.S. government should use the Dispute 
Settlement Body review currently underway in the WTO to press 
for early improvements.

                               Conclusion

    Let me conclude by reiterating that the Chamber strongly 
supports the WTO and its objectives in creating an open and 
free global trading regime. The WTO's market-opening efforts 
lead to domestic job creation and a better standard of living 
for member countries. Closing borders to trade is detrimental 
to economic well-being because protective trade policies result 
in less competition, business inefficiencies, and job losses. 
While the WTO goal of opening markets serves American interests 
in a direct and meaningful way, the United States must also 
continue to strengthen its competitiveness at home. This means 
continuous improvement in the quality of U.S. production 
processes, technologies, and the workforce. Support for the WTO 
should be seen as a useful part of the larger U.S. strategy to 
realize the economic potential of the global marketplace.
    That concludes my statement and I will be happy to answer 
any questions.
      

                                


Joint Statement of the National Retail Federation and J.C. Penney 
Company, Inc.

                            I. Introduction

    The National Retail Federation (NRF) is the world's largest 
retail trade association with membership that comprises all 
retail formats and channels of distribution including 
department, specialty, discount, catalogue, Internet and 
independent stores. NRF members represent an industry that 
encompasses more than 1.4 million U.S. retail establishments, 
employs more than 20 million people--about 1 in 5 American 
workers--and registered 1998 sales of $2.7 trillion. NRF's 
international members operate stores in more than 50 nations. 
In its role as the retail industry's umbrella group, NRF also 
represents 32 national and 50 state associations in the U.S. as 
well as 36 international associations representing retailers 
abroad. NRF is a founding member of the U.S. Alliance for Trade 
Expansion (USTrade).
    The J.C. Penney Company, Inc. (J. C. Penney) and Eckerd 
Drug Stores operate 4,150 stores in the United States. They 
employ 260,000 full-and part-time workers. In addition, they 
operate stores in three countries, which are supplied with in 
part with products made in the United States. In 1998, they had 
combined sales of $31 billion.

                         II. Retail Priorities

    The NRF, J.C. Penney, and the entire U.S. retail industry support 
U.S. sponsorship of and participation in the upcoming round of 
negotiations under the auspices of the World Trade Organization (WTO) 
at the Seattle Ministerial Conference. Significant gains in trade 
liberalization and economic growth have been made in previous rounds of 
multilateral negotiations. We would like to see that progress expanded 
upon in the upcoming round.
    On behalf of the retail industry, we want to express our concern on 
four key issues that we hope will be addressed in the next round of 
multilateral negotiations.

A. Harmonization of Rules of Origin

    The first issue of key importance to American retailers is the 
successful completion of the effort to harmonize international rules of 
origin. Determining the country of origin of products is an important 
responsibility in the administration and regulation of trade as it 
includes such functions as collecting statistics, applying proper 
tariff rates, allocating and tracking quotas, and effectively enforcing 
trade and customs laws. Differing rules of origin among WTO Member 
Countries being applied to the same products has proven cumbersome on 
import/export transactions and impedes the expansion of international 
trade. Drastic and ill-conceived changes in the rule of origin could 
substantially disrupt current trade. This was amply demonstrated in 
July 1996 when changes in textile and apparel rules of origin resulted 
in onerous adjustment problems for U.S. importers of textile and 
apparel products, especially since these categories are still subject 
to a rigid quota system. NRF and J. C. Penney would encourage 
negotiators to remain mindful of the impact of any proposed changes on 
the ability of U.S. retailers to supply their customers with products 
within current quota and/or visa systems. We believe that any proposed 
changes in the rules of origin should be clearly articulated in a 
negotiated settlement that is simple to understand and does not 
materially interrupt current trade. Conversely, negotiators should 
reject rules that place unreasonable burdens on U.S. importers and 
could be subject to arbitrary and inconsistent interpretation by those 
responsible for implementing and administering them.

B. Customs Administration

    The second issue of concern to America's retailers is Customs 
administration. NRF and J. C. Penney hope that this new round of 
multilateral talks can include negotiations to increase and enhance the 
transparency and speed of Customs administration. On this issue, 
retailers would like to see the creation of multilateral disciplines to 
facilitate the separation of the processing of goods by Customs 
officials from the processing of the documentation associated with the 
importation of those goods. Currently, the administration of Customs 
functions can be considered non-tariff trade barriers. Also, NRF and J. 
C. Penney would like to see negotiators seek to reduce the delays 
between arrival of goods to, and release of goods from, the custody of 
Customs authorities. This could be accomplished first by developing a 
uniform measurement and notification of arrival-to-release times by WTO 
Members. Ultimately, a schedule for graduated reductions in these 
arrival-to-release times could be established. As an example, the U.S. 
Customs clearance process normally ranges from 1 to 5 days, but can be 
as long as 90 days on a rare occasion. By comparison, Mexico and 
Chilean Customs clearance procedures may range up to 3 days, and 
Brazilian Customs clearance procedures up to 40 days depending upon the 
port of clearance. Uniform clearance procedures will significantly aid 
retailers in providing consumers with goods on a more timely basis, 
preventing delays in shipping that are absorbed by consumer prices.

C. Implementation of the Agreement on Textile and Clothing (ATC)

    Third, NRF and J.C. Penney are concerned about the continued 
progress of efforts to liberalize textile and apparel trade through the 
implementation of the Agreement on Textiles and Clothing (ATC). The 
decision of the U.S. to put off integration of many products into the 
ATC until the final December 24, 2004 deadline effectively will 
postpone any meaningful benefits to American families through 
liberalization of trade in this sector until U.S. quotas on these 
products are finally terminated. Even after quotas are phased out, 
companies will still face significant barriers as high tariffs will 
continue to keep the cost of these goods very high. The average U.S. 
apparel tariff is 16 percent, in comparison to the average tariff for 
all other goods, which is less than 4 percent. To date, the U.S. has 
eliminated only two of its 750 import quotas, which is only 6 percent 
of U.S. textile and clothing subject to restrictions. American 
consumers must pay these tariffs in addition to costs imposed on them 
from textile and apparel quotas. Furthermore, we believe this issue is 
also of critical importance to many developing countries from which the 
United States will be seeking concessions on a host of sensitive 
issues. As a result, retailers strongly recommend significant 
reductions in textile and apparel tariffs and urge a commitment from 
the WTO Ministerial Conference to continue progress on the 
implementation of the ATC, avoiding policies, practices, or initiatives 
that may undermine the benefits and timely implementation of the 
agreement.

D. Trade in Distribution Services

    The fourth issue of concern to retailers is liberalization of trade 
in distribution services. The U.S. retail industry strongly supports 
negotiations to strengthen commitments from other countries on the 
distribution services sector. U.S. retailers realize that there are 
many attractive business opportunities outside the United States. Many 
foreign countries, in regions such as Latin America and Asia, have a 
growing middle class that increasingly demands the quality of service 
and broad selection of products that U.S. retailers can offer at 
competitive prices. Notwithstanding the current global economic 
situation, many U.S. department, specialty, discount and mass 
merchandise retail companies have opened stores abroad and are looking 
to expand their foreign operations to meet growing consumer demand 
outside the United States.
    In many countries, the opportunities for U.S. retailers to 
establish and maintain a presence are limited by various laws, 
regulations, and policies. Countries such as Japan and Brazil have 
protected their small stores from competition by limiting the size of 
retail establishments and placing onerous restrictions on where they 
can locate. Additionally, restrictions to protect so-called ``cultural 
industries'' by other countries have significantly hindered the 
establishment of retail operations by large U.S. booksellers. The U.S. 
retail industry strongly encourages negotiators to seek the elimination 
of foreign restrictions to trade in distribution services. It would be 
worth emphasizing the economic and employment benefits other countries 
could realize by liberalizing their distribution services sector. With 
registered sales receipts of more than $2.7 trillion in 1998, and 
having a significant multiplier effect throughout the U.S. economy, the 
retail industry adds substantially to U.S. Gross Domestic Product 
(GDP), economic growth, and employment. We invite U.S. negotiators to 
impress upon their counterparts that an open and thriving retail 
industry specifically, and distribution services sector generally, can 
be an important factor in improving the standard of living of their 
citizens, expanding economic activity and growth, and developing a 
modern consumer society.

                               Conclusion

    In conclusion, NRF and J. C. Penney would like to thank 
Chairman Crane, Ranking Member Levin and the Members of the 
Trade Subcommittee for the opportunity to provide comments on 
the efforts to develop an agenda for the United States in the 
upcoming Seattle Ministerial Conference. America's retailers 
would like to reiterate that this is an important opportunity 
for the United States, U.S. companies, their employees, and 
consumers. We look forward to working with you in the coming 
months to prepare for the launching of the Seattle round of 
negotiations. We also look forward to working with you in the 
following years to bring the round to a successful and timely 
conclusion.
      

                                


Statement of the Labor/Industry Coalition for International Trade 
(LICIT)

    LICIT appreciates this opportunity to testify on U.S. 
objectives for the Seattle Ministerial and the ensuing round of 
WTO talks.
    Celebrating its 20th anniversary this year, LICIT brings 
companies and unions together in support of increased and 
equitable international trade. Among the companies and labor 
unions who have endorsed LICIT's latest paper are: American 
Flint Glass Workers; AMT--The Association for Manufacturing 
Technology; Bethlehem Steel Corp.; Communications Workers of 
America; Corning Inc.; DaimlerChrysler; International 
Brotherhood of Electrical Workers; Milacron Inc.; Motorola, 
Inc.; Paper, Allied-Industrial, Chemical & Energy Workers 
International Union (PACE); Union of Needletrades, Industrial 
and Textile Employees (UNITE); and United Steelworkers of 
America/United Rubber Workers Conference.\1\
---------------------------------------------------------------------------
    \1\ Members do not necessarily associate themselves with every 
LICIT report or recommendation.
---------------------------------------------------------------------------
    The goal of the Seattle Ministerial is to launch and set 
parameters for a new round of multilateral trade negotiations. 
The main focus of these talks will be revisions to the existing 
WTO rules on agriculture, services and intellectual property. 
There is much that the United States can and should seek to 
accomplish within the parameters of this ``built-in agenda.'' 
However, none of these positive results can be achieved unless 
the United States resolutely blocks efforts by a handful of WTO 
Members to go outside this agreed list of topics and reopen 
debate over the WTO's antidumping and anti-subsidy rules.

       Importance of Effective Antidumping and Anti-Subsidy Rules

    Antidumping and anti-subsidy rules are a pillar of the WTO and an 
essential element of the multilateral trading system. From its 
inception, the GATT has provided that injurious dumping ``is to be 
condemned'' and has provided for remedies to offset and deter dumping 
and trade-distorting government subsidies. These rules are designed to 
ensure a basic level of fairness and to prevent abuse. The clear intent 
of the countries who want to reopen these rules, however, is to weaken 
them. Allowing this effort to succeed would inevitably lead to abuse of 
the world's open markets--including that of the United States, the 
world's most open market--and would rapidly undermine confidence in the 
WTO itself.
    The Antidumping Agreement has been a particular focus of attacks by 
certain WTO Members as the Seattle Ministerial approaches. Yet, as the 
United States observed in a July 1998 submission to the WTO Working 
Group on the Interaction between Trade and Competition Policy, the 
antidumping remedy is:

        necessary to the maintenance of the multilateral trading 
        system. Without this and other remedial safeguards, there could 
        have been no agreement on broader GATT and later WTO packages 
        of market-opening agreements, especially given the 
        imperfections which remain in the multilateral trading system. 
        . . . [T]he antidumping rules represent an effort to maintain a 
        ``level playing field'' between producers in different 
        countries . . . [and] are a critical factor in obtaining and 
        sustaining necessary public support for the shared multilateral 
        goal of trade liberalization.

    Without these essential rules and the accompanying rules on trade-
distorting subsidies, past successes in trade liberalization could not 
have been achieved and future progress on the core WTO trade agenda 
would become impossible.

       The Antidumping and SCM Agreements Should Not Be Reopened

    The Committtee on Ways and Means, in its 1997 markup of fast track 
legislation, approved by voice vote and without dissent a provision 
instructing U.S. negotiators to reject any agreement that would weaken 
current disciplines against dumping and subsidies:

        In the course of negotiations conducted under this title, the 
        United States Trade Representative shall--. . . preserve the 
        ability of the United States to enforce rigorously its trade 
        laws, including the antidumping and countervailing duty laws, 
        and avoid agreements which lessen the effectiveness of domestic 
        and international disciplines on unfair trade, especially 
        dumping and subsidies. . . .

    The fast track bill reported by the Senate Finance Committee in 
1997 also contains language highlighting the importance of strong rules 
against dumping and subsidies.
    The implication of these actions by the committees of jurisdiction 
are clear: the United States cannot join in any consensus to reopen 
negotiations over the WTO's antidumping and anti-subsidy rules. For 
several reasons, this is an eminently sound and sensible position:
      The current WTO antidumping and anti-subsidy rules were 
concluded only with great difficulty during the Uruguay Round, have 
hardly been tested, and certainly have not proven defective. Moreover, 
there are many new users of antidumping and anti-subsidy laws, often 
developing countries, trying to come into compliance with Uruguay Round 
rules. What is needed is a period of repose and certainty, not 
continued shifting of the WTO rules which could spur confusion and 
negatively affect all WTO Members' exports.
      Antidumping measures affect only a tiny fraction of world 
trade. Where applied, they simply ensure a modicum of fairness. It 
would hardly be plausible to argue that use of antidumping is a major 
problem in international trade. There is other, much more important, 
work to do in Geneva. The same applies to countervailing measures under 
the SCM Agreement.
      Reopening the Antidumping and SCM agreements will only 
serve to make the next WTO round impossible to conclude, or else make 
its results impossible for the United States to digest. Conversely, 
avoiding another divisive fight over antidumping is the best way to 
promote progress on the far more important issues that comprise the 
agreed, built-in agenda for the next round.
      The only unresolved antidumping issue from the Uruguay 
Round, referred to the Committee on Anti-Dumping after the Marrakesh 
Ministerial, was circumvention.\2\ Unless and until some further 
agreement is reached on this point, the United States can continue with 
its current approach to preventing circumvention of valid AD/CVD 
orders. Adding clarity to the WTO rules (while certainly desirable and 
important) does not require, or justify, re-opening the agreement. 
Likewise, the only SCM issue requiring near-term attention is the 
pending expiration, unless extended by Ministerial decision, of the 
``greenlight'' provisions of Arts. 8 and 9 and the ``dark amber'' 
provisions of Art. 6.1. Resolving this matter does not require or 
justify any reopening of the remainder of the SCM Agreement.
---------------------------------------------------------------------------
    \2\ See Agreement on Implementation of Article VI of GATT 1994: 
Statement on Anti-Circumvention, MTN/FA III-11(a).
---------------------------------------------------------------------------

                 Implementation of Uruguay Round Rules

    There have been only minor problems with WTO Members' 
implementation of the Antidumping Agreement, and certainly none that 
justify reopening the Agreement itself. While continued monitoring 
(within the Committee on Anti-Dumping) of how the Uruguay Round rules 
are being implemented makes sense, that is of course very different 
from re-negotiating those rules. The United States should be very clear 
about the distinction, and should be careful not to agree to anything 
under the ``implementation'' rubric that will in practice lead to 
reopening. The same is true with respect to the SCM Agreement.
    There are two Marrakesh Ministerial Decisions indirectly relating 
to antidumping that have not yet been properly implemented, but they 
should be addressed as part of the pending review of the WTO Dispute 
Settlement Understanding and resolved prior to any post-1999 
negotiations. The first calls for an examination of the Antidumping 
Agreement Art. 17.6 standard of review, to determine whether it 
deserves broader application in WTO dispute settlement proceedings.\3\ 
The second recognizes the need for consistent WTO panel resolution of 
AD and CVD disputes--in other words, it makes clear by implication that 
the Art. 17.6 standard of review applies equally to panel reviews of 
CVD measures.\4\ While quite important, neither of these dispute 
settlement issues provides any reason to reopen the underlying 
substantive (Antidumping and SCM) agreements.
---------------------------------------------------------------------------
    \3\ Agreement on Implementation of Article VI of GATT 1994: 
Statement on Standard of Review for Dispute Settlement Panels, MTN/FA 
III-11(b).
    \4\ Statement on Dispute Settlement Pursuant to the Agreement on 
Implementation of Article VI of the GATT 1994 or Part V of the 
Agreement on Subsidies and Countervailing Measures 1994, MTN/FA III-12.
---------------------------------------------------------------------------

       Needed Reforms to the WTO Dispute Settlement Understanding

    As a separate item with a connection to the Seattle Ministerial, 
reforms must be made to the WTO Dispute Settlement Understanding (DSU). 
These reforms, which were supposed to be completed by the end of 1998 
as a result of the 4-year review, are necessary if the DSU and, in 
effect, all WTO rules are to work. Therefore, the U.S. Government 
should seek reform in the following major areas:
      The U.S. must place a high priority on the ``defensive'' 
concerns of the United States. Although the United States has been much 
more frequently a complainant than a defendant, this pattern cannot be 
expected to continue. The U.S. should therefore insist that any legal 
instrument extending the DSU 1) notes the critical importance of the 
Antidumping Agreement standard of review, and 2) clarifies the 
applicability of that standard to CVD disputes. One of the pillars of 
trade liberalization, after all, is the guarantee of effective remedies 
against unfair trade.
      The system needs to become more transparent. The United 
States should seek to amend the DSU by: 1) requiring Members to submit, 
promptly after each submission to a panel, a public version sufficient 
to permit a full understanding of the arguments; 2) requiring panel and 
Appellate Body meetings to be opened to all WTO Members and to the 
public; and 3) allowing affected private parties to participate fully 
in panel proceedings. This would enhance the credibility and 
performance of the system by allowing governments to fully utilize the 
resources and expertise of affected private parties who are normally 
the real parties of interest in WTO cases.
      The operation of the DSU has not provided a clear 
solution to market access problems when government enlists the 
assistance of the private sector in restricting access to its market. 
Solutions must be found to problems of market access in countries that 
employ these hybrid missions. As currently constituted, the system is 
structurally biased in favor of countries that maintain opaque 
barriers, and against countries with transparent legal regimes like our 
own.
      The DSU should also be revised to set clear limits on the 
WTO Secretariat's role in dispute settlement proceedings. It is 
inappropriate for Secretariat officials--who often do not accept or 
agree with the substantive rules which panels are supposed to be 
enforcing--to be substantively involved with panel deliberations. The 
Secretariat does not exist to espouse positions attacking individual 
articles of the GATT, or to side with particular Members who want to 
rewrite the Uruguay Round results in particular subject areas. The 
United States should therefore insist on a thorough review of the 
Secretariat and its funding.

                               Conclusion

    The built-in agenda for the next round is an important one. There 
may also be other WTO issues on which the United States can and should 
seek progress at Seattle and in the talks that follow. However, to 
achieve a result that will enhance U.S. trade objectives and the status 
of America's working men and women, it is essential that the United 
States defeat any and all efforts to weaken the existing fair trade 
rules of the WTO. In practice, this means that those rules should not 
be reopened at all. LICIT looks forward to working with this Committee, 
with the Congress as a whole, and with the Administration to ensure 
that the promise of the upcoming multilateral talks is not squandered 
through a useless and unwise debate over antidumping and anti-subsidy 
rules.
      

                                


Statement of Arthur H. Smith, Vice President, General Counsel & 
Secretary, Libbey Inc., Toledo, Ohio

    Libbey Inc., headquartered in Toledo, OH is a leading 
producer of glass tableware and a producer of ceramic 
dinnerware in the United States and is a provider of metal 
flatware to U.S. foodservice customers. The company is actively 
involved in international trade and is keenly interested in 
developments within the World Trade Organization (``WTO'') and 
regional trade organizations. These Comments are in response to 
the Subcommittee's Advisory of July 8, 1999 inviting public 
comment on U.S. negotiating objectives for the WTO ministerial 
meeting to be held in Seattle, WA November 30-December 4, 1999.
    The Subcommittee is well aware that implementation is 
critical to the success of any trade agreement. The United 
States has a history of full and timely implementation of its 
obligations. U.S. companies are entitled to expect that our 
trading partners will reciprocate. Thus, Libbey strongly 
supports efforts by the United States to monitor and encourage 
compliance with all agreements by trading partners. Libbey 
likewise urges the United States to seek effective and 
transparent notification of compliance for all countries and 
all agreements.
    Also in regard to implementation, Libbey supports efforts 
by the United States and various international organizations, 
including the WTO, to provide technical assistance to 
developing countries in meeting agreed-to obligations. This 
assistance is especially critical in the areas of intellectual 
property, customs valuation, pre-shipment inspection. Libbey 
addresses these and other areas of particular interest below.

                    Intellectual Property Protection

    In the area of intellectual property, Libbey is 
particularly concerned with trade dress and industrial design. 
The United States and Japan, inter alia, have raised 
implementation of the Trade Related Intellectual Property 
(``TRIPs'') Agreement as a priority issue for Seattle. Libbey 
in particular urges progress towards explicit recognition of 
trade dress rights, whether or not there has been an 
application for ``industrial design'' protection. Libbey calls 
on the United States to support extension of the duration of 
protection provided under Article 26.3 to as long as the 
industrial design is in commercial production in a member 
country.

         Customs Valuation Agreement and Preshipment Inspection

    Because Libbey exports to a number of countries around the 
world, it is acutely aware of the importance of commercial 
certainty that the implementation of the Customs Valuation 
Agreement provides to exporters. With the transition period for 
implementation of that Agreement about to expire for many 
developing countries, there is an urgency to be sure that 
countries due to conform to the Agreement are able to do so on 
a timely basis.
    As the Subcommittee knows, more than thirty countries 
currently require preshipment inspection (``PSI'') because 
their own customs infrastructures are not sufficiently 
developed to provide these services. Libbey understands the 
problems that have lead many developing and least developed 
countries to substitute a third party for their national 
customs service. Libbey believes, however, that there is a need 
for both a phased reduction in the number of countries relying 
on PSI companies and WTO supervision of PSI activities other 
than handling individual company complaints.

                      Industrial Tariff Reductions

    Libbey is not opposed to inclusion of industrial tariffs in 
any upcoming negotiations as long as such negotiations are done 
on a request/offer basis. Glassware and ceramic dinnerware have 
long been viewed as highly import sensitive. This continues to 
be the case in 1999. Libbey specifically urges the United 
States to oppose efforts by some countries to have tariffs on 
industrial goods reduced on a formula basis or for singling out 
tariff peaks for above average tariff reductions. Such 
proposals will prove counterproductive to efforts by the United 
States and others to have the new negotiations conclude within 
a reasonable period of time.
    Libbey supports Australia's proposal to lower imposed 
tariff rates to the bound rates. Many developing countries in 
particular agreed to bound rates that were substantially higher 
than existing applied rates. Such differences can create market 
uncertainties, particularly in countries where there has been 
frequent resort to tariff modifications. There are provisions 
within the WTO to address import surges and unfair trade 
practices. It would make sense to eliminate the commercial 
uncertainty the tariff variability currently provides.

                    Services and Electronic Commerce

    Libbey strongly urges the United States to make 
liberalization a particularly priority in certain service 
sectors. These include: distribution services; tourism 
(primarily restaurants); and transportation. These are of 
concern to Libbey as a supplier to the food service industry. 
In addition, Libbey supports further liberalization in 
financial and telecommunication services, as this reduces the 
cost of business in general. Finally, Libbey would benefit from 
expanded right-of-establishment for U.S. retail, wholesale and 
restaurant/bar enterprises.
    Related to business facilitation is minimal government 
interference with electronic commerce. Issues such as taxation, 
privacy and other regulation are significant concern to Libbey. 
The company supports the U.S. position of minimal government 
interference in this area, and urges the United States to make 
this goal of WTO work on electronic commerce as well.

                           Dispute Settlement

    Libbey has not to date had direct interest in a dispute at 
the WTO. The company concurs, however, with proposals of the 
United States and others that seek greater transparency and 
improved access to the dispute settlement process within the 
WTO. The following would all promote support for the WTO 
system: timely derestriction of panel documents and public 
party briefs; access to panel and Appellate Body proceedings 
for representatives of private interested parties as well as a 
mechanism to permit amici briefs from such parties; and the 
availability of public transcripts of panel and Appellate Body 
meetings.
    Libbey understands that the ongoing dispute settlement 
review process has raised dozens of possible modifications to 
the system. Libbey would hope that any modifications that are 
ultimately accepted reflect the commercial reality that the 
existing system is already overlong, taking three years or more 
through appeal and implementation for the aggrieved U.S. 
industry to expect any relief. Changes to the system should not 
increase timelines for either disputes or implementation of 
changes required.

                         Government Procurement

    Libbey believes that transparency in government procurement 
promotes government efficiency and promotes trade 
liberalization. Libbey supports the ongoing initiative to 
develop a transparency agreement that would be applicable to 
all WTO members. Indeed, Libbey continues to hopes that such an 
initiative will be completed by the time of the Ministerial.

Antidumping, Subsidies and Countervailing Duty Measures, and Safeguards

    Libbey has not to date had to use U.S. trade laws. The 
existence of effective laws, is, however, critical to trade 
liberalization. Libbey opposes any general reopening of the 
Antidumping Agreement, which has been operating fairly well in 
its first 5 years. Libbey also opposes the selective re-opening 
of the existing rules system in the Antidumping Agreement. The 
United States should make clear to its trading partners that 
any rebalancing of that system would open up other areas, such 
as tariff bindings and the acceptability of concepts such as 
``special and differential treatment.'' Given that improved 
operation of the dispute settlement mechanism provides any 
party access to review for any antidumping, countervailing duty 
or safeguard action by another party, a re-examination of the 
relatively new Antidumping Agreement is not warranted.
    With regard to the Subsidies Agreement, Libbey observes 
that the serious prejudice provisions in Art. 6.1 has thus far 
not proven useful. Libbey would support either elimination of 
Articles 6.1, 8 and 9 pursuant to Article 31 of the Agreement, 
or extension with review by the end of 2001. In the safeguards 
area, Libbey suggests that the United States undertake a review 
of the hundreds of gray area measures in place during the 
Uruguay Round negotiations, which were to have been phased out 
by January 1, 1999. Such a review would ensure that such 
measures have been eliminated in fact.

                           Competition Policy

    It is Libbey's understanding that there are a number of 
countries that seek to have competition policy included on the 
Seattle Ministerial agenda. For example, Japan's submission 
indicates that it plans to raise the issue of measures 
affecting competition at the ministerial. The European Union 
has over time also expressed a keen interest in the issue, as 
have Hong Kong and other members.
    Libbey's position on this issue is that the WTO is not the 
appropriate forum in which to raise this issue or that, at a 
minimum, it is premature to have the issue considered as part 
of the Seattle process. As the process within the Organization 
of Economic Cooperation and Development (``OECD'') has 
demonstrated, it is extremely difficult to get even active 
antitrust administrators within developed countries to agree on 
what should be viewed as hard core competition problems. The 
exchange of information process within the WTO over the last 
two years suggest that at most, a process of continuing to 
exchange information should be pursued.
    Moreover, it is disturbing that a number of countries 
believe that the consideration of adding competition issues to 
the WTO agenda would permit a reopening of the rules area, in 
particular antidumping. None of the WTO articles has been 
evaluated on a ``competition'' basis (particularly since there 
is no agreement on what ``competition policy'' should be across 
borders). While Libbey would not object to considering whether 
there is a consensus on competition principles, since the 
objective of many countries appears not to be expanded 
disciplines on anticompetitive behavior but rather a weakening 
of the existing rules regime, the United States should simply 
oppose inclusion of competition policy on the agenda.
    Should competition policy be included, the United States 
must insist on not reopening other areas. Finally, if areas are 
reopened, all should be reopened and examined including S&D, 
whether Most Favored Nation and national treatment are always 
consistent with competition policy, etc.

                       State Trading Enterprises

    While in most parts of the world, products of interest to 
Libbey are not produced or sold through state trading 
enterprises, Libbey agrees with the position of the United 
States and others that state trading enterprises should be 
reexamined, including ways to in fact ensure that such 
entities, if they continue, act in a manner consistent with WTO 
obligations. State trading enterprises are provided with 
significant rights and privileges under Article XVII and, 
through their operation, they can erect significant barriers to 
trade.

                  Multilateral Agreement on Investment

    The United States and other countries tried hard during the 
Uruguay Round to obtain a substantial agreement on investment. 
The Agreement on Trade Related Investment Measures (``TRIMs''), 
which does little more than restate preexisting obligations, 
was the only result. Efforts within the OECD to fashion an 
investment agreement were not successful there. It is hard to 
imagine how reconsidering investment within the WTO will 
advance meaningful rules on investment liberalization in the 
near future. Nonetheless, investment restrictions abroad 
(including trade-balancing and local content requirements) are 
important to industrial producers like Libbey. Thus, Libbey 
agrees with countries such as Japan that have urged that 
investment is an important area for WTO consideration. However, 
no agreement should be accepted which does not significantly 
liberalize investment around the world.

                         Labor and Environment

    Libbey views the work of the WTO Committee on Trade and the 
Environment as valuable, at least in the area of transparency, 
and also in terms of efforts to define how multilateral 
environmental agreements relate to the WTO. Libbey is among the 
many U.S. industries that face artificial competitive 
disadvantages because the labor and environmental standards of 
the United States are not internationally agreed to or applied. 
Although there is an existing forum for discussion of 
substantive labor rights, the International Labor Organization, 
the issue of whether violations of core labor rights should 
result in trade action could, in Libbey's view, be explored by 
the WTO in a fruitful manner.
    Libbey thanks the Subcommittee for the opportunity to 
provide these comments.
      

                                


Statement of Micron Technology, Inc., Boise, Idaho

    Micron Technology, Inc. (``Micron'') appreciates the 
opportunity to provide trade policy recommendations for the 
upcoming WTO Ministerial Meeting in Seattle this November.
    Micron is a manufacturer of dynamic random access memory 
(DRAM) semiconductors, static random access memory (SRAM) 
semiconductors and flash memory. Micron also, through its 
subsidiary, Micron Electronic Industries, manufacturers 
personal computers, laptop computers and servers. Micron's U.S. 
facilities are located in Boise, Idaho and Lehi, Utah. Micron 
also has facilities in Italy, Japan, and Singapore. Micron 
employs approximately 8,000 people in the United States.
    Micron is vitally interested in several issues that are 
likely to be raised in the context of a new trade round. 
Specifically, Micron is concerned that there will be a 
concerted effort by U.S. trading partners to introduce 
weakening changes to the WTO Antidumping Code, either in the 
context of antidumping discussions or through discussions held 
in the context of trade and competition policy. Micron is also 
concerned about the ongoing efforts in the WTO to harmonize 
rules of origin. To the extent that these efforts will continue 
in the context of the new round, Micron stresses the importance 
of ensuring that the provisions of the antidumping and 
countervailing duty laws continue to be enforceable once 
harmonization has occurred. Micron also favors elimination of 
remaining duties on semiconductors and semiconductor 
manufacturing equipment. Finally, Micron believes that in the 
context of the Agreement on Subsidies and Countervailing 
Measures (``SCM''), that the purpose of the ``greenlight'' 
subsidy provision has been served and that it should be allowed 
to expire at the end of this year as contemplated in the SCM. 
The serious prejudice provisions, however, should be extended.

       No Changes Should be Made to the WTO Antidumping Agreement

    Micron believes that in order to preserve the consensus for 
an open international trade regime, national authorities must 
have the tools to deal effectively with instances of injurious 
unfair trade practices. Under the auspices of the Uruguay 
Round, very significant changes were made to the Antidumping 
Code, which went into effect only at the beginning of 1995. 
Many of these changes served generally to weaken disciplines 
against dumping, and thus weaken the U.S. antidumping law. 
Despite the fact that these changes were made fairly recently, 
several countries have announced their intention to seek a 
reopening of the Agreement on Implementation of Article VI if 
the General Agreements on Tariffs and Trade 1994 (Antidumping 
Agreement) with the aim of further limiting the efficacy of the 
dumping provisions. Japan, for example, in a communication to 
the WTO General Council regarding preparations for the 
Ministerial dated July 6, 1999, recommends clarifying relevant 
articles, with the aim of limiting ``the abuse of antidumping 
measures.'' Their very clear intention is to introduce 
additional provisions that will weaken antidumping remedies. 
The government of South Korea has voiced similar 
recommendations.
    Strong antidumping laws are critical to the semiconductor 
industry. Our industry has long been plagued by significant 
dumping that very nearly eliminated the entire DRAM industry in 
the mid-1980's when Japanese producers lost millions of dollars 
in order to drive U.S. producers out of business. Korean and 
Taiwanese semiconductor producers have engaged in similar 
tactics.
    As this committee is well aware, the United States has the 
most open trading regime in the world, and its companies 
operate on the basis of market principles. Other countries, by 
contrast, still maintain significant barriers to trade, and 
often their domestic producers do not operate within a market-
based framework, but benefit from significant government 
protection and support. The U.S. antidumping laws are really 
this country's last bulwark against the unfair and injurious 
trade practices of many countries. Micron believes that the 
Antidumping Agreement should not be reopened in this 
negotiation, and that antidumping disciplines should not be 
weakened or sacrificed in order to achieve agreement in other 
negotiating areas.
    In addition, there are several countries that would like to 
use discussions in the WTO about trade and competition policy 
as a back door to making changes in the antidumping area. This 
must not be allowed to happen. Trade and competition 
discussions have thus far not proceeded beyond very general 
discussions about national laws curbing anticompetitive 
practices. Micron therefore believes that the issue of 
international rules governing competition is not ripe for this 
round of trade negotiations. Moreover, any discussion in this 
area should not be used to alter in any way existing WTO 
antidumping disciplines.

 National Trade Laws Must be Preserved When Origin Rules are Harmonized

    Micron believes that the work program undertaken in Uruguay 
Round with respect to harmonizing national rules of origin must 
not in any way undermine the use or effectiveness of 
antidumping or countervailing duty laws. The current Agreement 
on Rules of Origin specifies that a single origin rule should 
apply to all trade matters from collection of Customs 
statistics to antidumping enforcement. While a single rule may 
be fine for certain industries, it would be very detrimental to 
U.S. semiconductor manufacturers concerned about dumping, if 
origin is established on the basis of the country in which 
final assembly occurs.
    Current U.S. law bases origin for semiconductors for 
Customs purposes on country of final assembly. In antidumping 
cases, however, origin is determined on a case-by-case basis. 
In the semiconductor area, antidumping orders are administered 
on the basis of where a semiconductor is fabricated. If a final 
assembly rule were adopted for all purposes, the antidumping 
law would no longer be of any benefit for U.S. semiconductor 
producers, since foreign fabricators could very easily move 
final assembly to another country, thus avoiding the order.
    For certain products it clearly would make most sense to 
have different rules for antidumping purposes and for general 
trade purposes. If this is not possible, however, Micron urges 
our negotiators to adopt harmonized origin ruled based on the 
country in which a semiconductor is fabricated.

    Duties on Semiconductors and Manufacturing Equipment Should be 
                               Eliminated

    Micron firmly supports continued elimination of industrial 
tariffs in any new round of WTO negotiations. Micron believes 
that more countries should be encouraged to eliminate their 
duties in accordance with the 1997 Information Technology 
Agreement. In addition, negotiating authority should be sought 
to negotiate elimination of all remaining duties on 
semiconductor manufacturing equipment and materials.

  The Subsidies Code Green Light Provision Should be Allowed to Expire

    Under the Agreement on Subsidies and Countervailing 
Measures that was negotiated during the Uruguay Round, WTO 
countries agreed to permit non-application (``greenlighting'') 
of countervailing duty measures to certain types of subsidies, 
including subsidies for environmental compliance, regional 
subsidies and certain research and development subsidies. WTO 
countries agreed that, unless specifically extended by WTO 
member countries, green lighted subsidies would once again 
become actionable subsidies after December 31, 1999.
    Micron believes that the benefits of the Green Light 
provision have run their course, particularly with respect to 
R&D subsidies. R&D subsidies, to the extent that they are 
specific to an enterprise or industry or group thereof, should 
be subject to countervailing duty disciplines and WTO 
challenges when they result in material injury, serious 
prejudice, or nullification and impairment. In today's 
competitive global climate there is simply no reason to exempt 
an entire category of subsidies from internationally-agreed to 
disciplines, particularly in area of R&D, where government 
subsidies can result in significant unfair advantages for 
national firms.
    Micron also believes that the serious prejudice provisions, 
which are also due to expire, should be permanently extended. 
These provisions have helped to increase disciplines against 
dark amber subsidies, several of which have been subject to WTO 
dispute settlement challenges.

                               Conclusion

    Micron supports the efforts of the United States to build a 
more open international trading environment. We appreciate this 
opportunity to express out views.
      

                                


Statement of North Dakota Durum Wheat Farmers

    These comments are submitted by durum wheat farmers located 
in North Dakota (whose names and addresses appear at the end of 
these comments) in response to the Subcommittee on Trade's 
Advisory of July 8, 1999 regarding the Subcommittee's hearing 
on U.S. negotiating objectives for the WTO Seattle Ministerial 
Meeting. We appreciate this opportunity to raise the concerns 
of wheat farmers such as ourselves so they may be addressed in 
the upcoming negotiations.
    Farmers, and wheat farmers in particular, have long been 
supporters of trade liberalization. We have supported trade 
liberalization because we believed that opening foreign markets 
by reducing tariffs and other barriers to U.S. exports would 
benefit U.S. farmers, who can compete with any farmers in the 
world absent programs or policies that distort trade. Lately, 
however, large segments of the farming sector, including wheat 
farmers, have come to question whether we have received all of 
the benefits of ``free trade'' to which we were entitled. The 
answer to that question is, sadly, ``no.''
    The upcoming WTO negotiations present an opportunity for 
policymakers to restore the faith of farmers in the 
effectiveness of trade agreements. Much is at stake, including 
the lives and livelihood of tens of thousands of farmers across 
the country.
    It is with these thoughts in mind that we identify what we 
believe should be our country's negotiating objectives. First, 
agriculture must be the top priority for the upcoming 
negotiations. As the Subcommittee's Members are no doubt aware, 
U.S. agriculture is in crisis. Oversupply and historically low 
commodity prices threaten to push large numbers of small 
farmers out of business. While emergency relief measures such 
as those being considered by Congress and the Administration 
can help in the short-term, the upcoming trade negotiations 
provide the opportunity to reach long-term solutions.
    The negotiations must focus on the elimination of foreign 
export subsidies and other programs that distort trade. Our 
negotiators should also focus on practices that allow countries 
to avoid export subsidy commitments, such as pooling 
arrangements and dual pricing systems. These types of practices 
undercut U.S. products in the world market by creating 
artificially low export prices for many foreign products.
    The negotiations must ensure that U.S. farmers have full 
and unimpeded access to foreign markets. Too many countries 
currently do not allow reciprocal marketing of U.S. 
agricultural products, even though the United States has 
granted such access to them. This cannot be permitted to 
continue.
    Sanitary and phytosanitary (SPS) issues are important to 
ensuring market access. Sound science must be the touchstone 
for SPS standards. At the same time, effective enforcement 
against pest and disease prevention, including karnal bunt, 
must be given appropriate priority as well.
    Resolution of disputes must be made speedier. The recent 
dispute with the European Union over beef hormones exposes the 
important shortcomings in the current system, and is a prime 
example of how the promises of the benefits of the new and 
improved trading system under the WTO have not come to fruition 
for America's farmers.
    Elimination of state trading enterprises (STEs)also should 
be a priority. Our experience with the Canadian Wheat Board, 
for example, has shown how STEs provide support to domestic 
producers through different means, and also has enhanced the 
ability of foreign countries to restrict trade from the United 
States. Efforts to ensure compliance with Article XVII 
principles have been unavailing. Elimination of STEs appears 
the only likely solution.
    As important as opening foreign markets and removing 
various impediments to U.S. exports is, we think it is no less 
important that farmers in the United States have available to 
them effective remedies when injurious imports enter our 
market, particularly when such imports are either being sold at 
dumped prices or are being subsidized. The United States should 
resist efforts to re-open international agreements on 
antidumping and countervailing duties which would likely result 
in weakening of those remedies. Accordingly, we oppose 
proposals to reopen these agreements.
    Finally, a review of barriers that exist with respect to 
access to purchase registered chemicals and pesticides should 
be undertaken without delay, whether in the Seattle context or 
separately as a NAFTA issue. Today, U.S. farmers face obstacles 
in trying to purchase certain pesticides in Canada, where they 
are available at much lower prices than in the United States 
because of differences in patent protection. These result in 
significant artificial cost disadvantages for U.S. farmers vis-
à-vis our Canadian competitors. We respectfully urge our 
negotiators to bring this important problem expeditiously to 
the negotiating table, whether under the TRIPs Agreement, 
bilaterally, or on a NAFTA-wide basis, to obtain harmonized 
patent protection for registered chemicals and pesticides so 
that U.S. farmers are not needlessly disadvantaged.
    Once again, we appreciate this opportunity to provide input 
into the negotiating agenda.

            Respectfully submitted,
                                            Jerome Anderson
                                                Ross, ND 58776-9096
                                             Marshall Craft
                                                  Stanley, ND 58784
                                               Louis Kuster
                                                  Stanley, ND 58784
                                               Curt Trulson
                                                     Ross, ND 58776
      

                                


Statement of Pharmaceutical Research and Manufacturers of America 
(PhRMA)

                                Summary

    The Pharmaceutical Research and Manufacturers of America 
(``PhRMA'') urge the United States to pursue every opportunity 
for improving the ability of the innovative pharmaceutical 
industry to compete in foreign markets. The United States has a 
substantial interest in ensuring that our trading partners do 
not erect barriers to our ability to compete in their markets, 
through non-market-based price controls, inadequate 
intellectual property protection standards, unfair or coercive 
government procurement practices, high tariffs or other 
measures. We urge the U.S. Government to approach the Seattle 
Ministerial Conference and the new round of negotiations in the 
World Trade Organization (``WTO'') with a view toward removing 
these impediments to trade. We stand ready to work with the 
Office of the U.S. Trade Representative (``USTR''), other key 
actors in the United States Government, and the Congress, to 
pursue an effective course of action in the new round and 
through other opportunities.
    To summarize our more detailed comments that follow, PhRMA 
has identified the following five priority areas. Among these 
negotiating objectives for the new round, our member companies 
place highest priority on the issues of intellectual property 
protection and non-market-based price controls.
      Intellectual property. Preclude any attempt to 
reduce, dilute or delay implementation of existing TRIPS 
obligations, ensure the possibility of initiating work to 
enhance the Agreement at a suitable time during the next round, 
and seek to enhance existing standards through other bilateral 
and multilateral fora.
      Price controls. Ensure that WTO Members identify, 
eliminate, or substantially reduce trade-distorting price 
controls and non-market-based government interventions in the 
pharmaceuticals market, as these measures undermine the goals 
of free trade.
      Government procurement. Pursue expansion of the 
plurilateral Agreement on Government Procurement to ensure the 
coverage of governmental and quasi-governmental entities 
responsible for direct and indirect procurement of and/or 
payment for pharmaceutical products.
      Sanitary and phytosanitary measures. Emphasize 
the importance of transparent and non-discriminatory rules, and 
oppose any attempts to undermine the risk assessment and sound 
science standards of the Sanitary and Phytosanitary Measures 
Agreement.
      Customs and tariff issues. Expand the 
pharmaceutical tariff agreement to cover both additional 
products and countries, complete the World Customs 
Organization's harmonization work program under the Agreement 
on Rules of Origin, and implement the Customs Valuation 
Agreement by developing countries.

                               Statement

    The Pharmaceutical Research and Manufacturers of America is 
a trade organization representing approximately 100 U.S. 
companies with a primary commitment to pharmaceutical research. 
This year, PhRMA members are expected to invest over $24 
billion in research and development efforts to identify and 
bring to market new drugs. Our members employ over 208,000 
Americans in a variety of high-skill, high-wage jobs. The 
industry's annual worldwide sales are expected to exceed $134 
billion, an increase of nearly 8 percent over 1998 figures. One 
third of this revenue comes from sales of our products in 
foreign markets. Our ability to compete successfully in those 
markets is dependent on effective, non-discriminatory trade 
rules that protect our technology and products.
    The Uruguay Round of multilateral trade negotiations 
produced significant gains in the area of patent protection, 
particularly in the creation of the Agreement on Trade-Related 
Aspects of Intellectual Property Rights (``TRIPS Agreement''). 
USTR and other trade agencies have already stated their 
commitment to enforcement of existing trade agreements. PhRMA 
considers such efforts to be of critical importance, 
particularly with regard to Uruguay Round commitments on the 
protection of intellectual property rights, sanitary and 
phytosanitary measures, and customs valuation. Such efforts 
will not be sufficient, however, to address the problems that 
the industry faces abroad. Accordingly, PhRMA urges the members 
of the Subcommittee to ensure that the U.S. Government pursues 
a forward-looking set of negotiating objectives in future trade 
negotiations. In these negotiations, the U.S. Government should 
advocate the creation of new trade rules to address, inter 
alia, the two most critical issues facing our innovative 
industry: insufficient intellectual property rights protection 
and non-market-based price control measures.

Intellectual Property

    The Agreement on Trade-Related Aspects of Intellectual 
Property Rights (TRIPS Agreement) was one of the most 
significant achievements of the Uruguay Round. The standards 
established by TRIPS represent a vast improvement over the 
patchwork of bilateral and multilateral agreements that existed 
at the time the Round was concluded.
    But the Agreement is more than simply a set of standards 
for protecting inventions, trademarks and other forms of 
intellectual property. From the outset, the TRIPS negotiators 
realized that the mere adoption of laws that reflect the 
standards of the TRIPS Agreement would not achieve the goal of 
delivering adequate and effective protection for intellectual 
property. As a result, the Agreement was structured as an 
innovative effort to establish a baseline level of intellectual 
property protection through a combination of legal norms, 
effective enforcement procedures and efficient registration 
systems. The objective of the Agreement must be recognized to 
be the establishment of functional intellectual property 
systems in all WTO Members that deliver adequate and effective 
protection of intellectual property rights. Thus, unless and 
until viable, efficient and effective intellectual property 
systems are established in all WTO Members, the potential of 
the Agreement to deliver more effective protection for 
innovation-based U.S. industries will not be realized.
    Many developing country WTO Members have used their 
transition period to establish the necessary reforms to bring 
their regimes into compliance with the TRIPS standards. 
However, a far larger number of developing country WTO Members 
have not made these legislative reforms. More distressing is 
the fact that few developing countries have undertaken reforms 
in the areas of enforcement or in development of improved 
registration systems (e.g., procedures for granting patents and 
registering trademarks) that are critical to giving effect to 
the obligations of the Agreement.
    PhRMA and its members applaud the efforts of the United 
States--directly and through its support of the World 
Intellectual Property Organization (WIPO) and other relevant 
multilateral organizations--to provide technical assistance to 
developing country officials focused on legislative reform. 
PhRMA believes these efforts must be complemented by additional 
activities to help developing country industrial property 
officials establish efficient and cost-effective procedures for 
granting rights. This assistance should include training of 
officials responsible for review and granting of patents, and 
development of relationships between the U.S. Patent and 
Trademark Office and other major industrial property offices 
that would enable these developing country industrial property 
offices to expedite the application review and granting 
process. The United States should also expand its efforts to 
provide training and other forms of assistance to courts, 
customs authorities and law enforcement officials in developing 
countries to help those countries develop effective enforcement 
measures.
    In addition to providing technical assistance, PhRMA 
encourages the United States to not hesitate in promoting 
reform by vigorously pursuing those developing country WTO 
Members that fail to meet their obligations under the TRIPS 
Agreement. PhRMA and its members strongly encourage the United 
States to use the dispute settlement procedures of the WTO to 
promote compliance and to confirm the nature of the existing 
obligations of the Agreement. PhRMA and its members believe the 
United States should complement these WTO-based enforcement 
efforts with bilateral discussions with those WTO Members that 
fail to implement their obligations under the TRIPS Agreement 
or otherwise undermine the intellectual property of innovative 
U.S industries.
    In moving forward toward the Ministerial Conference and 
beyond, it is important to recognize that work has already 
begun within the WTO that could enhance the Agreement.
      Under the built-in agenda, the TRIPS Council has 
begun its review of the protection required by the Agreement 
for plant and animal innovation and on the issue of expiration 
of the moratorium on use of non-violation grounds in dispute 
settlement proceedings involving the TRIPS Agreement. The U.S. 
Government should make it a priority to ensure that these 
reviews produce favorable outcomes that will strengthen the 
obligations of the Agreement.
      The TRIPS Council will conduct reviews of 
implementation of the Agreement by developing country WTO 
Members over the next 18 to 24 months. These reviews will shed 
light on the results of efforts taken by these Members to bring 
their systems into compliance with their obligations. PhRMA 
looks forward to working with USTR to ensure that this process, 
as intended, results in improved global intellectual property 
protection standards by all developing country WTO Members.
      Work planned under the built-in agenda will also 
include reviews specified in Article 71 of the Agreement, 
including the comprehensive review of the Agreement starting in 
the year 2002. These reviews will provide an opportunity for 
the United States to elaborate its views on a number of the 
provisions, and will provide other WTO Members a similar 
opportunity to indicate how they view the Agreement.
      Several disputes concerning obligations of the 
TRIPS Agreement are now pending before the WTO Dispute 
Settlement Body (DSB). Additional disputes are likely to 
commence after expiration of the second transitional period 
specified in the Agreement (i.e., after January 1, 2000). The 
results from these dispute settlement proceedings will help to 
identify any weaknesses or deficiencies in the Agreement so 
that corrective action can commence.
    The results from this work under the built-in agenda and 
from the decisions of the DSB will provide important insights 
into the nature and effectiveness of the current obligations of 
the Agreement, and may point to a need to clarify or enhance 
certain parts of the Agreement.
    A number of developing country WTO Members have submitted 
proposals to the General Council in preparation for the WTO 
Ministerial, some of which suggest that the TRIPS Council 
conduct work on ways to decrease the level of protection 
afforded under the Agreement. Other proposals seek to extend 
the transitional periods for implementation of the Agreement. 
Proposals along these lines are extremely troubling to PhRMA 
and its members. The suggestion that it would be appropriate 
for the TRIPS Council to pursue a work program to weaken the 
TRIPS Agreement before the Agreement has even been fully 
implemented raises serious questions about the commitment of 
these Members to honor the obligations they accepted during the 
Uruguay Round. Similarly, it is extremely troubling that 
certain WTO members are advancing proposals to extend the 
transition period at the time when these countries are required 
to have implemented their obligations. The U.S. Government must 
be prepared to respond to these proposals in a way that 
forecloses any opportunity to weaken the current Agreement and 
that does not prejudice future enhancements to the Agreement.
    Accordingly, PhRMA and its members recommend that the U.S. 
Government stress the following principles concerning the TRIPS 
Agreement during the Ministerial Conference.
    First, PhRMA and its members believe it is imperative for 
the United States to dispel any notion that the Ministerial 
Conference or the new round could provide an opportunity to 
reduce, dilute or delay implementation of the obligations 
mandated by the current text of the TRIPS Agreement. The 
obligations undertaken by all WTO Members in the Uruguay Round 
on intellectual property must be respected and met by 
developing country WTO Members through timely and full 
compliance with both the spirit and letter of the TRIPS 
Agreement. Accordingly, the U.S. Government must preclude any 
deliberations in the Ministerial Conference that would call 
into question the existing obligations of the Agreement. The 
U.S. Government should work closely with developed country WTO 
Members to ensure consistent interpretations of TRIPS. 
Moreover, the Quad countries should ensure that they are fully 
compliant with TRIPS provisions prior to the Ministerial, 
including patent and trademark obligations and enforcement.
    PhRMA and its members believe the United States Government 
must complement this stance on timely and full implementation 
by aggressively opposing any efforts by developing country WTO 
Members to begin work in the new round that could dilute or 
weaken the obligations of the Agreement. In particular, we urge 
the United States Government to oppose proposals that could 
raise the possibility of diminishing the patent obligations of 
the Agreement, such as by narrowing the obligations concerning 
patent eligibility for plant and animal inventions, or by 
loosening the restrictions use of patented inventions without 
the permission of the patent owner.
    Similarly, the United States Government must be prepared to 
not only oppose but to foreclose the possibility of addressing 
certain concepts that are likely to be advanced during the 
deliberations on the new round. The two issues of immediate 
concern are the expiration of the moratorium on use of non-
violation grounds in WTO dispute settlement proceedings 
involving the TRIPS Agreement and extension of the transition 
periods for compliance.
    On the former issue, PhRMA is concerned that there appears 
to be support among a number of WTO Members for an extension of 
the moratorium on invocation of non-violation grounds in WTO 
dispute settlement proceedings involving the TRIPS Agreement. 
PhRMA and its members believe that a temporary or indefinite 
foreclosure on use of non-violation grounds in dispute 
settlement proceedings will deprive intellectual property 
owners of the full protections afforded by the Agreement. Given 
the resistance of certain WTO Members to substantive 
intellectual property reform, it is crucial that the U.S. 
Government preserve all of its options in the dispute 
settlement process to remove direct and indirect impediments to 
TRIPS compliance. The United States Government should 
accordingly strongly oppose any effort to extend the moratorium 
specified in Article 64.2, including a temporary extension of 
the moratorium during the new round.
    On the latter issue, PhRMA and its members believe the 
United States Government must oppose any effort to extend the 
transition periods for compliance with the obligations of the 
Agreement for developing countries. The five years provided to 
developing countries to date has been more than adequate to 
enable these countries to undertake the legislative and 
regulatory reform needed to place their systems into compliance 
with the TRIPS standards. Countries that have chosen to delay 
implementation with the hope that the transition periods will 
be extended should not be allowed to succeed in their efforts 
to avoid the obligations they undertook as part of the Uruguay 
Round. PhRMA and its members strongly urge the United States to 
oppose any effort to delay the effective date of any of the 
obligations of the Agreement.
    Second, PhRMA and its members recommend that the United 
States Government seek assurances in the Ministerial Conference 
that developments arising out of work on the built-in agenda 
are framed so as to provide only for the possibility of 
enhancing the levels of protection offered under the Agreement. 
The United States Government should also ensure that the WTO 
Ministerial Declaration reserves the possibility of initiating 
work to enhance the Agreement at a suitable time during the 
next round.
    We urge this approach recognizing that, although the TRIPS 
Agreement holds the potential for significantly improving the 
global environment for the protection of intellectual property 
rights, it was a carefully negotiated compromise that addresses 
only parts of the global intellectual property regime important 
to our industry. Unfortunately, the Agreement does not 
satisfactorily resolve a number of issues of critical 
importance to the research-based pharmaceutical industry. 
Examples of deficiencies in the Agreement include:
      impediments to the enforcement within the WTO 
dispute settlement process of obligations in the TRIPS 
Agreement concerning the exclusive right of a patent owner to 
prevent importation of products obtained outside the 
jurisdiction of the member;
      an absence of comprehensive patent eligibility 
through the authority of Members to exclude plant and animal 
inventions from protection under patents;
      a lack of precision in the definition of 
obligations concerning use of data or conclusions drawn from 
data generated to prove the safety and efficacy of 
pharmaceutical and other regulated new products and new 
indications of existing products;
      an absence of means to realize an effective term 
of patent protection where the ability to market the patented 
product has been impeded through regulatory delays or 
procedures;
      inadequate safeguards regarding trade in 
counterfeit pharmaceutical products and incomplete protection 
for trademarks and trade dress of pharmaceutical products; and
      overly generous transitional periods for certain 
developing countries with respect to product patent protection 
for developing countries.
    Also, while the Agreement imposes general obligations 
concerning the overall efficiency of systems for granting 
rights, there is a pronounced need for systems that grant 
rights in a more efficient and cost-effective manner. PhRMA 
members will not realize the benefits of the current agreement 
until such systems are established.
    Third, PhRMA and its members recognize that the WTO is not 
the only forum available to pursue enhancements to the global 
intellectual property system. For example, there are a number 
of activities underway in WIPO that could improve the ability 
of innovative U.S. industries to obtain and enjoy effective 
protection. Recognizing this, PhRMA and its members believe the 
United States Government should complement its efforts within 
the WTO by seeking to enhance these standards through 
opportunities within WIPO and other international 
intergovernmental institutions, and in its bilateral and 
multilateral negotiations.

Non-Market-Based Price Controls

    PhRMA believes that in this round of trade negotiations, 
the U.S. Government should ensure that WTO Members identify, 
eliminate, or substantially reduce trade-distorting price 
controls and non-market-based government interventions in the 
pharmaceuticals market. The elimination of government-imposed 
price controls should be a U.S. negotiating priority, because 
such measures lead to international market distortions that 
profoundly undermine the goals of free trade.
    In a growing number of foreign markets, PhRMA member 
companies face non-market-based measures designed to regulate 
prices and the consumption of pharmaceutical products, under 
the justification of ``cost containment.'' While the 
pharmaceutical industry recognizes the need for governments and 
consumers to contain costs, the price and market regulation 
approaches used by governments are problematic and are often 
discriminatory against U.S. innovators. Unfortunately, these 
government-imposed interventions generally fail to contain 
costs and lead to delays in patient access to new and important 
medicines.
    Different countries employ a wide variety of price and 
volume control measures. Some national health authorities 
calculate a price for products or groups of products based on 
expert advice or on the products' cost of production. Other 
governments fix prices based on the average price for a product 
in a ``basket'' of other countries. Still others limit the 
amount of profits a pharmaceutical company can earn. Cost 
control programs are sometimes ``voluntary'' (i.e., imposed 
through company-specific or industry-wide agreements with the 
government), but are often mandatory. However, even programs 
that are nominally voluntary frequently permit the health 
authorities to impose cost controls if the industry is not 
sufficiently cooperative. In France, for example, if companies 
do not voluntarily limit their sales growth, the government 
imposes industry-wide penalties. Similarly, in the United 
Kingdom, the health authority retains the discretion to impose 
price or profit control measures even if the industry agrees to 
participate in a voluntary cost control scheme.
    Despite the variety of approaches used by governments to 
control the prices of or spending on drugs, all of these cost 
containment interventions have one feature in common: they 
incorporate a non-free-market based approach to the purchase 
and consumption of pharmaceuticals, and therefore distort free 
trade of these products and open competition.
    These government interventions in pharmaceutical pricing 
and purchasing have several adverse effects, which are 
frequently overlooked by national legislatures and health care 
authorities. These measures have an impact not only on the 
trade of goods and services, but as importantly, on the ability 
of patients to access pharmaceutical products.
      Government-imposed market interventions generally 
lead to lower than market-based prices, and, consequently, 
directly reduce the industry's revenues. The reduction in 
revenues undermines the value of a company's patent rights and 
therefore directly contradicts the intent of the TRIPS 
Agreement to provide for protection of intellectual property 
rights. More importantly, these measures and their impact on 
industry revenues make it difficult for pharmaceutical 
companies to fund the necessary R&D to continue to develop 
innovative products.
      These government interventions are focused on the 
pharmaceuticals industry, rather than addressing commercial 
health sectors across-the-board. As a result, such measures 
discriminate against the pharmaceutical industry in particular.
      Most often, government interventions in the 
market for pharmaceuticals are intended to reduce government 
budgetary expenditures. However, in some cases, their objective 
is to protect the domestic pharmaceutical industry from 
imports. Under these circumstances, there is clear 
discrimination against foreign products, in violation of 
requirements for national treatment of all products.
      Moreover, these measures generally are targeted 
toward innovative products. As a result, they 
disproportionately impact the U.S. industry, which has 
historically been at the forefront in the development of 
innovative, fast-growing and profitable pharmaceutical 
products.
    PhRMA believes that it is critical for the United States 
Government to address the use of such government-imposed 
interventions within the pharmaceutical markets of its trading 
partners. There are several avenues by which this could be 
done.
    The WTO Agreement already addresses some aspects of these 
non-market based measures. For example, paragraph 9 of Article 
III of the General Agreement on Tariffs and Trade 1994 
acknowledges that internal price control measures can have 
prejudicial effects on imported products, in that some measures 
may discriminate against innovation and therefore against 
certain companies. In addition, these measures seriously 
undermine the protection afforded by other parts of the WTO 
Agreement, including the TRIPS Agreement and the General 
Agreement on Trade in Services. TRIMS also precludes measures 
that would require domestic investment or production in order 
to obtain an advantage, and might thereby invalidate some of 
the cost containment mechanisms in place. It may also be 
possible to address these measures on the issue of protection 
of domestic industries. Lastly, recent OECD documents have 
called for reforms to regulatory regimes that slow innovation 
and reduce competitiveness, and for keeping markets open to 
international trade and investment, and therefore staying the 
course of market-based approaches.

Government Procurement

    PhRMA urges the United States to pursue the expansion of 
the scope of the plurilateral Agreement on Government 
Procurement to ensure the coverage of governmental and quasi-
governmental entities responsible for the direct and indirect 
procurement of and/or payment for pharmaceutical products. 
Currently, although many Parties to the Agreement have listed 
their Ministries of Health in their respective schedules, the 
entities that actually procure pharmaceutical products are not 
listed and often do not adhere to the rules set forth in the 
Agreement. This is compounded by the problem of governments 
acting as monopsonistic purchasers, leading to many of the same 
distortionary and inefficient market results as are more 
generally feared under monopoly seller conditions. In addition, 
government procurement operates within a regulatory framework 
in which competition policy, reimbursement rules, and drug 
marketing approvals are all established by the same government, 
often resulting in less than transparent outcomes. Furthermore, 
the Agreement on Government Procurement is a plurilateral 
agreement to which only 26 of the 134 WTO Members have acceded. 
WTO Members who are not a party to this Agreement should be 
encouraged to ratify it and bring their procurement policies in 
accordance.
    PhRMA applauds the efforts of USTR to reach an agreement at 
Seattle on transparency in government procurement that would 
cover all WTO Members. The United States must seek to broaden 
the WTO's inquiry into transparency in government procurement 
practices to encompass the impact of government corruption on 
trade. In addition, PhRMA believes that the core elements of 
the Anti-Bribery Convention completed under the auspices of the 
Organization for Economic Cooperation and Development should be 
extended to all WTO Members, and made enforceable through WTO 
dispute settlement.

Sanitary and Phytosanitary Measures

    The Agreement on the Application of Sanitary and 
Phytosanitary Measures (SPS Agreement) contains a number of 
disciplines that have benefited or could benefit the U.S. 
pharmaceutical and biotechnology industry, such as the 
requirement that regulatory decisions be based on sound science 
and on a risk assessment. However, some of the principles of 
the Agreement--such as regionalization for animal diseases and 
the development of international standards--have proven to be 
difficult to apply. Both the strengths and the weaknesses of 
the Agreement were evident during the discussions between the 
United States and the European Union (``EU'') on the 
implementation of the EU Commission Decision on the prohibition 
of the use of materials presenting a risk as regards 
transmissible spongiform encephalopathies (the so-called SRM 
ban) which, as originally drafted, would have inflicted 
billions of dollars of commercial damage on the pharmaceutical 
industry without any clear safety benefit to consumers.
    Accordingly, the U.S. Government should emphasize the 
importance of implementation of transparent and non-
discriminatory rules consistent with the intent of the SPS 
Agreement, and should oppose any attempts to undermine its risk 
assessment and sound science standards, particularly with 
respect to the ``precautionary principle.''
    PhRMA also believes that USTR should use the built-in 
agenda of the Agriculture Agreement to elaborate key provisions 
of the SPS Agreement, focusing on the need to base measures 
affecting trade on sound science, rather than on political 
goals or vaguely phrased ``consumer concerns'' not grounded in 
fact. However, the U.S. Government should resist at all costs 
any effort to dilute the disciplines already found in the SPS 
Agreement, or to limit the scope of their application.

Customs and Tariff Issues

    Finally, in addition to the issues described above, PhRMA 
member companies assign considerable importance to the 
following customs and tariff objectives:
      Continuing the expansion of the pharmaceutical 
tariff elimination agreement, to cover both additional products 
and countries. The current agreement, reached in the Uruguay 
Round, brought significant benefits to millions of patients by 
eliminating the unnecessary tax on research and development, 
which serves no trade protective purpose in a globalized 
industry. PhRMA strongly believes that the agreement can be 
improved upon by revising the tariff nomenclature to permit 
coverage of new products without the cumbersome process of 
negotiating update agreements every three years. In addition, 
the many less-developed countries that have received ``free 
rides'' under this plurilateral arrangement should be brought 
into the fold, either through their direct inclusion in the 
pharmaceutical zero-for-zero agreement, or through full 
participation in the Accelerated Tariff Liberalization 
initiative. Finally, all additional countries acceding to the 
WTO should be required to become signatories to the zero-for-
zero tariff agreement.
      Prompt completion of the World Customs 
Organization's harmonization work program under the Agreement 
on Rules of Origin. This agreement will permit the industry to 
apply predictable origin rules for labeling and other purposes, 
based on the U.S. position that chemical reactions, normal 
dosage formulation, and activities resulting in a change in 
tariff heading confer the origin status of the country in which 
the prescribed activity took place. The failure to complete 
this work under the Uruguay Round schedule has resulted in 
uncertainty (and potential liability) in the industry and the 
international marketplace, due to conflicting local regulations 
and rulings, and questions about the applicability of foreign 
customs origins rules to drug registration agency rules.
      Full implementation of the Customs Valuation 
Agreement by developing countries. This agreement lends 
predictability to customs valuation of traded finished drug 
products, bulk active ingredients, and intermediates. Arbitrary 
valuation schemes for dutiable products based on minimum 
values, projected resale prices, or other non-WTO compliant 
approaches, compound the negative effects of those countries' 
failure to participate in the zero-for-zero tariff agreement. 
The U.S. should urge all WTO members to adhere to the 
implementation schedule of the GATT/WTO Customs Valuation 
Agreement, without agreeing to requests for further delays.
    Conclusion

    PhRMA appreciates the opportunity to present these comments 
on the upcoming WTO Ministerial Conference in Seattle. PhRMA 
looks to USTR and other U.S. trade agencies to seek significant 
improvements in the proposed new trade round to existing 
international trade rules, with the objective of eliminating 
all constraints to the operations of free markets on a global 
basis. At the same time, the U.S. Government must continue to 
seek compliance with existing WTO rules through vigorous 
enforcement efforts. PhRMA is committed to work closely with 
the Subcommittee to ensure that these objectives are adequately 
reflected in the Ministerial Declaration to be issued in 
Seattle later this year and in the ensuing round of 
negotiations.
      

                                


Statement of PPG Industries, Inc., Pittsburgh, Pennsylvania

    PPG Industries, Inc. (``PPG'') is an U.S. producer of flat 
glass, fiber glass, chemicals and coatings. With production 
facilities both in the United States and abroad, PPG 
manufactures and markets its products on a global basis. Thus, 
the company has a strong interest in expanding free trade and 
ensuring a fair international trading system.
    In support of liberalizing trade and further reducing 
tariff and non-tariff barriers, PPG offers the following 
suggestions with respect to negotiating objectives for the 
World Trade Organization Ministerial meeting in Seattle.

                I. Implementation of Existing Agreements

    The existing GATT 1994 Agreements which came out of the 
Uruguay Round and the work programs initiated by those 
agreements set forth the rights and obligations of all the WTO 
member countries. These are the rights and obligations for 
which the United States bargained as part of the multilateral 
negotiations that led to the creation of the WTO.
    To the extent that member states have not and are not 
meeting the requirements of their obligations, the U.S., in 
some measure, is not receiving the rights for which it 
bargained. Implementation of these agreements and their 
accompanying work programs are of great importance to U.S. 
businesses. Further discussion of the WTO work programs appears 
under heading III below.

A. Agreement Compliance

    Many WTO Members have not notified the appropriate 
Committees of their implementing legislation. This includes 
notification in important areas such as antidumping, 
countervailing duties, and customs valuation. Lack of 
notification suggests the possibility of non-compliance. Until 
there is appropriate notification, a given Committee cannot 
decide whether there is compliance.
    Even when there has been compliance with basic reporting 
requirements, some Committees have not been able to obtain 
responses to follow-up questions regarding implementation. For 
example, the Committee on Subsidies and Countervailing Measures 
in a report prepared for the Singapore Ministerial noted that 
it had not been able to obtain answers to questions that had 
been put to Members following review of implementing 
legislation. [See Report (1996) of the Committee on Subsidies 
and Countervailing Measures at 5-6, G/L/126 (10/28/96).] The 
unanswered questions included questions regarding: perceived 
inconsistencies between the Agreement, newly-enacted 
legislation by various member countries, and pre-existing 
legislation and the potential for actions inconsistent with the 
Agreement if based on that pre-existing legislation. [Id. at 
6.]
    In these circumstances, it is hard for an U.S. company to 
measure the extent of the benefits that arise from the 
Agreements or to discern opportunities that might exist.

B. Future Compliance

    Developing countries joining the WTO have been able to 
postpone compliance with a number of different agreements. For 
example, fifty-one countries have postponed compliance with the 
Agreement on Implementation of Article VII of the GATT 1994 for 
five years. [See Report of the Committee on Customs Valuation 
to the Council for Trade in Goods at 1, G/L/121 (10/29/96).] 
The TRIPS and TRIMS Agreements also include provisions which 
allow developing countries to delay implementation for five 
years.
    This means that those developing countries which were 
original Members of the WTO and opted to delay compliance will 
all have to be in compliance by January 1, 2000. It is 
important for the WTO to begin steps now to ensure that these 
countries meet their obligations in a timely manner.

C. Reporting

    Annex 1A to the Agreement Establishing the World Trade 
Organization containing the Multilateral Agreements on Trade in 
Goods establishes 175 notification obligations or procedures, 
of which twenty-six are periodic, for member states. [See 
Report of the Working Group on Notification Obligations and 
Procedures, G/L/112 at 3 (10/7/96).] WTO materials published to 
date indicate that many Members have not met these obligations.
    For example, Article 25 of the Agreement on Subsidies and 
Countervailing Measures requires that Members provide a new and 
full notification of all subsidies every third year and updated 
reports in every intervening year. The first full notification 
was due on June 30, 1995 but only 76 of 131 Members had 
reported as of July 31, 1997, two years after the due date. 
Moreover, as of the mid-1997 due date for reporting, only 48 
countries had provided their 1996 update and only nine had 
provided the 1997 update. [See WTO Annual Report 1997, Vol. 1 
at 108.]
    In addition, under Article 18.5 of the Agreement of Article 
VI of the GATT 1994 and a decision of the Committee on Anti-
Dumping Practices, Members were required to notify their 
antidumping legislation and/or regulations by March 15, 1995. 
[See WTO Annual Report 1997 at 110.] As of June 30, 1997, forty 
countries had not made any such notification. Thus, significant 
numbers of countries have avoided scrutiny of their subsidies 
and their antidumping regime, despite their commitments as WTO 
Members.
    In some measure, this broad failure to meet reporting 
requirements may be attributed to lack of resources. PPG 
therefore urges the United States Government to support the 
provision of assistance to developing countries that seek it.
    Regardless of the reasons, the lack of compliance and 
reporting reduces the value of U.S. participation in and 
support for the WTO. To enhance the value of U.S. membership, 
the United States should support a number of different efforts, 
including:

        (1) Ensure adequate funding for both U.S. monitoring agencies 
        and a strong U.S. presence in Geneva;
        (2) In particular, the USTR should ensure sufficient resources 
        for participation in WTO dispute settlement proceedings;
        (3) Work with WTO officials to ensure rapid public 
        dissemination of all data submitted as a result of WTO 
        notification requirements.

                       II. Mandated Negotiations

    Article XIX of the General Agreement on Trade in Services 
calls for negotiations leading to progressive liberalization of 
trade in services. At the Singapore Ministerial, the Ministers 
endorsed the GATS Council's beginning to consider the 
guidelines and procedures for Article XIX negotiations. [See 
WTO Annual Report 1997 at 119.] Reduction in the costs of 
services (including financial, telecommunications, 
transportation, and distribution services) will enhance the 
ability to compete of PPG and other U.S. businesses that sell 
abroad.
    PPG supports U.S. participation in negotiating efforts that 
will lead to greater liberalization in the service sectors. In 
particular, PPG urges the U.S. Government to focus on securing 
liberalization of distribution services, a service sector, 
which has effectively closed certain foreign markets to 
participation by U.S. goods manufacturers.

          III. Review of Existing Agreements and Work Programs

    As discussed under heading I above, many WTO Members have 
not yet fully complied with the notification and reporting 
requirements to which they agreed. Absent such reporting, it is 
not clear that those Members who have not reported are in 
compliance with existing agreements. In some instances, this 
makes it hard to determine the efficacy of existing Agreements.
    In addition, PPG has the following specific comments 
regarding existing agreements and work programs:

A. Antidumping

    The United States should focus the attention of the Members 
and the organization on the remaining implementation and 
notification failures. The United States should strongly oppose 
proposals, which would permit a general reopening of 
negotiations on either the subsidies or the antidumping 
agreements. These agreements, achieved after particularly 
difficult negotiations, have been in place for less then five 
years. Hence, such reopening is premature given the lack of 
experience and the evolving body of law within member countries 
as well as under the WTO Dispute Settlement Understanding, and 
should be strongly opposed.
    Moreover, PPG further urges USTR to consider effective and 
meaningful anti-circumvention provisions, particularly in the 
antidumping agreement. Circumvention of legitimate and 
necessary remedies provided for by the agreement is the real 
issue of concern with regard to the operation of these 
agreements, not the ungrounded fears of some member countries 
that the remedies under the agreements might lead to 
unspecified abuses. [See, WT/GC/W/145, 8 February 1999, 
Communication of the Government of Japan.]

B. Subsidies

    PPG agrees with suggestions of the United States and some 
other WTO Members that implementation could be improved by 
modifying the notification and review process such that 
updating notifications are eliminated and full notifications 
are made every other year, permitting a regular cycle in which 
subsidies are notified in the first year and reviewed in the 
second, etc. [WT/GC/W/107, 3 November 1998, Communication from 
the United States.]
    Article 31 of the subsidies agreement calls for the WTO to 
review the operation of Article 6.1 (serious prejudice), and 
Articles 8 and 9 (non-actionable subsidies), and determine 
whether these articles should be modified or eliminated. PPG 
supports the continuation of these articles.
    PPG further proposes that tighter rules be developed to 
preclude the circumvention of export subsidy commitments so 
that there is a fully shared understanding of what is permitted 
and precluded by commitments on export subsidies. PPG also 
encourages the President to vigorously pursue the application 
of countervailing duty laws to identifiable subsidies in non-
market economies. Some of these subsidies, such as export 
subsidies, are easily identifiable and quantifiable.

C. Customs Valuation

    PPG agrees with USTR that technical assistance should be 
focused on active assessment of specific needs of particular 
Members, to avoid a situation where a Member might refer to the 
lack of effective assistance as an explanation for a failure to 
meet obligations by the agreed-upon deadline.
    PPG also shares the United States' concerns regarding the 
increased use by some Members of questionable valuation 
methodologies, sometimes combined with a preshipment inspection 
regime, as a substitute for more selective trade remedies, or 
to otherwise raise broad market access barriers. PPG agrees 
that Members should consider appropriate ways to address the 
misuse of valuation methodologies short of dispute settlement 
procedures, given the important relationship between valuation 
and market access. [See WT/GC/W/107.]

D. Dispute Settlement

    PPG believes that to date the WTO dispute settlement 
process has worked reasonably well. However, the process could 
be significantly improved if it were more transparent. To that 
end, PPG supports public access to panel and appellate body 
proceedings, including access to adequate and timely public 
versions of submissions. In addition, the companies actually 
involved in the dispute should be allowed to submit amicus 
briefs and make oral presentations in both panel and appellate 
body proceedings. In this context, PPG welcomes the recent 
decision of the appellate body in the Shrimp-Turtle dispute, 
holding, among other things, that the agreement does not 
require that panels reject unsolicited submissions.

E. Rules of Origin

    Currently, Article 1.2 applies the Rules of Origin 
agreement to antidumping and countervailing duties and to 
safeguard measures under Article XIX. In the absence of 
adequate anticircumvention provisions applicable to antidumping 
and countervailing duties, PPG proposes that USTR should seek 
the modification of Article 1.2, to eliminate antidumping, 
countervailing duty, and safeguard measures from the scope of 
the Agreement on Rules of Origin.

F. Trade-Related Investment Measures (TRIMS)

    PPG encounters substantial obstacles in its export business 
in the form of trade related investment measures. Thus, PPG 
urges USTR to pursue a reopening of the TRIMS agreement to 
strengthen its provisions.
    Article 9 of the TRIMS agreement calls for a review of the 
operation of the current agreement and consideration of whether 
the current agreement should be complimented with provisions on 
investment policy and competition policy. The agreement could 
be modified to allow majority interests by any member country 
in any business in other member countries, and to prohibit 
restrictions on the repatriation of investment and earnings. In 
addition, notification and elimination provisions should be 
enforced, pursuant to Article of 5 of the TRIMS agreement 
(notification and transitional arrangements). Efforts to 
broaden the agreement to include provisions on investment 
policy or competition policy, however, are premature (please 
see below at heading V.).

G. Trade Related Aspects of Intellectual Property Rights 
(TRIPS)

    PPG shares the concerns of USTR that many developing 
country Members have as yet not started to conform their laws 
to the TRIPS agreement in preparation for full implementation 
of their TRIPS obligations no later than January 1, 2000. While 
PPG generally supports the WTO's efforts to integrate all 
developing countries in the multilateral trading system, this 
should include the enforcement of all obligations under the 
agreement by the agreed upon deadlines.

              IV. Integration of Least-Developed Countries

    The integration of all developing countries in the 
multilateral trading system should include the enforcement of 
all obligations under the agreement, including the notification 
provisions, to all Members. In this context, PPG Industries 
also refers to its comments regarding Customs Valuation under 
heading III C above, and the need for effective and specific 
technical assistance to developing countries that require it.
    In addition, PPG Industries believes that benefits under 
the Generalized System of Preferences should be limited to the 
least developed countries. The current system grants 
preferential treatment to countries that do not need such 
preferences to compete in export markets. As a result the 
benefits of GSP for the least developed countries are diluted 
and MFN treatment is unfairly withheld from third country 
suppliers.

              Singapore Ministerial Meeting Work Programs

A. Trade and Investment

    Negotiations within the OECD of an agreement on trade and 
investment have, to date, not been completed, and an agreement 
does not appear imminent. The OECD countries, of course, are 
much more homogenous in their stages of development and 
economies than the Members of the WTO. Given the apparent 
difficulty for the similar countries to reach an investment 
agreement, the likelihood of a WTO agreement in the near term 
does not appear strong.
    PPG suggests that the United States support placement of 
these WTO negotiations on hold until such time as the OECD 
countries have reached an accord. Moreover, PPG believes that 
attempts to achieve a broad agreement on investment issues are 
premature, in light of the current international financial 
crisis and concomitant changes in the views of the trading 
partners regarding the desirability of the regulation of 
capital flows.

B. Trade and Competition Policy

    Because of the great disparity in definitions of 
competition policy and what constitutes anti-competitive 
practices, it does not appear likely that any meaningful result 
can come from consideration of these issues. In connection with 
competition policy, PPG supports the views of the U.S. 
Department of Justice and the Federal Trade Commission that 
there are other, more practical, things countries can do to 
collaborate on competition policy.
    PPG, however, has encountered anti-competitive practices in 
various arenas around the world and would like to see such 
practices outlawed. The most practical approach to global anti-
competitive practices that PPG is aware of is the international 
coordination and information exchange undertaken by the Justice 
Department and the Federal Trade Commission. Therefore, PPG 
urges the President to support the suspension of the WTO effort 
in this area while supporting the efforts of Justice and the 
FTC.
    PPG also urges the United States to strenuously oppose any 
efforts to use this working group as a means for re-opening 
consideration of any other WTO agreements, such as the 
antidumping agreement.

C. Transparency in Government Procurement

    The stated goals of the Working Group on Transparency in 
Government Procurement are to study country procurement 
practices that foster transparency and then to develop 
recommendations for elements to be included in an agreement. 
[See WTO Annual Report 1997 at 142-43.] Such efforts will be 
beneficial, and the United States should support them. PPG 
believes that more tangible and significant results in the area 
of government procurement may be achieved by obtaining 
significantly more signatories to the Agreement on Government 
Procurement. PPG asks that the President include this as an 
objective in the United States trade negotiations.

                        VI. Electronic Commerce

    Electronic commerce has great potential for the reduction 
of transaction costs, and the opening of additional markets. In 
addition, the application of electronic technology to the 
notification process holds the potential of increased 
transparency and improved implementation. [See also, infra, 
Tariff Bindings; WT/GC/W/107, 3 November 1998, Communication 
from the United States (PC Integrated DataBase).] Any review of 
electronic commerce issues, however, should be undertaken in 
the spirit of minimizing government interference, relying 
instead on self-governance by users and transparency. 
Government intervention will likely result in unneeded 
restraints, distort the development and application of new 
technology, and add costs. Thus, such intervention will 
compromise benefits attainable from the new technologies.
    For example, the European Union has put into place a 
privacy directive that went into effect on October 23, 1998. 
[See Directive 95/46/EC, OJ L 281 (Nov. 23, 1995).] While it is 
important to preserve citizens' privacy rights, it is possible 
that the approach taken by the EU will result in undue and 
extreme limitations on the movement of electronic data between 
countries over the long-term. Such limitations are likely to be 
disruptive, and the USTR should continue its efforts to reach 
an agreement with the EU which will avoid draconian results. In 
this matter and in the other E-Commerce arenas, the United 
States should support a program of limited government 
involvement and/or restriction.
                                    Respectfully submitted,
                                                     PPG Industries
      

                                


Statement of Hon. Jack Quinn, a Representative in Congress from the 
State of New York

    Mr. Chairman and Members of this Committee, thank you for 
this opportunity to testify today on the upcoming WTO 
negotiations in Seattle.
    These negotiations present the United States with an 
important opportunity to greatly expand fair trade. 
Unfortunately, a handful of countries are seeking to use these 
negotiations to weaken anti-dumping and countervailing duty 
rules. These rules have been extensively negotiated in previous 
rounds, and we must send a clear messgae to the Administration 
that attempts to dilute international fair trade rules will not 
be tolerated.
    As you well know, these laws are vitally important to our 
basic manufacturing and agricultural sectors. They have been 
particularly important to the U.S. steel industry and its 
workers. Foreign-government subsidies and closed foreign 
markets continue to fuel a recurrent worldwide steel crisis, 
and it is U.S. mills and workers that have borne the brunt of 
the adjustment costs.
    The United States, in fact, accepts a disproportionate 
share of steel exports from around the world, especially Asia. 
Public and private barriers--such as government-imposed quotas 
and mill-to-mill agreements--limit imports into other major 
markets such as the EU and leave the United States as the 
world's ``dumping ground.'' Most recently, our markets have 
been a target for steel turned loose by the collapse of demand 
in Asia and Russia.
    Adjusting to the structural crisis in steel has been 
painful for our firms, workers, and communities. The industry 
has transformed itself, however, and modernized U.S. mills are 
now among the most efficient in the world. But U.S. mills 
cannot compete against foreign governments treasuries and 
foreign firms operating in protected markets.
    Mr. Chairman, our anti-dumping rules and countervailing 
duty laws are the last line of defense against unfairly traded 
imports. Maintaining fair trade requires anti-dumping rules and 
countervailing duty rules--which ensure that exporters in 
closed markets do not abuse our open market policies.
    Other countries' efforts to reopen the WTO agreements on 
these fair trade rules are poorly disguised attempts to weaken 
these rules. U.S. negotiators must not allow this to happen. 
This Committee approved an amendment to fast track legislation 
in 1997 that would instruct U.S. negotiators to reject any 
agreement that weakens disciplines against dumping and 
subsidies. We should send a strong message to the 
Administration that this issue continues to be a top priority. 
We cannot abandon these critical laws.
    Indeed, we must work instead to enhance these laws. In this 
regard, I am proud to be a cosponsor of the English-Cardin 
bill, the ``Fair Trade Enhancement Act.'' The amendments in 
this bill respond to the fact that current U.S. law makes 
relief unnecessarily difficult to obtain, imposing standards 
more onerous the those in our existing international 
agreements.
    Having effective and up-to-date trade laws in place is 
important to internationally competitive U.S. manufacturing 
industries--particularly the steel industry, where 
international trade has been more heavily distorted by 
subsidies, closed markets, cartelization, and dumping than in 
any other economic sector.
    I urge this Committee to send a strong message to the 
Administration that we will not allow our industries to be 
hamstrung by a weakening of international trade rules. I 
encourage you to support the English-Cardin--which proposes 
needed reforms to keep our fair trade laws a credible and 
effective deterrent into the next Millennium.
      

                                


Statement of Ranchers-Cattlemen Action Legal Fund

    This statement is submitted by the Ranchers-Cattlemen 
Action Legal Fund (``R-CALF'') in response to the Subcommittee 
on Trade's Advisory of July 8, 1999 regarding the 
Subcommittee's hearing on U.S. negotiating objectives for the 
WTO Seattle Ministerial Meeting.\1\ R-CALF, a non-profit legal 
foundation that monitors trade issues that affect cattle 
producers and petitioner in antidumping and countervailing duty 
investigations concerning imports of live cattle from Canada 
and Mexico, appreciates this opportunity to provide input into 
the crafting of U.S. negotiating objectives and to help ensure 
that the economic interests of domestic cattle ranchers are 
effectively represented in the upcoming WTO negotiations. This 
statement addresses key issues for the upcoming ministerial, 
including: (1) export subsidies and foreign trade barriers to 
U.S. exports of cattle and beef products; (2) the importance of 
U.S. tariff-rate quotas and special safeguards for the cattle 
and beef industry; (3) effective trade remedy laws; (4) special 
rules for perishable agricultural products; (5) improvements in 
dispute settlement; (6) sanitary and phytosanitary issues; (7) 
labor and environment issues; (8) State Trading Enterprises; 
and (9) rules of origin and country-of-origin labeling for beef 
imports.
---------------------------------------------------------------------------
    \1\ ``Crane Announces Hearing on United States Negotiating 
Objectives for the WTO Seattle Ministerial Meeting,'' July 8, 1999 (No. 
TR-13).
---------------------------------------------------------------------------

    I. Foreign export subsidies and other trade-distorting measures

    Many of our trading partners continue to provide 
substantial export subsidies and maintain significant trade 
barriers and programs which distort the flow of trade in cattle 
and beef products. Numerous programs and policies in addition 
to high tariffs impede the flow of imports of U.S. cattle and 
beef products into foreign markets. Other programs which 
artificially boost the production of cattle and beef abroad can 
encourage increases in imports of beef into the United States 
beyond the levels which would exist in the absence of such 
programs. R-CALF endorses the elimination of export subsidies 
and dramatic reductions in domestic subsidies which affect 
domestic production.
    Listed below are examples of just a few of the programs 
that cause or may cause distortions in international trade 
flows in this sector.

Argentina

    The Argentine Government and provincial governments have 
considered providing incentives to cattlemen to increase their 
herds.\2\ This policy could be designed to make up for the 
stock decline of the past several years ands to prepare for new 
export demands.\3\ According to embassy reports, such a program 
might include tax incentives or credit programs designed to 
increase the number of cattle.\4\
---------------------------------------------------------------------------
    \2\ Ken Joseph, Annual Livestock Report (AGR No. AR7065), foreign 
Agricultural Service, U.S. Department of Agriculture (U.S. Embassy, 
Buenos Aires, July 30, 1997).
    \3\ Ken Joseph, Annual Livestock Report (AGR No. AR6050), foreign 
Agricultural Service, U.S. Department of Agriculture (U.S. Embassy, 
Buenos Aires, August 8, 1996).
    \4\ Id.

---------------------------------------------------------------------------
Australia

    The Government of Australia maintains one of the strictest 
regimes on quarantine and phytosanitary regulations for imports 
of livestock and food products, which have been the subject of 
both the U.S. Trade Representative's National Trade Estimate 
Report \5\ and WTO Trade Policy Review.\6\ For some of these, 
the Australian Government has not completed a risk assessment 
that would provide the WTO-required scientific basis for 
imposing such restrictions.\7\ Australia also continues to 
provide financial support for its beef and veal sector. The 
WTO's Trade Policy Review estimated that the sector received 
$A185 million in 1996.\8\
---------------------------------------------------------------------------
    \5\ Office of the United States Trade Representative, 1998 National 
Trade Estimate Report on Foreign Trade Barriers, at 13.
    \6\ World Trade Organization, Trade Policy Review: Australia (1998) 
72-75.
    \7\ Office of the United States Trade Representative, 1998 National 
Trade Estimate Report on Foreign Trade Barriers, at 13.
    \8\ World Trade Organization, Trade Policy Review: Australia (1998) 
100.

---------------------------------------------------------------------------
Brazil

    Brazil's Agriculture Breeding Technology Development 
Program fosters the creation or improvement of breeding 
enterprises. Among other incentives, this program provides a 
deduction of up to 8 percent of income tax owed. This program, 
which is paired with a program for industrial development, is 
allocated over $300 million annually.\9\
---------------------------------------------------------------------------
    \9\ World Trade Organization, Communication of Brazil, G/SCM/N/16/
BRA (July 5, 1996).
---------------------------------------------------------------------------
    Brazil's Amazon Investment Fund and Northeast Investment 
Fund provide financial backing for firms that establish 
investment projects in the Amazon or Northeast regions of 
Brazil. The cattle industry is a priority industry for the 
distribution of funds available through these programs.\10\
---------------------------------------------------------------------------
    \10\ World Trade Organization, Trade Policy Review: Brazil (1996) 
at 112-133.
---------------------------------------------------------------------------
    States in Brazil support programs to increase the 
production of beef. Incentives include tax cuts to the state 
value added tax, subsidized genetic programs, and sanitary 
assistance (such as for vaccinations). Another state program 
reduces the slaughter age of cattle, thus increasing beef 
production; through this program, producers receive a tax 
rebate for slaughtering younger cattle.\11\
---------------------------------------------------------------------------
    \11\ Joao Silva, Livestock Annual Report (AGR No. BR7625), Foreign 
Agricultural Service, U.S. Department of Agriculture (U.S. Embassy, 
Brasilia, August 1, 1997).
---------------------------------------------------------------------------
    The Brazilian Government offers tax and tariff incentives 
to promote exports. Exporters can receive an exemption from 
withholding tax for expenses in other countries for loan 
payments and marketing. Exporters can also be exempted from 
Brazil's financial operations tax for deposit receipts on 
export products. Excise and sales tax exemptions apply to 
agricultural export products.\12\
---------------------------------------------------------------------------
    \12\ Trade Compliance Center, Country Reports on Economic Policy 
and trade Practices: Brazil (1998), available at ``http://
www.mercosurinvestment.com/brazil.html'' (obtained from internet on 
July 25, 1998).
---------------------------------------------------------------------------
    In March 1997, the Brazilian Government enacted new import 
financing rules, which affect imports of U.S. cattle products. 
The rules require that importers purchase foreign exchange to 
pay for most imports once they are imported or 180 days before 
they are imported rather than pay for them as provided under 
the contract. This measure provides more favorable rules to 
Mercosur members. It in effect raises the price of many 
imports.\13\
---------------------------------------------------------------------------
    \13\ Trade Compliance Center, Country Reports on Economic Policy 
and trade Practices: Brazil (1998), available at ``http://
www.mercosurinvestment.com/brazil.html'' (obtained from internet on 
July 25, 1998).
---------------------------------------------------------------------------
    Finally, obtaining import licenses, which are required for 
imports into Brazil, can be burdensome, and thus impede U.S. 
exports.\14\
---------------------------------------------------------------------------
    \14\ Trade Compliance Center, Country Reports on Economic Policy 
and trade Practices: Brazil (1998), available at ``http://
www.mercosurinvestment.com/brazil.html'' (obtained from internet on 
July 25, 1998).

---------------------------------------------------------------------------
Canada

    The Canadian federal and provincial governments provide 
numerous subsidy programs which benefit Canadian cattle 
producers. These subsidy programs are currently the subject of 
investigation by the Department of Commerce initiated pursuant 
to petition filed by R-CALF.\15\
---------------------------------------------------------------------------
    \15\ See Initiation of Countervailing Duty Investigation of Live 
Cattle From Canada, 63 Fed. Reg. 71889 (Dec. 30, 1998).

---------------------------------------------------------------------------
Chile

    Consumer cuts of U.S. beef are not permitted to enter Chile 
unless first graded by Chilean standards. Yet, as Chilean meat 
standards are derived at the time of slaughter, i.e., upon 
slaughter in Chile, U.S. produced beef is in effect blocked 
from the Chilean market.\16\
---------------------------------------------------------------------------
    \16\ Office of the United States Trade Representative, 1998 
National Trade Estimate Report on Foreign Trade Barriers, at 42.

---------------------------------------------------------------------------
Colombia 

    Cattle producers in Colombia are encouraging their 
government to create variable import duties for beef through 
the Andean Price Band system in an attempt to restrict 
imports.\17\
---------------------------------------------------------------------------
    \17\ Hector Sarmiento, Annual Report (Livestock) (AGR No. CO7016), 
Foreign Agricultural Service, U.S. Department of Agriculture (U.S. 
Embassy, Bogota, August 1, 1997).

---------------------------------------------------------------------------
European Union 

    The European Union's continuing ban on imports of growth 
promoting hormones in meat production is a very substantial 
barrier to U.S. cattle and beef producers' ability to export to 
that market. This ban is currently the focus of trade 
retaliation by the United States.\18\
---------------------------------------------------------------------------
    \18\ See Implementation of WTO Recommendations Concerning EC-
Measures Concerning Meat and Meat Products (Hormones), 64 Fed. Reg. 
14486 (Mar. 25, 1999).
---------------------------------------------------------------------------
    An EU-wide compulsory beef labeling system is set to take 
effect on January 1, 2000, and detailed application procedures 
are currently pending within the European Commission. According 
to the National Trade Estimates Report, ``There is considerable 
concern that a lack of timeliness in announcing and 
transparency in implementing these regulations could disrupt 
U.S. beef sales to the EU.'' \19\
---------------------------------------------------------------------------
    \19\ Office of the United States Trade Representative, National 
Trade Estimates Report on Foreign Trade Barriers (1998) at 106.

---------------------------------------------------------------------------
Japan 

    Japan continues to maintain high tariffs on agricultural 
and food products. USTR reported that the United States is 
monitoring Japan's implementation of the Uruguay Round measures 
for agriculture, including safeguard measures for beef and 
pork.\20\
---------------------------------------------------------------------------
    \20\ Office of the United States Trade Representative, National 
Trade Estimates Report on Foreign Trade Barriers (1998) at 206.

---------------------------------------------------------------------------
Uruguay

    The Uruguayan Government is considering implementing a 
program to subsidize pasture improvement. The program would 
call for the government to provide $75 for each hectare 
developed for improvement, which would total about one-half the 
cost of such improvements. The program would cost about $150 
million over a ten year period. Such a program would upgrade 
about 2 million hectares over a decade instead of 20 years, 
which is the current rate. Supporters of this program claim 
that it would assist Uruguay in expanding beef production and 
exports by about $500 million.\21\
---------------------------------------------------------------------------
    \21\ Gary Groves, Uruguay Livestock Situation Update (Global 
Agriculture Information Network Report No. UY 8004), Foreign 
Agricultural Service, U.S. Department of Agriculture (July 14, 1998).

---------------------------------------------------------------------------
Venezuela

    The Venezuelan Government subsidizes agricultural credits
    through the Fondo de Credito Agropecuario. In addition, 
Venezuelan agriculture is exempt from the country's revenue tax 
and its tax on capital assets.\22\ Venezuela is currently 
attempting to eradicate foot and mouth disease for the purpose 
of opening markets for its cattle and cattle products.\23\
---------------------------------------------------------------------------
    \22\ World Trade Organization, Trade Policy Review: Venezuela 
(1996) at 89-90.
    \23\ Jose Pasos, Livestock Annual Report (AGR No. VE7033), Foreign 
Agricultural Service, U.S. Department of Agriculture (U.S. Embassy, 
Caracas, July 30, 1997).
---------------------------------------------------------------------------

 II. The Important Role of TRQs and Special Safeguards to U.S. Cattle 
                           and Beef Producers

    Given the significant economic difficulties which the 
cattle sector is now facing and the widespread barriers and 
distortions to trade in cattle and beef products, it is useful 
to highlight the importance of the tariff rate quotas and 
special safeguards currently in place for the cattle and beef 
industry. Domestic cattle ranchers who have been denied the 
full benefits of trade liberalization in previous trade 
agreements are currently in perilous economic health. Yet the 
industry has relatively few mechanisms in place to help it 
weather the current difficulties. One such mechanism is a 
system of tariff rate quotas (TRQs), which became operative 
upon the implementation of the Uruguay Round Agreements Act in 
1995. A second mechanism is the special safeguards provision 
for imports of certain beef products, which also went into 
effect in 1995 and operates in accordance with Article 5 of the 
Agreement on Agriculture of the WTO. For the reasons discussed 
below, the United States should negotiate to retain these 
provisions in any new WTO agreement on agriculture.
    Tariff rate quotas: The United States has long recognized 
the special sensitivities of certain agricultural products, 
including beef, in the marketplace. Prior to the conclusion of 
the Uruguay Round, the Meat Import Act of 1979 set quotas on 
imports of beef when the aggregate quantity of these imports on 
a yearly basis was anticipated to exceed a prescribed trigger 
level.\24\ During the Uruguay Round, the United States agreed 
to convert the quotas established by the 1979 Act into TRQs in 
order to bring U.S. law into conformity with the requirements 
of the Agreement on Agriculture of the WTO.\25\ The United 
States committed itself to a TRQ of 656,621 metric tonnes (MT) 
along with additional TRQs of 20,000 MT each for Argentina and 
Uruguay, dependent upon these countries being found free of 
foot and mouth disease (FMD) and rinderpest.\26\ In particular, 
a total of 64,805 MT is available to countries other than 
Australia, New Zealand, Japan, Argentina and Uruguay, each of 
which has its own separate allocation. The provisions do not 
apply to imports from Canada or Mexico.
---------------------------------------------------------------------------
    \24\ Committee on Ways and Means, U.S. House of Representatives, 
Overview and Compilation of U.S. Trade Statutes (1995) at 123-24.
    \25\ USITC Pub. 3048 at 6-2.
    \26\ USITC Pub. 3048 at 6-2, 6-4 to 6-5. In 1995, Uruguay was 
granted approval to export fresh, chilled and frozen meat to the United 
States as Uruguay was determined to be free of rinderpest and FMD, and 
the United States gave permission for Argentina to ship beef to the 
United States in June 1997 for the same reasons. See 60 Fed. Reg. 55440 
(1995); 62 Fed. Reg. 34385 (1997). Uruguay was expected to fill its 
quota for 1998. Source: Gary Groves, Uruguay Livestock Update (AGR No. 
UY8001), Foreign Agricultural Service, U.S. Department of Agriculture 
(U.S. Embassy, Buenos Aires, March 10, 1998). Argentina was not 
expected to fill its quota for 1998, its first full year of 
eligibility, but could be expected to reach its quota within several 
years, which will bring increased imports into the U.S. market.
---------------------------------------------------------------------------
    Even for above-quota imports, the tariffs are relatively 
low, particularly when compared to foreign tariff levels. 
Further, while there has not been occasion to invoke the 
special safeguards provision since it came into effect in 1995, 
there should not be discussion of removing what are already 
relatively low levels of protection before foreign barriers are 
fully addressed.
    The importance of the TRQs to the domestic industry can be 
seen from the recent situation with Canada, which has been 
exempted from the TRQs as a result of the U.S.-Canada Free 
Trade Agreement and the North American Free Trade 
Agreement.\27\ In 1989, imports of fresh, chilled and frozen 
beef from Canada totaled 87,110 MT. Those imports steadily 
increased to more than double that amount in 1994 and to nearly 
270,000 MT in 1997.\28\ Presumably, had TRQs for Canada been in 
place, these import volumes would not have grown so 
substantially, displacing beef produced from U.S.-raised 
cattle.
---------------------------------------------------------------------------
    \27\ USITC Pub. 3048 at 6-2 to 6-3.
    \28\ Source: Bureau of Census, U.S. Commerce. Based on HTS 0201.10, 
20, 30 and HTS 0202.10, 20 and 30.
---------------------------------------------------------------------------
    There is no reason to believe that this increase in imports 
is because Canadian cattle producers are more efficient or 
competitive than their U.S. counterparts. The prevalence of 
subsidies throughout Canada which bestow benefits on Canadian 
producers and questionable sanitary and phytosanitary 
restrictions on imports of U.S. feeder cattle have essentially 
resulted largely in a one-way flow of trade in cattle and beef 
between the United States and Canada. Permitting such largely 
one-way trade in cattle and beef with Canada is untenable. 
Expanding such one-way trade to our trading partners in general 
would result in the destruction of one of the most efficient 
producers of cattle and beef products in the world.
    Special Safeguards: Article 5 of the WTO Agreement on 
Agriculture includes a special safeguard provision which 
permits countries to resort to additional duties in the event 
that the volume of imports of a particular product exceeds a 
threshold or ``trigger'' level, or the price of those imports 
falls below a trigger price level. Section 405 of the Uruguay 
Round Agreements Act (19 USC Sec. 3602) requires the President 
to publish in the Federal Register a list of special safeguard 
agricultural goods as well as a trigger level and a trigger 
price. USDA has published the levels and prices in 1995, 1996 
and most recently in March 1998. The current quantity-based 
trigger for beef is 817,803 metric tons. Although imports from 
countries with allocations under the TRQ system have not filled 
the levels set by the U.S. Department of Agriculture, the 
special safeguard provision nonetheless provides an important 
remedy in the event of a sudden surge in imports of beef.

       III. Importance of Maintaining Effective Trade Remedy Laws

    As important as it is to open foreign markets to U.S. 
exports, it is equally important that the current trade rules 
and remedies that exist to protect against dumped and 
subsidized imports be maintained. The trade remedy laws, 
including the antidumping and countervailing duty laws, are the 
few effective means that agricultural sectors such as cattle 
producers have available for addressing economic harm caused by 
imports of commodity products sold at below cost prices and/or 
that benefit from countervailable subsidies. U.S. producers of 
fresh garlic, fresh tomatoes, kiwifruit, sugar, oranges used to 
make frozen concentrated orange juice, red raspberries, fresh 
cut flowers, salmon, pistachio nuts, and live swine and pork, 
among others, have made successful use of the trade remedy laws 
to address injurious imports that did not conform to 
international trading rules when no other tools were available.
    Dumped and subsidized imports of agricultural commodity 
products are especially harmful when commodity prices are 
otherwise already low. Surplus volumes of dumped and subsidized 
imports prolong depressed market conditions and prices which 
would otherwise recover more quickly, thereby restoring farmers 
and other agricultural producers to at least sustainable, if 
not fully profitable, conditions. Accordingly, R-CALF opposes 
efforts to re-open the WTO Antidumping Agreement and other 
agreements governing trade remedies in the upcoming 
negotiations. The current agreement has been in place for only 
five years. It would be premature to re-open the agreement

         IV. Special Rules for Perishable Agricultural Products

    Agricultural commodities such as cattle and beef, as well 
as other products, are frequently affected by price volatility 
and problems arising from perishability that make it impossible 
to ``ride out'' downturns in the market. Grain and swine 
producers, as well as ranchers, have seen virtual collapses in 
prices in recent years, collapses which are widely acknowledged 
to be due to oversupply. Current international trading rules do 
not provide adequate and timely mechanisms for remedying these 
kinds of economic crises.
    Trade remedies should be available for perishable and 
seasonal agricultural products that reflect the commercial 
realities of these products. It bears noting in this regard 
that the former head of the Uruguay Round agriculture 
negotiating team observed at the Ag Forum immediately preceding 
the FTAA Business Forum in Belo Horizonte that specific rules 
for perishable commodities could be helpful and may be 
advisable. The Agreement on Agriculture recognizes the need for 
separate treatment or timelines for perishable and seasonal 
commodities.
    R-CALF believes that the United States Trade Representative 
should add to the agenda in Seattle the issues of special rules 
that would provide producers with effective tools to deal with 
these problems. Also, R-CALF requests that the United States 
include in the negotiations consideration of what special rules 
are needed to cope with commodity price collapses such as have 
been and currently are being experienced in livestock and 
grain.

                         V. Dispute Settlement

    The agreement on dispute settlement that came out of the 
Uruguay Round was a substantial improvement on the previous 
system. However, recent disputes such as the EU Beef Hormone 
case indicate that additional work in this area is needed, 
especially in the context of compliance with panel decisions 
and time periods for implementation. The United States should 
oppose any proposals that would result in extensions of 
existing timelines, which would delay relief from measures that 
are inconsistent with WTO obligations.

                 VI. Sanitary and Phytosanitary Issues

    Cattle producers are well acquainted with SPS issues, both 
as an export issue and an import issue. On the export side, 
questionable Canadian regulations, for example, impede the 
export of U.S. feeder cattle to Canada. The EU Beef Hormone 
dispute exemplifies the problems that cattle producers have in 
gaining market access for exports of beef. On the import side, 
the health of domestic livestock depends on effective 
prevention, control and eradication of pests and diseases. In 
short, we need full implementation of the SPS Agreement by all 
of our trading partners. In this regard, strict adherence to 
sound science is essential. If American producers demonstrate 
scientifically the absence of any hazards and if we also accept 
agricultural goods from pest free zones or certified products 
from other countries, we must have reciprocity and open access 
to our products as well.

                   VII. Labor and Environment Issues

    The work of the WTO Committee on Trade and the Environment 
is valuable, at least in the area of transparency, and also in 
terms of efforts to define how multilateral environmental 
agreements related to the WTO. Cattle producers are among the 
many U.S. industries that face artificial competitive 
disadvantages because the labor and environmental standards of 
the United States are not internationally agreed to or applied.
    The United States must stress the importance of attaining 
harmonization at least with our major trading partners in 
agriculture on these issues.

                    VIII. State Trading Enterprises

    State trading enterprises (STEs) are another important 
priority that urgently needs addressing. The impact of STEs 
such as the Canadian Wheat Board is not limited to the 
commodity markets in which they specifically operate, but also 
other markets for which those commodities are an input. For 
example, the CWB's export restrictions on feed barley distort 
the conditions of trade in cattle as Canadian ranchers and 
feedlots receive an effective subsidy for feeding their cattle 
that U.S. ranchers and feedlots do not. In R-CALF's view, 
efforts to ensure STE compliance with Article XVII principles 
have been unsuccessful. The actual elimination of STEs appears 
the only workable solution.

           IX. Rules of Origin and Country of Origin Labeling

    R-CALF believes that open issues with regard to rules of 
origin should not be made part of the negotiations, but should 
instead be handled within the WTO as is.
    R-CALF joins with other cattle and beef producer 
organizations in the call for country of origin labeling for 
imports of beef and beef products. Consumers are entitled to 
know where their hamburger, steak or pot roast comes from. Many 
consumers assume that a product which is labeled as USDA-
approved was produced in the United States. Country of origin 
labeling would educate consumers.
    The proposal for country of origin labeling has been 
criticized as possibly inconsistent with U.S. WTO obligations. 
R-CALF disagrees with these assessments, and believes the issue 
can and should be addressed on a bilateral basis. If necessary, 
however, the issue also can be addressed in the Seattle 
context.
    Concerns that such labeling requirements would be very 
costly are mistaken. Cattle producers in numerous countries 
including Canada and Mexico are exploring technologies that 
would make it possible to track a steer or heifer from the 
feedlot back to the ranch or farm from which it originally 
came. If such technology is available, surely it is likewise 
possible to label the beef that is produced from these animals 
with the country of origin. Moreover, the estimates of the 
costs of such a requirement are dwarfed by the amount of trade 
of cattle and beef.
    R-CALF appreciates this opportunity to present its views to 
the Subcommittee on Ways and Means on the important issues 
facing our negotiators in Seattle in November. We would be 
pleased to respond to questions or provide any additional 
information that the Subcommittee might need.
            Respectfully submitted,
                                   Leo R. McDonnell, Jr.
                                   Midland Bull Test
                                   Kathleen S. Kelley
                                    Meeker, CO 81641
                                   Jack McNamee
                                    Columbus, MT 59019
                                   John Lockie
                                    Columbus, Montana
                                   Herman Schumacher
                                    Herreid, SD 57632
                                   Dennis McDonald
                                    Melville, MT 59055
                                   Bill Donald
                                    Melville, MT 59055
                                   Chuck Rein
                                    Big Timber, MT 59011
                                   John Patterson
                                    Columbus, MT 59019
      

                                


Statement of Rubber and Plastic Footwear Manufacturers Association

    The Rubber and Plastic Footwear Manufacturers Association 
(RPFMA) is the spokesman for the manufacturers of most of the 
rubber-soled, fabric-upper footwear, waterproof footwear, 
slippers, and components for such footwear made in this 
country. The names and addresses of the Association's members 
are attached hereto.
    Rubber footwear is a labor-intensive, import-sensitive 
industry: labor constitutes about 40% of total cost; imports of 
fabric upper footwear and of slippers take more than 90% of the 
U.S. market and imports of waterproof footwear take close to 
50%. These imports are from countries where wages are 1/15th to 
1/20th of the level in the domestic industry.
    The duties on rubber footwear and slippers are considerably 
higher than the average duty on all manufactured products 
imported into the United States. With insignificant exceptions, 
the duties on rubber footwear and slippers were not cut in the 
Kennedy Round, the Tokyo Round, or the Uruguay Round, and the 
facts which dictated the maintenance of this industry's duty 
structure then are even more compelling today. The shrinkage of 
domestic employment from about 26,000 production workers in the 
1970s to about 5,000 today and the increase in market share 
enjoyed by imports are clear evidence that the duties on rubber 
footwear and slippers cannot be considered an impediment to the 
ability of the products of foreign factories to come into this 
market.
    The companies which are left in this domestic industry 
represent the survival of the fittest. Their state-of-the-art 
facilities, the quality of their products, and their name brand 
recognition will permit them to continue manufacturing in this 
country provided that the current level of tariffs on competing 
imports is not reduced.
    The rubber footwear and slipper industry recognizes the 
value to our country of a successful outcome to the trade 
negotiations which presumably will be jump-started at the 
Seattle WTO meeting, for this industry knows that the health of 
our economy is dependent to a considerable degree on America's 
ability to export its products. There is, however, very little 
that our Government can do to improve the export prospects for 
rubber footwear and slippers in light of the ability of low-
wage foreign producers to dominate the markets of the world. On 
the one hand, there is no quid pro quo which could be offered 
to this industry as an enhancement to its export prospects, 
and, on the other hand, any modification of the industry's duty 
structure would threaten the continued domestic presence of 
those companies which still produce in America. Similarly, any 
such modification would have a serious impact on the many 
domestic component suppliers--from shoelaces to shoe boxes--to 
the rubber footwear producers in this country.
    This industry, which has already stated its basic case to 
the Trade Policy Staff Committee and to the International Trade 
Commission, expects to justify an exception from duty cuts 
before whatever forum is established by the ``Seattle Round.'' 
Our purpose in submitting the present statement is merely to 
alert the Ways and Means Committee, in its oversight role, of 
the fact that the legitimate needs of such an import-sensitive 
industry as rubber footwear and slippers, as well as the 
suppliers to this industry, should not be overlooked in the 
course of this major effort to remove impediments to trade.
    The history of past multi-lateral trade negotiations 
demonstrates that there are very few domestic industries whose 
survival is as threatened by imports as is the rubber footwear 
and slipper industry. History also demonstrates that the 
success of the Kennedy, Tokyo, and Uruguay Rounds was in no way 
blemished by the restraint shown in excluding the products of 
this industry from duty cuts. Accordingly, we urge the 
Subcommittee on Trade to seek to have the agenda for the 
Seattle meetings include an assurance of flexibility in the 
conduct of negotiations which will permit exceptions from duty 
cuts where warranted, as is clearly the case with respect to 
rubber footwear and slippers.

                               Appendix I

Rubber and Plastic Footwear Manufacturers Association Member List

American Steel Toe Co. 
S. Lynnfield, MA 01940-0959         EMTEX Inc. 
                                    Chelsea, MA 02150
S. Goldberg & Co., Inc.
Hackensack, NJ 07061-6892           LaCrosse Footwear
                                    LaCrosse, WI 54602
Apex Mills Corporation 
Innwood, MA 11097                   Frank C. Meyer Co. 
                                    Lawrence, MA 01843
Henkel Adhesives
Elgin, IL 60120                     New Balance Athletic Shoes, Inc.
                                    Alston, MA 02134
Bixby International 
Newbury Port, MA 01950              Genfoot, Inc. 
                                    Montreal, Quebec PQH4T1P1 CANADA
Hudson Machinery Worldwide
Haverhill, MA 01831                 Norcross Safety Products
                                    Rock Island, IL 61204-7208
Converse, Inc. 
North Reading, MA 01864             Tingley Rubber Corporation
                                    S. Plainfield, NJ 07080
Johnson Technologies Corp.
Nashville, TN 37207                 Sheehan Sales Company, Inc.
                                    Beverly, MA 01915
Cote Brothers Co. 
Auburn, ME 04211                    United Shoe Machine Corp.
                                    Wilmington, MA 01887
Jones and Vining
Brockton, MA 02301                  Wolverine Leathers
                                    Rockford, MI 49351
Draper Knitting Co., Inc. 
Canton, MA 02021                    Worthen Industries, Inc.
                                    Nashua, NH 03060
Kaufman Footwear Corp.
Kitchner, Ontario N2G 4J8 CANADA
      

                                


Statement of Bill Welsch, President, Safe Alternatives for our Forest 
Environment (SAFE), Hayfork, California

    Dear Committee Members:
    The membership of SAFE is deeply concerned about the 
upcoming meeting in Seattle and the U.S. position negotiations 
on world trade. We are concerned about environmental and social 
justice in particular.... as environmentalists, labor groups 
and human rights groups have been systematically and 
consistently excluded from having any input on government's 
actions while representatives of the corporate world have had 
an exclusive say in all matters involving trade, including in 
human, worker, and environmental protection laws. Social and 
environmental environments are forever intertwined. The fact 
that agents of government, and of our national and 
transnational corporations have politically separated this bond 
in their trade discussions does not alter this truth, it only 
reinforces the belief that corporate money can and does 
influence political decisions and public policy.
    Agreements made under NAFTA and GATT have already revealed 
that our representatives in government are quite willing to 
abdicate their responsibility to the public, and act as agents 
of national and trans-national corporations....and in the 
process, Congress has granted special rights to corporate 
entities while snipping away at, and denying at times, the 
constitution rights of the public for which they have taken an 
oath to serve, (IE. Passage of a salvage logging rider that 
denied the citizens the right of appeal; giving trans-national 
corporations the right to sue the Federal government without 
the permission of Congress... a right not held by the public).
    The intent of the WTO is also clear. The intent is to 
reduce labor costs and environmental protections in order to 
raise profits for corporations and investors by pitting the 
poor against the poor in third world nations; which in turn 
drives down wages and undercuts environmental protections in 
first world nations. All, in the name of ``competition.''
    While old world colonialism is out, neo-colonialism is in. 
The old mercantile theory.... that colonies exist for the 
benefit of the mother country has been replaced with a new 
mercantile theory... that government exists for the benefit of 
corporations. Government is supposed to regulate corporations, 
not act as an agent thereof.
    Our government came about with the consent of the governed. 
It was formed to protect the natural born rights of its 
citizens, to provide for their general welfare, and to protect 
them from all enemies, foreign and domestic. In protecting the 
natural born rights of its citizens and the rights of those 
residing, visiting or working in our nation, environmental and 
worker protection laws were passed. Any or all of these 
protection laws are now subjected to being overruled by an 
unelected body within the WTO. We the people, have no 
representation in this court, and no right to appeal any 
decision made. Human or environmental right violations are not 
issues taken up in this court. What is taken up, is whether or 
not trade is in any way being hampered by the establishment of 
laws protecting human or worker rights or the environment.
    The problem with corporate power was, and still remains 
predictable. President Grover Cleveland, in a prophetic speech 
before Congress in December of 1888 stated: ``Our survival for 
one hundred years is not sufficient to assure us that we no 
longer have dangers to fear in the maintenance, with all its 
promised blessings, a government founded upon freedom of the 
people, upon more careful inspection we find that wealth and 
luxury of our cities mingled with poverty and discontent with 
agricultural pursuits...corporations, which should be the 
carefully restrained creatures of law and the servants of the 
people are fast becoming the people's masters. Unfortunately, 
what President Cleveland did not foresee, was the take over of 
agricultural pursuits by corporate America, destroying for ever 
the ethos of the early American farmer and replacing family 
farms with corporate farm factories.
    In 1935, General Smedley Butler, former U.S. Marine 
Commandant revealed the power of corporate America when he 
stated: ``I spent thirty-three years in the Marines, most of my 
time being a high class muscle man for Big Business, for Wall 
Street and the bankers. In short, I was a racketeer for 
capitalism.
    I helped purify Nicaragua for the international banking 
house of Brown Brothers in 1910-12. I helped make Mexico and 
especially Tampico safe for American oil interests in 1914. I 
brought light to the Dominican Republic for American sugar 
interests in 1916. I helped make Haiti and Cuba a decent place 
for National City (Bank) boys to collect revenue in. I helped 
in the rape of half a dozen Central American republics for the 
benefit of Wall Street. In China in 1927 I helped to see to it 
that Standard Oil went its way unmolested.
    I had a swell racket. I was rewarded with honors, medals, 
promotions. I might have given Al Capone a few hints. The best 
he could do was to operate a racket in three city districts. 
The Marines operated on three continents.''
    General David Sharp, former U.S. Marine Command, 1966, had 
this to say: I believe that if we had and would keep our dirty, 
bloody, dollar soaked fingers out of the business of other 
nations so full of depressed, exploited people, they will 
arrive at a solution of their own....And if unfortunately their 
revolution must be of the violent type because the ``haves'' 
refuse to share with the ``have nots'' by any peaceful method, 
at least what they get will be their own, and not the American 
style, which they don't want and above all don't want crammed 
down their throats by Americans.''
    What hasn't been said in the 1990's is the truth about the 
secret partnership of corporate America and the U.S. government 
in the war against peasants throughout Central America in the 
80's. Under the guise of saving these nations from Communism, 
men, women and children were murdered, tortured and raped in 
the re-institution of corporate control of Central America. At 
the time, we were openly trading with communist nations, and in 
fact supplying nations classified as ``terrorists nations, `` 
including Iraq (which at the time was under communist Russia's 
sphere of influence) with weapons. Our involvement in Central 
America with the Contras and others, aided and abetted the 
taking of more lives than the Serbs recently took in Kosovo. In 
one massacre alone, in El Mozote, El Salvador, American trained 
and financed troops killed over 200 people in one convent. Of 
143 identifiable bodies exhumed, 131 were children, the average 
age of which was 6.\1\ By no stretch of the imagination could 
these individuals have been a threat to U.S.
---------------------------------------------------------------------------
    \1\ U.N. Truth Commission Report on El Mozote
---------------------------------------------------------------------------
    The fact that this administration engaged in secret talks, 
for several years, to create a multi-lateral agreement on 
trade, without any input from human rights groups, worker 
rights groups, or environmental groups clearly demonstrates the 
power and influence corporations have upon both the legislative 
and executive branches of government. When the pursuit of trade 
is based entirely on profits; when trade is carried out through 
the exploiting of human and natural resources with little to no 
concern for either, this can not be called ``free trade,'' it 
is the crushing of freedom. Monetarily, we subsidize corporate 
America in excess of $125 billion per year. When hidden 
subsidizes are added, such as tax breaks, foreign aid (which at 
times is really corporate aid), and the decoupling of trade 
from human rights, the visual subsidy becomes dwarfed when 
compared to the unseen subsidies. We have seen no move by 
``free traders'' in government to remove this cost from ``free 
trade.''
    We are rightfully concerned about human rights and worker 
rights. We are concerned about the exploitation of the world's 
resources, particularly when the benefits of the exploitation 
go largely to an elite and wealthy few while the cost, the 
pain, and the misery is paid in varying degrees by the many, 
with the heaviest load placed upon the weak, the meek, the poor 
and the defenseless.
    Naturally, as an environmental group, deforestation is a 
major concern, particularly when global free logging is one of 
the main items on the upcoming WTO ministers' agenda. 
Deforestation will be hastened by global free logging. Already 
deforestation is a world wide problem. Deforestation has played 
a major role in: altering climates, increasing the siltation of 
rivers, lakes and streams; dislocating indigenous populations, 
exacerbating floods, contributing to global warming and leaving 
a legacy of impoverishment for future generations. The doubling 
of the world's population is close at hand. How can future 
generations absorb the debts of the present, solve the problems 
of crime, education, medical care, etc, and continue feed the 
bulk the world's wealth into the hands of an unsatiable few? 
All wealth comes originally from the exploitation of natural 
resources. How long can these resources last amid rising 
populations and declining resources? How many of our natural 
resources will survive future floods, hurricanes, and forest 
fires, the intensity of which will be greater because of man's 
exploitation of these resources?
    It is the duty of the government of any nation to protect 
the public's interest and welfare, and to protect its nations 
natural resources. It is not the duty of any government to act 
as a corporate partner, acting in the interests of private 
individuals and corporations at the public's expense. Any trade 
agreement must include verifiable human and worker rights 
protections as well as environmental protections. Environmental 
protections must based upon current knowledge and ``public,'' 
as opposed to ``industry'' science. The end of sweat shops, 
child labor, and forced labor must be a goal that is sought by 
government with the same vigor that corporations have sought 
private financial gain. If we are going to hail the 
Constitution as a ``beacon of freedom'' human and environmental 
justice must be made an integral part of any trade agreement. 
Instead of following the corporate lead of ``pitting the poor 
against the poor'' to keep wages down; corrupting currencies of 
other nations to disrupt their struggling economies and forcing 
nations into unfavorable trade positions, we should be building 
up sustainable economies worldwide. The concentration of wealth 
and power into the hands of a few, at the expense of the many, 
must also be addressed. As Ghandi once said, ``The earth will 
supply all of man's needs, it will not supply all of man's 
greed.''
    Each nation should be able to pass laws to protect their 
natural resource assets, and to set high standards of worker 
and human rights protections. All nations should be encouraged 
to do so for the health of the planet and for the benefit of 
world peace. No trade organization should be able to set up a 
court system that looks only at trade barriers and profits and 
ignores the people and the natural world that they must live 
in. Corporations should not become ``co-sponsors of 
government,'' or achieve an equal status with government.
    Nations that refuse to cooperate should be excluded from 
all trade. All subsidies, including tax loopholes for 
corporations, should end. This is consistent with ``free 
trade'' and consistent with the thinking and philosophy of Adam 
Smith, the father of ``free trade.'' Smith did not want to see 
the hand of government involved in free trade. We do not want 
to see the hand of transnational corporations involved in 
government affairs and directing public policy, or in our 
pockets.
    This committee will be deciding more than U.S. policy in 
foreign trade. Its decision will illuminate, for the world, 
what is the greatest concern of our government representatives: 
The health and welfare of the people and their environment, or 
the health and welfare of the world's richest individuals and 
the corporations from which they direct public policy. This 
vote will determine whether members of Congress are to be seen 
as ``straw bosses'' for transnational corporations, or 
representatives of the people.
    While our forefathers did not practice what they wrote or 
preached in drafting up and approving our Constitution, they 
did provide a foundation upon which to build a true government, 
of the people, by the people and for the people. We ask this 
committee to put some truth and action behind the words of this 
noble document, and end U.S. support for the WTO and its 
present policies.
            Sincerely,
                                                Bill Welsch
                                                    President: SAFE
      

                                


Statement of Steve Judge, Senior Vice President, Government Affairs, 
Securities Industry Association

    Mr. Chairman and Members of the Subcommittee, my name is 
Steve Judge and I am senior vice president, government affairs, 
of the Securities Industry Association (``SIA'').\1\ Thank you 
for giving me this opportunity to present the securities 
industry's views on U.S. preparations for the World Trade 
Organization (WTO) Ministerial Meeting in Seattle. SIA strongly 
supports the inclusion of financial services in the Year 2000 
Round because it will build on the important progress achieved 
in the 1997 negotiations.
---------------------------------------------------------------------------
    \1\ The Securities Industry Association brings together the shared 
interests of more than 740 securities firms to accomplish common goals. 
SIA member-firms (including investment banks, broker-dealers, and 
mutual fund companies) are active in all U.S. and foreign markets and 
in all phases of corporate and public finance. The U.S. securities 
industry manages the accounts of more than 50 million investors 
directly and tens of millions of investors indirectly through 
corporate, thrift, and pension plans. The industry generates 
approximately $270 billion in revenues yearly in the U.S. economy and 
employs more than 380,000 individuals.
---------------------------------------------------------------------------
    My testimony will address the following key points: 1) the 
existing framework for open and fair markets; 2) the importance 
of financial services to the U.S. economy; 3) the need to 
further market liberalization; and 4) the securities industry's 
objectives for the Year 2000 Round.

            Developing a Framework for Open and Fair Markets

    The World Trade Organization (WTO) Financial Services 
Negotiations were successfully concluded December 12, 1997. The 
agreement was the first of its kind for financial services, 
resulting in the creation of a MFN-based global framework for 
the provision of financial services, and, more importantly, 
specific commitments by the 102 parties to the agreement to 
reduce and eliminate many discriminatory barriers.
    The financial services sector, including the U.S. 
securities industry, secured meaningful benefits from this 
agreement, including:
     creation of international rules for all financial 
services firms;
     reduction and removal of many discriminatory 
restrictions;
     institution of a dispute settlement system for 
agreement violations;
     specific liberalizing measures to be taken in 
emerging markets; and
     establishment of a ``floor'' from which to build 
future liberalization.
    Despite these advances, we believe there is more to be done 
to secure open and fair markets for U.S. providers of financial 
services. Remaining barriers to entry and discriminatory 
treatment stifle the innovation and creativity of the 
securities industry, thus making the Year 2000 Round (the 
``Millennium Round'') of tremendous importance. U.S. 
negotiators will have another opportunity to eliminate 
obstacles from foreign markets that hamper the competitiveness 
of U.S. firms and reduce U.S. economic growth and job creation. 
Moreover, liberalization will result in real benefits in key 
developing markets, enhancing and strengthening capital market 
efficiency, and increasing financial sector stability.

  The Financial Services Sector is a Catalyst for U.S. Economic Growth

    The U.S. financial services sector is a key component of the U.S. 
economy. Importantly, its continued strength is dependent on unfettered 
access to foreign markets. Whether firms are raising capital for a new 
business, extending credit for a corporate acquisition, managing 
savings for a retail customer, or supplying risk management tools to 
U.S. multinationals, this sector touches all aspects of the U.S. 
economy. In light of the financial service sector's unique role in the 
U.S. economy, its health is essential if the U.S. economy is to 
continue to show rates of economic growth and job creation it has 
during this decade.
    The U.S. financial services industry's impressive strength is best 
illustrated by these numbers. Financial services firms contributed $626 
billion to U.S. Gross Domestic Product (GDP) in 1998, about 7.7 percent 
of total GDP. A record six-million employees \2\ support the products 
and services these firms offer. Perhaps most impressive is how this 
industry has increased its relative importance to the U.S. economy. 
From 1980-1997, the U.S. securities industry's contribution to total 
output of the U.S. economy increased by 8.4 times--three times the 
increase of the overall economy.\3\
---------------------------------------------------------------------------
    \2\ Approximately six percent of total non-farm employment.
    \3\ U.S. Department of Commerce.
---------------------------------------------------------------------------
    It is important to underscore that financial services firms are 
also exporters. In 1998, exports totaled $15.8 billion, with a trade 
surplus of $5.9 billion. Clearly the cutting edge services and products 
U.S. financial services firms offer are eagerly sought by foreign 
individuals, institutions and governments. The continued well being of 
this sector is directly linked to its ability to sell its products in 
foreign markets.
    The reason for the U.S. financial services sector's increasing 
commitment to foreign markets is clear. Over the last decade, the U.S. 
economy and securities markets--while still the largest in absolute 
terms--have seen their share of the global pie shrink. Approximately 80 
percent of the world's GDP and half of the world's equity and debt 
markets are located outside the U.S. Indeed, many of the best future 
growth opportunities lie in ``non-U.S.'' markets. U.S. investors and 
corporations have already tapped these new markets, with U.S. 
securities firms establishing substantial foreign operations to serve 
the growing international focus of their clients. The graph below 
illustrates this point.
[GRAPHIC] [TIFF OMITTED] T5092.008


   Expanding Business Opportunities for U.S. Financial Services Firms

    The 1997 financial services agreement reflects a commitment 
by both developed and developing countries to enforce 
international rules in financial services. Since increasing 
levels of securities transactions are occurring on a global 
basis, and foreign firms are establishing operations abroad, 
there was a clear need to establish an infrastructure on which 
to build an open and fair global market for financial services.
    From SIA's perspective, the WTO financial services 
agreement was a critical development in global trade policy 
because it not only ``locked-in'' current levels of access, but 
also produced commitments by countries to eliminate and reduce 
some of the most egregious and discriminatory practices.\4\ 
Moreover, in developed countries--many of which already have 
open and fair markets--the accord guarantees the current level 
of access which foreign financial services firms enjoy.
---------------------------------------------------------------------------
    \4\ It should be noted that many countries left certain activities 
``Unbound"; that is the country may introduce a measure inconsistent 
with market access or national treatment, and may grow more restrictive 
in the future.
---------------------------------------------------------------------------
    The central purpose of the 1997 negotiations was to remove 
the barriers foreign firms and their clients face in the 
world's developing markets (see chart below). In that regard, 
the pact will lead to the reduction and elimination of some 
onerous barriers foreign firms face, and a correspondent 
increase in business opportunities. For example, U.S. 
securities firms are now permitted to have majority control of 
a domestic securities company in nearly all WTO countries. U.S. 
consumers will also benefit because these commitments expand 
the ability to acquire foreign securities in the local market. 
Most important, this agreement is the base from which the Year 
2000 Round will begin.

Benefits of the 1997 WTO Financial Services

                 Agreement for the Securities Industry

Indonesia

     Existing investments of foreign firms protected
     Elimination of portfolio investment limitations

Philippines

     Foreign majority ownership permitted
     Existing investments of foreign firms protected

South Korea
     Increased foreign access to listed stocks
     Expanded foreign access to existing securities 
companies

Thailand

     Foreign ownership limits lifted for ten years

           SIA's Objectives and Goals for the Upcoming Round

    SIA strongly supports the inclusion of financial services in the 
Year 2000 Round. SIA's objective is to achieve substantial 
liberalization of financial services markets in developing and 
developed countries. As the negotiations progress, we will recommend 
that negotiators reject deficient offers, such as those that codify the 
status quo without any progress; enshrine existing discriminatory 
practices; or, do not fully grandfather existing investments and 
operations.
    While SIA is still formulating its objectives for the upcoming 
talks, and will develop a specific list of country priorities, we 
believe a successful financial services trade agreement must 
incorporate the following core principles:

1. Binding Commitments to Open Markets

    In the last Round, many of the commitments made were to ``lock-in'' 
current practice. While some progress was made on efforts to reduce and 
eliminate existing barriers, much work remains to be done. For example, 
in the case of Malaysia, foreign ownership of local securities firms is 
limited to minority ownership. To meet the GATS goal of ``Progressive 
Liberalization'' (Appendix A) the Year 2000 Round negotiations must 
result in substantial binding commitments by countries to remove 
specific financial services barriers.
    Unless specific barriers are lifted, the agreement will provide 
little tangible benefits to the U.S. Importantly, any agreement reached 
during the Year 2000 Round must grandfather existing investments and 
not create new restrictions. This is particularly important given that 
during the past two years, many countries have opened their markets 
beyond the commitments they made at the conclusion of the last Round. 
Current access must be made part of any final agreement.

2. Freely Established Commercial Presence

    Establishing and developing relationships are critical elements in 
providing financial services. Increasingly, services must be delivered 
by having a business presence in the host country. Despite the progress 
made during the last Round, many developing nations still deny foreign 
investors the right to structure their businesses efficiently, or 
prevent them from establishing a commercial entity at all. In many 
cases, establishment is limited to minority joint venture, or hindered 
by an ``economic-needs test.''
    The ability to operate competitively through a wholly-owned 
commercial presence or other form of business ownership must be a 
fundamental element of an agreement. Non-residential financial services 
companies must be given every opportunity to establish a viable 
business presence outside their home country. Once established, 
companies in foreign markets should receive the same (i.e., national) 
treatment as domestic companies.

3. Elimination of Investment and Equity Limitations

    U.S. institutional and retail investors hold nearly $1.2 trillion 
of foreign stocks. Increasingly, U.S. investors are looking to 
securities from developing markets to diversify their holdings. 
However, U.S. investors are often constrained by ceilings and 
limitations on the purchase of these securities, which artificially 
raise their costs. Additionally, these limitations also have costs to 
the local markets, reducing liquidity and increasing volatility. These 
restrictions should be reduced and, eventually, eliminated.

4. Transparent Laws and Regulations

    In negotiating greater access for goods, reductions in tariffs 
provide a readily available way to reduce barriers to trade; i.e., 
tariffs on widgets can be reduced from 50 percent to ten percent over a 
five-year period. Financial services firms, however, are confronted 
with non-tariff barriers. These barriers come in two forms--regulatory 
shortcomings and lack of transparency in the implementation and 
application of regulations--and prevent access in the same way as 
tariffs. However, unlike tariffs, no quantitative mechanism exists to 
reduce regulatory barriers.
    We would urge negotiators to work on provisions that would, inter 
alia, eliminate preferential access to regulatory proposals; require 
public availability of proposed regulations; provide an adequate public 
comment period on new regulations; and mandate the enforcement of 
regulations in a non-discriminatory manner.
    From a business standpoint, ensuring a high level of transparency 
is as essential to a successful financial services agreement as tariff 
cuts are to an agreement on trade in goods. Lack of transparency in the 
implementation of laws and regulations--including limited public 
comment periods on proposed regulations, non-transparent approval 
mechanisms for firms and financial products, or other practices which 
are not dealt with pursuant to written regulations--can seriously 
impede the ability of securities firms to compete fairly.
    Regulatory prohibitions also limit the ability of U.S. firms to 
compete in foreign markets. In some cases, the sale of specific 
products requires regulatory approval. In other instances, the ability 
to establish is impaired in light of restrictions on new licenses. 
Elimination of these barriers is complicated, especially in light of 
the ability of countries to claim that they are ``prudential'' in 
nature; that is, they exist to protect the safety of consumers and 
soundness of the marketplace. However, we believe that many of these 
restrictions go beyond any legitimate prudential objective.

5. Reasonable Transition Periods

    The securities industry understands that local financial services 
firms in developing markets will need time to adapt to new competitive 
pressures. In this regard, reasonable transition periods should be 
considered, with remaining restrictions progressively eliminated 
throughout the transition. The transition time frames, however, must be 
accompanied by an initial down payment that results in immediate 
liberalization. Permanent restrictions on market share, activities or 
geographical location are unacceptable. NAFTA's sector specific 
transition periods is a useful model to study. For illustrative 
purposes, the transition periods for the securities industry in NAFTA 
are in Appendix B.

6. Increased Cross-Border Access

    The cross-border provision of financial services should be an 
important element of a WTO financial services agreement. Cross-border 
provisions should, for example, include the right to buy and sell 
financial products cross-border and the right to participate in and 
structure transactions. We believe this can be accomplished while 
addressing appropriate prudential concerns.

                               Conclusion

    Mr. Chairman, we believe these negotiations offer Congress 
and the Administration another opportunity to secure open and 
fair access to foreign markets for U.S. firms and their 
clients. The start of the 21st century will find the U.S. 
securities industry on the leading edge of international 
technology, finance and innovation. If it is to remain there, 
however, it must be able to meet the demands of both its U.S. 
and foreign clients.
    Congressional leadership will be a critical factor in 
making sure that the Seattle WTO Summit produces a negotiating 
framework for the Year 2000 negotiations for that reduce and 
eventually eliminate barriers to trade. SIA stands ready to 
work with you as an active participant in these important trade 
talks.

Appendix A

Part IV

Progressive Liberalization

                              Article XIX

                  Negotiation of Specific Commitments

    1. In pursuance of the objectives of this Agreement, 
Members shall enter into successive rounds of negotiations, 
beginning not later than five years from the date of entry into 
force of the WTO Agreement and periodically thereafter, with a 
view to achieving a progressively higher level of 
liberalization. Such negotiations shall be directed to the 
reduction or elimination of the adverse effects on trade in 
services of measures as a means of providing effective market 
access. This process shall take place with a view to promoting 
the interests of all participants on a mutually advantageous 
basis and to securing an overall balance of rights and 
obligations.
    2. The process of liberalization shall take place with due 
respect for national policy objectives and the level of 
development of individual Members, both overall and individual 
sectors. There shall be appropriate flexibility for individual 
developing country Members for opening fewer sectors, 
liberalizing fewer types of transactions, progressively 
extending market access in line with their development 
situation and, when making access to their markets available to 
foreign service suppliers, attaching to such access conditions 
aimed at achieving the objectives referred to in Article IV.
    3. For each round, negotiating guidelines and procedures 
shall be established. For the purposes of establishing such 
guidelines, the Council for Trade in Services carry out an 
assessment of trade in services in overall terms and on a 
sectoral basis with reference to the objectives of this 
Agreement, including those set out in paragraph 1 of Article 
IV. Negotiating guidelines shall establish modalities for the 
treatment of liberalization undertaken autonomously by Members 
since previous negotiations, as well as for the special 
treatment for least-developed country Members under the 
provisions of paragraph 3 of Article IV.
    4. The process of progressive liberalization shall be 
advanced in each such round through bilateral, plurilateral or 
multilateral negotiations directed towards increasing the 
general level of specific commitments undertaken by Members 
under this Agreement.

Appendix B

NAFTA Transition Periods

For Securities Firms

                Three-Tier Transition Period for Foreign

                   Securities Firms Entering Mexico*

Period 1 (1/1/94--12/3/99)

    * phase-in caps are based on total capital of Mexican securities 
firms
---------------------------------------------------------------------------
     Four percent transitional individual firm cap
     Ten percent industry aggregate share in 1994, growing to 
twenty percent by the end of 1999, on a pro-rata basis
     

Period 2 (1/1/2000--12/31/2003)


     Four percent individual-firm cap removed permanently
     Industry can grow up to thirty percent; if the industry 
does not reach or exceed thirty percent during Period 2, aggregate cap 
is permanently lifted
     

Period 3 (can begin anytime during Period 2)


     If at any time the industry reaches or exceeds thirty 
percent in Period 2, Mexico has the option to impose a new three-year 
cap; after three years, the transition period is over.
     No more aggregate caps at the end of Period 3.
      

                                


Statement of Daryl Hatano, Vice President, Semiconductor Industry 
Association

    Thank you for the opportunity to provide our trade policy 
recommendations for the upcoming WTO Ministerial Meeting in 
Seattle this November.
    To begin, I would like to provide some background on the 
U.S. industry and outline the stakes for this industry from the 
new WTO round.The U.S. semiconductor industry is now America's 
largest manufacturing industry, contributing 20 percent more to 
the U.S. GDP than the next leading industry. U.S. semiconductor 
makers employ about 260,000 people nationwide, and the presence 
of the industry is widespread--35 states have direct 
semiconductor industry employment. And these are high paying 
jobs. The average wage in the semiconductor industry is 
approximately $55,000, nearly twice the average of private 
industry overall.
    Semiconductors are an increasingly pervasive aspect of 
everyday life, enabling everything from computers to cell 
phones to modern defense systems to the Internet which is, in 
fact, a world wide web of silicon chips. They have sparked the 
growth of the U.S. electronics industry, which provides 
employment for 4.8 million Americans in all 50 states.
    Behind this enormous economic success is the ever shrinking 
transistor. A transistor is an electronic circuit, which is the 
basic building block for an electronic system. A decade ago, we 
were able to integrate thousands of transistors on a single 
chip. By steadily shrinking the size of the transistor, we now 
place millions of transistors on a single chip.
    The industry has succeeded in quadrupling the number of 
transistors per chip every three years over the last several 
decades. The resulting steady decreases in the price of a 
chip's capability is called ``Moore's Law.''
    The implications of Moore's law cannot be overstated. The 
Commerce Department tracks the revenues our industry collects. 
However, a future historian looking back at this century might 
instead focus on the revenues we do not collect--that is the 
effect of the rapid and constant price decline of the 
transistor. Economist Kenneth Flamm has concluded that the 
impact of chip price declines has had from two to five times 
the impact on the U.S. economy that the railroad had during a 
comparable period during the last century.
    Moore's law has become the axiom of the information age. It 
will continue to make microchips more affordable, allowing 
additional millions around the globe to enjoy the benefits that 
many Americans take for granted--such as cellular telephones, 
email and access to the Internet. And in America, microchip 
advances will transform our economy into one where ecommerce is 
the norm.
    To continue the progress described by Moore's Law requires 
massive investments in research and development to invent ways 
to etch ever smaller patterns on chips, and constant 
investments in new plant and equipment to replace factories 
which become rapidly obsolete. Last year, the U.S. chip 
industry invested 14 percent of sales on research and 
development and almost 20 percent in new plant and equipment.
    Worldwide, the semiconductor industry's revenues grow about 
15% per year, but its output in transistors increases from 40 
to 80% per year. Today, the world consumes about 17 million 
transistors per person, a tenfold increase over the amount 
consumed five years ago. That is a lot of computing power.
    The WTO negotiations for the new millennium must address 
the challenges of the digital age so that everyone around the 
world can benefit from the information economy. This is an 
economy where a semiconductor can be designed and manufactured 
in America, packaged and tested in Malaysia, and sold to a 
computer manufacturer in Japan who exports that computer to 
Europe. As product cycles become shorter, and ideas and data 
flow effortlessly across the globe, national trade barriers 
become particularly pernicious. The WTO negotiations must 
promote greater trade liberalization because only open markets 
can best insure that the benefits of information technology are 
enjoyed by people around the world. To this end, the following 
summarizes the tariff and non-tariff issues of importance to 
the U.S. semiconductor industry in the upcoming Seattle 
Ministerial and the new WTO round.

                   Information Technology Agreement 

    The SIA believes that a central element of any new WTO 
round of negotiations must be continued attention to industrial 
tariff elimination by WTO members. The U.S. semiconductor 
industry has been at the forefront of efforts to eliminate 
tariffs on semiconductors and related products worldwide. At 
SIA's urging, the United States, Japan and Canada eliminated 
their semiconductor tariffs in the mid-1980s. In 1994, Mexico 
eliminated its semiconductor tariffs on a most-favored-nation 
basis under the North America Free Trade Agreement. In 1997, 
another 39 countries and customs territories agreed to 
eliminate their semiconductor tariffs through the Information 
Technology Agreement (ITA). As part of the ITA, the EU and 
Korea also agreed to accelerate the phase-out schedule for 
their semiconductor tariffs, with full elimination in 1999, in 
order to allow the European and Korean semiconductor industries 
to join the World Semiconductor Council (WSC) at its inaugural 
meeting in 1997.
    It is worth noting that the Information Technology 
Agreement is unique in that countries agreed to eliminate their 
information technology tariffs without tying these concessions 
to benefits in other areas or sectors. This is due to the 
recognition of the benefits achieved by tariff elimination, 
such as lower costs for businesses and consumers and 
improvements in a country's information technology 
infrastructure.
    The United States should encourage all WTO member countries 
to join the ITA as soon as possible and thereby permanently 
eliminate tariffs on semiconductors, semiconductor 
manufacturing equipment and related information technology 
products. While the United States has been successful in 
encouraging many countries to join the ITA and eliminate their 
tariffs, increased participation in the ITA remains a priority. 
ITA participation remains very limited in certain regions of 
the world. In Latin America, for example, only three 
countries--Costa Rica, El Salvador and Panama--are currently 
signatories to the ITA. Persuading additional WTO members to 
join the Agreement should continue to be a U.S. trade policy 
priority.
    In addition, the United States should require countries 
negotiating for accession to the WTO to follow the lead of 
Taiwan and to join the ITA as an interim measure as their 
accession negotiations continue. China, for example, has taken 
significant steps toward joining the ITA in recent months, and 
every effort should be made to encourage China to continue to 
move forward in this positive manner.
    Expansion of the ITA to include additional products and 
signatories should be maintained as a separate process during 
the course of broader WTO multilateral negotiations. A clear 
goal for the end of any new multilateral negotiations, however, 
should be to make ITA participation mandatory for all WTO 
member countries. Continued attention should also be placed on 
the current ongoing review of the ITA to expand the product 
coverage of the agreement (ITA II). Every effort should be made 
to reach agreement among the existing ITA signatories to expand 
the product coverage of the agreement as soon as possible. For 
those countries that have yet to join the original ITA, it 
should also be pointed out that joining the original ITA would 
permit them to play an active role in determining the future 
direction of international efforts to expand the product 
coverage of the ITA.
    Finally, the WTO Secretariat should be charged with fully 
monitoring participants' compliance with their ITA obligations, 
including the depth and timing of tariff cuts and coverage of 
already agreed-to products. Expeditious elimination of 
semiconductor tariffs will not only spur development of a 
competitive microelectronics industry in foreign markets, it 
will allow U.S. producers to sell advanced semiconductors to 
their foreign customers at the lowest possible price, thereby 
both increasing U.S. exports and strengthening developing 
electronics industries. 

                          Electronic Commerce 

    Another tariff-related issue of importance to SIA is the 
tariff treatment of electronic commerce. SIA supports U.S. 
efforts to urge WTO members to continue the current practice 
with respect to tariff treatment of electronic commerce. 
Currently, no WTO member considers electronic transmissions as 
importations and, consequently, no member imposes customs 
duties on those transmissions. Given the increasing importance 
of electronic commerce over the Internet, SIA believes that the 
United States should continue its leadership in this area, 
and--in addition to encouraging permanent implementation of 
duty-free treatment--should urge WTO members to commit to tax-
free treatment of electronic transmissions. 

                  Antidumping and Competition Policy 

    SIA supports the maintenance of a strong and effective 
antidumping remedy as a critical component of the international 
trading system. The antidumping remedy is especially important 
with respect to the semiconductor industry given the history of 
injurious dumping in our sector.
    The WTO Antidumping Agreement, recently renegotiated in the 
Uruguay Round, permits WTO members to take remedial action 
against dumped imports and prescribes international rules for 
the conduct of antidumping actions. Given the recent 
substantial changes to antidumping rules in the Uruguay Round, 
SIA believes it would be inappropriate at this time to launch a 
new international negotiation of an antidumping agreement and 
SIA would strongly oppose new negotiations in this area as part 
of the WTO agenda.
    The continued monitoring of how the Uruguay Round 
antidumping rules are being implemented is appropriate, but 
that is very different from supporting or permitting the re-
negotiation of these rules. The United States should be very 
clear about the distinction, and should be careful not to agree 
to anything under the ``implementation'' rubric that will in 
practice lead to reopening of this important agreement.
    Additionally, there are a number of WTO member countries 
seeking to use the current discussions in the WTO over trade 
and competition policy to pursue their agenda of curbing 
antidumping trade remedies. Most of the competition policy 
discussion so far has been grounded in theory rather than in a 
factual examination of the specific barriers to international 
trade and investments that need to be remedied. Before 
attempting new international disciplines, it is necessary to 
understand the dimensions of the problems posed for trade by 
the absence of competition rules and/or their enforcement in so 
many markets around the world. SIA believes that the issue of 
competition policy is not sufficiently developed to be included 
in the new WTO round and that it should not be used as a 
mechanism to weaken existing WTO-endorsed antidumping trade 
remedies.

                         Intellectual Property 

    As an R&D intensive industry, the U.S. semiconductor 
industry is also very concerned about the full and effective 
protection of intellectual property rights. The Uruguay Round 
Agreement on Trade-Related Aspects of Intellectual Property 
Rights (TRIPS) represents a major advance in the protection of 
intellectual property (IP). The agreement began the process of 
improving worldwide IP protection and allowed for staged 
implementation over the course of a decade. Developed countries 
were required to implement TRIPS almost immediately (January 1, 
1996); less developed countries (LDCs), as a general rule, were 
given until January 1, 2000 and least developed countries have 
until January 1, 2006 to implement TRIPS.
    In the case of developed countries, some dispute settlement 
cases were and continue to be necessary to strengthen national 
protection. Nevertheless, for the most part, TRIPS has been 
implemented in developed countries. There is a real concern, 
however, that some LDCs may not be able to meet their 
commitments by the January 1, 2000 deadline. Some developing 
countries view their obligations under the Uruguay Round TRIPS 
Agreement as nonbinding and may try to push back implementation 
of their TRIPS obligations in the next round of the WTO 
negotiations. Failure to meet this deadline would mean that the 
expected commercial gains for those WTO members that have met 
their commitments would not be realized. Further, it could 
result in a deluge of cases submitted to the WTO dispute 
settlement process that will present a significant challenge to 
the institution. In the context of the upcoming Seattle WTO 
Ministerial Meeting, the United States should have as a 
priority the full implementation of TRIPS by less developed 
countries by the year 2000 deadline. The Seattle WTO 
Ministerial should not be the occasion for delaying this 
obligation. 

                               Services 

    Semiconductor companies also face trade barriers in the 
area of services. The ability of U.S. firms to import, export 
and distribute goods within foreign markets is essential for 
ensuring true market access. Therefore, as part of any new 
negotiations relating to services, the United States should 
seek commitments from all WTO members to permit foreign 
companies to engage in trading and distribution services 
without restriction.
    Numerous restrictions on the ability of U.S. semiconductor 
firms exist, especially in countries in the process of 
transitioning from centrally-planned to market-oriented 
economies.
    Restrictions in some countries on ``trading rights'' (e.g., 
the ability to import and export) are significant impediments 
to U.S. semiconductor firms' ability to access foreign markets. 
If not eliminated, these restrictions may undermine the benefit 
of other trade liberalization measures. U.S. firms doing 
business abroad should not be limited to importing or exporting 
through certain designated enterprises. Rather, U.S. companies 
must be able directly to sell and service end products, spare 
parts and components. The United States should urge countries 
to provide such trading rights to all firms, without 
discrimination on the basis of nationality.
    Equally important as the right to import and export is the 
right to distribute goods within foreign markets. Forcing U.S. 
producers to sell through foreign distributors can add 
significant cost and adversely affect service, inventory, and 
delivery. The inability to deal directly with end-users is a 
particular problem in the semiconductor industry, where the 
design and development of application-specific chips requires 
extensive contact between semiconductor producers and the 
ultimate end-users of the chips.
    Similar commitments should be insisted upon with respect to 
all newly-acceding WTO members. In fact, such commitments 
should be considered to be a fundamental obligation of WTO 
membership. 

                              Investment 

    Other non-tariff barriers exist in the area of investment. 
The freedom to engage in direct investment is critical to 
market access in many sectors and particularly for the 
semiconductor industry. Unfortunately, existing rules on Trade-
Related Investment Measures (TRIMs) do not adequately 
discipline many of the restrictions placed on investment in 
various countries. U.S. semiconductor companies often face 
complex rules and requirements when engaging in foreign direct 
investment, including ownership restrictions, export targets, 
local content requirements and pressure to transfer technology.
    U.S. semiconductor manufacturers frequently must grapple 
with policies, in the form of both official and unpublished 
``administrative guidance,'' restricting foreign ownership, 
including pressure to enter into joint venture agreements with 
local firms. Many U.S. companies have also been pressed to 
agree to export targets for their overseas plants, including, 
for example, requirements that a certain percentage (or all) of 
their facility's output be exported, or requirements that the 
U.S. firm agree to reinvest all profits earned from domestic 
sales. U.S. firms also face a range of localization 
requirements for parts and materials for products made abroad. 
Firms must sometimes file localization plans with foreign 
investment applications and can be subject to audits to 
determine local content.
    These ownership restrictions export targets and local 
content requirements may be imposed not only as strict legal 
obligations, but also as quid-pro-quos for decisions by 
government officials at both the national and sub-national 
level. Regardless of their form, these measures are often used 
as levers to obtain transfer of technology from foreign firms.
    These measures can have a real and significant competitive 
impact on U.S. electronics firms, as advanced technology is 
often the key to competitive success. To the extent that our 
trading partners can maintain such measures, U.S. exports in 
the electronics sector, such as semiconductors, may be 
restricted. Moreover, such investment restrictions have a 
negative effect on the country imposing them, as they 
discourage the investment necessary to develop a local 
electronics industry on a commercially sound basis.
    Improving and expanding WTO rules on TRIMs therefore should 
be a part of any ongoing WTO negotiations, and should include 
strengthened provisions prohibiting WTO members from taking any 
of the above measures--especially those which require a foreign 
enterprise to invest, enter into any form of joint venture 
arrangement with a domestic entity or to transfer any 
technology or intellectual property to a domestic entity. These 
strengthened provisions should also encompass measures that are 
mandatory or enforceable under domestic law or under 
administrative rulings, or compliance with which is necessary 
to obtain any approval or advantage. 

                 Access to State-Invested Enterprises 

    Traditional market access commitments can be undermined if 
foreign enterprises are denied the ability to sell to state-
invested enterprises--enterprises wholly or partially owned by 
central, provincial or local governments. Unfortunately, 
current WTO rules in this area are inadequate. The WTO's 
principal tool for addressing distortions in trade that arise 
from state-invested enterprises--Article XVII of the General 
Agreement on Tariffs and Trade--does not effectively cover the 
purchasing decisions of state-invested commercial enterprises. 
In addition, such enterprises are not covered by the WTO 
Government Procurement Code because their purchases are for the 
purpose of manufacturing commercial goods rather than for 
government use.
    State-owned and state-invested enterprises are particularly 
active in the electronics sector in many countries, and 
frequently control a significant share of the imports and 
exports of electronics goods. As a result, there is a 
significant risk that other state-owned or state-invested 
enterprises may be encouraged by government officials to 
purchase semiconductors from other state-invested or domestic 
suppliers. Such discrimination could obviously have a very 
negative effect on U.S. semiconductor sales.
    Given the inadequacy of Article XVII, the SIA urges 
stronger WTO rules in two areas that include affirmative 
obligations on the part of all WTO members. The first 
obligation would be to ensure that state-owned and state-
invested enterprises, including partially state-invested and 
recently privatized enterprises that were formerly state-
invested, make purchases and sales on the basis of commercial 
considerations. The second obligation would be to afford the 
enterprises of other WTO members adequate opportunity to 
compete for sales to state-invested enterprises.
    The SIA also believes that WTO members should be required 
to refrain from taking any measure, including administrative 
guidance, to influence or direct state-owned and state-invested 
enterprises as to the quantity, value, or country of origin of 
goods purchased or sold, or otherwise impair the purchase or 
sale of goods. In addition, the WTO should review on a regular 
basis whether state-owned or state-invested enterprises are in 
fact making purchases on the basis of commercial 
considerations.

                            Rules of Origin

    In the Uruguay Round, WTO members agreed to pursue 
international harmonization of rules of origin based on the 
substantial transformation standard. The WTO Agreement on Rules 
of Origin (ARO) applies to all origin rules used in non-
preferential trade applications, from collection of trade 
statistics to product marking to antidumping and countervailing 
duty measures. SIA believes this work program should be 
reviewed to ensure that it does not undermine the effectiveness 
of the U.S. antidumping law.
    Under existing U.S. practice for determining origin, 
semiconductors that are fabricated in one country but assembled 
in another country are treated differently for general trade 
purposes (such as for customs purposes) than they are for 
purposes of administering antidumping measures. The treatment 
of semiconductors in a general trade context is determined by 
rules of origin, which base a semiconductor's origin on the 
country where final assembly takes place. Antidumping 
investigations, on the other hand, employ fact-specific 
criteria to determine that a semiconductor is ``from'' the 
country of wafer fabrication (also known as diffusion). This is 
because a final assembly standard would allow foreign exporters 
subject to antidumping orders to evade those orders by simply 
changing the country of final assembly--a relatively simple and 
inexpensive change in the semiconductor industry.
    Ongoing WTO efforts to harmonize rules of origin, however, 
may require the U.S. Government to change its current practice, 
so that it would no longer be able to employ these differing 
approaches. This requires the establishment of new rules of 
origin for semiconductors that will ensure that antidumping 
orders on semiconductors can continue to be effectively 
enforced.
    SIA believes that fact-based scope determinations for 
antidumping purposes should be decoupled from general purpose 
rules of origin. While the WTO origin harmonization exercise 
must result in origin rules that facilitate international trade 
through easy-to-administer and consistently-applied criteriait 
is equally important that the origin harmonization exercise not 
disrupt the existing ability of governments to administer 
antidumping and countervailing duty orders.
    This is in fact consistent with the ARO. The ARO sets out 
several objectives to be achieved as a result of the 
harmonization exercise. The preamble to the ARO notes that, in 
agreeing to the harmonization effort, WTO members recognized 
that clear and predictable rules of origin would ``facilitate 
the flow of international trade'' and sought ``to ensure that 
rules of origin themselves do not create unnecessary obstacles 
to trade'' while at the same time seeking ``to ensure that 
rules of origin do not nullify or impair the rights of Members 
under GATT 1994.'' Indeed, one of the rights of WTO members 
under GATT 1994 is the right to impose antidumping or 
countervailing duty measures to remedy injurious dumping or 
subsidization. Accordingly, some countries have proposed 
content-based origin rules for electronics products to ensure 
that their ability to impose antidumping or countervailing duty 
measures is not restricted. The European Union, for example, 
has proposed a 45 percent value-add origin rule for all 
electronics products, even through such a rule could pose an 
obstacle to the free flow of trade in electronics goods.
    To prevent WTO adoption of onerous origin rules while at 
the same time ensuring the effective administration of 
antidumping and countervailing duty measures, SIA believes that 
WTO negotiators must pursue a ``decoupling'' approach that 
would allow administering authorities in antidumping and 
countervailing duty cases to use fact-based criteria other than 
rules of origin in determining the scope of antidumping and 
countervailing duty measures. In turn, this would permit the 
WTO to adopt internationally harmonized rules for general trade 
that are different from, and not based upon, the standards used 
to administer antidumping and countervailing duty measures. 
This would also allow the harmonization of general purpose 
rules of origin in a manner that will facilitate, rather than 
encumber, trade, while also preserving an effective antidumping 
and countervailing duty remedy for all products.

                              Fast Track 

    In addition, I would like to emphasize in the context of 
the WTO Ministerial that the SIA strongly believes that fast 
track negotiating authority is crucial to reducing trade 
barriers that impede the development and growth of high-value-
added U.S. industries such as the semiconductor industry. In 
addition to reducing tariffs around the world, U.S. trade 
policy must continue to be focused on eliminating non-tariff 
barriers. Fast track legislation is essential to U.S. efforts 
to reduce complex non-tariff barriers that remain as 
significant obstacles to our exports in many countries around 
the world. We therefore support congressional enactment of fast 
track legislation at the earliest possible opportunity.

                              Conclusion 

    In conclusion, SIA strongly supports the efforts of the 
United States in pursuing stronger international disciplines on 
measures that restrict or distort trade and investment around 
the world. On behalf of SIA and our member companies, let me 
thank you again for this opportunity to share our views.
      

                                


Statement of Larry R. Brown, Senior Vice President and General Counsel, 
Timken, Canton, Ohio

    Dear Mr. Singleton:
    The Timken Company herein submits its comments regarding 
the August 5, 1999, hearing of the Subcommittee on Trade on 
U.S. negotiating objectives for the World Trade Organization 
(WTO) Seattle ministerial meeting.
    The Timken Company is a U.S. producer of tapered roller 
bearings, ball bearings, cylindrical bearings and various steel 
mill products (including bearing quality steel, high alloy 
steel and steel tubing) with worldwide sales of $2.68 billion 
in 1998. Timken is based in Canton, Ohio, and manufactures its 
products in many countries and sells them around the world. 
Thus, Timken has a strong interest in a fair international 
trading system that seeks to reduce tariff and non-tariff 
barriers over time while maintaining rules that prevent trade 
distortions that flow from dumping or subsidization.
    As an efficient producer of high quality bearings, Timken 
can compete effectively with any other manufacturers of such 
products around the world where unfair trade practices are not 
employed. Accordingly, Timken recognizes the benefits that 
liberalized trade, with its reductions in tariff and non-tariff 
barriers, can have for it. However, many markets have proven 
difficult, if not impossible to penetrate despite superior 
technology and product from US producers. The US must be sure 
that liberalization undertaken by the US is not matched by 
continued closed markets abroad in law or in fact.
    In addition, while Timken was generally pleased with the 
outcome of the Uruguay Round negotiations, many members have 
been slow in complying with the requirements of these 
agreements, and some are still not fully in compliance. While 
there has been some focus within the WTO and other 
organizations on improving compliance, it makes little sense to 
undertake additional obligations where our trading partners 
have not to date implemented those obligations already 
undertaken.
    Timken's comments are divided into three sections: (1) a 
review of the existing WTO agreements, (2) a discussion of 
mandated WTO negotiations, and (3) an examination of 
difficulties of compliance with the WTO agreements.

                   I. Review of Existing Agreements.

    Full and effective implementation of the agreements 
concluded in the Uruguay Round should be a top priority for the 
WTO in general, and, in particular, in the agenda that 
ministers will consider in Seattle. This is true for all 
agreements. Moreover, for some agreements in the rules area 
where there is limited experience by member nations and few 
dispute settlement decisions, Timken supports completion of the 
agenda items agreed upon in Marrakesh (e.g., development of 
meaningful anticircumvention provisions) and extension of the 
Art. 6.1 and Art. 8 subsidy provisions. Otherwise, Timken urges 
the US to oppose any reopening of the agreements on Rules as 
premature.

A. Antidumping Agreement.

    As is true with many agreements, notifications by member 
nations as required by the agreement have been incomplete, 
although there has been an effort in recent months to clarify 
which non-responding members have in fact not used domestic law 
during the six month time period being considered. The US 
should encourage member nations to improve compliance with the 
notification obligations of the antidumping agreement and all 
other agreements. Moreover, the WTO receives copies of all 
Rules decisions from member nations but does not make them 
available on the internet to the public. This would be of 
substantial assistance to other nations, to businesses trading 
internationally, and to those who advise us. The US should push 
for increased transparency by the publication on the WTO web 
site of all administrative decisions received by the WTO from 
member nations.
    Timken urges the United States to oppose proposals that 
would permit a reopening of negotiations on the Antidumping 
Agreement. Our trading partners have not fulfilled their 
obligations to negotiate with the US on a meaningful 
anticircumvention provision for the antidumping agreement 
despite the agreement in Marrakesh that it was a significant 
problem. The existing agreement otherwise is in no need of 
reexamination. Many countries have only in recent years brought 
their laws into conformity with the WTO agreement, and there 
are few dispute settlement decisions on the agreement. 
Reopening any of the Rules areas at this time is not only 
premature but would, in light of the conflict between certain 
major trading partners on the rules, guarantee that the new 
Round would not conclude within three years.

B. Subsidies.

    Like the other WTO agreements, the Agreement on Subsidies 
and Countervailing Measures has only been in place for five 
years and is not an appropriate candidate for substantive 
revision at this time. Timken does agree with suggestions put 
forward by the United States and some members that 
implementation could be improved by modifying the notification/
review process such that updating notifications are eliminated 
and full notifications are made every other year. This would 
permit a regular cycle in which subsidies are notified in the 
first year and reviewed in the second.\1\
---------------------------------------------------------------------------
    \1\ See, e.g., WT/GC/W/107, Preparations for the 1999 Ministerial 
Conference--Communication from the United States (3 November 1998).
---------------------------------------------------------------------------
    Article 31 of the Subsidies Agreement calls for the WTO to 
review the operation of Article 6.1 (serious prejudice), and 
Articles 8 and 9 (non-actionable subsidies), and to determine 
whether these articles should be eliminated. Timken believes 
that Article 6.1 provides a useful definition of ``serious 
prejudice'' that should be retained. The United States should 
support the retention of these three provisions.

C. Customs Valuation.

    Timken believes that technical assistance should be 
provided to those members in need of help in conforming to the 
Agreement on Implementation of Article VII. Such assistance 
should be focused on active assessment of specific needs of 
particular members to avoid a situation in which a member might 
fail to meet obligations by the agreed-upon deadline because of 
a lack of effective assistance.

D. Dispute Settlement.

    Timken believes that, in general, the dispute settlement 
process has worked well. There are some significant procedural 
issues which should be considered for possible change, e.g., 
the issue of whether the Appellate Body, when it makes a legal 
decision that requires further fact-finding, should be able to 
remand to a panel. Timken believes that whatever decisions are 
made to resolve such procedural problems, they should not 
involve any extension of the already lengthy period the dispute 
settlement process currently takes. Businesses and their 
countries that have been aggrieved by a member's action already 
face a process that does not provide rapid relief. Further 
extension would extenuate any relief beyond a reasonable 
measure.
    The United States has already expressed its concern that 
the WTO function in as transparent a mode as possible. Timken 
suggests that the WTO make available on the internet all 
filings in dispute settlement proceedings, including those made 
by non-governmental organizations and any other non-members. In 
this context, Timken welcomes the holding of the Appellate Body 
in the shrimp-turtle dispute that the Dispute Settlement 
Understanding does not require that panels reject unsolicited 
submissions.\2\ At present, as Timken understands it, the WTO 
retains an index of such filings but does not make them 
available to the public on-line. Given the relatively low cost 
of loading these documents onto the internet, the WTO should 
enhance its transparency by putting them there.
---------------------------------------------------------------------------
    \2\ WT/DS58/AB/R, United States--Import Prohibitions of Certain 
Shrimp and Shrimp Products, AB-1998-4 (12 October 1998) at 76.

---------------------------------------------------------------------------
E. Rules of Origin.

    The Timken Company notes that the technical committee 
forwarded the final HTS chapters to Geneva earlier this year. 
It is Timken's understanding that there are literally hundreds 
of open issues remaining. Timken believes that the proper forum 
for the resolution of the rules of origin (ROO) issues is 
outside of the new Round. Substantively, Timken is troubled 
that other countries have not accepted the positions presented 
by the US on some of the overarching issues that remain 
outstanding and on issues in Chapter 84 pertaining to bearings. 
Timken would strongly oppose any resolution of ROO issues that 
would undermine the integrity of existing antidumping duty 
orders on tapered and other bearings. Timken has suffered from 
substantial evasion of the orders over time and believes it 
would be inappropriate to create more loopholes by accepting 
certain of the proposed ROO options in Chapter 84.

F. Trade Related Investment Measures (TRIMs) and Trade Related 
Aspects of Intellectual Property Rights (TRIPs).

    As is the case with Customs Valuation, WTO members, 
particularly those in developing and least developed countries, 
are in need of technical assistance to help them implement the 
provisions of the TRIMs and TRIPs Agreements. Timken encourages 
the United States to continue to support efforts to provide 
such assistance. It is critical that all countries bring 
themselves into compliance with these two agreements by the end 
of the year. Seattle is too late to see that such compliance 
has been accomplished.

G. Integration of Least Developed Countries.

    Timken supports the efforts of the WTO and its members to 
integrate the least developed countries into the WTO system and 
urges the United States to continue its support for such 
efforts. In addition, Timken believes that the benefits under 
the Generalized System of Preferences (GSP) should be limited 
to the least developed countries. The current system grants 
preferential treatment to countries that do not need such 
preferences to compete in export markets. As a result, the 
benefits of GSP for the least developed countries are diluted 
and normal trade relation (NTR) treatment is unfairly withheld 
from third country suppliers.

H. Industrial Market Access.

    Timken generally supports inclusion of industrial tariffs 
in upcoming negotiations so long as they are addressed on a 
``request-offer'' basis.
    In addition, as U.S. and Australian communications have 
recognized, in some instances tariffs are applied at levels 
below bound rates, including through tariff regimes that appear 
to be complex, non-transparent, and discriminatory.\3\ Thus, 
Timken agrees that an important objective in the upcoming 
negotiations should be to improve and expand market access 
opportunities by lowering bound tariff rates to eliminate the 
disparity between applied and bound rates and by ensuring that 
the market access results provide greater certainty and 
transparency in the operation of tariff regimes.
---------------------------------------------------------------------------
    \3\ See WT/GC/W/132, Preparations for the 1999 Ministerial 
Conference--Communication from Australia (21 January 1999).
---------------------------------------------------------------------------
    In this context, Timken also applauds the efforts of the 
U.S. Trade Representative to support the preparation of updated 
electronic versions of the members' various tariff bindings.\4\ 
The US should ensure that such schedules when available are 
released to the public.
---------------------------------------------------------------------------
    \4\ WT/GC/W/107, Preparations for the 1999 Ministerial Conference--
Communication from the United States (3 November 1998).
---------------------------------------------------------------------------

                       II. Mandated Negotiations.

    Timken supports efforts to obtain liberalization in the 
service industry, including repair and maintenance services, 
financial services, telecommunication services, express 
integrated transportation services, distribution services, and 
transport services generally. On the whole, liberalization in 
these sectors will decrease the costs of doing business abroad 
and will help Timken and other U.S. exporters to achieve better 
access to export markets.

               III. Compliance with Existing Agreements.

    The existing Uruguay Round agreements and the work programs 
initiated by them represent that which the United States 
bargained for and agreed to as part of the multilateral 
negotiations that led to the creation of the WTO. To the extent 
member states have not and are not fulfilling their 
requirements, the United States is in some measures not 
obtaining that for which it bargained. Thus, the implementation 
of these agreements and any work programs inaugurated by them 
is of great importance to U.S. businesses, including The Timken 
Company. Until such time as the WTO is fully functioning and 
members are abiding by their current obligations, the United 
States should not seek major changes to WTO agreements that are 
not subject to further liberalization under the built-in 
agenda.

A. Reporting.

    Annex 1A to the Agreement Establishing the World Trade 
Organization containing the Multilateral Agreements on Trade in 
Goods establishes 175 notification obligations or procedures, 
of which 26 are periodic, for member states.\5\ WTO materials 
to date indicate that many members have not met these 
obligations.
---------------------------------------------------------------------------
    \5\ See G/L/112, Report of the Working Group on Notification 
Obligations and Procedures (7 October 1996) at 3 (7 October 1996).
---------------------------------------------------------------------------
    For example, Article 25 of the Agreement on Subsidies and 
Countervailing Measures requires that members provide a new and 
full notification of all subsidies every third year. The first 
due date for new and full notifications was June 30, 1995.\6\ 
At present, only 70 out of 119 members have submitted the 
notifications that were due at that time.\7\ Of those 70 
submissions that were received, the average length of tardiness 
was fourteen months.\8\ For notifications due in 1998, only 35 
notifications have been received, and only three of these were 
received by the deadline date.\9\ As of July 30, 1999, some 
forty members had not provided any of the notifications 
required under Article 25.\10\
---------------------------------------------------------------------------
    \6\ G/SCM/23, Note by the Secretariat (30 July 1999) at 2.
    \7\ G/SCM/23, Note by the Secretariat (30 July 1999) at 2.
    \8\ G/SCM/23, Note by the Secretariat (30 July 1999) at 2.
    \9\ G/SCM/23, Note by the Secretariat (30 July 1999) at 2.
    \10\ G/SCM/23, Note by the Secretariat (30 July 1999) at 1.
---------------------------------------------------------------------------
    Similarly, under Article 18.5 of the Agreement on Article 
VI of the GATT 1994 and a decision of the Committee on Anti-
Dumping Practices, members were required to notify their 
antidumping legislation and/or regulations by March 15, 
1995.\11\ As of June 30, 1997, forty countries had not made any 
such notifications.\12\
---------------------------------------------------------------------------
    \11\ See WTO Annual Report 1997 at 110.
    \12\ Id.
---------------------------------------------------------------------------
    Such delays and partial responses are typical for all 
agreements. In these circumstances, it is difficult for a 
country or its citizens to discern the extent of the benefits 
that arise from the WTO agreements.
    In some measure, this failure to notify may be attributed 
to lack of resources, and, as described above, The Timken 
Company supports the provision of assistance to developing 
countries that seek it. Regardless of the reasons, the lack of 
compliance and reporting reduces the value of U.S. 
participation in, and support for, the WTO. To enhance the 
value of U.S. membership, the Congress should support a number 
of different efforts, including:
      The provision of adequate funding for the U.S. 
monitoring agencies and a strong U.S. presence in Geneva; and
      The provision of sufficient resources for 
participation in WTO dispute settlement.
    In addition, Timken recommends that the USTR establish a 
mechanism that will allow private parties, which are concerned 
that notified materials are not publicly available, to request 
determination by the USTR of the status of such documents and 
commitments to gain the release and public dissemination of 
such information.

B. Future Compliance.

    Developing countries joining the WTO have been able to 
postpone compliance with a number of different Agreements. For 
example, fifty-one countries have postponed compliance with the 
Agreement on Implementation of Article VII of the GATT 1994 for 
five years.\13\ The TRIPS and TRIMS Agreements include 
provisions that allow developing countries to delay 
implementation for five years. This means that those developing 
countries that were original members of the WTO and opted to 
delay compliance will all have to be compliant by January 1, 
2000. It is important for the WTO to identify what, if any, 
efforts are being taken by developing countries to bring 
themselves into compliance. This approach is already taken in 
dispute settlement where losing countries are required to 
provide periodic reports of efforts being made to bring 
themselves into compliance. The same should be done for 
countries given an extended period for compliance.
---------------------------------------------------------------------------
    \13\ See Report of the Committee on Customs Valuation to the 
Council for Trade in Goods at 1, G/L/121 (October 29, 1996).
---------------------------------------------------------------------------

                            IV. Conclusion.

    The Timken Company strongly supports ongoing efforts to 
liberalize international trade and to strengthen our rules-
based system. The upcoming negotiations should focus on the 
built-in agenda and traditional tariff negotiations. The 
existing Rules should not be reopened, although extensions of 
the Subsidy Articles that would otherwise expire should be 
agreed to and anticircumvention provisions should be added as 
contemplated in Marrakesh. Energy should be spent on improving 
compliance with existing agreements and on improving the 
transparency of the WTO generally and the dispute settlement 
system particularly. While not reviewed above, Timken strongly 
concurs with the existing position of the US that it is 
inappropriate at the present to launch negotiations in the 
competition policy area. There are many areas where bilateral 
cooperation needs to be developed before multilateral rules 
would be appropriate. Considering the problems experienced in 
the OECD on an investment agreement, Timken similarly does not 
believe that it is in the US's interest to negotiate an 
investment agreement within the WTO. Finally, Timken supports 
technical assistance to developing country members to assist 
them to come into conformity with WTO obligations but believes 
that all countries that are not in compliance should be 
required to provide periodic reports on efforts being 
undertaken to bring themselves into compliance.

            Sincerely,
                                             Larry R. Brown
      

                                


Statement of Torrington Company, Torrington, Connecticut

    Founded in 1866 at Torrington, Connecticut, as a maker of 
sewing machine needles, The Torrington Company is now a leading 
worldwide producer of high-quality, precision bearings and 
motion control components and assemblies. The largest U.S.-
owned full-line producer of antifriction bearings, Torrington 
is a subsidiary of Ingersoll-Rand Company. Torrington is a key 
supplier to the motor vehicle industry, the machine tool 
industry and the aerospace industry. The company has an 
extensive network of 25 manufacturing plants in North and South 
America, Europe and Asia and more than 11,000 employees. More 
than 50 offices are located in strategic cities around the 
globe, with corporate headquarters situated in Torrington, 
Connecticut. The Torrington Company, in 1998, was a recipient 
of the first annual Quest for Excellence award presented by 
Automotive Industries (AI), a leading industry publication. In 
addition, subscribers of Machine Design and American Machinist 
magazines voted Torrington one of America's leading 
manufacturing technology companies in the 1998 Excellence in 
Manufacturing Technology Achievement Awards.
    Torrington's comments focus on a number of issues 
previously identified by the United States Representative as 
relevant to the upcoming Ministerial meeting.

       I. Implementation of existing agreements and Work Programs

A. Full Implementation and Notification

    Torrington agrees with the position of the United States 
and other WTO members that full and effective implementation of 
the Agreements concluded in the Uruguay Round should be a top 
priority for the WTO and the agenda that Ministers will 
consider in November 1999. WT/GC/W/107, 26 October 1998, 
Communication from the United States. For a discussion of 
Torrington's concerns with particular agreements, see section 
III, infra.

                       II. Mandated Negotiations

    Torrington supports efforts to obtain liberalization in the 
service industry, including repair and maintenance services, 
financial services, telecommunication services, transport 
services generally, express integrated transportation services, 
distribution services and transport services generally. In 
general, liberalization in these sectors will decrease the 
costs of doing business abroad and thus is expected to help 
Torrington and other U.S. exporters to achieve better access to 
export markets. In addition, repair and maintenance of bearings 
is an integral part of the bearing business, hence, 
liberalization efforts in this sector would likely benefit 
Torrington directly.
    In addition, Torrington has urged USTR to continue efforts 
to improve market access for U.S. producers in important export 
markets, particularly Japan. See also, infra, Section VI.A 
(industrial market access).

         III. Reviews of Existing Agreements and Work Programs

A. Antidumping

    Torrington has urged USTR to oppose the proposals by 
several countries seeking a general reopening of negotiations 
on either the subsidies or the antidumping agreement. The 
agreements, achieved after difficult negotiations, have been in 
place for less then five years. Hence, such reopening is 
premature. In any event, any controversies should first be 
handled through the already established dispute settlement 
procedures. USTR should focus the attention of the members and 
the organization on remaining implementation and notification 
failures. Moreover, member nations have not accomplished 
agreement on addressing circumvention problems as called for by 
the Marrakesh decisions. US focus in antidumping should be 
limited to the above and should oppose any reopening of the 
agreement. See, WT/GC/W/145, 18 February 1999, Communication of 
the Government of Japan.

B. Subsidies

    Torrington agrees with suggestions of the United States and 
some other Members of the WTO that implementation of the 
Subsidies agreement could be improved by modifying the 
notification/review process such that updating notifications 
are eliminated and full notifications are made every other 
year, permitting a regular cycle in which subsidies are 
notified in the first year and reviewed in the second, etc.. 
WT/GC/W/107, 3 November 1998, Communication from the United 
States.
    Article 31 of the Subsidies agreement calls for the WTO to 
review the operation of Article 6.1 (serious prejudice), and 
Articles 8 and 9 (non-actionable subsidies), and determine 
whether these articles should be eliminated. Torrington 
supports the continuation of these articles.
    Torrington further agrees that tighter rules should be 
developed to preclude the circumvention of export subsidy 
commitments so that there is a fully shared understanding of 
what is permitted and precluded by commitments on export 
subsidies.

C. Customs Valuation

    Torrington agrees with USTR's efforts to improve technical 
assistance, by focusing on active assessment of specific needs 
of particular Members. Such efforts are particularly relevant 
in the context of efforts to bring about full integration of 
all Members in the world trading system, including developing 
countries. However, Torrington is concerned that many nations 
have not brought themselves into compliance only four months 
ahead of the required timeline. The US should encourage full 
compliance by January 1, 2000.

D. Dispute Settlement

    Torrington generally supports efforts to increase 
transparency in the dispute settlement process. In this 
context, Torrington suggested to USTR that all submissions in a 
dispute settlement proceeding, including submissions by NGOs, 
be made available to the public. Finally, Torrington 
understands that review of the DSU process is focused on two 
principal issues: the appropriateness of remands for further 
factual information; and the clarification of Article 21 and 22 
in light of recent panel experience. In this context, to the 
extent any modifications to the dispute settlement process are 
considered, Torrington is concerned that such modification 
would not affect the existing timelines, thus delaying relief.

E. Rules of Origin

    Torrington understands that the work of the Technical 
Committee has not been able to resolve a number of 
disagreements among the Members. In this context, Torrington 
has urged USTR to take the position that these issues should 
not become a matter of negotiation in the new Round, but should 
be discussed separately.

F. Trade Related Aspects of Intellectual Property Rights

    Torrington supported and continues to support USTR's 
efforts to promote effective technical assistance, such as the 
joint initiative announced by WTO and WIPO. WT/GC/W/107, 3 
November 1998, Communication from the United States. As stated 
before, such efforts are particularly relevant in the context 
of efforts to bring about the full integration of developing 
country members in the WTO system. Similar to Customs Valuation 
and TRIMs, many developing countries are required to bring 
themselves into compliance by January 1, 2000. The U.S. has 
much to lose if such compliance is not full.

              IV. Integration of Least-Developed Countries

    Torrington supports efforts to integrate all developing 
countries in the multilateral trading system. In this context, 
Torrington refers to its comments above regarding the need for 
effective and specific technical assistance to developing 
countries that require it.
    In addition, Torrington believes that benefits under the 
Generalized System of Preferences should be limited to the 
least developed countries. The current system grants 
preferential treatment to countries that do not need such 
preferences to compete in export markets. As result the 
benefits of GSP for the least developed countries are diluted 
and MFN treatment is unfairly withheld from third country 
suppliers.

                         V. Electronic Commerce

    Electronic commerce has great potential for the reduction 
of transaction costs and the opening of additional markets. In 
addition, the application of electronic technology to the 
notification process holds the potential of increased 
transparency and improved implementation. See also, infra, 
Tariff Bindings; WT/GC/W/107, 3 November 1998, Communication 
from the United States (PC Integrated Data Base). These 
developments, apart from increasing international trade 
generally, should also facilitate the integration of developing 
countries in the world trading system.
    Any review of electronic commerce issues, however, should 
be undertaken in the spirit of minimizing government 
interference, relying instead on self-governance by users and 
transparency. Government intervention will likely result in 
unneeded restraints, distort the development and application of 
new technology, and add costs. Thus, such intervention will 
compromise benefits attainable from the new technologies.

                  VI. Other Trade Matters of Interest

A. Industrial Market Access

    Torrington generally supports the inclusion of industrial 
tariffs, where done on a request/offer basis.
    Further, Torrington supports the elimination of tariffs on 
information technology products under the Information 
Technology Agreement, with the understanding, however, that 
such elimination in fact is limited to information technology 
products. Thus, bearings should remain excluded from such an 
agreement.
    As the U.S. and Australia communications recognized, in 
some instances tariffs are applied at levels below bound rates, 
including through tariff regimes that appear to be complex, 
non-transparent and discriminatory. See, WT/GC/W/132, 21 
January 1999, Communication from Australia. Thus, Torrington 
agrees that an important objective in the upcoming negotiations 
should be to improve and expand market access opportunities by 
lowering bound tariff rates to eliminate the disparity between 
applied and bound rates and by ensuring that the market access 
results provide greater certainty and transparency in the 
operation of tariff regimes.
    In this context, Torrington applauds USTR's efforts to 
support the preparation of updated electronic versions of the 
Members' various tariff bindings. WT/GC/W/107, 3 November 1998, 
Communication from the United States (PC Integrated Data Base)

B. Consultations With Non-Governmental Stakeholders

    Torrington supports USTR's efforts in this regard, and 
refers in particular to its comments under section III, D, 
above, regarding the public availability of all relevant 
documents.

C. Trade and Investment; Trade and Competition Policy
    Torrington does not believe that the US should support 
negotiations within the WTO on either trade and investment or 
trade and competition. Torrington strongly supports expanded 
investment liberalization. However, considering the problems at 
multilateral agreements encountered within the OECD, Torrington 
does not believe that the multilateral approach through the WTO 
is appropriate. Similarly, Torrington concurs with the position 
of the US that it is not the right time to pursue multilateral 
negotiations on competition policy.

            Respectfully submitted,
                                        Robert T. Boyd Esq.
                      Vice President, Secretary and General Counsel
      

                                


Statement of U.S. Integrated Carbon Steel Producers

    This statement sets out the views of the five major 
integrated U.S. producers of carbon steel products--Bethlehem 
Steel Corp., U.S. Steel Group, a unit of USX Corp., LTV Steel 
Co., Ispat Inland Inc., and National Steel Corp.--on the 
importance of not allowing bilateral or multilateral 
negotiations to be used as a forum for attacking U.S. trade 
laws, primarily antidumping and countervailing duty laws. 
Maintaining strong trade laws are essential to facilitating an 
open market policy both in the U.S. and abroad. Internationally 
agreed upon antidumping rules must not be open for 
renegotiation in any forum--not even with an original intent of 
strengthening these laws. This must be a primary negotiating 
objective for the Administration at this year's WTO Ministerial 
in Seattle.
    During the debate of whether to extend fast-track authority 
in the 105th Congress, both the House Ways and Means Committee 
and the Senate Finance Committee sent clear messages that U.S. 
antidumping and countervailing duty laws must not be 
compromised as a result of trade agreements entered into by the 
United States. The most recent, and continuing, steel import 
crisis has demonstrated that without strong and effective 
enforcement of our trade remedy laws, U.S. manufacturers and 
workers would be left fully defenseless against sudden massive 
surges of unfairly traded imports. This import crisis has been 
devastating, forcing several vibrant American steel companies 
into bankruptcy and resulting in the loss of thousands of good 
American jobs. As families and entire communities have 
struggled to survive the crushing effects of unfairly traded 
imports, their belief in U.S. open market policies has been 
tested. As such, the United States must have strong trade laws 
that are able to respond vigorously and effectively against 
unfair trade if open market policies are to succeed. The 
integrity of these laws must be maintained in our international 
trade negotiations.

Trade Remedy Laws Most Effective Method for Combating Causes of Import 
                                 Crisis

    Unfairly traded imports, and the trade distortions which 
enable foreign producers to engage in such practices, can best 
be stopped by eliminating the benefits of dumping into the U.S. 
market. U.S. antidumping and countervailing duty laws are the 
most effective tools available to achieve this end.
    The roots of the steel import crisis can be found in the 
global overcapacity of steel. This overcapacity was created, 
and is maintained, by misguided economic policies of foreign 
governments and unfair trade practices by foreign steel 
producers. As demand for steel dropped due to the economic 
crises in Asia, Eastern Europe, and Latin America, the pressure 
on foreign producers to export their excess steel production 
into the U.S. market was exacerbated by the rapid decline in 
demand in these other world markets.
    There are three basic causes of global steel production 
overcapacity. First, there is massive foreign government 
subsidization of foreign steel (over $100 billion in such 
subsidies during the past 20 years). Second, many foreign steel 
companies enjoy protected home markets through government 
intervention (e.g. quotas, import licensing). Third, 
anticompetitive business practices, including domestic and 
international cartel arrangements involving foreign steel 
companies, effectively create protected markets. As a result, 
foreign steel manufacturers can produce at levels not supported 
by the economic realities of the market place. In many 
countries, it also has enabled manufacturers to set 
artificially high home-market steel prices to support dumped 
low-price steel in the U.S. market.
    Not surprisingly, countries which have engaged in unfair 
trade practices have been the most vocal opponents of the 
antidumping and countervailing duty laws. They have been well 
organized in seeking renegotiation of these rules during the 
upcoming WTO and FTAA talks. The Ways and Means Committee, as 
it has done before, and Congress, must demand that U.S. 
negotiators block any attempts at renegotiating these rules.

  American Steel Companies and Workers Are Paying the Price of Unfair 
                                 Trade

    American steel companies and workers have paid a heavy 
price over the last decade to reorganize their businesses into 
a world class, globally competitive, and environmentally sound 
industry. American steel companies invested over $50 billion 
dollars to modernize their plants and equipment, and have 
reduced their labor force by over 60 percent during that same 
period. Foreign producers, who have dumped their excess 
products into the U.S. market, and who have enjoyed the 
benefits of subsidies and protected home markets, have not made 
such sacrifices. Instead, as confirmed by the International 
Trade Commission's affirmative findings of injury in the 
recently filed hot-rolled, cold-rolled, and cut-to-length plate 
cases, and the high dumping margins and countervailing duty 
rates found by the Commerce Department, those producers have 
sold dumped and subsidized steel into the U.S. market.
    After having made the necessary investments to modernize 
the industry, American steel companies and workers are now 
paying again--this time for the refusal by foreign 
manufacturers to restructure their industry. Since the 
beginning of the current import crisis, over 10,000 good U.S. 
steel jobs have been lost. Several American steel companies 
were forced into bankruptcy during a period of high demand. 
This crisis is far from over. Steel imports remain high 
compared to historical norms; steel prices remain severely 
depressed; and the fundamental causes of this crisis remain in 
place. Even if trade imports and prices return to normal 
levels, a crisis of greater proportions could restart at any 
moment since the United States remains the most open and 
available market for the world's excess steel capacity.

 Antidumping and Countervailing Duty Laws Must Be Preserved to Achieve 
                 An Open Market Trade Policy Objective

    Strong antidumping and countervailing duty laws are 
essential if global and regional market opening policy 
objectives are to be achieved. Maintaining free trade depends 
on maintaining fair trade. Antidumping rules are designed to 
ensure that exporters based in countries with closed markets do 
not abuse other countries' open market policies. Weakening 
these rules would inevitably lead to abuse of the world's open 
markets--including that of the United States, the world's most 
open market--and would ultimately undermine confidence in the 
WTO itself.
    Although international rules in this area were recently and 
comprehensively renegotiated in the Uruguay Round, our trading 
partners have already launched a multi-front attack on the U.S. 
trade laws and the WTO agreements which these laws implement. 
In the WTO, as well as in FTAA and APEC discussions, foreign 
countries continue to seek further erosion of our trade 
remedies. It is neither necessary nor appropriate to revisit at 
this time the antidumping and countervailing duty laws in 
international negotiations.
    Statutory trade policy negotiating goals provide broad 
instructions to executive branch negotiators--identifying 
priorities and implicitly suggesting where there may be 
latitude to accommodate other countries' interests. The intent 
of the provisions in various versions of fast track legislation 
has been to direct U.S. negotiators to pursue stronger trade 
remedies as a priority objective and to alert foreign 
governments that agreements weakening U.S. trade laws would not 
be approved at the implementing stage by Congress. These 
provisions were adopted in recognition of the critical role 
these trade laws play in opening world markets and in providing 
for a more fair market structure in the United States. However, 
despite any intentions of U.S. negotiators to strengthen the 
antidumping laws, other countries at the negotiating table 
would strongly pursue weakening the trade laws, and U.S. 
negotiators should, accordingly, avoid opening negotiations on 
these laws at all costs.
    Following her testimony at the Ways and Means Committee's 
August 5 hearing, Ambassador Esserman made an encouraging 
statement with regard to the possibility of reopening 
negotiations on the antidumping laws: ``The U.S. position is 
firm--it is not appropriate to have antidumping as a subject 
for negotiations in this next round.'' This Committee should 
reaffirm its commitment to the trade remedy laws and demand 
that the Administration stand by this statement later this year 
in Seattle. Under no circumstances should foreign governments 
be allowed to re-open negotiations on the antidumping rules.
      

                                


Statement of the Government of the United States Virgin Islands

                              Introduction

    The Government of the United States Virgin Islands (USVI)) 
hereby provides this written submission in opposition to any 
reduction in the present duties on rum in conjunction with the 
upcoming World Trade Organization (``WTO'') Seattle ministerial 
meeting or any other future tariff negotiations under the 
auspices of the WTO.
    The USVI strongly urges that rum be excluded from any WTO 
or FTAA negotiations on possible further reductions or 
eliminations of duties. As explained below, U.S. duties on low-
value bulk and bottled rum have only recently been affirmed 
after delicate and complex discussions among the United States, 
the European Union (``EU''), Caribbean governments and non-
governmental stakeholders. The result of these 1997 
negotiations reflects longstanding United States policy to 
preserve tariffs on imported rum. This consistent U.S. policy 
is based on the fundamental fact that the rum industry and 
existing U.S. tariff preferences play a critical role in the 
economies of the USVI and other Caribbean jurisdictions. 
Moreover, under a Congressionally mandated program to foster 
the development of the USVI, federal excise taxes on Virgin 
Islands rum shipped to the United States are returned to the 
USVI treasury. This revenue--which accounts for approximately 
10 percent of the USVI's total budget--secures hundreds of 
millions of dollars of government borrowings in support of 
essential public services and programs.
    Any reduction or elimination of existing tariffs on low-
value rum would disrupt these carefully considered trade and 
development programs and have devastating consequences for the 
fiscal stability of the Virgin Islands. In view of these 
serious economic consequences, Congress and the Administration 
must oppose any reductions in rum tariffs, particularly at a 
time when the USVI is struggling with a financial crisis 
exacerbated by the massive destruction wrought by three 
successive 100-year hurricanes in the last decade. Indeed, the 
USVI urges that Congress and the Administration index the price 
cut-offs established by the 1997 rum accord for inflation in 
order to assure that current tariff benefits for low-value rum 
do not diminish or erode over time.

                               Discussion

    The USVI recognizes that reduced duties and increased 
market access have the potential to benefit a variety of U.S. 
industrial producers. However, the elimination or reduction of 
duties on rum would cause serious economic injury to U.S. 
producers in the USVI and Puerto Rico--who comprise virtually 
all of the domestic rum industry--C and to Caribbean 
beneficiaries of the U.S. Caribbean Basin Initiative (CBI). 
Accordingly, as explained more fully below, rum must be 
excluded from any proposed WTO negotiations on the elimination 
or reduction of duties.

A. The Continued Need for Tariffs on Low-Value Rum Was 
Considered and Affirmed in the 1997 U.S.-EU Agreement on 
``White Spirits''

    As part of a tariff agreement initialed at the December 
1996 WTO Ministerial in Singapore, the United States and the EU 
committed to phase out their tariffs on ``white spirits'' 
(including rum) by no later than 2000. In response to this 
unexpected announcement, U.S. and Caribbean governments and 
producers, Administration officials and Members of Congress 
strongly emphasized to the USTR and EU negotiators that, unless 
exempted, such a drastic change in the duty structure for rum 
would deal a severe blow to the USVI, Puerto Rico and the 
island nations of the Caribbean, whose economies and 
governments depend heavily on revenues generated by trade in 
rum.
    In response to these substantial concerns, the USTR and the 
EU returned to the negotiating table in 1997 and--with 
substantial input from many Caribbean governments and 
producers--subsequently fashioned a compromise tariff mechanism 
for rum. This new mechanism sought to balance trade 
liberalization with the particular concerns of the Caribbean 
region by retaining existing MFN duties (and the duty 
preferences of Caribbean producers) on low-priced bottled and 
bulk rum while substantially liberalizing (and ultimately 
phasing out) duties on more expensive rum. See U.S. Schedule XX 
Rectification (Apr. 2, 1997) (U.S. WTO tariff concession 
schedule). Pursuant to this agreement, current higher U.S. 
duties on low-priced rum are cut off above $3.00/proof liter 
for bottled rum and $0.69/proof liter for bulk rum. See 
Harmonized Tariff Schedule of the United States, heading 2208. 
The importance of this protection for low-value rum is 
underscored by the fact that U.S. and other Caribbean-region 
rum producers are currently seeking to index these price cut-
offs against inflation and to assure that the value of these 
essential protections is maintained over time.
    The willingness of U.S. and EU negotiators to reopen their 
initial tariff commitments to address the import sensitivity of 
low-value rum demonstrates the special and the significant role 
which rum generally plays for the economies and governments 
throughout the Caribbean. The 1997 rum agreement was a reasoned 
compromise agreed to by the concerned governments with 
substantial participation by key non-governmental stakeholders. 
In developing a negotiating strategy for the WTO, Congress and 
the Administration must recognize and continue this careful 
approach to the unique issues raised by rum. The Congress 
should strongly recommend that the United States take 
affirmative measures to ensure that rum is excluded from any 
future WTO tariff reduction negotiations.

B. The Virgin Islands Economy Is Linked By Congressional Design 
To The Health Of the Territory's Rum Industry

    As an unincorporated territory of the United States, the 
Virgin Islands is uniquely dependent upon the continuing health 
and vigor of its rum industry.
    Rum is a product of special significance to the USVI and 
other Caribbean jurisdictions. Rum has been produced in the 
Caribbean for centuries, providing important contributions to 
local economies, as well to the history and lore of the region. 
Today, the rum industry plays even greater role in the 
prosperity and stability of the USVI economy. Indeed, rum 
production is the second most important industry in the Virgin 
Islands, surpassed only by tourism.
    Most Virgin Islands rum occupies the low-price end of the 
market and is sold as unaged bulk rum to regional distributors 
in the United States. The distributors, in turn, bottle and 
sell the rum under private labels or sell to national beverage 
companies which market under various product labels. Virgin 
Islands-produced rum is also sold as prepared cocktail mixes. 
Because Virgin Islands bulk rum is generally sold as a 
commodity and does not have name brand recognition, it cannot 
command premium prices. Rather, bulk rum is extremely price 
sensitive and is sold in a highly competitive environment where 
pennies can literally make or break a sale. As a result of this 
position in the market, Virgin Islands-produced rum is 
vulnerable to imports from low-cost countries, like Brazil, 
with large indigenous sugar cane industries.
    In recognition of the special importance of rum to the USVI 
economy, successive Congresses and Administrations have 
maintained high tariffs on imports of low-value rum from non-
CBI countries. Current U.S. tariffs on low-priced rum are 25.9 
cents per proof liter for bottled rum valued at $3 per proof 
liter or less and 25.9 cents per proof liter for bulk rum 
valued at $0.69 per proof liter or less. These substantial 
duties are critical to the continued viability of the Virgin 
Islands rum industry. The importance of these tariffs was 
affirmed as recently as 1997 in the U.S.-EU rum agreement. 
Removal of the current duty on low-value rum, on the other 
hand, would confer an enormous advantage upon Brazilian and 
other non-CBI producers, who already enjoy substantial cost and 
production advantages and would likely expose Virgin Islands 
producers to immediate and destructive import competition. In 
short, the current duty is necessary to prevent serious injury 
to the Virgin Islands rum industry and, by extension, to the 
entire USVI economy.
    Corollary to its interest in ensuring the competitive 
health of an historic industry, the USVI and the United States 
Government also have a common interest in protecting one of the 
USVI's principal sources of governmental revenue. Congress has, 
by statute, mandated that federal excise taxes imposed on 
Virgin Islands rum be returned to the treasury of the Islands 
to finance needed capital projects and public services. Under 
the Virgin Islands Revised Organic Act of 1954 (``ROA''), Pub. 
L. No. 517, 68 Stat. 12, which established a comprehensive 
scheme of local self-government in the Territory, Congress 
provided that federal excise taxes collected on rum 
manufactured in the Virgin Islands and shipped to the United 
States shall be returned to the treasury of the Virgin Islands. 
ROA, Sec.  28(b) (codified at 26 U.S.C. Sec.  7652(b), (e)). 
Prior to the enactment of the Revised Organic Act, the Virgin 
Islands was dependent upon ad hoc Congressional appropriations 
for the support of its local government. As part of its 
statutory scheme for the political and economic development of 
the Virgin Islands, Congress intended that these tax cover-over 
provisions generate a permanent source of funds for the Virgin 
Islands Government and thus contribute to the financial self-
sufficiency of the Territory. See S. Rep. No. 1271, 83d Cong., 
2d Sess. 4 (1954), reprinted in 1954 U.S. Code Cong. & Ad. News 
2585. See also Commonwealth of Puerto Rico v. Blumenthal, 642 
F.2d 622 (D.C. Cir. 1980), cert. denied, 451 U.S. 983 (1981) 
(purpose of cover-over provisions is ``to ease financial 
plight'' of the Virgin Islands and Puerto Rico).
    The rum industry and the cover-over provisions of the 
Revised Organic Act presently contribute approximately 10 
percent of the Territory's total budget. For 1999, the USVI 
estimates that rum excise taxes returned to the Virgin Islands 
will total between $43 and $46 million. These cover-over 
revenues finance 100 percent of the Virgin Island's capital 
budget by securing hundreds of millions of dollars in bonds 
issued by the Government and sold to mainland institutions and 
investors. These bonds, in turn, finance needed capital 
improvements and infrastructure development in the Territory 
including, inter alia, the construction of schools, health care 
facilities, airports and other vital projects throughout the 
Virgin Islands--projects made all the more necessary by the 
hundreds of millions of dollars of damage caused by three major 
hurricanes over the last decade. In addition, the number of 
direct jobs generated by these capital expenditures run into 
the thousands--far outpacing the number of jobs in the rum 
industry, which is itself one of the largest manufacturing 
industries in the Territory.
    The rum industry thus provides one of the principal sources 
of employment and government revenue in the Virgin Islands. 
Even a modest increase in imports from Brazil and other non-CBI 
producers triggered by extending duty-free treatment to low-
cost rum would invariably result in depressed prices and 
correspondingly reduced profits for U.S. rum producers in the 
Virgin Islands. Because of the linkage established by Congress 
between the industry and excise tax revenues, even minimal 
displacement of Virgin Islands rum shipments to the United 
States by foreign competition will threaten the fiscal 
stability of the Territorial Government, raise the cost of the 
government borrowings, and, derivatively, put the entire 
economy of the Islands at risk. Accordingly, current rum 
tariffs must not be reduced as a result of any WTO of FTAA 
tariff negotiations.

C. The Reduction or Elimination of Current U.S. Duties on Low-
Value Rum Would Run Counter to Long-Standing Federal-
Territorial Policy and Threaten the Special Fiscal Relationship 
Between The Virgin Islands and Its Rum Industry

    Both the Congress and the Executive Branch of the United 
States have repeatedly recognized the unique role that the rum 
industry plays in the legal, economic and political 
relationship between the United States and its island 
territories in the Caribbean. The 1997 U.S.-EU agreement on rum 
is only the most recent expression of this historical 
relationship. Indeed, the United States has taken affirmative 
action on many prior occasions to protect the Virgin Islands 
and Puerto Rico rum industries \1\ from potential competitive 
harm in the context of other trade negotiations and other trade 
preference programs.
---------------------------------------------------------------------------
    \1\ As in the Virgin Islands, rum production is one of the primary 
industries of Puerto Rico. Like the Virgin Islands, federal excise 
taxes imposed on Puerto Rico rum shipped to the United States are also 
rebated to Puerto Rico.
---------------------------------------------------------------------------
    Historically, all foreign-produced rum imported into the 
Untied States was subject to U.S. customs duty. In 1983, in 
response to the President's foreign policy objectives for the 
Caribbean, Congress enacted the Caribbean Basin Economic 
Recovery Act (``ACERA'')--popularly known as the ``Caribbean 
Basin Initiative''--which created a special system of tariff 
preferences for products (including rum) originating from 
eligible Caribbean countries. Pub. L. No. 98-67, 19 U.S.C. 
Sec. Sec. 2701 et seq. The legislation was carefully developed 
to balance domestic economic interests against U.S. foreign 
policy goals for the Caribbean. After careful Congressional 
deliberation, a legislative compromise was worked out to 
protect the Virgin Islands and its rum industry from any 
increase in Caribbean rum imports. Among other things, Congress 
enacted several compensatory measures in recognition of the 
heightened vulnerability of the Virgin Islands rum industry to 
CBI imports, including a partial rebate to the USVI of a 
percentage of excise taxes imposed on foreign-produced rum. See 
Pub. L. No. 98-67 Sec. 214, 19 U.S.C. Sec. Sec. 1202, 2251 
(note), 2703 (note), 33 U.S.C. Sec. 1311 (note).
    The Federal Government has also demonstrated its continued 
recognition of the special role of rum in the USVI's economy in 
its disposition of various petitions under the Generalized 
System of Preferences. In 1981, 1982, 1987 and 1990, the U.S. 
Government rejected various GSP petitions seeking duty-free 
entry of rum produced by non-Caribbean producers. The rejection 
of these GSP petitions reaffirms the import-sensitivity of the 
rum industry and reflects a considered judgment that the 
potential harm to the Virgin Islands and Puerto Rican rum 
industries outweighed any policy benefit to the petitioning 
countries.
    The U.S. Government similarly safeguarded trade preferences 
for U.S. and Caribbean rum in the development of the Andean 
Trade Preferences Act (``ATPA''), which provided duty-free 
access to the U.S. market for certain products originating in 
Bolivia, Colombia, Ecuador and Peru. After careful 
consideration by Congress and the Administration, rum was 
expressly excluded from the list of products eligible for duty-
free treatment under the ATPA. In explaining this action, the 
House Ways & Means Committee stated:
        The Committee added rum to the list of articles that would be 
        ineligible for duty-free treatment under the Act in order to 
        preserve the benefits that Congress has provided to Puerto 
        Rico, the Virgin Islands, and the Caribbean Basin countries. 
        Rum is a product which the ITC has identified as benefitting 
        most from duty-free treatment under the CBI. . . . Andean Rum 
        Producers have significant natural resource and cost advantages 
        over their Caribbean and U.S. Territorial counterparts as well 
        as large excess production capacity.
    H.R. Rep. No. 102-337 at 15 (1991).
    The special provisions for low-value rum in the 1997 U.S.-
EU rum agreement thus are but the most recent manifestation of 
Federal policy in support of U.S. and other Caribbean-based rum 
production. After close consultations with Caribbean 
jurisdictions and various non-governmental stakeholders, the 
United States and the EU agreed to revise their tariff 
reduction plan for white spirits to retain existing tariffs on 
low-value rum originating from non-Caribbean jurisdictions. By 
doing so, they collectively affirmed the crucial role which rum 
plays for the economies and governments of the Caribbean 
region.
    For all these reasons, the inclusion of rum in any WTO 
tariff reduction talks would be contrary to long-standing 
Federal policy against the extension of tariff preferences for 
low-value rum produced outside of the Caribbean. As 
demonstrated by the 1997 rum accord, rum is not a product which 
can or should be included in any across-the-board or formula-
based tariff reduction schemes. Rather, any tariff discussions 
must address the special economic and political significance of 
the rum trade to the Caribbean region. The considered 
compromise reached in the 1997 agreement on rum provides a 
proper balance between the needs of the USVI and other 
Caribbean producers of low-value rum and liberalized trade for 
higher-priced rum. Congress should urge that this carefully 
crafted solution not be disturbed in future tariff reduction 
talks, including those under the auspices of the WTO.

D. The Reduction or Elimination of Current U.S. Duties on Rum 
Would Result In Serious Injury To U.S. Producers In the Virgin 
Islands And The Overall Economy of the Virgin Islands

    Duty reductions for rum as part of any WTO negotiations 
would impose unacceptable hardships on the USVI and its rum 
producers. Because it lacks strong name brand identification 
and a well-developed national distribution network, Virgin 
Islands rum generally cannot command premium prices. Rather, as 
explained above, most Virgin Islands rum is sold at the low end 
of the market and is generally purchased in bulk as an unaged 
commodity by U.S. bottlers. In this sales environment, Virgin 
Islands producers must compete almost exclusively on the basis 
of price and, accordingly, are particularly vulnerable to 
competition from low-cost producers of bulk rum.
    Removal or reduction of current duties on low-value rum 
would provide producers from outside the Caribbean region with 
an irresistible incentive to target the low end of the U.S. rum 
market currently occupied by Virgin Islands producers. 
Producers in various South American countries currently have 
numerous economic advantages relevant to the production of rum. 
As noted, in refusing to extend duty-free benefits under the 
ATPA to rum, Congress recognized that the Andean countries 
enjoyed significant natural resource, cost and capacity 
advantages over U.S. territorial rum producers.\2\
---------------------------------------------------------------------------
    \2\ H.R. Rep. No. 102-337 at 15 (1991).
---------------------------------------------------------------------------
    Imports from Brazil would pose a particular threat to 
Virgin Islands rum producers. Brazil produces 40 percent of the 
world's ethanol. Its alcohol producers benefit from below-
world-market prices for molasses, more highly developed 
transportation and distribution networks, inexpensive fuel, low 
manufacturing-sector wages and freedom from U.S. regulatory 
requirements. Brazilian ethanol production is heavily 
subsidized and, as a result, two thirds of the country's cane 
crop has historically been converted to ethanol. In recent 
years, the Brazilian alcohol/sugar sector has faced the kinds 
of economic and production pressures which traditionally 
encourage the aggressive entry into new markets, including low 
domestic alcohol prices, excess supplies of alcohol (an 
estimated 2 billion liters in 1998), rising sugar cane output 
(average annual increases of 10 percent) and cash-flow 
pressures on producers. See U.S. Dep't of Agriculture, Foreign 
Agricultural Service, Brazil--Sugar: Annual Report 1999, Global 
Agriculture Information Network Report BR 90090 
(www.fas.usda.gov).
    Finally, the rum/cachasa production capacities of South 
American producers literally dwarf those of Virgin Islands and 
other Caribbean producers. Brazil alone produced an estimated 1 
billion proof liters of rum/cachasa in 1998, as compared with 
USVI production of approximately 21 million proof liters.
    Without the benefit of the relative tariff protection 
affirmed in the 1997 rum agreement, Virgin Islands producers 
would quickly be overwhelmed by non-CBI alcohol and rum 
producers in the commodity or price-sensitive segment of the 
U.S. market in which Virgin Islands rum competes. The total 
U.S. rum market would face drastic effects if even minimal 
percentages of Brazilian rum/cachasa production were diverted 
to the United States. The effects of Brazilian imports would be 
even more pronounced on the U.S. market for bulk rum--the 
market segment in which Virgin Islands rum competes. For 
example, Brazil could capture 10 percent of the U.S. bulk rum 
market by diverting a mere 1 percent of its rum to the United 
States. The diversion of 3 percent of Brazilian production 
could capture 31 percent of the U.S. bulk rum market. Clearly 
Brazilian rum imports alone could readily overwhelm Virgin 
Islands and other Caribbean producers if current duty 
preferences were eliminated.
    The elimination of relative U.S. tariff preferences 
currently enjoyed by Virgin Islands rum would also seriously 
threaten the future of the Congressionally mandated program to 
finance the USVI's development needs through the return of 
excise taxes on rum to the USVI treasury. As explained above, 
this cover-over program finances some 10 percent of the USVI's 
annual budget and 100 percent of its capital budget and secures 
government bonds issued for crucial development and 
infrastructure projects. This vital economic program depends, 
however, on the continued existence of a viable rum production 
industry in the Virgin Islands.
    Without current tariff preferences, non-CBI producers would 
likely use their tremendous competitive advantages to displace 
Virgin Islands rum from the U.S. market, thereby drying up USVI 
treasury revenues generated by the return of excise taxes on 
Virgin Islands-produced rum. This lost revenue would not be 
made up by the partial rebate of excise taxes on foreign rum 
granted by the CBI. The CBI provides only a limited guarantee 
of Virgin Islands rum revenues and simply does not make the 
Virgin Islands whole where foreign imports are increasing 
disproportionately at the bottom end of the bulk rum market--
precisely the segment where the Virgin Islands industry 
competes. Moreover, from a practical political standpoint, even 
this limited rebate program would be unlikely to continue if 
Virgin Islands rum production ceased or were deemed no longer 
viable.
    Finally, and perhaps most significantly, the very prospect 
of serious reductions in rum cover-over revenues would likely 
imperil the USVI's bond rating and overall economy even before 
any non-CBI rum producers could avail themselves of reduced 
U.S. tariffs. Bond markets and investors are historically wary 
of risk and would hesitate to provide needed bond financing at 
acceptable costs to the USVI based on a threatened or declining 
stream of cover-over revenues.
    Thus, the elimination of current tariff preferences for 
Virgin Islands rum would have a devastating domino effect on 
the USVI and its economy. Without these preferences, rum cover-
over revenues would seriously decline and the USVI could lose 
its access to the financial markets. Because of the USVI's 
significant dependence on rum-related revenues, these 
developments would ultimately put at risk the fiscal autonomy, 
if not solvency, of the USVI.

E. The Elimination of Current Tariff Preferences on Rum Would 
Be Contrary To Sound Public Policy In Light of the Precarious 
Fiscal State of the Virgin Islands

    As noted above, current tariff preferences for Virgin 
Islands rum are founded on a longstanding Federal-Territorial 
policy which links the Islands' development with revenues from 
rum. This Congressionally-mandated policy provides compelling 
reasons to resist any elimination of tariff preferences for 
Virgin Islands rum. Moreover, in view of the current precarious 
fiscal state of the USVI, any tariff reductions for rum in 
upcoming WTO talks would be particularly ill-timed and 
inconsistent with sound public policy.
    Indeed, the new administration in the USVI has inherited a 
fiscal state of affairs of enormous and alarming proportions. 
The USVI operating deficit for FY 1999 is expected to exceed 
$100 million, while its total recurring and non-recurring 
liabilities are expected to top $1.2 billion. A sizeable 
portion of the Government's current debt is the direct result 
of the three successive hurricanes which have battered the USVI 
over the past decade. As of December 31, 1998, these hurricane-
related liabilities included $190 million owed to the Federal 
Government in outstanding FEMA loans. In addition, the USVI 
requires over $125 million in assistance for rebuilding/
replacing a number of federally mandated capital projects, such 
as schools, prisons and environmental facilities.
    The new administration in the USVI is committed to 
addressing this fiscal crisis as its top priority in order to 
avert a potential financial disaster, including the prospect of 
payless paydays for Government workers. With the ongoing 
assistance of the U.S. Department of Interior, the USVI is 
developing a Five-Year Fiscal Recovery Plan and is implementing 
a number of specific measures to reduce costs and enhance 
revenue collections. As part of this recovery effort, the USVI 
is seeking over $300 million in new Federal assistance, 
including FEMA disaster relief, special appropriations for 
federally mandated infrastructure project, and elimination of 
the current $10.50 per proof gallon cap on the amount of 
federal rum excise taxes returned to the Treasury of the Virgin 
Islands Government.
    In light of the Federal Government's substantial 
involvement and interest in these recovery efforts, it makes no 
sense for the U.S. Government to simultaneously undermine one 
of the major sources of revenue of the USVI through the 
elimination of current rum preferences. Sound fiscal policy--as 
well as longstanding trade and development policies--require 
the maintenance of the current tariff structure and the 
preservation of the U.S.-EU rum accord.

                               Conclusion

    For reasons discussed above, the reduction or elimination of 
tariffs on rum in WTO negotiations would pose an inevitable and serious 
threat to the health of the Virgin Islands economy and its rum 
industry, as well as to the fiscal autonomy of its Government. Granting 
duty-free treatment to rum would have a devastating impact on one of 
the Virgin Islands' most significant industries and sources of 
governmental revenue and would be contrary to the historical and legal 
covenants between the Virgin Islands and the United States. Congress 
has, in the past, refused to abandon those covenants and, in 
particular, the interests of the domestic rum industry. Because of the 
current weakened fiscal state of the Virgin Islands Government, the 
case against including rum in WTO tariff reduction negotiations is even 
more compelling today. For the reasons set forth above, Congress should 
strongly urge that the United States preserve the careful compromise 
embodied in the 1997 U.S.-EU rum accord and exclude rum from any future 
WTO tariff reduction negotiations.
      

                                


Joint Statements of The Government of the U.S. Virgin Islands and the 
Virgin Islands Watch Producers

                              Introduction

    The Government of the U.S. Virgin Islands (the ``GVI'') and 
Belair Watch Corporation, Hampden Watch Company, Inc., Progress 
Watch Co., Unitime Industries, Inc. and Tropex, Inc. (the 
``V.I. Watch Producers) hereby jointly file this written 
submission in opposition to any reduction in duties on watches 
and watch parts in conjunction with the upcoming World Trade 
Organization (``WTO'') Seattle ministerial meeting or any other 
future tariff negotiations scheduled under the auspices of the 
WTO.
    The watch industry is the largest light manufacturing 
industry in the U.S. Virgin Islands and remains one of the most 
important sources of private sector employment in the 
Territory. The GVI, which has a mandate to protect the fragile 
manufacturing base of the U.S. Virgin Islands, and the V.I. 
Watch Producers, which represent a substantial majority of the 
U.S. insular watch industry, strongly oppose any reduction in 
current tariff levels for imported watches and watch parts 
without enactment of new compensatory legislation to maintain 
the present balance of competitive advantages enjoyed by the 
V.I. Watch Producers and conferred by Congress.
    Congress has consistently demonstrated its special concern 
for the health and survival of the Virgin Islands and domestic 
watch industries over the last quarter of a century. Since 
1988, for example, Congress has recognized the import-
sensitivity of watches by imposing a strenuous test before 
watches can even be considered for special tariff preferences 
under the Generalized System of Preferences (``GSP''): under 
the Omnibus Trade and Competitiveness Act of 1988, watches are 
deemed import-sensitive and thus ineligible for GSP preference 
unless the President first makes an affirmative determination 
that such preferences would not cause ``material injury'' to 
either the U.S. domestic or the U.S. insular watch industries. 
In numerous attempts over the last decade, a single foreign-
owned company has petitioned for duty-free treatment of its 
foreign-produced watches but has repeatedly failed to meet the 
high burden imposed by this Congressionally established test. 
The administrative reviews triggered by these petitions, 
together with more recent trade data, conclusively demonstrate 
that the U.S. and insular watch industries operate in an 
increasingly competitive environment and are extremely 
vulnerable to tariff reductions and import penetration.
    For reasons explained more fully below, the reduction or 
elimination of tariffs on watches and watch parts would have 
severe economic effects on the Virgin Islands watch industry--
an industry which has merited special congressional concern. 
Accordingly, the United States must oppose any effort to reduce 
or eliminate these tariffs, unless Congress first enacts 
compensatory legislation to maintain the present delicate 
competitive balance on which the Virgin Islands watch industry 
depends for its survival. Elimination of duties on watches, in 
the absence of such compensatory legislation, would only 
accelerate the trend of global watch producers to move watch 
assembly and manufacturing operations to low-cost countries and 
to take advantage of significant duty savings now denied under 
GSP.

                               Discussion

    Watches have long and consistently been determined to be 
import sensitive by the Congress and the USTR. Indeed, much of 
the domestic production of watches has moved off-shore in 
search of low-cost labor and other competitive advantages, even 
as imports of foreign-produced watches have continued to 
increase at double digit rates. Any effort to eliminate or 
reduce duties on watches and watch parts, in the context of 
forthcoming WTO tariff negotiations, would only accelerate 
these trends at the inevitable expense of the remaining U.S. 
and insular watch industries.
    Even if such reductions were to occur in the context of a 
zero-for-zero agreement, the duty-savings would necessarily and 
disproportionately favor foreign producers to the competitive 
disadvantage of domestic and insular producers. In fact, trade 
data suggests that total U.S. and insular watch exports equal 
less than five percent of total U.S. imports of foreign-
produced watches. Moreover, because existing production 
incentive programs tie Virgin Islands watch production to the 
U.S. market, V.I. producers would have little opportunity to 
avail themselves of any reductions in foreign tariffs. Thus, 
the value of duty savings for foreign producers resulting from 
any such agreement would far outweigh any benefit to U.S. and 
insular producers, while increasing the competitive pressures 
that threaten further erosion of the U.S. market share of 
domestic producers and their ultimate survival. Accordingly, 
the GVI and the V.I. Watch Producers strongly urge that 
Congress and the Administration affirm existing U.S.-trade 
policy by opposing any reductions in duties on watches and 
watch parts during forthcoming WTO tariff negotiations.

A. Congress and the USTR Have Previously Determined that the 
U.S. and Insular Watch Industries Are Import-Sensitive and 
Require Special Protections

    The Trade Act of 1974, Pub. L. No. 93-618, 88 Stat. 1978 
(Jan. 3, 1975), included watches in the list of import-
sensitive products statutorily ineligible for duty-free 
treatment under GSP. Beginning with the Omnibus Trade and 
Competitiveness Act of 1988, Pub. L. No. 100-418, 102 Stat. 
1107 (Aug. 23, 1988)--which amended the 1974 statute pursuant 
to a legislative compromise negotiated by the American Watch 
Association (``AWA''), Timex Corporation (``Timex'') and 
others--watches may now be considered for GSP duty-free 
treatment in limited circumstances but are subject to special 
procedural requirements designed to prevent harm to the 
domestic and U.S. insular watch industries. In particular, 
current law limits GSP treatment only to those categories of 
watches ``the President specifically determines, after public 
notice and comment, will not cause material injury to watch or 
watchband, strap, or bracelet manufacturing and assembly 
operations in the United States or the United States insular 
possessions.'' 19 U.S.C. Sec. 2464 (emphasis added). The clear 
presumption of this statutory scheme is that watches will 
remain on the list of ineligible articles unless a petitioner 
has first proved the negative, i.e., GSP treatment would not 
result in material injury to the USVI or U.S. industries.\1\
---------------------------------------------------------------------------
    \1\ The presumption in favor of current dutiable treatment is 
further reinforced by the legislative history of the 1988 statute. As 
instructed by the Senate Finance Committee Report, ``watches [will] 
remain ineligible for GSP except those watches. . .that, if given 
preferential treatment, would not cause material injury to watch or 
watch band. . .manufacturing and assembly operations in the U.S. or the 
U.S. insular possessions.'' S. Rep. No. 71, 100th Cong., 1st Sess. 238 
(1987) (emphasis added).
---------------------------------------------------------------------------
    Congress' presumption that watches will remain on the 
statutory list of ineligible articles may be defeated only by a 
clear preponderance of the evidence, tested in the course of a 
comprehensive administrative proceeding, that duty-free 
treatment will not result in material injury to either the 
domestic or the insular watch industries. To assist in 
constructing the fullest possible record in compliance with its 
legislative mandate, the USTR has required that, in any 
administrative review, the International Trade Commission 
should provide more comprehensive analysis than the ``probable 
economic effects'' advice it normally dispenses in ordinary GSP 
cases.\2\ Specifically, USTR has requested in past GSP watch 
investigations that the Commission should analyze--in addition 
to standard GSP criteria--the probable effects of duty-free 
treatment on USVI and U.S. watch and watch band companies with 
respect to such relevant factors as annual production, 
capacity, capacity utilization, domestic shipments, exports, 
inventories, employment, wages and financial experience.
---------------------------------------------------------------------------
    \2\ See,e.g., 61 Fed. Reg. 54677 (Oct. 21, 1996).
---------------------------------------------------------------------------
    In short, in making any material injury recommendation to 
the President based on the fullest possible record with respect 
to any GSP watch petition, the USTR and Commission must analyze 
and weigh all of the factors regularly considered by the ITC in 
injury investigations conducted pursuant to Title VII of the 
Trade Agreements Act of 1979, as amended. Unless the record 
clearly demonstrates that GSP treatment for watches will not 
result in adverse effects with respect to these enumerated 
factors, Congress has expressly prescribed that GSP treatment 
must be denied. The GVI and the V.I. Watch Producers 
respectfully submit that the USTR must not vitiate the clear 
congressional construct for GSP treatment of watches by 
agreeing to support duty reductions on a Most Favored Nation 
(``MFN'') basis without comprehensive analysis by the 
Commission of probable economic effects of such reductions and 
the same material injury determinations that are required under 
the GSP statute.
    In weighing the impact of duty reductions on watches, in 
the context of future WTO negotiations, Commission and the USTR 
should also remain mindful of other expressions of 
Congressional intent regarding the U.S. insular watch industry. 
The General Note 3(a) program set forth in the Harmonized 
Tariff Schedule, and related production incentives of the U.S. 
and USVI governments, were designed to rehabilitate and promote 
the watch industry in the U.S. insular possessions. These 
incentives are working, but would be completely undermined by 
watch duty reductions on an MFN or GSP basis. As testimony in 
earlier watch investigations has made clear, the General Note 
3(a) tariff incentive for the insular industry is dependent on 
its differential or relative advantage, i.e., it is completely 
vitiated by extending similar tariff treatment on an MFN, GSP 
or other regional basis. The related production incentive 
program minimizes, but does not overcome, the labor cost 
advantages presently held by producers in low wage countries. 
Because the potential duty savings may be many times as great 
as the existing labor cost advantages, duty reductions under 
the auspices of the WTO would totally undermine the purpose of 
the Congressionally-sanctioned insular watch production 
incentives program.

B. The United States Has Consistently Denied the Petitions of 
Foreign Producers for Tariff Reductions Under the Generalized 
System of Preferences

    In 1988--on the very day of the enactment of the 1988 law--
a single foreign-owned producer with substantial manufacturing 
operations in the Philippines filed a petition requesting duty-
free treatment under GSP for all watches. This petition 
resulted in one of the most thorough investigations in the 
history of the GSP program and certainly one of the most 
comprehensive investigations of the worldwide watch industry. 
Interested parties submitted for the record voluminous studies, 
economic analyses and numerous briefs to guide the President in 
his decision. In addition, the Commission prepared a 
comprehensive report on the probable economic effects of duty-
free treatment on manufacturing and assembly operations in the 
United States and its insular possessions.\3\ This 
unprecedented investigation culminated with the November 1989 
decision by the President to deny duty-free treatment to a 
substantial majority of watch tariff categories, including all 
quartz watches and most categories of mechanical watches.\4\ 
The President specifically rejected GSP treatment as to these 
watch categories ``because of the potential for material injury 
to watch producers located in the United States and the Virgin 
Islands.'' \5\
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    \3\ See Probable Economic Effects of Providing Duty-Free Treatment 
for Watches Under the Generalized System of Preferences (USITC 
Publication 2181, April 1989).
    \4\ The President specifically rejected GSP treatment for 40 watch 
categories, while granting duty-free treatment to fourteen watch 
classifications. These latter classifications include liquid crystal 
display and mechanical watches at the very low end of the price range 
and jeweled pieces at the very high end of the price range. This 
determination was premised on the understanding that the domestic and 
insular watch industry does not compete with digital or mechanical 
watches at the two extremes of the price range. See Proclamation 6058 
of October 31, 1989 (To Amend the Generalized System of Preferences), 
54 Fed. Reg. 46,348 (Nov. 2, 1989).
    \5\ White House Press Release of November 1, 1989.
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    In June 1991, the same foreign producer filed a petition 
for the inclusion of several categories of watches, previously 
rejected, to the list of GSP eligible articles. After challenge 
by the GVI, the V.I. Watch Producers and the AWA, the foreign 
producer withdrew its petition.
    In June 1993, the company again petitioned for GSP 
treatment for a limited number of specific categories of 
watches. The USTR again rejected the petition for review on 
grounds that it failed to provide any new information on 
changed circumstances or to rebut the reasons why the President 
first rejected GSP treatment for the watches at issue in the 
President's 1989 decision. The petitioner also failed to 
demonstrate that the circumstances of the domestic or U.S. 
insular watch industry had improved or were better able to 
withstand foreign imports. Later, in 1996, Congress rejected an 
attempt by the same company to eliminate the material injury 
test in the GSP statute. And finally, in 1997, the USTR 
excluded, after extended review, watches and watch parts from 
the expanded list of eligible GSP articles reserved for Less-
Developed Countries (``LDC'').
    This procedural and legislative history amply demonstrates 
that, despite substantial lobbying by a single foreign-owned 
producer, Congress, the USTR and the Commission have 
consistently concluded, after comprehensive investigation and 
administrative review, that the grant of duty-free treatment 
for watches--even on a limited GSP basis--poses a special and 
unacceptable risk to the U.S. domestic and insular watch 
industries. The GVI and the V.I. Watch Producers are unaware of 
any data trends to support the conclusion that the U.S. or 
insular watch industries are better today able to withstand 
foreign competition than they were during the most recent 
administrative reviews triggered by the various GSP petitions.

C. Just as the Virgin Islands Watch Industry Could Not Survive 
Increased Competition under GSP, It is Axiomatic that the 
Insular Industry Could Not Survive the Extension of Duty-Free 
Treatment on an MFN Basis

    If the Virgin Islands watch industry could not withstand 
increased competition from developing countries under the 
limitations and protections of the GSP program, it is 
manifestly clear that it could not withstand more broad-based 
competition from imports provided duty-free treatment on an MFN 
basis. Indeed, the overwhelming majority of U.S. watch imports 
over the last 10 years have been from non-GSP eligible 
countries, including such highly developed countries as Hong 
Kong, China, Japan and Switzerland.
    Of the approximately 200 million watches imported into the 
United States in 1988, for example, Hong Kong supplied over 100 
million units, China supplied 41 million units and Japan 
supplied over 27 million units. Insular producers in the Virgin 
Islands, on the other hand, shipped less than 3 = million units 
to the United States that same year. Because Virgin Islands 
watch shipments to the United States have continued to decline 
in recent years, it would take only a slight increase in import 
penetration to completely overwhelm the U.S. insular industry.
    Indeed, publicly available data demonstrate the decline in 
the health and competitiveness of the Virgin Islands watch 
industry since Congress established the special material injury 
test in 1988 and the President rejected GSP treatment for most 
watches in 1989. Since 1988, the USVI and its watch industry 
have been battered by three devastating hurricanes. Between 
1988 and 1995, the number of watches shipped from the Virgin 
Islands to the United States for domestic consumption steadily 
declined from 3.44 million units in 1988 to approximately 
805,000 units in 1998--a reduction of more than 75 percent. 
During the same period, the value of such shipments declined 
from approximately $36 million to less than $10 million. This 
sharp decline in sales has resulted in more than a 50 percent 
reduction in employment in the Virgin Islands watch industry 
from a high of 660 workers in 1988 to under 300 workers in 
1998. In addition, during this ten year period, the number of 
Virgin Islands watch producers has dropped from seven to five.
    Notwithstanding this decline, in a small economy like the 
USVI, 300 high-wage, high-skill jobs provided by the V.I. Watch 
Producers--and the many other jobs indirectly supported by 
their operations--continue to be critical to the manufacturing 
sector and the overall health of the USVI economy. Indeed, the 
V.I. watch industry remains the largest light manufacturing 
industry in this U.S. possession. Moreover, when Congress 
recently reauthorized the GSP program, it specifically 
continued the special material injury test for watch producers 
in the U.S. insular possessions, clearly demonstrating its 
continuing concern for the special role of watch production in 
the USVI. Under these circumstances, it is incomprehensible 
that the Administration should be permitted to sanction the 
death knell of this important Virgin Islands industry by 
broadly extending, on an MFN or basis, trade benefits which it 
has consistently denied under the substantial limitations of 
the GSP program.

                               Conclusion

    The GVI and the V.I. Watch Producers note with approval the 
concern expressed by the American Watch Association for the 
import sensitivity of the Virgin Islands industry and its 
support for compensatory measures in the event of future tariff 
reductions. However, unless and until compensatory legislation, 
designed to maintain the present competitive balance, is firmly 
in place, the Government of the U.S. Virgin Islands and the 
V.I. Watch Producers must respectfully request, for all the 
reasons noted above, that Congress and the Administration 
oppose any duty reductions for watches and watch parts in 
forthcoming WTO tariff negotiations. Any such duty reductions 
would have severe economic effects for the U.S. insular watch 
industry. Overwhelming evidence from earlier trade 
investigations conclusively demonstrates that such reductions 
would necessarily result in material injury or threat of 
material injury to the U.S. and the U.S. insular watch 
industries in contravention of long standing and express 
Congressional policy.

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