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




 
     OUTCOME OF THE WORLD TRADE ORGANIZATION MINISTERIAL IN SEATTLE

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 8, 2000

                               __________

                             Serial 106-50

                               __________

         Printed for the use of the Committee on Ways and Means

                     U.S. GOVERNMENT PRINTING OFFICE
66-204 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 January 14, 2000, announcing the hearing.............     2

                               WITNESSES

Office of United States Trade Representative, Hon. Charlene 
  Barshefsky, United States Trade Representative.................    22
U.S. General Accounting Office, Susan Westin, Associate Director, 
  International Relations and Trade Issues, National Security and 
  International Affairs Division; accompanied by Beth Sirois, 
  Assistant Director, and Nina Pfeiffer, Senior Evaluator........    60

                                 ______

Agriculture Advisory Committee, Dale E. Hathaway.................    76
American Farm Bureau Federation, Bob Stallman....................   110
American Federation of Labor and Congress of Industrial 
  Organizations, John J. Sweeney, as presented by Richard Trumka.    81
Coalition of Service Industries, Robert Vastine..................   127
Dawson, Rhett, Information Technology Industry Council...........   122
Electronic Industries Alliance, Hon. Dave McCurdy................   135
Hathaway, Dale E., National Center for Food and Agricultural 
  Policy, and Agriculture Advisory Committee.....................    76
Hufbauer, Gary Clyde, Institute for International Economics......    69
Information Technology Industry Council, Rhett Dawson............   122
Kittridge, Frank D., National Foreign Trade Council, Inc.........    95
Lewis, Hon. John, a Representative in Congress from the State of 
  Georgia........................................................     5
Marconi Commerce Systems, Steve Robertson........................   131
McCurdy, Hon. Dave, Electronic Industries Alliance...............   135
National Association of Manufacturers, Steve Robertson...........   131
National Center for Food and Agricultural Policy, Dale E. 
  Hathaway.......................................................    76
National Foreign Trade Council, Inc., Frank D. Kittridge.........    95
National Wildlife Federation, Mark Van Putten....................   115
Niles, Thomas M.T., United States Council for International 
  Business.......................................................    85
Public Citizen's Global Trade Watch, Lori Wallach................    89
Robertson, Steve, Marconi Commerce Systems, and National 
  Association of Manufacturers...................................   131
Stallman, Bob, American Farm Bureau Federation...................   110
Sweeney, John J., American Federation of Labor and Congress of 
  Industrial Organizations, as presented by Richard Trumka.......    81
Trumka, Richard, American Federation of Labor and Congress of 
  Industrial Organizations, presenting statement of John J. 
  Sweeney........................................................    81
United States Council for International Business, Thomas M.T. 
  Niles..........................................................    85
Van Putten, Mark, National Wildlife Federation...................   115
Vastine, Robert, Coalition of Service Industries.................   127
Wallach, Lori, Public Citizen's Global Trade Watch...............    89
Waters, Hon. Maxine, a Representative in Congress from the State 
  of California..................................................    10
Weller, Hon. Jerry, a Representative in Congress from the State 
  of Illinois....................................................     7

                       SUBMISSIONS FOR THE RECORD

American Apparel Manufacturers Association, Arlington, VA, 
  statement......................................................   147
American Fisheries Society, Bethesda, MD, Ghassan N. Rassam, 
  letter.........................................................   149
American Iron and Steel Institute, statement.....................   151
American Lands Alliance, Antonia Juhasz, statement...............   155
Blackwelder, Brent, Friends of the Earth, statement..............   162
Dernbach, John C., Foreign Policy in Focus, and Widener 
  University Law School, Harrisburg, PA, statement...............   160
DiPeso, Jim, Rainier Audubon Society, Auburn, WA, statement......   176
Foreign Policy in Focus, and Widener University Law School, 
  Harrisburg, PA, John C. Dernbach, statement....................   160
Friends of the Earth, Brent Blackwelder, statement...............   162
Grocery Manufacturers of America, statement......................   164
Head, David, Save Endangered Wilderness, Hatboro, PA, statement..   186
Inouye, Lauren, Edina, MN, letter and attachment.................   166
Institute for Agriculture and Trade Policy, Minneapolis, MN, 
  Sophia Murphy, statement.......................................   168
JBC International, letter........................................   171
Jones, Laura E., United States Association of Importers of 
  Textiles and Apparel, New York, NY, statement..................   189
Juhasz, Antonia, American Lands Alliance, statement..............   155
Labor/Industry Coalition for International Trade, statement......   172
Murphy, Sophia, Institute for Agriculture and Trade Policy, 
  Minneapolis, MN, statement.....................................   168
National Electrical Manufacturers Association, Rosslyn, VA, 
  Malcolm O'Hagan, letter........................................   175
Pjerrou, Mary, Redwood Coast Watersheds Alliance, and Save the 
  Redwoods/Boycott the Gap Campaign, Elk, CA, letter.............   177
Rainier Audubon Society, Auburn, WA, Jim DiPeso, statement.......   176
Ramstad, Hon. Jim, a Representative in Congress from the State of 
  Minnesota......................................................   182
Rassam, Ghassan N., American Fisheries Society, Bethesda, MD, 
  letter.........................................................   149
Redwood Coast Watersheds Alliance, and Save the Redwoods/Boycott 
  the Gap Campaign, Elk, CA, Mary Pjerrou, letter................   177
RONGEAD, Lyon Cedex, France, Hon. Tran Van Thinh, statement and 
  attachments....................................................   182
Save Endangered Wilderness, Hatboro, PA, David Head, statement...   186
U.S. Integrated Carbon Steel Producers, statement................   187
United States Association of Importers of Textiles and Apparel, 
  New York, NY, Laura E. Jones, statement........................   189
Van Thinh, Hon. Tran, RONGEAD, Lyon Cedex, France, statement and 
  attachments....................................................   182
Yeutter, Hon. Clayton, Hogan & Hartson, L.L.P., statement........   191


     OUTCOME OF THE WORLD TRADE ORGANIZATION MINISTERIAL IN SEATTLE

                              ----------                              


                       TUESDAY, FEBRUARY 8, 2000

                  House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 1 p.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

January 14, 2000

No. TR-18

   Crane Announces Hearing on the Outcome of the WTO Ministerial in 
                                Seattle

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the outcome of the World Trade 
Organization (WTO) Ministerial held in Seattle. The hearing will take 
place on Tuesday, February 8, 2000, in the main Committee hearing room, 
1100 Longworth House Office Building, beginning at 1:00 p.m.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. The invited witness will be Ambassador Charlene Barshefsky, 
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 or for inclusion in the 
printed record of the hearing. The Subcommittee intends to hold other 
hearings on the WTO in the future.
      

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 the Uruguay Round was to establish the WTO to administer the GATT 
agreements and to settle disputes among WTO members. The so-called 
``built-in agenda'' of the Uruguay Round Agreements calls for the 
resumption of negotiations by the year 2000 to further liberalize trade 
in agriculture and services, as well as the examination of government 
procurement practices and enforcement of intellectual property rights.
      
    The WTO Ministerial conference that was hosted by the United States 
in Seattle, Washington, from November 30 through December 4, 1999, was 
to have formally launched these negotiations. At this meeting 
representatives of the 135-member countries of the WTO considered the 
procedures and substance of the ``built-in'' WTO agenda, as well as 
other issues including transparency, possible reforms to the dispute 
settlement system, treatment of electronic commerce, and the 
accelerated Tariff Liberalization effort for industrial tariffs.
      
    However, in a major setback on December 3, following four days of 
meetings, Conference Chairperson Charlene Barshefsky announced a 
suspension of negotiations, saying: ``Our collective judgement, shared 
by the WTO Director General, the Working Group Chairs, and the 
membership generally, was that it would be best to take a time out, 
consult with one another, and find creative means to finish the job.''
      
    Convening in Geneva on December 17, 1999, the WTO General Council 
decided to postpone until early 2000 a decision on how to proceed with 
the ``built-in agenda'' and other issues outstanding from the Seattle 
Ministerial Conference. At this meeting, one of the proposals on the 
table sought delays in the December 31, 1999, deadlines for applying 
obligations and other provisions of existing WTO agreements -for 
example, in intellectual property and trade related investment 
measures.
      
    In announcing the hearing, Chairman Crane said: ``The Seattle 
Ministerial meeting represented a significant lost opportunity for U.S. 
workers, businesses, and farmers. It is important that Congress 
investigate the cause of the failed outcome, as well as the adequacy of 
logistical and other preparations for this meeting of trading nations. 
We must critically examine where we go from here in a manner that is 
productive to our trade agenda and our goal of expanding markets abroad 
for U.S. goods and services.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing will be to examine preparations for the 
Seattle Ministerial Meeting and the course of events leading to a 
suspension of negotiations without agreement on a Ministerial 
Declaration. Testimony will be received on: (1) causes of the impasse; 
(2) the negotiating strategies pursued by the United States and its 
trading partners; (3) the impact of the failure to launch a new round 
of WTO negotiations on jobs, wages, economic opportunity, and the 
future competitiveness of U.S. manufacturers and service providers; (4) 
how the United States can achieve more forward movement on the ``built-
in agenda"; (5) prospects for future WTO negotiations, including 
what issues are ripe for discussion in tandem with negotiations on the 
``built-in,'' and the status of, provisions in the Uruguay Round 
Agreements that may be time-sensitive.
      

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, Wednesday, January 25, 2000. 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 Friday, February 4, 2000. 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, Tuesday, 
February 22, 2000, 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://waysandmeanshouse.gov''.
      

    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. Good afternoon. This is a meeting of the 
Ways and Means Trade Subcommittee to evaluate American trade 
policy and our role in the world trading system after the 
failed WTO ministerial meeting in Seattle.
    Our focus here today is to steer a course for returning 
America back to its historic position of strong influence and 
leadership in the trading system. Clearly, the train has jumped 
the track and must be repaired and redirected if we are to 
preserve our prosperity and unbeatable success in international 
markets.
    The WTO system has borne huge benefits for U.S. firms, 
workers, farmers, ranchers, and for all of us as consumers. The 
breakdown in Seattle represents a direct threat to the WTO 
system of trade rules. Constructed over 50 years by Presidents 
from both parties, in close consultation with Congress, the WTO 
system is fundamentally American-based ``rules of the road'' 
for commerce.
    Because of the force of U.S. leadership, our trading 
partners have been willing to accept this structure of fair 
trade rules. There is absolutely no better strategy for 
improving living standards than to pry away trade barriers and 
grow foreign markets for U.S. products. To tear it down or 
stand by as it is slashed and slandered is to put our 
prosperity at risk. A compact among 135 governments can always 
be improved. But to unravel the WTO rules of the road for world 
trade, with no alternative system in mind, invites chaos, 
commercial conflicts, and growing poverty in poor countries.
    There are, of course, many causes of the problem we faced 
in Seattle. These include: a lack of agreement on a declaration 
prior to Seattle, recalcitrance on the part of the European 
Union to agree to the elimination of agricultural subsidies, 
Japanese foot-dragging on the ATL initiative, and the U.S. 
inflexibility on antidumping, to name just a few.
    With that, I would like to yield to the Ranking Member of 
our Subcommittee for his opening remarks, Congressman Sandy 
Levin.
    Mr. Levin. Mr. Chairman, we were just discussing here that 
we would give our full-length statement after these witnesses, 
our colleagues, so that they could go on to other things. So I 
will withhold my opening statement so that our three 
distinguished colleagues can give their statements. I 
understand that Ambassador Barshefsky will then be here and I 
will present my opening statement before her testimony.
    Chairman Crane. Very good.
    With that then, we shall yield to our first witness panel. 
Please try and keep your oral testimony to 5 minutes or less. 
All written statements will be made a part of the permanent 
record.
    I now yield to Hon. John Lewis, our colleague from Georgia.

STATEMENT OF HON. JOHN LEWIS, A REPRESENTATIVE IN CONGRESS FROM 
                      THE STATE OF GEORGIA

    Mr. Lewis. Thank you, Chairman Crane, Ranking Member Levin, 
and other Members of the Subcommittee for the opportunity to 
address this Subcommittee this afternoon.
    For a long time I have been saying that people have a right 
to know. They have a right to know what is in the food they 
eat, the air they breathe, and the water they drink. They also 
have a right to know how their tax dollars are spent and what 
issues come before this Subcommittee and the Congress. The 
people have a right to know.
    I think most of us would agree that as Members of Congress 
we have a sacred duty to protect this right. We have a duty to 
make sure that we are, in fact, a government of the people, by 
the people, and for the people.
    And that is what I am here to talk about today--government 
in the sunshine, shining a little light on trade.
    International trade is filled with complex and often 
divisive issues. This is understandable. When jobs and the 
economy are at stake, passion and partisanship can sometimes 
overwhelm debate between reasonable people with honest 
differences.
    Mr. Chairman, we can bridge the divide on trade. But to do 
so we must build trust, bring people together, and seek common 
ground. Mr. Chairman, I believe that letting the sun shine in 
on trade is the best way to begin.
    I would like to share an example of how we can improve the 
process. Under Chapter 11 of the North American Free Trade 
Agreement, if a Canadian or a Mexican company believes that the 
United States or a State or local government has unfairly 
expropriated or taken its investment, that company is entitled 
to request compensation for its loss from the State or Federal 
Government.
    If a dispute arises over compensation, the company can 
submit its case to an arbitration panel. NAFTA requires that 
before a case begins a company must file a notice of intent to 
arbitrate a dispute. This notice gives the disputing country 
basic information about the case including the basis for the 
claim and the approximate damages sought by the company.
    The issues that come before NAFTA for arbitration are 
important. They are important to many people--both inside and 
outside of government. Despite this fact, current law does not 
require that the notice of intent to arbitrate or other basic 
information on these cases be made public. The ideas that 
things may be going on behind closed doors creates mistrust and 
hurts the process. We should open those doors and give the 
American people a view of what is going on the inside.
    I propose to accomplish this goal by requiring the United 
States government to publish in the Federal Register the 
content of any notice of intent to arbitrate filed against the 
United States. This will let interested people know that a case 
may be forthcoming.
    I also believe that it is important to give people an 
opportunity to share their views on trade. We need a process, 
Mr. Chairman, whereby people and organizations can submit their 
comments on NAFTA arbitration cases to the government. At the 
same time, we need an approach that includes people without 
encroaching on NAFTA.
    Finally, a credible process requires that those in power 
have the trust of the people. We need common sense requirements 
that guarantee that arbiters in NAFTA cases are fair and 
impartial.
    Again, my approach is a simple one. But in its simplicity 
lies the seeds of progress. As I said at the beginning of my 
statement, our democracy is built on the idea that regular 
people can and should be part of the governing process. I 
believe that we owe it to all Americans, indeed, we owe it to 
all citizens of all nations, to demonstrate that democracy 
works and that regular people can and should participate.
    I thank you, Mr. Chairman and Members of the Subcommittee.
    [The prepared statement follows:]

Statement of Hon. John Lewis, a Representative in Congress from the 
State of Georgia

    Thank you Mr. Chairman for the opportunity to address your 
committee this afternoon.
    For a long time I've been saying that people have a right 
to know. They have a right to know what's in the food they eat, 
the air they breathe and the water they drink. They also have a 
right to know how their tax dollars are spent and what issues 
come before this Committee and the Congress. The people have a 
right to know.
    I think most of us would agree that as Members of Congress, 
we have a sacred duty to protect this right. We have a duty to 
make sure that we are in fact a government of the people, by 
the people and for the people.
    And that is what I am hear to talk about today: government 
in the sunshine, shining a little light on trade.
    International trade is filled with complex and often 
divisive issues. This is understandable. When jobs and the 
economy are at stake, passion and partisanship can sometimes 
overwhelm debate between reasonable people with honest 
differences.
    Mr. Chairman, we can bridge the divide on trade policy. But 
to do so we must build trust, bring people together and seek 
common ground. Mr. Chairman, I believe that letting the sun 
shine in on trade is the best way to begin.
    I'd like to share an example of how we can improve the 
process. Under Chapter 11 of the North American Free Trade 
Agreement, if a Canadian or Mexican company believes that the 
United States or a state or local government has unfairly 
expropriated or ``taken'' its investment, that company is 
entitled to request compensation for its loss from the state or 
federal government.
    If a dispute arises over compensation, the company can 
submit its case to an arbitration panel. NAFTA requires that 
before a case begins, a company must file a notice of intent to 
arbitrate a dispute. This notice gives the disputing country 
basic information about the case including the basis for the 
claim and the approximate damages sought by the company.
    The issues that come before NAFTA for arbitration are 
important. They are important to many people--both inside and 
outside government. Despite this fact, current law does not 
require that the notice of intent to arbitrate or other basic 
information on these cases be made public. The idea that things 
may be going on behind closed doors creates mistrust and hurts 
the process. We should open those doors and give the American 
people a view of what's going on.
    I propose to accomplish this goal by requiring the United 
States Government to publish in the Federal Register the 
content of any notice of intent to arbitrate filed against the 
United States. This would let interested people know that a 
case may be forthcoming.
    I also believe that it is important to give people an 
opportunity to share their views on trade. We need a process 
whereby people and organizations can submit their comments on 
NAFTA arbitration cases to the Government. At the same time, we 
need an approach that includes people without encroaching on 
NAFTA.
    Finally, Mr. Chairman, a credible process requires that 
those in power have the trust of the people. We need common 
sense requirements that guarantee that arbiters in NAFTA cases 
are fair and impartial.
    Again, my approach is a simple one. But in its simplicity 
lie the seeds of progress. As I said at the beginning of my 
statement--our democracy is built on the idea that regular 
people can and should be part of the governing process. I 
believe that we owe it to all Americans--indeed we owe it to 
all citizens of all nations--to demonstrate that democracy 
works and that regular people can and should participate. Thank 
you.
      

                                


    Chairman Crane. Thank you, Congressman Lewis.
    Our next witness, Hon. Jerry Weller from Illinois.

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

    Mr. Weller. Thank you, Mr. Chairman and Members of the 
Subcommittee. I thank you for the opportunity to testify today. 
My purpose in being here today is to reintroduce to the Trade 
Subcommittee an issue that we brought before the Subcommittee 
and the Full Committee this past year. That is the issue of the 
loss of 20,000 film and television industry jobs last year from 
runaway film production. I want to raise this issue again to 
urge that our domestic film and television industry be given a 
seat at the table at any future WTO discussions to address the 
cultural content issue and its relationship to runaway film 
production.
    Some might say that runaway film production is just a 
Hollywood issue. But it is actually a growing national issue 
which directly impacts thousands of working Americans from New 
York to Florida, Washington to California, Illinois to Texas. 
During last year's Committee discussion on the Financial 
Freedom Act, we discussed an amendment that I offered to 
essentially level the playingfield and of course counter the 
loss of film and television production jobs to Canada.
    Remember the film ``Coming to America''? Unfortunately, it 
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, today that 
giant sucking sound is really the sound of 20,000 film industry 
jobs which headed north this past year to Canada.
    A recent study commissioned by the Directors Guild of 
America and the Screen Actors Guild shows that in 1998 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 past decade. In the last 4 years, Texas 
has seen a 31 percent decrease in direct production revenues, 
while my home State of Illinois is down nearly 20 percent. This 
has resulted in a loss of 20,000 jobs nationwide last year 
alone.
    In looking at the small businesses and jobs lost by runaway 
production, 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. Let's also remember 
that the average film industry worker makes around $26,000 a 
year. They include caterers, hotel and motel operators, 
restaurants and bars, rental equipment businesses, 
electricians, set construction workers, and many others 
involved in this important activity. Over the years, film and 
television production has been a leading exporter and a major 
contributor to the American economy.
    Mr. Chairman, this is a constituent issue which we should 
take seriously. This is a significant issue for you as well as 
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. I often refer to the district I have the 
privilege of representing 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. And even more embarrassing was 
the fact that the Canadian filmmakers were calling the Chicago 
Film Commission to ask them for best advice on how to make 
Toronto more Chicago-like.
    With my statement, I have included a copy of the Directors 
Guild and Screen Actors Guild study they completed last year 
explaining many of the reasons why film and television 
production is leaving the United States, and they have 
concluded that one of the main reasons is the generous tax 
incentives and subsidies offered in countries such as Canada, 
Australia, and the United Kingdom which we do not have here in 
the United States. Canada alone offers Federal and provincial 
tax credits of 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 25 
to 30 percent savings overall.
    The United States should not be put at a competitive 
disadvantage by tax incentives offered abroad. Rather, we need 
to level the playingfield if we are going to keep this 
important industry in America.
    Related to this is the issue of Canadian cultural content. 
The Canadian government has given certain ``cultural 
industries'' special treatment. This policy has been 
implemented in large part through legislation as well as from 
trade barriers. These cultural content requirements 
discriminate against our American film production. Canada uses 
cultural content more as an industrial policy regarding jobs. 
Under their definition of cultural content, the film ``Bad As I 
Want To Be: The Dennis Rodman Story'' is defined as Canadian 
culture, not because it is Canadian culture but because it was 
filmed in Canada using Canadian workers. Clearly, this is 
unfair.
    As you know, toward the end of the WTO round in Seattle the 
Canadians and Europeans raised the possibility of further 
cultural exceptions to future trade agreements, including new 
technologies. I believe that this would go against what many of 
us are fighting for, which is to keep e-commerce barrier free.
    Cultural content and cultural exceptions trade agreements 
must be addressed in future WTO talks with the backdrop of the 
issue of the 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 and subsidies. 
While at the same time, cultural policies established by the 
Canadians and others discriminate against United States film 
interests thereby creating a double hit to industries such as 
domestic film production.
    It is an important issue that affects real Americans, Mr. 
Chairman. I ask this Trade Subcommittee's interest as well as 
we make this a priority in future trade negotiations. Thank 
you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Hon. Jerry Weller, a Representative in Congress from the 
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 Subcommittee and the full Committee last year. The 
issue is the loss of 20,000 American film industry jobs from 
runaway film production. I want to raise this issue again to 
urge that our domestic film industry be given a seat at the 
table at any future WTO talks 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. In 
fact, during the late hours of the Seattle talks in November, 
the Canadians and Europeans raised cultural content concerns. 
They were advocating the implementation of cultural content 
barriers to new technologies. I believe that this goes against 
what many of us are fighting for, keeping e-commerce barrier 
free.
    I believe that the cultural content issue must continue to 
be addressed in future WTO talks with the backdrop of the issue 
of runaway film production, as well as e-commerce. 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, even if the problem of runaway production had 
not become so great, the Canadian insistence on maintaining 
their cultural content rules and regulations ought to be on the 
table at future WTO talks. However, simple fairness requires a 
response by the U.S. to the increasing efforts by Canada to 
attract production away from the U.S. So long as these efforts 
continue, the U.S. must address the Canadian cultural content 
rules. Canada cannot unilaterally decide to invite in our 
production jobs, but close the door on our productions.
    Thank you Mr. Chairman for this opportunity to testify.
      

                                


    Chairman Crane. Thank you, Mr. Weller.
    Our next witness, Hon. Maxine Waters from the State of 
California.

 STATEMENT OF HON. MAXINE WATERS, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Ms. Waters. Thank you very much, Mr. Chairman. I attended 
the WTO meeting in Seattle and I am really honored to have the 
opportunity to come before you today and discuss the results of 
this watershed event.
    I was there really as the Ranking Member of the 
Subcommittee on Domestic and International Monetary Policy of 
the Banking and Financial Services Committee. I went there 
focused on Jubilee 2000, the wonderful debt relief success 
accomplished by a combination of our government working with 
other governments and nongovernment organizations, especially 
the faith-based communities. While it did not get a lot of 
coverage in the press, we had wonderful ecumenical services all 
around the idea that we could help developing countries and 
poor nations get rid of their debt and be able to feed their 
citizens.
    As you know, thousands of people went to Seattle to protest 
the WTO and its policies. These protesters were as diverse as 
they were numerous. They included young people, labor union 
members, environmentalists, church leaders, small farmers, 
consumer advocates, and human rights activists. They came from 
all over the United States and the world. They went to Seattle 
to express their concerns about the WTO and the impact of its 
decisions on the world's people.
    It seems that the size of these protests and the intensity 
of the backlash against the WTO took everyone by surprise. Mr. 
Chairman, they did not take me by surprise at all.
    For the last 4 years, I have been working on the problem 
created when the United States took the case of the European 
banana regime to the WTO. The European banana regime provides 
access to the European market for bananas that are produced in 
Europe's former colonies. This regime is essential to ensure 
that small Caribbean family farmers have access to the European 
market to export their bananas.
    The countries of the Caribbean Community are predominantly 
small island democracies, many of which are completely 
dependent on banana production. In the Windward Islands, which 
include St. Vincent, St. Lucia, Grenada, and Dominica, along 
with Eastern Jamaica, the banana industry employs one third of 
the labor force, provides over 80 percent of the total 
agricultural exports, and contributes over 12 percent of the 
Gross Domestic Product. Bananas are ideally suited for the 
agricultural conditions of the Caribbean. Even after a 
hurricane, the banana crops are replanted and grow back within 
approximately 6 months.
    Bananas are essential to the stability and prosperity of 
these island democracies. Banana production in the Caribbean 
takes place on small family owned farms. These family farmers 
work hard to grow their bananas and support their families. The 
people of these countries are very proud people. They do not 
want foreign aid. They want to support themselves, and the 
banana industry allows them to do so.
    The banana case, interestingly enough, was the very first 
case that the United States took before the WTO, despite the 
fact that the United States does not grow or export bananas. 
Only one company--Chiquita Brands--claimed to have been harmed 
by the banana regime. It is obvious to me that Carl Lindner, 
the chief executive officer of Chiquita and a major contributor 
to both Republican and Democratic campaigns, used his political 
influence and connections to convince the United States to 
bring this case before the WTO. The February 7, 2000, issue of 
Time magazine features an in-depth cover story on the influence 
of large campaign contributions in this WTO case.
    Unfortunately, the WTO ruled in favor of Chiquita and 
against the Caribbean family farmers. Furthermore, WTO 
authorized the United States to impose $191 million in 
sanctions on a variety of European imports. The sanctions 
imposed by the United States have also caused irreparable harm 
to many small businesses in the United States, which import 
European products affected by the sanctions.
    It is ironic that these sanctions and the damage they cause 
to Caribbean farmers, European producers, and American small 
businesses alike are the direct result of a WTO decision. The 
Chiquita banana case has proven that the WTO does not prevent 
trade wars. It authorizes them.
    As the Time magazine article said, ``When a fruit baron 
wanted to conquer more of the European market, he got 
Washington to launch a trade war for him. The victims of the 
cross fire? A bunch of ordinary Americans who never saw it 
coming.''
    The Trade Related Intellectual Property Rights, known as 
TRIPS, agreement provides another example of a WTO policy that 
benefits wealthy and powerful special interests. The TRIPS 
agreement gives patent rights over plants and medicines to 
wealthy corporations. Corps use their patent rights to force 
developing countries to pay for the use of the plants and 
medicines. Now mind you, many of these plants and animals are 
the indigenous plants and animals of these countries. Yet the 
big corporations go in and get patent rights on them and then 
force the people of those countries to pay for the products 
that they develop from these plants and animals from their own 
countries, and it is protected right in the WTO. As a result of 
the TRIPS agreement, many people in developing countries have 
been denied life-saving medicines because they cannot afford to 
pay for them.
    In 1997, the South African Government proposed new 
legislation to require compulsory licensing of HIV/AIDS drugs 
which would allow the drugs to be sold at a fraction of the 
cost. Unfortunately, the U.S. pharmaceutical industry, with the 
support of the United States government, is trying to prevent 
this proposal from being implemented.
    In closing, these are precisely the kinds of WTO policies 
and decisions that outrage both developing countries and 
nongovernmental organizations worldwide. It should not surprise 
anyone that the WTO met such strong opposition in Seattle, both 
inside and outside the meeting room. The WTO promotes market 
access and investment opportunities for multinational 
corporations without regard to the rights of workers and 
farmers, the protection of the environment, or the health and 
safety of people in the United States and throughout the world. 
The WTO has developed into an invisible government that makes 
its decisions in secret for the benefit of a small number of 
extremely wealthy people.
    It is time for the WTO to begin listening to the concerns 
of developing countries, family farmers, union leaders, church 
leaders, environmentalists, consumer advocates, and human 
rights activists from around the world.
    We do not need a new round of negotiations that will give 
even more power to wealthy corporations like Chiquita. What we 
need is a reevaluation of the existing WTO rules. I urge this 
Subcommittee to critically examine the impact of the WTO and 
its decisions on working families in America and throughout the 
world.
    Thank you, Mr. Chairman.
    [Applause.]
    [The prepared statement follows:]

Statement of Hon. Maxine Waters, a Representative in Congress from the 
State of California

    Thank you, Mr. Chairman. I attended the WTO meeting in 
Seattle and I am honored to have the opportunity to come before 
you today to discuss the results of this watershed event.
    As you know, thousands of people went to Seattle to protest 
the WTO and its policies. These protestors were as diverse as 
they were numerous. They included young people, labor union 
members, environmentalists, church leaders, small farmers, 
consumer advocates and human rights activists. They came from 
all over the United States and the world. They went to Seattle 
to express their concerns about the WTO and the impact of its 
decisions on the world's people.
    It seems that the size of these protests and the intensity 
of the backlash against the WTO took everyone by surprise. Mr. 
Chairman, they did not take me by surprise.
    For the last four years, I have been working on the problem 
created when the United States took the case of the European 
banana regime to the WTO. The European banana regime provides 
access to the European market for bananas that are produced in 
Europe's former colonies. This regime is essential to ensure 
that small Caribbean family farmers have access to the European 
market to export their bananas.
    The countries of the Caribbean Community are predominantly 
small island democracies, many of which are completely 
dependent on banana production. In the Windward Islands, which 
include St. Vincent, St. Lucia, Grenada and Dominica, the 
banana industry employs one third of the labor force, provides 
over 80% of total agricultural exports and contributes over 12% 
of the Gross Domestic Product. Bananas are ideally suited for 
the agricultural conditions of the Caribbean. Even after a 
hurricane, the banana crops are replanted and grow back within 
approximately six months.
    Bananas are essential to the stability and prosperity of 
these island democracies. Banana production in the Caribbean 
takes place on small family-owned farms. These family farmers 
work hard to grow their bananas and support their families. The 
people of these countries are proud people. They do not want 
foreign aid. They want to support themselves, and the banana 
industry allows them to do so.
    The banana case was the first case that the United States 
brought before the WTO--despite the fact that the United States 
does not export bananas. Only one company--Chiquita Brands--
claimed to have been harmed by the banana regime. It is obvious 
to me that Carl Lindner, the CEO of Chiquita and a major 
contributor to Republican and Democratic campaigns, used his 
political influence and connections to convince the United 
States to bring this case before the WTO. The February 7, 2000, 
issue of Time magazine features a cover story on the influence 
of large campaign contributions in this WTO case.
    Unfortunately, the WTO ruled in favor of Chiquita and 
against Caribbean family farmers. Furthermore, the WTO 
authorized the United States to impose $191 million in 
sanctions on a variety of European imports. The sanctions 
imposed by the United States have also caused irreparable harm 
to many small businesses in the United States, which import 
European products affected by the sanctions.
    It is ironic that these sanctions and the damage they cause 
to Caribbean farmers, European producers and American small 
businesses alike are the result of a WTO decision. The Chiquita 
banana case has proven that the WTO does not prevent trade 
wars. It authorizes them!
    As the Time magazine article said, ``hen a fruit baron 
wanted to conquer more of the European market, he got 
Washington to launch a trade war for him. The victims of the 
cross fire? A bunch of ordinary Americans who never saw it 
coming.''
    The Trade Related Intellectual Property Rights (TRIPS) 
agreement provides another example of a WTO policy that 
benefits wealthy and powerful special interests. The TRIPS 
agreement gives patent rights over plants and medicines to 
wealthy corporations. Corporations use their patent rights to 
force developing countries to pay for the use of the plants and 
medicines. As a result of the TRIPS agreement, many people in 
developing countries have been denied life-saving medicines 
because they cannot afford to pay for them.
    In 1997, the South African government proposed new 
legislation to require compulsory licensing of HIV/AIDS drugs, 
which would allow the drugs to be sold at a fraction of the 
cost. Unfortunately, the U.S. pharmaceutical industry, with 
support of the U.S. government, is trying to prevent this 
proposal from being implemented.
    These are precisely the kinds of WTO policies and decisions 
that outrage both developing countries and non-governmental 
organizations worldwide. It should not surprise anyone that the 
WTO met with such strong opposition in Seattle, both inside and 
outside the meeting room. The WTO promotes market access and 
investment opportunities for multinational corporations without 
regard to the rights of workers and farmers, the protection of 
the environment or the health and safety of people in the 
United States and throughout the world. The WTO has developed 
into an invisible government that makes its decisions in secret 
for the benefit of a small number of extremely wealthy people.
    It is time for the WTO to begin listening to the concerns 
of developing countries, family farmers, labor union leaders, 
church leaders, environmentalists, consumer advocates and human 
rights activists from around the world.
    We do not need a new round of negotiations that will give 
even more power to wealthy corporations like Chiquita. What we 
need is a reevaluation of the existing WTO rules. I urge this 
Subcommittee to critically examine the impact of the WTO and 
its decisions on working families in America and throughout the 
world.
    Thank you.
      

                                


    Chairman Crane. Thank you, Ms. Waters.
    Order in the chamber.
    [Applause continuing.]
    Chairman Crane. The Committee will be in order, and this is 
a warning.
    Ms. Waters. Mr. Chairman, let me just say that while I 
appreciate the enthusiasm, this was not orchestrated. I did not 
know such enthusiasm was in the room. I do not want you to 
think that I in some way orchestrated this. Thank you.
    Chairman Crane. Ms. Waters, how come they are all from 
California?
    Ms. Waters. I do not know. I am proud of Californians 
wherever they show up. And if they do happen to be from 
California, that is a plus, but I did not orchestrate it.
    Chairman Crane. Yes. We realize that.
    Now I yield to our distinguished colleague from California, 
Mr. Thomas.
    Mr. Thomas. Ms. Waters, you described a situation in terms 
of agriculture in general, and specifically the subject of 
bananas, and painted what amounts to a conspiracy theory for 
producing the current impasse. Are you aware that there was a 
dispute resolution panel which decided against the EU and the 
EU has refused to follow the dispute panel decision?
    Ms. Waters. I am very much aware. I know it in detail, Mr. 
Thomas.
    Mr. Thomas. Do you believe there is also a conspiracy 
associated with the beef hormone question and the failure of 
the EU to move forward on that?
    Ms. Waters. Just a moment, because you have concluded, Mr. 
Thomas, that you believe it is a conspiracy. I do not believe 
it is a conspiracy. I believe that Chiquita bought its way into 
the WTO and used us to advance its cause.
    Mr. Thomas. Do you believe the Cattlemen's Association and 
the U.S. beef industry has bought themselves into the beef 
hormone problem?
    Ms. Waters. No, I do not. And I did not testify on that. I 
testified on bananas because I know it so well.
    Mr. Thomas. Do you believe that the canned fruit industry 
is also in a conspiracy or they bought their way into the 
dispute process? Because in that instance as well the European 
Union had a dispute resolution panel rule against it and the 
European Union has refused to follow that agreement and that 
has produced a similar problem for the United States as 
bananas.
    Ms. Waters. Mr. Thomas, let me say again, it is you who 
refers to what is happening as a conspiracy. I do not.
    Mr. Thomas. No, you said he bought his way into it.
    Ms. Waters. Yes, he did.
    Mr. Thomas. So I am wondering if you believe the canned 
fruit industry bought themselves into the same situation since 
it was exactly the same decision that produced that result.
    Ms. Waters. I cannot testify on anything else but bananas. 
I have spent 4 years on this. And I agree with the Time 
magazine article about Mr. Lindner and the fact that he bought 
his way into the WTO and used the United States to start this 
trade war. I believe that, Mr. Thomas.
    Mr. Thomas. And I think you might spend some time with 
other Californians who produce specialty agriculture crops--
peaches, pears, canned fruit--and meet with them in an 
unplanned, unorganized meeting so that you can listen to their 
concerns about the United States not backing up our people when 
the World Trade Organization and formerly the General Agreement 
on Tariffs and Trade has a dispute resolution panel rule 
against the European Union and the European Union refuses to 
follow the agreement. That is a group of Californians you 
probably should spend a little bit of time with as well so that 
you can fully appreciate the problems that have led us to, both 
in bananas and in canned fruit.
    Ms. Waters. I think it would have a lot more credibility, 
Mr. Thomas, if the United States had led with a legitimate 
case. They did not lead--the very first case that was taken to 
the WTO was Mr. Carl Lindner's banana case, and we do not grow 
bananas or export bananas in the United States. And as a result 
of what has happened, now these little countries are reverting 
to producing drugs, marijuana that will find their way into the 
United States.
    Mr. Thomas. And one of the last cases under the General 
Agreements on Tariff and Trade was the canned fruit. There was 
an attempt to move forward based upon exactly the same 
arguments that you are presenting. If, in fact, you cannot be 
first or you cannot be last, and the first and the last failure 
are exactly the same, then in one sense I will join with you, 
the WTO is not much progress than we had before. So in that 
sense, maybe we can join together and decide that it really is 
not a conspiracy nor is it an attempt to buy your way into the 
structure, but it is the European Union that has an absolute 
phalanx against changing and against having its world view 
mitigated by everybody else.
    If we can sit down and talk about that, I think you really 
need to spend 4 years on the canned fruit controversy so that 
you can fully appreciate that this one case does not stand out; 
there are a series of cases and they all are based on the fact 
that the European Union refuses to budge from any of its 
current practices--any of its current practices--whether it be 
bananas, whether it be beef hormone, or whether it be canned 
fruit, or a host of other subsidies structures. This is not a 
unique situation.
    Ms. Waters. I appreciate that, Mr. Thomas. But you also 
need to focus on the role that money and campaign contributions 
play with the WTO and who the decisionmakers are, how they make 
the decision, and who is influencing what.
    Mr. Thomas. And take a look at the canned fruit industry in 
terms of how small it is and how much it has been maltreated 
and how the United States has failed to help the downtrodden. 
Perhaps we can agree that it is not an influential individual 
with a lot of money, but maybe it is the system that is at 
fault. And if you look at canned fruit and the bananas, look at 
canned fruit and the bananas, in fact, it would be an 
interesting cocktail salad, you could really appreciate the 
structural flaws which perhaps you have overlooked because you 
are so enamored with the conspiracy theory.
    Thank you, Mr. Chairman.
    Ms. Waters. I have no conspiracy. This is fact.
    Chairman Crane. Mr. Levin.
    Mr. Levin. Welcome. I think I will refrain from asking 
questions about the banana dispute. Ambassador Barshefsky is 
going to be testifying in a few minutes and she may or may not 
want to comment on it. As I understand it, there is now a 
proposal pending before all the parties to resolve this issue 
and to do so to the satisfaction of the countries in the 
Caribbean plus the countries in other parts of Latin America 
which have a stake in this. That is pending I think. So let's 
see if the Ambassador wants to comment on that.
    Let me just say a quick word about the reference to the 
battle against AIDS. All of us have some deep feelings about 
this and surely I do. We have talked with the administration, 
as you know, about this matter. I am hopeful that the 
administration is going to be able to take some important steps 
to make certain that the drugs that are badly needed are made 
available. It is not a very simple issue but it is a crucial 
one. I think our challenge on this issue and a lot of other 
issues is to realize that crucial issues can be somewhat 
complex. If we do not recognize that, we do not resolve them. 
And in this case, it seems to me in this instance, as well as 
others, we must take steps to resolve the problem and to meet 
the need.
    I will not go on at length. But over the weekend two of my 
distinguished Democratic colleagues and a number of others of 
us in the Democratic ranks talked about this at length. And I 
know there is concern across the aisle. I am very hopeful that 
we can find an answer. My own judgement is that meeting the 
issue head on will be more effective than a lot of finger-
pointing.
    So, Representative Waters, you have been active, as your 
colleague from Georgia and a lot of us, on this issue. I think 
we are determined to persevere until there is an answer.
    Ms. Waters. Thank you.
    Chairman Crane. Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman. With respect to this 
exchange, I want to just make a comment or two because I am 
quite concerned. Let me say I hope that all my colleagues keep 
an open mind because this is serious, serious business.
    I am a believer in the WTO or in some similar organization. 
Ms. Waters, we have got to have some organization in this 
global world that we live in. It is built-in controversy. If 
you stop and reflect on it and just think about it, it is built 
in because you are trying to resolve differences; it is going 
to be a tug of war and it is going to be gnashing of teeth.
    But it cannot continue like it is. I have been a supporter 
of WTO but I feel strongly that there has got to be some 
changes and there needs to be some movement before that 
approval resolution comes before Congress, which is up or down, 
on our participation in the WTO.
    My problem is I have been working on something for 10 
years, and that is the beef hormone. They knew that by 
declaring, say, a beef hormone they were not going to allow 
U.S. beef to be imported into the European Union because 95 
percent or more of our beef in the United States uses beef 
hormone. Every steak that we eat. It is good quality, the 
highest quality beef, regulated by FDA. The European Union does 
not have an FDA or anything equivalent to it. But they are 
sitting with a standard saying we are not going to allow you to 
ship beef into Europe, and they are not even going to allow 
non-hormone beef to go into Europe now.
    It is an unfair trade barrier. I have been working on this 
for 10 years. That is when they started saying we are not going 
to allow United States of America beef into their Union. It is 
totally wrong. They must change.
    Now, over that 10 years, we finally, and I came here 
pounding that witness table 3 years ago, they finally ruled in 
our favor. Ms. Waters, in about 31 or so cases out of about 33 
presented before the WTO the ruling was in our favor. There 
have been a couple of things, as Mr. Portman knows, and yes, 
bananas and beef are two of those first ones out there. We have 
a situation though where finally the WTO ruled in our favor. 
The U.S. Trade Representative came up with the fact that after 
looking at everything our penalty was going to be, and we put 
on the table, about $250 million. Let me assure you it is a lot 
higher than that. But it started out looking at something like 
$900 million and they have come down to $250 million. They 
finally settled though for about $116 million.
    I am beginning to feel a little concerned about our U.S. 
Trade Representative and just where we are. Are we willing to 
stand up and gut it out and fight it out for some of our 
enterprises in this country? That we do not put beef and 
bananas on the back of the shelf if we are right, and we are 
right in beef, I know that factually.
    I am concerned about this loop that has drawn out over all 
these many years, as my friend Mr. Thomas from California said, 
and he is correct, we have an endless loop--some of us are 
talking about it as being a carousel, Mr. Portman and I very 
much, and I am going to be pushing that with my colleague with 
full force and we need your help and other people's help--a 
carousel on those penalties. We cannot continue like we have 
been or we are not going to have an effective trade policy in 
this country.
    I know full well we have got to have global trade. It is 
part of our great economic expansion. Yes, information 
technology, but we are opening up markets around the world. So 
I ask you to join in a constructive way of trying to make sure 
our U.S. Trade Representative puts some teeth in these things 
and not back off, that we stand up for the beef cattle people, 
for the banana people, and others if we are going to have an 
effective respected trade policy for this country. I ask that 
of all my colleagues.
    Thank you, Mr. Chairman.
    Ms. Waters. If I may just say, I am not opposed to global 
trade and I believe in fair trade. You say you are concerned 
about Ms. Barshefsky. I am too. I have been for a long time. I 
believe that the decisions of the WTO----
    Mr. Watkins. Excuse me, Ms. Waters. I did not use a name. I 
said I am concerned about the U.S. Trade Representative Office.
    Ms. Waters. Well, I am using a name, Charlene Barshefsky. 
That is who I am concerned about now. And I was concerned about 
my friend Mr. Mickey Kantor before her because of this issue 
that I have spent so many hours on understanding how this issue 
got to the WTO and how the decisions were made.
    I think you and I are saying the same thing. If we are to 
have trade mediated, negotiated, there must be a fair way of 
doing it. We must know who the people are, how they operate, 
and we must have a fair opportunity to be heard. As long as you 
have organized labor and human rights activists and small 
developing countries tearing away at these decisions, we are 
not going to get anywhere. I think we are smart enough to 
include the voices of many--who do not mind fair trade but will 
not have trade at any cost--involved in ways that we can 
resolve the disputes to the interests of this country and other 
countries. I am committed to working with that. What I am not 
committed to doing is supporting the WTO even if every decision 
was in favor of the U.S.A. if, in fact, those decisions are 
driven by money and power.
    Mr. Watkins. Ms. Waters, we cannot have free trade unless 
it is fair trade.
    Ms. Waters. We must have fair trade.
    Mr. Watkins. I yield back the balance of my time, Mr. 
Chairman.
    Chairman Crane. I thank the gentleman for yielding.
    I thank our panelists for their presentations. I would 
simply suggest, Ms. Waters, our next witness that I will call 
to the dias is Hon. Charlene Barshefsky, our U.S. Trade 
Representative, and if you want to hang in here, after she has 
made her presentation you might have questions you want to ask. 
So, feel free.
    Ms. Waters. Yes. Thank you.
    Chairman Crane. With that, let me welcome to the 
Subcommittee Hon. Charlene Barshefsky, our outstanding U.S. 
Trade Representative.
    I delivered some opening remarks and some of this that I 
may say is somewhat repetitive. But one of the concerns, Madam 
Barshefsky, that we experienced coming out of the Seattle 
ministerial meeting was the recognition that there was lack of 
agreement on a declaration prior to Seattle, and also the EU's 
failure to agree to the elimination of agriculture subsidies, 
and the Japanese foot-dragging that I touched upon before, and 
the U.S. inflexibility on antidumping, to name just a few.
    I do, however, want to express my deep regret over the 
President's comments linking labor standards to trade sanctions 
imposed by the WTO. This statement was received like a torpedo 
in the developing world and was taken as bad faith. It 
undermined our chances of reaching an agreement. Whatever his 
motivations, I believe the President's comments were off base 
given the lack of consensus that exists in this country for 
such an approach. This objective has no chance of becoming 
American law, and the cost of injecting our domestic 
controversies over trade policy into an international effort to 
launch negotiations will be deep.
    For many years the United States has possessed the 
remarkable ability to design world trade rules. By exposing the 
political divisions in this country on the international stage, 
the President emboldened new constituencies in this country and 
abroad who will now fight against our economic success in 
trade. Don't think for a moment that our foreign competitors 
won't use these divisions against us. And as we speak, progress 
on the U.S. trade agenda in Geneva is in serious question.
    The President's actions in Seattle as well as his legacy of 
avoiding the consensus-forging debate needed to pass trade 
negotiating authority have had serious consequences. If he 
retreats into retirement, it is this Subcommittee and a new 
President which must pick up the pieces and shoulder the burden 
of the repair work. Fortunately, there are key steps that can 
be taken this year to get us back on track, including early 
passage of the CBI-Africa legislation with meaningful trade 
benefits for these developing regions, and permanent normal 
trade relations for China which will force unprecedented 
reforms on that vast country. In addition, we should pursue 
regional trade initiatives including Chile, the FTAA, and the 
Pacific Region.
    Before us also lies a path of dangerous and destabilizing 
conflict with our largest trade and investment partner, the 
European Union, including a confrontation over a threat to 
fundamental elements of the U.S. tax system embodied in the 
Foreign Sales Corp. This occurs against a background of 
flagrant noncompliance by the Europeans on the panel reports 
against them regarding bananas and beef and a push in Congress 
to ramp up retaliation. As to FSC, I would like to schedule a 
meeting with you, Madam Ambassador, to consult about the 
administration's strategy.
    Ambassador Barshefsky, we have had our work cut out for us 
this year. By working to find a way to come together on trade 
matters, I think that we can turn the picture of Seattle 
around. I do not want to detract from your personal record of 
hard work and service as you took us into Seattle. Yet, it is 
important for us to recognize that our priorities and strategy 
for the WTO need to be retooled.
    Let me just conclude my remarks with a major salute to you 
for all of the time and energy and work and professionalism you 
have invested in our common national interest. You have done an 
outstanding job as our U.S. Trade Representative.
    With that, I yield to the Ranking Member of the 
Subcommittee for his opening remarks.
    Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman.
    I hope, Ambassador, you will use that professional talent 
to set the record straight as to what the administration was 
trying to accomplish at Seattle including on matters of labor 
and the environment.
    In retrospect, it seems clear there was inadequate 
preparation and time to resolve the issues that loomed large at 
the WTO meeting in Seattle. Drafting of an agenda for a new 
round of trade negotiations was very rough going into the 
ministerial with text on key issues still in brackets. 
Ministers were confronted with the challenge of both moving 
forward in traditional areas of trade negotiations such as 
agriculture and developing approaches to newer areas such as 
the relationship between trade and core labor standards, the 
relationship between trade and the environment, and making WTO 
institutions more open to public view and to public input.
    WTO members faced an uphill battle on both the new and the 
old. Not surprisingly, vocal resistance to particular agenda 
items came from various corners. The imperative now is to learn 
from Seattle and to move ahead.
    The President undertook just that in his remarks at the 
Davos World Economic Forum last month. In the first half of his 
Davos remarks the President vividly described the important 
role of trade in an era when globalization is on the march. He 
described what I believe to be true and what I saw in my recent 
intensive 10 days in China--globalization is here to stay. The 
question is whether and how to shape it. In the second half of 
his Davos remarks the President addressed that very question. 
He stated that we must try to shape globalization including by 
tackling the new issues. The President said: ``The consequences 
of opening up a dialog and dealing honestly with these issues 
will show that in the new economy we can have more growth and 
more trade with better treatment for people in the workplace 
and more sensible environmental policies.''
    As I see it, and I am convinced that many, many of my 
colleagues believe this, our challenge is how to piece together 
the two halves of the President's Davos remarks. To focus on 
just one or the other, to adopt either a just say yes or a just 
say no approach to issues of expanded trade in the year 2000 
does not meet the challenge. As the President put it at Davos, 
``Those who heard a wake-up call on the streets of Seattle got 
the right message. But those who say we should freeze or 
disband the WTO are dead wrong.''
    What is needed I believe is a plan of action for helping to 
shape globalization. Today's hearing on the WTO after Seattle 
and next week's full Ways and Means Committee hearing on 
China's potential accession to the WTO are opportunities to 
consider components of such a plan of action. Today I will 
focus on six components of such a plan that apply generally to 
reforming the WTO and moving it forward. I leave for next 
week's hearing a discussion of components relating specifically 
to China's potential accession to the WTO.
    First, we should open up the WTO to public view and public 
input. That has already been discussed here today. The U.S. 
should press for reforms of the WTO, including: Prompt public 
release of documents, public meetings of panels, acceptance of 
amicus briefs, and more effective coordination with 
nongovernmental organizations, labor, and business.
    Second, we must continue efforts to bring labor market 
issues into trade policymaking. Our goals must be to promote 
greater understanding of the links between trade and labor 
market issues and ensure the more consistent enforcement of 
core labor standards as competition grows between evolving 
economies and largely developed economies. These goals should 
be pursued at both the multilateral level through the 
establishment of a WTO working group on trade and labor and the 
bilateral and regional levels through implementation of 
adherence to core labor standards as a condition for receipt of 
trade benefits. It should be made clear that our aim is not to 
eliminate the comparative advantage of evolving economies but 
rather to avoid distortions that result when workers are denied 
core rights and thus denied the benefits of trade.
    Third, we should move forward on environmental issues in 
trade discussions. We should commit resources to the 
performance of environmental impact assessments in advance of 
agreement to trade liberalization measures and seek an enhanced 
role for the WTO's Committee on Trade and the Environment.
    Fourth, we should pursue the built-in agenda vigorously. I 
understand, and this relates to agriculture and services, that 
the WTO General Counsel reached agreement yesterday on a 
framework for negotiations in those areas.
    Fifth, we should apply a consistent policy of implementing 
the other major Uruguay round Agreements and not renegotiate 
them. They include TRIPS and TRIMS, and others, and the 
antidumping agreement, and the subsidies agreement. They were 
thoroughly negotiated during the Uruguay round. These 
agreements provide vital safeguards and benefits in foreign 
markets for the United States. Unlike agriculture and services, 
none of these agreements provides for follow on negotiations 
and the U.S. should continue to resist attempts to extend 
deadlines across the board or otherwise weaken these agreements 
through renegotiation.
    Sixth, but importantly, we should work to make developing 
countries our partners rather than opponents. As we work to 
make the WTO more open and to bring new subjects within its 
purview, we need to do so within a framework that fosters 
greater understanding and partnership with developing 
countries. This means including them in key agenda-setting and 
negotiating processes rather than presenting them with done 
deals. It also means recognizing that neither aid nor a policy 
of trade not aid is an adequate means of helping developing 
countries. We need to pursue a coherent policy of trade and aid 
by relieving the least developed countries of overbearing debt, 
as we began to do last session, and providing technical 
assistance and other aid that will enable an increase in living 
standards.
    Some may ask, and I close with these thoughts, why the 
trade agenda has become more complicated. The answer is over 
the last fifteen years globalization has truly gone global. It 
used to be in this Subcommittee just a decade ago when we 
talked about trade policy we were referring mainly to relations 
among the developed nations and to the reductions of tariffs 
and the dismantling of the more glaring nontariff barriers. 
That way of thinking plainly is outmoded today. There has been 
a dramatic increase in trade and competition between our 
country and evolving economies and the barriers to trade are 
increasingly complex and decreasingly transparent. I make this 
plea to all of us: These new trends demand new ways of 
thinking.
    Mr. Chairman, I do not expect for us to agree on 
everything, as evidenced in our opening statements. But we must 
face up to these issues and it is vital that we start now. As 
the changing nature of the world economy brings new challenges, 
we must be open to implementing new ideas so that we can move 
beyond the stalemate of the last 5 years. I am ready, with I 
think most of my colleagues, to work together to meet the 
challenges before us. Thank you.
    Chairman Crane. Thank you.
    Now, we welcome you, Madam Ambassador. Any remarks beyond 
your oral presentation will be made a part of the permanent 
record. Proceed when ready, Charlene.

  STATEMENT OF HON. CHARLENE BARSHEFSKY, OFFICE OF THE UNITED 
                  STATES TRADE REPRESENTATIVE

    Ambassador Barshefsky. Thank you very much, Mr. Chairman, 
Congressman Levin, and Members of the Subcommittee. It is of 
course a great pleasure to be here and I know I will see you 
again next week on the China question. But today we are talking 
about our agenda at the World Trade Organization for this year 
and talking a bit about Seattle.
    Let me begin with the most immediate point, and that is 
that the global trading system is fundamentally sound and 
participation in it is profoundly in America's interest. While 
the ministerial conference in December in Seattle did not agree 
on a new negotiating round, and while legitimate criticisms of 
the trading system deserve a respectful hearing and repair, the 
WTO is fulfilling its central mission and its central mission 
is critical. That is, it is opening new markets and new 
opportunities for Americans across the spectrum; it promotes 
sustainable economic development, raising living standards, as 
50 years of the global system has demonstrated, and 
strengthening peace as countries realize they have a stake in 
peace and stability beyond their own borders.
    And our continuing leadership in the WTO is of critical 
importance to Americans and to the world. This is clear in the 
historic record. Over 5 decades, our development of the trading 
system has helped to foster what amounts to a 50 year economic 
boom. Since the fifties, the world economy has grown sixfold, 
per capita income nearly tripled, and hundreds of millions of 
families around the world have escaped from poverty.
    The completion of the Uruguay round in 1994 took us 
further, addressing for the first time agriculture as well as 
services, protecting intellectual property rights, and 
strengthening our ability to enforce agreements covered by the 
WTO. And, of course, those negotiations enabled us further to 
conclude more recent sectoral multilateral agreements on 
information technology, basic telecommunications, and financial 
services.
    Worldwide, the WTO, and its forerunner the GATT system, has 
strengthened the rule of law, opened markets, and during the 
Asian financial crisis helped countries to avoid a cycle of 
protection and retaliation similar to that which deepened the 
Depression in the thirties and exacerbated tensions among the 
major world powers.
    At home, since 1992, the global trading system has helped 
America's goods and services exports to expand 55 percent. This 
export growth is particularly important because export-related 
jobs in the U.S. typically pay between 12 and 15 percent above 
the national average wage. Likewise, our own economy's growing 
openness and receptivity to imports has helped to promote 
competition, keep inflation low, and raise living standards 
especially for our poorest families. And together with fiscal 
discipline and increased investment in education, the trading 
system has made a remarkable contribution to America's record 
of growth, job creation, technological progress, and rising 
living standards.
    As the record indicates, development of the trading system 
over 50 years has been a work of profound importance. And 
because of that, it has always been difficult. Just as we saw 
in Seattle, nations always have entrenched interests which 
benefit from the status quo. And at each point along the road 
governments over the last 50 years have had to make politically 
difficult choices to serve the greater good.
    So at times we meet deadlock. The founding of the GATT in 
1948 was built on a failure to set up an international trade 
organization in 1947. The creation of the WTO 5 years ago 
followed a failed attempt to launch the Uruguay round in 1982, 
a mid-term breakdown in 1988, a failure to conclude the round 
in 1990, a failure to conclude the round in 1993. More recent 
negotiations on financial services and telecom also broke down 
in 1996 and 1997. And in all cases success followed.
    The experience in Seattle was similar to many of these 
deadlocks. While broadly supportive of a new round, a number of 
WTO members were reluctant to commit themselves to a 
negotiating agenda covering difficult issues. The reform of 
agriculture trade poses a special challenge to the European 
Union and Japan. Developing countries also have diverse 
interests which a round must taken into account. And we in the 
U.S. have sensitivities as well. All of us, every country must 
be willing to look hard at our agendas and consider ways to 
accommodate a number of the concerns of our trading partners if 
we are to move forward.
    Of course, the core elements of the negotiating agenda are 
before us. Yesterday it was agreed in the WTO that negotiations 
on agriculture and services, as required under the Uruguay 
round Agreements, would commence. These are of tremendous 
importance to American farmers, ranchers, and services 
providers. I am pleased to report that through our efforts and 
those of others these negotiations will proceed as confirmed. 
The Council on Trade and Services will meet in special session 
later this month to formally initiate the negotiating process, 
and the Committee on Agriculture will do the same in March. We 
are preparing a Federal Register Notice seeking public comment 
on the full range of negotiating proposals in agriculture and 
services and we will consult closely with the Subcommittee as 
we move forward.
    Beyond these mandated negotiations in agriculture and 
services, we have additional pressing needs particularly in 
relation to market access. Whether on industrial tariffs and 
nontariff barriers, electronic commerce, or trade facilitation, 
there are a number of market access areas that will need to be 
addressed quite apart from the built-in agenda. And while there 
are a variety of different options for proceeding with this, of 
course at the same time, as the President said, we will 
continue to work toward consensus for a new round. This will 
not be simple but the outlines can be drawn if WTO members are 
willing to rethink some of the positions they brought to 
Seattle, focus more fully on the shared benefits of success, 
and find a balance that allows us to move ahead. As the 
President has said, we will keep working toward consensus but 
success requires flexibility and shared responsibility from all 
WTO members.
    Apart from these negotiations, we have a broad and ongoing 
agenda at the WTO this year. My written testimony lays these 
out in detail, but let me just raise a few.
    First, the implementation of a set of WTO Agreements 
covering intellectual property, trade related investment, 
customs valuation, and other issues. These come into force this 
year when a number of transitions expire. It is crucial that 
these agreements be implemented smoothly.
    Second, we have action to address the problems and concerns 
particularly of the least developed countries. This includes 
both market access, on which we are prepared to proceed 
unilaterally, as the President stressed in his State of the 
Union, by securing passage this year of legislation to further 
open U.S. markets to goods from Africa and the Caribbean, as 
well as improved technical assistance and capacity-building to 
ensure that the least developed countries can fully assert 
their rights and interests at the WTO.
    Third, the WTO is considering the accession of 31 new 
economies, with a number of these negotiations well-advanced. 
We expect Jordan and Georgia to enter in the very near future. 
We have completed our bilateral negotiations with China, 
Taiwan, Albania, and Croatia. We have made significant progress 
with a number of other countries. As I mentioned earlier, I 
will be before the Subcommittee next week on China's accession. 
But let me say just one word on that. China's accession to the 
WTO has the potential to support reform in China, create 
opportunities for the United States and China's other trading 
partners, and ultimately help to further stabilize peace in the 
Pacific. As part of this process, as you know, the United 
States must grant China permanent NTR or risk losing the full 
benefits of the agreement we negotiated.
    Finally, let me turn to the question of WTO reform. The 
protests and criticisms of the WTO were not at the heart of the 
negotiating impasse in Seattle. But they raise issues that 
require a response. Only through openness and a willingness to 
listen to its critics will the trading system retain the broad 
support of the public and member governments over time.
    This does not mean that all criticism is valid. Indeed, 
part of the response must be a rejection of unsubstantiated and 
more radical criticisms. The core vision of the trading system 
is right. Opening markets in the past decades has sparked 
growth, reduced poverty, and strengthened peace. To begin 
reversing that work would be irresponsible and damaging in the 
extreme, including lowering living standards, including putting 
brakes on the hope of increasing labor and environmental 
standards, and including broader prospects for political 
stability.
    But the WTO must also be willing to listen to and act upon 
legitimate criticisms and the WTO must be willing to 
incorporate new ideas. It can do more to promote environmental 
protection. It can do more to advance internationally 
recognized core labor standards. Let me stop on these two 
issues just for a moment if I may.
    I appreciate Congressman Levin's review of the President's 
speech in Davos which was very well received I think by all 
parties to the debate, by and large. I think the President's 
fundamental point is this: That in an era of globalization, it 
is not possible any longer to claim that areas of concern in 
the trading regime should not also be integrated. If this is an 
era of globalization in which trade impacts a series of issues 
and a series of issues impacts trade, then let us at least take 
a careful and close look at the full array of issues and 
attempt to find means to spark dialog about them and to see if 
we cannot make a series of competing interests mutually 
compatible instead of mutually destructive. This will require a 
step-by-step approach.
    There is deep suspicion among many nations of the world, in 
particular in developing countries, of developed country 
motives in regard to environmental protection and the 
observance of core labor standards. There are many reasons for 
this distrust and for the suspicion that the developing 
countries have on this, including perhaps 30 years of rhetoric 
on the North-South divide that has in large part helped to 
poison the atmosphere and as to which all parties are equally 
responsible. The question is how do we piece together what some 
view as competing interests of these issues and an open trading 
regime, but which I believe need not be competing at all but 
instead can be rather complimentary.
    The first step, and what the U.S. is first trying to 
initiate in the WTO, is discussion, discussion of these issues 
and acknowledgement that many in the developed world--many in 
the U.S., many in the European Union, in Canada, Norway, other 
developed countries--feel quite strongly about these issues. 
And while there might not be unanimity of view in our own 
country or within Europe or elsewhere, nonetheless the trading 
system should begin to listen to the concerns and to attempt to 
see whether solutions can be provided and are appropriate in 
the context of the WTO.
    It is I think vitally important that we try and come 
together on these issues. Divisiveness does not serve the 
interests of the global trading regime nor does it serve the 
interests of those who would wish to see the regime become 
somewhat more modern and somewhat more in acknowledgement of 
the reality of globalization and the fact that many of these 
issues are now integrated one with another even if it is not 
often easy to accept that challenge.
    Let me also say the global system must address concerns 
about transparency. These are valid and they can be easily 
remedied. This is especially important in dispute settlement 
where the current practice is, for example, to close arguments 
to the public. If this remains unchanged, public confidence in 
the system will erode.
    As a first step, in our US-EU Summit in December, which 
followed Seattle, we proposed that we and the EU, as the 
largest users of dispute settlement, immediately agree to open 
the arguments in our transatlantic disputes in the WTO. Thus 
far, to our very deep regret and surprise, the EU has refused. 
But it is quite clear that this issue of transparency, not only 
with respect to open hearings but a number of other issues, 
amicus briefs, for example, must be addressed sooner rather 
than later.
    Likewise, the WTO's internal processes can be improved and 
updated given the growth and greater diversity of its 
membership. Director General Moore has begun consultations with 
WTO members toward this end. But as we address this issue, we 
must be careful not to alter the principle of consensus for 
decisionmaking in the WTO, and also ensure that such procedural 
discussions do not distract us from taking immediate action on 
core policy issues.
    In summary, Mr. Chairman, the WTO faces a number of 
challenges but also opportunities in the coming year, from its 
newly inaugurated negotiations on agriculture and services, to 
implementing prior agreements, bringing in new members, 
integrating better the least developed countries, internal 
reform, work toward a new round, and embark upon a serious 
dialog with respect to a range of issues not traditionally 
thought of as trade but which have direct impacts. None of 
these tasks will be easy or simple; but generations before us 
have shouldered equally difficult tasks in the past.
    I believe that the record of the last 50 years should give 
us a great deal of confidence. The promotion of the rule of 
law, creating new opportunities worldwide for economic growth, 
creating opportunities for Americans and for our trading 
partners, it seems to me that this amply justifies the decision 
Congress took 5 years ago to support creation of the WTO as a 
successor to the GATT. And it should remind us of how 
significant will be the rewards of success as we take up the 
challenges of this new century.
    Thank you very much.
    [The prepared statement follows:]

Statement of Hon. Charlene Barshefsky, United States Trade 
Representative

    Chairman Crane, Congressman Levin, Members of the 
Subcommittee:
    Thank you very much for this opportunity to testify before 
the Subcommittee on our agenda at the World Trade Organization 
over the coming year. I appreciate this opportunity to review 
our assessment of the WTO after five years, the events at last 
year's Ministerial Conference, the negotiations and other work 
we have under way in the year 2000.

                              Introduction

    Our agenda for the year 2000 ranges from opening 
negotiations on agriculture and services as mandated by the 
Uruguay Round Agreement of 1994; to implementing and enforcing 
existing agreements, including several now coming fully into 
force; promoting the full integration of the least developed 
countries into the trading system; institutional reform at the 
WTO, with a focus on strengthening transparency; and the 
accession of new members, in particular China, to the 
organization. At the same time, we are working with other WTO 
members for consensus on a new Round. To reach such a 
consensus, as the President has said, all WTO members will have 
to show flexibility and accept their share of the 
responsibility for success.
    My testimony will review each of these points, but will 
open with a more basic review of the record of the WTO over the 
past five years. And here the immediate point is clear. That 
is, the trading system is fundamentally sound and our 
participation in it is profoundly in America's interest. While 
the Ministerial Conference in Seattle was unable to agree on an 
agenda for a new negotiating Round, and the WTO has received 
some criticism from its members and from outside as well, on 
the whole the WTO is fulfilling its mission of opening new 
opportunities, promoting sustainable development, raising 
living standards and strengthening peace.
    As the President recently said, there is no substitute for 
the confidence and credibility the WTO offers the world as 
trade grows. WTO membership opens world markets to our goods 
and services, and helps us take advantage of our 
competitiveness in agriculture, manufacturing and high-tech 
industries. It advances the rule of law in commerce, and 
promotes stability during economic crisis. And thus our 
participation and leadership in the WTO is of critical 
importance.
    Criticisms, both from within the WTO and from outside, 
deserve a respectful hearing and the WTO must respond to the 
legitimate issues they raise. But these were not the 
fundamental reason the Ministerial conference did not launch a 
new Round. Rather, the WTO's 135 members reached an 
unfortunate, but familiar, impasse on some of the major policy 
issues. The impasse will not fix itself; but if WTO members 
remember history and first principles, focus more intently on 
the shared benefits we derive from the open markets and rule of 
law represented by the WTO, and accept the shared 
responsibilities of developing the trading system, we can break 
the deadlock and move ahead.

                              The Context

    Our first challenge is to place the Ministerial in its 
proper context.
    Today's WTO has its roots in the General Agreement on 
Tariffs and Trade, or GATT, created under President Truman 
after the Second World War. The leaders of the time acted in 
the light of their personal experience: they had seen the 
Smoot-Hawley Act in America and similar protectionist policies 
overseas deepen the Depression and contribute to the political 
upheavals of the 1930s. Fifteen years later, they believed that 
by reopening world markets they could promote growth and raise 
living standards; and that as open markets gave nations greater 
stakes in stability and prosperity beyond their borders, a 
fragile peace would strengthen.
    The work they began has proceeded through five decades. 
Over time, as we and others abandoned the closed markets of the 
Depression era, we have strengthened peace by integrating first 
Germany and Japan, then the post-colonial world, and now the 
countries moving away from communist planning systems into a 
modern economic world. And we have fostered what amounts to a 
fifty-year economic boom during which the world economy grew 
six-fold, per capita income nearly tripled, and hundreds of 
millions of families escaped from poverty.
    Most recently, with completion of the Uruguay Round and 
Congress' passage of the Uruguay Round Agreements Act in 1994, 
we made a fundamental advance: going well beyond the GATT 
agreements in addressing agriculture and services; protecting 
intellectual property rights; and strengthening our ability to 
enforce all the agreements covered by the WTO. In the WTO 
itself we created a small but efficient organization, with a 
very small budget and professional staff, to serve as a venue 
by which governments can agree by consensus on measures in the 
general interest. This is evident in the substantial further 
progress we have made since 1995, in conclusion of the landmark 
multilateral agreements on Information Technology, Basic 
Telecommunications and Financial Services.
    Taken as a whole, these achievements have substantially 
improved the world trade environment and its institutions, in 
ways including:
     Expansion of the Rule of Law: In just five years, 
the 50 year-old trading system has been transformed from a 
complex set of rules and disciplines that applied fully to a 
relatively few members to a system where the rules apply to all 
members (subject to transitions) eliminating the potential for 
``free riders'' on the benefits of an open trading system.
     Dispute Settlement: Today, WTO Members rely on a 
set of procedures for the prompt settlement of disputes, 
eliminating many of the shortcomings of the earlier GATT system 
where the process could drag out indefinitely. While 
improvements to the system are still warranted, the greater 
certainty of the new system has led to a more prompt resolution 
of disputes and greater predictability in the application of 
rules.
     Market Access in traditional and new areas of 
commerce: Globally, the Uruguay Round is reducing manufacturing 
tariffs by a third; American farmers and ranchers are finding 
export opportunities, as a result of the first real commitments 
to reduce barriers and limit the use of export subsidies; for 
the first time in the history of the trading system services 
providers have also recorded real export opportunities, from 
accounting to telecommunications services providers. New 
entrants into the global marketplace, particularly small and 
medium-sized enterprises, are also benefitting from these new 
market openings and innovations.
     Intellectual Property Rights Protection: WTO 
member governments have accepted a landmark set of rules for 
protection of patents, copyrights, trademarks and other forms 
of intellectual property. This both protects the research and 
innovation of Americans in our most competitive industries, and 
creates incentives for further investment and technological 
progress worldwide.
     Global Membership: The WTO has grown by 50%, from 
the 90 members which joined to launch the Uruguay Round in 1986 
to 135 in 1999, with another 30 members seeking to negotiate 
entry. More stringent requirements for membership mean 
acceptance of WTO rules helps to open markets to American 
products and promote domestic economic reform. This is 
especially important for countries emerging from communist 
planning systems and seeking to establish market-based 
economies. Thus, membership in the WTO is a key element in 
newly emerging economies in Eastern Europe, in Asia, and in the 
Middle East. African nations as well are participating more 
fully in the WTO than in the past.
     Creation of a dynamic forum for trade 
liberalization: In establishing the WTO, we created a system 
that is responsive to rapid changes in technology and the needs 
of the 21st century. The WTO first set in motion and then 
realized agreements in financial services, basic 
telecommunications services and information technology, whose 
outcomes are larger in scope than the totality of the results 
of the Uruguay Round; and by setting a built-in agenda to 
continue in agriculture and services this year.
     High Technology: The dynamism of the WTO has kept 
the trading system current with technological development, 
providing real benefits to business and consumers -through its 
work on the Information Technology Agreement, Basic 
Telecommunications, Financial Services, electronic commerce and 
other initiatives. Since the Basic Telecommunications Agreement 
came into effect, for example, rates paid by U.S. consumers for 
international service to most foreign destinations have 
declined significantly. From 1996 to 1998, the average price of 
an international long distance call declined from 74 cents per 
minute to 55 cents per minute, a 25% decline. On highly 
competitive routes, such as the U.S.-UK route, prices have 
fallen even more dramatically, to as low as 10 cents per 
minute. Although aggregate data for 1999 are not yet available, 
indications are that the trend toward lower rates has continued 
and that the current average price worldwide is well below 55 
cents per minute.
     World Economic Stability: The WTO has also 
strengthened the world's ability to address economic crises. 
During the financial crisis of 1997 and 1998, for example, the 
respect WTO members, including ourselves, showed for open 
market commitments helped to prevent a cycle of protection and 
retaliation similar to that of the Depression era, ensuring 
affected countries the access to markets they needed for 
recovery, and minimizing damage to American farmers and 
manufacturing exporters.
     Greater Openness and Accountability: While, as I 
will note later, we are not satisfied with the WTO's progress 
toward full transparency, we also recognize that in five years, 
the WTO has moved forward on these issues by making a majority 
of its documents available to the public, reaching out via 
symposia and other means to the NGO community and by creating a 
Web page. All of the WTO Ministerial Meetings held thus far -in 
Singapore, Geneva and Seattle -have enjoyed strong NGO 
participation.

                   The WTO in America's Economic Boom

    These policy achievements, in turn, have helped to 
facilitate an expansion of American goods and services exports, 
despite the effects of the Asian financial crisis, by 55% since 
1992. This is especially important, as export-related jobs 
typically pay 10-15% above the average U.S. wage. Together with 
domestic policy measures such as the improvement of fiscal 
discipline since 1993 and increased investment in education, 
the trading system has thus made a remarkable contribution to 
our prosperity in the past five years. By opening markets, 
advancing the rule of law and promoting competition, the WTO 
has contributed to a record of:

     Growth: The U.S. economy has grown by $2.2 trillion, from 
$7.0 trillion in 1992 to $9.2 trillion in 1999. To put this figure in 
context, only two countries in the world apart from the United States 
have a GDP totaling $2 trillion or greater.
     Jobs: U.S. employment has grown by over 20 million, as 
unemployment levels dropped from 7.3% to 4.0%. This is the lowest 
unemployment rate since January of 1970.
     Rising Living Standards: American living standards are 
rising, as hourly wages for nonsupervisory workers are up by 6.8%. At 
the same time, openness to imports has helped to keep inflation low, 
broaden choice and improve consumer prices especially for basic 
household necessities. This is especially important for the poorest 
families.
     Investment: Since creation of the WTO, U.S. non-
residential business investment has risen at 10.8% per year.
     Shared Benefit: Americans have broadly benefitted from our 
expansion, with poverty rates falling to the lowest level measured 
since 1979, and unemployment at record lows for African-Americans and 
Hispanics.

    A final point to note is that in the past five years, the 
U.S.' share of world foreign direct investment has sharply 
increased, with foreign countries investing more than $400 
billion in America. Many had expressed fears that a more open 
world would promote investment in countries with weaker labor 
and environmental standards. Investment decisions obviously 
have many causes, but experience shows that our high standards 
have not been any sort of a deterrent to investment in the 
United States.

                      Reasons for Seattle Deadlock

    Let me now turn to an analysis of the Ministerial, and then 
to our next steps.
    As the record--both of the past five years and of the past 
fifty--indicates, developing the trading system has been work 
of profound importance. It has therefore always been difficult: 
nations always have entrenched interests which benefit from the 
status quo, and at each point along the road, governments must 
make politically difficult choices to serve the greater good.
    It should therefore be no surprise that we at times have 
encountered deadlocks. This happened at the creation of the 
trading system, in which the founding of the GATT in 1948 built 
upon a failure to set up an ``International Trade 
Organization'' in 1947. The creation of the WTO five years ago 
followed a failed attempt to launch a Round in 1982, a mid-term 
breakdown in 1988, and failures to conclude the Round in 1990 
and 1993. More recent negotiations on financial services and 
telecommunications also broke down in 1996 and 1997, in all 
cases to be followed by success.
    The experience in Seattle was similar to many of these 
previous negotiating deadlocks. While broadly supportive of a 
Round, a number of major WTO members were reluctant to commit 
themselves to a negotiating agenda covering issues that are 
genuinely difficult.
    Most important, any new Round must clearly have as a 
central goal the rapid reform of agricultural trade. This is a 
commitment the WTO made long ago, when in 1995 it adopted a 
``built-in agenda'' requiring the opening of agricultural talks 
this year. This poses a special challenge to the European Union 
and Japan. However, developing countries also have diverse 
interests and agendas, which a Round must take into account, 
and we in the U.S. have sensitive areas as well. All of us must 
be willing to look hard at our agendas and consider ways to 
accommodate a number of the concerns of our trading partners to 
move forward.
    We knew well before the Ministerial, of course, that a new 
Round would involve difficult issues. But an agenda that does 
not take on the difficult issues is one of little real-world 
consequence. Over the long run, WTO members have been able to 
overcome their differences; on this occasion they did not. WTO 
members began to harden their positions rather than coming to 
consensus, and the negotiations proved unable to bridge the 
gaps.

                          WTO Agenda for 2000

    Since then, we have been consulting with our trading 
partners and with Director-General Moore on ways to move ahead. 
As we do so, we view it as of fundamental importance that the 
WTO acts on the issues immediately before it: the 
implementation of core agreements under the Uruguay Round, the 
opportunity to promote development and integration for the 
poorer countries, the decision by China and a number of other 
countries to join the WTO and the commitment made in 1995 to 
open negotiations on agriculture and services this year.

1. Implementation of Agreements

    To begin with, a set of WTO agreements covering 
intellectual property, trade-related investment measures, 
customs valuation and other issues come fully into force this 
year, when remaining transitions expire. It is crucial that 
this proceed smoothly. We are meeting our own commitments, of 
course, in areas such as textiles. And in case of outright 
refusal to keep promises, we will not hesitate to use dispute 
settlement to enforce compliance.
    But we also recognize that these agreements are complex. 
Some countries have genuine difficulty implementing them 
despite making sincere efforts to do so. In such cases, our 
preferred approach is to work through the problems on a 
practical, constructive and pragmatic basis. That is the best 
way to ensure that we address the fundamental concerns 
countries have, and preserve the integrity of the balance of 
rights and obligations all of us have taken up. Likewise, we 
are willing to review concerns others may have about our own 
implementation of agreements.

2. Least Developed Nations

    WTO members must also act with greater generosity of spirit 
toward the least developed countries.
    Part of this is greater market access for the poorest 
countries. We are prepared to do this unilaterally, as the 
President stressed in his State of the Union Address, by 
securing passage this year of legislation further opening U.S. 
markets to goods from Africa and the Caribbean. This is of 
fundamental importance to growth and sustainable development 
for the people of these regions, and will also help them become 
better markets for our own products.
    Equally crucial, we must develop better means to help these 
countries participate fully in the trading system. Many of them 
come to the table with less experience in trade policy and at 
times fewer resources to devote to it. They often rightly feel 
they have difficulty in asserting their rights and interests in 
the WTO. A proposal we introduced last year, together with 
Bangladesh, Lesotho, Nigeria, Senegal and Zambia, to improve 
the technical assistance and capacity-building programs 
available from the WTO and other international institutions, 
can serve as a starting point.

3. WTO Accession for China and Others

    Likewise, the WTO is considering the accession of 31 
economies. A number of these negotiations are well advanced: we 
expect Jordan and Georgia to enter in the very near future; we 
have also completed our bilateral negotiations with Albania, 
China, Croatia, and Taiwan; and have had significant progress 
with a number of other countries. Each case will mean 
significant trade liberalization, bounded by the rule of law.
    Let me say a few special words about the completion of 
China's entry into the WTO. This is a critical goal for the WTO 
this year. The economic liberalization and opening to the world 
China will make as part of its WTO accession have the potential 
to support reform in China, create opportunities for China's 
trading partners, and ultimately help to stabilize peace in the 
Pacific. And simply from the perspective of the trading system, 
a status quo in which the world's third-largest economy does 
not need to follow WTO rules is an enormous source of 
distortion and uncertainty. The China accession is thus a 
central task for the WTO, and must move ahead this year.
    This will require expeditious action, first of all by those 
WTO members which have yet to complete their own negotiations 
with China, and second by the entirety of the WTO's membership 
on rules issues. It is a complex task, but one which is 
manageable for the WTO and should be completed soon. As part of 
this process, the United States must grant China permanent NTR 
or risk losing the full benefits of the agreement we 
negotiated, including special import protections, and rights to 
enforce China's commitments through WTO dispute settlement, 
among other means. If Congress were to refuse to grant 
permanent NTR, our Asian and European competitors will reap 
these benefits of the agreement we negotiated with China, but 
American farmers and businesses may well be left behind.

4. Built-In Agenda Negotiations and Work Toward New Round

    Finally, with this work proceeding, we must look to the 
future. The core elements of the negotiating agenda are before 
us, in the opening of talks on agriculture and services, as 
required under the ``built-in agenda'' WTO members agreed upon 
in 1995. These are the sectors in which markets remain most 
distorted and closed, and in which the opening of trade will 
mean perhaps most to future prospects for rising living 
standards, technological progress, and sustainable development.
    I am pleased to report that WTO Members are moving forward 
on this agenda. The WTO General Council yesterday set dates for 
the initial meetings for the negotiations on services and 
agriculture, and our expectation is that the important work for 
those negotiations will proceed. That will include the 
development of negotiating proposals this year, a matter on 
which we will be consulting with Members, the private sector 
and other interested Americans in the days ahead. The work has 
just begun, and we will soon publish a notice in the Federal 
Register seeking comments from all interested parties as we 
begin the process of developing proposals for these 
negotiations. But our view of the initial steps is as follows:
     In agriculture, the WTO Agreement on Agriculture, 
with binding commitments on market access, export subsidies and 
domestic support, provides the basis on which to pursue further 
agricultural reform. Useful preparatory work has already been 
accomplished through the WTO Committee on Agriculture over the 
last three years, where countries have identified key issues 
and their interests.
    We are now working with other countries to ensure 
discussions in Geneva focus on substantive reform proposals. 
Our work last year enabled us to identify general negotiating 
objectives, such as eliminating export subsidies; reducing 
tariffs; expanding market access opportunities for products 
subject to tariff rate quotas, including better disciplines on 
the administration of those TRQ's; reducing trade-distorting 
domestic support levels; and ensuring that the operation of 
agricultural state trading entities are more market-oriented. 
We also want to ensure access for biotechnology products.
    We are now developing specific proposals to implement these 
objectives. While specific negotiating timelines have not been 
established by the Uruguay Round, the expiration of the 
agricultural ``peace clause'' in 2003, and continued domestic 
farm reform efforts in the United States, Europe and other 
countries, should help to move the negotiations forward.
     In services, we are developing negotiating 
proposals for a wide range of sectors where our companies have 
strong commercial interests, including, energy services, 
environmental services, audiovisual services, express delivery, 
financial services, telecommunications, professional services, 
education and training, private healthcare, travel and tourism, 
and other sectors. Our companies are poised to be among the 
primary beneficiaries from stronger services commitments in the 
WTO.
    Broadly speaking, our objectives are to remove restrictions 
on services trade and ensure non-discriminatory treatment. We 
also need to ensure that the commitments we obtain accurately 
reflect our companies' range of commercial activities. For 
example, the GATS definition of environmental services does not 
include recycling services, an area where U.S. companies are 
leaders. We want to fix this and similar deficiencies in the 
GATS.
    Our proposals must also reflect the many different means 
U.S. service providers use to meet the needs of their foreign 
customers. This includes U.S. companies that establish 
operations overseas -for example, as a branch or subsidiary; 
that deliver their services electronically -by phone, fax, or 
the Internet; or that depend on individual personnel to 
``export'' services -for example, Americans that perform short-
term consultancy services in a foreign country.
    Beyond these mandated negotiations, we have pressing needs 
to address market access concerns in non-agricultural products, 
electronic commerce, issues related to trade and the 
environment, trade facilitation, and perhaps other topics as 
well. Thus, while there are a number of different options for 
proceeding with trade liberalization beyond the agricultural 
and services sectors, we working to build consensus for a new 
Round.
    To build a consensus for such a Round will not be a simple 
task. However, the outlines can be drawn, if WTO members prove 
willing to rethink some of their positions, focus more fully on 
the shared benefits of success, and find the balance that 
allows us to move ahead. As the President has said, we will 
keep working toward consensus; we are willing to be flexible, 
and expect our trading partners to do the same.

                               WTO Reform

    Finally, let me turn to the criticisms the WTO has received 
and the questions of institutional reform.
    The protests and internal criticisms of the WTO were not at 
the heart of the negotiating impasse in Seattle. However, they 
raise issues that require a response. Only through openness and 
willingness to listen to its critics will the trading system 
retain the broad support of the public and its member 
governments over time.
    This does not mean that all criticisms are valid. Indeed, 
part of the response must be a rejection of unsubstantiated and 
more radical criticisms. The core vision of the trading system 
is right: opening markets in the past decades has sparked 
growth, reduced poverty and strengthened peace. The creation of 
the WTO here in the United States has brought this still 
further: by cutting tariffs, it has been the equivalent of a 
$750 billion global tax cut, whose benefit goes largely to less 
prosperous families which devote more of their income to food 
and basic necessities. It has helped America's farmers, working 
people and businesses find new markets overseas. And as our 
import growth has shown, it has helped to raise living 
standards, dampened inflationary pressures and broadened 
consumer choice, while creating new opportunities for our 
trading partners. Most recently, during the Asian financial 
crisis the respect WTO members showed for open market 
commitments helped to prevent a cycle of protection and 
retaliation similar to that of the Depression area, ensuring 
affected countries the access to markets they needed for 
recovery, and minimizing damage to farmers and manufacturing 
exporters worldwide.
    To begin reversing the work we have done would be 
irresponsible and damaging in the extreme. Workers in poorer 
countries would lose jobs as industrial markets closed; living 
standards of the poor in America and other industrialized 
countries would fall as the price of food, clothing, shoes and 
other essential goods rose. Hopes of rising labor and 
environmental standards would be deferred, as countries which 
suffer from grinding poverty have little time or resources for 
clean air enforcement and factory inspection. And a crucial 
support for peace would weaken, as the stake nations now have 
in one another's prosperity and stability beyond their borders 
diminished.
    But the WTO must also be willing to listen to and act upon 
legitimate criticisms and incorporate new ideas. Most 
immediately, it must address concerns about transparency which 
are valid and can be easily remedied. This is especially 
important in dispute settlement, where the current practice is 
to close arguments to the public. Historically, the practice 
dates from an earlier era, in which dispute settlement largely 
meant mediation and negotiation. But today, dispute settlement 
is a more adjudicative process. In such a process, what once 
was privacy becomes a harmful secrecy that reduces public 
confidence in decisions.
    If this remains unchanged, public confidence in the system 
will erode. As a first step, at our US-EU Summit in December, 
we proposed that we and the EU, as the largest users of WTO 
dispute settlement, immediately agree to open the arguments in 
our transatlantic disputes. Thus far, to our regret, the EU has 
refused. But it is quite clear that this issue threatens to 
erode public confidence in the WTO and its work, and must be 
addressed sooner rather than later.
    Likewise, the WTO's internal processes can be improved and 
updated. Since 1986, when the Uruguay Round opened, the WTO has 
grown by over 50%, from 90 to 135 members, with more to follow 
this year. It is not only larger but more diverse, ranging from 
the world's most developed to its poorest countries, and 
covering each point of the spectrum in between. Each of these 
members has different priorities and interests, adding to the 
complexity of negotiations. Over time we should develop a more 
effective means of ensuring both participation and efficient 
consensus-building. Director-General Moore has begun 
consultations with WTO members toward this end. However, as we 
address the issue, we must be careful not to alter the 
principle of consensus for decision-making in the WTO. And we 
must also ensure that such procedural discussions do not 
distract us from taking immediate action on core policy issues.
    There are also clear areas in which the WTO can do more to 
help environmental protection. These include elimination of 
environmentally abusive subsidies, such as fishery subsidies 
which contribute to over-fishing; elimination of barriers to 
trade in environmental goods and services; and the disciplining 
of agricultural subsidies, including the elimination of 
agricultural export subsidies.
    And we believe the WTO can contribute to the advance of 
internationally recognized core labor standards. Its current 
refusal to discuss the links between trade and labor cannot be 
justified. It can also cooperate more actively with the 
International Labor Organization on a number of issues.
    We should also, however, draw lessons for the future from 
our experience in Seattle in these areas. While our 
environmental proposals won a substantial amount of support, we 
received at times intense criticism for pressing to open a 
discussion of trade and labor. If we are to move forward, I 
believe we must address more effectively the reasons many 
developing countries are suspicious of these discussions. Few 
want to specialize in low-wage industries; almost all would 
prefer highly skilled, healthy and prosperous work-forces. But 
most also fear discrimination against their products that would 
block development and perpetuate poverty. Clearly, our 
proposals in this area have no such intention and would have no 
such effect. But if the trading system is to play a role in 
achieving the shared goal of improving labor standards--as it 
should--we must find ways to allay these concerns.

                              USTR Budget

    Finally, Mr. Chairman, in the context of our ability to 
meet the totality of these challenges, let me raise one final 
issue.
    Yesterday, the president transmitted his budget to the 
Congress. In it, he is recommending funding for USTR at $28.3 
million and 190 staff. This represents an increase of $2.8 
million and 12 full-time positions. In addition, the 
President's initiative on enforcement includes additional 
resources for our agency. Thus, this budget, like the previous 
two the President has submitted, calls for funding increases, 
to match the escalating workload our agency has at home and 
worldwide.
    As you know, USTR is certainly one of the leanest and I 
believe most cost-effective agencies in the Federal government. 
When we began, we were an agency designed to coordinate policy, 
drawing on the resources of other agencies. Today, we have 
tremendous statutory obligations, together with complicated and 
demanding interactions with nearly 200 foreign trade partners 
and a very wide spectrum of Americans. As the Appropriations 
Committee begins considering this budget request, I ask your 
support as our authorizers for the addition of these 12 new 
positions to our team. To fulfill our mission most effectively, 
we need additional support not only at the WTO, but with 
respect to agriculture, Africa, China, Japan and several other 
areas. I hope you will support this request.

                               Conclusion

    In conclusion, then, the WTO faces a number of challenges 
in the coming year, from proceeding on the built-in agenda for 
agriculture and services, to implementing prior agreements, 
bringing in new members, improving the ability of the least 
developed countries to participate, reforming its institutions, 
and working toward a new Round. To meet these challenges is a 
responsibility that all WTO members share. None of these are 
easy or simple; but others have shouldered equally difficult 
tasks in the past.
    And the record of the past fifty years should give us a 
great deal of confidence. Taken as a whole, the multilateral 
trading system has promoted the rule of law, created new 
opportunities for worldwide economic growth, and created 
opportunities for Americans. This amply justifies the decision 
Congress took five years ago to support creation of the WTO as 
a successor to the GATT. And it should remind us how 
significant will be the rewards of success as we take up the 
challenges of the new century.
      

                                


    Chairman Crane. Thank you, Madam Ambassador.
    When that Seattle meeting became deadlocked, did you 
consider offering a fallback position in the form of a 
ministerial declaration that would have identified a few areas 
of common ground and commitment to keep the talk going?
    Ambassador Barshefsky. No. And the reason is severalfold. 
Countries, and most countries did, that expressed flexibility 
before Seattle became increasingly inflexible at Seattle and 
were not willing to take the political leap necessary. This was 
first apparent and most radically apparent actually in the 
agriculture negotiations, where after 6\1/2\ hours of word-by-
word negotiations on a text, the European Union, Japan, and 
Korea said at the end of that they could not accept the text 
and would reserve their rights not to accept the text. This was 
a startling development and ultimately there was no agriculture 
text agreed upon.
    As far as a smaller declaration went, that was really not 
in the cards. I felt it most prudent at that point that rather 
than countries feel they would need to yet further harden their 
negotiating positions, that countries instead take a pause, a 
time out, regroup, rethink where they were, what their 
positions were in the hopes of coming back to the table at an 
appropriate time. And we of course would hope that appropriate 
time would be sooner rather than later, but it will require 
further flexibility on the part of all countries.
    An abbreviated declaration or a partial declaration was 
never in the cards, would not have been accepted by the trading 
partners, but I think would have had the effect of a further 
hardening of positions, making it impossible to reach consensus 
even after a pause. And we wanted to avoid that further 
hardening of positions.
    Chairman Crane. I gather that you do favor launching a new 
round.
    Ambassador Barshefsky. Yes, very much so.
    Chairman Crane. When do you think it is likely to occur?
    Ambassador Barshefsky. I think it depends very much on a 
review by all countries of the positions taken in Seattle, that 
will also require a review by the United States of positions 
taken into Seattle, to see if each country could move a little 
bit. And if each country could move a little bit, we may well 
be able to get there.
    There are a number of international remarks to the effect 
that countries would like to see the launch of a round this 
year. I think many countries see a substantial danger in 
waiting, particularly in the run-up to French elections where 
Europe's agricultural position will harden even further. But 
the rhetoric has to be matched by reality. And if countries in 
fact are not willing to move some, then there will be no round 
whether this year or in the future. Countries, all countries, 
will need to take careful evaluation and careful stock of their 
positions and determine whether, in light of the Seattle 
activities and negotiations and discussions that took place, 
they can move forward.
    Chairman Crane. What in your estimation are the prospects 
for real progress especially given the EU's reluctance to 
further liberalize agriculture without a comprehensive round?
    Ambassador Barshefsky. I do think, certainly in the early 
stages, moving forward now on agriculture and services 
negotiations will be very productive. Because in any 
negotiation, even in the context of a round there is quite a 
bit of underbrush that needs to be cleared away before you get 
to the array of political decisions that will have to be taken. 
I do think, at a minimum, over the course of this year we will 
be well positioned in the process in Geneva in agriculture and 
services to begin to clear away a lot of that underbrush so 
that at the point at which a round is launched a substantial 
amount of work has already been done particularly at the 
technical level.
    Chairman Crane. One of the concerns I heard while we were 
out in Seattle with you is the feeling on the part of many of 
the less developed countries that they were being excluded from 
the process. I know 135 countries cannot participate all at 
once in negotiations, but is there a better way that we could 
keep the member countries informed of key developments as they 
are proceeding?
    Ambassador Barshefsky. I think that the process used in 
Seattle was actually much more inclusive than anything that had 
been previously utilized. Four working groups were created, all 
countries could participate in all groups, those groups were 
each a series of negotiating sessions in which all countries 
participated. Where I think the criticism comes into play is 
the fact that in the last day and a half or so negotiations 
were narrowed further to a smaller group of countries. And that 
is the product of a realization that 135 countries cannot all 
be in the room at once.
    I think that there does have to be a better means for the 
Director General of the WTO to inform the body as a whole of 
developments as they proceed. But there is also a 
responsibility on the part of countries that are regional and 
subregional leaders to keep their neighbors informed of 
progress. And there were many participants in these sessions 
who claimed to be representatives of a group of nations but who 
then did not report back to those nations as they should have 
done with respect to progress.
    So I think both the overall process needs to be looked at, 
particularly as one gets to the endpoint of a negotiation, as 
well as the role of countries that claim to be regional or 
subregional representatives of a variety of countries and their 
responsibilities to those countries to the extent report of 
progress is appropriate. We have asked Mike Moore, the Director 
General of the WTO, to look at this full range of issues on 
internal reform. He will be doing that, hopefully to report 
back to the body as a whole in the coming months.
    Chairman Crane. If Congress approves a more generous CBI-
Africa trade bill, will this help build political support for 
expanding the trade system among developing countries in your 
estimation?
    Ambassador Barshefsky. I think that the Africa and CBI 
bills are absolutely critical. I think it will send a signal to 
our trading partners that the United States intends to remain 
fully engaged. I do believe, and many countries have said this 
to me, that our completion of the bilateral agreement with 
China was an extremely important marker for many countries with 
respect to U.S. leadership and U.S. engagement.
    But I think the CBI and Africa pieces of legislation ought 
to be passed by the Congress in whatever form the House and 
Senate can agree upon and we ought to get programs expanded for 
these two critical regions of the world, which is what each of 
the bills would do.
    Chairman Crane. I could not agree with you more. As you are 
well aware, the EU has gone forward in a free trade agreement 
with Mexico.
    Ambassador Barshefsky. Yes.
    Chairman Crane. And are negotiating with Chile. We cannot 
be caught in the wings.
    With that, I yield to our distinguished Ranking Minority 
Member, Mr. Levin.
    Mr. Levin. Thank you, Mr. Crane.
    I was going to ask you, Ambassador, as I said in my opening 
statement, to put in perspective the President's comments at 
Seattle. But I think you have already done that. And you did so 
in part by referring to his speech at Davos. We were both 
privileged to be there for his speech. I wasn't there before or 
after except for the reception where there were some 
interesting comments by ministers and people in the business 
world and Mr. Sweeney about his speech. It essentially said 
trade needed to be expanded and so did our perspectives on what 
trade is. It seems to me that sums up the challenge. I think 
especially your extemporaneous remarks about labor market 
issues and environmental issues should give everybody here some 
thought.
    We have been stalemated for 5 years on trade legislation in 
this institution, in good measure because of disagreement over 
the role of labor market and environmental issues in the trade 
equation. No one would say in the domestic economic equation 
that labor market and environmental issues are irrelevant. We 
fight over them all the time in part because they are relevant 
to the economics of the whole country and of one section or 
another. So I do not think it should surprise us that these 
issues, as competition grows between different economic 
structures, would become relevant and contentious.
    I think all of us need to work on it. As I have said to the 
administration, have everybody in the administration take the 
talk of the President and talk that talk and try to walk the 
walk and actually implement both parts of his speech.
    Let me just say a word about transparency from my 
experience at Seattle. Several of us met with the Mexican Trade 
Minister and he was opposed to any opening up of the processes 
within the WTO. We asked him whether within his country they 
would tolerate the same processes used in a civil or criminal 
trial that are utilized in the WTO, which isn't exactly the 
same but it is a quasi- judicial process and you do not know 
what documents are going in, which ones are the base of 
decision, and what exactly comes out of it. And if there is 
going to be finality, and I voted for it in the Uruguay round, 
there has to be transparency.
    And so I think it is a step forward to see you as 
passionate about the new issues as the old issues. Because if 
we do not resolve or confront both of them, I think we are 
going to continue to be stalemated here. And as you know, I 
urged the same in terms of issues like core labor standards in 
the CBI Agreement.
    So I guess I do not really have a question to ask you. I 
just want to express my belief that your presentation here 
gives some indication that the ball is moving forward. I think 
you have answered the Chairman's comments about the President 
in Seattle by referring to what the President said at Davos. 
This is not mainly a politically motivated issue within this 
country. It is an issue that has been coming to the surface now 
for 5 years, these new issues. If we are not passionate in 
pursuing them, we are going to have deep divisions abroad and 
deep divisions here at home.
    Ambassador Barshefsky. I know that was not a question, but 
if I might just respond to a couple of points.
    Mr. Levin. Please.
    Ambassador Barshefsky. First of all on transparency, I 
think a lot of countries' hesitations on opening up the dispute 
settlement process really stem from an earlier era under the 
old GATT system, where a dispute settlement was largely a forum 
in which one might negotiate a settlement but was never 
genuinely a litigation forum as it were.
    Under the new system, this is very much a litigation forum. 
You make formal submissions on the record, you have oral 
argument before the panel, a record is maintained, there is an 
appellate body to which you can appeal again based on a record, 
based on formal submissions and oral argument as well as 
additional submissions. This takes on the character of more 
traditional administrative litigation as in the United States 
and Europe and elsewhere. And just as those kinds of 
proceedings are in most countries open at least to some degree, 
and in the developed world virtually entirely open as to 
submissions, the availability to sit in the back of the room 
and watch an oral argument, the ability to know who the parties 
are, what the record of the proceeding is, and so on, so too 
these same steps and processes should be available now in 
dispute settlement given its litigation oriented nature.
    Hopefully, over time some attitudes will change. But it has 
been somewhat surprising to us how entrenched the attitudes are 
on the question of opening up dispute settlement, including by 
Europe, for example, which does not want to see panel 
proceedings open to the public. I find this shocking.
    Mr. Levin. Inexcusable.
    Ambassador Barshefsky. Second, with respect to the issue of 
core labor standards, I would make only one observation. I 
think we have paid too little attention to very genuine 
sensitivities of the developing world on this issue. By that, I 
mean I do not think that our rhetoric is perhaps calibrated in 
the most effective way internationally. Many developing 
countries take a U.S. or European focus on core labor standards 
as harboring an implied rebuke to the way in which they have 
conducted their economy or the way in which they treat their 
workers. Many of these countries come to us and say, ``Do you 
think we don't want to see living standards increased?'' ``Do 
you think we don't want to see our workers moved to higher 
value-added occupations?'' They look at remarks made by 
developed countries as containing an implied rebuke of their 
handling of the economy. And certainly the comments are not 
intended in that way.
    I think we have to think through carefully how better to 
get across the point that these are issues in which both 
developing and developed countries have a common stake, and 
that these are issues that one needs to discuss, to work 
through, to think through jointly so that we are sure the 
benefits of a global trading regime can be more evenly shared 
and can lead to the goals that both developing countries and 
developed countries want to see for their own people. I feel 
that we have never really gotten our own rhetoric quite right 
in this area, which has helped to fuel the kind of suspicion 
and a resistance, a very deep resistance on the part of many 
countries to even discussing or embarking upon a discussion of 
these issues.
    I think as we proceed into this year we will want to work 
with the Subcommittee because we do want to get the message out 
in the most effective way possible. Because at the end of the 
day, trade, labor issues, environmental issues should be 
mutually supportive. One can easily see ways in which they 
would be mutually supportive and mutually constructive in 
increasing trade while you increase environmental protection, 
as we have in this country, increasing trade while you increase 
labor standards, as we have done in this country, and at the 
same time, as the President points out, not in any way detract 
from economic growth overall. So there are logically ways in 
which these issues should be able to be fit together in a very 
mutually supportive way.
    But the first step, which may be the hardest, is persuading 
countries to entertain a dialog on these issues in the WTO. And 
in that regard, I feel that we, Europe, the other developed 
countries need to work on a more effective means of 
communicating the aims, the goals of these discussions lest the 
developing countries especially believe this is simply a guise 
for increased protectionism, that instead of using tariffs as 
the basis, using labor/environment as the excuse. That is 
surely not the intention.
    Mr. Levin. It isn't. And when we talk about core labor 
standards, and I will close, we are talking about core labor 
standards that almost all of them have agreed to in ILO 
documents and talking about embedding them within trade 
agreements.
    Ambassador Barshefsky. Right.
    Mr. Levin. Thanks very much.
    Ambassador Barshefsky. Thank you.
    Chairman Crane. Thank you, Mr. Levin.
    Mr. Thomas.
    Mr. Thomas. Thank you very much, Mr. Chairman.
    Thank you, Charlene. Nice to have you with us and I assume 
we will have some repeat engagements.
    In listening to your opening statement, I have been on the 
Trade Subcommittee now for more than a decade, I was in 
Seattle, but I will certainly defer to your more detailed 
knowledge of world trade history when you indicated that 
Seattle was similar to earlier breakdowns. Which of those 
earlier breakdowns provided a video war of pitched battles that 
produced a victory for antitrade forces?
    Ambassador Barshefsky. Certainly, Seattle was characterized 
by protests; no question about that. And certainly there was 
substantial coverage of it. And certainly, as the President 
said, there is something of a wakeup call at work here. But 
that is not what led to a negotiating impasse.
    If you look at earlier impasses, they typically were 
followed----
    Mr. Thomas. No. I have a question on that. But I just think 
we have to realize that the context, where it occurred, how it 
occurred, and the new format of visibility produced, I think, a 
result that was far more disastrous than earlier breakdowns 
which were in closed rooms and backroom restaurants in Geneva 
and in other areas of the world. If you will concede that, we 
can----
    Ambassador Barshefsky. I do not think I would concede that 
it was disastrous in the same way. I look at it actually rather 
differently. That is to say, I reject much of the radical 
criticism made of the global trading system. But I do accept 
that there are ways in which the trading regime can and should 
be updated. And to the extent the protests went to that point--
--
    Mr. Thomas. Then let me ask a question a different way so I 
can understand and focus it. Did the events in Seattle further 
the Clinton administration's trade policies?
    Ambassador Barshefsky. I think any breakdown of a round 
does not. In other words, clearly, we would have preferred a 
round to be launched. Clearly also, it was not going to be 
launched without the key litmus test being passed, and that is 
on agriculture. And that was not passed. So did it further the 
trade regime or the trade record? Certainly not. That is 
obvious.
    Mr. Thomas. Then with hindsight, with the failure of the 
governments to narrow their differences, with a total lack of 
prior agreement on most elements of a text for the declaration, 
especially agriculture, in your opinion would it have been 
better to postpone the Seattle ministerial rather than take the 
consequences that occurred?
    Ambassador Barshefsky. Well, I think most countries felt 
going into Seattle it might be possible to construct a round. 
And most countries with whom we had dealt bilaterally, that is, 
one-on-one, gave us certainly every indication that result 
would be achievable at Seattle.
    But what happened there happened in 1982, in 1989, 1990, 
and 1993, and it is this. You never know for sure before you go 
in the room whether the deal is going to be there or not. If I 
had taken that approach on China, I never would have returned 
to China.
    Mr. Thomas. I have a very short period of time. And you 
once again alluded to the similarity between the Seattle 
breakdown and, for example, 1982, when in fact in 1982, because 
it did not have that visual and dramatic and physical 
disruption, we were actually able to come back and salvage it 
fairly quickly. But we will discuss the similarity or 
differences in the history of this particular event.
    I happen to think that in hindsight, based upon our failure 
to have a clear understanding of where we were going, we 
probably damaged ourselves more significantly than we thought 
we were going to. And that since we did not have a wedge that 
we could deliver, that the downside outweighed any potential 
upside. And then, of course, in my opinion, and I think of many 
other observers, the fact that the President came in and made 
the presentation that he did pretty well guaranteed, given your 
description of the concern and fear and miscommunication of 
various phrases, and I do think sanctions is one that can 
create fear, that perhaps produced some miscommunication, but 
which is a word that in the international trade community is 
clearly understood.
    So my question is this. What is the administration's 
current position on labor issues? Are you still saying that you 
would accept a study group to examine labor issues in the 
context of expanded trade, or is there now some commitment to 
sanctions?
    Ambassador Barshefsky. No. The proposal we have made in the 
WTO is very clear. This is a working group to review the 
intersection between trade and labor policies. That is what it 
is intended to do, with participation by the ILO, the Bank, the 
fund, and so on.
    Can I make one other point though since you have raised the 
President in this, as did Mr. Crane. First off, the President 
has talked about these issues since he began campaigning for 
President in 1991. Second of all, I think his Davos speech 
articulated really quite beautifully his own views on this 
subject. That is to say that these issues have to be made to be 
mutually supportive. Third, his statements in Seattle, which 
were rather off-the-cuff, did not alter any country's position 
on this issue. There is no country on the fence on these 
issues. Those that believe that labor and environmental issues 
should be considered in the context of the WTO believed it 
before the President spoke and believed it after, and those 
that believe they have no place in the WTO took that position 
before he spoke and took that position after he spoke.
    Mr. Thomas. Just let me tell you, ma'am, that very often 
perception is reality. There were a number of forces, those who 
stood up here, and unfortunately a number of them left prior to 
engaging in what I consider to be an educational dialog, who 
were here for a different reason than education.
    Republicans offered policies on labor and the environment 
in the Fast Track discussions, on paper, concrete. I think it 
might be useful if we begin talking about what the Clinton 
administration's positions are on labor and the environment, on 
paper, concrete, so that as you are reaching out to try to 
build a consensus across countries and across the equator that 
we could work together since I think it is in our mutual 
interest to come up with a policy that, as we do with Fast 
Track, is in somewhat pre-approval condition.
    Here is a quote from Director General Mike Moore: ``We need 
to hear more of the `F' word--flexibility--before I can say 
with any great confidence there has been enough movement from 
all sides.'' Now, flexibility is important, but in response to 
a question by the Chairman about the difficulty in launching a 
new round, you brought up the argument that the Europeans will 
harden fast because of the French elections. What time this 
year are the French elections?
    Ambassador Barshefsky. The French elections will be toward 
the end of next year.
    Mr. Thomas. Oh, so not even this year in 2000?
    Ambassador Barshefsky No. But the French----
    Mr. Thomas. They are in 2001?
    Ambassador Barshefsky [continuing]. But the French view 
prevailed among the member states in Seattle now.
    Mr. Thomas. Do you think there is any possibility that 
elections that are going to be occurring this year, not next 
year, might be a reason for a reluctance to launch a new round; 
i.e., the U.S. elections?
    Ambassador Barshefsky. I do not think so. Because if you 
look at the areas of U.S. sensitivity, and you all know what 
they are--dumping and textiles, those are 30-year issues. Those 
are issues on which most members have very distinct views.
    Mr. Thomas. No. I think, ma'am, that what happened in 
Seattle was the core arguments; those who were wearing the 
circle with the stripe across the WTO are looking at labor and 
the environment. And I would submit to you that the elections 
that are going to occur this year are not a climate in which 
this administration or candidates running for President want to 
engage in a responsible discussion of labor and the environment 
in the context of world trade.
    Ambassador Barshefsky. I disagree with that conclusion.
    Mr. Thomas. Last question. In the interest of getting a new 
round launched, what is your reaction to the U.S. being a bit 
more flexible on some of our issues? If we pull our sensitive 
issues off the table and then require other folk to talk about 
their sensitive issues, that might also heighten the concern 
about motives. Where are we? And if you don't want to talk 
about it, I understand that, I am going to give you a list of 
written questions so I can have you respond to me. But can't we 
maybe talk about investment, competition policy, antidumping 
policy, even someone like me, accelerated phase-out of textile 
quotas just to kind of show good faith and trust our people 
such as you, and our negotiating capabilities, and not create a 
front-loaded barrier to discussing issues that are sensitive to 
others if we were to discuss issues that were sensitive to us 
as well?
    Ambassador Barshefsky. Right. I do not think that we 
created front-loaded barriers. On investment and competition, 
for example, we offered the EU a variety of approaches on those 
issues which I believe the EU should have accepted. They did 
not. But that showed flexibility on our part. We did that 
because, to be frank, these two issues are very important to 
the global trading system and in the longer run we are going to 
need to also find ways of dealing with them.
    With respect to the issue of textile quotas, there was very 
little raised by developing countries on textile quotas. Think 
about it from their point of view. They are phased out 4 years 
from now in any event. Why would they pay in a negotiation to 
get a phase out 6 months earlier by the time the next round 
ended? There is very little discussion at all about textile 
quotas.
    And with respect to antidumping, as with our trade laws, 
certainly I do not think Congress would want to see us weaken 
our trade laws in a negotiation. On the other hand, we also 
have to recognize other countries are using these laws more and 
more in a rather abusive fashion. So there will need to be some 
dialog on them, but certainly I think we must reject any dialog 
that would lead to a weakening of our trade laws. And my guess 
is that is probably the congressional view as well.
    Mr. Thomas. And perhaps we ought to ask our trading 
partners if they view your analysis of their position to be 
their position. And that may be one of the problems that you 
indicated in terms of our ability to listen and understand. I 
think the integration of some of those issues is a real concern 
and that perhaps we ought not to dismiss them out of hand by 
placing ourselves in their conceptual framework and providing 
the answer we believe they would have provided instead of 
having them provide it in the first place.
    Mr. Chairman, I would ask that I could submit these 
questions. They are wide-ranging. Obviously, we did not spend 
any time on agriculture, and I am very concerned about the 
continued subsidies of agriculture in Europe, in fact, the 
concentration of certain of them in areas that I think are very 
detrimental to the United States.
    Chairman Crane. Without objection.
    Mr. Thomas. And I look forward once again to your very 
thoughtful answers, Ambassador, as you have provided in the 
past.
    Mr. Chairman, thank you very much for the liberal use of 
the 5 minute rule.
    [Questions, and their respective answers, submitted by 
Representative Thomas for Ambassador Barshefsky follow:]

Questions submitted for the record by Congressman Bill Thomas for 
Ambassador Charlene Barshefsky

   1. On what issues did the U.S. encounter the most resistence from 
                           trading partners?

    Answer 1:

    At the May 1998 WTO Ministerial, WTO Members authorized a 
process to prepare for the 3rd Ministerial Conference and the 
possible launch of a broad-based multilateral trade 
negotiation, recognizing that a new phase of negotiations was 
already mandated to begin at the end of 1999/beginning of 2000 
for the agriculture and services agreements concluded in the 
Uruguay Round. In the course of this preparatory process, WTO 
Members affirmed the need to proceed with these mandated 
negotiations. Most also agreed that the time frame for 
completing negotiations needed to be relatively short, and that 
the scope of the negotiations should be broadened beyond the 
``built-in agenda'' of agriculture and services. Members were 
near consensus on the proper treatment of electronic commerce, 
the agenda for negotiations on services, and several issues 
relating to trade and the environment.

    Major points of disagreement included:

    1. Agriculture: The EU, Japan and Korea resisted a 
commitment to thorough reform of agricultural trade. The built-
in agenda negotiations envisioned further reductions in export 
subsidies, strengthened rules on domestic support, reductions 
in tariffs and the expansion of market access opportunities for 
products subject to tariff-rate quotas.
    2. Implementation of Existing Agreements: A number of 
developing countries, including some of the most advanced, 
requested broad exemptions from previous commitments. Likewise, 
certain of our trading partners sought to use the debate on 
implementation to reopen agreements like textiles, confusing in 
some cases the problems with implementation with a more basic 
dissatisfaction over the results of the Uruguay Round. 
Antidumping, in particular, was one agreement where many WTO 
Members sought new negotiations, which the United States 
resisted as being premature, at best.
    3. Market Access: Questions here centered on the 
comprehensiveness of the negotiations, whether they could be 
supplemented with early provisional results as was suggested by 
the APEC sectoral initiatives in the industrial sector, and to 
what extent industrial market access would result in 
improvements in current or existing market access.
    4. Investment and Competition Policy: The EU and Japan in 
particular argued for negotiation of broad and binding rules in 
the areas of investment and competition policy, but found 
relatively little support.
    5. Labor: Extensive consultations were held at the 
Ministerial on various ways to address the relationship between 
trade and adherence to core labor standards in the WTO's work 
program. In keeping with the mandate of the Uruguay Round 
Agreements Act of 1994, the United States called for 
establishment of a Working Group in the WTO, with ILO 
involvement; others proposed a broader forum outside the WTO 
context, having minimal if any WTO involvement.
    6. Environment: Broad agreement emerged to confirm 
sustainable development as a guiding principle for the 
negotiations, to pursue trade liberalization and disciplines in 
areas that hold particular promise for yielding both trade and 
environmental benefits and to use the Committee on Trade and 
Environment to identify and consider the environmental 
implications of the negotiations. Differences emerged, however, 
regarding the specifics of proposals to address subsidies that 
contribute to over-fishing, and other proposals aimed at 
modifying WTO rules.

2. What steps are being taken to advance the ``built in'' negotiations 
on agriculture? When will talks start and how will you proceed without 
             a ministerial declaration framing the issues?

    Answer 2:

    We view the agriculture negotiations as an important tool 
to expand markets for American farmers and ranchers and want to 
take full advantage of the opportunity.
    Domestically, we are continuing our internal work 
identifying priorities and assessing different approaches for 
eliminating export subsidies, reducing tariffs, expanding 
market access opportunities for products subject to tariff rate 
quotas, including better disciplines on the administration of 
those TRQs; reducing trade-distorting domestic support levels 
and ensuring greater transparency and fairness in the operation 
of agricultural state trading entities. We also are reviewing 
approaches for dealing with biotechnology in the WTO in 
addition to our bilateral efforts in Europe and elsewhere.
    At the WTO, we have set up a process for conducting 
substantive negotiations on agricultural reform. At the first 
negotiating session on 23-24 March countries agreed to a 
meeting schedule and work program for the next twelve months 
and set timeframes for submitting negotiating proposals.
    Negotiations will be conducted under the terms of Article 
20 of the Agreement on Agriculture, which calls for fundamental 
reform. Under this mandate we have the scope to address all of 
our negotiating objectives. We are also working with other 
countries to establish the basis for a broader negotiating 
Round.

  3. What is the Administration's position on labor sanctions now? If 
sanctions are not being proposed, how is the Administration going about 
 convincing developing nations that its interest in labor standards is 
      not a stalking horse for imposing rules on their economies?

    Answer 3:

    Our proposal for a Working Group on Trade and Labor is for 
study and discussion on the important relationships between 
trade and labor. This is not being done now by the 
international community. Therefore, it is premature to propose 
remedies to problems that have not been analyzed fully, nor is 
it possible yet to define the appropriate role, if any, for the 
WTO in addressing these problems. Of course, our trade 
preference programs already provide statutory authority for the 
suspension of duty free treatment if beneficiaries are not 
taking steps to afford internationally recognized worker 
rights.

   4. Can the U.S. get agreement to launch a new round without being 
     willing to discuss our dumping laws or ``competition policy''?

    Answer 4:

    The United States is more than prepared to discuss both 
topics; the only major issue has been whether it is appropriate 
to initiate full negotiations in either area. On that, the 
United States is not alone in its opposition.
    As regards antidumping, we have taken the view that it is 
premature to embark upon the negotiation of new rules given the 
changes still being implemented as a result of the Uruguay 
Round negotiations. The provisions of the Antidumping Agreement 
are among the most complex of any WTO Agreement. Their 
complexity is driven, in part, by the need to ensure that all 
Members respect the transparency and due process requirements 
that have for some time been features of our own law. Moreover, 
to ensure impartiality and that the circumstances affecting a 
fair comparison of prices are appropriately taken into account, 
the methodologies are necessarily complicated. Insofar as a 
negotiation would likely lead to even more complex rules which 
would be difficult for many countries to apply in a WTO-
consistent fashion, we believe the first step must be to review 
the existing rules and the adequacy of their implementation. 
This would include looking in particular at the provisions 
affecting developing countries, and considering how to improve 
the coordination of technical assistance for new users of the 
antidumping remedy so that the current rules are adequately 
respected. This is critical to ensuring that U.S. exporters get 
fair treatment in foreign markets, while also providing an 
effective remedy against unfair trade in the U.S. market.
    On the issue of competition policy, the United States has 
been one of the most active participants in the working group 
established at the 1996 WTO Ministerial to study this issue. 
While the EU, Japan and some others have been anxious to move 
on to the negotiation of a broad set of binding rules in the 
WTO, many developing countries either oppose the basic 
requirements of any such rules (e.g., the need to have an 
antitrust law) or believe that the matter is not yet ripe for 
negotiation. What's clear is that more work is needed to 
encourage and guide other countries in the development of a 
competition culture and the infrastructure necessary to 
administer sound competition laws and policies. We also think 
there needs to be further analysis leading to a better 
understanding of and consensus about how to address anti-
competitive practices that affect international market access. 
We are, therefore, working with our WTO partners to find the 
best means for advancing work on competition issues.

   5. European Union domestic subsidies of fruits and vegetables are 
  distorting the price of products like canned fruit and olives by as 
 much as $3 per case. How does the U.S. plan to deal with these trade-
    distorting domestic subsidies in the ``built-in'' agricultural 
                             negotiations?

    Answer 5:

    We have identified reductions in trade distorting domestic 
support as a priority negotiating objective for the agriculture 
negotiations. We are working closely with the fruit and 
vegetable industry to identify the best approach to address 
these EU subsidy programs as we develop our agriculture 
negotiating proposal.

   6. Are you preparing to pursue bilateral agreements as a means of 
                     advancing the WTO discussions?

    Answer 6:

    The United States makes full use of its bilateral 
relationships to advance work in the WTO. We have met on 
numerous occasions over the past several months with a wide 
variety of our trading partners in order to explore their 
concerns or reservations on the launch of a new Round, and try 
to find ways to narrow any differences. We have devoted 
considerable time and energy to ``confidence-building'' steps, 
ranging from ways to improve market access and technical 
assistance for the least-developed countries to improvements in 
the transparency and functioning of the WTO itself. We have 
made clear our openness to working with those having difficulty 
implementing their transitional WTO obligations on a timely 
basis, to ensure both adherence to WTO commitments and the most 
practical and expeditious means of securing compliance. We have 
cooperated with our APEC partners to build support for early 
market access results in the WTO, and have worked well with our 
FTAA partners in the Western Hemisphere to advance shared 
positions, such as the ultimate elimination of agricultural 
export subsidies. The United States will not shrink from any 
opportunity to use bilateral agreements and cooperation in 
order to make progress on the multilateral agenda.

  7. As you know, the European Union has not approved any agriculture 
 biotech products since the spring of 1998. This has led to U.S. corn 
 farmers losing $200 million for each of the last two years due to the 
  EU's unwillingness to address approvals of new agricultural biotech 
  products. More recently, the EU has threatened to limit imports of 
 other U.S. corn based products, such as corn gluten feed which total 
  $800 million a year, because they may contain genetically modified 
organism varieties unapproved in Europe. Does the Administration have a 
              short term game plan to resolve this issue?

    Answer 7:

    Yes. The Administration is pursuing several approaches to 
address this problem. We have made biotechnology a priority in 
our dealings with the EU.
    Presidents Clinton and Prodi agreed to form a high-level 
dialogue to address the full range of problems facing agri-
biotechnology, including market access. Senior EU and U.S. 
officials met last December to begin work under this dialogue. 
They met again in February and March, with another possible 
meeting in May. During each meeting, U.S. officials press for 
EU action to resolve its regulatory process for agri-
biotechnology products.
    We are also using the Transatlantic Economic Partnership 
(TEP) Biotech Group to explore in detail some alternative ways 
to resolve this issue. This group met in December shortly after 
the meeting of senior officials and plan to meet again in May.
    We also have been using U.S. Embassies in the EU to urge 
Member State support for ending the moratorium on approvals of 
new varieties, which would facilitate resolution of trade 
problems. We are trying to find ways to address concerns Member 
States might have, particularly for those varieties that have 
already undergone scientific review in the EU.

 8. How many products have been held up in the EU approval process for 
  political reasons? Would you say that there has been undue delay in 
           approving certain products developed in the U.S.?

    Answer 8:

    The main problem we have with the EU approval process is 
that decisions appear to be driven by politics and not by 
science. This political influence is best demonstrated by the 
decision of some Member States to enforce a de facto moratorium 
on approvals of new agri-biotech varieties, regardless of 
whether there is a scientific basis. The EU has not approved 
any new varieties since April 1998. We have received reports 
that the EU's moratorium could remain in effect until the EU 
finalizes new approval procedures, which not might be for 
another two years. We are working with the EU see if there are 
ways new approvals could proceed before completion of new EU 
regulations.

    9. What specific steps are being taken by the Administration to 
    encourage the EU to proceed with final clearance of outstanding 
 approvals? Has this been a topic of discussion in bilateral meetings 
    with Mr. Lamy and President Prodi and, if so, what has been our 
                               position?

    Answer 9:

    As indicated above, we are also using the Transatlantic 
Economic Partnership (TEP) Biotech Group to explore in detail 
some alternative ways to resolve this issue. We also have been 
using U.S. Embassies in the EU to urge Member State support for 
ending the moratorium on approvals of new varieties, which 
would facilitate resolution of trade problems. President 
Clinton raised U.S. concerns about the adverse effect the EU's 
regulatory system is having on U.S. exports and gained 
President Prodi's consent to a high-level effort to try to 
overcome these problems.

 Question 10. What are the prospects of resolving disputes on corn and 
   soybean varieties prior to next fall's harvest? If the EU is not 
    willing to act on biotech products that have been submitted for 
             approval, how will the Administration respond?

    Answer 10:

    We would not want to speculate about what our next steps 
might be. The U.S. goal is to work with the EU to get agri-
biotech products approved and entered into the EU, if possible 
before next fall's harvest.
      

                                


    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman.
    Madam Ambassador, great to have you here. I always thought 
your job was difficult. Now, after Seattle, I know it is 
difficult. But I just wanted to say also that Representative 
Maxine Waters is here and was part of another panel and she is 
listening in on this whole procedure.
    Look, I just have four basic questions. The first is about 
antidumping. I really applaud you for standing up tall on this 
thing. I remember being part of an industry that almost went on 
its knees after 150 years in business because of the unfair 
labor and unfair dumping laws that took place. I hope you are 
going to stick with that.
    Point number two is on the FSC. I go back so far I remember 
the DSC. I thought that was all solved. I thought that everyone 
thought that was a great idea. And now this thing rears its 
ugly head and I just have a feeling that it could lead to some 
really unfortunate consequences, maybe an international trade 
war, which is wrong.
    But I think that maybe the two most important things I 
wanted to talk about are these. You mentioned transparency. But 
if I understand correctly, in terms of the dispute settlement 
panel which you are opening up, the Europeans do not want it. 
Here, you are offering something, it obviously came out of 
Seattle that we ought to have a more transparent situation, and 
the very people who it would help are against it. I really 
don't understand that.
    And the last issue, and you may want to comment, is sort of 
the issue of the green room, that obviously things can't be 
solved by everybody in a huge open forum. But sometimes I think 
in taking a look at the procedures we get involved in that 
rather than in the substance and what is happening. And you may 
want to make a comment on those.
    Ambassador Barshefsky. Sure. I think with respect to 
transparency and Europe, I have never understood the European 
position on transparency in terms of opening up dispute 
settlement panels to public observation, or the filing of 
amicus briefs which the EU has also opposed. I do not 
understand it. It is so contrary to an extraordinary legal 
tradition in the EU, a tradition that we have adopted from 
Europe over the course of 200 years. And so this has always 
been something of a mystery.
    Generally, when the EU speaks about the issue they raise a 
concern about the government-to-government nature of 
proceedings, and they are government-to-government, and the 
fact that opening these processes up would detract from the 
government-to-government character of the proceedings. But that 
certainly is not the EU's position in, for example, the 
International Court of Justice which are government-to-
government proceedings. So I have never quite understood the 
argument that is raised.
    I would hope that we could continue to work with Europe to 
get progress on transparency. They have been quite forthcoming 
in some areas, like the further derestriction of documents, 
making many more documents presumptively open to the public 
rather than the reverse presumption which pertains now, and in 
some other key transparency areas where the EU has been 
forthcoming. But in this area of dispute settlement they have 
not been. And, of course, this hurts us with other countries 
because if the EU with its legal tradition does not want to 
move in this direction, other countries take note and decide 
they don't have to move either. So we have something of a bit 
of a vicious cycle there.
    With respect to the green room and process, I think 
ultimately there should be ways of better accommodating the 
needs of all 135 members. We have a quite different situation 
now than at the start of the Uruguay round. The WTO membership 
now is 50 percent larger than it was at the start of the 
Uruguay round. And even the start of the Uruguay round was 
hampered in 1982 by countries claiming they were not involved, 
they were not involved. And now you have a membership that is 
50 percent greater in size.
    There ought to be ways of reconciling how to deal with the 
bigger group but how to also get the work done. One of the 
things we have asked Mike Moore is to consult with a variety of 
countries on this issue. The British have put in a suggestion 
on convening an ``eminent persons'' group to look at the 
internal issues with respect to the WTO and make 
recommendations. We are looking at the British proposal now. 
There may be many other ways of proceeding. But I think it is 
critical that the WTO take a careful look at its internal 
procedures to avoid the kinds of problems that have plagued us 
in the past and at Seattle.
    Mr. Houghton. Yes, but at the same time not getting in the 
way of some of the substantive things you have to do.
    Ambassador Barshefsky. Exactly.
    Mr. Houghton. Because it is always easier talking about the 
mechanics than it is looking at the gut issues.
    Ambassador Barshefsky. Absolutely. We have made it very 
clear in Geneva that we view the issue of internal reform as 
one to be handled in parallel with, not sequentially, in 
parallel with the ongoing work of the WTO, including moving on 
the built-in agenda, as we are going to do.
    Mr. Houghton. Thanks very much.
    Chairman Crane. Mr. McDermott.
    Mr. McDermott. Thank you, Mr. Chairman, for letting me ask 
a question.
    Chairman Crane. First, Mr. McDermott, if you will yield?
    Mr. McDermott. Yes.
    Chairman Crane. We want to thank you for all that gracious 
hospitality in Seattle. [Laughter.]
    Mr. McDermott. Well, it is about that that I wanted to 
raise an issue with the Ambassador.
    It seems to me after our experience in Seattle the Congress 
has to rethink something, and I would like your comments on it. 
When the United States government decided they wanted to have 
this meeting in the United States, cities began to compete for 
it--Denver, Detroit, San Diego, Seattle, Honolulu, and many 
others were eliminated in the first round and wound up with 
five, and Seattle won the prize. [Laughter.]
    Mr. McDermott. I was in San Diego and saw a newspaper that 
said thank God we didn't win. And I sat in from the very start 
on the planning for this meeting on the Seattle Host 
organization meetings and was there, Jennifer Dunn had 
representatives, and our Senators did and so forth. We were 
there a year almost in advance trying to put it together and so 
forth.
    It has become clear to me after seeing what happened that 
the funding of these kinds of meetings needs to be rethought. 
That saying that a city can go out and raise the money for a 
meeting like this, and that somehow the Federal Government gets 
the benefit of having the meeting in the United States in some 
city without footing a very significant part of the bill is 
going to be unacceptable to any city in these United States if 
they anticipate anything close to what happened at the Seattle 
meeting.
    The biggest problem was that the business community went 
out and started trying to solicit money from their conferrers 
around the country, and of course when you offer the 
opportunity to contribute people wonder what they are getting 
for contributing. Some people saw the attendance at meetings 
and other things as selling influence, and such an uproar 
developed over that that they could not raise money. That was 
one of the big problems--raising money.
    The second thing that happened was we put in a specific 
appropriation into the State Department for security and other 
things, much of which has not yet been released to Seattle.
    I would like to hear your comments about the likelihood of 
having another meeting that comes to the United States in this 
way. And I say that because I was in Germany in January and the 
German bankers said to us if there was a meeting in Europe we 
would have had the same thing that you had in Seattle, so don't 
feel bad because we would have had 100,000 people there about 
beef hormones, genetically modified, and so forth. And it was 
just our chance to be in the sun. It turned out the sun was a 
little hotter than we had anticipated.
    But I would like to hear your thoughts about how you have a 
meeting like this and have it successfully carried off.
    Ambassador Barshefsky. Well, I think you raise an issue 
that I would probably have to give quite a bit of thought to. 
Certainly, the protocol, if you will, used for the Seattle 
meeting was followed by the U.S. Government in meetings of this 
sort over many, many years, where you have a host organization, 
you have some funding by the Federal Government, some funding 
by the State or city, and so on and so forth. And you may be 
right that that whole model needs to be reviewed in light of 
what happened in Seattle.
    I know that the city is now in discussions with the State 
Department on the question of certain funds. We are not a party 
to those negotiations but I do know that they are going on at 
the present time.
    I think you certainly raise a critical issue and I think 
that this is an issue in general the administration ought to 
look at because it may be that the way in which these 
conferences have been put together in the past simply will not 
suffice for the future.
    Mr. McDermott. The question really is, if you were to say 
let's have another meeting of the World Trade Organization in 
the United States in the next 2 years, what city would put 
their name up there wanting it? And on what basis would they 
want it?
    Ambassador Barshefsky. Right.
    Mr. McDermott. I think it is the old Machiavellian business 
of hang somebody in the square and everybody walks by and says 
``Thank God it isn't me.'' But the next time you have a meeting 
you are going to run into, I think, some real serious problems 
around this whole issue.
    May I just ask one other question, and that is I understand 
the President put $25 million additional money in his budget to 
monitor and enforce trade agreements. Tell me how you 
anticipate using that money.
    Ambassador Barshefsky. Much of that money is contemplated 
being divided among USDA, USTR, and some other agencies, 
although I think our portion of that will be relatively small. 
I think a good part of the funding will go out to Commerce 
Department field office which can be extremely helpful on 
enforcement issues but do not at this point have the capability 
at the local levels at which they operate, do not have the 
resources to be of as much help as they could be. These are 
people who are on the ground whether in relevant cities or 
overseas that can really help us on enforcement issues.
    So, much of the funding is directed toward that, some 
toward USDA enforcement, some toward USTR enforcement since we 
do all of the litigation on WTO dispute settlement as well as 
much of the monitoring of the trade agreements, as well as some 
other agencies. I would be happy to get a dollar breakdown of 
that if you would like, if that would be helpful to you.
    Mr. McDermott. I ask that question really because it 
strikes me that there was a good deal of I guess surprise 
around here about what happened in steel. It is hard for me not 
to think that we could have had the capability of knowing that 
was happening long before the wave got to the level that it did 
to require us to be out here passing resolutions on the floor.
    Ambassador Barshefsky. I think steel was an issue that 
also, to some extent, took the American producers by surprise. 
That is, I think they did not anticipate this crushing wave of 
imports from Japan, Russia, Korea, and elsewhere as came in so 
rapidly, so very rapidly, and certainly the U.S. Government did 
not anticipate it. I confess to that fully. I do not think 
there was anyone who fully appreciated what was headed toward 
the United States in such a concentrated period of time toward 
the end of 1997 and through 1998.
    I think if we had more folks on the ground, it may well be, 
and you are right, it may well be that this would have been 
known more in advance and perhaps there would have been some 
preventative action or precautionary action that could have 
been taken; at a minimum, being able to engage our trading 
partners who were sending us this stuff at a much earlier point 
in time than we actually did. And that would have been very 
much to the U.S. advantage to have had those resources in place 
at the time to be able to handle an issue before it became so 
huge and so destructive of U.S. steel producers here that we 
really had quite a job on our hands.
    Mr. Levin. Would the gentleman yield for ten seconds?
    Mr. McDermott. Surely.
    Mr. Levin. I very much favor the added enforcement effort. 
But in the steel case there actually were warnings quite a few 
months before. I think we also need to take a look at section 
201 because it has certain barriers to prompt action, even when 
the data are very clear.
    Mr. McDermott. Thank you, Mr. Chairman, for your 
indulgence.
    Chairman Crane. One thing in response to a question that 
you raised about what city would want to serve as host next 
time. I have heard that since you have gotten through your 
practice game out there in Seattle that you are ready now for 
the real affair, that you are number one.
    Mr. McDermott. I heard Chicago had practice.
    Chairman Crane. Chicago remembers 1968 still. We have got a 
long memory.
    Congressman Camp I think would like to ask a question.
    Mr. Camp. Thank you, Mr. Chairman.
    Ambassador Barshefsky, I just want to shift gears and make 
a brief statement, and I realize this is not directly on WTO 
and Seattle, regarding NAFTA and our trade policies with 
Mexico, particularly with regard to the dry bean industry and 
the problems we had last year with the permitting process, and 
the lack of announcement by the Mexican Government for the 1999 
auction period and the devastating effect that had on markets. 
The uncertainty that the Mexican Government created caused our 
markets to plunge. And second, the cost of the permits 
themselves. Since the implementation of NAFTA the imports of 
dry beans to Mexico have been subject to many changes in the 
auction rate. I would just at some point like you to comment on 
what the administration is doing to ensure that Mexico changes 
that permit system. I realize that this is not something that 
you are prepared to testify about today.
    But regarding today's testimony, we are about 2 weeks away 
from a ruling on WTO regarding the FSC issue. I wondered what 
the administration's strategy was for dealing with the EU on 
this issue should the findings of the appellate body go against 
us, and particularly what steps the administration has taken to 
ensure that the United States and our employers are not put at 
a competitive disadvantage regarding the European competition 
with regard to tax treatment of Foreign Source Income and 
especially with regard to export transactions.
    Ambassador Barshefsky. If I could respond in the case of 
dry beans, we are working with the Mexican Government to fix 
it. You are quite right, what they did on the permitting 
process in terms of the auction period was very disruptive. The 
cost of the permits is an additional problem. I am happy to 
provide you with more detail on that.
    Mr. Camp. Thank you.
    Ambassador Barshefsky. On the question of FSC, as you know, 
this case is in litigation. We did not prevail at the panel 
stage. But the case is on appeal. Oral argument was held, I 
guess, about 2 weeks ago or so. The appellate body should issue 
a decision sometime. I would say at the end of this month or 
early March. But because the appellate body is actively 
considering the panel report, which we believe to be 
substantively and factually incorrect and unsupportable, I do 
not think it is appropriate for me to comment further on U.S. 
plans. Our plan is to do everything we can to get the panel 
report overturned.
    Chairman Crane. And now our co-host to the exciting Seattle 
ministerial, Ms. Jennifer Dunn.
    Ms. Dunn. Oh, heck, I will give all the credit to Mr. 
McDermott. [Laughter.]
    It is good to see you, Ambassador, still in one piece. We 
are sorry we didn't give you a better welcome in Seattle.
    Ambassador Barshefsky. That is a great city.
    Ms. Dunn. Yes, it is. I would like to see it glow once 
again, not with the fires that we saw while we were there but 
with the natural beauty that our lovely city does show off most 
of the time.
    I wanted to add my interest to that of Mr. Camp and Mr. 
Houghton on the FSC situation. I think in the long run it is in 
our best interest to be looking for a settlement with the 
European Union. I am very concerned about what is going to 
happen otherwise. I do not want to see trade wars breaking out 
or anything like that. So I hope that you and the rest of the 
folks on the negotiating team are proactively working with the 
European Union on the FSC issue. That is just a statement not a 
question.
    I am concerned about some of the things I am beginning to 
hear. We have always realized that on the NTR vote, the 
permanent NTR vote with China that we would be able to move 
into that as soon as the other bilaterals are completed. Now we 
are beginning to hear some of the advocacy groups say that it 
is not necessary for us to enjoy the relationship with China 
under the WTO for us to have a vote on permanent NTR. You 
mentioned this in your opening statement.
    Ambassador Barshefsky. The view of the administration 
obviously is that the benefits of the agreement we negotiated 
will be put at risk if Congress does not pass permanent NTR for 
China. That is to say there is a substantial risk that our 
bilateral agreement will have opened up the Chinese economy to 
the rest of the world but not for us, which would be a 
remarkable irony, indeed. And that risk comes about to the 
extent Congress does not pass permanent NTR.
    So, as you know, the administration, the President are very 
committed to achieving permanent NTR for China this year at 
such point as the contours of the final package become known. 
That is to say there are other countries that need to close out 
bilaterally with China, most notably the European Union, but 
there are others beyond the European Union. In addition, there 
will be an additional rules negotiation in Geneva which will 
also have to be completed or largely completed so that the 
final contours of the entire WTO accession for China will be 
fully known. And at that point, of course, the administration 
would want to proceed to a very rapid vote.
    Ms. Dunn. Do you have any sense now of the timing of all of 
that?
    Ambassador Barshefsky. It is a little hard to gage, but I 
do think we are hopeful for a vote in spring.
    Ms. Dunn. Good. And I was delighted to hear the President's 
speech in Davos. I think it was a good speech and his effort to 
put his shoulder to the wheel on that permanent NTR vote is 
very welcome by those of us who have been working to make this 
happen.
    Ambassador Barshefsky. If I might say, I think that the 
timing on NTR is a little bit uncertain because, of course, it 
depends on how quickly our trading partners move. That is 
obviously an area over which we have very little control. But I 
think we do hope to see that process proceed apace. And if it 
does, then a vote sometime in the spring or late spring should 
be doable.
    Ms. Dunn. Good. That is good. That is very hopeful.
    Let me ask you a question on TRIPS. You mentioned that you 
believe sticking to these agreements is crucial to upholding 
the lines that we lay down under the Uruguay round. Could you 
bring us up to date on what is happening with TRIPS. How are 
the WTO countries doing on compliance? Are the least developed 
countries still pressing for an extension of the deadline? Are 
you planning to bring action against any country that does not 
meet the deadline? What is happening on TRIPS?
    Ambassador Barshefsky. Well, in December of last year I 
ordered my staff to undertake a review of compliance by all of 
the developing countries; that is, by any country whose 
transition expires January 1, 2000. That review is underway now 
so I do not want to talk about any one particular case.
    But by and large, we see, generally speaking, either 
compliance with the requirements or countries having put 
themselves in a position to comply, or countries that are 
desperately trying to comply but need some additional technical 
assistance, and we are pleased to work with them on that, and 
we have seen some, but relatively few, countries that simply 
appear to have no intention whatever to comply. Those are 
obviously the ones on which I think we need to focus first 
because these are countries for whom issues of technical 
assistance are not pertinent but who simply regret the 
commitment they made in the Uruguay round and do not intend to 
comply. That I think then merits a fairly strong response by 
the United States.
    For those countries that have tried to comply, that need a 
little more technical assistance, a little more help, sometimes 
able to be provided, frankly, by our industry, those countries 
obviously we want to work with. The object is not litigation, 
it is compliance. If we can work out a timely compliance plan, 
which we do for many, many countries including developed 
countries around the world, that probably brings us to where we 
will want to be over the coming months.
    And then, of course, for those countries that have 
undertaken very substantial and successful efforts to ready 
themselves for compliance, we see very good efforts having been 
made and we feel fairly comfortable about that group that 
compliance problems will not be a particular issue.
    Ms. Dunn. Thank you very much, Madam Ambassador.
    Mr. Chairman, I think it might be very useful to us, since 
the report of the bilateral agreement between the United States 
and China is classified, that we could have an executive 
session with the Ambassador maybe even between now and our 
hearing next week.
    Chairman Crane. I agree with you. I think it would be very 
valuable. We will try and work on it.
    Ambassador Barshefsky. I would be delighted.
    Chairman Crane. Mr. Nussle.
    Mr. Nussle. Thank you, Mr. Chairman.
    Madam Ambassador, can you tell us how many products have 
been held up in the European Union approval process for 
political reasons or, in other words, because products that 
have passed scientific reviews have failed to gain approval 
from the EU Council. Can you tell us about how many products 
there are currently?
    Ambassador Barshefsky. I cannot give you the number except 
to say that the EU has not approved a GMO variety since April 
1998.
    Mr. Nussle. And this is after it has passed scientific 
review?
    Ambassador Barshefsky. Yes. In other words, the issue in 
Europe has never been scientific review of those products for 
which GMO approval has been requested, whether corn varieties, 
or additional soybean varieties, some other more specialized 
varieties that are on tap now. The issue has never been 
scientific review because European scientists are generally in 
accord with our scientists that these foods provide no health 
risk. The issue has been a political issue in Europe.
    Mr. Nussle. Could you give us a brief description on your 
strategy, the administration strategy for dealing with this 
approval problem before the coming planting season.
    Ambassador Barshefsky. We have for a number of months now 
engaged the Europeans on this. President Clinton and President 
Proti have agreed to set up a high level group on the issue of 
product approvals, that group having met once already, with the 
hope that the EU can get its approval process back on track and 
functioning so that we can have greater assurance for our 
farmers that the EU process will in fact approve the varieties 
that have passed scientific scrutiny.
    Mr. Nussle. Will those assurances be ready before the 
planting season?
    Ambassador Barshefsky. We are pushing very, very hard at 
this juncture. The EU is aware of the concern about the 
planting season and the disruptive impact that their failed 
approval process has had on U.S. farmers. We will continue to 
push them very, very hard both in the context of this high 
level group as well as in the context of an additional biotech 
working group that we have.
    We also have in the U.S. an interagency process that 
involves all of our relevant agencies including the science-
based agencies, for example, FDA, as a means further to make 
sure the U.S. Government approach and position is well 
coordinated on these issues. So we are pushing very, very hard, 
particularly on the varieties that are pending now for 
clearance by the EU.
    Mr. Nussle. If that cannot be accomplished in the next few 
months, is a WTO case being contemplated?
    Ambassador Barshefsky. We will look at all of our options. 
The issue here is access on the basis of sound science and 
approvals on the basis of sound science. We believe that test 
has been met, European scientists believe that test has been 
met. The U.K. just issued a report, as you may know, in the 
case of beef hormones, for example, but also with respect to 
GMOs. The science is not an issue here. This is political. And 
so we will undertake a full review of all of our options and 
hopefully choose that option that will be most effective to get 
this process back on track.
    Mr. Nussle. I will tell you, and I will let the farm 
organizations speak for themselves because they obviously 
represent a diverse number of farmers and producers across the 
country, I will just speak for the folks that I have spoken to 
in my district, if this cannot be resolved, this is big.
    Ambassador Barshefsky. Yes, I understand that.
    Mr. Nussle. No, I want you to understand even more than 
what you may understand. And that is that this is going to 
erode, totally and completely erode, in my very humble opinion 
from one district in Iowa, the agricultural support that we 
need in order to maintain the support in Congress and across 
this country for fair trade and free trade in this world. I do 
not know how I can say it any stronger than I have just said 
it. And if a resolution on this matter cannot be achieved prior 
to planting, we are in trouble. We were just talking about the 
President on NTR with China. I mean, Katie bar the door when it 
comes to trade legislation if in fact there is erosion on the 
part of agriculture. And it won't just be the guys in the ties 
that represent the organizations here in Washington. It is 
going to be the guys on the combines that are going to be 
making that decision. And right now their support is a mile 
wide and an inch deep. It is not very strong.
    Finally, I would just give you the opportunity to respond 
to an accusation made here today by a very senior Democrat in 
the House of Representatives basically accusing you and the 
administration of pursuing the Chiquita banana case in the WTO 
because of an exchange of campaign contributions. If it had 
been made by a protester at the WTO, I would have maybe taken 
it a little bit differently than I would if it were a senior 
policymaker in this House of Representatives. The fact that it 
is from the Party that the administration represents is even 
more surprising. But it was a very direct and appeared to be 
somewhat factual accusation. I would just give you the 
opportunity to respond.
    Ambassador Barshefsky. I do not know what the accusation 
was, but I will tell you----
    Mr. Nussle. Well, the accusation was we are pursuing the 
Chiquita banana case because the administration took campaign 
contributions, period.
    Ambassador Barshefsky. The Chiquita banana case arises from 
a 301 petition filed by Chiquita, supported by Dole and the 
Hawaiian banana growers. We take 90 percent of the 301 
petitions filed. That is to say we turn away very few and only 
on the basis that the petitions did not meet the requirements 
of the statute or of the regulations, or that the petition 
itself was so ill-conceived it would surely lead to a loss at 
the end of the day and we give people an opportunity to 
withdraw their petitions when they realize that the petitions 
are completely inadequate for whatever reason. But other than 
that, USTR's history is we take about 90 percent, a little over 
90 percent of all of the petitions filed.
    Chiquita's petition was in good shape. It followed on two 
refusals by Europe to comply with two previous panel rulings 
which found their regime illegal under international standards. 
Now if we are not taking that case, what case is it that we are 
taking?
    So this is a substantive issue, as the panel recognized in 
the appellate body where we won again two more times. How many 
times do we have to win this case again and again and again? As 
the appellate body found, the European Union's policies were 
discriminatory, they violated Europe's WTO obligations, they 
violated international norms. And that is certainly proof 
positive that this was a case fought on the basis of the 
merits, and obviously the panels, now all four of them, decided 
on the basis of the merits.
    Mr. Nussle. Thank you. That was a very good response. I 
appreciate that. I wanted to give you that opportunity because 
I have heard you give that response before and I happen to 
agree with it. I am not aware of what campaign contributions 
she may be speaking of, but I will take that for whatever it is 
worth.
    Finally, I would just suggest that this may be indicative 
of what we are up against. That the opponents of trade will use 
both legitimate and illegitimate ways to try and forward their 
case. But I will suggest that there are some legitimate 
concerns, as you have outlined them today. And I only wanted to 
make you aware of the concerns of my constituents in Iowa about 
agriculture, in particular, the foods enhanced through 
biotechnology, and I appreciate your response.
    Thank you, Mr. Chairman.
    Chairman Crane. Thank you.
    Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman.
    Ambassador, it is a pleasure to have you here. Thank you 
for being so patient in answering all the questions. Before I 
ask any questions, I would like to just say that I appreciate 
your response that was made to some of the comments made by my 
colleague Mr. Levin earlier with regard to core labor standards 
and the environmental issues that you confront. I, too, believe 
that there is a way to try to resolve this if people talk, and 
I think you made a very valid point about using the right 
language. Sometimes we do send messages that hurt more than 
help. And I think the developing countries in a sense do have 
some claim for concern, but ultimately I think we all want to 
do the right thing and they understand that as well, that we 
are not trying to impose on them some type of condition that 
makes it difficult for them to compete.
    Let me ask you a little bit about FSC. I know you said the 
case is pending, you expect to hear fairly soon what the 
appellate body will rule, how it will rule. And to the degree 
that you can comment, because I know you said you were 
restricted in what you can say, give us a sense if the 
appellate body of WTO does rule erroneously, as I believe you 
are correct that it was an erroneous decision, if they uphold 
that erroneous decision. If, in fact, that is the case, and if, 
indeed, you are not able to resolve this through some type of 
settlement with the EU anytime between now and then, what is in 
the offing? Won't this lead to a general deterioration of our 
trade relations with the EU, and won't this make Congress 
somewhat suspicious of the WTO and how we proceed forward with 
it? I have a difficult time seeing how something as big and as 
important as FSC is to us can be allowed to just fester.
    Ambassador Barshefsky. Let me say as a general matter that 
because the appellate body is considering the case now, I am 
very reluctant to suppose or assume, even hypothetically so, 
that we might lose. We should win this case. That does not 
necessarily mean we will or we won't, but we should win the 
case on the basis that we believe firmly that the panel below 
erred both substantively and with respect to the background and 
facts of the case. So let me just start by saying that.
    Certainly, we have engaged the European Union on this case, 
we have from the beginning, because it is a large and important 
case. We take the view that the U.S. must comply with panel 
rulings. We have done so in all cases, even those that are 
politically sensitive. But recognizing how large this case is, 
we engaged the EU early on it by way of general discussion and 
we have continued to do that really all through the pendency of 
the action.
    I think certainly Europe is waiting for the appellate body 
ruling in the hopes that the panel will be affirmed. We are 
waiting for the appellate body ruling in the hope that the 
panel below will be reversed. And that is really the current 
status right now.
    Mr. Becerra. I see the temperature rising on bananas, on 
beef----
    Ambassador Barshefsky. Oh, this would dwarf that, there is 
no question about it.
    Mr. Becerra. Yes, it would. And for that reason, it would 
put us at an even more disadvantage competitively to some of 
our European counterparts in the corporate community. And if 
something is not done quickly, (1) I think you are going to see 
a deterioration of support for the WTO in Congress, and (2) I 
think you are going to find that it is going to be very 
difficult to deal in the future with the European Union.
    Is there something that you can tell us that leads you to 
believe that the Europeans are going to try to help us resolve 
this, given that in fact they must have accepted it back when 
in 1981-82 the changes were made that gave us FSC and it seemed 
that for the longest time they were accepting of it. Now I 
guess maybe because they lost in bananas and beef they are 
saying we will give you one back.
    Ambassador Barshefsky. Certainly I think Europe needs to be 
cautious because, depending on the ruling and the range of the 
ruling, many of Europe's own tax programs will be directly at 
risk. I do not think Europe necessarily thought this throughout 
as carefully as they should have before this action was 
brought.
    In addition, as you know, FSC arose from a settlement of 
the DSC dispute, a settlement which existed for 15 years. And 
so Europe having brought this action, we felt it was largely 
not just unexpected but that one had to question the motives 
and whether this was an attempt to try and balance the 
litigation scorecard. I obviously have no way of knowing. And, 
of course, there are many European companies that benefit 
directly from the FSC as well.
    Mr. Becerra. It almost seems an abrogation of the agreement 
we had when we went from DSC to FSC because they were a party 
to that.
    Ambassador Barshefsky. Yes. Certainly part of the 
argumentation before the panel in the appellate body is that 
this was a settlement entered into and essentially brought into 
the Uruguay round, and that as a settlement of a prior dispute 
agreed to by the parties to that dispute FSC does not 
constitute a subsidy that is prohibited under the rules or any 
other action that would be proscribed by WTO rules. And that is 
certainly one of the basic arguments that we made to the panel 
and that we have reaffirmed with the appellate body.
    And as I said, we will continue to talk to the Europeans on 
this issue. As you may know, following a dispute settlement 
case, the party that loses, which could be Europe in this case 
or the U.S., does have time within which to think about it. In 
the case of a losing party, one has a number of months in which 
to consider options related to compliance or settlement or some 
other means. And so this will not be a decision that comes into 
effect immediately in any event. But as I said, we are very 
focused on doing everything we can to see that the panel ruling 
below is overturned, as we believe it should be.
    Mr. Becerra. We urge a very vigorous defense and certainly 
a vigorous----
    Ambassador Barshefsky. Extremely vigorous defense, yes.
    Mr. Becerra [continuing]. And a vigorous search for any 
solution outside of that as well, because I think all of us are 
concerned about where this may lead. Thank you, Ambassador.
    Thank you, Mr. Chairman.
    Chairman Crane. Thank you.
    Mr. English.
    Mr. English. Thank you, Mr. Chairman. And Mr. Chairman, I 
want to thank you for the opportunity to participate in today's 
hearing.
    Welcome, Ambassador. I want to congratulate you as a 
participant in Seattle on what the Chairman felicitously 
referred to as the U.S. inflexibility on antidumping 
negotiations. I believe that our delegation took the right 
position. I believe that strong antidumping laws are essential 
to police our market in a way that allows Americans to support 
open trading laws. I believe this has been a settled issue 
negotiated and with concessions in the past in the WTO, and I 
want to congratulate you for resisting the drive by some of our 
trading partners, particularly the Japanese, to use this 
negotiation to weaken our trading laws.
    I was privy to a recent meeting which included Commissioner 
Lemee, and in that meeting the argument was advanced that 
reopening the antidumping code was necessary as a concession to 
the developing countries to get them to play in the WTO 
negotiations. It has been my impression that the narrow 
disciplined agenda that we put forward in Seattle included many 
things that were attractive to the developing world. Would you 
care to comment on whether reopening the antidumping code is 
really necessary to get those countries to join us?
    Ambassador Barshefsky. I think for most developing 
countries the issue is not U.S. antidumping law, the issue is 
agricultural market opening where many of these countries 
believe they have or can achieve comparative advantage in 
agricultural production but cannot possibly compete globally 
with heavy EU export subsidies on the very products they wish 
to grow or have grown but then cannot sell in world markets. 
This is the issue for most developing countries and most rank 
that as by far and away their top priority, absolutely their 
top priority.
    Certainly, on the question of dumping, we have some 
concerns and we do need to find a means of dialog with the way 
in which dumping laws are being handled in many other countries 
which do not have the procedural requirements we have or due 
process requirements. But the notion that we would in any way 
undertake any action that could weaken our trade laws I think 
is well understood around the world to be completely 
impossible, particularly as one looks at the relative openness 
of this market and the fact that, as the WTO concluded, we take 
in about 22 percent of the world's goods. Europe, which is 15 
countries, takes in about 19 or 20 percent. Japan takes in 6 
percent.
    The Japanese of course have focused on this issue and have 
demanded in the past a very extensive negotiation on dumping, 
largely we believe at the behest of their steel industry. I 
would suggest to Japan that restructuring their steel industry 
might be more in order than claiming that U.S. trade laws has 
in any way created a real problem for their industrial base.
    Mr. English. And my understanding is the implementation of 
the WTO antidumping code still allows us to have discussions 
with some of our trading partners that might lead to some 
refinements. In other words, don't we still have some wiggle 
room on that point?
    Ambassador Barshefsky. Yes, certainly. And certainly we 
want that kind of room. There are concerns on the part of some 
countries with respect to our implementation. We have to be 
willing to discuss that and address it. We have a range of 
concerns with respect to other country implementation and we 
would hope they would listen to our concerns and attempt to 
address those concerns. So in that regard, certainly a give and 
take can proceed, hopefully very productively so.
    We have made clear to our trading partners that we would 
not only be amendable to, but, indeed, would be very interested 
in such a give and take because there are an array of 
implementation problems we have faced. And in that spirit, we 
need also to take a look at implementation problems called to 
our attention.
    Mr. English. Thank you, Ambassador.
    Thank you, Mr. Chairman.
    Chairman Crane. Thank you.
    Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman.
    Madam Ambassador----
    Ambassador Barshefsky. Let me first of all say----
    [Brief sound system malfunction.]
    Mr. Watkins. I appreciate that. I want to say that we need 
to move rapidly, because I know this priority resolution is 
going to be coming to the Floor.
    Ambassador Barshefsky. Yes.
    Mr. Watkins. And a lot of my people feel like that a lot of 
foreign countries are being treated a lot better than they are, 
especially a lot of my cattle people. And I want you to know 
I'm, I want to invite you to come to Oklahoma one of these 
days. I think you might make a favorable impression on some of 
them that you are really working out there to try to do 
something about this unfairness and this unfair trade barrier 
there.
    Mr. Chairman, I appreciate the time, and your allowing me 
to be here and express this on behalf of all my constituents.
    Chairman Crane. Well, thank you, Madam Ambassador. And one 
quick question before you leave.
    The Interagency Council, when do you anticipate it will 
have completed its work?
    Ambassador Barshefsky. I don't want to put a date on it. 
I've just told my people that their instruction in this meeting 
is to get this process moving quickly and to come back to me in 
a rapid manner with specific recommendations.
    Chairman Crane. All right. Well, we thank you always for 
your participation and we look forward later in the week to 
participating further with you.
    Ambassador Barshefsky. Good. Thank you. Thanks so much, Mr. 
Chairman.
    [Questions, and their respective answers, submitted by 
Representative Dunn for Ambassador Barshefsky follow:]

Questions Submitted for the record by Congresswoman Jennifer Dunn for 
Ambassador Charlene Barshefsky

                              Background:

    Since a separate WTO Working Party was formed in 1992 to 
review Taiwan's accession, there has been an understanding that 
Taiwan may accede to the WTO, but only after China's accession. 
Taiwan believes that they should be judged on the merits of 
their case for WTO membership, independent of other factors. 
Taiwan is our seventh largest trading partner and purchases 
twice as many goods from the U.S. than China right now. 
Clearly, their accession will be good for the U.S. and the rest 
of the world community.

     Question for Barshefsky: I have used the term ``simultaneous 
   accession'' of China and Taiwan, which has drawn opposition from 
   China's Foreign Ministry. What I mean by that is the WTO General 
 Council should consider Taiwan's accession immediately following the 
consideration of China's accession during the same day's business. Will 
         the Clinton Administration push for such a timetable ?

    Answer:

    We have worked intensively with both Taiwan and China to 
achieve membership in the World Trade Organization (WTO) on 
strong commercial terms. This objective has driven the timing 
of our work in both accession negotiations. The United States 
has completed all of its negotiations with Taiwan for it to 
accede to the WTO. Other countries have also resolved their 
substantive issues with Taiwan. Some technical issues need to 
be resolved and final verification and approval of Taiwan's 
accession package remain to be done. While China's accession 
negotiations are not yet completed, China has recently reached 
bilateral agreements with most members of the Working Party. We 
are prepared to work intensively with China and other WTO 
Members to conclude the accession negotiations as quickly as 
possible. We anticipate that when the Working Parties on Taiwan 
and China's accession reach a consensus on their respective 
accession packages, the WTO General Council will approve both 
accession packages and invite them to become WTO members at the 
same meeting of the General Council. China has consistently 
stated that it has no objection to Taiwan's membership in the 
WTO and no intention to block its accession. Their primary 
concern is that China be admitted first. This is not a problem 
for Taiwan and can be accommodated by the procedure set forth 
above. Our objective is to have both of these important trading 
powers in the WTO and we do not believe that delaying either 
accession advances that objective.

                              Background:

    APEC has been pursuing a trade initiative known as Accelerated 
Tariff Liberalization, or ATL. This initiative identifies eight sectors 
for tariff liberalization and, since it involves wood and paper 
products, is very important to the Pacific Northwest. Last year, APEC 
was unable to reach a final conclusion on ATL since Japan was unwilling 
to liberalize on another of the ATL's sectors: fish products. The final 
solution was a joint statement by all APEC nations that the ATL 
negotiations would be pursued in the next trade round.

    Question for Barshefsky: Both the U.S. government and many U.S. 
companies have invested significant time and resources in pursuing the 
 ATL initiative. Can you briefly describe the negotiations in Seattle 
     with respect to ATL? What is being done to ensure that these 
                 negotiations continue to move forward?

    Answer:

    We are very appreciative of all the efforts made by U.S. 
industry to push the ATL initiative, initially with our APEC 
partners and in Europe last year. As a result of these efforts, 
it is evident that EU industry is quite interested in the ATL 
and recognizes the benefits of liberalization in these sectors. 
In the WTO preparatory process last year and at Seattle, we 
worked very closely with a number of our colleagues, including 
colleagues from APEC, Canada, New Zealand, Australia, Singapore 
and Hong Kong, to make early provisional implementation of the 
ATL initiative a part of more general market access 
negotiations on non-agricultural products as part of a new 
Round. The European Commission held the view that sectoral 
liberalization initiatives could only take place in the context 
of broader WTO market access negotiations, and expressed 
concerns (undefined) about the ATL coverage.
    We are continuing to consult closely with our private 
sector, and the ATL Coalition in particular, on next steps for 
ATL products and launching broader market access negotiations 
as part of a new Round. We have issued a Federal Register 
notice to obtain private sector views on broader market access 
negotiations in the WTO. Finally, we are continuing to press 
forward with the APEC non-tariff work programs in the ATL 
sectors as a way of maintaining APEC interest in the ATL 
sectors. This non-tariff work in APEC will help us to prepare 
for the broader non-tariff measures negotiations that will be 
part of the WTO market access negotiations.
      

                                


    Chairman Crane. You're more than welcome.
    And now I want to invite Susan Westin, the Associate 
Director of the International Relations and Trade, U.S. General 
Accounting Office, to come to the witness stand.
    Welcome, Ms. Westin. Your printed remarks, if your oral 
testimony exceeds roughly 5 minutes, will be made a part of the 
permanent record. So you may proceed when ready.

STATEMENT OF SUSAN S. WESTIN, ASSOCIATE DIRECTOR, INTERNATIONAL 
RELATIONS AND TRADE ISSUES, NATIONAL SECURITY AND INTERNATIONAL 
 AFFAIRS DIVISION, U.S. GENERAL ACCOUNTING OFFICE; ACCOMPANIED 
 BY BETH SIROIS, ASSISTANT DIRECTOR, AND NINA PFEIFFER, SENIOR 
                           EVALUATOR

    Ms. Westin. Mr. Chairman, Members of the Subcommittee, we 
are pleased to be here this afternoon to provide some 
observations about the WTO Ministerial Conference in Seattle. 
In my remarks, I will summarize what happened, why it happened 
and what lessons we can draw from the experience.
    With me this afternoon are two of my colleagues, Beth 
Sirois and Nina Pfeiffer. In addition to attending the 
Ministerial, we have had discussions with U.S. and foreign 
government officials and other WTO experts. The main message of 
my testimony is that significant differences among WTO member 
countries on several issues led to the failure of the 
Ministerial to launch a new round of multilateral trade 
negotiations. Notwithstanding the outcome, there are several 
lessons to be learned from the Seattle experience.
    Let me speak first to what happened. After 4 days of 
intensive talks, the Ministerial was suspended without agreeing 
on a round, and without issuing a ministerial declaration or 
any other formal documentation of its deliberations. As a 
result, the status of the Ministerial remains unclear.
    Although negotiations to further liberalize trade in 
agriculture and services are scheduled to begin this year, and 
in fact, the announcement just came out that it looks more 
positive they're going to start right away, progress may be 
slow because the agenda lacks a deadline for completion.
    As to why it happened, we concluded that there were two 
major reasons. First, the difference on important issues, both 
among the major trading countries and between developed and 
developing nations, were too large to be resolved in Seattle. 
For example, the United States wanted to pursue a narrow agenda 
in the new round, focusing on market access issues, while the 
European Union proposed including investment, competition 
policy and other issues in a broad framework for negotiations. 
In addition, there were differences on very sensitive issues, 
such as agricultural export subsidies.
    Developing countries also had concerns about the scope of 
the negotiations and several sensitive issues. For example, 
they sought more time to implement their Uruguay round 
commitments. In addition, they feared that addressing labor 
standards under the WTO was a veiled form of protectionism 
aimed at undermining one of the few competitive advantages they 
enjoy as low-wage producers. According to some officials from 
developing countries, the U.S. insistence on resurfacing the 
labor in Seattle and the President's remarks potentially 
linking labor standards to trade sanctions were 
counterproductive.
    The second major reason leading to the failure to launch a 
new round was the number of challenges faced by the 
negotiators, both in Seattle and in preparations leading to 
Seattle. In particular, efforts to balance efficiency with 
allowing the maximum participation of all WTO members and 
negotiations presented a challenge to reaching consensus. In an 
effort to include all WTO members, the Ministerial co-chairs 
set up five large working groups on the major issues. The 
working groups were to provide draft text on their issues to be 
brought together into a Ministerial declaration at the end of 
the conference.
    After 2 days of working group meetings, it was clear that 
the process was not moving toward consensus, and the 
traditional green room process began on Friday. By then, there 
wasn't enough time to work sequentially through the unresolved 
issues.
    We identified several factors that contributed to the 
challenges faced by the negotiators in Seattle. One major 
factor was the inherent weakness of the draft text used as the 
basis for negotiations. When WTO ministers arrived in Seattle, 
the draft declaration officially on the table was 32 pages long 
and contained nearly 400 bracketed items indicating 
disagreement among members. As one WTO official noted to us, 
negotiators had to build down, or remove text, to reach a 
consensus document. This is more difficult to do than building 
up, or negotiating to add desired language.
    A number of officials with whom we spoke said that hosting 
the Seattle Ministerial posed procedural challenges for the 
United States, as it is difficult to serve as both host and key 
participant. This job was made harder by the newness of the WTO 
team. The WTO Director General took office in September, and 
his principal deputies were named less than a month before the 
Ministerial.
    Finally, there are several lessons that could be learned 
from the experience in Seattle. One, efforts to launch a new 
round may have been premature. Many countries, due to political 
or other reasons, may not have been ready to launch a new 
round. Two, ministerial conferences are more likely to succeed 
if they address only a handful of politically difficult 
decisions, having reached consensus on most issues in advance. 
Three, the WTO needs to find ways to address the institutional 
challenges posed by increases in the number of and diversity of 
its members. And four, holding high profile WTO meetings in 
countries that are major trading partners, such as the United 
States, or the EU, may present difficulties.
    Mr. Chairman, this concludes my prepared remarks. We will 
be happy to respond to any questions you may have or, given 
time considerations, we are willing to respond to any written 
questions from you or Members of the Subcommittee.
    [The prepared statement follows:]

Statement of Susan S. Westin, Associate Director, International 
Relations and Trade Issues, National Security and International Affairs 
Division, U.S. General Accounting Office; accompanied by Beth Sirois, 
Assistant Director, and Nina Pfeiffer, Senior Evaluator

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today to provide some observations 
about the World Trade Organization's ministerial conference in 
Seattle that took place in December 1999. Specifically, my 
testimony will address (1) the outcome of the ministerial 
conference, (2) the factors contributing to the outcome, and 
(3) the lessons learned from the meeting.
    My observations are based on our past and ongoing work; our 
review of World Trade Organization and executive branch 
documents; related literature; discussions with experts on the 
World Trade Organization and international trade; and U.S. 
government, World Trade Organization, and foreign government 
officials from 14 countries. In addition, I along with members 
of my staff attended the Seattle ministerial conference.
    The ministerial conference, composed of the trade ministers 
of all the WTO member countries, is the highest decision making 
body in the WTO and is required to meet at least every 2 years. 
Ministerial conferences are intended to evaluate current trade 
agreements and set the agenda for future work with a 
ministerial declaration that identifies issues for negotiation 
and specifies how negotiations should proceed.
    The Seattle ministerial conference was to be particularly 
significant because it was expected to launch a major new round 
of negotiations and it was hosted and chaired by the United 
States for the first time. The core of the new round was to be 
negotiations on agriculture and services (such as 
telecommunications); these negotiations, referred to as the 
``built-in agenda,'' were already mandated to begin on January 
1, 2000. Ministers intended to decide on what other trade 
issues, if any, to include in the agenda for a new round. They 
also expected to review the implementation of past agreements 
and to address calls from nongovernmental organizations and 
some WTO members to improve the WTO's openness. In addition, 
they were to develop a plan to assist least developed countries 
in several ways, such as providing technical assistance to help 
them meet their trade obligations.

    Summary

    WTO member countries failed to meet their goal of launching 
a new round of multilateral trade negotiations at their 
biennial ministerial conference last December in Seattle. The 
conference was suspended without initiating a new round or 
issuing a ministerial declaration. No one factor, but a 
combination of circumstances, led to the impasse. However, two 
themes emerged. First, there was lack of agreement on many 
issues both among major trading partners and between developed 
and many developing countries on the eve of the ministerial 
conference. Disagreement centered on the scope of the round and 
stemmed from the sensitivity and complexity of the issues being 
addressed. Second, the Seattle negotiation process had inherent 
difficulties. For example, the document used as the basis for 
negotiations was a poor starting point for reaching consensus. 
It was a lengthy amalgamation of countries' divergent positions 
rather than a text reflecting members' common objectives. In 
addition, the negotiating process was hampered by the newness 
of the WTO leadership team. Further, the process was made 
difficult by the challenge of accommodating the needs and 
interests of a large and increasingly diverse WTO membership.
    Several lessons can be learned:
     Efforts to a launch a new round may have been 
premature.
     Ministerial conferences are more likely to succeed 
if they address only a handful of politically difficult 
decisions, having reached consensus on most issues in advance.
     The WTO needs to find ways to address the 
institutional challenges posed by increases in the number and 
diversity of its members.
     Holding high profile WTO meetings in countries 
that are major trading partners, such as the United States and 
the EU, may present difficulties.

    Background 

    The World Trade Organization (WTO) was established on 
January 1, 1995, as a result of the Uruguay Round of 
international trade negotiations. The WTO provides the 
institutional framework for the multilateral trading system. It 
administers rules for international trade, provides a mechanism 
for settling disputes, and provides a forum for conducting 
trade negotiations. The WTO succeeded the General Agreement on 
Tariffs and Trade (GATT), which had provided the institutional 
framework for world commerce since 1948. The 1994 Uruguay Round 
agreements brought agriculture, services, intellectual property 
rights, trade-related investment measures, and textiles and 
apparel under the discipline of multilateral trade rules for 
the first time and established a stronger dispute settlement 
process. Two of these agreements also mandated a ``built-in 
agenda'' for further negotiations on agriculture and services 
to commence January 1, 2000.
    Membership in the WTO has grown to 135 members, up from 
about 90 GATT members in September 1986, at the start of the 
Uruguay Round. Not only has there been an increase in 
membership, but also increased diversity in WTO members. 
Roughly 80 percent of the current members are developing 
countries, although some are at more advanced stages of 
development than others and thus they do not all have the same 
needs. According to WTO, virtually all of the 30 countries 
currently applying for membership are also developing nations 
or economies in transition. Unlike many other international 
organizations where decisions are based on a majority of member 
votes, decision-making in the WTO is largely based on consensus 
among member governments.
    There have been three ministerial conferences since the 
creation of the WTO: one in Singapore in December 1996, one in 
Geneva in May 1998, and the third in Seattle in December 1999. 
The WTO General Council makes major decisions in the periods 
between ministerial conferences. The Director General, chosen 
by members, heads the WTO Secretariat that supports the 
membership and the institution.
    The 1996 Singapore ministerial conference reviewed the 
implementation of the Uruguay Round agreements and considered 
proposals for trade issues to be addressed in the future. The 
ministers in Singapore reaffirmed their commitment to complete 
the built-in agenda and also addressed several trade issues 
that were previously outside the scope of detailed trade 
negotiations. Among other things, they authorized the creation 
of working groups to study transparency in government 
procurement, investment and competition, and agreed to continue 
ongoing analysis of trade and environment issues. The ministers 
in Singapore rejected attempts led by the United States to 
establish a working group on trade and labor, stating that this 
issue was best handled by the International Labor Organization.
    The Geneva ministerial conference coincided with the 50th 
anniversary of the GATT. Ministers agreed to begin preparing an 
agenda for further trade liberalization. Ministers also 
accepted President Clinton's offer that the United States host 
the next ministerial conference. Seattle was selected as the 
host city in January 1999.

           Seattle Ministerial did not Achieve its Objectives

    The ministerial conference failed to achieve its goal of initiating 
a new round of multilateral trade negotiations with a ministerial 
declaration. After 4 days of intensive talks, the conference was 
suspended on December 3 without agreeing on a round, or issuing a 
ministerial declaration or any other formal documentation of its 
deliberations. As a result of the inconclusive nature of the meeting, 
the status of the ministerial conference remains unclear. For example, 
members have not decided if and when the conference might reconvene. 
Even without a new round, negotiations to further liberalize trade in 
agriculture and services are scheduled to begin in the year 2000 under 
the Uruguay Round agreements' built-in agenda. Progress on these 
negotiations, however, may be slow, partly because the agenda lacks a 
deadline for completion. The negotiating impasse also left several 
issues unresolved, such as addressing some developing countries' 
concerns about expiration of certain Uruguay Round agreement deadlines.
    In a brief statement at the end of the meeting, the Conference 
Chair, U.S. Trade Representative (USTR) Charlene Barshefsky, noted that 
the issues before WTO ministers were complex, and divergences too wide 
to be bridged rapidly. Ambassador Barshefsky stated that it was the 
collective judgement of those present that it would be best to, ``take 
a time out, consult with one another, and find creative means to finish 
the job.'' She then announced that the ministers had agreed to suspend 
the work of the ministerial conference. In the interim, the Chair asked 
WTO Director General Mike Moore to consult with delegations in an 
effort to bridge differences, develop an improved decision-making 
process, and prepare for a successful conclusion of the ministerial 
conference.
    The Chair and other delegations emphasized that the progress that 
was made at Seattle would not be lost. But those assurances were 
quickly dismissed by other participants, who refused to ``freeze'' 
their positions and said that any draft texts of a declaration on the 
table at Seattle were no longer valid. Even if members were to agree in 
principle to restart negotiations from where ministers left off at 
Seattle, no text reflects the state of countries' positions at the end 
of the day.
    One outstanding issue due to the suspension of the Seattle meeting 
concerns developing countries' efforts to delay their end-of-1999 
deadlines for conforming to certain provisions in a number of Uruguay 
Round agreements, such as those on intellectual property rights and 
investment measures. The WTO General Council met on December 17 but 
could not agree on whether to grant extensions for all developing 
countries, or to consider them on a member-by-member basis. The General 
Council postponed until early 2000 a decision on how to proceed. In the 
meantime, WTO members were asked by the General Council Chairman to 
exercise restraint and understanding in dealing with these deadlines. 
USTR officials told us that the United States retains the right to 
bring cases based on the deadlines, which have since passed.

            No one Factor Contributed to Ministerial Outcome

    No one factor, but a combination of circumstances, led to 
the WTO's inability to launch a new round. Nonetheless, 
seemingly unbridgeable gaps on major issues both among the 
major trading partners and between developed and many 
developing countries were at the root of the outcome of the 
ministerial conference. First, disagreements centered on the 
scope and direction of a new round. They also stemmed from the 
increased sensitivity and complexity of the issues on the 
table. Further, Seattle negotiators faced inherent difficulties 
in their negotiation process both in Seattle and Geneva. These 
included the challenge of accommodating the needs and interests 
of a large and increasingly diverse WTO membership. In 
addition, negotiators were working from an unwieldy draft text 
symptomatic of the lack of agreement among countries in Geneva 
on the eve of the ministerial meeting. Further, U.S. and 
foreign officials noted that WTO members' selection of a new 
Director General earlier in the year had been lengthy and 
divisive. This experience left members without leadership 
during a good part of their preparations for Seattle and 
lingering hard feelings. Adding tension to a difficult 
situation, protesters marching against the WTO in Seattle 
during the week disrupted the proceedings.

    No Agreement on the Scope of Negotiations

    U.S. and foreign officials with whom we met said that 
fundamental differences between the major trading countries 
contributed greatly to the ministerial conference's ultimate 
lack of consensus. The United States wanted to pursue a narrow 
agenda in the new round, while the European Union (EU) and 
Japan promoted a broad framework for negotiations to bring many 
new areas under international disciplines. Officials we 
interviewed generally felt that without agreement among these 
major players in international trade, it would be impossible to 
build consensus among the rest of the members.
    The United States favored limiting negotiations primarily 
to address market access concerns and to focus on the areas of 
agriculture and services as called for under the Uruguay Round 
agreements. With the backing of the other major agricultural 
exporting countries, known as the ``Cairns Group,'' the United 
States insisted that negotiations on agriculture address a 
number of tough issues, including the elimination of export 
subsidies and substantial reduction of trade-distorting farm 
supports. Such far-reaching goals in agriculture were difficult 
for the EU to accept. According to European officials, they 
simply could not support language calling for the elimination 
of agricultural export subsidies as the starting point of 
negotiations. Instead, the EU viewed the new round as an 
opportunity to establish international rules in other areas of 
the global trading system. In addition to agriculture and 
services, the EU proposed including investment, competition 
policy, government procurement, and other issues in a broad 
framework for negotiations.
    Japan largely supported the EU's position on these issues. 
Although U.S. negotiators indicated support for continued study 
of investment and competition policy by WTO working groups, the 
United States and many other WTO members were unwilling to 
include these issues in the negotiating agenda.
    In addition to differences among the major trading 
countries, there was also a serious gap between developed and 
many developing countries on the scope of a new round. Like the 
United States, developing countries generally backed a narrower 
scope for negotiations. Although developing countries' 
positions differed on some issues, many of them called for a 
reassessment of the commitments of the Uruguay Round 
agreements. The United States did not want to reopen existing 
agreements to new negotiations. Some developing countries felt 
they had received few benefits from the Uruguay Round and had 
found it difficult to meet their obligations under its 
agreements. For example, certain developing countries insisted 
they lacked the financial and technical resources to implement 
the complex requirements called for under the intellectual 
property agreement. Developing countries also wanted to re-
negotiate areas of the Uruguay Round, such as the agreement on 
textiles that they argued had not given them the benefits they 
had anticipated. U.S. negotiators indicated they would consider 
ways of helping developing countries meet their Uruguay Round 
commitments on a case-by-case basis, but they rejected any 
attempt to reopen negotiations on the hard-fought agreements.
    Finally, officials from some developing countries we 
interviewed noted that 5 years did not provide enough time for 
them to cope with the changes mandated under the Uruguay Round. 
Given the difficulties they were having in implementing the 
Uruguay Round agreements, many of these countries expressed 
reservations about undertaking further trade liberalization. 
One developing country official remarked that in comparison 
with the situation in 1994 when the Uruguay Round was 
concluded, starting a new round at this time would be 
considerably more difficult. In 1994, the ideas of market 
reforms and trade liberalization were still fresh and held 
tremendous promise. It was also a time of economic growth in 
many of the developing countries engaged in the negotiations. 
The current situation is very different. Much of the developing 
world is going through a difficult time economically, even 
though many countries have already undertaken far-reaching 
market reforms and trade liberalization.

    Sensitivity and Complexity of Issues Impeded Progress

    The most sensitive and complex area of negotiations between 
the EU on the one hand and major agricultural exporters 
including the United States on the other was on agriculture. 
Although the EU has been reducing subsidies to agriculture 
since the Uruguay Round, it remains by far the world's largest 
user of agricultural export subsidies.\1\ In the WTO, the 
United States and other major agricultural exporting nations, 
such as Australia, Brazil, and Canada, have put increased 
pressure on the EU to abandon its reliance on export subsidies. 
Export subsidies, however, are a key mechanism in the EU's 
Common Agricultural Policy. The Common Agricultural Policy is 
intended to preserve farm incomes and rural economies by 
supporting high domestic prices for a wide variety of 
agricultural commodities and products. EU member states have 
taken a very strong position on maintaining the Common 
Agricultural Policy, which is a central element in the EU's 
institutional system and is regarded as essential to its 
cohesiveness.
---------------------------------------------------------------------------
    \1\ See Commitments by the European Union and the United States to 
Reduce Agricultural Export Subsidies (GAO/NSIAD-99-198R, June 18, 1999) 
for more details.
---------------------------------------------------------------------------
    Like the EU and its position on agricultural export 
subsidies, the United States was virtually isolated on the 
issue of antidumping regulations in the negotiations. Major 
trading partners like Japan and Korea, as well as some 
developing countries, called for reconsideration of the 
agreement on anti-dumping reached under the Uruguay Round. 
These countries felt that the current antidumping rules allow 
countries to use trade remedies to unfairly protect certain 
sectors. The United States argued that re-opening the complex 
agreement was premature and risked weakening the strength of 
the existing U.S. anti-dumping regime. U.S. negotiators said 
they would consider holding discussions on how WTO members were 
implementing the agreement's procedural requirements, but this 
U.S. offer attracted limited support.
    Developing countries were very concerned about U.S. and EU 
initiatives to bring labor into the WTO. They feared that 
addressing labor standards under the WTO was simply a veiled 
form of protectionism aimed at undermining one of the few 
competitive advantages they enjoy as lower-wage producers. At 
the Singapore ministerial conference, it had been agreed that 
labor standards were best addressed in the International Labor 
Organization rather than in the WTO, and many developing 
countries felt the issue had been put to rest. According to 
some officials from developing countries, the U.S. insistence 
on resurfacing the issue of labor in Seattle and the 
President's remarks potentially linking labor standards to 
trade sanctions were counterproductive.

    Seattle Negotiation Process had Inherent Difficulties

    The difficult task of accommodating the needs and interests 
of a large and increasingly diverse WTO membership hampered 
progress in Seattle. Efforts to balance efficiency with 
allowing the maximum participation of all WTO members in 
negotiations presented a challenge to reaching consensus.
    In an effort to give all WTO members the opportunity to 
take part in the negotiations, Chairperson Barshefsky and 
Director General Moore set up five large working groups on the 
major issues including agriculture, market access, 
implementation, Singapore issues (such as investment), and 
systemic issues (such as the structure of the WTO). The working 
groups were open to all WTO member delegations and convened on 
the second day of the conference. Working group chairs--trade 
ministers selected in Seattle--were to facilitate consensus and 
refine the Geneva draft text into a consensus document. Next, 
working group consensus texts were to be brought together later 
in the week to produce a complete ministerial declaration to be 
issued at the end of the conference.
    Ultimately however, the working groups were not able to 
achieve the necessary consensus to avoid the more traditional 
less inclusive ``green room'' process.\2\ Chairperson 
Barshefsky had told ministers at a meeting on Wednesday that 
she intended to proceed with the large working groups, but if 
they were unsuccessful she would initiate a green room to 
facilitate consensus. After 2 days of large working group 
meetings, the green room process began Friday morning, the last 
day of the conference.
---------------------------------------------------------------------------
    \2\ Traditionally, negotiations have taken place among a smaller 
number of key WTO members, which would work out privately some of the 
more difficult compromises. This smaller group negotiation of 20-30 
members is known as the ``green room'' process.
---------------------------------------------------------------------------
    One difficulty in achieving consensus may have been that 
the chairpersons of the working group meetings were not in 
place until Tuesday during the ministerial conference. This may 
have prevented parts of the leadership team from effectively 
preparing for their roles--such as developing compromise texts 
and meeting with key delegations before Seattle--as some have 
claimed. Officials said that it had been difficult to find 
chairpersons because trade ministers had to volunteer their 
time to lead the sessions as opposed to their own country 
delegations.
    The green room had only 1 day to work out compromises 
across the range of unresolved issues and then gather the 
support of the rest of the delegation. Furthermore, the green 
room worked sequentially--issue by issue. Negotiators began in 
the morning with agriculture and spent until mid-afternoon on 
this issue. Although many officials said that the green room 
did make progress in agriculture, others argued that too much 
time was spent on this issue to the exclusion of others. 
However, officials expressed mixed views about whether 
additional time would have resulted in consensus on a round. 
Some said an additional day would have sufficed with the 
progress made in agriculture, while others were more 
pessimistic or said outright that no agreement could have been 
reached.
    Despite efforts to the contrary, some countries still 
expressed frustration about being left out when the 
negotiations shifted to the green room. In fact, a group of 
Latin American and Caribbean countries and a group of African 
countries stated publicly in Seattle that they would reject the 
outcome of these smaller sessions. However, some officials 
noted that a green room process involving a smaller number of 
countries is necessary to efficiently handle the negotiations. 
Some said the particular problem with the green room process in 
Seattle was that countries were selected to participate in an 
ad hoc, informal manner. They recommended a more formalized or 
transparent process of determining the members invited to 
participate in the green room.
    A number of officials with whom we spoke said that hosting 
the Seattle WTO ministerial meeting posed both substantive and 
procedural challenges for the United States, given its large 
stake in the world trading system. First, perceptions about the 
U.S. role as chair may have affected the negotiating dynamic. 
For example, it may have raised questions about U.S. neutrality 
in brokering compromise, or raised WTO members' expectations 
about U.S. willingness to make concessions to ensure the 
ministerial conference's success. Second, the United States was 
wearing two hats, that of host and key participant, a difficult 
job that was made harder by the newness of the WTO team and the 
number of issues to be resolved at Seattle. Overall, several 
U.S. and foreign officials said that a major trading nation 
hosting such meetings inevitably poses problems.
    Another major factor affecting the outcome of the Seattle 
negotiations was the inherent weakness of the draft text used 
as the basis for negotiations. When WTO ministers arrived in 
Seattle in late November, the draft declaration officially on 
the table was some 32 pages long and contained nearly 400 
bracketed items indicating disagreement among members. The 
draft was, in fact, an amalgamation of all the proposals, or 
position papers, members had submitted to the WTO General 
Council during their 15-month, pre-Seattle preparatory process. 
The problems with the draft conveyed the wide differences over 
substance and philosophical approach that remained at the 
conclusion of those preparations. Also, one WTO official noted 
that because the text included many strongly held competing 
proposals, negotiators had to ``build down,'' or remove text, 
to reach a consensus document. In his view, this is more 
difficult to do than ``building up,'' or negotiating to add 
desired language. Thus, he believed, in Seattle, countries 
automatically perceived agreeing to remove text as a loss.
    Contributing to members' inability to reach consensus 
before Seattle were the difficulties they had experienced in 
selecting a new Director General. In Geneva in early 1999, WTO 
members had had great difficulty reaching consensus on a new 
Director General, whose 4-year term had expired. There were two 
final candidates, Mike Moore from New Zealand and Supachai 
Panitchpakdi from Thailand, from a developed and developing 
country, respectively. Ultimately, members selected both 
candidates to serve a split term, with Mike Moore serving 
first. Many U.S. and foreign officials said that the 
divisiveness of that experience had dampened the mood for 
compromise in Seattle.
    In addition, the lengthy and contentious selection process 
left WTO members without leadership for 5 of the 11 months they 
had available to prepare for Seattle. Mike Moore did not take 
the helm at the WTO until September, when drafting of a 
declaration started in earnest. His principal deputies were 
named less than a month before the WTO ministerial conference. 
While the WTO is largely a member-driven organization, the WTO 
Director-General and his deputies can play an important role in 
facilitating consensus and organizing work so as to ensure 
maximum progress. The diversity of member interests and lack of 
institutional leadership meant that fewer informal, consensus-
building meetings took place both in Geneva and Seattle.
    During the ministerial conference, nongovernmental 
organizations representing labor, the environment, and other 
interests demonstrated and marched against the WTO in the 
vicinity of the Seattle convention center. The protests 
interfered with the convention by causing delays and dampening 
the general mood among the delegates but were not a major cause 
for their ultimate inability to launch a new trade round. The 
most frequent comment we heard from foreign government 
officials was that the protests cost them 1 to 2 days of work. 
Some foreign officials attending the ministerial conference 
said that limitations on moving safely about the city 
interfered with delegates' normal ability to resolve 
differences through informal social contacts. Another foreign 
embassy official said that, while not a deciding factor, the 
protests raised questions about the U.S. ability to conduct 
trade negotiations without being unduly influenced by domestic 
politics. Overall, however, delegates did not believe that the 
protesters changed the outcome of the conference.

    Lessons Learned

    Several lessons can be learned from the experience in 
Seattle:

     Efforts to launch a new round may have been 
premature. Countries, for various reasons, may not have been 
ready to launch a new round. Due to current strong domestic 
concerns, the EU and United States each found it politically 
difficult to make concessions and exert leadership. Many 
developing countries were resistant to calls for the WTO to 
address new issues such as labor and skeptical about the 
benefits of the last round.
     Ministerial conferences are more likely to succeed 
if they address only a handful of politically difficult 
decisions, having reached consensus on most issues in advance. 
WTO members had not reached agreement on most issues on the eve 
of the conference. As a result, ministers in Seattle faced a 
long list of unresolved items. This left ministers with an 
overwhelming task to be accomplished within a short time frame. 
Efforts to sort through and agree upon a manageable number of 
issues should be made before a ministerial conference takes 
place.
     The WTO needs to find ways to address the 
institutional challenges posed by increases in the number and 
diversity of its members. The Seattle negotiations demonstrated 
the importance of taking into account the different views of 
the WTO's large and diverse membership on issues such as the 
scope and nature of any further trade liberalization. Since the 
ministerial conference, the WTO Director General has been 
consulting with WTO member governments on ways to help 
developing countries engage in world trade and has been 
examining how the WTO can better gauge and act on its varied 
members' interests.
     Holding high profile WTO meetings in countries 
that are major trading partners, such as the United States and 
the EU, may present difficulties. It is not easy for major 
trading countries to host ministerial conferences, given their 
significant interests in international trade and possible 
concerns about their influence on the negotiating agenda.

----------------------------

    Mr. Chairman and members of the subcommittee, this 
concludes my prepared remarks. I will be happy to respond to 
any questions you may have.

    Contacts and Acknowledgement

    For future contacts regarding this testimony, please call 
Susan Westin or Beth Sirois at (202) 512-4128. Individuals 
making key contributions to this testimony included Nina 
Pfeiffer, Howard Cott, Kim Frankena, Juan Gobel, Richard 
Seldin, and Tim Wedding.
      

                                


    Chairman Crane. Thank you very much, Ms. Westin.
    Let me put a quick question to you, and that is, how 
isolated do you think the U.S. is in its insistence that 
dumping with the exception of the agreement's procedural 
requirements be off the negotiating table in the new round?
    Ms. Westin. Well, from our experience in Seattle, and we 
attended many of the working groups and some of the press 
conferences where they talked about what was going on with the 
negotiations, our experience was that the United States was 
completely isolated. I think in one instance it was referred to 
134 to 1 on this issue.
    Chairman Crane. And on what basis did the USTR believe that 
developing countries would be willing to launch a new round of 
trade negotiations?
    Ms. Westin. In the ministerial conference in Geneva in May, 
1998, many countries, most countries had expressed their 
willingness to launch a new round. But the developing countries 
definitely wanted on the agenda a re-examination of their 
implementation of the existing commitments under the Uruguay 
round. And I think that in addition to some of the market 
access issues, particularly on agriculture for them, as the 
Ambassador referred to, I think there was some interest in 
launching a round, but it was clear that that was one of the 
things they wanted on the agenda.
    Chairman Crane. Well, with regard to developing countries 
and negotiations, the Uruguay round on textiles, they, as I 
understand it, believe the United States has not given them the 
benefits that they anticipated and how much liberalization has 
taken place in that sector?
    Ms. Sirois. I believe some liberalization has occurred. I 
think more is, I think more textile quotas that the U.S. has 
imposed are due to be eliminated in January 2002. However, most 
U.S. quotas will not be eliminated until 2005.
    Chairman Crane. Mr. Levin.
    Mr. Levin. Well, I wasn't going to ask any questions. Our 
other panelists have been waiting patiently.
    I just want to say to you, though, I was at Seattle from 
beginning to end. And I was there most of the hours. And I must 
say, I think your perspective on the attitude of the countries 
toward antidumping are not what I heard. If you ask the 
countries to rank their priorities, and maybe you would agree 
with this, I think all but a few would have ranked opening up 
antidumping rather low.
    The Japanese had it quite high, very high, maybe the 
highest. But other than the Japanese and a few other countries, 
I can't think of any other nation that would have ranked it 
very high. Can you?
    Mr. Westin. No, I don't disagree with you, Mr. Levin, in 
terms of ranking it as a priority. But I understood Mr. Crane's 
question to be where countries fell on the position. I think 
that's a slightly different question.
    But I agree, I didn't hear it as a particular priority 
issue.
    Mr. Levin. So to say we were isolated, I think, this is the 
intensity level of other nations. They weren't, except for a 
few. And my reaction to the Japanese on dumping, those who dump 
don't like our antidumping laws. And they dumped steel, and I 
say this as someone who did not vote for the quota bill, 
because it violated our WTO obligations. But Lord, it's clear 
they dumped. And we had to do something, and we finally did, 
under antidumping laws, though it was quite late.
    And a few other countries that dump don't like it. Some of 
them aren't in the WTO. And that's why we had to have, 
negotiate some major antidumping provisions, for example, with 
China, which also dumped steel here in a dramatic sense. And in 
terms of textiles, there's been a major change in that area, 
and I don't think anyone should ignore the fact that we're 
facing increased competition. And the question is what we do 
about it and where it comes from.
    But I think the worst way to handle problems is to ignore 
that certain dynamics exist, and that the quotas are going off, 
as we all know. So anyway, I'm glad for your response in terms 
of antidumping. Because somehow the notion is that a country 
that protects itself against an unfair trade practice of 
another country is protectionist. The protectionist one is the 
one that violates fair rules. And the WTO specifically permits 
U.S. antidumping laws. In fact, we could strengthen 201 further 
within WTO structures.
    Thanks very much.
    Chairman Crane. Thank you.
    Mr. Becerra.
    Well, you get off the hook easy then, Ms. Westin. But we're 
sorry for the duration and the disappearance of some of our 
colleagues here. It's been a longer day thus far than we 
anticipated. But we thank you so much for your participation.
    Ms. Westin. Thank you.
    Chairman Crane. And with that, I next would like to call 
our panel one, Gary Hufbauer, Reginald Jones Senior Fellow, 
Institute for International Economics; Dale Hathaway, Executive 
Director, National Center for Food and Agricultural Policy, and 
Chairman of the Agriculture Policy Advisory Committee; Thomas 
M.T. Niles, President, United States Council for International 
Business; Lori Wallach, Director, Public Citizen's Global Trade 
Watch; and Frank Kittredge, President, National Foreign Trade 
Council.
    We have someone also that is substituting for John Sweeney, 
President of the AFL-CIO, who did not make it. Do we have your 
name, sir?
    Mr. Trumka. Richard Trumka, Secretary-Treasurer of the AFL-
CIO.
    Chairman Crane. Rich Trumka. And do we have a--very good.
    So we will proceed in the order that I presented you, and 
please try and keep your oral testimony to 5 minutes or less, 
and all written testimony will be made a part of the permanent 
record. And with that, we yield to Mr. Hufbauer.

STATEMENT OF GARY CLYDE HUFBAUER, REGINALD JONES SENIOR FELLOW, 
             INSTITUTE FOR INTERNATIONAL ECONOMICS

    Mr. Hufbauer. Thank you very much, Mr. Chairman.
    The WTO is blocked, and the overriding reason is simple. 
The Congress and the country are deeply divided on the way to 
shape the competing force of globalization.
    For the United States, the open economy ranks as one of our 
three great engines of growth. The other two are the flexible 
economy and information technology. These three engines have 
brought us a remarkable period of low inflation, very low 
unemployment and rising productivity, even after 8 years into 
the boom.
    But a prosperous and dynamic economy has losers as well as 
winners. Moreover, our trading partners do not necessarily 
embrace values that are deeply held in the United States 
concerning environment and labor standards. These two issues, 
more than any others, in my opinion divide the Congress and the 
America people on WTO, on NAFTA, on China and on other trade 
agreements.
    Today, I'd like to spend my few minutes on urging solutions 
to these two critical issues. Both solutions can be made in 
America. They do not require fresh international negotiations. 
They only require agreement by the Congress and the President.
    The first solution, I commend to you, is degressive wage 
insurance, namely, a make-up payment lasting 3 years for a 
portion of FICA wages lost by all dislocated workers. The make-
up would start at 75 percent and gradually diminish to 25 
percent in the third year. This wage insurance would be the 
same whatever the reason for dislocation--technology, 
restructuring, or trade.
    Statistics indicate that dislocated workers today lose 
under 5 percent of their income when they move to a new job. 
That's much lower than it was 10 years ago, and the reason is 
our very strong economy.
    Let me turn now to environmental and labor standards. I 
argue that we should move the central debate out of the WTO and 
into a U.S. commission. The commission would be charged with 
developing appropriate environmental and labor labels and the 
underlying standards for their use. With appropriate labeling, 
household consumers and industrial buyers could make an 
informed choice between goods and services that were produced 
anywhere in the world in full accordance with the standards, or 
not in accordance with the standards.
    This approach would represent a generalization of the 
approach recently adopted in the biosafety protocol. A similar 
approach has already been used for tuna, apparel, athletic 
shoes, lumber products and others. It would not be designed to 
afford protection against imports.
    The commission I envisage would be an independent 
commission with distinguished members. It would categorize 
goods and services in a simple two-by-two matrix. One dimension 
is whether the good or service requires a voluntary label or a 
mandatory label. The other dimension is whether the label can 
be provided by one or more of the private labeling services 
which already exist--such as Underwriters Lab and many, many 
others--or whether a new government label is required.
    In creating labels and in specifying the underlying 
standards, the commission would hold hearings open to all 
interested parties. There would a very, very sharp differences, 
very honest differences. The AFL-CIO might take a position on 
labor standards that should be embodied in the label that 
differed sharply from the position rendered by, for example, by 
apparel importers.
    But it would be a domestic debate. And I think this debate 
can and should take place in a domestic forum. And it can be a 
debate that is settled by a U.S. commission.
    If we have a solution along these lines, I think the way 
would be clear for us to go forward in the WTO and in other 
trade agreements. Thank you very much.
    [The prepared statement follows:]

Statement of Gary Clyde Hufbauer, Reginald Jones Senior Fellow, 
Institute for International Economics

     World Trade After Seattle: Implications for the United States

    Seattle leaves a huge question mark over the U.S. role in 
world trade policy. Faulty preparation and flawed tactics were 
abundant--both in the street and between the delegations. The 
Battle of Seattle may acquire the same instructive value for 
future diplomats as Pearl Harbor has for military officers.
    But this Policy Brief is not about preparation and tactics. 
The Seattle outcome might have been far different--if the U.S. 
Trade Representative had not swept concessions off the table 
months before the ministerial conference. Or if the police had 
cordoned downtown Seattle on Monday. Or if President Clinton 
had left the phrase ``trade sanctions'' out of his Tuesday 
interview. Or if France had agreed on Friday to the eventual 
elimination of agricultural export subsidies. But this Policy 
Brief is not about ``might have beens.''
    Instead, this Policy Brief is an attempt to size up the 
direction of world trade policy after Seattle. In particular, 
it focuses on strategies that open market forces might adopt to 
regain the initiative.

   World Trade Game Score (since WTO 1994): Backlash 7, Open Market 3

    By my score, the global Backlash forces, in the United States and 
elsewhere, have enjoyed seven victories since the WTO agreement was 
reached in Marrakesh in 1994. They defeated renewal of U.S. ``fast-
track'' negotiating authority twice (scored only once in my count). In 
addition, the Backlash forces have stalled the Free Trade Agreement of 
the Americas (FTAA) in the Western Hemisphere and have slowed European 
Union enlargement. Kindred forces in Japan defeated the ``Early 
Voluntary Sectoral Liberalization'' proposals in the Asia Pacific 
Economic Cooperation forum (APEC) at the Kuala Lumpur meeting in 
November 1998. Together with the French (concerned about U.S. cultural 
imperialism), the nongovernmental organizations killed the Multilateral 
Agreement on Investment (MAI) in December 1998. Meanwhile, the U.S. 
Congress has stalled a twin vote on NAFTA parity for the Caribbean 
Basin countries (Caribbean Basin Initiative [CBI] Parity) and the 
Africa Growth and Opportunity Act (AGOA). From a media exposure 
standpoint, their crowning glory was Seattle.
    Against this count, the Open Market forces have achieved three 
important victories since the WTO was established in 1994. They signed 
off on the Information Technology Agreement at Singapore in December 
1996. They crafted the Basic Telecommunications Agreement in February 
1997. And they adopted the Financial Services Agreement in December 
1997. These were all solid achievements--even if they were not media 
spectaculars.

    A Rest Stop Or a Turning Point?

    Ten years from now, Seattle could be seen as only one more pause in 
the long march toward open markets. The march that began in 1947 with 
the establishment of the GATT has been interrupted many times. Europe 
had a difficult time negotiating current account convertibility in the 
1950s. Oil shocks in the 1970s threatened the world trading system. 
Agriculture was particularly tough in the Uruguay Round. Yet on each 
occasion, progress resumed.
    On the other hand, ten years from now, Seattle could be seen as the 
turning point--the event that marked the end of the policy-driven open 
markets agenda for much of the world. If this is the outcome, many 
countries could build new barriers, especially in areas not already 
covered by international rules (such as financial services and e-
commerce). Three points are worth making in handicapping ``rest stop'' 
versus ``turning point.''
    First, the Backlashers have not yet succeeded in rolling back 
liberalization. NAFTA stands and prospers. Mercosur has so far survived 
Brazil's currency devaluation. In the aftermath of the Asian crisis, 
none of the ASEAN members nor Korea has reversed its trade commitments. 
In the tax arena, more legislators are worried about ``runaway 
headquarters'' (Chrysler/Daimler Benz) than ``runaway plants.'' The 
Tobin tax and its kissing cousins remain academic toys.
    But in the aftermath of Seattle, the Backlashers can claim three 
achievements. They enlisted sympathizers who want the WTO to encompass 
moral values, not just economic virtues. In the process, they turned 
trade and investment talks into a political ``third rail'' (to borrow 
Marc Noland's phrase). And they probably added years to the life 
expectancy of stratospheric agricultural barriers, sky-high textile and 
apparel tariffs, the U.S. antidumping laws, and other formidable 
barriers.
    Make no mistake: rollback is their goal. Hard-core labor 
Backlashers (fortified by sympathy from Clinton) want wide latitude to 
impose trade sanctions against offensive production processes. They 
want to extend textile and clothing quotas well beyond the 2005 phase-
out date. They want tougher antidumping laws, and easier access to 
normal safeguards. They welcome capital controls. In time, they will 
resurrect the Burke-Hartke concept (dating from the early 1970s) of 
imposing import quotas and heavier taxes on the foreign operations of 
multinational firms. The ``new'' Backlashers want to put new trade 
agreements in peril until social issues are addressed. Both Backlash 
camps would dearly love to rewrite or even dissolve NAFTA.
    Unless the Open Market forces regroup and adopt a winning strategy, 
``turning point'' seems more plausible than a ``rest stop.''

    Next Battle: China

    China is the next battle and it could prove decisive. It is hard to 
know how China and the WTO intersected in the minds of top 
administration officials, but three scenarios are plausible.
     First scenario: Clinton may have cut an implicit behind-
the-scenes deal with AFL-CIO leaders: I'll trash Seattle and you don't 
trash China. A deal along these lines would give something dear to 
business (better access to Chinese markets) and something dear to the 
AFL-CIO (no new trade talks without labor sanctions). From what we know 
about the sequence of events, this scenario seems far more plausible as 
an after-the-fact rationale for hopeless fumbling in Seattle than a 
Machiavellian before-the-fact game plan. It is not at all clear that 
the AFL-CIO leaders will sign on to their part of the ``bargain,'' 
namely, stopping short of a ``take no prisoners'' battle against China.
     Second scenario: In vintage Clinton style, the 
``technical'' talks over the details of China's accession to the WTO 
could be strung out and the normal trade relations (NTR) vote pushed 
forward to 2001, when a new president is sitting in the White House. 
This would deny Clinton an important legacy, but it might reduce the 
``China factor'' in the U.S. presidential election and avoid 
embarrassing demonstrations in Washington.
     Third scenario: Clinton has simply lost control of trade 
and investment policy. Evidence for this scenario is a string of events 
since 1996: The loss of fast track in 1997. The MAI burial in 1998. The 
China fiasco in April 1999. Haphazard preparations for Seattle. 
Finally, Clinton's ``trade sanctions'' interview, which eliminated all 
prospects of reaching an accord with developing countries on labor 
issues. Under this scenario (favored by Marc Noland), China will be 
Clinton's last trade debacle--a big effort, but not big enough to round 
up the votes for permanent NTR. In the end, Congress votes the usual 
one-year extension.

    Can the Open Market Forces Regroup? Lots of Generals, Not Many 
Soldiers

    Missing from the ranks in the battle for open markets are business 
firms and consumer groups. The most energetic soldiers are economists. 
As Stalin famously remarked, ``How many divisions does the pope 
command?'' That said, many strategic concepts have been offered for 
regrouping the Open Market forces and sparking public enthusiasm for 
globalization. Everyone wants business and government leaders to speak 
out more forcefully in favor of free trade and investment. Beyond that 
common theme, strategies differ. For brevity, I will summarize the 
ideas of leading strategists in caricature.

    Jagdish Bhagwati and Daniel Tarullo:

    ``Back to basics.'' Focus the WTO on border barriers. Reconsider 
the TRIPs agreement (as T. N. Srinavasan has urged). Bhagwati goes 
further: forget about regional groups--they're a nuisance at best, and 
more likely harmful. In other words, get the WTO out of difficult 
national sovereignty questions, and don't burden commerce with a 
spaghetti of FTAA, APEC, Pacific-5, and other new regional 
arrangements.
     Problems: Where do you put the ``social issues"? Will 
U.S. and European business firms push for new trade agreements that can 
be easily nullified behind the border? As a practical matter, several 
regional groups now seem healthier than the WTO--debilitated as it is 
by the splits within the Quad and between the United States and 
developing countries. In the regional arena the European Union is 
rapidly moving ahead on new deals with Mexico, Mercosur, and the 
Lomé Convention countries.

    Robert Samuelson:

    ``Let the markets work.'' With dramatic cuts in transportation and 
communications costs, the ascendancy of multinational corporations, the 
rise of e-commerce, plenty of globalization will occur even if trade 
ministers take a 10-year holiday. Moreover, thanks to the overwhelming 
success of the U.S. economy, sensible countries will enthusiastically 
sign on to the Washington consensus and Anglo-Saxon capitalism, without 
another USTR or IMF mission abroad.
     Problems: Mercantilism has dominated commercial policy for 
350 years (today it's called ``reciprocity''). Who hears the death 
rattle of this enduring ideology? What about growing underbrush that 
threatens to choke e-commerce and other new realms? C. Fred Bergsten's 
``bicycle theory'' worked well at explaining past swings between 
liberalization and protection. Has this piece of political economy now 
vanished?

    Larry Summers:

    ``Go with the Living Ism.'' In 1991, before he became a senior U.S. 
official, Larry Summers famously proclaimed his love for all the 
``isms''--bilateralism, regionalism, multilateralism. Now that the WTO 
has run into difficulties, this strategy would call for deepening NAFTA 
(especially with Canada), the Pacific-5 (Australia, New Zealand, 
Singapore, the United States, and Chile), working on bilateral issues, 
and doing a few sectoral deals. Just be pragmatic.
     Problems: The NGOs killed the MAI, and some see a threat 
in the CBI and Africa. Will they pass up the next bilateral or regional 
deal? Indeed, in the regional context, won't they insist on a heavier 
loading of social issues? The same virus that hit Seattle could easily 
spread.

    I. M. Destler and Peter Balint:

    ``Bring in the social issues.'' These are the natural next step in 
the long GATT/WTO journey from tariffs, to quotas, to services, to 
intellectual property rights, to phytosanitary standards. Go with the 
flow. Reasonable people can find reasonable solutions that both improve 
production conditions worldwide and respect national sovereignty.
     Problems: India, Brazil, and China have an automatic 
response: ``Not on your life.'' Will the United States and Europe put 
their own miserable treatment of illegal immigrants on the table? What 
about state environmental standards and layoff laws? Finally, what 
concessions will the United States and Europe make to get social 
clauses? Will they accelerate the elimination of Multifiber Agreement 
(MFA) quotas, slash textile and apparel tariffs, and reform their 
antidumping laws? Will they liberalize stratospheric restrictions on 
sugar, dairy, peanut, tobacco, and other specialty agriculture imports?

    Dani Rodrik and Robert Litan:

    ``Buy off labor.'' This strategy sees the United States (not 
Europe) as the main stumbling block to open markets, and identifies 
organized labor as the key opponent. Hence the prescription. Enlarge 
the U.S. social safety net across the board, as Rodrik advocates. Or, 
in Litan's formulation, provide for a realistic, but degressive (e.g., 
lasting 2 to 3 years), make-up payment for a portion of the wages lost 
(e.g., starting at 75 percent of the loss) by all dislocated workers 
who find new jobs. Ensure that dislocated workers have health care and 
moving allowances.
     Problems: Who will spend the necessary money for a wide 
social safety net? Gore is already attacking Bradley for wanting to 
increase the health care budget. My estimate for degressive wage make-
up costs across the board is about $15 billion annually. Wage insurance 
limited to trade-impacted workers would come cheap, about $500 million 
annually. But labor has disdained all forms of Trade Adjustment 
Assistance (TAA) for 15 years. Why would it love this wrinkle? Besides, 
there is no meaningful distinction between workers displaced by 
technology or restructuring and workers displaced by trade. If labor 
alone is bought off, will other social causes be satisfied?

    President Clinton:

    ``Y'all come.'' The central problem is process, not substance. 
Invite responsible NGOs into the negotiations. Allow them to bring 
disputes in the WTO. Broadcast the proceedings live on television and 
the Internet. A more open party will be a better party.
     Problem: No one believes this solution. Probably not even 
Clinton.

    Sizing Up the Problems

    If the next U.S. president wants to restart the trade engine, he 
will need to commit the same level of political resources as he might 
devote to major tax, budget, or labor legislation. Gone are the days 
when important policy-driven progress toward open markets can be 
achieved without bitter political battles. There is no low-cost-lunch 
strategy.
    If the new ``third rail'' proves too hot for the next U.S. 
president and his G-7 counterparts, then the open markets agenda will 
depend on the two forces inherent in Robert Samuelson's analysis: the 
technology revolution in transportation and communications, and the 
winning appeal of Anglo-Saxon capitalism. In a pre-Seattle trip to 
Asian capitals, Fred Bergsten found considerable enthusiasm for new 
regional institutions ranging from trade to money. Asian leaders are 
tired of dancing to Washington's economic tune. They want to write 
their own songs. Seattle can only reinforce these sentiments. If 
Washington and Brussels falter, the future trade agenda could be led by 
an Asian renaissance.
    If the ``third rail'' turns out to be a Washington problem--and not 
so serious in Brussels, Tokyo, and Ottawa--the other G-7 powers might 
well pursue their own regional initiatives. The European Union might 
negotiate free trade arrangements with Mercosur and the Lomé 
Convention nations, adding to its extensive free trade network with 
Eastern Europe, North Africa, and Mexico. Japan could surprise everyone 
by negotiating a free trade agreement with Korea. And Canada might join 
the Northeast Asian party. A burst of regional energy along any of 
these lines would disadvantage U.S. exporters.

    The U.S. Trade Calendar in 2000

    Multiple trade issues loom on the congressional calendar. In the 
wake of Seattle, these issues present inviting targets for Backlash 
demonstrations, attracting new financial support and more media 
attention. Accordingly, a few thoughtful Open Market protagonists think 
that the best strategy--in an election year--would ``cool down'' trade 
and put off issues until 2001. Here is how ``third rail'' 
countertactics might play.
     String out the technical talks on China's accession to the 
WTO, and simply go for a one-year renewal of NTR in July 2000. 
(Clinton's ``second scenario'' for dealing with China.)
     Don't even mention ``fast track.'' At most, hold quiet 
consultations with Ways and Means and Senate Finance Committee leaders 
on possible new formulations and new labels.
     Hold off on CBI Parity and AGOA.
     Keep FTAA, APEC, and Pacific-5 talks at a strictly 
technical level.
     Avoid a media event of the House and Senate votes on 
continued U.S. membership in the WTO. (Under the 1994 legislation that 
ratified the Uruguay Round agreements, upon the request of a single 
member, the House and the Senate each vote up or down on continued U.S. 
membership in the WTO every five years.)
     Downplay a possible adverse decision by the WTO appeals 
panel in the Foreign Sales Corporation case. (In a case brought by the 
European Union, a WTO panel found that this U.S. tax provision, 
designed to promote exports, violates the Uruguay Round Code on 
Subsidies and Countervailing Measures. The WTO appeals panel will issue 
its decision by March 2000.)

    ``Firewall'' in 2000?

    A different strategy for Open Market forces next year is to stand 
and fight. In this strategy, an all-out battle would be waged to 
welcome China in the WTO with permanent NTR legislation. Likewise, CBI 
Parity and AGOA would be the next priority.
    The argument for this strategy is simple. Unless the Open Market 
forces build a firewall, the Backlash forces will gain momentum and 
financial support. If trade policy is stalled in 2000, it will be that 
much harder to restart the engine in 2001.
    A New Strategy for 2001

    Fact One. Steven Kull's polls show broad-based moral concern in the 
United States about labor and environmental conditions abroad (even if 
better conditions abroad translate into higher consumer costs at home). 
His polls also show that the American public is worried about U.S. job 
dislocation, even when workers can find new jobs at the same or better 
pay, and even when a flexible economy means lower prices at the local 
shopping mall.
    Fact Two. Americans sharply disagree on the benefits of free trade, 
polarizing by income level. According to a Wall Street Journal poll, 
only about 32 percent of all U.S. adults think that the United States 
has been hurt by free trade agreements. (By contrast, 35 percent think 
the United States has been helped, and 24 percent think that trade 
agreements haven't made much difference.) However, 54 percent of adults 
with income under $20,000 think that the United States has been hurt by 
free trade agreements, while naysayers drop to 25 percent among 
households with income over $50,000.
    Fact Three. Meanwhile, developing countries violently oppose a 
working group on labor in the WTO, and they were enraged by Clinton's 
mention of trade sanctions. Developing countries hold a well-grounded 
fear that the concerns and worries of ordinary Americans will be 
hijacked by the AFL-CIO and extreme Backlash groups--and turned into 
formidable trade barriers.
    Putting these three facts together, the time has come to address 
labor and environmental concerns, but with a strategy that
     would not entail new WTO rules;
     would be accepted by the U.S. business community;
     and would broaden the base of U.S. public support for 
freer trade.
    If this strategy can be crafted, then the way would be clearer for 
Congress to grant the next president authority to conduct trade and 
investment negotiations. No plausible strategy can avoid a political 
battle. The right strategy could improve the chances of an Open Market 
victory.

    Six Linked Concepts of the New Strategy

     First, create a permanent independent U.S. commission, 
insulated from daily political life, to create and authorize labels 
certifying that imported and domestic products and services are made in 
ways that meet core labor and environmental standards. The labels would 
be optional, not mandatory, both for importers and domestic producers. 
For producers, the labels should become a ``badge of honor,'' enabling 
concerned consumers (business or household) to purchase certified 
products, at a premium price if necessary. The Global Reporting 
Initiative (www.globalreporting.org) has already published its 
suggestions for an appropriate framework.
     Second, dedicate a portion of capital gains taxes to 
creating a fund for degressive wage insurance (and health care and 
moving allowances) for all dislocated workers, as Robert Litan has 
urged. Individual capital gains taxes are running above $50 billion 
annually; hence earmarking 30 percent for degressive wage insurance and 
associated benefits should prove adequate. The basic rationale is that 
globalization and technology are shifting part of national income to 
capital; some of these gains are in turn captured by the capital gains 
tax. It is only fair that a slice of the rewards generated by the new 
economy be returned to those shaken up by its dislocations. Earmarking 
would foster harmony between winners and losers. For earmarking to have 
meaning, however, less money would be dedicated to the fund in years 
when capital gains plunge and tax receipts drop.
     Third, replace the antiquated and inefficient U.S. system 
for taxing the worldwide income of U.S. multinationals (a system that 
raises very little revenue) with a new system that allows a broad 
exemption for income earned abroad. However, the broad exemption would 
be conditioned on certification that the U.S. parent corporation, all 
its foreign subsidiaries, and its principal suppliers exceed core labor 
and environmental standards in their operations and appropriately 
disclose their labor and environmental performance. Again, an 
independent commission (not the IRS), drawing on the work of the Global 
Reporting Initiative, would set certification and disclosure standards.
     Fourth, in parallel with domestic initiatives on labor and 
the environment, the administration should launch negotiations in the 
International Labor Organization (ILO) to establish a worldwide system 
for certifying observance of core labor standards, by both firms and 
countries. Likewise, as Daniel Esty has proposed, the administration 
should enlist international support for creating a Global Environmental 
Organization (GEO). Among its tasks, the GEO would certify the 
observance of recognized environmental standards. Both the ILO and the 
GEO would issue periodic ``report cards'' on national performance, just 
as the IMF and the WTO do on trade and macroeconomic policy.
     Fifth, authorize the president to negotiate new trade and 
investment agreements to reduce barriers. Congress would vote these up 
or down on a ``no amendments'' basis, within the life of the Congress 
(if submitted during its first session). In other words, new 
authorizing legislation should call for enabling legislation on a 
``slow track,'' not a ``fast track.''
     Sixth, the authorizing legislation should give the 
president authority to pursue trade and investment negotiations in 
various forums--WTO, APEC, FTAA, Pacific-5--after giving advance 
notice, plus a list of specific objectives, to Congress. (After 
receiving notice, each house of Congress should have a 60-day window to 
disapprove the launch of negotiations--a variant of the ``narrow 
track'' idea floated by Representative Phil English.) The president 
should be permitted, but not required, to seek agreement on 
plurilateral or multilateral measures (in the ILO and the GEO as well 
as in trade organizations) that would reinforce the labor and 
environmental provisions already adopted by the United States (as 
outlined above). Broad presidential authority would enhance America's 
ability to achieve its goals--since the president would be tied neither 
to a single forum nor to unattainable objectives.
    The views expressed in this publication are those of the author. 
This publication is part of the overall program of the Institute, as 
endorsed by its Board of Directors, but does not necessarily reflect 
the views of individual members of the Board or the Advisory Committee.
      

                                


    Mr. Houghton [presiding]. Thank you, Mr. Hufbauer.
    Mr. Hathaway.

   STATEMENT OF DALE E. HATHAWAY, PH.D., EXECUTIVE DIRECTOR, 
NATIONAL CENTER FOR FOOD AND AGRICULTURAL POLICY, AND CHAIRMAN, 
             AGRICULTURE POLICY ADVISORY COMMITTEE

    Mr. Hathaway. Thank you, Mr. Chairman.
    I appreciate the opportunity to present my views on these 
issues. I don't think that either the street theater or the 
agricultural negotiations caused the breakdown in Seattle. I 
believe the breakdown was inherent in things that preceded that 
by quite some time.
    Basically, I think it was a function of a lack of political 
will on both the U.S. and the European sides. On the U.S. side, 
it was clearly evident by the inability of the Congress and 
administration to get trade negotiating authority for the 
President. On the European side, it was equally apparent in 
their inability to even make modest adjustments in their 
agricultural policies. It appeared as part of the impasse over 
the director general which in turn led to inadequate 
preparations and an almost inevitable failure at the time.
    This is behind us. It is now time for us to move ahead. And 
it seems to me that the U.S. again can provide some leadership 
and has begun to.
    First, I am pleased to see that the general counsel, in 
part at the prodding of the U.S., has agreed to move ahead in 
the committee on agriculture to do, as Ambassador Barshefsky 
calls it, clear the underbrush. After a Ministerial in 1982 
failed to launch a new round, the committee on agriculture, 
chaired by Aart de Zeeuw of the Netherlands, met from 1982 to 
1986. That committee was very largely responsible for laying 
out a framework that made the Uruguay round negotiation in 
agriculture possible.
    One final caveat in that regard. The agricultural community 
is much concerned about a comprehensive undertaking in the 
negotiation. The committee on agriculture will not provide 
that. Therefore, it is important that the U.S. insist that any 
activities that occur in the committee on agriculture be folded 
back into a broader negotiation when it is possible to restart 
those negotiations.
    Finally, I think that, as everyone has suggested, we need 
to pay substantially more attention to the concerns of the 
developing countries. I think it became obvious when the 
developing countries decided they no longer were willing to let 
Europe and the U.S. decide who the next director general was 
going to be that this is a different WTO and one in which we 
need those countries on our side.
    I think that is especially important in agriculture, where 
those countries suffer as much as or more than anyone in terms 
of the trade practices that we want to have removed. Therefore, 
I think we should spend less time in agriculture negotiations 
and in arm wrestling with the European Union, and more time in 
gathering broad based allies that move to reduce the trade 
distorting practices in agriculture.
    Thank you very much, Mr. Chairman.
    [The prepared statement follows:]

Statement of Dale E. Hathaway, Ph.D., Executive Director, National 
Center for Food and Agriculture Policy, and Chairman, Agriculture 
Policy Advisory Committee

                          Summary and Overview

    A number of factors contributed to the failure of the World 
Trade Organization (WTO) Ministerial in Seattle. These 
included: insufficient political will and a lack of consensus 
in Europe and the United States, inadequate preparation and 
agreement on the agenda prior to the Seattle meeting, decision-
making procedures used before and during the Ministerial that 
are inadequate to the much larger WTO, and a failure to 
comprehend the depth and nature of the discontent among the 
developing countries.
    At this point it is counterproductive to lay blame and 
point fingers as to who is responsible for the failure. We 
should concentrate on how we can repair the damage, remove the 
obstacles, and move ahead with the needed changes in both our 
own positions and in the WTO as an organization.
    I do not believe that the street theater of the rioters and 
marchers was a significant factor in the failure. Nor do I 
believe the difficulties in arriving at an agreed framework for 
the agricultural negotiations was the crucial element that 
caused the breakdown. If all other elements of the negotiations 
had been in place, I believe that the difference on the 
agricultural issues could have been bridged.
    The first task should be to move ahead with the built-in 
agenda in a way that will help overcome the difficulties 
encountered in Seattle. In the case of agriculture this can 
best be done by activating the Committee on Agriculture of the 
WTO, finding a new dynamic chairman for that Committee and 
charging the Committee to develop an agreed-upon approach for 
carrying out the mandate to continue the agricultural reforms 
started in the Uruguay Round.
    Second, I believe we should broaden the base of our 
interest in the agricultural negotiations and move off our 
excessive focus on the European Union (EU). In Seattle, most of 
the discussions on the agricultural text appeared to focus on 
achieving language that would predetermine the outcome of the 
negotiations. It appeared to be a contest between the EU and 
its allies and the US and its Cairns Group allies. Rather than 
adhering to this narrow focus, we must enlist the broad support 
of developing countries in our efforts to reduce and remove 
trade-distorting agricultural subsidies. This shift will 
require a change in the attitude of many agricultural groups as 
well as that of our officials and members of Congress.
    Third, we also should do more to deal with the concerns of 
developing countries that make up the majority membership of 
the WTO. We and others promised technical assistance at the end 
of the Uruguay Round to help countries implement their Uruguay 
Round obligations, and that assistance has not been 
forthcoming. Many countries lack the trained personnel to mount 
a negotiation and lack the expertise to analyze the potential 
benefits of different proposals. As a result they join blocs 
led by countries claiming to know what is best for them or they 
ask for special exemptions from new trade rules. They are 
frustrated by feeling excluded from the key decision-making 
groups and by the fact that their concerns are largely ignored. 
It is in our long-run interest to help these countries become 
better informed participants in the process.
    In all likelihood it will be at least a year before the 
Ministerial can be resumed. We have much to do in that time, 
including the developing of a new political consensus to 
support our trade policy. In the absence of such consensus the 
US cannot resume its position as the world leader in 
international economic policy.

                              Introduction

    As chairman of Agricultural Policy Advisory Committee 
(APAC) I was a part of the official US delegation to the 
Seattle Ministerial of the World Trade Organization (WTO) held 
November 30 to December 3, 1999. The APAC met with senior 
administration officials in late October before the Seattle 
meeting and had discussed the US positions on issues related to 
agriculture at that meeting and at the two prior APAC meetings. 
My observations are based on discussions and conversations 
during and after those meetings, briefings provided during the 
Seattle meetings for the Delegation and for the APAC; as well 
as, my experience as the senior agricultural negotiator in the 
Tokyo Round.
    There were two events taking place simultaneously in 
Seattle, one on the streets where protesters attempted to 
disrupt the Ministerial meeting, and one in the Convention 
Center where official representatives of governments were 
dealing with the business of the Ministerial and attempting to 
launch a new round of trade negotiations. The protesters 
consisted of two groups, one dedicated to disrupting the 
activities of the WTO and other international institutions, and 
a group of labor representatives and environmental groups that 
are skeptical about further trade liberalization and want it 
accompanied by international rules regarding labor rights and 
protection of the environment. A great deal of attention has 
been paid to the activities in the street, and many persons, 
including the President, have discussed the need to accommodate 
the concerns of the labor and environmental groups in our trade 
negotiations.
    I believe that the protests outside the Convention Center 
had little or nothing to do with the failure of the 
Ministerial. The effect of the protesters was and will be 
related to their ability to bring political pressure on some 
WTO member governments to adopt the positions and issues they 
espouse. As I shall point out later, the greater the success of 
these protest groups, the more difficult it will be to move 
toward more liberalized trade in the WTO of the 21st century.

    Factors Contributing to Failure

    In my view more attention needs to be paid to the 
activities inside the Convention Center, and the reasons 
underlying the failure of those negotiations to launch 
successfully a new round of trade negotiations. One factor 
leading to the failure of the Seattle Ministerial was the lack 
of attention paid to developing countries' opposition to the 
agenda. Finding a common ground with the developing country 
members of the WTO should become a priority in subsequent 
negotiations.
    The danger signs of a possible failure in Seattle were 
clear for all to see. They first appeared as an impasse over 
the choice of a new Director-General of the WTO. Developing 
countries, that now make up the majority of the WTO members, 
were no longer content to have the Europeans and the US choose 
another European Director-General as they have since the 
founding of GATT in 1947. Developing countries put forth their 
own well-qualified candidate and hung tough on the choice until 
the US and Europe were willing to compromise on a split term 
for the two leading candidates. This impasse resulted in a 
Director-General who clearly was not the first choice of many 
countries and, more importantly, came to the position late and 
had inadequate time to lead the preparations for a successful 
Ministerial.
    Second, a successful trade negotiation requires significant 
political leadership by the leaders of major trading countries, 
most especially the United States and Europe. It is clear to 
the world that there is no political consensus for an new trade 
negotiation in the US. The Congress has refused to provide 
trade negotiating authority to the President, and the attention 
of the White House was diverted for most of 1998 and early 1999 
by investigations and impeachment hearings. Many of the 
strongest Administration supporters are strongly opposed to new 
trade negotiations and have insisted on adding labor rights and 
environmental issues to the agenda if any negotiations are to 
take place. As a result the Administration did not provide 
strong clear leadership, but proceeded cautiously by putting 
forth proposals for a limited negotiation involving politically 
popular new trade initiatives and sector negotiations.
    The situation in Europe also shows lack of political will. 
A new Commission of the European Union took over in mid-1999 
after the old Commission resigned in disgrace as a result of 
scandal and mismanagement. Moreover, the new government of 
Germany, that normally is strongly supportive of trade 
liberalization, has proven to have serious domestic political 
difficulties. Political power is divided in France. The EU is 
focused on the launch of the common currency, enlargement, and 
the Balkans. A forecast of the limited European commitment to 
further agricultural reform was evident in the refusal of the 
EU heads of state to accept the rather modest reforms of the 
Common Agricultural Policy (CAP) proposed by the Commission in 
1998 to enable the EU to meet additional rollbacks in export 
subsidies expected as a result of a new negotiation. The French 
insistence that internal prices not be reduced as much as the 
Commission proposed was a clear signal that the EU would not 
accept a negotiating mandate to phase out export subsidies 
completely. That, of course, was a major sticking point in 
Seattle and brought intervention from the highest political 
levels in France to veto any mention of eliminating export 
subsidies in the proposed text on agriculture.
    Thus, the two major trading powers that must provide 
consensus and leadership for any trade negotiation to succeed 
were both unable and unwilling to do so. The US proposed a 
limited agenda that would have entailed minimum sacrifice and 
immediate gains for the US from a short negotiation. It also 
proposed adding labor rights and environment issues to the 
negotiating agenda. The EU proposed a broad agenda of new 
issues involving competition policy and investment policy 
almost certain to entail years of negotiation. Moreover, 
whereas the US was happy to settle for further negotiations to 
liberalize agricultural trade using the Uruguay Round format, 
the EU was pushing for a series of new agricultural issues 
involving food safety, animal rights, and ways to protect the 
multifunctionality of agriculture.
    The developing countries had limited enthusiasm for a new 
round, asserting that they needed additional time to adjust to 
the Uruguay Round agreements. They also wanted some of their 
issues on the agenda, including a reopening of the trade remedy 
rules and the intellectual property rights agreement. Most 
developing countries felt left out of the preparatory process, 
and felt they were not included in the key consultative process 
in Seattle.
    Moreover, the developing countries were strongly opposed to 
both the US and EU suggestions for new agenda items. Developing 
countries viewed the move to include labor rights and 
environmental issues as overt moves toward protectionism by the 
developed countries. This view was reinforced by President 
Clinton's quoted remark that we would use trade sanctions to 
enforce labor rights in other countries. This, together with 
the refusal of the US and others to give serious hearings to 
the demands of developing countries regarding problems they 
have had with the Uruguay Round agreements, led to the 
developing countries' withdrawing from the process.
    Normally, a Ministerial meeting begins its deliberations 
with a text for the different sectors and the overall framework 
upon which the major trading parties virtually agree. Some key 
elements are always unresolved, and they are the primary focus 
of the Ministerial negotiations. These nearly final texts are 
the result of months of discussions and compromises brokered by 
the WTO Secretariat.
    No such texts existed for the Seattle Ministerial. Several 
attempts to produce a text for agriculture had failed to 
produce a common text with only a few remaining differences. 
Instead the production of a draft text fell to the chairman 
appointed to chair the agricultural negotiating group. That 
text was still under negotiation when the Ministerial was 
adjourned. Now the EU and others have said that text has no 
standing and the process will go back to the beginning.
    In my view the agricultural issues were not the deciding 
issues that caused the failure of the Ministerial. However 
difficult agricultural issues can be, I doubt that the US, the 
EU or the developing countries would have scuttled the 
negotiations over a word or two in the agricultural text if all 
the other elements of the negotiation had been in place.
    The US was under siege on some issues that we wanted to 
keep out of the negotiations and was making little or no 
progress on gaining acceptance of some of the issues we wanted 
included. The push for accelerated tariff liberation on 
selected products in which we have a substantial advantage was 
opposed by Europe and most developing countries. Thus, in 
general, the immediate political fallout in the US appeared 
significant and the gains distant. In this context, the 
suspension of the Ministerial probably was not the worst 
outcome from the Administration's point of view.
    Moving Beyond Seattle

    It appears that it will take some time to clear the decks 
so that the full Ministerial can be resumed. While they are too 
polite to say so openly, most countries have no interest in 
negotiating with a lame-duck US administration. Thus, the full 
negotiation can probably not be resumed until sometime in 2001, 
after a new administration is in place and organized. Some 
developing countries suggest it could be as much as two years 
before they will be ready to return to completing the 
Ministerial.
    However, the Uruguay Round called for a renewed negotiation 
on agriculture and services to begin in 2000. There seemed to 
be some agreement in Seattle that the so called built-in agenda 
should be honored, and thus, that negotiations on agriculture 
and services should proceed. The question is how should they 
proceed and what should the US strategy be. It is important 
that the US take the initiative to move the so-called built-in 
agenda forward so that when a full negotiation is again 
inaugurated, the problems plaguing the Seattle Ministerial in 
agriculture will be resolved.
    It is also important that the administration insists that 
any progress made on the built-in agenda be incorporated into a 
broader agenda when one is finally authorized by a Ministerial 
because the built-in agenda does not provide a broad 
negotiating base. The agricultural community identified and 
expressed its concerns about whether a single undertaking 
negotiation involving only agriculture could produce 
significant results during the preparations for the Seattle 
Ministerial. This caused some tensions between the 
Administration and the agricultural community over the proposed 
Accelerated Tariff Liberalization.
    It should be remembered that this is not the first failed 
Ministerial. In 1982, a similar failure occurred, but it was 
possible to make substantial progress in agriculture toward 
laying the groundwork for the subsequent Uruguay Round. This 
was done through the Committee on Agriculture of the GATT under 
the skillful chairmanship of Aart de Zeeuw of the Netherlands. 
That committee laid out the issues, discussed alternative ways 
of addressing them, and moved the process toward agreement on a 
text that was to become the mandate for the agricultural 
negotiations in the Uruguay Round.
    The Committee on Agriculture of the WTO should be charged 
to play the same role again. The US should move immediately to 
find and to urge the appointment of an able, forceful and 
neutral chairman and work with that person to develop an agenda 
to do the preparatory work that was not completed before 
Seattle. When the Ministerial is resumed it should start with a 
text on agriculture that has, at most, a few brackets left to 
the highest level decision makers.
    Second, the US needs to engage the developing countries 
fully in discussions on all issues, including agriculture. The 
USDA had efforts in this regard before Seattle, but a 
government-wide coordinated effort is needed to bring the 
developing countries more fully into the WTO decision making 
process. Congress needs to recognize and take into account of 
the interests of developing countries. For years we have said 
we want trade not aid, but in reality we have not offered much 
of either to developing countries. The EU offers both special 
arrangements and much sympathy to developing countries while we 
lecture them to deregulate, and it is not surprising the 
developing countries generally line up with the EU on crucial 
trade issues. This is especially ironic when you realize that 
the developing countries are among those most hurt by the 
trade-distorting policies of the CAP.
    There are two areas in which I believe we should do more to 
assist developing countries. One is to provide technical 
assistance to help countries meet their obligations under the 
Uruguay Round agreements. Such assistance was promised at the 
end of the Uruguay Round and has not been delivered. The second 
area is assistance in capacity building to enable developing 
countries to participate fully in and benefit from trade 
negotiations. In our work at the National Center with the 
Caribbean Community (CARICOM) countries of the Carribean and 
from discussions in Africa last year, I have been struck by how 
limited the capacity of many countries is to understand and 
cope with complex negotiations.
    In addition, we should focus more attention on the issues 
of Special and Differential treatment for developing countries 
rather than dismissing such demands out of hand as we tend to 
do. We should ask whether the requests are based on sound 
justification, and if special and differential treatment is to 
be a part of trade agreements, how it can be incorporated 
without destroying the universality of the world trading rules.
    Third, the US should broaden its focus in agricultural 
negotiations, that appears to be largely on the EU. It is true 
that the US wants to curb some of the trade-distorting 
practices of the EU, namely export subsidies, and wants to 
avoid some of the trade restrictive practices the EU is 
proposing in the guise of food safety, animal welfare, and 
multifunctionality. However, the reality is that market growth 
for US agricultural exports is outside the EU in the developing 
countries of Asia, Latin America, and Africa. Therefore, our 
market access strategy should focus on those countries. I have 
been observing and participating in trade negotiations for 
nearly forty years, and in that time I have observed a near 
obsession in the USDA regarding the CAP and efforts to change 
or destroy it at the cost of almost every other issue.
    It appears that too much effort is being put into achieving 
a negotiating mandate that tries to predetermine the final 
outcome of the negotiations. Some, including some of our 
agricultural groups, view each word proposed by other countries 
as having a hidden meaning and always attribute the worst 
possible motives to that meaning. I believe that we should stop 
trying to negotiate the final outcome in advance and 
concentrate on getting discussions started on the modalities to 
achieve the trade liberalization we desire. It is far more 
important whether the final outcome contains a 25, 50 or 90 
percent reduction in the volume of subsidized exports than 
whether the negotiating mandate contained the magic word 
eliminate. And it probably would not mark the end of all market 
access negotiations if the word multifunctionality appears 
somewhere in the mandate. We should focus on strategy to 
achieve desired results not on strategy to produce a framework 
with the desired buzzwords.
    At the same time that we are pursuing a negotiating 
framework in the WTO Committee on Agriculture and attempting to 
gather allies from the developing countries, we should actively 
pursue our rights under WTO rules. The so-called ``peace 
clause'' expires at the end of 2003, and we should be ready and 
willing to take WTO action as soon as it expires against those 
practices and policies that appear to jeopardize our WTO 
rights. Unless other countries indicate a willingness to 
cooperate on moving ahead on the agricultural issues of 
interest to us, we should not agree to extend the peace clause 
beyond its current expiration date.
    The WTO decision process clearly is not suited for a world 
of instant communication and a membership of 135 countries or 
more. The consensus approach to decision making appears no 
longer to work, and a system to replace it is not immediately 
obvious. In addition, the closed nature of the process has 
raised suspicions among some member nations as well as 
nongovernmental organizations. This issue also needs to be 
addressed, with due regard to the vast difference between 
countries on the role of private organizations.
    There appears much work to be done before the WTO 
Ministerial can be resumed with a good prospect of success. 
Getting that work underway also will allow the next 
administration to move to develop the consensus needed in the 
US to allow us to become the world leaders again.
      

                                


    Mr. Houghton. Thank you, Mr. Hathaway.
    Mr. Trumka.

STATEMENT OF JOHN J. SWEENEY, PRESIDENT, AMERICAN FEDERATION OF 
LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS; AS PRESENTED BY 
              RICHARD TRUMKA, SECRETARY-TREASURER

    Mr. Trumka. Thank you, Mr. Chairman.
    I thank you for the opportunity to appear here today on 
behalf of the AFL-CIO and our 13 million members. It's clearly 
important that we understand, all of us understand and 
appreciate what happened in Seattle, and that we learn the 
right lessons from the breakdown in negotiations from the tens 
of thousands of people in the streets and from the realities of 
the current global economy.
    We all have a tendency to view these events through our own 
eyes. Many of those who have given testimony here today have 
stressed the up side of the global economy, rapidly growing 
trade, investment flows, a booming stock market, job creation 
here in the United States.
    But I speak to you today on behalf of working families here 
in the United States and across the world, and working families 
have experienced a different side of the global economy. From 
our side of the bargaining table, it appears that the current 
rules of the global economy have been used to tilt the odds in 
favor of corporations at the expense of workers, family 
farmers, the environment, and sometimes small businesses.
    These rules have freed up corporations to move production 
around the globe in search of the most vulnerable and 
disenfranchised workers and the most lax regulation. These 
rules have pressured governments to cut social spending, to 
weaken labor laws and to export their way out of every corner.
    We have not yet experienced the global economy described by 
the so-called free traders, an economy that evenly spreads 
wealth and opportunity and that brings prosperity which in turn 
improves rights. We live in a global economy where inequality 
is at an all-time high and growing, both between and within 
countries. We live in a global economy ravaged by financial 
crises and speculative booms and busts, where workers pay the 
high price of adjustment and speculators are bailed out.
    We live in an economy where the largest companies in the 
world, headed by some of the richest people in the world, sell 
over-priced goods to the relatively wealthy consumers and pay 
their workers too little to buy a quart of milk or a pound of 
beans for their family, put factories in countries where 
organizing an independent labor union can be a death sentence 
and spend millions of dollars a year fending off union 
organizing drives.
    But at the end of the day, we're all living in the same 
global economy. Rosy predictions and corporate cheerleading 
cannot change the reality of the global economy. That's our 
job.
    Yours as Members of Congress, mine as Secretary-Treasurer 
of the AFL-CIO, to insist that governments craft rules for this 
global economy that will deliver better outcomes to workers as 
well as employers and to small poor countries as well as to big 
rich ones. The lesson of Seattle that we must all learn is that 
there is no going back. The American people and the U.S. 
Congress have rejected new trade agreements that simply 
replicate the old ones. The member countries of the WTO have 
called for a time out on further trade talks until we have a 
better common understanding of the impact of past trade and 
financial liberalization on income and equality, on development 
and on global financial markets.
    Worse yet, many diverse voices in Seattle called for 
institutional reforms to ensure that the WTO operate with more 
democratic accountability and transparency. I want to take this 
opportunity to associate myself and thank Mr. John Lewis for 
his remarks this afternoon.
    I am particularly, we are particularly frustrated, Mr. 
Chairman, with the administration's prolonged inaction on steel 
wire rod section 201 cases. A decision was due from the 
administration on September 27, more than 4 months ago. In the 
meantime, imports continue to grow and thousands of steel 
workers' jobs have been put at risk. The steel workers played 
by the rules. They waited patiently for a decision and their 
patience is wearing thin. They deserve a timely decision and 
appropriate action.
    If we do not do better in the future, Mr. Chairman, if the 
global system continues to generate growing inequality, 
environmental destruction, and a race to the bottom for working 
people, then I can assure you, it will generate broad 
opposition that will pale Seattle. It's important for all of 
you in Congress to recognize that these views are shared by a 
broad and a growing majority, both in the United States where 
voters overwhelmingly believe that workers' rights and 
environmental protections should be enforced in the global 
economy and across the world, by working people whose voices 
too often go unheard.
    None of these issues, Mr. Chairman, that I've raised here 
today is addressed in the bilateral WTO ascension agreement the 
United States government signed with China late last year. The 
Chinese Government's abysmal record of violating its citizens' 
fundamental human rights to freedom of speech and religion and 
association will be harder, not easier to challenge, if 
Congress grants permanent NTR.
    The Chinese Government's woeful record of violating the 
term of trade agreements it has signed will likely be worsened, 
not improved, if the United States agrees to grant permanent 
NTR. If Congress gives up the right to an annual review of 
China's human rights record and trade compliance, the pressure 
to reform will be off the Chinese Government. It's absolutely 
essential that this Congress take a firm and principled 
position against permanent NTR so that we can begin to build a 
global economy that lives up to its potential and to our 
expectations.
    Mr. Chairman, let's all agree on one thing, that business 
as usual cannot be the order of the day. This global economy 
will either be reformed or face ever greater resistance. Thank 
you, sir.
    [The prepared statement follows:]

Statement of John J. Sweeney, President, American Federation of Labor 
and Congress of Industrial Organizations; as presented by Richard 
Trumka, Secretary-Treasurer

    Mr. Chairman, members of the Subcommittee, I thank you for 
the opportunity to appear here today on behalf of the AFL-CIO 
and our thirteen million members.
    It is crucially important that we all understand and 
appreciate what happened in Seattle, and that we learn the 
right lessons from the breakdown in negotiations, from the tens 
of thousands of people in the streets, and from the realities 
of the current global economy.
    We all have a tendency to view these events through our own 
lens. Many of those who have given testimony here today have 
stressed the upside of the global economy--rapidly growing 
trade and investment flows, a booming stock market, and job 
creation here in the United States.
    But I speak to you today on behalf of working families--
here in the United States and also across the world. And 
working families have experienced a different side of the 
global economy.
    From our side of the bargaining table, it appears that the 
current rules of the global economy have been used to tilt the 
odds in favor of corporations at the expense of workers, family 
farmers, the environment, and sometimes small businesses. These 
rules have freed up corporations to move production around the 
globe in search of the most vulnerable and disenfranchised 
workers and the most lax regulation. These rules have pressured 
governments to cut social spending, to weaken labor laws, and 
to export their way out of every corner.
    We don't experience the global economy described by the so-
called free traders--an economy that evenly spreads wealth and 
opportunity, and that brings prosperity, which in turn improves 
rights.
    We live in a global economy where income inequality is at 
an all-time high, and growing--both between and within 
countries. We live in a global economy ravaged by financial 
crises and speculative booms and busts, where workers pay the 
high price of adjustment and speculators are bailed out. We 
live in a global economy where the largest companies in the 
world, headed by some of the richest people in the world, sell 
over-priced goods to relatively wealthy consumers, pay their 
workers too little to buy a quart of milk or a pound of beans 
for their family, put factories in countries where organizing 
an independent labor union can be a death sentence, and spend 
millions of dollars a year fending off union organizing drives.
    But at the end of the day, we are all living in the same 
global economy. Rosy predictions and corporate cheerleading 
cannot change this face of the global economy. That is our 
job--yours as members of Congress, mine as president of the 
AFL-CIO--to insist that governments craft rules for this global 
economy that will deliver better outcomes--to workers, as well 
as employers, and to small, poor countries, as well as to big, 
rich ones.
    The lesson of Seattle that we all must learn is that there 
can be no going back. The American people and the U.S. Congress 
have rejected new trade agreements that simply replicate the 
old ones. The member countries of the WTO have called for a 
time-out on further trade talks until we have a better common 
understanding of the impact of past trade and financial 
liberalization on income inequality, on development, and on 
global financial markets. Many diverse voices in Seattle called 
for institutional reforms to ensure that the WTO operate with 
more democratic accountability and transparency.
    I would like to take this opportunity to express my 
appreciation for Mr. Lewis's remarks this afternoon on the need 
to improve the transparency of our trade institutions in 
general and NAFTA in particular.
    The AFL-CIO believes that the WTO must carry out the 
following reforms if it is to survive as a legitimate and 
politically viable institution:
     Incorporate enforceable rules on core workers' 
rights (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.
     Develop stricter rules against the mandatory 
transfer of technology, production, and production techniques.
     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.
    It is also essential that the U.S. government enforce its 
existing trade laws effectively and consistently. I am 
particularly frustrated with the Administration's prolonged 
inaction on the steel wire rod Section 201 case. A decision was 
due from the Administration on September 27--now more than four 
months ago. In the meantime, imports are continuing to grow, 
and thousands of steelworkers' jobs have been put at risk. The 
steelworkers played by the rules, and they have waited 
patiently for a decision, but their patience is wearing thin. 
They deserve a timely decision and appropriate action.
    If we do not do better in the future--if the global system 
continues to generate growing inequality, environmental 
destruction and a race to the bottom for working people--then I 
can assure you, it will generate broad opposition that will 
make Seattle look tame.
    All of us need to think anew. Leaders of the global 
institutions face a legitimacy crisis that cannot be solved by 
better public relations and more educational campaigns. Their 
institutions will become more accountable, or more irrelevant.
    Developing nations face a growing inequality of income and 
hope. They should not be forced into one economic strait-
jacket. For they will either find ways to empower workers and 
protect the environment, or face growing popular resistance.
    Heads of global corporations and banks must not be misled 
by their own rhetoric. They will be held accountable for how 
they do business--by consumers, by workers, by governments. 
Leaders of the corporate community must join the effort to 
establish enforceable laws that put limits on cut-throat 
competition. It is in the interest of multinational 
corporations and the governments that regulate them to have 
rules that are agreed upon by all.
    Labor leaders across the world also must change to meet the 
new challenges. At the AFL-CIO, we know that we have to deepen 
our own growing internationalism, and develop new 
sophistication in bargaining and organizing across national 
lines.
    We also recognize that we must join our voices with those 
in developing countries calling for high-road development 
strategies. We must work to ensure that developing countries 
are no longer crippled by crushing debt burdens, and that they 
have the resources they need to engage in trade negotiations on 
an equal footing, as well as the technical support to implement 
and enforce labor and environmental standards.
    Seattle marked a crossroads. Now, joined by millions of 
others across the world, we pledge not to rest, but to continue 
to press for core workers' rights that are the basis of 
economic freedom and equitable development.
    It is important for you in Congress to recognize that these 
views are shared by a broad and growing majority--both in the 
United States, where voters overwhelmingly believe that 
workers' rights and environmental protections should be 
enforced in the global economy, and across the world, by 
working people whose voices too often go unheard.
    None of the issues I have raised here today are addressed 
in the bilateral accession agreement the U.S. government signed 
with China late last year. The Chinese government's abysmal 
record of violating its citizens' fundamental human rights to 
freedom of speech, religion, and association will be harder, 
not easier, to challenge if Congress grants permanent Normal 
Trade Relations (NTR). The Chinese government's woeful record 
of violating the terms of trade agreements it has signed will 
likely be worsened, not improved, if the United States agrees 
to grant permanent NTR. If Congress gives up its right to an 
annual review of China's human rights record and trade 
compliance, the pressure to reform will be off the Chinese 
government. It is absolutely essential that Congress take a 
firm and principled position against permanent NTR, so that we 
can begin to build a global economy that lives up to its 
potential and to our expectations.
    Here, let us all agree on one thing: that business as usual 
cannot be the order of the day. This global economy will either 
be reformed or face ever greater resistance.
    I thank you for your attention and I look forward to your 
questions.
      

                                


    Mr. Houghton. Thank you very much, Mr. Trumka.
    Mr. Niles.

   STATEMENT OF THOMAS M.T. NILES, PRESIDENT, UNITED STATES 
     COUNCIL FOR INTERNATIONAL BUSINESS, NEW YORK, NEW YORK

    Mr. Niles. Thank you very much, Mr. Chairman. I appreciate 
the opportunity to appear before the Subcommittee today.
    I'll use my time primarily to talk about the issue of trade 
and labor, or to put it another way, how to deal with the issue 
of labor rights in the globalizing economy. This is because the 
organization I represent, the U.S. Council for International 
Business, represents U.S. business in the International Labor 
Organization. We have a particular interest in this issue.
    Trade and labor was one of the points of controversy in 
Seattle, but by no means the only issue. It was not, I don't 
think, the principal rock on which the WTO Ministerial failed. 
In my view, Seattle failed largely because of the long and 
debilitating struggle over the succession to Renato Ruggiero as 
WTO Director General. Traditionally, the DG has played the role 
of conciliator and consensus builder in the WTO. However, 
during most of the period leading up to the Seattle 
Ministerial, there was no Director General, and the position 
itself was a source of controversy.
    Ministers, not surprisingly, in Seattle during 4 days were 
not able to do what their senior officials were unable to do in 
18 months in Geneva. Progress was made in Seattle and I hope 
that that can be enshrined in some sort of a document and can 
be used as the basis for further discussions in Geneva.
    The demonstrations that we've discussed today were largely, 
in my view, street theater and a media event, and did not cause 
the failure of the Ministerial. The Ministerial would have 
failed had there been no demonstrations in Seattle.
    On the trade and labor issue, Mr. Chairman, there were two 
proposals on the table. 1) the United States proposal for a 
working group on trade and labor; 2) a proposal by the European 
Union for a ``Joint WTO-ILO Standing Working Forum on Trade 
Globalization and Labor Issues.'' The developing countries 
rejected both of these proposals, arguing that the issue of 
trade and labor had been settled once and for all in Singapore. 
The statement that President Clinton made to the Seattle 
newspaper changed no minds. It did tend to confirm what the 
developing countries had believed all along, that the United 
States was not after a study, but after sanctions.
    My organization, the USCIB, fully shares and supports the 
efforts and objectives of the United States government and 
others, including the AFL-CIO, to raise labor standards around 
the world. Where we part company is over tactics, or how best 
to do it. Let me briefly explain why we don't believe it would 
be productive to continue to try to introduce labor issues into 
the WTO.
    First, if we're interested in studies, Mr. Chairman, the 
studies have been done, many of them, in the OECD and the ILO, 
with generally the conclusion that differences in labor 
standards do not in and of themselves determine trade flows and 
investment flows. If we want to use trade to encourage higher 
labor standards, there's a better way to do it. We could follow 
the European Union's example and add to our GSP benefits for 
developing countries that fully satisfy ILO basic core labor 
standards. We can do this unilaterally.
    The second reason for not putting labor issues into the WTO 
is that developing countries are dead set against the proposal 
and are not going to change their position. I saw no evidence 
in Seattle that there was any flexibility on their part. 
They're not prepared even to discuss it, which can be seen as 
irrational, but that's their position.
    Third and most importantly, Mr. Chairman, there is a better 
way to do this, namely through the use of the June 1998 ILO 
Declaration on Fundamental Principles and Rights at Work. This 
declaration, which was developed largely through cooperation 
between our Council and the ICFTU, takes the mandate that was 
given to the ILO by the Singapore WTO Ministerial and creates a 
means to raise core labor standards around the world, including 
in countries that have not ratified ILO core conventions. And 
that latter point is particularly important.
    Implementation of the Declaration is now beginning with the 
principle of freedom of association. We hope that the U.S. 
Government and the AFL-CIO will join us in the ILO to ensure 
the success of this project. Through the use of ILO cooperative 
programs and its influence, coupled with the extraordinary 
power of publicity in our networked world, this could be a very 
effective process. Countries will not want to risk being left 
out of international investment flows due to poor labor 
practices. Nor will companies wish to run the risk of consumer 
resistance due to problems in the labor area. We've seen many 
examples of how this can work.
    We do need, Mr. Chairman, better coordination between the 
various organizations that are involved in parts of the 
international economic development process, including the 
international financial institutions, the ILO and the WTO, to 
ensure that the social consequences of economic restructuring 
can better be dealt with.
    In sum, Mr. Chairman, our council believes there's a better 
way through the ILO to deal with the issue of trade and labor. 
Resurrecting the U.S. proposal for a WTO working group after 
three rejections, Marrakesh, Singapore and Seattle, would not 
only mean another rejection in the WTO. It would also 
compromise our chances for major progress in the ILO, given the 
developing countries' likely reaction.
    We have a significant opportunity now to overcome this 
setback of Seattle and move ahead on a broad front 
internationally and domestically. On the latter, we hope that 
this millennial year will be marked by Congressional approval 
of PNTR for China, the Africa CBI initiative and WTO 
reauthorization, demonstrating to our trading partners that 
Seattle was an aberration and that the United States can play 
its indispensable leadership role in creating a rules based 
international trading system.
    Thank you very much, Mr. Chairman.
    [The prepared statement follows:]

Statement of Thomas M.T. Niles, President, United States Council for 
International Business, New York, New York

    I am Thomas Niles, President of the United States Council 
for International Business (USCIB). The USCIB has approximately 
300 members including multinational enterprises, law firms and 
trade associations. It represents U.S. business in the 
International Chamber of Commerce (ICC), in the Business and 
Industry Advisory Committee (BIAC) to the OECD, and, most 
importantly for the subject I wish to discuss today, in the 
International Labor Organization (ILO) through the 
International Organization of Employers (IOE).
    I very much appreciate the opportunity to appear before the 
Subcommittee today. I wish to use the time allocated to me to 
discuss the issue of the relationship between trade and labor. 
Because of the USCIB's participation in the ILO, this is an 
issue on which we have been particularly active.
    The issue of trade and labor, or to put it another way, how 
to deal with the issue of labor rights and standards in a 
globalizing economy, is not a new one, going back as it does at 
least to the formation of the ILO in 1919. However, this issue 
received more prominence during the run-up to the Seattle WTO 
Ministerial and at the Ministerial itself than was the case in 
previous multilateral trade rounds. While trade and labor was 
one of the controversial issues at Seattle, it was not the 
only, or even the principal rock, on which that enterprise 
foundered.
    In my view, the principal reason for the failure in Seattle 
was the long and debilitating struggle in the WTO over the 
replacement of Renato Ruggiero as WTO Director General. 
Traditionally, the WTO, or GATT, Director General has played a 
vital role as conciliator and problem solver. During much of 
the run-up to Seattle, not only was there no Director General, 
but the filling of that office itself was a major source of 
contention. Not surprisingly, Ministers found it impossible to 
solve in four days what had eluded senior officials for more 
than 18 months. In addition, the developing countries came to 
Seattle believing they had been denied the ``special and 
differential treatment'' they had been promised in the Uruguay 
Round. For these countries, numbering more than 100 of the 
WTO's 134 members, the trade and labor issue was particularly 
sensitive.
    There were two proposals on the trade and labor issue on 
the table at Seattle: one, put forward by the United States, 
called for the establishment of a trade and labor working group 
in the WTO; the second, advanced by the EU, provided for the 
formation of a ``Joint ILO-WTO Standing Working Forum on Trade, 
Globalization and Labor Issues.'' The developing countries 
rejected both. Their position was, and remains, that this issue 
was settled once and for all at the Singapore WTO Ministerial 
in December 1996, which referred the issue to the ILO. This was 
restated in a G-77 statement on Seattle issued in October 1999.
    Although Administration representatives insisted that they 
were only interested in ``studying'' the relationship between 
trade and labor standards, this position was not taken 
seriously by the developing countries. The latter assumed that 
the United States had a hidden agenda of establishing a basis 
for imposing trade sanctions over non-observance of core ILO 
labor standards. President Clinton's December 1 interview with 
the Seattle Post-Intelligencer confirmed their fears that the 
United States had something more concrete in mind than a 
``study.''
    The USCIB strongly supports efforts to raise labor 
standards around the world. In this respect, we fully share the 
goals of the Administration and others, such as the AFL-CIO. 
Where we part company is on how best to accomplish this goal. 
Allow me briefly to outline why we oppose the introduction of 
labor issues into the WTO:
     If studies, and not sanctions, are indeed all that 
is involved, the fact is that this issue has been extensively 
studied by the ILO and the OECD. These organizations have 
concluded that the extent to which countries adhere to ILO 
labor standards does not have a discernable impact on trade 
flows. For its part, the WTO, which has no particular 
analytical capability, is unlikely to be able to add anything 
to those studies. If the objective is to create a basis for 
trade sanctions, we question how the imposition of barriers to 
LDC exports will promote better compliance with ILO labor 
standards. We believe, as many studies have shown, that the key 
to better labor standards is economic development, which can be 
achieved through increased trade and investment flows, not 
sanctions. If the U.S. wishes to push this process forward, we 
recommend the adoption of the EU program of giving a supplement 
to GSP to countries that fulfill their obligations under ILO 
conventions;
     As I noted, the developing countries are dead set 
against the U.S. proposal, which they see as the first step 
toward a new protectionism. Realistically, there is no package 
of concessions to which we could agree that could cause them to 
abandon this position. Under the provisions of the WTO Charter, 
a consensus would be required to introduce provisions 
permitting us to impose sanctions in cases involving non-
observance of core labor standards. Should we argue that 
developing country acceptance of a trade and labor working 
party is a requirement for their agreement to a new trade 
round, most of the developing countries would reply that the 
idea of a new round was ours and that they are prepared to 
forego the experience; and,
     Finally, and most importantly, there is a better 
way to deal with this issue, namely through the ILO, using the 
June 1998 ILO Declaration on Fundamental Principles and Rights 
at Work.
    The ILO Declaration was developed in large part at the 
initiative of the USCIB, particularly by my predecessor, 
Ambassador Abraham Katz. It takes the mandate given to the ILO 
by the Singapore WTO Ministerial and creates a basis on which 
the ILO can use its influence to promote the implementation of 
its core labor standards throughout the world, including in 
countries that have not ratified the relevant ILO Conventions. 
This process is now beginning, and in its first year the ILO 
will consider the principle of freedom of association, one of 
the fundamental requirements for raising labor standards.
    It has been argued that this approach is flawed due to the 
fact that the ILO ``has no teeth.'' However, the ILO has 
significant influence, including in some of the countries most 
in need of radical changes in the labor area. Moreover, the 
publicity that will accompany ILO efforts to deal with these 
problems, using the Declaration, will be a powerful incentive 
for governments and private companies that do not adhere to 
core labor standards to clean up their acts. Countries will not 
wish to be in the spotlight for poor labor practices, given 
what this can mean for flows of capital, and companies will not 
wish to run the risk of consumer resistance to their products 
due to problems in the labor area. We have seen examples of the 
power of such publicity in a networked world.
    One idea that has recently surfaced in the discussion of 
this issue is the need to establish some mechanism to 
coordinate the activities of the various international agencies 
involved in one aspect or another of the development process. 
For example, when the IMF develops a country program that 
involves austerity measures by the country concerned, it is 
crucially important to keep in mind that this program may have 
significant social consequences. Does the country in question 
have programs, a ``social safety net,'' to deal with those 
consequences? This is where the ILO could, and should, be 
called in, to work with the IMF to ensure that the negative 
social consequences of the IMF program can be minimized. Some 
sort of informal consultative structure involving the 
International Financial Institutions, the ILO, the WTO, UNCTAD, 
and other organizations, could prove quite useful.
    In conclusion, Mr. Chairman, the USCIB believes strongly 
that there is a better way to deal with the issue of trade and 
labor than to persist in what will be a futile effort to force 
this issue into the WTO. The ILO is the better alternative, and 
the United States government, labor and business should work 
together, as we did in the case of the 1998 ILO Declaration, to 
ensure that the ILO moves ahead vigorously in implementing the 
Declaration. Further alienating the developing countries by 
pushing for a WTO working group on trade and labor could ensure 
that we will fail in the ILO as well as in the WTO.
      

                                


    Chairman Crane [presiding]. Thank you.
    Ms. Wallach.

 STATEMENT OF LORI WALLACH, DIRECTOR, PUBLIC CITIZEN'S GLOBAL 
                          TRADE WATCH

    Ms. Wallach. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to testify. I'm Lori Wallach with 
Public Citizen's Global Trade Watch.
    I'll summarize my written testimony by starting with number 
one, Seattle was not a fluke or an accident caused by random 
factors, either. And indeed, it's important to understand who 
the protesters were and what they were about.
    For instance, to rely on the goofiness of, say, Tom 
Friedman, is at the peril of making the changes to move 
forward. In fact, the protesters were informed. Ninety-nine 
point nine percent of them were peaceful. They are diverse, and 
I chance to say, some of them might have been your neighbors.
    They came there, 50,000 of them, on their own time and 
their own dime, because they were motivated by their personal 
experience of 5 years of the WTO. The WTO's record was the 
major organizer of the protest.
    Not only should these folks not be dismissed as ignorant, 
but at this point it's not possible to saddle with them with 
more macroeconomic statistics or promises of benefits. Some of 
them bought into the $1,700 a year in family income will 
increase if the WTO passes line, and after 5 years, they don't 
just realize that didn't happen, they were additionally peeved.
    Meanwhile, many of the things they were concerned about did 
occur. Every single environmental and consumer law that WTO 
reviewed was ruled against, income inequality has increased. 
For the folks who work in development issues, the share of 
trade for the developed countries has decreased, and so forth.
    These folks also don't buy the inevitability line. They 
know the question is not whether there will be globalization or 
not, but what will be the rules. And they know it took a long 
time for the current rules to be designed and put in place. And 
they find the current rules' outcomes unacceptable, and they're 
committed to working for change. And they're blessed to live in 
a democracy, where when the demand for change builds 
sufficiently, change either happens in the policy or in the 
policymakers.
    Number two, the intensity and diversity of the protests 
should not have come as a surprise, certainly not to the U.S. 
Congress, as there is a long list of empirical evidence 
demonstrating that the NAFTA-WTO paradigm of international 
commerce is no longer viable. That evidence being two fast 
tracks, two CBIs, an MAI, and so forth., that did not happen.
    The consensus is gone because the circumstances changed and 
the policy didn't keep up. And the folks who were in Seattle 
would really prefer to work for it in a creative way to change 
old policies. But it appears that those who support the status 
quo seek one more piece of evidence about why we're not going 
that way. And that would be the fight on permanent most-
favored-nation. Which by the way, after hearing the mantra from 
the administration about losing all the benefits if we don't 
permit most-favored-nation, no Subcommittee other than this one 
knows more that we have a bilateral reciprocal MFN agreement 
with China which continues. The question is the dispute 
resolution. We don't lose the market access benefits.
    And number three, continued inflexibility will be the 
number one contributing factor to imploding the WTO. The 
President says we should try a new paradigm, but then he pushes 
permanent MFN with no labor, environment and human rights. USTR 
Barshefsky calls for new a round, but actually a month ago said 
her lesson was they needed to fix the WTO first. The groups who 
brought you Seattle are arguing that to start with, pruning 
back some of the places that the Uruguay round got into 
domestic decisionmaking would be a first way to go forward.
    And then finally, the cause of the breakdown of the 
negotiations and the implications. To say there was no link 
between the protesters is perhaps soothing in the short term, 
but it's wrong. It wasn't the folks in the streets. It's been 
years of organizing and educating in numerous countries. And in 
fact, a year-long campaign leading toward Seattle, called the 
new turnaround campaign.
    What resulted was, number one, for the first time 
negotiators were someone accountable to their own publics and 
were being closely observed. And number two, the whole world 
got to see that the U.S. public opinion did not necessarily 
support the agenda the U.S. had pushed.
    So as a conclusion, I would hope one thing we can agree is 
that the Seattle experience should have been a wakeup call for 
the groups who organized toward it. The resolution on the WTO 
is not something we take seriously. We think the WTO should be 
on a short leash to make some major changes, but to face fix it 
or nix it, either the system will have to bend or it will 
break. That would be unfortunate.
    Thank you.
    [The prepared statement follows:]

Statement of Lori Wallach, Director, Public Citizen's Global Trade 
Watch

    Mr. Chairman and members of the committee, on behalf of 
Public Citizen and its members nationwide, thank you for the 
opportunity to testify about the historic World Trade 
Organization (WTO) Ministerial Summit in Seattle held in late 
1999.
    My name is Lori Wallach. I am the director of Public 
Citizen's Global Trade Watch. Public Citizen is a consumer 
advocacy group founded in 1971 by Ralph Nader. Global Trade 
Watch is a division of Public Citizen founded in 1993 which 
focuses on governmental and corporate accountability on 
globalization, international commercial and trade issues.
    Allow me to start my testimony with a summary of my 
conclusions:
    First--Seattle was not a fluke. The sentiment underlying 
the WTO protests is based on the personal experience of people 
affected by the WTO's rules and rulings. The critics of WTO are 
energized by their knowledge of WTO's effects, not by 
``ignorance,'' which some WTO-boosters dismissively argue can 
be educated away. The majority of protestors were peaceful, 
informed people who probably include some of your neighbors and 
who intend to see the major flaws in the current model of 
corporate economic globalization fixed. These folks realize 
that what we have now is not ``free trade.'' And, they won't 
tolerate the continued damage to many of their most important 
values and interests of the ``corporate managed trade'' system 
we now have. They know that there is nothing inevitable about 
the current rules. They know it took years for those 
benefitting from this version to develop it and put it into 
place via mechanisms like the Uruguay Round Agreements and the 
WTO.
    Second--the diversity and intensity of the protests against 
WTO in Seattle should not have been a surprise--certainly not 
to the US Congress. The fact of the matter is that 
international commercial policy in the United States has been 
at a standstill for years because consensus on this vital 
matter has broken down. American consumers rallied with labor 
and environmental allies to stop the out-dated Fast Track 
procedure, CBI NAFTA expansion, and the Multilateral Agreement 
on Investment. The status quo trade policy--which now does set 
environmental, human rights and labor standards in commercial 
agreement, but in the form of constraining government action in 
these areas--is no longer publically acceptable or politically 
viable. We need to move forward towards a new policy. Yet 
instead the same folks who stopped Fast Track, MAI et al are 
facing the tedious prospect of having to stop yet another 
backwards proposal--PMFN for China--instead of working on how 
to move forward.
    Third--continued stubbornness by the beneficiaries of the 
international commercial policy status quo (against working 
towards a new approach) will be the number one contributing 
factor to further implosion of institutions such as WTO. WTO 
either must bend significantly or it will break.
    On Friday, December 3, 1999, labor, environmental, 
consumer, human rights, religious, and other non-governmental 
organizations (NGOs) from around the world let out a collective 
``whoop'' in Seattle, when WTO Director General Michael Moore 
and USTR Charlene Barshefsky announced a halt to WTO 
negotiations intended to launch a Millennium Round of WTO 
expansion.
    Many of these groups had been working since the early 
1990s. First we worked to shape the Uruguay Round texts. Then, 
we tried to stop their adoption after having core public 
interest concerns about safeguarding food safety and the 
environment not only totally left out, but undermined by the 
Uruguay Round package. Finally, over the past five years we 
have monitored the Uruguay Round's outcomes and attempted to 
limit the damage the Uruguay Round Agreements were doing to our 
hard-won domestic public interest policies and democratic 
decision-making systems.
    However, as well in that room now also whooping to see the 
WTO foiled from an expansion of ``more of the same'' where the 
minority of NGOs which had supported the Uruguay Round and 
establishment of the WTO. This shift is one that proponents of 
the status quo dismiss at their peril.
    For instance, the international consumer movement to which 
Public Citizen relates was divided on the Uruguay Round. Some 
consumer groups were concerned that the powerful enforcement of 
the WTO combined with the anti-public interest provisions 
tucked into the Uruguay Round's underlying substantive 
agreements could undercut vital consumer interests and 
safeguards. Other consumer groups were hopeful that increased 
competition would lower prices and increase choice for 
consumers around the world while promised economic benefits 
would improve the standard of living for many poor consumers. 
Back in 1993, no one could know what precisely would result.
    But after carefully reviewing the WTO's real life five year 
record, in the fall of 1999 Consumers International (the 
international federation of consumer groups which had supported 
the Uruguay Round) as well as many of its members 
organizations, joined a global NGO command for no WTO expansion 
until an array of problems were ``turned around''--namely 
repairs, deletions and replacements of some WTO terms.
    We are often asked how we were able to organize such 
diverse WTO critics coming from all over the country at their 
own expense to protest the expansion of the WTO. There actually 
is a simple answer to that inquiry. It was not any NGO, but the 
WTO, which provided the greatest organizing push: the WTO's 
five year record of undercutting a diverse array of hard-won 
public interest accomplishments around the world is what 
brought out all of those people to Seattle.
    WTO and US officials claim that the impasse in Seattle had 
nothing to do with the opposition by citizens and the protests 
in Seattle's streets, but was a result of the irreconcilable 
differences between developed and developing countries.
    On the contrary, the collapse of the Seattle WTO expansion 
attempt was in no small part the result of years of work--based 
on analysis of the WTO's operation to date and aimed at the 
inherent and fundamental flaws of that organization.
    Over the course of 1999, hundreds of NGOs working on the 
``inside,'' including Public Citizen and thousands of NGOs 
around the world, put forth to their governments rigorous 
demands on topics now included in international commercial 
negotiations as diverse as food safety and labeling, 
genetically modified organisms, forest and animal protection, 
investment rules, services, and agriculture. We also monitored 
our country delegations closely.
    Tens of thousands of protestors came to the streets when it 
became clear that all of our calls for a review and repair of 
WTO had been rejected in favor of more-of-the-same.
    The protestors on the streets, 99.9% of whom were peaceful 
and well-informed, can be credited with revealing to foreign 
delegation and to the world public via the media the depth of 
US public opposition to an international commercial agenda 
sublimating all values to that of commerce. Given this agenda 
is pushed by the US government, revealing the lack of broad 
public support for it here is one of many successes from 
Seattle. (See Annex below for more on the protests.)
    The protests also shortened the time for negotiations to 
launch WTO expansion. The shorter time made clearer how central 
the controversial ``Green Room'' process was in making key 
decisions.
    As well, the Clinton Administration, just like governments 
all over the world, found itself for the first time in 
international commercial talks, with its public demanding some 
level of accountability and watching VERY closely. This 
scenario made it impossible to slip into the usual closed room 
and trade away numerous countries public interest for narrow 
special interests.
    The events in Seattle rocked the corporate world. The 
Financial Times editorial page bemoaned the ``Disaster in 
Seattle,'' the New York Times the ``Shipwreck in Seattle,'' and 
The Economist labeled the talks ``A Global Disaster.'' And, 
from reports we have had from Davos, the CEOs collected there 
either were stunned about Seattle and/or still do not 
understand what happened or it means.
    First--Seattle was not a fluke. The sentiment it 
represented is based on the personal experience of people 
affected by the WTO's rules and rulings. The critics of WTO are 
energized by their knowledge of WTO's effects, not by 
``ignorance'' as claimed by some WTO-boosters. Indeed, those 
who follow Tom Friedman's ill-informed calls to ignore the 
protest as a fluke and move on with business as usual are being 
set up for a major fall. Seattle was no fluke; it is the new 
reality.
    The majority of protestors were peaceful, informed people 
who probably include some of your neighbors and who intend to 
see the major flaws in the current model of corporate economic 
globalization fixed. These folks realize that what we have now 
is not ``free trade.'' They are not willing to tolerate 
continued damage to many of their most important values and 
interests of the ``corporate managed trade'' system delivered 
by mechanisms like the Uruguay Round Agreements and WTO.
    There has been enormous interest in how Public Citizen 
raised ``all of the money'' required to organize the assorted 
NGO conferences in Seattle, open offices, and provide 
transportation and housing to NGO participants from around the 
world. The nature of that inquiry exactly pinpoints the depth 
of mis-understanding about what the opposition was and is.
    There is no interested source of Public Citizen's funding 
because frankly, there was not much money that went into 
Seattle organizing. The Seattle protestors were ``public 
citizens'' meaning not our organization's membership, but 
people with ``day jobs'' who gave up their free time to work on 
Seattle activities because they are interested and involved in 
their governance. With the exception of a few NGO 
representatives from Africa and Latin America, everyone paid 
their own way and the latter were assisted by several church 
organization and other internationally-minded NGO in the U.S. 
and Europe.
    Unlike the corporate host committee for Seattle, almost all 
of our work was done by volunteers and supplies and services 
were donated bit-by-bit by people who care about what 
globalization means for their lives.
    We did find accommodations for almost 2500 people, but what 
is often not noted is that one paid staffer and a team of 
volunteers found local families to put up over 2000 of these 
folks in homes. The rest paid for beds we set aside early on at 
the local youth hostel and a few cheap hotels. We did arrange a 
transportation system, but it was a pool of hundreds of 
volunteers who signed up for certain times and days to 
volunteer to drive around people and supplies in their car, 
vans and trucks.
    With volunteer help from local union carpenters, we built a 
temporary office space in an empty building in downtown Seattle 
that is slated for demolition. That office was given ancient 
computers donated by a Seattle homeless advocacy group which 
had gotten computer upgrades. The phones were an assortment of 
old phones from Public Citizen and a local environmental group. 
At the peak, there were five paid staff--who coordinated 
literally over 1000 Seattle-area volunteers.
    Second--the diversity and intensity of the protests against 
WTO in Seattle should not have been a surprise--certainly not 
to the US Congress. International commercial policy in the 
United States has been at a standstill for years because 
consensus on this vital matter has broken down. American 
consumers rallied with labor and environmental allies to stop 
the undemocratic Fast Track procedure, CBI NAFTA expansion, and 
the Multilateral Agreement on Investment.
    The status quo trade policy--which now does set 
environmental, human rights and labor standards in commercial 
agreement, but in the form of limiting government action on 
these vital public interest safeguards--is no longer publically 
acceptable or politically viable. We need to move forward 
towards new policies.
    Yet, instead the same folks who stopped Fast Track, MAI and 
the Seattle WTO expansion launch are facing the tedious 
prospect having to stop yet another backwards proposal--PMFN 
for China--instead of working on how to move forward.
    Third--continued stubbornness by the limited beneficiaries 
of the status quo on international commercial policy (against 
working towards new approachs) will be the major contributing 
factor to further implosion of institutions such as WTO. WTO 
either must bend significantly or it will break.
    The message from US voters, NGOs and the international 
consumer movement is one and the same. We must radically 
restructure the way in which our governments undertake 
international commercial policy--and we are not just talking 
about transparency, but about substance.
    While the specifics of such substantive changes are beyond 
the scope of this testimony, the basic notion is that the WTO 
must be pruned back. As regards a variety of issue areas, the 
18 agreements the WTO was empowered to enforce after the 
Uruguay Round simply go beyond what is appropriate to be 
decided by ``international commercial'' regulations. The 
Uruguay Round saw a transformation from a focus on tariffs and 
quotas and objective principles of competition (eg national 
treatment) into an array of rules setting regulatory and social 
policy.
    With the Uruguay Round, so-called ``trade'' rules moved 
beyond the objective and into imposing value decisions about 
the level of health or safety protection a country will be 
permitted to provide its residents if it desires to remain 
within trade rules (and avoid sanctions, etc.) Thus, the 
European Union deciding to ban all meat with residues of 
artificial growth hormones--taking a Precautionary Principle 
approach to health regulation--was ruled to violate WTO rules 
even though it treated domestic and foreign cattle the same. 
That level of protection (zero risk) was not allowed.
    Similarly, the notion of imposing 20 year monopoly patents 
on seeds and all medicines is a value decision to subjugate 
health and food security under commercial priorities. It is 
these sorts of issues, in which WTO rules constrain today's 
developing countries from using the same strategies for 
development used by the US when it was a developing country 
relative to much of Europe, that fuels opposition to WTO in the 
developing world.
    The over-reaching into such subjective policy decisions, as 
implemented on millions of people over the past five years, is 
what is at the root of growing WTO opposition worldwide.
    Thus, ironically it has been in achieving the goal of the 
Uruguay Round's designers--to quote its former head to create 
``the constitution for a single global economy''--that the WTO 
will be brought down absent major change.
    Are we against trade? Do we oppose any and all 
globalization? Obviously not. However, what we are for is for 
is rules for a global economy in which consumers, farmers, 
workers, environmentalist and other citizens who will live with 
the results are able to shape the design to meet the public 
interest.

 Annex: Seattle Protestors--``Who are those guys...'' and what really 
                                happened

    Given the television network's obsession with replaying the 
few violent scenes that transpired in Seattle and the short-
sighted strategy of WTO booster in trying to characterize the 
Seattle protestors as loopy and violent, I wanted to use the 
record of this hearing to set that record straight.
    Thousands of NGO representatives attended conferences, 
workshops and meetings at venues inside and outside the 
official WTO meeting buildings. Each day of the Ministerial 
also had an NGO theme and a full day of educational 
programming. (Days included ``health and environment,'' ``labor 
and livelihoods,'' etc.) Each day had a major protect or march 
which was conducted with permits and on three of the four days 
drew crowds of 15,000 (agriculture and food day at a harbor 
side park) to 40,000 (the labor day rally at Arena Stadium.) 
All of these activities were overshadowed in media coverage, 
however, by what started as peaceful civil disobedience and 
ended with police sousing crowds with tear gas and rubber 
bullets.
    Even though Public Citizen did not organize the civil 
disobedience protests, I want to set the record straight as an 
observer and then later having debriefed scores of those 
involved:
    What occurred on Tuesday November 30 was that before 
sunrise, several west coast activist groups, who had trained 
hundreds of people in non-violent, civil disobedience 
techniques, organized protestors to sit in at the street 
intersections leading to the Trade and Convention Center. The 
Seattle Student/Worker Walkout Committee organized a mass 
walkout of students and employees from local schools and 
businesses who were part of the sit down protest. Activists 
linked arm-in-arm and sometimes chained themselves together 
with the announced goal of shutting down the start of the WTO 
negotiations. From the perspective of these groups and 
activists, the conferences, rallies and marches organized by 
groups like Public Citizen and the AFL-CIO were only one aspect 
of effective protest: these groups put their focus on peaceful 
direct action, such as sit ins.
    These actions, premised on the non-violent civil 
disobedience techniques of Martin Luther King, Jr. and Ghandi, 
had been planned over months. Indeed, the groups had used 
publicly accessible webcites to describe their plans and invite 
people to obtain non-violent civil disobedience training.
    Whatsmore, the sit down protest organizers had met with the 
Seattle police both to make clear their commitment to non-
violence and to prepare the police for the massive civil 
disobedience arrests that would be necessary to clear the 
streets on November 30. Indeed, through a series of meeting, 
the police and the sit-down protest organizers made an 
agreement that arrests would not begin until sunrise so the 
process could be reported by the news media. Capping these 
meetings, there was a joint news conference the week before the 
Ministerial which included the Seattle mayor, representatives 
of groups like Public Citizen and the AFL-CIO which held march 
and protest permits, and representatives of the direct action 
groups planning the sit in.
    For reasons which remain unclear, the Seattle police never 
began the agreed process of arresting the civil disobedience 
protesters and bussing them away from Seattle's downtown. Most 
of the sit down protestors were not prepared to remain at their 
positions for much longer than Tuesday morning, thus the media 
images of hungry, shivering young protestors.
    Then, mid-morning Tuesday, several dozen young people 
dressed in identical black garb and wearing face masks appeared 
and started marching in formation down one of Seattle's main 
streets, near the Convention Center. Despite their highly-
regimented paramilitary appearance, they identified themselves 
as anarchists. They had popped up, disrupted a peaceful protest 
and then melted into the crowd the day at a peaceful protest in 
front of a McDonalds which had featured a French farmer handing 
out French cheese hit with high tariffs under current WTO 
retaliation on a dispute. Tuesday midmorning, once again, these 
few appeared and began smashing the windows of downtown stores, 
including Old Navy, Starbucks, Niketown, and FAO Schwarz.
    The peaceful protesters conducting the sit-in shouted 
``Shame!'' and ``Non-violent protest!'' at the youths. Some 
grabbed the window-breakers, attempting to halt the property 
damage. Hundreds of Seattle police officers dressed in full 
riot gear stood by and watched, actively refusing to arrest the 
masked window-smashers even when peaceful protesters asked for 
assistance. Indeed, in one instance, a person restraining a 
black-masked vandal armed with a brick and poised before a 
store window was told by police to release the vandal or risk 
arrest for assault. The police then stood by as the released 
vandal smashed a row of store windows in front of them.
    Meanwhile, at noon, tens of thousands of labor unionists, 
family farm, consumer, religious, and environmental activists 
rallied at Memorial Stadium to listen to AFL-CIO president John 
Sweeney, Teamsters president James Hoffa, Jr., Steelworkers 
president George Becker, and other U.S. and international 
labor, environmental, and other NGO leaders speak on the WTO's 
impacts on people around the globe. The massive labor rally, 
sponsored by the national, state, and local AFL-CIO and many 
international unions, then marched toward downtown Seattle. The 
plan was for the march to proceed to the Convention Center and 
then head back to the stadium, where hundreds of buses awaited 
the labor participants.
    By mid-afternoon, over 40,000 students, activists, and 
labor representatives thronged into downtown Seattle as part of 
the march from Memorial Stadium. The scene that greeted the 
labor marchers was surreal. Riot police dressed in Robocop 
costumes (even the police horses had plastic eyeguards against 
the tear gas) had begun without warning to attack random 
circles of sit down protesters with an array of weaponry 
including tear gas, pepper spray, concussion grenades, and 
rubber bullets.
    Instead of asking the crowds to disperse, the police 
randomly charged protesters, beating them with nightsticks, 
shocking them with stun-guns, and continuously firing rounds of 
tear gas and more lethal CS gas.
    Meanwhile, police shot into the crowds at close range with 
rubber bullets (not aimed at feet and legs as protocols 
require) and set off concussion grenades, the goal of which is 
to fell rioters by giving them concussions.
    Given many protesters were literally chained or tied 
together and had been given no notice to disperse, the impact 
of this weaponry was vicious. Each sit-down group had a person 
designated as a ``medic'' equipped with water and vinegar spray 
for eyes in case tear gas was used. However, police targeted 
those with medic IDs and also the protesters (many volunteer 
lawyers and law students) identified with ``legal observer'' 
IDs for beatings and arrest. All this time the police allowed 
the violent marauders to continue to spray-paint graffiti and 
smash store and car windows.
    As many of the labor marchers came onto these repeated 
scenes of police violence, they intervened to protect the sit-
down protesters. The result was groups of beefy Teamsters and 
Longshoremen trying to protect a diverse array of protesters--
including those in turtle costumes and others with a rainbow of 
hair colors--at numerous intersections from platoons of police 
marching in military formation and slapping their nightsticks 
in rhythm on their metallic shin guards.
    This ugliness could have been entirely avoided had the 
police arrested the few vandals early-on and implemented their 
agreed plan for civil disobedience arrests of the sit down 
protestors. Instead skirmishes between protesters and the 
police continued well into the night, with the police firing 
tear gas indiscriminately into the crowds and pushing them into 
Seattle's Capitol Hill residential section.
    Ironically, by dousing a residential area with tear gas, 
the police added many more Seattle residents to the following 
days' protests. Local television played over and over an 
interview of a man in his pajamas holding his small daughter 
with both their faces red and tear-stained from being gassed in 
their home.
    The next day, the security zone was also turned into a no-
protest zone and anyone caught within it without WTO ID (only 
available by applying months before to a WTO office in Geneva) 
was arrested. This resulted in over 500 arrests within two 
days. Indeed, numerous people with WTO credential were also 
arrested, as were several bishops of a major Protestant 
denomination, among others. In addition to the frequent beating 
and other mistreatment of these arrested, the ACLU filed a 
lawsuit in December 1999 which also challenges the police's 
practice of holding arrestees for days without charging or 
processing them.
      

                                


    Chairman Crane. Thank you, Ms. Wallach.
    Mr. Kittredge.

 STATEMENT OF FRANK D. KITTREDGE, PRESIDENT, NATIONAL FOREIGN 
                         COUNCIL, INC.

    Mr. Kittredge. Thank you, Mr. Chairman.
    I'm Frank Kittredge, President of the National Foreign 
Trade Council. My remarks today will focus on three issues: the 
outcome of the Ministerial meeting, the United States and 
Europe's fundamental interest in the multilateral trading 
system, and the upcoming 5-year report on the WTO.
    First, the Seattle Ministerial and the future outlook for 
the WTO. The NFTC was, of course, disappointed that trade 
ministers failed to launch a new WTO round last December. It 
was particularly dismaying, considering the progress that was 
achieved in the draft ministerial declaration. Progress was 
made on key issues including services, agriculture, e-commerce 
and developing country concerns such as capacity building.
    We were also on the threshold of a step forward in 
improving WTO transparency and eliminating environmentally 
harmful practices, such as fishery subsidies. Everyone lost 
when the talks were suspended.
    There were many reasons for the failure to launch new trade 
talks. They included ministers' intransigence on a few highly 
charged issues, inadequate preparation, difficulties in 
managing a ministerial process that included more active 
players, and insufficient political leadership. As an aside, 
the protest activity was not the reason for the lack of final 
agreement, even though it allowed those who wanted to stop the 
advancement of international trade to claim victory.
    The NSTC views the way forward as a two-step process. 
First, we should move ahead as quickly as possible on the 
mandated, built-in agenda on services and agriculture, as well 
as address the immediate issue of expiring provisions. On this 
point, I'd like to note the NSTC's concern about the growing 
list of developing country requests for extending 
implementation deadlines, some by as much as 10 years, for key 
agreements, such as customs valuation, trims and trips.
    Second, there must be a willingness on everyone's part to 
be less rigid. The U.S., for example, may have to recognize 
that it cannot insist that issues of chief concern to a number 
of countries, such as antidumping, are completely off the 
table. Moreover, until developing countries are convinced that 
a working party on trade and labor is not simply the developed 
countries' excuse for new forms of trade protection, we are 
unlikely to make much progress.
    Likewise, Europe and Japan have to realize that substantial 
agricultural trade liberalization must be dealt with. Launching 
a negotiation requires realism and flexibility on all sides.
    Second, U.S.-European relations. Perhaps the most important 
step required to get the trade talks back on track is for the 
U.S. and the EU to get back to their basic shared interest in 
maintaining a vibrant, multilateral trading system. All past 
trade rounds have been made possible by U.S.-EU agreement on 
the fundamental need for trade liberalization. This has not 
prevented the two from having trade disputes, surely, but their 
mutual support for the broader trading system contained these 
disputes within manageable limits.
    As a case in point, and has been talked about quite a bit 
here today, we're very concerned about the EU's current 
challenge to the FSC. The EU's action breaks a 1981 agreement 
that provides for equivalent treatment of exports under the 
European territorial and the U.S. worldwide systems of 
taxation. If unchecked, this case could lead to a cycle of 
retaliation and counter-cases, and could ultimately undermine 
basic U.S. support for the WTO. The NFTC urges the 
administration and the EU to resolve this dispute expeditiously 
in a manner that preserves the competitive balance created by 
the FSC.
    Third, the WTO and a 5-year report. The NFTC looks forward 
to the administration's March 1 report on the WTO as a prime 
opportunity to advance the WTO's positive record. On that 
point, I'd like to request that the U.S. Alliance for Trade 
Expansion's guide to whose trade organization be submitted for 
the record. The Alliance released this guide to identify 
specific misrepresentations by WTO opponents.
    It is clear that the WTO and the GATT have accomplished a 
remarkable record. Trade liberalization has helped lift 3 
billion people out of poverty, fostered global economic 
stability and prosperity, and spread democratic values, such as 
the rule of law, peaceable dispute settlement, and 
nondiscrimination. As far as our own economy is concerned, 
we're experiencing the longest economic expansion in history. 
America's openness to trade, as fostered by the WTO, is a 
primary reason why we are so strong economically. Advancing 
trade liberalization is essential to sustaining America's 
leading edge, job-creating economy.
    The NFTC recognizes that WTO is not perfect. We agree that 
there should be greater transparency. However, we do not agree 
that the WTO is not accountable. It is a government-to-
government organization, driven by consensus among nation 
states, which are accountable to their citizens. Providing a 
seat at the table to business and other special interest groups 
would make the WTO less, not more accountable.
    Finally, improving worker standards and the environment are 
important objectives. And rule-based trade expansion under the 
WTO has been a positive force for change in these areas. The 
single most important way to improve environmental and labor 
standards is to improve economic conditions, a main result of 
trade expansion.
    Moreover, while there is a need to better understand the 
ways in which these issues interrelate, the WTO is not the sole 
solution to every multilateral problem. It's time to devote 
efforts to more effective approaches.
    Mr. Chairman, I'll stop there. Thank you very much.
    [The prepared statement follows:]

Statement of Frank D. Kittredge, President, National Foreign Trade 
Council

    Mr. Chairman and distinguished members of the Subcommittee, 
I am Frank D. Kittredge, President of the National Foreign 
Trade Council (NFTC). The NFTC is a broad-based organization of 
more than 550 U.S. companies having substantial international 
operations and interests.
    I appreciate the opportunity to testify today on the 
implications of the recent WTO ministerial meeting in Seattle. 
The vital importance of the WTO to the U.S. national interest 
and the upcoming five-year report on the WTO makes this a 
timely and significant hearing. My remarks will focus on three 
basic issues: 1) the ministerial meeting and outlook on future 
WTO trade talks; 2) the United States and Europe's fundamental 
shared interest in strengthening the multilateral trading 
system; and 3) the Administration's upcoming five-year report 
on the WTO.

    The Seattle Ministerial and Outlook on Future WTO Trade 
Talks

    The NFTC and its member companies were very disappointed 
that trade ministers failed to launch a new round of 
multilateral trade negotiations at the WTO ministerial meeting 
in Seattle last December. It is particularly dismaying when 
examining the significant progress that was achieved in the 
draft ministerial declaration. While we recognize the draft 
declaration was a negotiating document and was not agreed upon 
by WTO members, it nonetheless provides an indication of what 
might have been achieved had the ministerial succeeded in 
launching negotiations. The draft declaration shows that 
progress was made on key issues, including services, 
agriculture, e-commerce, government procurement transparency, 
and developing country concerns, such as capacity building. The 
NFTC believes we were also on the threshold of taking a step 
forward on issues of concern to both the business and NGO 
community, such as improving transparency of the WTO and 
eliminating environmentally-harmful fishery subsidies. Everyone 
lost when the talks were suspended.
    There were many reasons for the failure to launch new trade 
talks. They include ministers' intransigence on a few highly-
charged issues, inadequate preparation before the ministerial, 
institutional difficulties in managing a ministerial process 
that included more active players from developing countries, 
and insufficient political leadership among major trading 
partners. As an aside, the protest activity was not the reason 
for the lack of final agreement, even though it allowed those 
who want to stop the advancement of international trade at all 
costs to claim victory.
    The NFTC views the way forward as a two-step process. 
First, we should move ahead as quickly as possible on the 
mandated ``built-in'' agenda on services and agriculture, as 
well as address the immediate issue of expiring provisions of 
interest to both developed and developing countries. On this 
point, I would like to note that many NFTC member companies are 
alarmed about the growing list of developing country requests 
for extending implementation deadlines--some by as much as ten 
years--for key agreements, such as Customs Valuation, TRIMS and 
TRIPS. Any extensions should be as short as possible to avoid 
harming U.S. exports.
    Agreement also should be reached on other ``confidence 
building measures,'' along the lines of Director General 
Moore's recent suggestions. For example, agreement on improved 
integrated technical cooperation for developing countries would 
be helpful to restoring positive momentum to the WTO 
negotiating process. Finally, action on issues that were ripe 
for agreement in Seattle, such as e-commerce, government 
procurement transparency, and the transparency of WTO 
procedures should be promptly addressed.
    Second, we must work towards resolving the underlying 
issues that prevented a successful launching of the trade 
talks. This will require, among other factors, a willingness on 
everyone's part to be less rigid in their positions. The United 
States, for example, may have to recognize that it cannot 
insist that issues of chief concern to a number of countries, 
such as antidumping, are completely off the table. Moreover, 
until developing countries are convinced that a working party 
on trade and labor is not simply a developed country's excuse 
for new forms of trade protection, we are unlikely to make any 
progress on this issue. Likewise, Europe and Japan have to 
realize that substantial agriculture trade liberalization must 
be dealt with effectively. Launching a negotiation requires 
realism and flexibility on all sides.

    U.S.-European Relations

    Perhaps the most important step required to get the trade 
talks back on track is for the United States and the European 
Union to get back to fundamental shared interests in 
maintaining a vibrant multilateral trading system and in 
raising living standards worldwide through trade expansion. In 
that regard, the NFTC is disturbed by what appears to be an 
increasing trend of trade-related political one-upmanship 
between the United States and Europe for narrow domestic 
reasons, at the expense of much more important global issues.
    All past rounds of trade negotiations through the Uruguay 
Round have been made possible by U.S.-EU agreement on the 
fundamental need for trade liberalization. This has not 
prevented the two from having heated trade disputes, but their 
mutual support for the broader trading system contained these 
disputes within manageable limits.
    The NFTC is very concerned that the EU's recent use of the 
WTO's dispute settlement system upsets this delicate balance, 
particularly with respect to the EU's challenge to the Foreign 
Sales Corporation (FSC) tax law. The EU's action breaks a 1981 
agreement that provides for equivalent treatment of trade under 
the European territorial and U.S. worldwide systems of 
taxation. This is a matter of maintaining U.S. jobs and trade 
and avoiding a deterioration in the trade balance. If 
unchecked, this case could lead to a cycle of retaliation and 
countercases, and could ultimately undermine basic U.S. support 
for the WTO. The NFTC urges the Administration to resolve this 
dispute expeditiously in a manner that preserves the 
competitive balance created by the FSC.

    WTO Benefits, Facts and Five-Year Report

    The NFTC looks forward to the March 1 report by the 
Administration on the WTO's five-year record. It is a critical 
opportunity to explain the benefits and positive record of the 
WTO. On that point, I would like to request that the U.S. 
Alliance for Trade Expansion's guide to ``Whose Trade 
Organization?'' be inserted for the record. The Alliance, which 
is a coalition of American farmers, consumers, businesses, and 
workers formed to increase public awareness of the benefits of 
rules-based trade expansion, released this guide to identify 
specific misstatements, misrepresentations and factual errors 
that have been propagated by WTO opponents.
    When the facts are known, it becomes clear that the WTO and 
its predecessor the GATT have accomplished a remarkable record 
of eliminating trade barriers, raising living standards 
worldwide, establishing basic rules of fairness in the conduct 
of trade, and preventing catastrophic trade wars. Trade 
liberalization under the WTO and GATT has lifted three billion 
people out of poverty, fostered global economic stability and 
prosperity, and spread democratic values such as the rule of 
law, peaceable dispute settlement, and non-discrimination. 
Furthermore, it has helped improve the environment and workers 
lives, and it fully protects the rights of nations to set 
stringent standards on human health and food safety.
    As President Clinton stated recently, ``open markets and 
rules-based trade are the best engine we know of to lift living 
standards, reduce environmental destruction and build shared 
prosperity.'' Trade and the institutions that foster it have 
nothing to be defensive about. As far as our own economy is 
concerned, we are experiencing the longest economic expansion 
in history. America's openness to trade and our nation's 
ability to trade with other countries as fostered by the WTO is 
a primary reason why we are so strong economically today. 
Advancing multilateral trade liberalization through the WTO is 
essential to sustaining America's leading-edge, job-creating 
economy.
    The NFTC recognizes that the WTO is not perfect. We agree 
with other NGOs that there should be greater transparency of 
the organization. However, we do not agree that the WTO is not 
``accountable.'' It is a government-to-government organization 
driven by consensus among democratically-elected nation states, 
which are accountable to their citizens. Providing a ``seat at 
the table'' to business and other special interest groups would 
make the WTO less, not more, accountable.
    We also agree with other NGOs that improving worker 
standards and the environment are important objectives. 
However, we believe that rules-based trade expansion under the 
WTO has been a positive force of change in these areas, and we 
should be focusing on these win-win solutions. The single most 
important way to improve environmental and labor standards is 
to improve economic conditions. Increased trade has proven to 
be perhaps the single most important catalyst to economic 
development around the world. Moreover, while there is a need 
to better understand the ways in which these issues 
interrelate, the WTO is not the sole solution to every 
multilateral problem. The ILO, for example, is making greater 
progress in addressing worker conditions and child labor. It is 
time to devote efforts to more effective multilateral 
approaches in addressing broader problems instead of simply 
blaming the WTO for them.
    The NFTC testified last year that it is prepared to sit 
down with members of this Committee, the Administration, and 
others to engage in a meaningful dialogue that will move the 
process forward on these issues. We remain willing to engage in 
such a dialogue.
    Before closing, I would like to add one more top priority 
WTO issue--China's accession to the WTO. The NFTC strongly 
believes bringing China into the WTO is in our best national 
economic interest and will lead to a more open Chinese economy 
and society. We urge Congress to approve permanent normal trade 
relations (PNTR) status for China this year so that the United 
States will be able to benefit from the groundbreaking market-
opening commitments China has agreed to make as part of its 
terms of accession.
    Mr. Chairman, thank you for the opportunity to testify 
today, and we look forward to working with you to achieve a 
bipartisan consensus on a forward looking trade agenda.
    [An attachment is being retained in the Committee files.]
      

                                


    Chairman Crane. Thank you very much, Mr. Kittredge.
    Ms. Wallach, I read your testimony, and the agreement that 
was negotiated between quiet, peaceful protesters and the 
Seattle police force occurred how far in advance of the 
beginnings of the WTO Ministerial meeting?
    Ms. Wallach. I think that the actual sort of sign-off with 
the sit-down protesters talked to the police about their not 
being violent in exchange for the police not arresting anyone 
until the sun came up and the cameras could roll was about 2 
weeks out. And the news conference----
    Chairman Crane. Wait, wait, 2 weeks before the conference?
    Ms. Wallach. Two weeks before the Ministerial. And I 
believe that the news conference announcing this, that the sit-
down strikers, and then the groups like ours or the AFL, who 
weren't doing the direct action but had permits for rallies and 
marches, all had together was the Wednesday before the Tuesday 
of the Ministerial.
    Chairman Crane. Mr. Trumka, is that your understanding, 
too?
    Mr. Trumka. I'm not familiar with the varied details of 
that. I know that we had permits and things that we had talked 
with, the people out there from the marches, AFL-CIO's point of 
view, for literally weeks in advance. We had worked with the 
county people, the town police, with ourselves for the march 
and everything else. But I don't know about the other people.
    Chairman Crane. But this was with the understanding that 
the people protesting would be arrested and peacefully charges 
would be filed and that would be settled at a later time. But 
this was all resolved in advance on the part of the 
overwhelming majority of the people who were protesting there?
    Ms. Wallach. Yes, sir.
    Chairman Crane. And it was the people who came in that you 
never knew who had the masks and did the violence to the 
buildings and the robberies and so forth?
    Ms. Wallach. It certainly wouldn't have been in the 
interest of those trying to have the focus beyond a critique of 
the WTO, to shift the focus onto the bashing of windows. And to 
that end, as I mentioned in my testimony, when some of our 
marshals, our folks who were trying to keep order, tried to 
stop the window breakers, like grabbing people's arms, they 
were told by the Seattle police that if they did not let them 
go, they would arrest them for assault.
    Chairman Crane. Do you know if the administration knew 
about this before the President's arrival?
    Ms. Wallach. Which this?
    Chairman Crane. About the agreement, the silent protesters, 
sitting and violating the law and getting arrested by the 
police after the sun came up when the media could cover it?
    Ms. Wallach. I don't know.
    Chairman Crane. Do you know whether the administration knew 
about these sidebar agreements, Mr. Trumka?
    Mr. Trumka. I don't know, Mr. Chairman.
    Chairman Crane. Do any of the rest of you know anything 
about this? Because this was my first understanding of this, 
that these agreements had been reached.
    Mr. Kittredge. Well, excuse me, I was there, Mr. Chairman, 
but I wasn't aware of other preagreements. It was clear to see 
the demonstraters and the denial of access that they produced 
to a lot of the buildings. But there was--I don't know about 
the agreement.
    Chairman Crane. Well, I find it puzzling that when there is 
a potential security question involved, and the President is 
making a personal appearance, that the administration was not 
involved in backing up the local police force. I mean at the 
very outset, in anticipation of anything going wrong.
    Well, we will try and explore that one. That's very 
intriguing, though. I had no idea about any of this. Do you 
have any further comment?
    Ms. Wallach. I know there are news clips from the news 
conference with the Seattle mayor, the sit-down folks and the 
marchers. I'm not sure of the exact dates, but I would suspect 
it was the Thursday before the week of.
    Chairman Crane. And that was public information a week 
before the Ministerial conference started? All right, very 
interesting.
    Mr. Hufbauer, did the President's comments increase or 
decrease chances to get countries to proceed further on labor 
issues?
    Mr. Hufbauer. They decreased chances. They confirmed the 
fears, in the minds of many developing countries, that it was 
all a smoke screen for protection. And so it hardened 
attitudes. But as Dale Hathaway and others have already said, 
attitudes were already pretty hard by the time we got to that 
point. However, President Zedillo's remarks in Davos just a few 
days ago reflected exactly this hardening.
    Chairman Crane. And Mr. Hathaway, do you believe the U.S. 
private sector advisers were adequately consulted during the 
Ministerial conference?
    Mr. Hathaway. Yes, I think at least in agriculture, we were 
kept informed as to what was going on, and asked for our 
reaction to proposed changes. I can't complain about 
consultation in terms of the agricultural negotiations.
    Chairman Crane. And Mr. Niles, how do you know that the 
keys to improving labor standards is economic development and 
not trade sanctions?
    Mr. Niles. Well, I think it's been demonstrated, Mr. 
Chairman, that where you have economic development, labor 
standards go up, as does environmental protection. And 
sanctions, lowering the chance of economic development, won't 
work to that end.
    Chairman Crane. And now I yield to our distinguished 
Minority Leader, Mr. Levin.
    Mr. Levin. Well, it's kind of late to carry on this debate, 
but let me say a few things. I was at Davos and heard reaction 
to the President's speech where he laid it on the line, I 
thought clearly. Some people wanted to listen only to the first 
half of the speech, and others only wanted to listen to the 
other half. But I was at a get-together after the speech, and 
there were people there from developing economies as well as 
from the American business sector.
    And it was interesting, because I heard many of them say, 
including some to me directly, that they liked the President's 
speech. And I find it kind of mystifying that people want to 
throw in the towel on tough issues so quickly. We didn't throw 
the towel in on intellectual property, though it was fought 
over for a long time, to get it into the trading system. We 
just listened to the first people who said almost in unison, 
no, we'd be nowhere with it today.
    And Mr. Niles, Ambassador Niles, you and I have discussed 
this subject. I know you're the representative to the ILO and I 
respect it. But to indicate that the answer is just publicity, 
the ILO has no enforcement powers. And just look at the record. 
Look at the record in countries that have signed onto the ILO 
which are not abiding by the principles they said they were 
adhering to.
    You and I have discussed this before. But I just don't 
think it will fly to say just leave it alone. And Mr. 
Kittredge----
    Mr. Niles. Might I respond?
    Mr. Levin. Yes, go ahead.
    Mr. Niles. The point I made about publicity is not the only 
thing that the ILO can do. The ILO does have programs designed 
to assist member countries, and the ILO can take sanctions 
against member countries, not trade sanctions.
    But of course, the WTO can't take trade sanctions, either. 
And anybody who thinks that we're going to be able to amend 
Article 20 of the WTO treaty to include enforcement of core 
labor standards is kidding himself. You've got to have an 
absolute consensus of the WTO membership, now 135 strong, to do 
that.
    So when I hear, when I'm told that the ILO has no 
enforcement capability and, therefore, we need to go elsewhere, 
I ask, where do you find the enforcement capability? Certainly 
not in the WTO. The ILO has a new Director General, the ILO is 
an organization which has come into a higher degree of 
prominence because of the focus on labor issues, greater 
attention to this problem. I think we ought to give it a 
chance.
    As far as countries that don't fulfill ILO conventions, the 
People's Republic of China is one that gets a lot of attention 
in this respect. China has not signed the core labor 
conventions, or have not ratified them. But they have agreed to 
the 1998 Declaration. So it gives us a way to work with China 
on these issues.
    Mr. Levin. OK. You know in our bilateral agreements, in our 
trade agreements, like GSP, we have a means of enforcing core 
labor standards.
    Mr. Niles. We do.
    Mr. Levin. It isn't as if it's novel within the trade 
agreement.
    Mr. Niles. That's a unilateral U.S. act.
    Mr. Levin. All right, OK, good. No one's talking about an 
overnight transition. But also we're not talking about a 
millennial tradition or a centuries tradition which it would I 
think likely be true within the ILO. That's the history of it.
    In the sense that the ILO was formed way back to enforce 
core labor standards. That's a major reason it was founded 
decades and decades ago. And let me just say, Mr. Kittredge, I 
just urge that, as I've urged the business community to take 
another look, because when you say, moreover, until developing 
countries are convinced that a working party, a working group 
on trade and labor is not simply a developed country's excuse 
for new forms of trade protection, we are unlikely to make any 
progress on this issue.
    The business community can help convince developing 
countries that that isn't what we're after. In a sense the 
concept is very clear and kind of basic. And that is, if 
countries are going to compete, and we are competing 
increasingly with evolving economies, that we're not talking 
about everybody being paid the same. What we're talking about 
is that the workers within those countries have the ability to 
gather together and fight for a fair part of the growth of that 
country.
    That's all we're talking about, or that's the main thing 
we're talking about. And to the credit of a few businesspeople, 
they signed onto the notion that there should be a working 
group. This is not a veiled effort at protectionism.
    Mr. Kittredge. Well, I think the point is that it may be 
perceived as that. And I think what you're talking about is one 
of the real issues with trade in many aspects, is trade 
education. And it would seem to me, and I would readily admit 
I'm not that close to the ILO, but it would seem to me that if 
the ILO doesn't necessarily have the enforcement mechanisms, it 
sure ought to be able to do a better job at educating 
developing countries on what really are the aims and the goals.
    Mr. Hufbauer. Mr. Congressman, you've been very generous in 
allowing my colleagues to respond, and I would like a little 
bit of time.
    Chairman Crane. Go ahead.
    Mr. Hufbauer. First of all, the President did a great deal 
of repair work in Davos, President Clinton. The fact that 
President Zedillo delivered his strong speech reflected what 
happened in Seattle. If President Clinton had said in Seattle 
what he said in Davos, I think the atmosphere would be much 
better.
    But I want to come right to the nub, because I think the 
gist of your comments was that I was throwing in the towel. I'm 
absolutely not throwing in the towel. I've tried to give a 
constructive suggestion in a very short period of time. I was 
given 5 minutes to try to give a constructive labeling 
suggestion for dealing with the proper expression of values.
    If I have a value that says I want Chinese goods to respect 
core labor standards, I want a label that tells me that the 
goods respected core labor standards, whether they were made in 
China or West Virginia. And I've tried to outline that. Time is 
limited, but I'm not throwing in the towel. I'm trying to take 
it out of a place where it's run into a dead end, which is the 
WTO. Thank you.
    Mr. Levin. OK, I'm glad you had the time. I was just 
worried about that red light. And we'll be talking further 
about that. I didn't mean to say you were throwing in the 
towel.
    I just want to suggest dead ends. There have been dead ends 
in the WTO before on a lot of issues, and we haven't given up. 
That's been true for decades. And it seems to me that it's 
unwise for us to consider this just a dead end and go on to 
something else. We need to think of other ideas, but continue 
working on this one.
    Mr. Trumka, and then I'll be finished.
    Mr. Trumka. I would like to comment on just two subjects 
that have been broached here. One, I've heard comments made by 
Mr. Niles that the developing countries do not support and will 
not support core labor standards being inserted into trade 
agreements. Well, I want to tell you something. We were outside 
and we marched, there were workers from all of those different 
countries. And they particularly did want labor rights and 
labor standards raised on their behalf.
    You very artfully, I think, capsulized what we're looking 
for in those agreements and why they should be in trade 
agreements. And the notion that we should use the ILO as a 
substitute for trade agreements, I think the world would look 
at us as just being slightly hypocritical.
    If you want to be serious, if you want us to believe that 
they're serious about using the ILO, the first step ought to be 
for the United States to adopt all 178 resolutions of the ILO. 
Except for a few maritime resolutions, we've not adopted any of 
the core labor standards ourself. How would we enforce 
something in the world that we hadn't even endorsed.
    So for that to even be considered, and I'm not saying that 
it would be, but the initial step toward seriousness would be 
for the United States to adopt all those. The dialog has to 
take off. We have to approach and make this world globalization 
work for everybody. The World Bank itself says income 
inequality is growing. And if the workers in Colombia and China 
and Poland and the United States, quite frankly, can't enjoy 
the benefits of that globalization, there will be continued 
resistance toward it in those countries as well as here.
    The time is now, and I think Seattle was just the spark 
that let everybody know that business as usual won't make it in 
the future.
    Mr. Levin. Thank you.
    Chairman Crane. Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. And thank you to all 
the witnesses for their indulgence and their patience. It's 
been a long hearing. And I won't try to prolong it much longer, 
either. Ambassador Niles, let me ask you, on the question of 
economic development and how that can lead us toward better 
working conditions, I don't think anyone disagrees that the 
more opportunities for better jobs, the better our working 
conditions become.
    The question I would ask is how long do you wait for those 
economies and the prosperity to trickle down to the point where 
those who are making the lowest wages under the worst working 
conditions finally see the fruits of that economic prosperity?
    Mr. Niles. I don't think there's a schedule for that. How 
long did it take in the United States? It took a while.
    Mr. Becerra. It took decades.
    Mr. Niles. Yes. And it could be that in some of the 
developing countries, it would take equally long, if not longer 
periods. But if you look at what has happened in some of the 
economies where we've had particularly good economic 
development in the last decade, despite the economic crisis of 
1997-1998, some of the countries of Asia such as Taiwan and 
Korea. Look at how poor Korea and Taiwan were, say, in 1960 and 
how they are today, now, that's 30 years, 40 years later. The 
change is absolutely extraordinary. Taiwan in 1960 was probably 
about where China is today.
    So under certain conditions, under the right conditions, 
this kind of development can take place during a relatively 
brief period.
    Mr. Becerra. And I think everything is relative, relatively 
brief meaning 30 years can be three decades for someone who's 
suffering under some pretty bad working conditions. I am 
reminded, as a Catholic, of the saying, the poor shall inherit 
the Earth. I think they want to get it before they die.
    And I think the difficulty a number of us have is that, 
while no one contests that the better off we are in our 
economies, and the more we're creating jobs, the better 
everyone will ultimately be, the fact remains that we have too 
many people, certainly in this country but throughout the 
world, more importantly, who aren't benefiting from all that 
prosperity. And to wait three decades won't help the guy who's 
20 years old right now, working under the worst of conditions. 
When he's 50, he probably won't be able to work any more.
    There has to be something more we can say to workers, 
whether they're outside of this country or inside this country, 
that we're going to do, if we're going to use our implements, 
our tools as a government, to open up markets, to accelerate 
the movement by reducing tariffs and barriers, then we should 
also be prepared to do some other things using government 
implements to make the conditions better for those who work.
    Mr. Niles. Could I make the point, in my remarks I refer to 
a program which you could adopt in the Congress unilaterally 
which would do just that, which is to take the GSP program and 
add an additional GSD benefit for those countries where you 
really do see progress on labor standards.
    Mr. Becerra. And I think that's actually an interesting 
approach, because it's the carrot versus the stick.
    Mr. Niles. Well, exactly, yes. More likely to work than 
imposing sanctions.
    Mr. Becerra. And the only problem there is, I think you'd 
have to help persuade a number of our colleagues that we should 
be prepared to give dollars to help countries do what they 
should otherwise be doing. And I think you're going to find a 
number of Members of Congress saying, I'd rather it be spent 
domestically than send it off on some foreign aid bill.
    But I agree with you, that is one way other than using a 
stick to try to get compliance with international labor 
standards. And I would pose this question to anyone. Give me a 
sense of how we get to the point. Because I think, Ambassador 
Niles, I think you're right. I think it's going to be 
difficult, at least under the current setting, to believe that 
anyone in the WTO setting today would be prepared to see the 
ILO core labor standards accepted within the WTO as a framework 
for implementing labor rights.
    How do we get some teeth into providing protections under 
whatever our framework is, whether it's WTO or ILO, for labor 
rights and environmental protections? Anything other than 
allowing economics and prosperity take us there through trickle 
down? Anything more?
    And I know, Mr. Hufbauer, you've suggested the approach of 
this labeling. I think that's a decent idea. Although if it's 
just voluntary, I think it becomes more difficult, because it 
becomes more problematic in getting people and countries and 
companies to agree.
    Mr. Hufbauer. But Congressman, I did give a matrix in my 
remarks. I said voluntary, mandatory, private labels, 
government labels. And that's where the fight should be.
    Mr. Becerra. Is there anyone who sees a two or three step 
process where we ultimately get there? Everything's 
compromised, and at some point we should be able to get there. 
But we've got the two divides. You can never enforce labor 
standards or environmental protections, and if you don't do it, 
we won't go anywhere with trade.
    Mr. Niles. Could I make one point, Congressman? You really 
need to distinguish between labor standards and environmental 
standards in terms of the WTO. The WTO recognizes the right of 
countries to enact trade measures in support of environmental 
standards, environmental legislation. In the three cases 
involving the United States environmental standards which have 
come before the WTO, the WTO has upheld the environmental 
standard in each case, but has not upheld the fact that in the 
legislation or the regulation, it was implemented in a 
discriminatory way. These were the tuna/dolphins, shrimp/turtle 
and Venezuelan fuel oil cases. So we really do have to make 
that distinction.
    There is no problem, as far as I can see, with the way in 
which the WTO has related to United States environmental 
standards. Now, labor, I recognize, is a different story. And 
we've run up against that wall several times, most recently in 
Seattle. But there is, as I suggested, another way to do it. 
Namely, the ILO. It's not perfect. There isn't a perfect 
solution out there, by the way.
    Mr. Becerra. Right.
    Mr. Kittredge.
    Mr. Kittredge. You made a little reference to trickle down 
or trickle up economics. Not to take exception with that, but 
let's not miss the point that the development of these 
countries and the economic prosperity that comes with trade and 
development is what's really going to raise labor standards and 
environmental standards, when they have the money to do what 
they need to do environmentally and when the workers increase. 
So that's not an incidental reason or way to bring them up.
    Mr. Becerra. And Mr. Kittredge, I don't disagree. I don't 
think anyone would disagree that ultimately the tide lifts all 
boats. The problem is, we could have said the same thing. If 
you let this country proceed forward, it's going to become more 
enlightened and not have slavery. We could have waited or we 
could have enacted laws that actually abolish slavery.
    Sooner or later, people would have come around to 
understanding, whatever the color of your skin, you were equal 
in the status of the Lord or anyone else, and therefore you 
should not be enslaved. But we decided not to wait until the 
natural course of intelligence led us to that conclusion. We 
passed laws.
    And the same thing can apply here, where we can wait, 
certainly, until the economics help a lot of folks rise out of 
poverty. But we're not waiting and letting the natural course 
take place in the way countries deal with each other in trade. 
We're talking about setting up a framework, a global framework 
with the WTO, that mandates that we act in certain ways.
    So why not then mandate that we act in certain ways 
globally with respect to other issues, if we can do it with 
capital, if we can do it with intellectual property, why--and 
I'm not saying we're ultimately going to get anything, as Mr. 
Niles said. There might be a solution out there. I'm just 
trying to figure out if there's somewhere that someone can come 
up with a little bit more of a compromise than saying you never 
can do it, or you have to do it.
    And Ms. Wallach, I know you wanted to say something, and 
Mr. Chairman, you've been very gracious with the time.
    Ms. Wallach. Well, an approach that is sort of a middle 
approach, which goes to the suggestion I made, which is where 
the NGOs from 30 countries who organized toward Seattle had 
gone was to prune back, not to have an expansion round, but to 
have pruning round, of limiting the places that the WTO at the 
moment constrains governments from taking action on 
environment, labor, human rights.
    There's a fallacy that there is no room for or there are 
not currently labor and environmental standards in the WTO. 
They are there, but there are constraints on government action 
in those areas, including for instance, the Article 20. I mean, 
I've read the same cases. In fact, the WTO has ruled that none 
of our environmental laws met the exception that's on paper, 
but never gets applied.
    So the alternative model would be what's called the 
convention model, which is, for instance, how the multilateral 
environmental agreements are enforced. They have international 
standards internationally enforced, the WTO intellectual 
property rules. Alternatively, you can have a convention. So 
for instance, CITES, the endangered species treaty, all of the 
parties agree to the standards, but then their commitment, 
their international law obligation, is to enforce it at their 
borders.
    So you set the standards internationally, but a convention 
is enforced so that basically it only affects goods in trade. 
The country itself is not committing, with their sovereignty 
protection, domestically to the same standard, but for 
instance, in CITES, it's trade and endangered species. You 
cannot let the list of things, and the rules are 
internationally agreed, be broken as regards the goods access 
into your market.
    And that certainly is a halfway step. But given there's 
either going to be some set of standards or there is going to 
be an implosive autoarchy, that would be one that would be 
something worth considering.
    Mr. Becerra. Mr. Chairman, thank you. Ms. Wallach, I think 
that last response, probably from the perspective of those who 
don't think it works to have core labor standards in WTO, would 
probably come close to being core labor standards in WTO, I 
think they'd have real concerns with it. I understand what 
you're saying. I think they'd have real concerns for that.
    But I thank everyone for their comments. Thank you, Mr. 
Chairman, for the time.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Well, thank you, Mr. Chairman. Thank you very 
much for being here, and I'm sorry I haven't been in the flow 
of this conversation, I had to go out a couple of times.
    I guess I just have one basic question. I mean, I've been 
around this trade game for a long time. And there are always 
obstacles to it, whether they're labor obstacles, Rich, you 
know, that you were talking about, or whether they're 
agricultural issues that Mr. Hathaway was talking about. There 
is always something that isn't going to jive.
    The question is, how do we put this thing together? We've 
got to have world trade. Ninety-six percent of our customers 
are outside of this country, we've got to reach for them. We've 
got to do it in a fair way, not a free way, because there's 
nothing free, it's got to be a fair way.
    So aren't there goals we can work toward, rather than 
hurdles that have got to be met? Can we sort of work toward 
those things, recognizing that the environmental or the labor 
or the human rights or some of the agricultural policies aren't 
exactly as we would like? We're always getting mad at somebody. 
I mean, the Europeans aren't particularly forthcoming in terms 
of transparency rules. And the Japanese won't let us in their 
market for television sets, or the Koreans are doing something, 
or the Chinese.
    There's always something there. Isn't there sort of a frame 
of reference we can use toward working toward goals, rather 
than having set lines in the sand that have got to be met 
before we move forward?
    Mr. Kittredge. Are you suggesting maybe we should get our 
own house in order before we start talking to other people 
overseas?
    Mr. Houghton. I think that's probably true. Can you start 
off with a suggestion?
    Mr. Kittredge. And could we start trying to get some of the 
people at this table and others to try to open communication 
channels to talk the things through?
    Mr. Houghton. Well, I think it's a good idea. I've had 
several, from my sense, I have several groups coming into my 
office all the time. I have business groups, I have labor 
groups, I have environmental groups, I have religious groups, I 
have everything. And I'm not sure really what we want.
    There was a labor group in my office, UAW, just a minute 
ago, talking about permanent NTR for China. And you know, to 
me, I don't think it makes any difference, as far as I'm 
concerned. We're going to have a relationship with China, 
whether it's 1 year, 2 years, 3 years, 6 months, 10 years, 
whatever it is. The question is, what do they want? You get so 
hung up on sort of the national, the normal trading 
relationship, that you don't ask yourself what's out there. The 
fact is that we can't get in their market, and they get in 
ours.
    So what do we do sort of philosophically, so that we can 
work together. And I think, Mr. Kittredge, you're absolutely 
right, how do we develop some sort of a philosophic base?
    Mr. Kittredge. We said in our testimony, I think it bears 
repeating, this issue, as much as any other, requires a lot of 
very strong political leadership. And that needs to be very 
evident before we make much progress.
    Mr. Houghton. Yes.
    Mr. Trumka. I would suggest that we begin looking at the 
issue, not just as a trade issue, but from the notion of 
globalization, and bring in all the forces that are driving 
globalization. You're talking about the World Bank, you're 
talking about the International Monetary Fund, as well as the 
WTO. Because that is what's influencing the lives of workers 
around the world. They have to believe that they have a voice 
in that process.
    And in fact, I was just on a panel with Ambassador Clayton 
Yeutter, and the subject was, how do we re-establish consensus. 
And my comment to him was, it's not re-establishing consensus 
on trade and globalization, it's establishing. Workers feel 
that they've been shut out of the process, that the process has 
been used to sort of weaken them. There's a distrust. Workers 
on all sides of the border, Mexican workers don't feel any 
different than American workers. Colombian workers don't feel 
any different than American workers. Trade's being used to 
ratchet them down, and to have them get less. They're not 
enjoying the benefits. Income inequality goes up.
    To start the dialog, look at it as globalization, and let 
us all talk about how globalization, honestly, is affecting 
each one of our lives, and be willing to own up to the facts 
and say, yes, there's an income inequality and here's what's 
driving it and how do we solve it. Then genuinely look at that 
process.
    Mr. Houghton. Well, I know, and Ambassador Niles, maybe 
you'd have a comment on that, then I'll be done.
    Mr. Niles. I don't disagree that we certainly need to 
discuss this issue more productively among ourselves, not 
necessarily just the groups that are represented here today. 
But I also think it's very important that we get the facts 
straight before we start this, and we know what indeed is 
happening in the world economy, and it's not true that wages 
are being driven down and that workers are suffering throughout 
the world as a result of the process of globalization. There 
are cases where that's happening, but there also are cases 
where it's not happening. And we have to make that clear.
    It's not true at all that there's a conflict between the 
WTO as an organization and U.S. environmental standards. Simply 
not correct. The only thing that the WTO has objected to in 
terms of U.S. environmental standards is when we enforce them 
in a discriminatory way, which we proposed to do on these three 
cases that came up.
    There's also no conflict between the WTO and observance of 
human rights. There's another organization in the United 
Nations, the United Nations High Commission for Human Rights, 
that's responsible for that.
    One of the things we ought to be mindful of not doing is 
mixing all these organizations up. We ought to have some sense 
of what organization is responsible for what job, and try to 
get that organization cranked up to do it right. And if the ILO 
doesn't do its job properly, let's see what we can do to make 
the ILO work more effectively, and not just say, well, let's 
take labor issues and put them into the WTO, which is going to 
be extraordinarily difficult to accomplish.
    Mr. Hufbauer. Mr. Chairman, in the correction of 
misstatements division, I'd like to say a word on world income 
inequality and then U.S. income inequality. I've done a paper 
on the world dimension, I'd be happy to send it to you and 
anybody else who's interested.
    In terms of world income inequality, the countries which 
are falling remarkably down and have every prospect of falling 
further are the countries not participating in the world 
economy. Those are countries in Africa, a number of countries 
in central Asia, and elsewhere--countries that have any amount 
of turmoil.
    There has been a very big group of countries where the 
inequality has actually decreased quite substantially. Those 
are the east Asian countries. And they have every prospect of 
further narrowing the gap. Those are facts.
    In the United States, the inequality premium--measured by 
the additional income which college graduates earn above high 
school graduates--that premium stopped growing in the year 
1994. These references you've heard are to data between 1973 
and 1994. Nineteen ninety-four is 6 years ago. Income 
inequality is not increasing in the United States today.
    Thank you very much.
    Mr. Houghton. Well, thanks very much, gentlemen and Ms. 
Wallach, thank you.
    Chairman Crane. Well, I want to thank all of our witnesses 
very much. And Mr. Trumka, one of your concerns about income, 
we hope to address possibly as early as Thursday with the 
elimination of the marriage penalty tax. [Laughter.]
    Thank you all for being here.
    Our next panel will be Mark Van Putten, President and chief 
executive officer of the National Wildlife Federation; Bob 
Stallman, President of the American Farm Bureau, Rhett Dawson, 
President of the Information Technology Industry Council; Bob 
Vastine, President, Coalition of Service Industries; Steve 
Robertson, Product Manager, Marconi Commerce Systems, and this 
is on behalf of the National Association of Manufacturers; and 
Hon. Dave McCurdy, President, Electronics Industries Alliance 
here in Virginia, a former colleague.
    And I would ask all the rest of you folks who are 
participating in this panel if you would be so gracious as to 
defer to Mr. Stallman to go first, so he can speak and run, 
because he's on a tight constraint to catch a plane. And we'll 
proceed with you first in order Mr. Stallman, and then Mr. Van 
Putten.

  STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU 
                           FEDERATION

    Mr. Stallman. Thank you, Mr. Chairman. I do appreciate your 
indulgence and the understanding of the rest of the panel. The 
last plane ride out of town to get to point B is a valuable 
commodity.
    I am Bob Stallman, President of the American Farm Bureau, 
and a rice producer.
    Chairman Crane. Folks, those of you that are inside the 
chamber, please hold your conversation until outside. All 
right, Mr. Stallman.
    Mr. Stallman. Thank you, Mr. Chairman. I am a rice producer 
and a cattleman from Columbus, Texas, as well as President of 
the American Farm Bureau. And I appreciate the opportunity to 
testify before you today on the issue of negotiations on 
agriculture in the WTO and the prospects for future 
negotiations.
    The Farm Bureau had a strong presence in Seattle during the 
WTO Ministerial, and saw first-hand how difficult it will be to 
overcome the resistance exhibited by key negotiating partners 
such as the European Union, Japan and Korea, to further market 
openings in agriculture. Every ounce of leverage and 
negotiating muscle will be needed to continue the agricultural 
trade reform started in the Uruguay round, and to make the 
results from future trade talks commercially meaningful for 
U.S. farmers and ranchers.
    It is well known that there were many causes for the 
failure of the trade ministers to launch a round in Seattle. 
And while the reasons are numerous and the issues complex, 
agriculture was not the cause for the breakdown of the trade 
talks. In fact, when the talks ended in Seattle, green room 
negotiations on agriculture had concluded and the agricultural 
text was nearly complete.
    Now, that's not to say the Farm Bureau endorsed the 
language in the agricultural text. While we acknowledge that 
significant ground was broken on key agricultural negotiating 
objectives, much work remains to be done. Negotiations on 
agriculture must be the highest priority for our negotiators as 
they meet in Geneva in an attempt to restart the trade talks. 
Not only is agriculture entitled to a new round of negotiations 
as mandated by the built-in agenda, our sector is also rife 
with unsurmountable trade barriers and trade distorting export 
subsidies that are not present in other sectors.
    In order for the WTO to claim that it has truly reformed 
trade around the globe, it must first achieve market 
liberalization in agriculture. Restarting the talks quickly and 
linking the progress of all aspects of the talks together as a 
single undertaking is crucial in order for U.S. agriculture to 
maintain its foreign market share and to compete on fair and 
equal terms with its export competitors.
    What's at stake for agriculture if the WTO talks do not 
resume? Well, our exports will continue to stagnate and our 
competitors, especially those that benefit from export 
subsidies or single-desk selling arrangements, will continue to 
undercut us in foreign markets. U.S. producers are the most 
efficient producers in the world. We can compete if allowed to 
meet our competitors head-on, rather than with one arm tied 
behind our backs, which is the case now as we compete against 
foreign treasuries that subsidize our competitors.
    There are many important objectives to be accomplished in 
the WTO negotiations on agriculture once the trade talks resume 
in Geneva. And I will briefly list those. First, the next round 
of negotiations in progress on the built-in agenda items should 
be pursued as a comprehensive single undertaking. Second, we 
must call for the complete elimination of export subsidies by 
all WTO member countries.
    Third, all WTO member countries should reduce tariffs, both 
bound and applied, in a manner that provides commercially 
meaningful access on an accelerated basis. Fourth, 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 must correct this 
imbalance for our farmers and ranchers, and we must end the use 
of all nontariff barriers to trade.
    Fifth, we cannot allow our trading partners to exempt 
certain products or policies from the negotiations. Everything 
must be on the table for negotiation. Sixth, we believe that 
countries should 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.
    In addition, we support elimination of trade distorting 
domestic support programs, now classified under the blue box 
criteria in the WTO. The U.S. does not use the blue box, but 
the EU continues to increase its blue box spending.
    And on domestic support, we oppose attempts to disguise 
protectionist policies as an endorsement of the multifunctional 
characteristics of agriculture. Domestic support for so-called 
multi- functionality or government spending for the 
multifaceted benefits of agriculture should be reasonable and 
nontrade distorting.
    Seventh, regarding sanitary and phytosanitary measures, we 
believe that the provisions of the WTO SPS agreement are sound 
and do not need to be reopened. Eighth, and very importantly, 
we must ensure market access for biotechnology products 
produced from genetically modified organisms. 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.
    Ninth, we must impose disciplines on State trading 
enterprises that distort the flow of trade in world markets. 
Tenth, the WTO dispute settlement process needs to be shortened 
and measures must be instituted to ensure compliance. We have 
seen in both the EU banana and EU beef cases that compliance is 
not always assured. And I would like to note for the record 
that nearly every country has complied with its WTO 
commitments. However, in cases where WTO member countries do 
not comply, a carousel retaliation approach should be adopted 
to bring about compliance.
    Finally, we believe that matters concerning the environment 
and labor should only be addressed in a manner that facilitates 
rather than restricts trade. In summary, America's farmers and 
ranchers are counting on the WTO negotiations to achieve fair 
access for their exports around the world.
    We are the most efficient producers in the world. Access to 
foreign markets should be based on efficiency and not on 
protectionist policies. Given the dire economic conditions that 
we are now experiencing in this country for our producers, 
opening markets and leveling the playingfield is now more 
important than ever.
    We call upon the administration to resume a broad-based 
negotiating round of the WTO and to link progress on the built-
in agenda items to an eventual round. Without such a 
comprehensive approach, substantial progress on the 
negotiations in agriculture will not be achieved.
    Thank you, Mr. Chairman, and if there are written questions 
later on, we'll be glad to respond for the record.
    [The prepared statement follows:]

Statement of Bob Stallman, President, American Farm Bureau Federation

    Mr. Chairman, members of the Committee, I am Bob Stallman, 
president of the American Farm Bureau, and a rice producer and 
cattleman from Columbus, Texas. I appreciate the opportunity to 
testify before you today on the important issue of the 
negotiations on agriculture in the World Trade Organization 
(WTO) and the prospects for future negotiations.
    Farm Bureau had a strong presence in Seattle during the WTO 
Ministerial Conference and saw first-hand how difficult it will 
be to overcome the resistance exhibited by key negotiating 
partners such as the European Union (EU), Japan and Korea to 
further market openings in agriculture. These countries have a 
very strong desire to continue trade distorting domestic 
support payments to their agricultural sectors. Given the 
urgent need to further open foreign markets for U.S. 
agriculture, and the intent of some countries to resist such 
market openings, it will be very tough to continue the 
agricultural trade reform started in the Uruguay Round. Every 
ounce of leverage and negotiating muscle will be needed to make 
the agricultural results from future trade talks commercially 
meaningful for U.S. farmers and ranchers.
    It is well known that there were many causes for the 
failure of the trade ministers to launch a negotiating round in 
Seattle. While the reasons are numerous and the issues complex, 
agriculture was not the cause for the breakdown of the trade 
talks. In fact, when the talks ended in Seattle, ``green room'' 
negotiations on agriculture had concluded and the agricultural 
text was nearly complete. This is not to say that Farm Bureau 
endorsed the language in the agricultural text. While we 
acknowledge that significant ground was broken on key 
agricultural negotiating objectives, much work remains to be 
done.
    Negotiations on agriculture must be the highest priority 
for our negotiators as they meet in Geneva in an attempt to 
restart the trade talks. Not only is agriculture entitled to a 
new round of negotiations as mandated by the built-in agenda, 
our sector is also rife with insurmountable trade barriers and 
trade distorting export subsidies that are not present in other 
sectors. In order for the WTO to claim that it has truly 
reformed trade around the globe, it must first achieve market 
liberalization in agriculture.
    The WTO General Council meetings, which are taking place in 
Geneva this week, must provide the basis for continuing the 
agricultural negotiations as required under the built-in 
agenda. Most importantly, the structure developed to restart 
the talks on agriculture must be linked with the progress of 
trade talks in other built-in agenda sectors as part of a 
single package. Restarting the talks quickly, as part of an 
eventual broad-based round, is crucial in order for U.S. 
agriculture to maintain its foreign market share and to compete 
on fair and equal terms with its export competitors.
    You are aware that the U.S. agricultural sector is perhaps 
the most open market in the world. According to the Agriculture 
Department, the average tariff for imports of agricultural 
goods into the United States is 8 percent or less, while our 
exports face an average tariff of nearly 50 percent. We must 
address this imbalance in the upcoming negotiations.
    What's at stake for agriculture if the WTO talks do not 
resume? We can expect that our exports will continue to 
stagnate and that our competitors, especially those that 
benefit from export subsidies or single desk selling 
arrangements, will continue to undercut us in foreign markets. 
U.S. producers are the most efficient producers in the world. 
We can compete if allowed to meet our competitors head on 
rather than with one arm tied behind our backs, which is the 
case now as we compete against foreign treasuries that 
subsidize our competitors.
    There are many important objectives to be accomplished in 
the WTO negotiations on agriculture and important improvements 
that need to be made on the Seattle agricultural text once the 
trade talks resume in Geneva.

                     Objectives for the Next Round

    Structure and Framework

    The American Farm Bureau Federation supports expediting action to 
commence broad-based negotiations and trade talks on the built-in 
agenda items, such as agriculture, in the WTO. We cannot sit by while 
our competitors trade openly in our market but deny us access to their 
markets on equal terms. We must begin negotiations on the built-in 
agenda items and weave these negotiations into a comprehensive round as 
early as possible to put U.S. agricultural producers on a level playing 
field with the rest of the world.
    First and foremost, the next round of negotiations and progress on 
the built-in agenda items, should be pursued as a comprehensive, single 
undertaking. By this we mean that all aspects of the negotiations 
should be pursued in parallel and that talks should conclude 
simultaneously for all sectors in order to get the best results.

    Export Subsidies and Export Credits

    We must call for the complete elimination of export subsidies by 
all WTO member countries. Our producers cannot compete against the 
mountain of spending by our primary competitors, such as the European 
Union, which spends in excess of eight times the level of domestic and 
export subsidies spent by the United States. The final version of the 
agricultural text from the WTO Ministerial in Seattle did not go far 
enough on export subsidies. We must not settle for anything less than 
complete elimination of export subsidies. Moreover, the United States 
should not allow other WTO member countries to link progress on 
elimination of export subsidies to corresponding action by the United 
States on export credits or other forms of export assistance.
    Regarding export credits, we believe that the negotiations in the 
Organization for Economic Cooperation and Development holds the best 
potential to impose disciplines on export credits.

    Market Access

    U.S. negotiators must comprehensively address high tariffs, trade-
distorting subsidies and other restrictive trade practices in the 
negotiations on agriculture.
    The negotiations 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 must 
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.
    In addition, we must end the use of all non-tariff 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, 
reference prices 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.
    We support a trade round that enacts no product or policy 
exceptions. Adopting a formula approach that addresses the disparity in 
global tariffs is the best method for ensuring that all sectors are 
included in the negotiations. As with the Uruguay Round framework, we 
recognize the need to address import sensitive products. It is 
imperative that the new negotiations address not only tariff 
disparities but also peak tariffs and tariff escalation in a 
commercially meaningful manner.

    Domestic Support

    We support 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 of 1996.
    In addition, we support elimination of trade distorting domestic 
support programs now classified under the ``blue box'' criteria in the 
WTO. Blue box payments are based on fixed area, yields and number of 
livestock and are not subject to reduction. The United States does not 
currently have any domestic support programs that qualify as blue box 
spending. The European Union, on the other hand, has over $22 billion 
in blue box spending and that is projected to increase as a result of 
the recent CAP reform under Agenda 2000. We must put an end to blue box 
spending.

    SPS and Biotechnology

    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 precedents 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.
    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.

    Multifunctionality

    We oppose attempts to disguise protectionist policies as an 
endorsement of the multifunctional characteristics of agriculture. 
While we agree that agricultural production holds multifaceted 
benefits, we disagree that trade distorting subsidies should be allowed 
to continue to sustain multifunctional endeavors. Government spending 
for such pursuits should be reasonable and non-trade distorting.

    State Trading Enterprises

    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.
    Dispute Settlement Process

    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. In cases where 
WTO member countries do not comply with WTO rulings, a carousel 
retaliation approach should be adopted to bring about compliance.
    Our trading partners cannot be allowed to unilaterally weaken the 
very principles that we negotiated in the Uruguay Round Agreement. 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 must be corrected.

    Environment and Labor

    We believe that matters concerning the environment and labor 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.
    In summary, America's farmers and ranchers are counting on the WTO 
negotiations to achieve fair access for their exports around the globe. 
We are the most efficient producers in the world. Access to foreign 
markets should be based on efficiency, not on protectionist policies. 
Given the dire economic conditions now being experienced by our 
producers, opening markets and leveling the playing field is now more 
important than ever.
    We call upon the administration to resume a broad-based negotiating 
round in the WTO and to link progress on the built-in agenda items to 
an eventual round. Without such a comprehensive approach, substantial 
progress on the negotiations in agriculture will not be achieved.
      

                                


    Chairman Crane. Thank you very much, Mr. Stallman. And you 
are excused. Any questions we'll submit to you in writing.
    And with that, 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'm Mark Van Putten, president of the National 
Wildlife Federation.
    The National Wildlife Federation is America's largest 
conservation education and advocacy organization, with over 4 
million members and supporters. In addition to those members 
and supporters, we have State affiliates in 46 States, which 
total an additional 1 million members. We were represented in 
Seattle and in fact, we're headed back to Seattle next month 
for our annual meeting where the delegates elected by our State 
affiliates come together to set our policies on matters such as 
trade and the environment.
    I say that because our members represent America's 
mainstream and main street conservation movement. They share a 
commitment to United States leadership in building a global 
economy that protects the environment while raising living 
standards for all.
    I was in Seattle for the WTO meeting leading the National 
Wildlife Federation delegation. I appreciated the opportunity 
to meet with you, Mr. Chairman, and Members of this 
Subcommittee who were there, the opportunity to meet with 
President Clinton, and the opportunity to chair the NGO session 
sponsored by the World Trade Organization.
    NWF has been intensely involved in the dialog with trade 
officials, Members of this Subcommittee, the administration and 
all of the participants. And I'd like to briefly outline for 
you four lessons that we learned in Seattle.
    The first lesson is, there's no turning back. The old, 
exclusive and secretive deal-making process must give way to an 
inclusive, transparent and domestic process. The negotiation 
strategies pursued in the past by the United States and its 
trading partners must be replaced by the new realities.
    At the beginning of the 20th century, President Wilson 
denounced secret deals, secretly arrived at. It is time to 
follow through with the process that takes fully into account 
the views of developing, as well as developed, countries and of 
citizens and citizen groups as well as those of industry and 
government officials. The era of international trade 
negotiations, being insulated from public concerns such as 
concern for the environment, is over.
    The second lesson, which relates to the first, is that 
trade liberalization and environmental protection must go hand 
in hand. In Seattle, we used every constructive means available 
to us to improve the WTO, not to disparage it. And we intend to 
continue on that course.
    Let me be clear. To the degree that a stereotype has been 
created that the environmental community wants to shut down 
international trade, that stereotype is false. The National 
Wildlife Federation believes globalization is a fact, not a 
policy choice. And we want the international trading system to 
succeed.
    But we want it to achieve its full potential. We want it to 
deliver on the promise of improving the quality of life, 
raising living standards, and respecting conservation values 
throughout the world. To achieve this goal, in my written 
testimony we outline the National Wildlife Federation's agenda 
for environmentally responsible trade, which we presented in 
Seattle. It includes first, the WTO should recognize and defer 
to legitimate national and international environmental 
standards. Second, new trade agreements should include 
environmental assessments of their potential consequences.
    Third, individuals and nations should be able to take into 
account the environmental effects of how imports are produced. 
And fourth, the WTO must adopt modern standards of openness.
    The third lesson we draw from the Seattle experience is the 
need to achieve global consensus. The WTO is a consensus driven 
institution, and we must find ways to unite the interests of 
the developed world with those of the developing world. We 
recognize that liberalized trade abroad can help the less 
developed nations implement policies for sustainable 
development and environmental protection.
    But these results are not a given. They will not happen 
automatically. All of us, including Members of Congress, 
administration officials and representatives of nongovernmental 
groups, and the business community, must reach out to 
developing countries with capacity building, technology 
transfer and other efforts to achieve common ground to remove 
and address some of the reservations about the reforms that we 
have advanced.
    The final lesson that we draw from Seattle is that it is in 
the self-interest of American business and traditional trade 
advocates who remain committed to old approaches to stop 
resisting the inclusion of environmental concerns and 
democratic values into the international trade system. Progress 
requires finding common ground, not accentuating differences 
and burying one's head in the sand.
    International trade is suffering a crisis of eroding public 
confidence. Those of us in Seattle witnessed this crisis first-
hand. Increasingly, average citizens, including my members, 
simply do not believe that the current rules of international 
trade respect their values, including their concern for the 
environment. To create public confidence, the trade system must 
respect these values, including the democratic values of 
openness and respect for environmental concerns.
    It's in the interest of everyone who wants trade to succeed 
to establish public confidence in the institutions and policies 
governing our global economy. We look to you, the Members of 
Congress, to help provide the leadership in this effort.
    The National Wildlife Federation is engaged and committed 
to advancing the cause of conservation in the global economy. 
We recognize about the international economy what we recognized 
about our own economy at the beginning of the 20th century. 
Trade is not an end in itself. It's a tool to achieve human 
aspirations, to improve standards of living and to enhance the 
quality of life. Our environment, our wild places, wildlife and 
wild things are part of that quality of life.
    Thank you very much.
    [The prepared statement follows:]

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, we have been involved in the 
development of United States trade policy. Our members are 
America's mainstream and main street conservation activists who 
share a commitment to United States leadership in building a 
global economy that protects the environment while raising 
living standards for all people throughout the world.
    I was in Seattle with our National Wildlife Federation team 
and our colleagues from the public interest community. We were 
intensely involved in dialogue with trade officials, members of 
this Committee, and all the participants. In response to the 
Committee's stated focus of inquiry for this hearing, I would 
like to outline for you the four key lessons that I believe 
emerged from Seattle and the implications of those lessons for 
future WTO negotiations.

                           I. No Turning Back

    The first lesson is that the old, exclusive and secretive 
deal making process of trade negotiations must give way to an 
inclusive, transparent, and democratic process. The negotiating 
strategies pursued by the United States and its trading 
partners must reflect this new reality. At the beginning of the 
twentieth century, President Wilson denounced secret deals, 
secretly arrived at. It is past time to follow through with a 
process that takes fully into account the views of developing 
as well as developed countries and of citizens and citizen 
groups as well as those of industry and government officials 
from all countries.
    In a speech before the World Economic Forum two weeks ago, 
President Clinton noted: ``Trade can no longer be the private 
province of politicians, CEOs, and trade experts. It is too 
much a part of the fabric of global interdependence. . . . 
[T]he consequence of running away from an open dialogue on a 
profoundly important issue will be--it won't be more trade, 
it'll be more protection[ism].''
    The clock can never be turned back to a time when the 
environmental and other goals of citizens from democracies 
across the world could be excluded from trade policy. Seattle 
put the impact of trade on the map of public consciousness. For 
growing majorities of people there is an understanding of the 
implications of trade for human values, for the way people live 
and work, indeed for the quality of life. The increased 
understanding has produced a determination to hold decision 
makers accountable on these issues. Those who want trade to go 
forward will have to make peace with environmental and other 
goals that are necessary to achieving the public interest. 
Trade policy must accommodate environmental values. We will 
insist on it. The era of international trade negotiations being 
insulated from public concerns, including respect for the 
environment, is over.
    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 positive approach to 
improving access to WTO decision makers in an attempt to ensure 
that people are able to hold the WTO accountable for its 
actions. The National Wildlife Federation urges the 
Administration to redouble its efforts and Congress to provide 
its support to infuse the WTO with the same democratic rules of 
accountability enjoyed by American citizens at home.
    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 formal 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, disclosure policies 
to make information readily available and clear and responsive 
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.
    Transparency at Home: Finally, a commitment to openness and 
transparency must be present in the development of all aspects 
of trade policy within the United States. For example, we note 
our disappointment with the Administration's recent decision to 
appeal a Federal court's ruling that requires the appointment 
of environmental representatives to Commerce Department trade 
advisory committees (ISACs) in the forest products sector. In 
addition, the Administration needs to produce a more open and 
transparent mechanism in the inter-agency decision-making 
process prior to initiating a trade-based challenge of a 
foreign country's environment, health, or safety law. Agencies 
with environmental protection and conservation responsibilities 
must play a major role in any such deliberations.
    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 
consideration of amicus briefs from interested NGO parties.

 II. Trade Liberalization and Environmental Protection Go Hand-in-Hand

    In our preparation for the WTO Ministerial and in our 
presence in Seattle, we worked through every constructive means 
we had available to improve the WTO, not to disparage it. And 
we will continue on that course.
    We want the international trading system to succeed.
    At the same time, we want trade to fulfil its true 
potential. We want trade to deliver on its promise of improving 
our quality of life. We want trade to raise living standards, 
including respect for conservation values throughout the world.
    How can we achieve this goal? NWF's trade and environment 
work is informed by our desire to: achieve clarity and 
predictability in WTO rules, raise environmental standards 
globally through cooperative methods wherever possible, support 
multilateral environmental solutions, and secure progress in 
improving democracy, transparency and access to information in 
all trade and environment policy arenas.

                             Specifically:

1. Improve WTO Deference to National Environmental 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 resources. Each WTO member country must retain the 
right to develop and enforce high conservation measures through 
trade restrictions--even if they exceed the international 
norm--without running afoul of WTO rules.
    WTO rules should also provide for deference to MEAs in 
instances of a conflict between trade rules and trade-related 
provisions of MEAs. Furthermore, WTO rules should allow for 
explicit deference to the independent institutions with 
environmental expertise on questions of environment-related 
trade matters. For example, the WTO should establish a formal 
link to the United Nations Environment Program in WTO disputes 
involving MEAs and WTO rules.

2. Allow Countries to Distinguish Between Products Based on the 
Way They Are Produced:

    Laws that address the environmental impact of how products 
are made (such as the U.S. import ban on shrimp harvested by 
trawl nets that kill endangered sea turtles), must be accepted 
as a valid part of trade rules. For example, trade rules should 
allow countries tolabel products or restrict the importation of 
products that are produced or brought to marketin a way that 
harms endangered species and/or the global commons.

3. Make Environmental Impact Assessments Integral to Trade 
Negotiations:

    Trade negotiators must look before they leap. The 
environmental ramifications of any trade agreement must be 
carefully evaluated before the agreement is concluded or put 
into effect.
    The goal of the environmental assessments and their open 
public review-and-comment process should be to provide accurate 
information on the environmental impact of the proposed trade 
agreement and to suggest alternatives to mitigate the impact of 
trade on the environment.
    We welcome the President's signing of an Executive Order on 
November 16, 1999, to perform environmental reviews of new 
trade agreements. This is a significant step that formalizes a 
process NWF has advocated for years. We look forward to an 
immediate implementation and funding for this order and pledge 
our constructive participation in such a process.

4. Reform WTO Procedures to Make Them More Open and Democratic:

    Institutions that govern public conduct must be accountable 
to the public. The WTO must adopt modern, democratic principles 
of due process, including the right of the public to review and 
comment on the written record of a trade dispute, access to 
working documents and a permanent role for nongovernmental 
organizations in WTO activities.

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

    Renewed attention and energy must be devoted to delivering 
eminently achievable ``win-win'' solutions relating to trade 
and the environment. 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. Nonetheless, 
the timing and transition efforts must be carefully managed so 
as to avoid short-term damage.
    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. 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 would 
represent a positive step forward.

6. Environmentally Responsible Investment Agreements:

    The United States should maintain its current position of 
not seeking multilateral investment negotiations within the WTO 
and should develop specific policy guidelines regarding the 
relationship between investment negotiations and domestic 
environmental regulation. Future investment negotiations 
should, at minimum, pursue the following:
     Seek mandatory, enforceable measures in the 
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 ensuring 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.
     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 and strengthened.

                         III. Global Consensus

    Seattle's next lesson is that as a consensus-driven 
institution, the WTO must find the common ground that unites 
the interests of the developed world with those of the 
developing world.
    Policy regarding trade and the environment is a global 
issue that requires global consensus. Seattle made clear that 
further progress on both trade policy and international 
environmental policy will require a consensus among all 
citizens of all countries on how best to proceed.
    We recognize the contribution trade liberalization is 
making to our own economy and that liberalized trade abroad can 
be vital in securing the means for less developed nations to 
implement policies for sustainable development and 
environmental protection. Nonetheless, while trade may help 
deliver prosperity and improve prospects for the environment, 
these results are not a given, nor will they occur 
automatically. Billions of people and many nations are not 
reaping the benefits of liberalization and continue to fall 
further behind. This cannot be ignored.
    We, as representatives of the non-governmental community 
have a shared responsibility, together with members of 
Congress, the Administration, and the business community in the 
United States, to do our part to reach out to developing 
countries through capacity-building efforts to achieve common 
ground. We must encourage governments and industry to ensure 
broader reach of the benefits of trade as well as improved 
environmental protection. The challenge is to work with 
developing countries, with understanding of their special needs 
and different circumstances, while remaining true to our 
commitment to environmental values. I believe deeply that 
reconciliation is possible.
    Specifically, what is needed is a structured formal process 
to enable developing countries to be full participants in 
global decision-making on trade and the environment. This 
process would provide a framework for cooperation so that both 
economic growth and environmental protection can improve 
together. A formal process would develop needs assessments, 
solicit input from both foreign and United States-based NGOs, 
and enlist cooperative support from multilateral institutions, 
all within specified timetables.
    Promote Environmental Cooperation: 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 is 
the possibility that regulation might be a disguised form of 
protectionism or that their governments will lack the will or 
the resources to implement regulatory requirements. We believe 
both of these reservations can be and should be addressed. Our 
goal is only to safeguard legitimate environmental standards 
and as stated above, we advocate greatly enhancing capacity-
building efforts.
    The National Wildlife Federation supports the notion that 
trade and investment agreements can create unique opportunities 
that should not be ignored to further environmental cooperation 
among our trading partners. The conceptual framework and 
cooperative mission of parallel environmental institutions 
associated with trade liberalization merit 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 facilitates cooperation and 
public participation among the NAFTA parties by addressing 
regional environmental concerns, helping to prevent potential 
trade and environment 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 
water, wastewater, and municipal solid waste (MSW) projects in 
the border region. 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.
    Although there remain areas that need improvement, 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.

                  IV. American Business' Self-Interest

    The fourth major lesson from Seattle is that it is in the 
self-interest of American businesses and traditional trade 
advocates who remain committed to old approaches to stop 
resisting the inclusion of democratic values into the 
international trade system. Progress requires finding common 
ground, not accentuating differences.
    Public confidence in the multilateral trading system is 
eroding. In Seattle, we did not have to travel far to witness 
the implications of this failure first-hand. Increasingly, 
average citizens simply do not believe that the rules of 
international trade respect their values, including their 
concern for the environment.
    As a result, the gravest threat to the multilateral trading 
system and its potential to raise living standards throughout 
the world is the lack of public confidence in its basic 
functions.
    The post-Seattle trade agenda presents us all with an 
opportunity and a responsibility:
     Seattle has raised the visibility of the 
relationship of trade and the environment. This presents us 
with the opportunity to gain public support for a new 
consensus.
     Our responsibility is to work together to build 
that new consensus.
    This does not mean that we should restructure the WTO into 
the World Trade and Environment Organization. We are not 
proposing or supporting measures that hide protectionism behind 
a screen of environmental safeguards. We are seeking legitimate 
reform, based on the merits of the issue.
    The environmental community's reform agenda is not about 
demanding the acceptance of one particular country's 
environmental standards by another country. It is about 
achieving clarity and predictability in WTO rules and raising 
environmental standards globally through cooperative methods 
wherever possible.
    In the post-Seattle era, we should set to work on making 
the multilateral trading system achieve its goals of 
eradicating poverty, promoting sustainable development, and 
truly raising living standards.
    In this effort, the National Wildlife Federation is 
committed to commonsense solutions to advance the environmental 
cause in this new world we have entered. Perhaps I can 
summarize by saying that we need to recognize for the new 
international economy what we began to recognize about our own 
national economy as the 20th century opened--that 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. 
Our environment, our wild places and wild things are part of 
humanity's quality of life.
    Thank you.
      

                                


    Chairman Crane. Thank you, and our next witness, Rhett 
Dawson.

 STATEMENT OF RHETT DAWSON, PRESIDENT, INFORMATION TECHNOLOGY 
                        INDUSTRY COUNCIL

    Mr. Dawson. Thank you, Mr. Chairman, Congressman Houghton, 
for inviting us to testify today. We're delighted to do so. We 
were delighted also to see you in Seattle and see so many 
Members of Congress you in large number participate in that 
meeting. That was a very important lesson for all of us.
    I am Rhett Dawson, president of the Information Technology 
Industry Council. ITI is the leading IT association comprised 
of the leading IT companies. Our members had worldwide revenues 
of $460 billion in 1999, and employed more than a million and a 
half people in the United States. As you know, our companies 
are making a significant contribution, 35 percent, to the 
growth of the economy. And we see innovation in the IT industry 
as very helpful to the economy, not only for the United States, 
but the world as a whole.
    So we promote group policies to open markets, foster 
innovation and give consumers choices, as well as stimulate the 
development of electronic commerce. Over the past 5 years, ITI 
has worked closely with our counterparts in Europe and Asia and 
Latin America, in particular, to build global information 
technology industry consensus to eliminate barriers to trade 
and promote an e-commerce trade agenda.
    Seattle, we believe, was a missed but not a lost 
opportunity. We were heartened by the progress that was made on 
electronic commerce. We believe that if the whole package could 
have come together, an e-commerce agreement could have been 
reached.
    Our industry has significantly benefited from trade 
liberalization on the product side, and now we also strongly 
support liberalization on services, which WTO director-general 
Mike Moore talked about yesterday. Liberalization must continue 
and trade rules must be adapted to reflect changes in 
technology and the new forms of business.
    Countries all over the world have seen for themselves the 
economic impact that information technology is having in the 
U.S.: productivity increases, job creation, and job growth. And 
they, too, want to achieve similar results. And this means 
ensuring an open, competitive marketplace which rewards 
innovation and entrepreneurship.
    There is much work to be done to broaden understanding of 
the digital world, especially to understand how electronic 
commerce is changing global business, and examining how trade 
rules apply, and really trying to figure out whether they need 
to be adapted to provide a stronger underpinning for the global 
information economy.
    ITI has taken an active role in working with the WTO 
delegates to help them understand how these changes are taking 
place and how they can affect international trade. We've held 
three seminars in Geneva over the past 18 months to begin this 
educational effort. We're going to continue to press forward on 
these educational efforts, as well as trying to press forward 
with an e-commerce agenda. We're heavily invested in the WTO, 
because we believe these things matter.
    Now, I couldn't let this opportunity to testify before you 
today go past without mentioning an issue that's really 
critical to our industry, which is permanent normal trade 
relations for China. I just want to tell you that bringing 
China into the WTO is very much in America's national economic 
interest and it is critical to continuing American 
technological leadership and competitiveness in international 
markets that this vote occur and occur this year. Granting 
China PNTR is a critical process for us, and we hope that we 
can count on you to support PNTR.
    Thank you. We appreciate the opportunity and your patience.
    [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 outcome of the World Trade Organization Ministerial Meeting 
in Seattle and the trade priorities of the information 
technology industry, particularly in the area of e-commerce. I 
commend you and the Members of this Committee, for the 
important step you took by participating in the meeting in 
Seattle. There is no doubt trade is important to all of us.
    I am Rhett Dawson, President of the Information Technology 
Industry Council. ITI is the premier trade association 
comprised of the leading IT companies. Our members had 
worldwide revenues of $460 billion in 1999 and employ more than 
1.5 million people in the United States. Our companies are 
making a tremendous contribution to the growth and innovation 
we see in the IT industry and to our economy as a whole.
    International trade and electronic commerce are of critical 
importance to ITI member companies. Nearly 60% of their total 
revenues are derived from overseas sales in more than 125 
countries. Consequently, a major focus of our work is to 
promote policies that open markets, foster innovation, provide 
consumers with choices, and stimulate the development of 
electronic commerce.

    I. Industry-to-Industry Collaboration on Trade Issues Essential

    Over the past five years, ITI has worked closely with our 
counterpart associations in 14 countries around the world in an 
organization called the International Information Industry 
Congress. Working on an industry-to-industry basis, we have 
developed consensus views on critical trade issues and 
advocated our positions to government. Our efforts helped pave 
the way for the 1996 Information Technology Agreement to 
eliminate customs duties on IT products. We are working through 
the IIIC and APEC to identify and eliminate non-tariff barriers 
to trade in IT products. In addition, our industry-to-industry 
work is focused on the benefits of information technology and 
the new issues brought about by electronic commerce.
    At the behest of USTR, ITI organized three seminars over 
the past eighteen months to familiarize WTO delegates in Geneva 
with trade issues affecting the information technology 
industry. We addressed the benefits of information technology 
for economic growth and development, the application of 
existing trade rules to new technologies, and proposed action 
by Ministers to keep e-commerce barrier free.
    Last winter, as we began preparing for the Seattle 
Ministerial, ITI teamed with the Business Software Alliance 
(BSA) to promote an e-commerce trade agenda for the 21st 
Century. We focused on defining key issues in international 
trade and e-commerce and on proposing action by industry and 
governments to ensure that the benefits of the global 
electronic marketplace are shared broadly among all countries, 
both developed and developing. We initiated dialogues with our 
industry counterparts in Europe and Asia and invested 
considerable resources to acquaint WTO representatives in 
Geneva with our technology and the potential trade policy 
issues that the WTO may need to address. We were prompted to do 
this in order to develop a common understanding of what e-
commerce is and means for the trading system.
    We arrived in Seattle with high hopes for ministerial 
action to keep e-commerce barrier-free. Our industry-to-
industry consultations revealed solid support for extending the 
moratorium on applying customs duties to electronic 
transmissions. We were encouraged by reports that consensus was 
developing on other key points, including: reaffirmation that 
current WTO rules apply to e-commerce; commitment to resist 
imposing burdensome regulations that would inhibit the growth 
of e-commerce and access to IT; and establishment of a WTO work 
program on the inter-related issues inherent in e-commerce, 
building on the WTO's efforts to date. Clearly, our industry-
to-industry consultations were successful in broadening 
understanding of these issues among WTO delegates and 
highlighting the need for on-going trade liberalization in this 
sector.

II. Disappointed, but Optimistic . . . E-Commerce and the Internet are 
                    Transforming International Trade

    To be sure, we were disappointed that Ministers failed to 
reach agreement and launch a New Round. But, we were heartened 
by the substantial progress that was made on e-commerce. We 
believe that an agreement on e-commerce could and would have 
been reached--had the whole package come together. In spite of 
criticism of the WTO, the Seattle Ministerial in particular, 
and U.S trade policy that you may hear expressed today, the IT 
industry is optimistic that trade negotiators will resume 
discussion of e-commerce issues in the very near term.
    Countries all over the world have observed the U.S 
experience and recognize the very positive, quantifiable impact 
IT is having on the US economy, as reflected in productivity 
increases, job creation, and economic growth. They understand 
that IT is not a specialized sector of the economy reserved for 
the so-called ``Internet companies or ``dot-coms.'' To be 
competitive in any business--whether public or private--
governments and companies must understand how to effectively 
utilize information technology and the Internet.
    A few data points might be helpful to illustrate this 
point:
     Between the first quarter of 1998 and the first 
quarter of 1999, the Internet Economy (which includes such 
things as online sales and investment in IT infrastructure) 
grew 68 percent.
     In the same time period, electronic commerce 
increased by 127 percent and nearly 400,000 e-commerce jobs 
were created. Some industry analysts estimate that e-commerce 
will generate more than $3 trillion in sales by 2003.
     Investment in computer and information 
technologies in the 1990s by every sector of the U.S. economy--
from car makers to farmers--has cut production costs and 
boosted output. The result has been to hold prices down and 
increase American competitiveness internationally.
    The future is even brighter:
     A report released last year by the University of 
Texas estimated that by the end of this year 56 percent of U.S. 
companies will sell their products online.
     In the next six years, almost half of the U.S. 
workforce will be employed by industries that are either major 
producers or intensive users of IT products and services.
    Not only is the Internet driving the New Economy it is also 
re-inventing our industrial base.
     Late last year the world's two biggest automakers 
announced plans to put their entire purchasing operation 
online. The move will connect suppliers, business partners and 
customers all around the world.
     Even the United States Postal Service is looking 
for ways to become more competitive in the Information Age--
focusing on how they can use technology to better serve their 
customers.
    The fact is IT is changing nearly every facet of our 
lives--from how we teach our kids to how business is conducted. 
While it is nearly impossible to predict what the future will 
look like, we do know that the success and growth of our 
industry has been--and will continue to be--fueled by 
innovation and trade.

                     III. Our Trade Agenda for 2000

    There is much work to be done to broaden understanding of 
the digital world, especially to understand how electronic 
commerce is changing global business, examine how current trade 
rules apply, and assess whether new rules are necessary to 
provide a strong underpinning for the global information 
economy. We will focus our effort on the WTO.

A. WTO Services Negotiations (GATS 2000)

    The WTO has a built-in agenda requiring negotiations on 
Trade in Services. We believe there may be an appropriate way 
to take up e-commerce issues in the context of these 
negotiations, and we are exploring possibilities with our 
industry and government colleagues both here and abroad. Some 
have suggested that the Telecom Reference Paper, which is part 
of the Services Agreement on Basic Telecommunications, may 
offer a starting point for elaboration of rules governing 
Internet access and e-commerce. We look forward to exploring 
this suggestion, though we are somewhat concerned that it may 
imply a greater government regulatory focus than the IT 
industry believes is appropriate. The IT industry's fundamental 
principle is to minimize government regulation of this sector 
and promote open competition. We need trade rules in the area 
of e-commerce that support the entrepreneurial innovation and 
competition that characterize our industry.

B. Potential Action by Ministers

    As WTO Director General Mike Moore reconvenes the delegates 
in Geneva, there may well be a possibility for ministerial 
action on the specific issue of e-commerce. We propose the 
following action:
    Ministers should make a public commitment to keep 
electronic commerce barrier-free. Such a commitment would be a 
``best efforts'' pledge that would set the tone and direction 
for ongoing liberalization of policies affecting electronic 
commerce, foster a transparent, predictable and technology-
neutral international trade environment, and spur global 
economic growth and development.
    To support this commitment, five additional actions by 
Ministers are needed:
     The first is to agree to continue the May 20, 1998 
Moratorium on Customs Duties on Electronic Commerce 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 specifically commit to 
resist imposing burdensome regulations that would inhibit the 
growth of electronic commerce and access to IT and instead, 
when measures must be taken, employ the ``least trade 
restrictive'' measures possible. Such measures should be 
subject to WTO principles (in particular, national treatment, 
non-discrimination, transparency, notification, review and 
consultation).
     Fourth, we want Ministers to give the WTO General 
Council responsibility to oversee a work program on the inter-
related issues inherent in electronic commerce, building on the 
WTO's efforts to date. Our objectives in this work program are 
to achieve: 1) expanded market access commitments in the 
General Agreement on Services (GATS), the Agreement on Basic 
Telecommunications and the Reference Paper; 2) expanded country 
participation and product coverage in the Information 
Technology Agreement, and 3) full implementation by all WTO 
members of the World Intellectual Property Organization (WIPO) 
copyright and phonograms treaties that impact e-commerce.
     Fifth, we want to establish a substantive dialogue 
on technical assistance for developing countries and continue a 
regular dialogue between the WTO and IT industry 
representatives.

C. Confidence-Building Measures are Needed 

    This Committee is in a unique position this year to take 
early action on certain trade matters that will have the effect 
of building confidence in our trading system. We commend you 
for the leadership you have shown in forging consensus on the 
Africa/CBI bill. While this legislation is not a priority 
matter for the IT industry, we strongly support it because of 
the important confidence-building messages it sends, namely 
that trade liberalization enhances our economy and must 
continue, and that the needs of developing countries must be 
squarely addressed. Later this spring this Committee will also 
consider the U.S. participation in the WTO, now five years 
after its creation. Here, too, this Committee can play an 
important role in restoring confidence among our trading 
partners by reinforcing the commitment of the U.S. Congress to 
the WTO.
D. Support for the On-going Process of Trade Liberalization

    PNTR for China is Essential. Later this spring Congress 
will consider extending Permanent Normal Trade Relations to 
China in connection with China's accession to the World Trade 
Organization (WTO). Bringing China into the WTO is in America's 
national economic interest, and it is critical to continuing 
American technological leadership and competitiveness in 
international markets. Granting China PNTR is a critical part 
of this process.
    There can be no doubt that the bilateral agreement is a 
solid ``win'' for our industry. High-technology products 
(including semiconductors, semiconductor capital equipment and 
materials, telecommunications, computer hardware and software, 
electronics, and other related information technology products) 
represent some of our country's most sought-after exports. 
China, already our 4th largest trading partner, is one of the 
world's fastest growing markets for high-tech exports. We 
benefit from the market access provisions subscribed to by the 
Chinese that substantially improve the trade and investment 
opportunities for the high-tech industry. These include:
     Elimination of tariffs on nearly all information 
technology products;
     The right to import and distribute goods without 
mandated intervention of Chinese entities;
     Increased foreign participation in China's 
telecommunications services sector; and
     Far-reaching reforms to bring China's economy into 
compliance with international rules.
    These market reforms will help bring about positive 
economic and social changes that will benefit all the people of 
China. The extension of permanent normal trade relations status 
to China will enable the IT industry to expand trade and 
investment with China. This, in turn, will lead the industry to 
create more high-wage jobs, contribute to expanded domestic 
economic growth, and advance American technological leadership 
and competitiveness in international markets. We will also 
benefit from having China abide by the international trading 
rules.
    We urge Congress to extend normal trade relations status to 
China on a permanent basis so that U.S. industry will receive 
the full benefits of China's WTO accession package.
    Conclude ITA II Negotiations. We need on-going 
liberalization to keep trade rules relevant to industry. The IT 
industry strongly supports the seminal Information Technology 
Agreement, which eliminated customs duties on a broad range of 
IT products. The ITA is a voluntary agreement, subscribed to by 
52 countries that represent over 95% of world trade in these 
products. The problem is that the list of products covered by 
the ITA is now two-to-three generations behind products being 
produced and exported today. In just the past three years we 
have seen the convergence of computing, telecommunications and 
consumer electronics technologies, and the creation of a 
fascinating range of new information appliances and 
applications. In addition, the ITA does not yet address 
specific technical or regulatory barriers to trade in this 
sector, and useful work could be done in the near-term on these 
matters.
    Access to all IT products on a duty-free basis is a 
critical element in bringing the benefits of Information Age to 
all enterprises--both large and small--in developed and 
developing countries. We must complete the ITA II negotiations 
without delay and then update the ITA product list to keep it 
relevant to the products that are being produced and exported.
    Improve the Functioning of the WTO. And finally, we must, 
as an urgent priority, continue to explain the benefits of 
international trade and improve the functioning of the WTO. 
This message must be broadly shared with small and medium-sized 
companies, consumers, labor groups and the media. We need to 
find a way to facilitate serious discussion among all 
interested parties on how to reform the WTO. We in the business 
community--particularly in the IT industry, which benefits so 
much from international trade--must take responsibility in this 
area.
    The IT industry is hopeful and optimistic that governments 
will heed our advice regarding trade and e-commerce issues. 
Industry around the world has been hard at work to help define 
issues and solutions in this critical area. In spite of the set 
back of the Seattle Ministerial, we are confident that there is 
a solid consensus that the WTO must address these issues.
    I know we can count on this Committee for leadership and 
policy direction for free and open trade. We stand ready and 
willing to lend our expertise and assistance to the Committee, 
the Administration, and our trading partners. It is in our 
common interest to keep e-commerce barrier-free.
    Thank you Mr. Chairman and I would be happy to answer any 
questions you might have.
      

                                


    Chairman Crane. Thank you, Mr. Dawson.
    Mr. Vastine.

 STATEMENT OF ROBERT VASTINE, PRESIDENT, COALITION OF SERVICE 
                           INDUSTRIES

    Mr. Vastine. Thank you very much, Mr. Chairman and 
Congressman Houghton. Good to see you both again.
    Thank you for this opportunity to testify on behalf of the 
Coalition of Service Industries. CSI and its partners and 
friends here and around the world have been working since the 
conclusion of the WTO telecommunications and financial services 
negotiations in 1997 toward the Services 2000 round. Supporting 
our skilled services negotiators in Washington and Geneva, we 
have strived to develop a consensus globally that the Services 
2000 negotiations must be used to expand significantly trade 
across a wide range of services.
    The failure of the Seattle Ministerial was very 
disappointing, particularly because there was consensus on the 
text of the declaration for services. Had the Ministerial 
succeeded, this text would certainly have been adopted. 
Nonetheless, the built-in agenda requires negotiations and 
services to start at the beginning of this year.
    The great question, until just yesterday, was whether the 
failed ministerial had so jaundiced the atmosphere that WTO 
members would refuse to proceed with the important work of the 
built-in agenda.
    CSI led a group of industry representatives for meetings of 
the WTO in Geneva last week for talks with Mike Moore and a 
number of key delegations in order to support the start of the 
Services talks. The tone of these meetings was surprisingly 
positive. It seemed to us very likely that a key meeting 
scheduled for yesterday would decide to move ahead on the 
built-in agenda.
    The news indeed from yesterday's WTO General Council 
meeting was very good. WTO members have decided that the global 
trading system is too important and the WTO itself too valuable 
not to get back to business. In Seattle, the members took a 
good look at the abyss and decided to step back from it. This 
means essentially that the services work will proceed much as 
it would have even if Seattle had produced a ministerial 
declaration.
    We are now, in fact, where we would have been had the 
declaration been adopted.
    And I must say that director general Mike Moore has worked 
very hard for this. We think he has done a very good job in 
exceptionally difficult circumstances to get that organization 
back on track. The General Council's decision yesterday means 
that the Council on Trade and Services will meet on February 
25th, later this month, to consider how to organize the 
services negotiations. That work will fall into two categories. 
First, work on rules and second, work on market access.
    In the rules area, we will pay special attention to the 
effort to reach agreement on rules permitting safeguards. There 
has not been a safeguards rule for services, and we will want 
to consider whether one is needed and what it might provide. 
The market access area is of course the heart of the effort, 
because here's where we can get expanded trade. We hope that 
the Council on Trade and Services will initiate the market 
access work in tandem with the rules work.
    What do we want in the new Services round? We have a long 
agenda. First, we want maximum liberalization in all the 
sectors, services sectors, as soon as possible. We want to 
include new sectors, like energy services and air express 
services, and work on existing sectors like education and 
health that have not gotten much attention heretofore.
    We want to remove barriers to electronic commerce. There 
has been a lot of focus in the last 2 years on the moratorium 
on electronic transmissions. This is important work, but there 
are other objectives perhaps of more immediate commercial 
value. One would be to secure commitments for free trade in all 
the services that make an e-commerce transaction possible, like 
distribution and financial services, for example.
    We want free movement of key business personnel for limited 
assignments in other countries. This is an extremely sensitive 
but very important area. U.S. business needs to send personnel 
to service clients' needs all over the globe. And the U.S. 
economy needs skilled personnel at a time of record 
unemployment.
    We also seek regulatory transparency. Regulations governing 
the provision of services are often used to prevent U.S. 
companies from doing business on equal terms with foreign 
domestic providers, with whom they compete. To cure this, we 
need to make regulatory processes transparent and accessible, 
and we will be seeking this kind of regulatory reform sector by 
sector in the coming negotiations.
    Mr. Chairman, we believe the WTO is the best available 
means to facilitate our trade expansion objectives. It has a 
successful track record in services. That is why we continue to 
help build its competence in services trade, and why we 
continue to build a world-wide base of private sector support 
for the services negotiations. We are very pleased by the 
decisions of the General Council yesterday. We anticipate a 
year of useful work in the WTO and are very positive about the 
outlook for making real progress toward freer trade in 
services.
    Thank you.
    [The prepared statement follows:]

Statement of Robert Vastine, President, Coalition of Service Industries

     MAKING PROGRESS ON SERVICES TRADE LIBERALIZATION AFTER SEATTLE

    Mr. Chairman, I am very grateful for the opportunity to 
present the views of the Coalition of Service Industries (CSI) 
on the post-Seattle trade agenda for services.
    CSI and its partners and friends here and around the world 
have been working since the conclusion of the WTO 
telecommunications and financial services negotiations in 1997 
toward the ``Services 2000'' round. Supporting our skilled 
services negotiators in Washington and Geneva, we have strived 
to develop a consensus that the ``Services 2000'' negotiations 
must be used to expand significantly trade across a wide range 
of services.
    These efforts included conferences on services in 
Washington; San Jose, Costa Rica; and Hong Kong. They 
culminated at the World Services Congress in Atlanta a month 
before the Ministerial, where more than 800 business, academic 
and government experts from more than 50 countries met to 
discuss and recommend policies on most of the important issues 
affecting trade in services. I would be glad to supply these 
recommendations for the record.
    Participating in these efforts along with CSI have been the 
Hong Kong Coalition of Service Industries, the American 
Enterprise Institute, the Brookings Institution, Harvard's 
Center for Business and Government, the Mark Twain Institute, 
and hundreds of companies, businessmen and scholars. Many of 
these organizations and individuals participate in the Global 
Services Network, a loose, broad-based network whose members 
support liberalization of trade in services. International 
organizations like the Organization of American States and the 
World Bank have also played an important role.
    Thanks to all these efforts and with the leadership of our 
negotiators, a strong consensus had developed by the time of 
the Ministerial Conference on the goals for the sector. The 
text relating to services contained in the final draft of the 
Seattle Declaration would certainly have been agreed had the 
Ministerial Conference concluded successfully. Nonetheless, 
that text, which is attached, will likely form the basis for 
the mandated Services 2000 negotiations, though it may not be 
adopted formally.
    Thus the services sector was left after Seattle in a 
position to move ahead at the beginning of 2000 as required by 
Article XIX of the General Agreement on Trade in Services. 
Indeed, in her remarks closing the Ministerial, Ambassador 
Barshefsky called for negotiations on services and agriculture 
to take place as mandated by the ``built-in agenda'' of the 
Uruguay Round.
    The great question until just yesterday was whether the 
unsuccessful Ministerial Conference had so jaundiced the 
atmosphere that Members would refuse, in the absence of a 
broader round, to proceed with the important work of the built-
in agenda.
    Members of the Coalition of Service Industries and services 
industry representatives from other countries met in Geneva 
last week with Director General Moore; key members of the WTO 
secretariat; the Ambassadors of the ``Quad"; the Chairman 
of the GATS Council, Stuart Harbinson of Hong Kong; and 
representatives of key WTO Members including Brazil, Pakistan, 
Thailand, Malaysia, Egypt, Argentina, and Australia. The 
purpose of our meetings was to express support for the WTO and 
for the effort to liberalize trade in services, prior to the 
General Council meeting scheduled to take place yesterday.

Decisions of the WTO General Council

    The news from yesterday's General Council meeting is good. 
WTO Members seem to have decided that the global trading system 
is too important and the WTO itself too valuable, not to 
proceed with the mandated agenda and get the organization back 
on course. In Seattle the Members got a good look at the abyss, 
and decided to step back from it.
    The Director General should get the lion's share of the 
credit. He has worked extremely hard since Seattle, using all 
of his political and personal skills to forge a consensus on a 
positive program among the highly diverse WTO membership.
    Yesterday the WTO General Council instructed the Council on 
Trade in Services (the ``GATS Council'') and the Committee on 
Trade in Agriculture to carry out the negotiations.
    This means the GATS Council will meet in special session on 
February 25 to consider a timetable for the negotiating process 
and other organizational matters. The Working Party on Domestic 
Regulation and the Committee on Specific Commitments will meet 
that week as well.
    The services work program for 2000 will thus proceed much 
as it would have even if Seattle had produced a Ministerial 
Declaration. Specifically, work on services will progress on 
two fronts: rules and market access.
    The first front, rules, entails completing unfinished work 
of the Uruguay Round, and improving on rules already adopted. 
This work is organized through a number of committees reporting 
to the GATS Council, including the Working Party on Domestic 
Regulation, Committee on Specific Commitments, the Working 
Party on GATS Rules (dealing with emergency safeguard measures, 
subsidies, and procurement), and the Committee on Financial 
Services.
    Though technical, some of the issues considered by these 
working groups are extremely important.
    For example, the Working Party on Domestic Regulation is 
looking at ways to strengthen the regulatory disciplines in 
GATS Article VI in regard to licensing, qualification 
requirements, and technical standards. The purpose is to insure 
that regulations are transparent and not unnecessarily 
burdensome or trade restrictive. I will discuss regulatory 
issues further below.
    The Working Party on GATS Rules is considering the adoption 
of a rule on safeguards, which must be completed by the end of 
the year. This work must be very carefully followed. While the 
principle of safeguards is well accepted for trade in goods, it 
has never been applied to trade in services. Whether safeguards 
have a place in the service sector and what that place may be 
is an important issue.
    The Committee on Specific Commitments is working on 
classification, in order to create accurate descriptions for 
important, newer, industries like air express services, and 
energy services, for example. The purpose is to ensure that 
when a country makes commitments to liberalize trade in a given 
sector, the commitments capture accurately the actual range of 
commercial activities performed in the sector, and are legally 
secure.
    There seems to be a solid consensus among WTO Members that 
this work should proceed immediately. Indeed, progress on these 
issues will encourage many emerging market delegations to move 
soon on market access talks.
    The second front, market access, is paramount for CSI, 
because this is the work that we expect will result in greater 
access to markets across the broad range of sectors and all 
four of GATS' ``modes of supply".
    Hopefully at its February 25 meeting the GATS Council will 
agree that preparations for market access negotiations should 
begin immediately, in tandem with the work on rules mentioned 
above. This means that governments will begin to prepare their 
request and offer lists, which they will likely exchange in the 
fall.
    While yesterday's General Council meeting established no 
formal link between the negotiations on services and the 
negotiations on agriculture, our discussions in Geneva left 
little doubt that many countries will make such a linkage. Our 
position is that liberalization of trade in services promotes 
economic growth, development of critical infrastructure, and 
technology transfer. It provides significant benefits for 
consumers in both advanced and developing markets. Limiting the 
gains from expanded trade in services by insistence on linkages 
would be self-defeating.

Goals for the Next Services Negotiations

    The US services sector has several priorities for the 
coming negotiations.
    The first is to achieve maximum liberalization in all modes 
of supply across the widest possible range of services, as soon 
as possible. The WTO is the best available means to facilitate 
this objective among all the world's significant trading 
nations. It has a track record of successful negotiations in 
telecommunications and financial services. That is why we 
continue to focus on building the WTO's competence in services 
trade, and why we continue to help build a worldwide base of 
private sector support for multilateral services negotiations. 
We are committed to working with developing economies to help 
them identify both their own interests in trade liberalization 
in services, and the benefits they can derive from such 
liberalization.
    The second, related objective is to fully embrace important 
new sectors in the liberalization effort. These new sectors 
reflect the continued growth of the knowledge-based services, 
and certainly include all the services required to support 
electronic commerce. They also include important, new sectors 
like energy and environment, and existing ones that have not 
received sufficient attention, like education and health.
    The third objective is to focus on the real barriers 
impeding the full realization of the promise of electronic 
commerce and the Internet. This may require a fresh look at the 
WTO work program on electronic commerce, which has been 
dominated by the objective of obtaining a permanent moratorium 
on duties on electronic transmissions. While this is a useful 
goal, there are other objectives of more immediate commercial 
value. One would be to secure commitments to ensure free trade 
in the services that make e-commerce possible, like 
distribution and financial services, for example, and the 
services that can be traded through electronic commerce.
    This objective could be pursued through the services 
negotiations. Efforts to obtain the extension of the moratorium 
on duties on electronic transactions and other elements of the 
electronic commerce agenda that were discussed intensively, but 
not finally agreed at Seattle, should be pursued on a separate 
track when the WTO Council considers how to re-launch this 
work.
    The fourth objective is to increase commitments to 
liberalization of cross border trade, providing, however, that 
governments may take necessary prudential, health, safety and 
consumer protection measures as already provided in GATS 
Article XIV. Currently there are relatively few commitments to 
cross-border trade in services. Such cross-border trade will 
create an incentive for service providers to operate from 
competitive home markets geared to product quality, transaction 
security and customer responsiveness.
    The fifth objective is to obtain commitments to the freer 
movement of key business personnel. This is an area of 
increasing concern to US business, which is daily hampered by 
shortages of critical skills in an economy blessed by 
remarkably low rates of unemployment. Immigration rules should 
be revisited to permit easy access to visas and work permits 
for short-term entry of foreign experts to complete limited 
assignments and return home. We should of course ask the same 
of other countries, because US businesses need to be able to 
transfer skilled people to service their own and their 
customers' needs, whether in Buenos Aires or in Bangkok. For 
sound reasons, some emerging market countries have made this a 
major goal in the WTO talks because of the opportunity it 
provides to upgrade the skills and opportunities of their own 
people; it would help reduce the incentive for skilled, 
talented people simply to emigrate in search of better work.
    The sixth objective is to strengthen GATS regulatory and 
transparency provisions. Services industries are in general the 
most highly regulated. In many instances, rules and regulations 
governing the provision of services are used in a manner to 
impede the ability of US firms to engage in doing domestic 
business on a level playing field with local businesses. Only 
by making regulations and regulatory processes transparent and 
accessible and treating foreign and domestic market 
participants equitably will firms be able to compete fairly on 
a global basis.

Conclusion

    Mr. Chairman, CSI is dedicated to supporting our 
government's efforts to develop fully, this year, the complex 
range of services work that is outlined above, including the 
launch of market access negotiations. Given its strong 
commitment to open markets, CSI was actively involved in 
private sector preparations both for the Seattle Ministerial, 
and the Services 2000 negotiations. The inability of Trade 
Ministers to leave Seattle with a blueprint for global trade 
negotiations is a warning to all that obtaining further trade 
liberalization will not be easy.
    For our part, we will redouble our efforts to work with 
businessmen and trade negotiators around the world to help 
achieve the consensus and political will that are the critical 
components of successful negotiations. We also look forward to 
working with the Administration and Congress to help develop 
the leadership necessary to bring trade negotiators together so 
that services negotiations, as part of the built-in agenda, can 
move forward. We look forward to a year of very useful work to 
move the services negotiations forward, and are very positive 
about the outlook for making real progress.
    [Attachments are being retained in the Committee files.]
      

                                


    Chairman Crane. Thank you.
    Mr. Robertson.

STATEMENT OF STEVE ROBERTSON, PRODUCT MANAGER, MARCONI COMMERCE 
  SYSTEMS, GREENSBORO, NORTH CAROLINA, ON BEHALF OF NATIONAL 
                  ASSOCIATION OF MANUFACTURERS

    Mr. Robertson. Good afternoon. I'm Steve Robertson, Product 
Manager at Marconi Commerce Systems. On behalf of Marconi, and 
also the National Association of Manufacturers, NAM, of which 
we are a member, I am pleased to have this opportunity to 
testify.
    I commend the Ways and Means Trade Subcommittee, and you, 
Chairman Crane, for holding these hearings on determining the 
direction of trade negotiations after Seattle. This subject is 
critical to both Marconi and the NAM. Marconi is headquartered 
in Greensboro. We produce and ship gasoline dispensers and 
related equipment, from pump controllers to total site 
management systems for convenience stores and service stations. 
The pamphlet you'll be getting in a moment here will show you 
the most tangible, familiar example of what we produce, a gas 
pump.
    We have two factories in the United States, both in North 
Carolina. We moved to Greensboro from Springfield, 
Massachusetts in 1966 and opened with fewer than 900 employees. 
We have grown as our international trade and domestic 
opportunities have expanded, to 2,500 people today in total, 
with 1,500 of them in Greensboro.
    The Greensboro plant produces gasoline dispensers for the 
world. In 1989, we were only shipping products to a handful of 
countries. Today, about 20 percent of our U.S. production is 
shipped to 85 different countries. Furthermore, Marconi has a 
worldwide presence, which includes manufacturing facilities in 
Australia, England, Germany and the People's Republic of China. 
Revenue directly related to international trade at the 
Greensboro plant has increased 585 percent in the past 10 
years. Our production and sales here in the United States would 
stagnate if our consumers were limited to the domestic market.
    I'd like to describe for you today one particular area of 
great concern to Marconi. For several years, our company has 
through hard work and good fortune been the leading supplier of 
gasoline dispensing equipment in Latin America. We sell to all 
countries in the region. Fully one half of our exports end up 
in Latin America.
    In response to our success, competitors have established 
manufacturing facilities in the MERCOSUR region of South 
America. Since we must pay duties ranging from 17 to 30 percent 
on the products we ship into these countries, we find ourselves 
at a serious price disadvantage. To deal with this problem, our 
short-term position is to cut costs as best we can and to 
sacrifice profits to maintain our number one market position. 
That is clearly not a tenable long-term approach.
    In the future, we will overcome the situation by 
elimination of tariffs through successful negotiation of the 
free trade area of the Americas and further WTO negotiations, 
or we will be forced to build a factory in Brazil. If we are 
forced to go, foreign workers will permanently replace up to 10 
percent of our highly skilled, highly paid U.S. production 
workers in Greensboro.
    But that's not all. Currently about 80 percent of the parts 
and components in our products come from U.S. suppliers. The 
pamphlet I have given you today lists some of these suppliers. 
These companies throughout the country will also suffer the 
loss of business as components for South American-produced 
product is sourced in South America.
    This example clearly illustrates how important it is for 
U.S. companies and U.S. workers to have better access to world 
markets. Marconi urges the U.S. Government to be a strong 
leader and an aggressive negotiator for the speedy elimination 
of trade barriers. These negotiations must proceed quickly. It 
is our serious hope that they last not more than 3 years. Three 
years is an eternity in terms of profitability and 
competitiveness for a manufacturing company.
    Marconi Commerce Systems, like most other U.S. 
manufacturers, looks forward to competing on a level 
playingfield with other worldwide manufacturers, because we 
believe that our workers are the most productive in the world, 
and the products they make are of the highest quality in the 
world. That is why Marconi is working hard on its own through 
the NAM and through the recently formed U.S. Alliance for Trade 
Expansion to support increased trade liberalization and to 
spread the message about the benefits of free trade.
    Thank you.
    [The prepared statement follows:]

Statement of Steve Robertson, Product Manager, Marconi Commerce 
Systems, Greensboro, North Carolina, on behalf of National Association 
of Manufacturers

    Good morning. I am Steve Robertson, product manager at 
Marconi Commerce Systems. On behalf of Marconi, and also of the 
National Association of Manufacturers (NAM), of which we are a 
member, I am pleased to have this opportunity to testify. I 
commend the House Ways and Means Trade Subcommittee and 
Chairman Crane for holding these hearings on determining the 
direction of trade negotiations after Seattle. This is a 
subject of critical importance to both Marconi and the NAM, so 
we are pleased to offer you our views.
    The NAM spearheaded the U.S. Alliance for Trade Expansion 
(US Trade), a coalition of American agriculture, consumer, 
manufacturing, retailing and service organizations, to promote 
the benefits of expanded international trade. I was in Seattle 
to promote our belief that trade expansion, and the rules-based 
trading system in particular, is beneficial to all Americans. 
Admittedly, the relatively sober pro-trade message we delivered 
had difficulty competing with the chaos that prevailed on the 
streets. Good theater doesn't necessarily mean good policy, 
however.
    While few Americans have the time, interest or patience to 
follow the political wranglings in Washington over a new round 
or permanent normal trade relations (PNTR) status for China, it 
is important to take a step back and consider what the failure 
to expand trade opportunities will mean to the bottom line of a 
small manufacturer in North Carolina.
    Marconi is headquartered in Greensboro. We produce and ship 
gasoline dispensers and related equipment, from pump 
controllers to total site management systems for convenience 
stores and service stations. Marconi also provides customers 
with several payment-at-the-pump and merchandising options, 
such as built-in card readers, cash acceptors and transmitter/
receiver in dispenser technologies.
    The pamphlet in front of you shows the most familiar 
tangible example of what we produce--a gas pump. We have two 
factories in the United States, both in North Carolina. We 
believe that our Greensboro factory is the largest of its kind 
anywhere in the world. We moved to Greensboro from Springfield, 
Massachusetts, in 1966, and opened with fewer than 900 
employees. We have grown, as our international trade and 
domestic opportunities have expanded, to 2,500 people total, 
with 1,500 of them in Greensboro today.
    The Greensboro plant produces gasoline dispensers for the 
world. About 20 percent of our U.S. production is shipped to 85 
different countries. We have high hopes and targeted plans for 
expanding sales to the African countries. In the past, our 
African sales have been limited to Egypt and South Africa. We 
recently have signed new distribution agreements in East and 
West Africa. Furthermore, Marconi has a worldwide presence, 
which includes manufacturing facilities in Australia, England, 
Germany and the People's Republic of China. For that reason, a 
sound, multilateral, rules-based commercial trading system is 
of paramount importance to Marconi. Without such a system, it 
would be much, much harder and costlier to operate 
internationally. Our production and sales here in the United 
States would stagnate if our consumers were limited to the 
domestic market.
    Certainly the Uruguay Round of negotiations and the 
resultant creation of the World Trade Organization were a 
groundbreaking exercise in global trade expansion. Marconi has 
capitalized upon these developments, as evidenced by the fact 
that revenue directly related to international trade at the 
Greensboro plant has increased 585 percent in the past 10 
years. In 1989, we were only shipping products to a handful of 
countries; today, as mentioned above, 85 countries receive our 
products.
    Several different explanations have been offered for the 
failure to agree on the agenda for a new round. First, the 
``Doomed To Failure''

    theory: Apart from agriculture and services--both of which 
were part of the so-called ``built-in'' agenda for which 
negotiations would be automatically launched on January 1, 
2000--there was never any broad consensus on the need for a 
comprehensive round, which was a European Union (EU) idea to 
begin with, to create as much possible compensation for much-
needed agricultural reforms within Europe. Moreover, countries 
needed more time to digest the Uruguay Round, major aspects of 
which (TRIPs and TRIMs) have not been implemented in many 
developing countries.
    Second, the ``Protesters Derailed It'' theory: The 
sometimes violent protests in Seattle undoubtedly had some 
chilling affect on the negotiations; they certainly gave the 
United States a black eye as the host for this international 
meeting. But did the protest derail the talks? I don't think 
so.
    Third, the ``Angry Developing Countries'' theory: Expecting 
a shot in the arm from the President's appearance in Seattle, 
the talks were thrown into crisis when the President explicitly 
called for sanctions to enforce ``core'' labor standards, 
despite assurances given by senior Administration officials 
that only an analytical working group was contemplated. Unlike 
previous rounds, the developing countries were not going to be 
excluded from the high-level, ``Green Room'' political 
discussions geared to cutting a final deal.
    Finally, the ``Miscalculation of the Dynamics of the 
Talks'' theory: The logistics of negotiating a consensus within 
a now unwieldy 135-member organization was unrealistic to begin 
with, given the politically charged atmosphere, and the 
complexity and scope of the issues. Moreover, negotiators did 
not enjoy the high-level support back home to cut politically 
sensitive deals.
    For my part, having witnessed the event, I concur with 
aspects of all four theories. Whatever the cause, we highly 
support further trade liberalization and urge you to ensure 
that these negotiations are launched in the year 2000. Time is 
of the essence: negotiations should not be put off.
    These negotiations should provide for the reduction of 
tariff and non-tariff barriers to facilitate the expansion of 
market access for companies such as Marconi. With reduced 
barriers, our potential is endless, and there is still much 
room to grow and further facilitate the operations of the 
international marketplace. By way of illustration, let me 
describe for you one particular area of great concern to 
Marconi. For several years our company has, through hard work 
and good fortune, been the leading supplier of gasoline-
dispensing equipment in Latin America. We sell to all countries 
in the region--fully one-half of all Marconi exports end up in 
Latin America.
    In response to our success, competitors have established 
manufacturing facilities in the Mercosur region of South 
America. Since we must pay duties, ranging from 17 percent to 
30 percent, on the products we ship into these countries, we 
find ourselves at a serious price disadvantage. To deal with 
this problem, our short-term position is to cut costs as best 
we can and to sacrifice profits to maintain our number-one 
market position. This is clearly not a tenable longer-term 
approach. In the future, we will overcome this situation by 
elimination of tariffs through successful negotiation of the 
Free Trade Area of the Americas (FTAA) and further WTO 
negotiations, or we will build a factory in Brazil.
    If we are forced to go, foreign workers will permanently 
replace up to 10 percent of our highly skilled, highly paid 
U.S. production workers in Greensboro. But that's not all. 
Currently, about 80 percent of the parts and components in our 
products come from U.S. suppliers.
    The pamphlet I have given you today lists some of these 
suppliers. These companies throughout the country will also 
suffer the loss of business, as components for South American-
built gas pumps are sourced in South America. This example 
clearly illustrates how important it is for U.S. companies and 
U.S. workers to have better access to world markets.
    For this reason, Marconi urges the U.S. government to be a 
strong leader and an aggressive negotiator for the speedy 
elimination of trade barriers. These negotiations must proceed 
apace, and it is our serious hope that they last not more than 
three years. Three years is an eternity in terms of 
profitability and competitiveness for a company. The early 
phase-in of reduced tariffs on capital goods, like our gasoline 
pumps, should face little opposition from our South American 
trading partners.
    I mentioned earlier in my testimony that Marconi has 
operations in China. Not surprisingly, China will soon be the 
largest market for petroleum-dispensing equipment. I want to 
reiterate here the importance of China's accession to the WTO. 
The deal that closed in November is a welcome and healthy 
development. A deal should be closed as soon as possible with 
other trading partners so that China can be assimilated into 
the WTO, and therefore be a participant in future multilateral 
negotiations.
    To give you an idea of just what kind of a deal we got, I 
would like to submit for the record a one-page document titled 
``Why American Manufacturers Support China's Entry into the 
World Trade Organization.'' In May, 1998, the NAM issued a 
report that set forth key commitments that China should make in 
order for American manufacturers to support China's accession 
to the World Trade Organization (WTO). The scorecard indicates 
just how much was achieved. The deal provides genuine market 
access to all sectors. It includes not only the right to export 
goods, services and agricultural products to China, but the 
right to market, sell and distribute them as well.
    In considering whether to support PNTR for China, it is 
important to keep the following facts in perspective:
    China makes the concessions. The U.S. gets the benefits. 
China must take on the challenge of opening its market. The 
United States makes no concessions. Our market is already open 
to Chinese imports. This agreement levels the playing field.
    China's market-access commitments are enforceable. The 
strong multilateral dispute-settlement mechanism of the WTO 
will help ensure that China adheres to its commitments. 
Violations would subject China to authorized trade sanctions 
under these same WTO dispute-settlement procedures.
    China's commitments to these disciplines will translate 
into jobs, profitable business ventures, increased productivity 
and competitiveness for U.S. workers and manufacturers.
    For Marconi specifically, only the southwestern tier of 
China, near Hong Kong, is open. The rest of China has recently 
been divided between two state-owned oil companies. To the 
extent that China's accession means a commitment by the Chinese 
to transition from state-run commerce to a market-driven 
economy, and multinational companies are permitted to enter the 
Chinese market, Marconi stands to benefit dramatically as our 
customers build retail fueling facilities in China. 
Additionally, tariff-reduction commitments would, we hope, 
reduce the up to 30-percent import duties we now face when 
sending parts to our operation in China. Obviously, China's 
accession to the WTO is of importance to Marconi.
    As a final note, our company and the NAM continue to urge 
Congress to extend the currently expired trade-negotiating 
authority procedures. The extension of fast-track trading 
authority is critical to enabling U.S. trade representatives to 
negotiate ``final'' trade agreements; authority they must have 
in order to be taken seriously. The current situation puts 
American companies' products and workers at a disadvantage. I 
don't have to tell you that while our trade negotiating 
authority has lapsed, competitor countries are concluding trade 
agreements without us. We are falling behind our competitors.
    Marconi, like most other U.S. manufacturers, looks forward 
to competing on a level playing field with other worldwide 
manufacturers because we believe that our workers are the most 
productive in the world and the products they make are of the 
highest quality in the world. That is why Marconi Commerce 
Systems is working hard, on its own, through the NAM, and 
through the recently formed U.S. Alliance for Trade Expansion, 
to support increased trade liberalization and to spread the 
message about the benefits of free trade. Thank you.
      

                                


    Chairman Crane. Thank you, Mr. Robertson.
    Mr. McCurdy, our distinguished colleague from Oklahoma. 
It's good to see you back in town again. You're now located 
right across the river, right?
    Mr. McCurdy. Just across the river. And it's a long way 
between.

     STATEMENT OF HON. DAVE MCCURDY, PRESIDENT, ELECTRONIC 
INDUSTRIES ALLIANCE, ARLINGTON, VIRGINIA; AND FORMER MEMBER OF 
                            CONGRESS

    Mr. McCurdy. Mr. Chairman, having chaired a Committee, I 
appreciate your leadership and your willingness to chair a 
hearing and go through a day like today.
    In order to be brief, and I know those lights well, I do 
represent the Electronic Industries Alliance, a partnership of 
electronic and high-tech associations and companies committed 
to shared knowledge and shared influence. With over 2,000 
member companies, accounting for 80 percent of the $550 billion 
electronics industry, we're proud to represent the most dynamic 
and competitive industry in the world economy today.
    The companies we represent operate globally. They think and 
we think and plan in global terms, and they face intense 
international competition. The fact is, the days when U.S. 
companies dominated the global high technology industry are 
over. Similarly, the days when domestic U.S. market could 
sustain the industry are also over. It has become almost 
cliche, but the global economy is a fact of doing business for 
us, and it is a critically important concept to keep in mind as 
we formulate public policy in this area.
    For the past 50 years, the United States has led the world 
toward economic integration and opening of global markets. From 
World War II to the conclusion of the Uruguay round in 1994, 
the U.S. Government, in a bipartisan approach, was committed to 
a multilateral trading system. Although the message was often 
confused, the benefits of trade: competition, specialization, 
economic integration in the world economy, and rising standards 
of living, all were clear.
    Consumers in open markets saw the equivalent of tax cuts, 
especially because of the increased purchasing power due to the 
availability of cheaper, often better quality products. This is 
especially true in the realm of electronics.
    The message is simple: trade is a win-win undertaking, and 
is a net benefit for all. With the defeat of communism, the 
world has embraced the concepts of market economics and 
reducing barriers to trade. While the opponents of trade often 
accuse us of engaging in a zero-sum game that is shifting 
wealth from developing to the developed world, the evidence in 
the last decade is unequivocal.
    Countries like Poland, Chile and Taiwan, which institute 
market reforms, adopt democratic, transparent institutions and 
open their economies to international trade and competition, 
see reduced poverty and rising living standards. Countries 
which remain closed or only institute partial or haphazard 
reforms experience stagnation or recession.
    While global tariff rates are low, and decreasing every 
year, the goal of trade policymakers is to now remove the 
remaining barriers to trade through deeper integration of 
economies, through broad-based negotiations and internationally 
agreed-upon rules. The Seattle Ministerial meeting, however, 
confused the picture for continuation of the economic 
fundamentals. What we saw in the name of opposition to 
globalization were fringe groups who want to stop trade, not 
expand it.
    The fact, however, is that globalization is a reality, and 
the best approach is to stick to the basics and press for 
multilateral, rules-based trade agreements. EIA believes it is 
crucial that expansion of high technology trade be a priority 
goal of U.S. trade policy. Key elements of a technology trade 
strategy should include securing a broadened information 
technology agreement and trade rules that are conducive to 
growth and e-commerce.
    The ITA is a prime example of an initiative that has the 
potential to promote the growth of the U.S. economy and that of 
other nations through improvements in efficiency and 
immigration. Considering the speed of change in our industry 
and the rapid development of so-called convergence products, we 
cannot afford to wait several years for the conclusion of a new 
round for necessary trade liberalization. Indeed, just the 
start of a new round may take too long.
    Members of the U.S. high technology industry are concerned 
that trade negotiating success in the technology sector not be 
held hostage to achievement of other trade policy goals. In 
this regard, it is important that U.S. decisionmakers take a 
creative and flexible approach to the built-in agenda that 
emerged from the Uruguay round negotiations.
    In any event, advancement of high technology trade 
expansion must be a foremost goal of America's post-Seattle 
approach to trade negotiations and cannot be sacrificed due to 
a perceived lack of success in other areas. Our written 
testimony provides more details regarding the ITA and e-
commerce. However, I'd like to discuss one of the most 
important WTO-related issues facing our industry today, and 
that is bringing China into the rules-based, multilateral 
trading systems.
    China is the single most promising emerging market in the 
world today. And this fact is especially true for the U.S. 
electronics industry. As China enters the information age and 
builds its information infrastructure, it will purchase more 
high-tech equipment from the world's leading supplier, the 
United States. Bringing China into a multilateral system of 
rules and procedures which the WTO oversees will go a long way 
toward making China a more attractive and easier place to do 
business.
    EIA member companies have an inherent interest to see China 
become a member of the World Trade Organization. The 
electronics industry has much to gain from China's accession in 
the area of tariff and nontariff barriers, distribution rights, 
trading rights, transparency, state-owned enterprises, and 
national treatment.
    Mr. Chairman, the issue and principle before us is very 
simple, and that is, to vote for continuing the momentum for 
trade liberalization and reform. The verdict of history is 
clear: democracy and market economics have won out over 
communism and state-controlled economies, which only produced 
human misery, economic deprivation, and environmental 
devastation.
    I would urge leaders in Congress to not delay nor try to 
make political and partisan hay from this vote. This vote 
should occur before the summer and not be dragged out.
    The best opportunity to continue the economic and social 
progress of the past decade lies in voting early this year, 
before the campaign season really begins, to further U.S. 
participation in WTO, support China's accession to WTO by 
granting permanent NTR status, and support for the principle of 
economic freedom and reform.
    Mr. Chairman, I would hope that this vote would be 
bipartisan, resounding and soon.
    [The prepared statement follows:]

Statement of Hon. Dave McCurdy, President, Electronic Industries 
Alliance, Arlington, Virginia; and former Member of Congress

    Thank you, Mr. Chairman, for the opportunity to testify 
today on the post-Seattle U.S. trade agenda. I represent the 
Electronic Industries Alliance (EIA), a partnership of 
electronic and high-tech associations and companies committed 
to shared knowledge and shared influence. EIA includes the 
Consumer Electronics Association (CEA); Electronic Components, 
Assemblies, Equipment and Supplies Association (ECA); 
Electronic Industries Foundation (EIF); Government Information 
Technology Association (GEIA); JEDEC--Solid State Technology 
Association; and Telecommunications Industry Association (TIA). 
Simply put, we connect the industries that define the Digital 
Age.
    I am also a former Member of Congress from Oklahoma. During 
my 14-year tenure in the House, I served as the Chairman of the 
Select Intelligence Committee, as well as subcommittee chairman 
on the Armed Services Committee and the Science Committee. This 
experience gave me valuable insight into the national security, 
foreign policy and technology policy issues of importance to 
the high technology industries.

Realities of the High-Tech Industry

    With over 2000 member companies, accounting for 80 percent 
of the $550 billion electronics industry, we are proud to 
represent the most dynamic and competitive industry in the 
world economy today. The companies we represent operate 
globally, they think and plan in global terms, and they face 
intense international competition. The fact is, the days when 
U.S. companies dominated the global high-technology industry 
are over. Similarly, the days when the domestic U.S. market 
could sustain the industry are also over. It has become almost 
cliche, but the global economy is a fact of doing business for 
us, and is a critically important concept to keep in mind as we 
formulate public policy in this area.
    As any successful CEO will tell you, competing--indeed, 
surviving--in the global economy means exporting. The 
phenomenal success of the U.S. technology industry comes from 
its entreprenurialism, its aggressiveness, its willingness to 
compete--all those free market forces that drive innovation. In 
this kind of business environment, tapping new markets before 
the competition does is the key to success. In 1999, more than 
one-third of what the U.S. electronics industry produced was 
exported overseas, over $150 billion in goods. That means more 
than a third of the 1.8 million employees who work for U.S. 
electronics companies depend on exports for their jobs, and the 
percentage goes up every year.
    We must also recognize that our high-tech companies are the 
engine of technological innovation and economic growth in the 
world today. The U.S. economy is the most competitive in the 
world due in no small part to the amazing advancements our 
companies have achieved. Technologies which, not long ago, had 
only military or limited civilian applications are now 
pervasive in our society, and the greater economic efficiency 
stemming from this diffusion of technology has been the driving 
force for the remarkable prosperity so many Americans are 
experiencing. Not incidentally, salaries for high-tech jobs 
average around $58,000 per year, whereas the U.S. average 
salary is $28,000 per year.

Leadership or Stagnation?

    With the successful passage into the year 2000 without 
major Y2K or terrorist events, Americans are as optimistic 
about the future as never before. The reason for the positive 
feeling is that the fundamentals are good. The economy 
continues to grow, with low unemployment, low inflation, 
increased productivity and a booming technology sector. The 
U.S. budget is balanced, thanks to the incredible economic 
performance. The social indicators such as crime and homicide 
rates are down. We are on course for continued unprecedented 
economic growth and prosperity at home and abroad.
    Because of these factors, voters are happy and policy 
makers should be ebullient. Now is the time for politicians to 
lead. The opportunity to continue this growth depends on 
keeping faith with economic fundamentals, especially support 
for free and open trade. For the past 50 years, the United 
States has led the world toward economic integration and 
opening of global markets. Accordingly, as President Clinton 
stated, ``the world has experienced the most rapid, sustained 
period of economic growth ever recorded.'' From WWII to the 
conclusion of the Uruguay Round in 1994, the U.S. government, 
in a bipartisan approach, was committed to the multilateral 
trading system. Although the message was often confused, the 
benefits of trade: competition, specialization, economic 
integration of the world economy and rising standards of 
living, all were clear. Consumers in open markets saw the 
equivalent of tax cuts, because of the increased purchasing 
power due to the availability of cheaper, often better quality 
products. This is especially true in the realm of electronics.
    The message is simple; trade is a win/win undertaking and 
is a net benefit for all. With the defeat of communism, the 
world has embraced the concepts of market economics and 
reducing barriers to trade. While the opponents of trade often 
accuse us of engaging in a zero-sum game--shifting wealth from 
the developing to the developed world--the evidence of the last 
decade is unequivocal. Countries like Poland, Chile, and Taiwan 
which institute market reforms; adopt democratic, transparent 
institutions; and open their economies to international trade 
and competition; see reduced poverty and rising living 
standards. Countries which remain closed or only institute 
partial or haphazard reforms, experience stagnation or 
recession.
    While global tariff rates are low and decreasing every 
year, now the goal of trade policy-makers is to remove the 
remaining barriers to trade through deeper integration of 
economies through broad-based negotiations and internationally 
agreed upon rules. A good example of this is the lifting of 
government restrictions on competition in industries such as 
telecommunications.
    The Seattle Ministerial Meeting, however, confused the 
picture for continuation of the economic fundamentals. What we 
saw, in the name of opposition to ``globalization,'' were 
fringe groups, who want to stop trade, not expand it. Under the 
guise of nationalism or environmentalism, the Seattle 
opposition was intent on destroying, not promoting multilateral 
economic cooperation. Playing to fears of rapid change, 
superbly organized groups are trying to reverse globalization, 
rather than influence or shape it. The fact, however, is that 
globalization is a reality and the best approach is to stick to 
the basics and press for multilateral, rules-based trade 
agreements.

The Seattle Ministerial

    The WTO was created in 1994 as a means to more formally 
bring together the world trading community under a binding 
system of rules that provide, among other things, the 
opportunity for countries to challenge each other on trading 
matters. In the past, negotiations were conducted between a 
relatively small group of countries, where informal agreements 
were hashed out and then presented to the larger group of 
countries for consensus. This process focused heavily on the 
interests and strength of the developed world and left many 
countries in the developing world unable to participate in some 
discussions, a complaint which resurfaced during the Seattle 
negotiations. Further complicating the Seattle talks was the 
basic fact that many of the ``easier'' trade issues were 
addressed in previous rounds, leaving the most contentious and 
difficult issues for the Ministerial.
    EIA participated at the Ministerial and conducted numerous 
meetings with representatives of other country delegations. 
From our meetings, it was apparent that many of the items for 
discussion at the Ministerial would be highly contentious. Many 
developing country representatives had a number of common 
interests to be addressed during the talks, including demands 
for additional time to implement Uruguay Round commitments.
    Adding to the confusion and disagreement was U.S. isolation 
in some of its negotiating positions. This was especially true 
in the case of the U.S. Government's support for inclusion of 
labor and environmental standards in the WTO Agreement as 
sanctionable trading violations. This pronouncement hit a 
strong chord with many developing country representatives, who 
felt that these standards would be used against them in trade 
disputes. In the end, these differences made it impossible for 
the WTO members to agree on a set of negotiating principles to 
lead the round for the next several years.

Future Agenda

    Trade in the high technology sector is a major and growing 
part of U.S. exports and world trade in general. Moreover, 
maintaining a vibrant U.S. high technology industry is now 
critical to U.S. economic prosperity and, in turn, depends on 
continued trade expansion.
    Accordingly, it is crucial that expansion of high 
technology trade be a priority goal of U.S. trade policy. Key 
elements of a technology trade strategy should include securing 
a broadened Information Technology Agreement and trade rules 
that are conducive to growth in E-Commerce. The ITA is a prime 
example of an initiative that has the potential to promote the 
growth of the U.S. economy and that of other nations through 
improvements in efficiency and integration. Considering the 
speed of change in our industry, and the rapid development of 
so-called ``convergence'' products, we can not afford to wait 
several years for the conclusion of a new round for necessary 
trade liberalization. Indeed, just the start of a new round may 
be too late.
    Members of the U.S. high technology industry are concerned 
that trade-negotiating success in the technology sector not be 
held hostage to achievement of other trade policy goals. In 
this regard, it is important that U.S. decision-makers take a 
creative and flexible approach to the ``built-in'' agenda that 
emerged from the Uruguay Round negotiations. In any event, 
advancement of high technology trade expansion must be a 
foremost goal of America's post-Seattle approach to trade 
negotiations and cannot be sacrificed due to a perceived lack 
of success in other areas.

Information Technology Agreement

    The Information Technology Agreement (ITA) was implemented 
on July 1, 1997. The agreement called for the elimination of 
import tariffs for information technology products by the year 
2000. Those products covered by the agreement include 
semiconductors, computer hardware, software and 
telecommunications equipment among others. The second round of 
negotiations, dubbed the ITA II, is underway to expand product 
coverage, eliminate non-tariff measures (NTMs) facing the high 
technology industry, and accelerate tariff reduction on 
products already included in ITA I.
    EIA is a strong supporter of the ITA process because the 
ITA calls for reductions in tariff rates on many of the 
products that our industry produces. These reductions allow our 
industry to penetrate markets from Europe to parts of Asia. 
Importantly, EIA endorses an expansion of the ITA to additional 
countries and additional products. We believe that while the 
first round of ITA negotiations produced important changes to 
world-wide tariff rates on information technology products, 
there needs to be a further examination of how convergence has 
expanded the scope of information technology. Specifically, EIA 
endorses an approach that broadens the types of products that 
should be included in the ITA in the future. Our definition of 
an information technology product includes:
    1) A product or device that uses digital means to process 
information; or
    2) A product or device that is critical to the functioning 
of an information technology product; or
    3) A product or device or components, parts, inputs of a 
device which enables or facilitates the transmittal of 
information; or
    4) A product, component, or input that is critical to the 
manufacture of an information technology product and is 
primarily or extensively used in such manufacturing.

E-Commerce

    EIA is pleased by the broad consensus among developed and 
developing countries alike that electronic commerce should 
remain duty free. The Administration should be applauded for 
its initiative in 1998 to reach multilateral agreement to keep 
Internet commerce tariff-free. Although several countries 
remain somewhat wary of making the moratorium permanent, the 
Administration has made considerable progress in explaining the 
benefits of e-commerce, as well as the stunting effect of ``e-
tariffs.'' Like the ITA II, extending the tariff moratorium on 
e-commerce is an area in which a conclusion is well within 
reach. Regardless of other issues, negotiations to permanently 
extend the moratorium on e-commerce tariffs should continue 
and, hopefully, conclude quickly.
    Similarly, the broader agenda of the WTO in examining the 
trade-related implications of electronic commerce must move 
forward as well. The emergence of the World Wide Web as a means 
of commerce raises a variety of questions which require careful 
consideration, questions such as: how to prevent the creation 
of technical trade barriers in this area, how to ensure 
nondiscriminatory access for network and service providers, how 
to treat electronic transmissions, and how can e-commerce 
expedite and simplify implementation of WTO commitments. The 
WTO has proven to be a useful forum for airing differing views 
on these types of questions, and for building multilateral 
consensus for moving forward.

China's WTO Accession

    Perhaps the most important WTO-related issue facing our 
industry is bringing China into the rules-based multilateral 
trading system. China is the single most promising emerging 
market in the world today, and this fact is especially true for 
the U.S. electronics industry. As China enters the Information 
Age and builds its information infrastructure, it will purchase 
more high-tech equipment from the world's leading supplier--the 
United States. Consider the following trends:
     Total U.S. electronics exports to China more than 
doubled between 1994 and 1999, from $1.3 billion to nearly $3 
billion.
     By December 1999, China was expected to have 39.7 
million mobile phone subscribers, with an annual growth rate of 
58.8 percent.
     China adds 15.1 million fixed telephone lines 
annually.
     The number of Internet users more than doubled 
between June and December 1999, from approximately 4 million to 
8.9 million.
     The number of websites also increased dramatically 
in that six month period, from 9,906 to 15,153.
    Nevertheless, our companies face considerable obstacles to 
penetrating the Chinese market, and this is reflected in the 
lopsided bilateral trade deficit. Even in the electronics 
sector, where in most cases U.S. manufactured products are 
superior in terms of both quality and price competitiveness, 
the trade deficit in 1998 totaled over $12 billion. This is 
due, in part, to the high tariffs China imposes on our 
products. In 1998, those tariffs averaged 18 percent, and in 
some sectors like consumer products, tariffs are in the 40 to 
60 percent range. But of even greater significance to our trade 
deficit with China are the costly and burdensome non-tariff 
barriers which confront our companies. As you can imagine, 
these barriers take many forms, from a distribution system 
which discriminates against our companies, to the 
discriminatory buying practices of state-owned enterprises, to 
the arbitrary customs procedures we face at the ports-of-entry.
    For the electronics industry in particular, China is an 
important export and import market for EIA's most competitive 
companies. On the export side, our industry looks to China as a 
market for its products. China is a market of one billion 
people that is growing in sophistication and buying power every 
year. On the import side, our industry utilizes China as a 
source for components that are then incorporated into larger 
products. The availability of these components, which often are 
not produced domestically, are essential to the competitiveness 
of our industry. Without access to the inputs produced in 
China, these firms would not be able to be competitive 
domestically or internationally.
    Bringing China into the multilateral system of rules and 
procedures, which the WTO oversees, will go a long way towards 
making China a more attractive, and easier, place to do 
business. EIA member companies have an inherent interest to see 
China become a member of the World Trade Organization (WTO). 
The electronics industry has much to gain from China's 
accession in the areas of tariff and non-tariff barriers, 
distribution rights, trading rights, transparency, state-owned 
enterprises and national treatment.
    As part of the agreement reached on November 15, 1999, 
China agreed to:
     Implement the Information Technology Agreement by 
2005, which will eliminate tariffs on a wide range of high-tech 
products.
     Provide U.S. firms significant market access 
rights that include the ability to import, export and 
distribute their goods throughout China. State-owned 
enterprises would be prohibited from discriminating against 
U.S. firms in their buying decisions.
     Enforce laws protecting intellectual property, and 
preventing local content requirements and forced technology 
transfers.
     Open the telecommunications market to foreign 
competition and investment:
        -China has agreed to implement the pro-competitive regulatory 
        principles embodied in the Basic Telecommunications Agreement 
        (including cost-based pricing, interconnection rights and 
        independent regulatory authority), and agreed that foreign 
        suppliers can use any technology they choose to provide telecom 
        services.
        -China will allow 49% foreign investment in all services 
        immediately upon accession, and will allow 50% foreign 
        ownership for value added in 2 years and paging services in 3 
        years. This is a change from the April 8 deal, in that China 
        had indicated it would allow 35% foreign ownership for value-
        added and paging services two years after accession and 51% 
        four years after accession.
        -China will phase out all geographic restrictions for paging in 
        3 years, value added, and closed user groups in 3 years, 
        mobile/cellular in 5 years and domestic wireline services in 6 
        years. China's key telecommunications services corridor in 
        Beijing, Shanghai and Guangzhou, which represents approximately 
        75% of all domestic traffic, will open immediately on accession 
        in all telecommunications services.
        -Internet services will be liberalized at the same rate as the 
        other key telecommunications services, and China will permit 
        provision of telecom services via satellite.
     Regarding antidumping, the U.S. will continue to 
treat China as a non-market economy. Moreover, in applying 
countervailing duty law, the U.S. will be able to take the 
special characteristics of China's economy into account when we 
identify and measure any subsidy benefit that may exist. This 
provision will remain in force for 15 years after China's 
accession to the WTO.
     Should China fail to abide by these commitments, 
China is subject to the WTO's Dispute Settlement Mechanism, 
including the possibility of multilateral trade sanctions.
    Whereas China has committed to overhaul its economic 
structures, all the United States must do is make permanent 
China's ``Normal Trade Relations'' (NTR) status under U.S. law. 
Unless Congress votes to make China's NTR status permanent, 
China will not grant, and is not required to grant, U.S. 
companies the benefits which have been agreed to. Ironically, 
our overseas competitors would receive the benefits of the 
November 15 agreement, while U.S. companies are shut out. EIA 
is proud to be a member of the U.S. High-Tech Industry 
Coalition on China, as well as the Business Coalition for U.S.-
China Trade, working to ensure that Congress permanent NTR.
    In addition to the substantial economic opportunities the 
accession agreement creates, China's membership in the WTO also 
advances our broader foreign policy goals by promoting economic 
and political reform. The practical effect of adhering to WTO 
principles and commitments makes China's economic reforms of 
the last two decades irreversible, and sets China on a course 
for further free-market reforms. It commits China to abide by 
the same multilateral trading rules--like national treatment, 
Most-Favored-Nation, and impartial dispute resolution--that we 
and our other major trading partners already abide by. WTO 
membership will require greater transparency from China's legal 
system and bureaucracies, creating unprecedented accountability 
for the country's decision makers. Furthermore, it creates the 
foundation for China's prosperity and improving the quality of 
life for a billion people. Finally, it promotes the free flow 
of ideas and information through enabling greater Internet 
penetration, music and movies, financial information and other 
news, and increased exposure to U.S. companies and citizens.
    Thirty-three emerging market countries have applied for 
membership in the 135-member World Trade Organization (WTO). 
Most of these countries are transitioning to market-based 
systems and represent 1.6 billion people, or nearly one-sixth 
of the world's Gross Domestic Product. The United States has 
seized the opportunity of potential WTO membership, to 
negotiate bilateral agreements with countries, such as China, 
to press them to open and modernize their economies and 
markets. China, not the U.S., had to make significant 
concessions to achieve membership in the WTO. China must reduce 
tariffs, open markets for competition and investment from U.S. 
firms and abide by international rules of commercial behavior 
and monitoring of its compliance. As a result, US 
telecommunication and high tech companies have a tremendous 
opportunity to gain from China's accession to the WTO and 
concurrent implementation of the WTO deal. As the Chinese 
Ambassador to the U.S. told me, the deal is ``good for China, 
good for the U.S. and good for trade. China will continue the 
process of opening up and modernization.'' It is a commercially 
viable agreement that is a huge win for the US and 
international trade.

Conclusion

    I served in the U.S. House of Representatives from 1981-
1995. During that time, there were only a handful of votes that 
were considered momentous, where Congress debated the issue 
fairly and rose above partisanship to send a clear signal of 
national direction. The one vote that stands out was the debate 
over commitment of force in Iraq. It was clear that sanctions 
were not going to work, despite the hand-wringing and fear of 
losing thousands of Americans in combat, Congress voted to send 
a clear message of our commitment to democracy and 
multinational coalitions to oppose aggression. Democrats in 
Congress, were in an uncomfortable position, but enough of us 
voted to authorize force based on our belief in core values and 
faith in America's ability to succeed.
    Congress is in the similar position today. The principle is 
simple, vote for continuing the momentum for trade 
liberalization and reform. The verdict of history is clear; 
democracy and market economics have won out over the legacy of 
Lenin, Hitler, Stalin and Mao, i.e. state-controlled economies, 
human misery, economic depravation, and environmental 
devastation. Leaders in Congress should not delay nor try to 
make political or partisan hay from the vote. It should occur 
in the Spring and not be dragged out. The best opportunity to 
continue the economic and social progress of the past decade 
lies in voting early this year, before the campaign season, to 
further U.S. participation in WTO, support China's accession to 
WTO by granting permanent NTR status and support for the 
principle of economic freedom and reform. It should be 
bipartisan, resounding and soon.
      

                                


    Chairman Crane. Thank you very much.
    Thank you all for your testimony. Dave, one quick question, 
and that is, I get the impression from your testimony that you 
are concerned that the high-tech sector not be held hostage to 
a lack of progress in other areas. Is that correct?
    Mr. McCurdy. That is correct. Mr. Chairman, the ITA and the 
ITA2 are important steps that need to be taken. In this 
business, as Mr. Houghton knows very well, the time to market 
is very quick. The demands and the competition are great. And 
the potential for opening these markets is critical. We would 
urge the trade negotiators and their policymakers in Congress 
to support maximum flexibility to move on other agreements to 
see this progress achieved.
    Chairman Crane. Very good. And Steve Robertson, I have a 
question for you with this pamphlet that you distributed.
    Mr. Robertson. Yes, sir.
    Chairman Crane. You've got the list of the people who are 
the providers of various component parts. And it's an 
impressive list of employees. Do all of those employees have 
copies of this?
    Mr. Robertson. All of those companies that we list as 
suppliers of ours in that pamphlet have multiple copies of 
that, yes, Mr. Chairman.
    Chairman Crane. But I hope they realize the importance of 
distribution of this to all of the employees. And I say that 
because in my district, my district is probably the biggest 
export district in the State of Illinois. We're the fifth 
largest export State in the union. And when I talk about the 
importance of trade issues at a town meeting, people start 
falling asleep.
    It is our employers--I've got corporate giants like the 
headquarters of Motorola, Sears, AmeriTech, United Airlines, 
Kemper Insurance, Baxter and Abbott are right on my border. And 
we had a trade hearing out there, and I knew that we had these 
big giants. But the thing that was interesting about the trade 
hearing is we found out that better than 90 percent of our 
exports out of Illinois came from companies employing 500 or 
less.
    And that message is not being gotten out to the employees, 
about the essentiality of trade to the preservation of the 
business. And that in turn translates to the preservation of 
their jobs.
    I was particularly struck in your testimony here about the 
duties that you're having to pay to penetrate the MERCASR 
market. And that if you don't get some relief, that it means 
leaving town.
    Mr. Robertson. Yes, sir.
    Chairman Crane. And going down there and replacing folks' 
jobs up here with jobs down there. And that's totally 
understandable, it's survival. But it's that kind of message 
that we need to get distributed to more folks so that they can 
in turn communicate with us. Because we have a number of 
Members here still that I don't think fully appreciate the 
importance of guaranteeing that we provide those windows of 
opportunity for expanded markets to our own businesses here.
    And with that, I'd like to yield to Mr. Levin.
    Mr. Levin. Thank you. And my apology, I'm sorry, I had no 
choice but to miss part of this hearing, which went longer than 
we expected, and I think much longer than you expected.
    I always say, if you're on the last panel, beware. But 
thanks for your patience, and I assure you, I will read your 
testimony carefully. In some cases, I already had a chance to 
review it. And if the others don't mind, if I might say a 
special hello to--it says Hon., how true--Dave McCurdy. It's 
nice to have you back and looking in such trim battle form.
    Mr. McCurdy. A little grayer, but doing well.
    Mr. Levin. I don't object to that. [Laughter.]
    But thanks very much, and you can be assured, your 
testimony will receive more attention than the late hour might 
indicate. Thank you.
    Chairman Crane. And Mr. Houghton.
    Mr. Houghton. Thank you very much, Mr. Chairman and Mr. 
Levin.
    Well, gentlemen, it's wonderful to be here. I'm not going 
to take long, because we've got to go for a vote, and you've 
been very patient here. But the question is, how does it all 
get done? I don't think there's really any disagreement of the 
fact that we've got to have normal trade relations with China, 
we've got to be part of the WTO, we've got to make sure that 
the foreign sales corporation exists, that we product our 
antidumping laws.
    How does it get done? Because you know, I don't think 
there's really any disagreement here. And Dave, you know this. 
And I mean, I have organization after organization come into my 
office and they have their own particular ideas. But you know, 
we're not really looking at a long term as citizens of the 
country, we look at it in terms of our own individual 
interests. And there are waves that come in, and if you don't 
get them, then I think you're really in trouble for years to 
come.
    So politically, how do we drive these things through? I 
have been fighting, as I guess most of us have around here, 
certainly in this room, for the fast track authority. I don't 
think it's complicated. I don't think it gives up anything as 
far as environment or labor or human rights and everything. But 
boy, I tell you, it is tough.
    And I guess maybe the one suggestion I might have is that 
you gentlemen represent the power sources in this country. I 
don't really think labor and business work together to explain 
to employees how important the international operations are. I 
mean, the three critical companies in my district all are 
totally dependent upon international sales, period. But you 
won't hear that when you go to the town meetings. There is 
something we need to do to explain, explain, explain and to 
work closer together.
    And absent that, I think these are going to be tough votes. 
Maybe you could have some ideas.
    Mr. McCurdy. Well, Congressman, if I could just take 1 
minute. Let me say this for the benefit of my former colleagues 
as well, a little quick commercial. Mr. Houghton was a member 
of EIA long before I was. As a matter of fact, he made a 
comment to me at one of our recent programs that he was a 
member of EIA before I was born.
    Mr. Houghton. Now, that hurts. [Laughter.]
    Mr. McCurdy. It hurt me, actually. But this year, it 
actually, I don't think that there's been appropriate mention 
on both sides, whether you're Members of Congress, and those of 
us who have now been on both sides of this podium. One is, I 
don't think there's been the long-term leadership needed, and 
the long-term vision.
    And I'll give you an example of where it can work, for 
those who are not aware. Congressman Houghton was the only 
chief executive officer of a Fortune 500 company to serve in 
the U.S. Congress. And Amo Houghton, during his leadership, 
took his company through some very difficult times to develop 
fiber optics.
    And we see today the benefits of telecommunications on a 
global basis because of the leadership of that person right 
there. So EIA this year is presenting him with a medal of honor 
for his leadership as an industry leader.
    Now, I use that as an example, because it took long-term 
vision to do that. It wasn't short-term sales, it wasn't the 
quarterly profit sheet, it wasn't the quarterly NASDAQ report 
or the DOW. You were looking long-term at something and you 
took a risk.
    I don't believe that there's been sufficient leadership 
either from the administration or quite frankly from the 
Congress and certainly not from industry on this issue. It is 
an educational requirement for all of us. We don't explain the 
benefits, the long-term benefits of this. And that's why in my 
testimony today, I cited a little bit of the history. Because 
we forget that.
    It hasn't been that long ago, we were fighting communism. 
We were in a gridlock. And when I was chairman of the 
Intelligence Committee and a Member of the Armed Services 
Committee, I was in a position to start looking at some of the 
other issues. When we were in a hot or cold war, we weren't 
worried about environmental concerns in Eastern Europe. But 
after we won, we realized the economic and environmental 
devastation that occurred under those command economies. And 
this is where I think we fail is in the basic education 
throughout the country.
    And Chairman Crane was right in talking about Marconi and 
distributing to the employees. The employees don't know where 
the benefits actually are derived from those international 
sales. And let me just make one last point. This vote on China 
PNTR is different than fast track. Fast track is a process 
question. China PNTR is an agreement. We conditioned our 
support for an agreement we did not see until we got a final 
agreement. When we examined it, it was not only a commercially 
viable agreement, it was a good agreement. And that agreement 
is to the benefit of the United States. The Chinese made the 
concessions, we didn't, the United States didn't. All we have 
to do is change the Jackson-Vanik requirement, and make 
permanent their membership in WTO and NTR, we used to call it 
MFN.
    But that word's not getting out. We're focused on the 
short-term, sometimes political debate and argument and 
forgetting the real true economic prosperity and increased 
standard of living. And quite frankly, in our industry, we 
can't say it for every industry, but in our industry, we 
actually are very involved in designing products that are not 
only good for consumers, but also environmentally sustainable, 
better for the environment overall. Issues like recycling and 
end of life, the types of materials, we have one of the most 
active areas in our association, just in the environmental 
issue.
    That's something that we can do proactively. But industry 
doesn't talk about the positive things they do. So I think it's 
a question of long-term leadership from the administration. I 
was pleased the President came up and said that they're going 
to commit it without any equivocation, no hesitancy, they're 
supporting this agreement and they're going to push for it. I 
think it's good that the leadership in the Congress is coming 
forward on this.
    And I would just urge my colleagues, and especially 
Democratic Members, this is not fast track. This is different 
than even NAFTA. This is an agreement that is very clear, 
whether you're in agriculture, whether you're in technology, 
across the board, this is an agreement that's good, certainly 
for the United States. And in the long-term, it's going to be 
better for the Chinese, people in China, that's why the Chinese 
liberals support it. Those that are seeking reform, political 
reform, support it. Those who are seeking environmental reform 
in China support it.
    And that's why I would urge my colleagues and former 
colleagues to support this. This is the number one priority for 
our organization. We've already produced letters to over 174 
Members of Congress, 82 Senators. And that's just the 
beginning. We're going to have lobby day, we're making this a 
top priority issue. And I think my colleagues here at this 
table will concur that it is at the top of their list as well.
    Mr. Van Putten. Congressman Houghton, may I respond? I 
certainly agree that visionary proactive leadership is what is 
required. What is required is to demonstrate concretely the 
ways in which liberalized trade can enhance values like 
environmental protection. What is required is an aggressive 
agenda in areas such as the perverse subsidies in fisheries to 
demonstrate ways in which the conservation of the world's 
fisheries can be enhanced.
    What is required is a carefully articulated strategy toward 
trade liberalization in the energy sector focused on ways to 
reduce global climate change causing greenhouse gases. What is 
required of those businesses who want to make the case for 
environmentally responsible behavior in China is don't supplant 
the governmental funding we've all worked so hard on the 
environmental community to prevent the Three Gorges Dam from 
going ahead.
    If we see private financial actors in the United States 
moving in, where the World Bank and the Japanese Development 
Bank have fled, and directly and indirectly fund that kind of 
environmentally destructive activity in China, it's a little 
hard to take the argument that it will inevitably be good. 
There are real concrete visionary opportunities to demonstrate 
how trade can work to vindicate values such as protection of 
the environment. And we need a policy that articulates that 
proactive benefit and then delivers.
    Mr. Houghton. Right. And Mr. Chairman, if I could just say 
this one thing, and I was picking up on that, I think what Mr. 
Dawson said, that the World Trade Operation, the meeting in 
Seattle, was not a lost opportunity, it was a missed 
opportunity. And I get sort of an ashes and sackcloth feeling 
around here, everybody thinks, oh, my gosh, this will never be 
brought together. It will be brought together. We've got to 
drive this thing.
    So thank you very much.
    Chairman Crane. Well, and let me add just one comment to 
Dave's remarks earlier. And I've argued this for years, that 
trade is not a Democrat or a Republican issue, it's an American 
issue, and I know it's not easy for some of our colleagues on 
the Republican side to take an objective view of trade. And 
simultaneously, I know a lot of Democrats are under pressures, 
especially in the post World War II era.
    But we have had a remarkably high level of bipartisanship 
on the e-trade issues. And I want to pay tribute to our 
Democratic friends as well as Republicans, keep working. But 
the big part of that problem is getting that message out, 
explaining to the folks back home the importance of it, and 
getting them to recognize that trade is almost one-third of our 
national economy now. And it's been the fastest growing over 
the past decade, the fastest growing component.
    And when we're less than 5 percent of the world's 
population, where's the market? It's out there beyond our 
shores. And we're the biggest export country on the face of 
this Earth. And no one has been able to match us in that 
competitive world.
    But we want to make sure that Steve isn't put out of 
business here, and down there competing with us in Brazil.
    Folks, I want to thank you for your participation, and 
please stay in touch with all of us. With that, our Trade 
Subcommittee hearing stands adjourned.
    [Whereupon, at 6:08 p.m., the hearing was adjourned, to 
reconvene at the call of the Chair.]
    [Submissions for the record follow:]

Statement of American Apparel Manufacturers, Association, Arlington, 
Virginia

    Thank you for providing the American Apparel Manufacturers 
Association (AAMA) an opportunity to submit testimony in 
connection with the Subcommittee's investigation of 
international trade issues in the aftermath of the failed 
Seattle Ministerial round in December 1999.
    AAMA is the central trade association for US companies that 
produce clothing. Our members are responsible for about 85 
percent of the $100 billion worth of garments sold at wholesale 
in this country every year. Our industry employs about 700,000 
Americans.
    While most of the large apparel manufacturers in the United 
States are our members, many of our members are relatively 
small companies. Two-thirds have sales under $20 million a 
year. Our members are predominantly domestic manufacturers, but 
most also manufacture in, and import from, other sources.
    AAMA has been a strong advocate of liberalized trade 
initiatives and was an ardent backer of both the North American 
Free Trade Area (NAFTA) and the Uruguay Round of the GATT. Our 
association is at the forefront of efforts to expand trade with 
the Caribbean Basin and has endorsed regional programs to 
expand trade through the Free Trade Area of the Americas (FTAA) 
and the Asia Pacific Economic Council (APEC) processes.
    AAMA was sorely disappointed when the Seattle Ministerial 
failed to launch negotiations for a new multilateral trade 
round. Simply put, we believe the United States, indeed the 
entire world, missed an important opportunity to lock in 
additional commitments for trade and tariff liberalization.
    Increasingly, our members rely upon unimpeded flow of 
commerce between countries to satisfy the needs of their 
customers and to stay competitive. The globalization of our 
industry, and the increased competition it has brought, 
requires our members to engage in flexible sourcing strategies 
if they are to survive. This means they have to be prepared to 
supplement their US production base with sourcing arrangements 
from a variety of countries.
    Although our members are most heavily concentrated in this 
hemisphere, they have increasingly found themselves in 
virtually every part of the globe. To produce the most 
competitive garments, our members are often required to import 
from and export to a variety of countries. Any barriers--be 
they traditional quotas and tariffs or non-traditional fees, 
investment restrictions, customs procedures, bureaucracy, or 
corruption--hinder their operations and drive up their costs. 
If their costs go up or if they are unable to deliver garments 
on time--because of trade distorting barriers--they often lose 
the business to their competitors.
    Accordingly, we believe it is of paramount importance that 
the United States find a way to put and keep the WTO trade 
liberalization process back on track. Recognizing that this is 
an effort partly directed at confidence building--both in the 
United States and among our trading partners--and partly 
directed at setting a concrete and meaningful agenda, we would 
like to make the following recommendations:
    First, Congress should declare its unequivocal support for 
an aggressive and pro-active trade agenda. The best way to do 
this is to complete action quickly on the pending CBI/Africa 
legislation, reaffirm US membership in the World Trade 
Organization following the Section 125 report, and, finally, 
extend permanent normal trade relations with China. 
Reauthorization of trade negotiating authority for the 
President, and its accompanying ``fast track'' procedures, 
should also be completed at the earliest possible date.
    Decisive action by Congress is important because many of 
the protests in Seattle have their genesis in the perception 
that the United States has abandoned its orientation toward 
trade liberalization. Protestors during the week of November 
29, 1999--ironically the fifth anniversary of congressional 
passage of the Uruguay Round of the GATT--were no doubt buoyed 
by some of the ``anti-trade'' votes taken by the House earlier 
in the year and in previous sessions. It is time the Congress 
swiftly and clearly rejects this perception and reasserts a 
positive agenda on trade.
    Second, we should be careful not to misunderstand the 
``message'' delivered by the Seattle protestors. In fact, there 
was probably no single message. Several of our staff and 
members who were in Seattle during the protests witnessed 
peaceful teach-ins just a few doors down from where a Starbucks 
store was being looted. Protestors demanding greater labor and 
environmental enforcement powers for the WTO stood shoulder-to-
shoulder with those hoping to strip the WTO of its existing 
responsibilities. A sign complaining that ``global trade was 
bad'' was partly obscured by a sign urging the end of the US 
trade blockade with Cuba.
    If anything, the Seattle protests showed us that few people 
understand the importance of trade liberalization--to their own 
well-being, to their own community, and to the world at large. 
While the WTO is an important arbiter of international trade 
laws, it is nothing more than a traffic cop. When the American 
people begin to perceive that the WTO possesses the kind of 
power that threatens national sovereignty, that is a clear 
signal that there is something fundamentally wrong with the 
public understanding of international trade.
    Third, we should collectively do a better job explaining 
the importance of trade liberalization. Policy makers have long 
argued that not enough ``trade education'' is done among 
workers and employees of companies that benefit from trade. 
This is true and the corporate community should do a better job 
in the future. But policy makers themselves must also play a 
key role--educating not just the workers at their jobs but also 
the workers' families in their communities and schools.
    We should begin by discarding the incorrect notion that 
imports are intrinsically bad. Traditionally, exports are seen 
as the ``good'' side of the trade equation while imports are 
measured only through the dislocation and disruption they may 
cause. Yet, this only tells half the story. Millions of 
American workers are employed because they handle or process 
imports. Hundreds of millions of American consumers benefit 
from lower prices or greater selections because of the 
availability of imports. If the American public can begin to 
perceive that imports are not a threat, the natural flows of 
international trade should cause them less anxiety.
    One way to do this is through the Trade Adjustment 
Assistance program, which provides retraining assistance for US 
workers whose jobs are adversely affected by trade. This is an 
important program that should be sustained. But as we do so, we 
should recognize that one of its by-products is that the US 
Government is steadily certifying that hundreds of thousands of 
US workers are losing their jobs because of international 
trade. Yet, at the same time, there is no equivalent program in 
which the Federal Government actually certifies that US 
workers, or consumers, are gaining ground because of 
international trade. If the Federal Government insists upon 
only telling half the story, who can blame the American public 
if they remain misinformed?
    Fourth, we must encourage the WTO to make its operations 
and activities more transparent and accountable. Veterans of 
the 1997 funding battle over the International Monetary Fund 
(IMF) will recall the complaint that the IMF conducted all its 
business behind closed doors. Congress eventually cleared 
funding for the IMF, but only after the IMF agreed to necessary 
reforms to bring about greater transparency. Similar steps are 
needed with the WTO. All parties affected by WTO decisions--be 
they non-governmental organizations, interest groups, or 
business entities--should be able to present the WTO with their 
perspectives and witness its decision making and rule-setting 
activities. This is especially important if we wish to provide 
least developed countries the opportunity to participate fully 
in the international trading system.
    Fifth, the United States should encourage the WTO to 
complete its unfinished agenda--namely the reciprocal 
elimination of tariffs. Our industry faces some of the highest 
levels of protection around the world. But while US tariff 
rates on imported apparel are high, they often pale in 
comparison to those imposed by other countries. The next round 
of tariff liberalization should begin by requiring other 
countries to bind their textile and apparel tariffs at US rates 
and then use that binding as a basis for further negotiation.
    A recent case with India clearly dramatizes why this is so 
important. In recent weeks, the US Government successfully 
persuaded the Indian Government to abandon a number of quotas 
and other quantitative restrictions on imports of textile and 
apparel products. However, some of the gains of this concession 
may be undermined due to Indian Government plans to raise 
tariffs on those same products. Because the tariff action will 
not exceed the Indian Government binding, the action may be 
permissible under the WTO. We need to convince the Indian 
Government to lower these bindings to, at the very least, US 
levels.
    Finally, we need to remain aggressive in ensuring that 
foreign countries live up to the bargains they strike in 
international trade deals. Confidence in the entire system 
falters when US workers, and their elected representatives, 
perceive that other countries do not have to play by the rules. 
We should insist that our trading partners live up to their 
commitments and have ``zero tolerance'' for those that fail to 
do so. Similarly, we should lead by example, and refuse to 
tolerate demands that we abandon our own commitments to satisfy 
vocal political constituencies.
    In the past month, the United States posted a record for 
the largest sustained economic expansion. This success occurred 
in no small part because we benefit from an open and liberal 
trading regime. US firms are able to produce goods and services 
for export markets while companies and individuals are able to 
purchase imports for inputs or final consumption. The more we 
can enhance this system--through multilateral trade 
negotiations and through unilateral action--the better chance 
we have of sustaining this economic growth in the years to 
come.
      

                                


                                 American Fisheries Society
                                    Bethesda, MD 20814-2199
                                                  November 23, 1999

William J. Clinton
President
The White House
1600 Pennsylvania Ave
Washington, DC 20500

Dear President Clinton:

    The American Fisheries Society (AFS) is a professional organization 
with 9000 members from academic, agency, tribal, and private 
institutions. We are concerned with the possible consequences of the 
World Trade Organization (WTO) ministerial meeting scheduled for 30 
November -3 December in Seattle, WA. We understand that the WTO 
objective is to foster international trade by:
    1. Eliminating or reducing tariffs on products, thereby reducing 
export costs while opening additional markets to producers.
    2. Requiring countries to treat foreign nations and corporations at 
least as well as domestic entities. That is, a government cannot 
subsidize or prefer domestic fishers who meet domestic regulations.
    3. Requiring that all foreign countries and companies be treated 
identically. For example, local or national governments could not ban 
fish products obtained in an unethical or ecologically unsound manner.
    4. Prohibiting quantitative import or export restrictions. In other 
words, fish produced from well-managed aquaculture facilities must be 
treated in the same way as fish obtained by mining pristine systems or 
endangered populations.
    It appears that the WTO seeks to facilitate international commerce 
without regard for fisheries consequences.
    International laws increase the potential of impacting fish and 
aquatic resources. The following seven examples demonstrate our 
concerns for the management and protection of our valuable fisheries 
resources.
    1. U.S. law requires that shrimp fishers use nets with turtle 
exclusion devices to protect sea turtles. Several Asian nations not 
using these devices could not market their product in the U.S. and 
sued, claiming that the import ban was an attempt to influence fishing 
behavior outside the U.S. The WTO agreed and the U.S. suspended the 
law.
    2. The U.S. Marine Mammal Protection Act embargoed tuna caught with 
porpoise-killing methods. Mexico declared that this law was an attempt 
to close U.S. markets to foreign competitors and sued. The law was 
declared an illegal tariff and the U.S. held the law in abeyance.
    3. National and global deforestation and forest degradation have 
increased since the Rio Earth Summit. If trends continue, the world's 
remaining unlogged forests will be lost in this coming century. Many of 
our most sensitive fish families and species maintain their greatest 
diversity and abundance in forested regions. Once the forests are 
removed, the diversity and abundance of sensitive fishes decline.
    4. The U. S. Federal Advisory Committee Act requires (and Judge 
Barbara Rothstein ordered recently) that advisory committees be 
composed of members representing a wide variety of perspectives. 
Nonetheless, the two U.S. trade committees contain only industry 
representatives, as have the past U.S. trade negotiation teams. 
Although Canadian Minister Pierre Pettigrew recently met with NGO, 
labor, and other interest groups, this has not occurred in the U.S. 
When fishery and aquatic environmental interests are not represented, 
they do not become part of trade agreements.
    5. The United States has adopted some elements of the precautionary 
approach to fisheries management which has been recommended by UNCED, 
UNEP, and many participants in the FAO. Giving priority to trade over 
protection of sustainability of fish populations will undercut the 
precautionary approach and re-establish the burden of proof for 
conservation on the managers rather than those who engage in 
overfishing or methods damaging to resources.
    6. U.S. law prohibits the import of some species of fish below 
specific minimum lengths. Swordfish below the approved minimum length 
may have to be allowed for import if the U.S. continued to import any 
swordfish at all.
    7. U.S. law required a 76% U.S. citizen ownership of fishing 
companies that are allowed the rights to harvest fish in the waters of 
the United States. WTO trade provisions may invalidate those laws and 
allow majority ownership and control by foreign interests that are not 
limited by U.S. conservation ethic and management.
    Therefore the AFS requests the following of the Canadian and U.S. 
governments:
    1. Ensure that strong environmental concerns are represented on 
U.S. and Canadian Advisory panels and negotiating teams.
    2. Certify that pre-established negotiating objectives (e.g., 
environmental protection, human rights) are met before Parliament and 
Congress grant a ``no amendments'' or ``fast track'' vote.
    3. Recognize that support of sustainable fisheries policies are in 
the interest of long-term social and economic stability.
    4. Develop rules permitting governments to protect biodiversity, 
and the environment--even if they secondarily impede trade.
    5. Adopt environmental standards even though they might interfere 
with free trade.
    6. Regulate imports of products at the expense of sustainable 
fisheries, or if a product is produced in an unsustainable, unsafe, or 
degrading manner, particularly if fishing communities are likely to be 
negatively affected by the production of that product.
    7. Allow national and sub-national governments to elect, adopt and 
enforce their own levels of protection.
    8. Allow trade measures that will enforce multilateral 
environmental agreements.
    9. Discourage challenge of government regulations that have 
incidental effects on investors' returns.
    10. Eliminate subsidies that harm the environment.
    11. Ensure that transnational corporations and their subsidiaries 
protect the environment, with the possible penalty of losing their 
charters.
    12. Submit an environmental impact statement prepared jointly by 
Environment Canada, the Ministry of Fisheries & Oceans, the Council on 
Environmental Quality, the Fish & Wildlife Service, the National Marine 
Fisheries Service, the Environmental Protection Agency, and the 
Canadian and U.S. trade representatives, sufficiently in advance of the 
proposed adoption of any specific trade measures related to fish or 
fishery products to allow those agencies to comment on and consult with 
the WTO with regard to any problems or objections that such agencies 
may present to the WTO.
    13. The WTO should favor industries that minimize direct and 
indirect environmental impacts because these practices promote long-
term ecosystem productivity and economic development.
    14. Recognize the validity and utility of the precautionary 
approach to fishery management as a recognized exception to the 
priority of trade in international commerce.
    15. Specifically allow the protection of fish habitat as a basis 
for exception to the priority of trade in international commerce.
    If you would like to discuss these issues further, please do not 
hesitate to contact me.

            Sincerely,

                                          Ghassan N. Rassam
                                                 Executive Director

    GNR:jpg
      

                                


Statement of American Iron and Steel Institute

    The following statement on the outcome of the Seattle World 
Trade Organization (WTO) Ministerial Conference is submitted on 
behalf of U.S. member companies of the American Iron and Steel 
Institute (AISI), who together account for approximately two-
thirds of the raw steel produced annually in the United States.

                           Rules-Based Trade:

AISI and U.S. Government Position in Seattle

    In going to Seattle, AISI representatives stressed that:
     trade liberalization without effective fair trade 
rules cannot work in the interests of America;
     there can be no further trade liberalization 
unless trade will be fair; and
     the best way to do this is through strong trade 
laws, strictly enforced.
    The AISI message going to Seattle can be summed up in three 
words: RULES-BASED TRADE. After Seattle, this message has 
become even more important.
    AISI went to Seattle to support the long-held, bipartisan 
position of the U.S. government in favor of continued 
multilateral trade liberalization, based on no further 
weakening of the WTO's antidumping and anti-subsidy rules. The 
U.S. government and AISI took this position because, had these 
agreements been opened up, it would have led to certain 
weakening of the WTO's fair trade rules.
    In the months leading up to the WTO Ministerial, the 
Administration stated repeatedly that, in the national interest 
of the United States--and in the ultimate interest of trade 
liberalization and the global trading system--it would not 
allow the WTO's antidumping and anti-subsidy rules to be the 
subject of negotiations. The Administration deserves credit for 
holding firm in Seattle against strong foreign government 
pressures to reopen the WTO's dumping and subsidy agreements.
    The Congress also deserves credit for making its views 
known. There is overwhelming bipartisan support for preserving 
effective international disciplines against unfair trade. In 
the months leading up to the Ministerial and then again in 
Seattle, Steel Caucus Members and other Members of Congress 
communicated an unswerving message of support on this issue. 
Last year, more than half of the U.S. House of Representatives 
called on the President not to enter into any international 
negotiation that includes U.S. trade laws. In 1997, in its 
markup of ``fast track'' legislation, the Ways and Means 
Committee approved without dissent a provision instructing U.S. 
negotiators to reject any agreement that would weaken existing 
disciplines against dumping and subsidies. Today, the 
bipartisan consensus in Congress on this point is even 
stronger. It is that fast-track procedures should never again 
be used to amend U.S. trade laws.
    AISI's position is that there is a role in the U.S. market 
for fairly traded imports, but there is no role for unfair 
trade. In President Clinton's August 1999 Steel Action Plan, 
the Administration said it agreed with us. It announced that it 
is committed to a policy of ``zero tolerance of unfair trade.''
    The devastation suffered by the U.S. steel industry and its 
workers over the past 18 months due to record levels of unfair 
trade has served as a warning. It has reinforced the need of 
competitive U.S. industries for strong, effective, vigorously 
enforced trade laws. The events in Seattle in the first week of 
December 1999 have also served as a warning. They have 
reinforced the point that effective disciplines against unfair 
trade are critical if we are to maintain an open market policy 
in the U.S., enable further trade liberalization and promote 
market opening and much needed adjustment abroad.

                        Seattle in Perspective:

Reasons for Outcome

    There are many reasons why the Seattle Ministerial may not 
have succeeded in launching a new round of international trade 
negotiations. The simplest explanation is that there were many 
complex, divisive issues; there was too little time; there were 
135 members (60 more than at the time of the Uruguay Round); 
and there was a lack of consensus and political will among the 
key players for going forward.
    Key points on which there was no consensus included (1) 
agriculture, (2) the basic relationship of developing countries 
to the WTO and (3) the new issues, such as the nexus between 
trade and labor and trade and the environment. Perhaps most 
important, both the European Union (EU) and Japan, unwilling to 
take the needed steps on agriculture, pushed a very broad 
negotiating agenda in large part as a diversionary tactic.
    While posing as a friend of the developing world, the EU 
subordinated everything else to the core goal of defending its 
closed and heavily subsidized agricultural regime, which is so 
injurious to developing countries. In the process--and urged on 
by Japan--the EU indicated an openness to undermining the WTO's 
antidumping rules. In much the same way, Japan--the number one 
dumper in the U.S. market--pursued a reopening of the WTO's 
antidumping rules on behalf of its own manufacturers, all the 
while claiming it was taking this position on behalf of the 
developing world.
    The antidumping issue was one of several divisive issues, 
because other countries thought the U.S. would change its 
position, and we did not. However, the Seattle Ministerial did 
not fail because of the U.S. position on antidumping. The U.S. 
position on trade laws was sound and no surprise. It was a 
long-held bipartisan position, articulated clearly, often and 
early in the process.
    As to where we go from here: AISI remains committed in 
support of trade liberalization--provided there is no further 
weakening of existing fair trade rules.

                    Ongoing Foreign Government Goal:

Erode and Weaken U.S. Trade Laws

    What modest decline occurred last year in overall U.S. 
steel imports took place because of the successful use of trade 
laws by America's steel companies and unions. As the steel 
crisis has shown, the antidumping and countervailing duty laws 
are America's last line of defense against surging unfair 
trade. Foreign unfair traders view the trade laws as the only 
remaining major obstacle to their unfettered abuse of the open 
U.S. market. To attack this obstacle head on, foreign 
governments and producers are employing three main ways to 
achieve their goals.
    International Negotiations. In Seattle, foreign governments 
sought to weaken U.S. trade laws through multilateral 
negotiations. Thanks to the steadfast position maintained by 
the Administration and the Congress, the forces of trade law 
weakening did not achieve their goal. However, these forces 
will not stand still. They will continue their efforts to try 
to weaken U.S. trade laws through multilateral negotiations, 
whether in the WTO, the FTAA negotiations or the APEC process. 
Therefore, Congress needs to remain vigilant.
    WTO Dispute Settlement. Having failed to achieve trade law 
weakening at Seattle, Japan, Korea and other countries whose 
producers have engaged in unfair trading are now trying to 
achieve through the WTO dispute settlement system what they 
could not achieve through multilateral negotiations. Thus, 
Japan--the same Japan that still refuses to import steel, and 
continues to underperform dramatically as an importer of 
manufactured goods in general--has recently filed a complaint 
with the WTO regarding U.S. antidumping measures on hot rolled 
steel, and both Japan and Korea have threatened to file other 
WTO appeals relating to steel trade cases decided under WTO-
consistent U.S. laws. The U.S. government needs to defend 
aggressively the trade laws enacted by Congress from this 
effort by unfair traders to use the WTO dispute settlement 
process to undermine America's fair trade rules.
    Trade Law Changes. In addition to using multilateral 
negotiations and WTO appeals of U.S. trade laws and trade law 
application, counsel for foreign governments and producers are 
now drafting trade law weakening legislative proposals. On 
this, both the Congress and the Administration need to send a 
very clear signal. Instead of trade law weakening, Congress 
should ensure that U.S. trade laws are as strong as what the 
WTO allows. In this regard, AISI urges prompt enactment of the 
Fair Trade Law Enhancement Act (H.R. 1505/S. 1741), the 
Continued Dumping and Subsidy Offset Act (H.R. 842/S. 61) and 
other proposals to strengthen U.S. trade laws consistent with 
WTO rules. This should include amendments targeting the problem 
of diversion of steel and other manufactured goods to the U.S. 
market as a result of foreign anticompetitive practices.

                            Steel's Example:

Need for Strong Remedies Against Unfair Trade

    Over the past 30 years, the U.S. steel industry has faced a 
world of pervasive trade and market-distorting practices, 
including:
     widespread foreign government ``targeting'' and 
subsidizing of steel;
     foreign government barriers to imports of steel 
and steel-containing products; and
     foreign government toleration of private cartels 
and corruption in the steel sector.
    These trade-distorting conditions have enabled less 
efficient foreign steel companies to produce at levels not 
supported by market forces, to maintain artificially high steel 
prices in their home markets and to dump large quantities of 
steel in the United States.
    The revitalized U.S. steel industry is very familiar with 
the challenge of having to compete against pervasive unfair 
trade practices. However, what occurred in 1998 was like 
nothing seen before. With Asia and Latin America in recession 
and with Russia in collapse, the United States experienced the 
single largest surge of dumped and subsidized steel imports in 
its history. This was a transplanted crisis caused by major 
structural economic failures elsewhere. The result was an 
unprecedented surge of imports, which turned the U.S. into the 
World's Steel Dumping Ground.
    The past 18 months should have been the best of times for 
an American steel industry restored to world class status, 
which in recent years has added over 20 million tons of new, 
state-of-the-art steelmaking capacity. Instead, the U.S. saw 
record steel imports in 1998, the second highest import total 
in history last year and continued unfair trade by less 
efficient foreign steel producers throughout this period. 
Against the background of record U.S. steel demand--and due to 
one reason alone--unfair imports:
     five U.S. steel companies are now in Chapter 11 
bankruptcy;
     virtually all U.S. steel companies have seen 
profits plunge or losses mount; and
     thousands of U.S. steelworkers have experienced 
layoffs, shorter work weeks or reduced benefits.
    This is not the way that market-based trade is supposed to 
work. Between 1980 and the onset of the steel crisis, the U.S. 
steel industry succeeded in reinventing itself. By 1998, we had 
become a new industry producing new steels, using new equipment 
and employing new processes. Thanks to nearly $60 billion in 
modernization investments since 1980 and a costly and painful 
restructuring of all aspects of steel operations, a new U.S. 
steel industry had by 1998 emerged as a highly competitive, 
technologically advanced, low cost, environmentally responsible 
and customer-focused industry.
    In contrast, the steel industries of other countries, 
including Asia, the former Soviet Union and South America, did 
not make the adjustments that the U.S. industry made in the 
1980s and 1990s. They maintained substantial excess capacity, 
and this excess found a destination in 1998-99 in the large and 
open U.S. steel market. As a result, over the past 18 months, 
the United States has experienced an unprecedented level of 
unfair steel imports sold at cut-throat prices in violation of 
U.S. laws and WTO rules.
    Internationally competitive U.S. steel companies and their 
highly productive employees have learned important lessons from 
the 1998-99 steel crisis. They are that:
     a surge of unfair and disruptive imports causes 
lasting damage;
     the damage can extend to all segments of the U.S. 
steel community, and affects even the most competitive 
producers;
     the current trade laws are inadequate and are not 
designed to address the kind of major shifts in trade flows 
that result from structural economic failures abroad; and
     yet, these laws at the present time are the only 
effective WTO-consistent defense that exists to counter surging 
unfair and disruptive imports.
    Therefore, steel producers in the United States, now more 
than ever, support:
     prompt and strict enforcement of U.S. trade laws;
     modernization of these laws in a WTO-consistent 
manner; and
     preservation of effective international 
disciplines against unfair trade.
    Today, significant unfair trade and serious import injury 
are continuing in the U.S. steel market. The import injury is 
confirmed by the International Trade Commission's recent 
affirmative findings with respect to hot rolled steel, cut-to-
length plate, wire rod and welded line pipe. The unfair trade 
is confirmed by the very high margins of dumping or 
subsidization found recently by the Commerce Department on hot 
rolled, cold rolled, plate and other products. An important 
point, often overlooked, is that this injury is long term 
damage for which the competitive U.S. steel industry will never 
be compensated.
    The injury caused to U.S. steel companies and employees by 
unfair trade should also be a cause of long term concern to 
steel's U.S. customers. It is vital that U.S. steel companies 
continue to generate internally the capital needed for 
modernization so that they can continue to reduce costs, 
improve quality, compete against other materials and serve 
customers. It is not in the long term interest of customers to 
see competitive U.S. suppliers undermined by unfair trade from 
less efficient foreign competitors.

                         Global Trading System:

Effective Fair Trade Rules are Essential

    In a July 1998 submission to the WTO Working Group on the 
Interaction between Trade and Competition Policy, the U.S. 
government said that antidumping law remains:
        ``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.''"'' STYLE="font-size: 10pt">
    It is no surprise that the countries that repeatedly engage 
in unfair and disruptive trade are the most vocal critics of 
U.S. trade laws. Japan and other governments, whose domestic 
markets remain largely closed, went to Seattle to open up--in 
order to weaken--the WTO's fair trade rules. Other governments 
would like to take away the only effective tools the United 
States has to counter unfair trade. It is no accident that 
countries with closed markets and cartels want to weaken the 
WTO's antidumping rules and that countries that subsidize their 
inefficient industries want to weaken the WTO's anti-subsidy 
rules.
    However, this effort to weaken disciplines against unfair 
trade is a direct threat not just to steel and other 
competitive U.S. industries. It is also a direct threat to 
further progress on global trade liberalization. Effective 
rules against dumping and trade-distorting subsidies are an 
essential element of the multilateral trading system. These 
rules are what enables the public here and elsewhere to support 
open trade.
    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, multilateral trade 
rules have allowed the U.S. and other countries to counter 
injurious dumping. The reason: a clear recognition that, over 
time, there can be no free trade unless it is rule-based and 
fair.
    When the public believes that existing trade rules are 
ineffective or are not being enforced, support for open trade 
begins to erode--and support for more restrictive, sometimes 
less transparent, solutions 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 improve and enforce U.S. laws 
against unfair trade.
    Only a few years ago, the Uruguay Round of trade 
negotiations led to weaker international disciplines--and 
national laws--against dumped and subsidized imports. The U.S. 
Administration, to its credit, went to Seattle determined to 
maintain the effectiveness of current international disciplines 
against unfair trade. Japan and other governments went to 
Seattle determined to discipline not the underlying trade-
distorting practices, but the WTO-consistent laws used in 
response to those practices.
    America's support for the WTO is not unconditional. It will 
not withstand another assault on the system's basic fair trade 
rules. The real problem in international trade is not the 
antidumping remedy. It is dumping, closed markets and other 
trade-distorting practices. If the public is again to support 
further trade liberalization, we need to build a new trade 
consensus in the United States around effective trade rules, 
effectively enforced. By contrast, if Japan and other 
governments get their way and U.S. trade laws are further 
weakened, public support for open trade will continue to 
decline.
    It took nearly eight years in the Uruguay Round to re-
negotiate the current international regime of antidumping and 
anti-subsidy rules. These rules have yet to be tested and have 
not proven defective. What the global trading system needs is 
proper compliance with current rules--not new negotiations, 
with new and confusing rule changes that could threaten all WTO 
members' exports.

                           Seattle's Message:

Importance of U.S. Trade Policy Objectives and Requirements

    This spring, Congress will review whether the United States 
should continue to participate in the WTO. In light of the 
devastation suffered by the U.S. steel industry in 1998-99 due 
to record levels of unfair trade--and given the ongoing foreign 
government attacks against U.S. trade laws and WTO rules--AISI 
is looking at this issue through the prism of key trade 
objectives and requirements. In any debate over the value of 
the WTO, Congress should consider the need to ensure that:
    1. the global trading system remains rules-based;
    2. the WTO is truly effective;
    3. the WTO achieves real structural reform (e.g., dispute 
settlement reform, more participation by the private sector and 
greater transparency), which is especially necessary after 
Seattle;
    4. U.S. trade laws are strengthened to the full extent 
allowed by WTO rules;
    5. there is absolutely no weakening of the WTO's existing 
fair trade rules or of current U.S. trade laws; and
    6. there is a review process for WTO panel decisions 
established under U.S. law, similar to the one sponsored in the 
last Congress by Representatives Benjamin Cardin (D-MD), Ralph 
Regula (R-OH) and others in the House and Senate. This will 
help ensure that, in future WTO appeals, WTO panels do not 
exceed or abuse their authority.
    In addition, Congress should consider convening a special 
inquiry into Japan's role in the international trading system--
including its continued closure to imports of manufactured 
products and its continued regulation of trade.

Conclusions

    Laws against unfair trade, especially the antidumping and 
countervailing duty laws, are necessary to offset foreign 
unfair trade and market-distorting behavior, level the playing 
field and restore public confidence in free trade. Such laws 
help ensure that more efficient domestic producers are not 
weakened or destroyed by less efficient foreign firms. Because 
these laws serve the interest of customers, consumers and the 
entire economy, successive U.S. Administrations and Congresses 
have taken the position that it is essential to preserve 
effective U.S. laws against unfair trade and effective 
international fair trade rules. This was the position that the 
U.S. government and AISI both took to Seattle.
    With respect to the Seattle WTO Ministerial, both the 
Administration and the Congress deserve significant credit for 
taking a strong stand against foreign government pressures to 
reopen the WTO's antidumping and anti-subsidy rules.
    The events that occurred in the streets of Seattle indicate 
what could occur in the global trading system without fair 
trade rules. Indeed, the global trading system as we now know 
it would not exist, and could not survive, without such rules. 
The key message coming out of Seattle is that it is essential 
to build a new trade consensus in the United States around the 
concept of RULES-BASED TRADE. The best way to begin doing this 
is for Congress and the Administration to:
     work together to strengthen U.S. trade laws in a 
WTO-consistent manner; and
     continue to resist foreign government efforts to 
weaken further the existing U.S. and WTO fair trade rules--
whether through international negotiations, WTO dispute 
settlement or trade law changes.
      

                                


Statement of Antonia Juhasz, Director, International Trade and Forest 
Programs, American Lands Alliance

    ``Defend Our Forests, Clearcut the WTO''--read a banner 
prominently featured on the front page of the New York Times 
the day after the start of the Seattle Ministerial, November 
30, 1999. Held beneath the banner were signs with slogans such 
as ``WTO Hurts Forests,'' ``Free Trade=Global Clearcuts,'' and 
``No to the WTO, No to the Global Free Logging Agreement.'' The 
banner and the signs were carried by forest activists from 
around the nation and the world who gathered in Seattle to 
ensure that their voices were heard in opposition to deals 
being negotiated by their governments that threatened to 
increase global forest destruction.
    Forest activists came to Seattle after sending hundreds of 
letters, making thousands of phone calls, visiting their local 
and national elected officials, submitting testimony and 
speaking before Congressional and Administration hearings on 
the WTO in Washington, DC and across the country, and visiting 
Washington, DC to meet with Clinton Administration officials. 
These traditional democratic activities did not reap the 
desired end, so activists went to Seattle to let their elected 
officials and the world know that they would not accept 
business as usual.
    Forest activists came to Seattle to voice their opposition 
to a deal to liberalize trade in forest products without 
providing protections for forests--dubbed the ``Global Free 
Logging Agreement'' due to concern that the elimination of 
tariffs and discussions of the removal of non-tariff trade 
barriers would give timber corporations a free hand at forest 
destruction around the globe.
    Forest activists also came to Seattle to express their 
concern over WTO agreements such as the Agreement on Sanitary 
and Phytosanitary Standards (SPS) which threatens forests by 
making it more difficult for countries to impose necessary 
protections against invasive species and the Technical Barriers 
to Trade (TBT) Agreement which, together with Production 
Process Method (PPM) restrictions, opens the door to attacks on 
forest protection measures such as forest certification 
programs and green procurement laws.
    Forest activists felt the need to join with labor, 
consumer, human and women's rights advocates to air their 
concerns through protests on the streets of Seattle because 
their concerns had heretofore fallen on virtually deaf ears by 
many governments. To many, the most important government to 
reach was the United States--the country most forcefully 
pushing the GFLA and the host of the Ministerial.

The Outcome of the Seattle WTO Ministerial

    The Seattle WTO Ministerial failed from the perspective of 
the WTO and the governments that wanted to launch a new round 
of trade negotiations in Seattle. The Ministerial was a success 
for forest activists who hoped to stop the GFLA and other 
harmful trade deals; for activists, developing countries and 
others who sought to halt a new round of negotiations; and for 
all those who hoped to send a message that the WTO could no 
longer be used as a multinational corporate bastion free from 
democracy.
    The Ministerial's failure is most often blamed on the 
particularly rigid stance taken by governments such that normal 
negotiations were made impossible. After offering this 
explanation, few attempt to explain why governments were less 
amenable to negotiation in the build-up to Seattle and in 
Seattle than in the past. An obvious answer is increased public 
awareness about trade policy. This awareness created a public 
that holds its elected officials accountable for their trade 
positions. The Seattle protestors who were willing to withstand 
pepper spray, rubber bullets, beatings and the removal of their 
constitutional rights, were a constant reminder that the public 
was watching and that free trade would forevermore have to 
survive in the sun-light and under the scrutiny of civil 
society.
    In his speech at the World Economic Forum in Davos, 
President Clinton made clear that he had heard the concerns 
expressed in Seattle less than one month prior when he 
explained that the demonstrators ``felt that they had no 
voice'' and therefore were in the streets. Unfortunately, the 
President made few substantive and no meaningful 
recommendations to address this problem in this speech nor in 
the State of the Union. On the contrary, while making several 
meaningful insights into the reasons for the protests, the 
President continually reaffirmed existing global trade rules 
and suggested that what is needed is a better understanding by 
the public of the benefits of free trade, rather than a re-
working of the rules themselves. These speeches, and the 
actions of the Administration taken post-Seattle, indicate that 
the Clinton Administration has not fully learned the lessons 
from Seattle.

Clinton Administration Rejects Forest Activists Concerns

    In a speech just weeks after the Seattle Ministerial, a 
State Department representative announced that the Clinton 
Administration continued to support the Advanced Tariff 
Liberalization Initiative (ATL) (otherwise known as the Global 
Free Logging Agreement). The Administration maintains this 
support in spite of letters from sixteen of the nations leading 
environmental organizations, over 500 forest activists from 
across the U.S. and the world, 48 bi-partisan Members of 
Congress, seven Senators, 22 Washington State Senators and 
Representatives and nine Seattle City Council members rejecting 
the GFLA and demanding protections for forests from 
international trade and investment policies.
    The Administration also rejected requests from forest 
activists and other environmental groups to reform WTO rules 
that threaten forests through the SPS and TBT agreements, the 
PPM requirements, and the dispute resolution process that have 
favored free markets over environmental and health concerns.
    Forest activists have asked, and the Administration has 
rejected, requests to pay particular attention to reform of the 
SPS Agreement. The SPS Agreement unwisely restricts steps that 
the U.S. Department of Agriculture and its counterparts in 
other nations can take to prevent introductions of potentially 
harmful exotic species.
    The SPS Agreement requires federal regulators to predict 
which foreign species will become invasive if introduced into 
the U.S. Scientists understand too little about both the 
Earth's estimated thirty million species and our own country's 
many and varied ecosystems to make such predictions. Scientists 
recommend, instead, that regulations be based on the premise 
that all species are ``guilty until proven innocent.'' Forest 
activists have asked the Administration to advocate revision of 
the SPS Agreement so that it expressly acknowledges the right 
of governments 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.

Forest Activists Excluded from U.S. Trade Policy

    Forest activists had hoped that one outcome of the Seattle 
Ministerial would be a recognition from the Clinton 
Administration that the democratic process leading up to 
Seattle had failed. An example of the failed democratic process 
was the exclusion of forest activists form the policy-making 
process of the United States Trade Representative (USTR). 
Forest protection groups won a federal district court ruling 
under the Federal Advisory Committee Act, requiring USTR to 
appoint forest protection representatives to relevant advisory 
committees which are currently composed only of industry 
representatives. Yet rather than reach out to the forest 
protection groups to discuss how to open up and balance the 
process, USTR chose to maintain an exclusively adversarial 
relationship and appeal the court ruling. In this context, 
forest activists are not encouraged by USTR's simultaneous 
announcement of an initiative to ``enhance opportunities'' for 
environmental groups to advise on trade issues.
    USTR's shortcomings in the environmental arena, even when 
partnering with the Council on Environmental Quality (CEQ), 
were made evident in the USTR/CEQ study of the ATL. While this 
study was welcomed by the forest community, particularly due to 
the inclusion of CEQ and the Forest Service, the process for 
completing the study and the policy-decisions made based on the 
study results were extremely disappointing and hopefully not 
precedent setting.
    The many methodological shortcomings which plague the study 
led forest activists to conclude that the potential threat of 
the forest negotiations at the WTO to forests and biodiversity 
were considerably worse than even those identified in the study 
itself.
    The study's methodological short-comings include: (1) a 
limited time-frame that made it impossible to provide a 
thorough analysis of the problem; (2) investigation of the 
acceleration of tariff elimination rather than the overall 
impact of the elimination of tariffs on forests; (3) absence of 
analysis of the impact on forests of the negotiations of non-
tariff barriers to trade that threaten vital forest protection 
laws; and (4) failure to develop an environmentally justifiable 
alternative to the ATL. Even if one ignores the methodological 
problems, the study findings confirmed some of the forest 
communities worst predictions regarding the ATL:
    1. The study found that the ATL alone will increase global 
logging, trade in forest products and production and 
consumption of forest products;
    2. The study found that the increased logging will take 
place in some of the world's most sensitive and biologically 
rich forests: the primary forests of Indonesia and Malaysia, 
among other endangered forests in additional countries; and
    3. The policy recommendations based on the study were in 
favor of continued support of the ATL, recommending only that 
``bilateral, regional and multilateral cooperation, including 
continued technical assistance to help countries develop 
environmentally sound national forest management policies and 
practices'' should be pursued. While such policies are welcome 
and desirable, alone they are not adequate to address the 
problems that arise from the ATL.
    In this context, we welcomed the President's announcement 
last week that he will request nearly double the current 
federal spending on programs to protect the world's tropical 
rain forests in his FY 2000 budget. This budget request 
demonstrates a concern for rainforest protection shared by 
forest activists everywhere. As mentioned above, while such 
policies are extremely welcome and we applaud the 
Administration for this program, alone such programs are not 
adequate to address the GFLA and other international trade 
agreements that threaten forests and forest protection efforts. 
The Administration must include forest protection as a criteria 
within trade and investment agreements and reject the inclusion 
of trade liberalization in non-trade agreements such as the 
United Nations Intergovernmental Forum on Forests.
    It is American Lands' hope that studies conducted in the 
future under the President's Executive Order on environmental 
reviews of trade agreements, will be administered by the 
Environmental Protection Agency (EPA), CEQ and when relevant, 
the Forest Service, as the lead agencies. Only by giving 
agencies with expertise in and a commitment to the environment 
control over such studies will forest concerns receive the 
necessary and proper attention.

Policy Recommendations

    ``This is what democracy looks like!''--was a chant 
repeated often in the streets of Seattle. The Administration 
can show us another version of democracy by moving forward on 
these and other recommendations from forest activists.

    Remove USTR From Environmental Aspects of U.S. Trade 
Policy.

    We join with other leading national environmental 
organizations in demanding that USTR be removed from 
environmental trade policy. The lead-up to Seattle confirmed 
environmental organizations' opinion that one of the main 
problems with U.S. trade and environment policies is USTR 
itself. USTR is not an environmental regulatory agency and 
lacks sufficient environmental expertise. Moreover, USTR is 
perceived as being ``captured'' by business interests and not 
as receptive to broader public concerns over the environmental 
implications of trade agreements. Nevertheless, USTR plays the 
lead role in devising U.S. policies on trade and the 
environment. In 1999, USTR used this role to block the 
environmental community's calls for WTO reforms that would have 
reduced threats to environmental law. The solution to this 
problem is to give environmental agencies like CEQ and the EPA 
the lead role in setting the environmental aspects of U.S. 
trade policy. USTR could focus on doing what it does best: 
negotiating to achieve these policies at the multilateral 
level.

    Remove the ``Global Free Logging Agreement'' (GFLA) From 
U.S. Trade Agenda

    The GFLA (also known as the ATL) would increase trade in 
wood products through the elimination of tariffs and the 
elimination of non-tariff trade barriers (NTBs). NTBs are 
forest and species protections that interfere with free trade. 
Tariff elimination will increase consumption of wood products, 
while the elimination of NTBs threatens existing and future 
forest protections. The Administration should drop its push for 
the GFLA at the WTO, the Asia-Pacific Economic Cooperation, the 
Free Trade Area of the Americas and other trade agreements or 
bodies.

Constrain Environmental Destructive Subsidies.

    Reducing harmful subsidies should take priority over 
cutting tariffs. Such subsidies distort trade and contribute to 
deforestation. Governments have recently advocated cutting 
environmentally destructive subsidies in the fisheries sector 
at the WTO. The Clinton Administration should use international 
trade agreements to reduce destructive forest subsidies as well 
as committing to eliminate these subsidies at home prior to the 
conclusion of such agreements. For example, the U.S. Government 
should stop wasting hundreds of millions of dollars each year 
on timber roads and below cost timber sales to logging 
companies.

Reform the SPS Agreement to Protect Forests from Invasive 
Species.

    American Lands hopes that the review of current statutes 
governing invasive exotic species that is now under way by the 
Invasive Species Council will highlight the conflict between 
the SPS Agreement and scientifically sound ``pest exclusion'' 
programs. We hope further that the Administration will then 
pursue needed amendments to that agreement, as well as other 
strategies to ensure that the harmful environmental impacts of 
trade are minimized. The SPS Agreement must be revised, among 
other changes, to expressly acknowledge the right of 
governments 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.

Support a Global Convention on the Trade in Old Growth (CTOG).

    Taking the example of the Convention on International Trade 
in Endangered Species (CITES), the Administration should 
examine the feasibility of a ban in the trade of forest 
products from old growth forests. Initially, the ban could be 
imposed on the trade in primary forests. Logging of primary 
forests for export is the most environmentally problematic 
aspect of the forest products trade. The U.S. Government is 
already committed to not funding timber operations in primary 
tropical forests through World Bank and OPIC policies. If the 
appropriate package of aid, debt relief and technical 
assistance can be created, this proposal could be expanded to 
tropical forests as well. Such assistance 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. 
Pursuit of such an agreement would also have to be accompanied 
by MEA recognition at the WTO and elsewhere.

Protect Non-Tariff Trade Barriers Used for Environmental 
Protection.

    The Administration much explicitly state that it will not 
support, but will rather fight, attempts to label forest 
protection measures as illegal ``non tariff trade barriers'' 
under WTO or other trade agreement of trade body rules.

Protect Independent Forest Product Certification Measures and 
Green Procurement Laws.

    Forest product certification programs such as the Forest 
Stewardship Council are threatened by WTO. We ask the 
Administration to ensure 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. We also 
ask the Administration to explicitly state that independent, 
voluntary and mandatory forest product certification measures 
and green procurement laws are in no way contradictory to the 
TBT Agreement.

Grant Preferential Treatment to Independently Certified 
Imported Wood Products.

    The U.S. government should consider adopting tariffs and 
non-tariff measures that encourage sustainable forestry and 
discourage unsustainable forestry practices. For instance, the 
Clinton Administration should consider only lowering tariffs 
for forest products that have been independently certified to 
have been produced in an environmentally and socially 
responsible manner. Governments could raise tariffs and 
consider additional controls on forest products that have not 
been certified in order to create incentives for 
environmentally protective forestry.

Negotiate Binding Code of Conduct Setting Minimum Standards for 
Forestry Industry.

    Concerns over trade and investment liberalization in forest 
products-such as ``cut and run'' operations, increased 
investment in countries without adequate laws--would be 
assuaged by the negotiation of binding minimum standards for 
corporations involved in international investment and trade in 
the forest sector. Such a code could draw upon existing 
principles and best practices, such as those of the World Bank, 
and voluntary codes. However, the rules should be binding and 
enforceable by citizens. The United Nations Development Program 
has called for such binding standards in their latest Human 
Development Report. According to UNDP, ``multinationals are too 
important for their conduct to be left to voluntary and self-
generated standards.''

Impose Small Tax On Cross-Border Trade in Forest Products, With 
Revenues Dedicated to Forest Protection.

    The total value of trade in forest products worldwide 
exceeds $150 billion annually. A small surcharge on all forest 
products imports, even just one percent, would raise 
significant sums that could be dedicated to forest protection, 
particularly in developing countries and critical forest ``hot 
spots.'' The Clinton Administration should examine the 
feasibility of this policy at the hemispheric level, as well as 
possible mechanisms or organizations that could channel the 
funds for forest protection, capacity building in forest 
regulation, and the promotion of sustainable forestry practices 
among the private sector.

Conclusion

    American Lands' wishes to thank the Committee on Trade for 
the opportunity to present these views to the Congress. We look 
forward to working with Congress and the Administration on a 
new set of trade and investment rules that will make the global 
economy respond to the needs of the world's forests, the 
environment and it's citizens.
      

                                


Statement of John C. Dernbach, Widener University Law School, 
Harrisburg, Pennsylvania, and Foreign Policy In Focus Associate

                    WTO and Sustainable Development:

 Why the Seattle Ministerial Failed and the Path for Future Directions

    WTO and Sustainable Development
     The WTO should be judged against its explicit 
objective--sustainable development, a term that includes 
economic and social development and environmental protection.
     The U.S. has no commitment to sustainable 
development and uses international trade laws primarily for its 
own economic development.
     The U.S. needs to play a leadership role in the 
WTO to make trade, environmental protection, and social 
development mutually supportive.
    The World Trade Organization (WTO) Ministerial Conference 
in Seattle could have been a defining moment for the world's 
commitment to sustainable development. It could also have been 
a defining moment for U.S. leadership on sustainable 
development. As the WTO and the U.S. pick up the pieces from 
Seattle, they may see that the ideas underlying sustainable 
development provided a unifying theme for many of the 
protesters.
    The WTO is the international entity responsible for 
overseeing implementation of the Global Agreement on Tariffs 
and Trade. The WTO agreement explicitly states that trade 
should be conducted ``in accordance with the objective of 
sustainable development.'' As the agreement recognizes, trade 
is a means of achieving sustainable development; it is not an 
end in itself. It is time to hold the WTO and its member states 
to that objective.
    Sustainable development is not a buzzword or another way of 
talking about environmental protection. It is a framework for 
reconciling key international goals, and it applies to national 
actions as well.
    Understanding sustainable development requires an 
understanding of development, a misused term that has a 
specific meaning in the international community. Development is 
intended to improve the quality of human life and generate 
opportunity by fostering peace and security, human rights (or 
social development), and economic development. But this cannot 
occur without a fourth component--supportive national 
governance. An international consensus about these goals grew 
out of World War II and the Great Depression. This 
understanding of development is taken directly from a variety 
of international agreements, U.N. General Assembly Resolutions, 
and reports of the U.N. Development Program.
    Since World War II, development has accomplished much good. 
People are living longer, more people are enjoying a higher 
standard of living, and we have not experienced a third world 
war. This is due in part to the 1947 Global Agreement on 
Tariffs and Trade.
    But the post-World War II development model has two 
failings, according to Our Common Future, the 1987 report of 
the World Commission on Environment and Development. The number 
of people living in poverty is now greater than ever, and 
widespread environmental degradation is occurring in every 
region of the world.
    The Commission found that each of the four basic components 
of development--peace and security, social development, 
economic development, and supportive national governance--
required protection, and even restoration, of the environment. 
Continued development is compromised and even prevented by 
inattention to the environment. People have fought over water 
and scarce resources. Environmental contamination and disease 
kill people or prevent them from living decent lives. People 
cannot earn a living from fishing when there are few fish to 
catch. Governments that do not protect their environment thus 
undermine their own development goals.
    At the United Nations Conference on Environment and 
Development (or Earth Summit) in 1992, the nations of the world 
endorsed sustainable development as a response to these 
problems. Sustainable development adds another component to the 
traditional development model--environmental protection and 
restoration. More fundamentally, it redefines progress. Instead 
of seeing progress in terms of traditional development--and 
tolerating environmental degradation--sustainable development 
means that we must also simultaneously seek progress in overall 
environmental quality. The nations of the world adopted a 
statement of principles (the Rio Declaration) and a plan of 
action (Agenda 21) to realize sustainable development.
    Concerning trade, the Rio Declaration urges states to 
``promote a supportive and international economic system that 
would lead to economic growth and sustainable development in 
all countries, to better address the problems of environmental 
degradation.'' Similarly, Agenda 21 states that the 
``international community should provide a supportive 
international climate for achieving environment and development 
goals'' by, among other things, ``[m]aking trade and 
environment mutually supportive.'' In 1994, when GATT was 
amended and the WTO created, sustainable development was 
incorporated into the WTO's goals.
    At century's end, however, the world generally is moving 
away from sustainable development rather than toward it. Trade 
is not the only reason, but it is a major reason. Global GDP 
has risen by five times since 1950 and could be four or five 
times its present size by 2050. The world's natural systems, 
however, are being undermined by unsustainable use and 
exploitation as well as grave imbalances between those who 
benefit from that exploitation and those who are burdened by 
it. A recent U.N. Environmental Programme report concludes that 
environmental protection is ``lagging behind economic and 
social development.''

Toward a New Foreign Policy

     The U.S. should exercise leadership to move the 
international trading system toward sustainable development.
     The WTO, with the support and leadership of the 
United States, should abolish subsidies that contribute to 
unsustainable development and integrate sustainable development 
into new and existing trade agreements.
     U.S. actions concerning trade should be part of a 
broader U.S. vision and strategy for sustainable development 
that is also applied in other forums.
    The U.S. should articulate a positive and compelling vision 
of what sustainable development would mean for the world's 
nations and integrate that vision into its domestic and foreign 
policy, including its trade policy. The United States should 
exercise that leadership in the WTO and other forums.

U.S. Leadership in the WTO

    The WTO needs to be part of the effort to achieve 
sustainable development, not part of the problem. The United 
States should exercise leadership in the WTO to achieve the 
following outcomes. Although many of the examples relate to 
environment, these recommendations also apply to labor, health, 
and other aspects of sustainable development.
    Elimination of Subsidies That Contribute to Unsustainable 
Development. WTO parties should phase out subsidies for 
environmentally unsustainable activities, including subsidies 
that contribute to fisheries overcapacity. The elimination of 
such fishing subsidies has been proposed by New Zealand, 
Iceland, and the United States.
    The parties should find other ways to apply the WTO's legal 
authority concerning subsidies to support sustainable 
development. For example, it is widely recognized that the use 
of fossil fuels is subsidized by governments in ways that often 
increase their use and that the use of fossil fuels contributes 
to global warming. The Kyoto Protocol specifically identifies 
elimination of national subsidies as one means of achieving 
greenhouse gas reductions. Subsidies for fossil fuels distort 
the prices charged for those fuels and create substantial 
economic distortions in the debate over the cost of Kyoto 
Protocol compliance.
    Consideration of Sustainable Development in New Trade 
Agreements. No trade-related agreement should be negotiated or 
allowed to go into effect unless a sustainable development 
impact assessment is first prepared and subjected to public 
review. The assessment should describe the impact of the 
proposed agreement on the environment, on social development 
and human rights (including labor), on peace and security, and 
on national governance that is supportive of those goals. The 
assessment should also describe alternatives to the proposed 
agreement, including alternatives relating to the special 
situation of developing countries, and particularly the least 
developed countries.
    Integration of Sustainable Development Goals into New Trade 
Agreements. No trade-related agreement should be allowed to go 
into effect unless the parties are satisfied, after public 
review, that the agreement would actually further not just 
economic development but also environmental protection, social 
development and human rights, peace and security, and 
supportive national governance. It is not enough to consider 
the effects on these goals. Trade agreements should actually 
further these goals, or at least not interfere with them. 
Procedural reforms to WTO's Committee on Trade and Environment 
will not achieve this result.
    The parties should also find additional ways to make GATT 
and multilateral environmental agreements mutually supportive. 
When negotiations relating to a particular economic sector 
begin, for example, and there is no multilateral environmental 
agreement in place concerning that sector, there should be 
preliminary discussion on whether it would be appropriate to 
have multilateral environmental standards and procedures 
applicable to that sector. (These standards would include 
process and production methods.) Environmental ministries 
should participate directly in such discussions. If so, then 
those standards could be negotiated at the same time as, or 
perhaps even as part of, the trade discussions for that sector. 
Such negotiations should also include appropriate standards and 
financial or technical assistance for developing countries.
    The standards should include air pollution, water 
pollution, sanitation, and drinking water--environmental 
problems that developing countries experience more severely and 
immediately than most other environmental problems. These 
problems generally are also not directly covered by 
multilateral environmental agreements. The quid pro quo for 
increased trade, in short, should be progress in addressing 
such problems and assistance by developed countries in doing 
so.
    Integration of Sustainable Development Goals into Existing 
Trade Agreements. Where trade agreements already exist (e.g., 
for products), the parties should facilitate the negotiation of 
international agreements concerning process and production 
agreements relating to products. These agreements should 
include, but not necessarily be limited to, extended producer 
responsibility, ecolabeling, and the greening of public 
purchasing. These agreements also should apply to air 
pollution, water pollution, and similar problems experienced 
severely by developing countries, and should include 
appropriate assistance. The WTO agreements should also be 
amended, or interpreted by the parties, to provide a more 
balanced test for the availability of the Article XX(b) and 
XX(g) exemptions for measures to protect ``human, animal or 
plant life or health'' or conserve ``exhaustible natural 
resources.'' In addition, the WTO agreements should expressly 
protect domestic actions taken pursuant to multilateral 
agreements and allow unilateral actions where necessary to 
protect the national interest.

U.S. Leadership in Other Forums

    Many of the changes required to make trade supportive of 
environmental and social goals cannot be achieved by WTO alone. 
Unless the United States exercises leadership for sustainable 
development in all relevant international and domestic forums, 
it will continue to miss many opportunities to improve the 
environmental and social effects of trade.
    Greater Assistance to Developing Countries for Sustainable 
Development. The Earth Summit bargain between developed and 
developing countries was that developed countries would provide 
financial and technical assistance to developing countries to 
help developing countries achieve environmental and social 
goals. The developed countries have not kept that bargain. 
Developed countries (including the U.S.) need to increase 
official development assistance, to assist technical and 
governmental capacity building, and to provide access to 
environmental technology and know-how on preferential terms. 
Creative means of financing this assistance should also be 
seriously considered (e.g., debt for environmental and health 
protection swaps, or a small tax on global trade and capital 
flows).
    Creation of International Institution for Sustainable 
Development Comparable to WTO. There is no organization equal 
in influence to the World Trade Organization concerning the 
environmental aspects of sustainable development. Such an 
institution should thus be created, probably by combining 
existing organizations (e.g., Commission on Sustainable 
Development, U.N. Environment Programme, secretariats of 
various multilateral environmental agreements). The 
consolidation of environmental organizations would be in 
addition to the integration of environment into existing WTO 
operations.
    Domestic Efforts to Achieve Sustainable Development. The 
U.S. and other developed countries must demonstrate by their 
own domestic actions, including actions concerning trade, that 
sustainable development provides better quality of life for 
their citizens and for succeeding generations.
      

                                


Statement of Brent Blackwelder, President, Friends of the Earth

    The 1999 Seattle Ministerial Meeting of the World Trade 
Organization (WTO) put trade issues under an intense spotlight 
of public scrutiny. The old way of conducting global trade 
talks--rules and agreements negotiated in a secretive manner 
that excludes the public and harms the environment--proved 
unacceptable to ordinary people and even to many governments. 
In Seattle and later at the World Economic Forum in Davos, 
President Clinton acknowledged the need to democratize trade 
policy and to make the WTO more transparent and accountable. 
The coming months provide an opportunity for US government 
leaders to act on these promises, and to demonstrate that they 
have truly learned the lessons of Seattle.

                      I. Democracy Starts at Home

    President Clinton and members of Congress have noted the 
need to open up the WTO, but democracy starts at home. The 
Clinton-Gore Administration and Congress must give the public a 
greater voice in the domestic trade policymaking process, which 
is currently dominated by corporate interests. This will lead 
to greener trade policy that inspires more public confidence in 
international trade. Friends of the Earth recommends that 
environmental agencies be charged with setting trade and 
environment policy, that the trade advisory system be opened to 
environmental organizations, and that public notice be given 
when the US uses the WTO to threaten other countries' 
environmental laws.
    A decade of advocacy on trade and environment issues leads 
environmentalists to the inescapable conclusion that the main 
trade threat to the environment is the United States Trade 
Representatives Office (USTR) itself. Though USTR lacks 
environmental expertise and is perceived as being beholden to 
business interests, it plays the lead role in setting US 
policies on trade and the environment. In the lead up to 
Seattle, USTR blocked the environmental community's calls for 
WTO reforms that would have reduced threats to environmental 
laws. The solution to this problem is to give environmental 
agencies like the Environmental Protection Agency (EPA) and the 
Council on Environmental Quality (CEQ) the lead role in setting 
the environmental aspects of US trade policy. USTR could then 
focus on doing what it does best: negotiating to achieve these 
policies at the multilateral level.
    Approximately 700 business representatives sit on 30 
industry sector advisory committees that get special access to 
information and advise USTR. There are no public interest 
members on these committees. For example, there are two 
committees advising USTR on the forest product trade. None of 
the members of the committees are environmentalists, so it is 
not surprising that USTR has aggressively pursued trade 
policies that threaten forests worldwide. These committees need 
to be opened to diverse public interests or abolished.
    Friends of the Earth is not concerned just with the WTO's 
effects on US environmental laws; we are equally outraged when 
the US government uses the organization to challenge other 
countries' regulations or block environmental progress. For 
example, the US electronics industry recently sent USTR 
detailed arguments that a proposed European directive on 
recycling waste violated WTO rules. USTR sent the arguments to 
US embassy staff in European countries, with instructions to 
register complaints over the directive. They did this without 
informing, much less with input from, the American public or 
environmental agencies like EPA.
    It is unacceptable for USTR to act as private mercenaries 
for corporate interests. The US Government should give public 
notice and seek comments before trying to undermine other 
countries' environmental or health laws.

                      II. What To Do About The WTO

    Friends of the Earth is not interested in transforming the 
WTO into an environmental organization. We don't want the WTO 
to use sanctions to enforce environmental standards. And we 
have no interest in or intent to prevent market access for 
developing countries. We believe the WTO should take a ``hands 
off'' approach to environmental and health laws, allowing 
governments to make environmental progress at the national and 
international level. We also believe the US and other 
governments must strengthen the Multilateral Environmental 
Agreements so economic liberalization doesn't rush ahead 
without an adequate framework of environmental protection.
    We believe environmental assessment must be part of all 
trade agreements. Governments have been leaping before they 
look on trade. Members of the WTO should commit to assessment 
of past and planned trade agreements. The breakdown in Seattle 
provides the opportunity to assess the five-year record of the 
WTO before starting new negotiations. Assessment should focus 
on trade agreements' impacts of ecosystems and environmental 
standards, but also address broader sustainability issues, 
including development and labor impacts. The assessments should 
happen at the national level and governments should also 
cooperate on a joint review, perhaps at the United Nations 
Environment Program. The Clinton-Gore Administration recently 
announced a policy of assessing the environmental impacts of 
some trade agreements. This is a good start, but should be 
followed through and strengthened to cover investment 
agreements, insure leadership from environmental agencies, and 
closely follow our tested and effective laws for domestic 
environmental assessment (NEPA). Ongoing negotiations for a 
Free Trade Area of the Americas (FTAA) provide an immediate 
opportunity for the US to put its assessment policy to work.

    Friends of the Earth also believes the WTO's dispute 
resolution rules and some substantive rules must be changed to 
grant greater deference to environmental and health laws. The 
WTO's rules are biased against environmental regulations, so 
reforming them would assure environmental organizations that 
they will not continue their perfect record of ruling against 
environmental laws. deference should also apply to Multilateral 
Environmental Agreements (MEAs) which use trade measures or 
impact trade.
    Friends of the Earth also believes the WTO should be 
downsized when it comes to environmentally sensitive sectors. 
Governments should follow the example of hazardous waste (which 
is regulated by the Basel Convention), and trade in endangered 
species (which is regulated by CITES) and negotiate MEAs while 
taking certain products out of the WTO. The recent completion 
of a Biosafety Protocol on trade in genetically modified 
products is an important step in the right direction. Bulk 
fresh water is another sensitive issue that should not be 
commodified and treated like other products. Governments should 
consider restricting trade in logs and products from old growth 
forests, both temperate and tropical.

Conclusion

    Friends of the Earth is a national environmental advocacy 
organization with affiliates in 63 countries. We were active in 
Seattle, conducting advocacy and public education as part of a 
team of nearly 40 representatives of FoE from 20 countries. I 
came away impressed by the depth of commitment and awareness 
shown by the vast majority of the protestors, marchers, and 
other members of the public in Seattle to express their 
concerns about the WTO. The people have spoken. We hope our 
government will act, and show the rest of the world that 
democracy works.
    For More Information on Friends of the Earth's Position on 
the WTO:
     View our website at http://www.foe.org/
international/wto
     Contact Mark Vallianatos at 202-783-7400 x. 231
      

                                


Statement of Grocery Manufacturers of America

    GMA welcomes this opportunity to present our views on the 
prospects for the mandated negotiations on agriculture in the 
World Trade Organization. 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 regrets that the recent WTO Ministerial meeting failed 
to launch a comprehensive new round of trade negotiations. 
Agriculture negotiations, however, will proceed as mandated 
under Article 20 of the WTO Agreement on Agriculture. GMA 
believes it is crucial that governments worldwide enter 
immediately into good-faith negotiations to build on the 
achievements of the Uruguay Round and continue to expand market 
access, reduce tariffs and dismantle barriers to food and 
agriculture products. United States leadership will be key to 
ensuring that negotiations begin in a timely fashion and 
proceed expeditiously.
    GMA respectfully offers its views on the structure and 
goals of the mandated negotiations on agriculture.

Structure of the Negotiations

    As noted above, GMA believes it is imperative that 
negotiations on the so-called ``built-in'' agenda begin in the 
WTO at the earliest possible date, in conjunction with 
necessary institutional and decision-making reforms. We 
recommend that negotiations begin under the auspices of the 
Committee on Agriculture with the eventual goal of a separate 
negotiating group on agriculture. Negotiations should follow 
the overall framework of the Uruguay Round, focusing on market 
access, export competition and domestic support. The United 
States should also exercise the necessary leadership to launch 
a more comprehensive round of trade negotiations, in order to 
secure maximum leverage for liberalization for food and 
agriculture products. However, GMA does not wish the lack of a 
broader package of negotiations to be used as an excuse to 
delay negotiations on agriculture.

GMA Goals for the Mandated Agenda

    GMA's goals for the agriculture negotiations remain 
consistent with our earlier testimony on the WTO 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 believes that export 
subsidies on food and agricultural products must be eliminated. 
Finally, GMA recommends that discussions on non-trade concerns 
relating to agriculture be carefully circumscribed throughout 
the negotiations.

Expanding Market Access for Processed Food and Primary 
Agricultural Products

    GMA recommends that the Administration place particular 
emphasis on liberalization in the processed food sector in the 
agriculture negotiations. U.S. trading patterns for food and 
agricultural products have undergone a profound change in 
recent years. Consumer products now account for 39% of U.S. 
exports in the agricultural sector, more than the percentage 
accounted for by raw agricultural products. Consumer and 
intermediate products, those that have undergone some 
processing, together comprise nearly two-thirds of total 
agricultural exports. Globally, trade in processed food is 
growing at more than twice the rate of trade in primary 
agricultural products. By 2000, trade in processed or value-
added products is predicted to account for 75% of global 
agrifood trade as compared with about 50% in 1985.
    Yet, despite this impressive growth, barriers to processed 
foods and beverages remain significantly higher than those for 
many other products. The Uruguay Round negotiations delivered 
some benefits by lowering barriers and reducing subsidies to 
producers and exporters. However, the reductions in tariffs for 
processed foods and beverages were mostly at the lower end of 
the allowable range. Because the rules allowed countries to 
average their tariff cuts, countries naturally chose to make 
high percentage reductions on already low tariffs and lower 
percentage reductions on higher tariffs. As a result, the 
average tariff on processed food products globally remains, on 
average, eight times the U.S. rate.
    To address these barriers, GMA strongly advocates an 
approach to tariff reductions that will address the particular 
problems of the processed food sector and will place these 
products on par with their industrial counterparts. We support 
an approach that will eliminate tariff peaks (asymmetrically 
high tariffs that far exceed a country's average tariff rate) 
and address the problem of tariff escalation, where tariffs 
increase with the level of processing. This approach should, in 
essence, reduce the higher tariffs faster than the lower ones 
to create meaningful market access for exports. We also 
recommend that governments worldwide work toward zero-for-zero 
tariff agreements on a number of products including, but not 
limited to, pet foods, dry cereals, soft drinks, soups, 
biscuits and cocoa and cocoa containing products.
    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 U.S. 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 U.S. 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 
U.S. 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

    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 U.S.' 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, GMA 
recommends that export subsidies on all primary agricultural 
commodities and processed food products be eliminated within 
five years of the conclusion of the 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.

Non-Trade Concerns

    GMA recognizes that Article 20 (c) of the Agreement on 
Agriculture directs countries to consider ``non-trade'' 
concerns in future agricultural negotiations. We are concerned, 
however, at the expansive approach that some countries took to 
this concept in the lead up to, and during the WTO Ministerial 
meeting. In particular, GMA was troubled that language 
pertaining to food safety was included in the last draft ``Text 
on Agriculture.'' Issues pertaining to food safety are already 
clearly covered by the existing Uruguay Round Agreement of the 
Application of Sanitary and Phytosanitary Measures (SPS), which 
should not be renegotiated or re-opened in any manner. GMA 
firmly believes that any reopening of the SPS Agreement 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

    Thank you for this opportunity to share our views on the 
mandated negotiations on agriculture. GMA firmly believes that 
it is of critical importance to farmers and producers alike to 
continue to expand market access, reduce tariffs and dismantle 
barriers to food and agricultural products. Achieving the 
objectives discussed above will benefit consumers around the 
world with a more reliable, diverse, safe and affordable food 
supply. We look forward to working with you and the 
Administration to achieve these goals.
      

                                


                   Stanford University, Class of 2002      
                      International Relations and Economics
                                                  February 12, 2000

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

Dear Mr. Singleton;
    The following outlines my testimony for the House hearing on the 
World Trade Organization.
    I think that this is an issue of tremendou importance. Today, 60 of 
the world's largest economies are corporations, rather than nations. 
Corporate citizenship will have to expand beyond donating a couple 
thousand to art museums and global trade will have to be balanced by 
concern for human rights and the environment. Realistically, I feel the 
only way to enforce laws protecting such fundamental human rights is 
through multilateral government agreements on trade with the same 
enforcement as other WTO agreements. Trade will dominate the future, 
and if we want the new millennium to bring true global prosperity, the 
WTO must be willing to listen to the protesters and make some 
fundamental changes as an institution to fulfill its responsibilities 
to the world's people.
    I appreciate your consideration.

            Sincerely,

                                              Lauren Inouye
                                                          Edina, MN
    ** The WTO prioritizes trade and commercial considerations over 
other values. WTO rules generally require domestic laws, rules and 
regulations designed to further worker, consumer, environmental, 
health, safety, human rights, animal protection or other non-commercial 
interests to be undertaken in the ``least trade restrictive'' fashion 
possible--almost never is trade subordinated to these noncommercial 
concerns. I agree that regulations should be taken in a manner that is 
the least-restrictive to trade-but only if the regulations remain 
effective.
    ** If the promotion of free trade is being ``justified'' on the 
basis that it improves everyone's lives, I think we should focus more 
on improving people's lives, and free trade only as a means to that 
end. The WTO is argues that development will lead to a better standard 
of living for all-that the rising tide will lift all boats. But the 
Wall Street Journal recently reported (10/29/99) that the per capita 
income gap between the wealthiest and poorest nation has grown from 3 
to 1 in 1820 to 35 to 1 in 1950 to 72 to 1 in 1992. Even if the 
increase in the gap was due entirely to the US getting richer (which it 
is not) I'm concerned. Basically, I don't think all growth helps 
people. Growth and GDP do not always accurately represent quality of 
life. GDP was never meant to be an indicator of people's wellbeing. It 
is a measurement of the size of the economy, simply that. I think any 
growth initiative should be carefully evaluated not simply on whether 
it will make $$$, but on how it will effect people's lives. The WTO 
(and, many would argue, the other Bretton Woods institutions, like the 
IMF and World Bank) promote growth without these considerations. 
Basically, people before profits.
    ** The WTO is not democratic. We did not elect our representative, 
Charlene Barshefsky, and have little opportunity to influence her 
policy. She has advisory panels to represent different segments of 
American industry, and the panels, except in one or two cases, are 
entirely composed of businessmen. NGO's and public citizens do not have 
an opportunity to share their concerns about labor, the environment, 
and human rights.
    ** The WTO operates in secrecy. Its tribunals rule on the 
``legality'' of nations' laws, but carry out their work behind closed 
doors. Neither the press or the public is allowed in their meetings.
    ** The Dispute Resolution Panels, which arbitrate trade arguments, 
often have a bias in favor of corporate interests, and their rulings 
cannot be overturned unless there is a unanimous decision to overturn 
them. ``Under WTO rules, once a commitment has been made to liberalize 
a sector of trade, it is difficult to reverse,'' the WTO says in a 
paper on the benefits of the organization which is published on its web 
site. ``Quite often, governments use the WTO as a welcome external 
constraint on their policies: 'we can't do this because it would 
violate the WTO agreements.'''
    ** The WTO does not just regulate, it actively promotes, global 
trade. Its rules facilitate global commerce and multinational 
development and do not equally promote local economic development and 
policies that move developing countries towards greater self-reliance. 
Although the leaders of many developing nations have clearly stated 
their desire to join the WTO, there is reason to believe that while the 
political elite want more international development, the people of the 
nation prefer smaller ``microenterprise'' and more control over their 
economy. Also, I feel the focus on international development agencies 
should be sustainable development, and that it is far wiser to aid 
developing countries with technology and other environmental aid now 
then to deal with the consequences 40 years from now.
    ** The WTO does not abide by the Precautionary Principle. The 
Precautionary Principle is an accepted norm in international law, and 
basically states that if there is reason to believe that a product 
poses a risk to human health or the environment, that it needs to be 
proven safe before being produced. (this is the principle that the FDA 
works on) WTO rules (the Sanitary and Phytosanitary Standards) 
generally block countries from banning exports of products which they 
cannot conclusively prove to be harmful-which is basically everything. 
(Think about how long tobacco companies denied that Cigarettes caused 
cancer). The most famous case here is that of the European Union and 
bovine growth hormone-treated beef.
    ** The WTO establishes international ceilings, rather than floors 
on import environmental standards through a process of 
``harmonization.'' It is argued that environmental standards which are 
too high make it difficult for LDCs to produce, and are therefore a 
barrier to trade. My feeling is that is that we should try as much as 
we can to keep standards high, and just put more money into tech. 
transfer programs to help them develop sustainably now. In the long-
run, clean-up and repair is often more expensive then investing in new 
technology-but business often looks at short-run profits rather than 
the long-term, and without an incentive to do so, are more likely to 
look for a way to make a quick buck. Programs to facilitate technology 
transfer through the Global Environmental Facility (managed through the 
UNDP and the World Bank) have already been established to help LDC's 
develop sustainably. Some say we should just have ``eco-labelling,'' 
putting the choice directly in the hands of the consumer. I agree in 
some instances, (this is the solution with tuna-look at the dolphin-
safe mark on the can) but we have national environmental standards and 
government enforcement of them, for a reason. The American people 
reached a general consensus that we wanted Clean Air and Water, and 
protection of Endangered Species. I don't think something as important 
as species survival should depend on consumer choice. By the time 
people realize that its really important to stop buying a certain 
product, the species may already be extinct or the land degraded.
    ** The WTO limits governments' ability to use their purchasing 
dollar for human rights, environmental, worker rights, and other non-
commercial purposes. In general, WTO rules state that governments can 
make purchases based only on quality and cost considerations. For 
example, Canada complained that US laws encouraging the federal 
government to buy recycled paper have hurt their logging industry by 
decreasing demand, and the US had to pay them reparations. Also the 
Massachusetts state government had selective purchasing laws preventing 
government purchase of items made in Burma/Myanmar, as Burma is 
currently run by a military dictatorship with documented instances of 
slave labor, and has their democratically-elected leader under house 
arrest. That law is currently under Supreme Court appeal-if they win, 
the WTO will overturn it, and the US will be forced to pay the 
determined fee. The WTO can't actually force national governments to 
change their laws-it just makes them pay fines for them. In these 
cases, I can understand why the laws are considered discriminatory-but 
I think that human rights are more important than free trade. 
Governments should have the right to say they don't want to purchase 
certain kinds of goods for certain reasons.
    ** The WTO does not allow bans or restrictions based on production. 
According to the WTO, Tuna is Tuna is Tuna. A nation cannot 
discriminate on how an item was made-for example, whether or not turtle 
excluder devices were used on shrimp nets, or whether precautions were 
taken to prevent dolphins from being killed catching tuna, or whether 
or not shoes were made with child labor. The developing county reps 
have expressed concern over labor standards that this would only end up 
hurting them, because. US industry wouldn't use their labor anymore at 
all, but I feel that many US companies could up labor standards without 
upsetting thier bottom line.
    ** Issues in bioethics. The WTO promotes intellectual property 
rights for DNA sequences and other ``life patents,'' and many feel that 
its wrong. Other intellectual property rights issues include 
controversy over whether Africa should get to produce generic versions 
of AIDS drugs without paying intellectual property rights because the 
drugs could potentially improve/save many lives. Also, many biotech 
companies have been accused of ``biopiracy'' for patenting indigenous 
people's traditional remedies, developing drugs, and then not 
compensating the people who developed the medicine as a public good.
      

                                


Statement of Sophia Murphy, Institute for Agriculture and Trade Policy

             Agriculture, Trade and Developing Countries:3

                        Where to after Seattle?

    The collapse of talks in Seattle last November, at the 
third Ministerial Conference of the World Trade Organization 
(WTO) has left a lot of confusion about what direction 
multilateral trade talks can take next. It is widely accepted 
that progress on new negotiations will be slow, and that the 
widely anticipated ``Millennium Round'' will not start this 
year. However, agriculture, together with services and the 
Trade-Related Intellectual Property Rights Agreement (TRIPs), 
have review clauses built into them. Negotiations are mandated 
to begin in 2000 in these areas regardless of whether or not 
other issues get taken up. In the Uruguay Round Agreement on 
Agriculture, Article 20 requires WTO member governments to 
undertake these new negotiations in the light of the experience 
of implementing the agreement.
    This written submission analyzes the agriculture 
negotiations in Seattle where the governments seemed to come 
very close to agreement on a draft text on agriculture. Also 
included is a review of what this draft text included and 
suggestions for ways in which the next text for negotiation 
could be strengthened to better reflect U.S. goals of 
supporting developing countries.
    There are different opinions on whether it was agriculture 
that broke the talks in Seattle. Even those closest to the 
negotiations, including government delegates, are not of one 
mind. Some say yes. The European Council of Agriculture 
Ministers did not accept the draft text on agriculture they 
were sent on the last day of the conference, saying they would 
need to see the whole deal before signing off on it. Coming as 
it did at the last stage of the meeting, with no time left to 
negotiate, this was the equivalent of refusing the deal. Others 
say that if Clinton had not insisted on linking trade sanctions 
to labor standards as part of the Seattle negotiations, then 
there would have been an agreed package that Europe would have 
found hard to reject over agriculture alone.
    There is no question that the frustration of many 
developing country delegates, particularly from Africa and the 
Caribbean, contributed to the failure of the negotiations. Many 
delegates were poorly informed about when and where meetings 
were taking place and how the working groups were supposed to 
function. Developing countries worked hard to develop common 
positions before Seattle and yet felt that they were still not 
being taken seriously in the negotiating process. The 
traditional practice of closed sessions among a small number of 
delegates to broker deals was continued in Seattle, despite 
assurances from the WTO's Director-General that smaller 
countries would not be excluded from the process. The protests 
going on in the streets throughout the week contributed to the 
sense of disorganization inside. The press statements made by 
the Organization for African Unity and then CARICOM (the 
economic community of Caribbean states) on the lack of 
transparency in the process created a dynamic that will make 
lasting changes to the way in which the WTO does its work. As a 
leader in the WTO the U.S. should work to address these 
concerns to make the WTO process more successful in the future.
    Despite all the problems in Seattle, the total collapse of 
the talks took many governments by surprise. For those 
observing the negotiations, it really did appear that 
governments were resolving their disagreements on agriculture. 
The European Union (EU), Japan and others stopped insisting 
that the review of the Agreement on Agriculture take into 
account ``multifunctionality,'' for example. Multifunctional 
agriculture is a term used by several developed country 
governments, particularly the EU, Japan, Norway and 
Switzerland, as well as Mauritius. The term refers to a concept 
of agriculture that extends beyond its purely productive 
function, to include its role in protecting culturally, 
ecologically or economically fragile regions. Most governments, 
particularly the United States and the Cairns Group of large 
agricultural exporters, object to the term, arguing that it is 
simply a justification for continued use of export subsidies 
and high levels of domestic spending on agriculture. In 
Seattle, the advocates of multifunctional agriculture accepted 
the use of the term ``non-trade concerns'' in the draft text 
instead, which is a term used in the Uruguay Round Agreement on 
Agriculture. Similarly, the Cairns Group and U.S. dropped their 
insistence on a call for the total elimination of export 
subsidies to accept a more gradual approach.
    One view maintains that it was the time it took to get 
these advances on agriculture that made progress in other areas 
of negotiation impossible. Certainly, for many governments, 
especially the Cairns Group members, but also many developing 
countries, a deal on agriculture was essential to reaching 
agreement on any other issue. For the EU, a reluctant 
negotiator on agriculture, agreeing a deal in Seattle was in 
turn dependent on the EU getting concessions in other areas, 
such as investment policy. Many agree that the Seattle agenda 
was too broad to hope that the wide differences among 
delegations that were evident in the preparatory negotiations 
could be bridged in the four days of the Ministerial 
Conference.
    Whether or not it was agriculture that broke the talks in 
Seattle, it is important to understand and evaluate the 
proposals that were put forward there. The U.S. asserts that 
the agreements reached in Seattle still stand as the basis for 
further negotiations. But almost no one else involved in the 
negotiations agrees that this is possible. The EU has clearly 
said that the deal was all or nothing. The likelihood is that 
governments will go back to Article 20 and start again. 
Nonetheless, it is widely accepted that the text reflects what 
an agreement could look like and it is important to look hard 
at what nearly came to be the basis for new negotiations on 
agriculture.
    The draft Seattle text on agriculture did not do justice to 
the agenda put forward by developing countries, although it had 
their widespread support. Paragraph 28 addressed many important 
developing country concerns, including the need for special and 
differential treatment to be reflected in the specific 
commitments on tariff reduction, domestic support levels and 
export subsidies. Yet it was paragraph 29 that dealt explicitly 
with operational commitments, and there special and 
differential treatment hardly made an appearance.
    On market access, some developing countries and many NGOs 
argue that developing countries should not have to increase 
access to their domestic markets until there is much more 
substantial access for agricultural products in developed 
countries. Yet the Seattle draft text speaks only of ensuring 
the ``broadest possible liberalization.'' Nor did the draft 
text mention the widely acknowledged problem of tariff peaks 
and tariff escalation on processed commodities. In other areas 
of the negotiations, for instance on market access on non-
agricultural products, this issue of tariff discrimination was 
specifically addressed. The Special Safeguard--a measure 
specific to the agriculture agreement that allows governments 
that requested the right to use it to impose temporary, very 
high tariffs to protect their domestic producers from import 
surges--was also not mentioned. This is a tool primarily 
available to developed countries although it is developing 
countries that are more vulnerable to economic shocks.
    On export subsidies, the Seattle draft text called for 
reductions that are ``in the direction of progressive 
elimination of all forms of export subsidization.'' This 
carefully crafted language avoids holding developed countries 
(by far the most significant users of export subsidies) to a 
hard commitment to end subsidies, despite their evidently 
trade-distorting impact. It was nonetheless a sign that the EU 
will continue to reduce, if not yet eliminate, its use of 
export subsidies (and therefore to reform its dependence on 
support prices for domestic producers, as these generate 
surpluses that the EU can only dispose of through subsidized 
export). Some developing countries, particularly in Africa, 
have legitimate concerns about ending export subsidies, as they 
are dependent on cheap imported food. Yet the dumping that 
results from subsidies has been shown to damage domestic 
production in food importing countries, as well as to distort 
trade. An end to export subsidies should be supported, as well 
as to the other forms of support given to developed country 
traders, such as export credits and tax relief.
    Although Egypt and others developed specific proposals to 
ensure the Marrakech Ministerial Decision (formally called the 
Ministerial Decision on Measures Concerning the Possible 
Negative Effects of the Reform Programme on Least-Developed and 
Net-Food Importing Developing Countries) could be made 
operational, the Seattle draft texts made little mention of it. 
The decision provides measures to help developing countries 
that face problems paying for food imports when prices surge. 
Yet WTO members were unwilling to meet their obligations and 
the decision proved too weak to be useful. In future 
negotiations, it will be important for net food importing 
countries to get clearer commitments of assistance from the 
international system.
    Finally, the Seattle draft text on domestic support 
programs was also disappointing. The simple proposal was for 
``progressive reductions'' in levels of domestic support. No 
mention was made of the gross inequalities that persist in 
levels of domestic support among countries. As the African 
Group's position reflects, many African countries need to 
increase their spending on agriculture, in some cases 
significantly. In some cases, this may require lifting the 
ceiling they face on domestic expenditures on agriculture. The 
current agreement reflects special and differential treatment 
for rich countries by allowing enormous expenditures on 
agriculture to be exempt from reduction commitments. The review 
of the Agreement on Agriculture needs to eliminate these 
anomalies, while ensuring that the commitment to food security 
and rural development made in the language of the text can be 
translated into concrete measures.
    The question of state-trading enterprises (STEs) was raised 
by some countries in the preparations for Seattle (notably the 
U.S.) but was not reflected in the draft text negotiated there. 
Many developing countries abolished their marketing boards (a 
typical form of STE) under structural adjustment programs. 
There were widely acknowledged problems with the way many of 
these boards work. Nonetheless, UNCTAD and others have shown 
that the privatization of the boards has often resulted, in the 
medium-term, in diminished competition and the dominance of a 
given export sector by one or two foreign companies. As a 
result, less of the economic benefit from the trade stays in 
the producer country. It is likely that properly managed STEs 
offer a useful second-best solution to the many imperfections 
in agricultural commodity markets. At a minimum, developing 
countries could request a review of the possible role of STEs. 
The proposal to make STEs illegal under WTO rules should be 
rejected. Linked to this question of market distortions, better 
documentation of the activities of the transnational companies 
that dominate many commodity markets is needed. This is also 
some thing that could be requested of WTO members, just as they 
are required to document the activities of their STEs.
    The failure to launch a new round of negotiations in 
Seattle is a welcome respite for many. There is no question 
that some U.S. interests were also served, as there is little 
domestic support for the legislation that the government needs 
to negotiate something as complex as a multilateral trade 
round. All along, the U.S. pushed for a limited agenda of 
talks. Yet it is certainly not fair to claim, as the WTO 
Director General Mike Moore has done, that developing countries 
lost in Seattle. While the multilateral system is preferable 
for small countries to bilateral negotiations with power blocs 
such as the U.S. and EU, the system needs to take far more 
account of developing country interests to be truly helpful.
    Now there is time for the U.S. to elaborate more clearly 
what kinds of special and differential treatment will promote 
equity in the multilateral trade system. However new approaches 
are necessary. Many NGOs have been advocating for some time the 
need for assessment reviews of the impact of the Uruguay Round 
Agreements. UN agencies such as the Food and Agriculture 
Organization and the UN Conference on Trade and Development 
have been doing some of this work. The results of these studies 
should inform future negotiations on agriculture. Both the U.S. 
and EU insist that we should look forward rather than at 
implementation experience for these impact studies but this 
ignores their obligations under Article 20 of the Agreement on 
Agriculture. They should not be allowed to persist in this 
policy.
    The U.S. must push for developing countries to be active 
participants in the negotiations on agriculture. The sector 
remains of primary importance for them and many of their 
people. While the developed countries may spend a lot more, and 
derive a lot more wealth from their production, the sector is 
marginal in the numbers of people it affects. Agriculture truly 
is multifunctional, and its cultural, environmental, social and 
economic importance is much greater in most of the developing 
world than in those countries advocating the term at the WTO. 
Trade rules should reflect this and ensure that developed 
countries do not promote practices that damage the development 
potential of developing countries. The failure of Seattle 
created breathing room for those who argue the Uruguay Round 
Agreement on Agriculture needs serious reform.
      

                                


                                          JBC International
                                       Washington, DC 20006

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

Dear Mr. Singleton:
    JBC International is pleased to submit comments on the outcome of 
the World Trade Organization (WTO) Ministerial held in Seattle. JBC 
International is an international trade and government affairs 
consulting firm based in Washington D.C. JBC International serves as 
Secretariat to the Joint Industry Group, a customs and trade coalition, 
and its CEO, James B. Clawson, serves as Chairman to the Industry 
Functional Advisory Committee on Customs matters (IFAC1).
    While overall we are disappointed that a new round of multilateral 
trade negotiations was not launched in Seattle, we would like to 
highlight the progress made in the area of trade facilitation and urge 
the Committee to ensure that trade facilitation continues to be a high 
priority for the U.S.
    Seattle represented the first time in the history of the 
multilateral trading system, that customs and trade facilitation issues 
were on the agenda to be considered as rules-based, enforceable 
measures. In anticipation of the Seattle Ministerial, several 
governments, including the U.S., submitted detailed work plans for an 
agreement on trade facilitation measures to be launched within the WTO. 
At the same time however, several other WTO members submitted positions 
aimed at delaying the implementation of key customs-related commitments 
made during their accession negotiations. As negotiations were breaking 
down on all other fronts, the WTO's Trade Facilitation Committee -
bolstered by strong U.S. leadership -was successful in moving the trade 
facilitation efforts forward while addressing the concerns of certain 
members. Most importantly, the requests to delay implementation of the 
WTO Valuation Agreement and other commitments, were met with concrete 
work plans to manage the adoption process while ensuring timely 
implementation.
    Although trade in goods serves as the foundation for international 
commerce and the primary focus of the WTO, customs procedures and trade 
facilitation measures need to be elevated to an equal footing in order 
for U.S. companies to take full advantage of the gains from trade. The 
successive multilateral trade negotiations, culminating in the Uruguay 
Round that gave birth to the World Trade Organization (WTO), have 
brought tariffs down to their lowest levels this century, but this 
unprecedented liberalization has drawn attention to other obstacles to 
the free flow of goods across borders. Indeed, many of the hard-fought 
gains from the Uruguay Round go unrealized in the face of the customs 
barriers to trade. What many traders have resigned themselves to accept 
as ``necessary costs'' of doing business are actually gross distortions 
of price and delivery, which ultimately serve as barriers for U.S. 
producers. These ``costs'' take many shapes: goods waiting to be 
unloaded, containers stuck at customs, mountains of paperwork, non-
transparent rules, unpredictable tariff rates, uplifted values, etc.
    The WTO, for the first time, provides us the opportunity to address 
these issues. In Seattle, the U.S. articulated its very ambitious 
proposal for the establishment of a WTO undertaking to create a rules-
based system. A rules-based system adopted by the WTO would set a 
minimum standard in all these areas and provide the political 
commitment needed to ensure that the proper measures are introduced 
where they are needed most.
    Although Seattle was a disappointment on many fronts, the work of 
the WTO on trade facilitation measures must continue. U.S. companies 
can ill afford to allow this monumental opportunity to pass. The U.S. 
must stand firm and insist on the establishment of rules that overhaul 
the international trade machinery so that the very agreements we 
negotiate can be supported. We therefore urge the Committee to see that 
the U.S. remains committed to a WTO Agreement on trade facilitation and 
that Congress and the Administration work together to ensure that this 
important work receives the high priority it deserves.
      

                                


Statement of Labor/Industry Coalition for International Trade

    LICIT appreciates this opportunity to testify on the 
outcome of the WTO Seattle Ministerial and some of the 
important issues that require attention in future negotiations.
    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 currently or recently participating in LICIT are: 
American Flint Glass Workers; AMT--The Association for 
Manufacturing Technology; Bethlehem Steel Corp.; Communications 
Workers of America; Corning Inc.; Daimler Chrysler; 
International Brotherhood of Electrical Workers; Milacron 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.
---------------------------------------------------------------------------

                            I. Introduction

    The goal of the Seattle Ministerial was to launch and set 
parameters for a new round of multilateral trade negotiations focused 
on agriculture, services and intellectual property--a ``built-in 
agenda'' that was established during the Uruguay Round. Unfortunately, 
no progress was made in these areas, and the Ministerial Conference 
ended in failure. Some critics have sought to blame this failure on the 
U.S. Government or on the demonstrators who occupied the streets of 
Seattle, but the reality is that the Ministerial cratered because the 
world's two other major trading powers--Japan and the EU--were 
unwilling to engage in serious discussions on agricultural 
liberalization.
    The U.S. Government expended a very substantial effort to achieve a 
launch of a new round of trade negotiations. This effort was led by the 
President and most of his Cabinet. Japan in particular, which benefits 
so much from the multilateral trading system, failed to take a 
leadership role. Instead, besides defending agricultural protectionism, 
denying its trading partners access to its market for these goods, it 
sought to undermine the international rules governing fair trade--in 
particular by seeking to re-open the recently negotiated antidumping 
rules. The U.S. Government held firm, supported broadly by Congress, 
business and labor. It did not agree to compromise fundamental elements 
of the WTO rulebook such as the rules on injurious dumping and 
subsidies. For this, it deserves to be commended.

                  II. The Antidumping Issue In Seattle

    The WTO Members which sought to circumvent the agreed list of 
negotiating topics and reopen debate over antidumping and anti-subsidy 
measures touched off a senseless and distracting confrontation with 
other Members, including the United States, that were focused on moving 
forward per the built-in agenda rather than on ripping up the Uruguay 
Round texts and re-fighting that Round's divisive battles. The tactic 
of reopening the antidumping rules was embraced by several developing 
countries whose broader Seattle agenda involved unraveling the Uruguay 
Round agreements rather than moving ahead with additional 
liberalization. The idea that side discussions on antidumping were in 
any way responsible for the failure to launch new talks on agriculture 
and services is untenable and belied by all of the evidence, anecdotal 
and otherwise.
    The assault on antidumping came from two categories of WTO Members: 
(1) those looking for a pretext to avoid movement in other areas (the 
EU on agriculture; the LDCs on meeting their Uruguay Round 
obligations); and (2) those whose exporters most frequently engage in 
dumping practices (Japan, Korea, and Hong Kong on behalf of China). It 
was particularly disappointing that the EU, seeking to shift attention 
away from its market-distorting agricultural policies, encouraged 
developing countries to press unfounded claims with respect to 
antidumping, and to seek unwarranted exemptions from the existing 
disciplines on trade-distorting subsidies.
    LICIT commends the Administration for firmly rejecting these 
efforts to reopen the WTO's basic fair trade rules. The Administration 
rightly recognized that the existing fair trade rules must be kept off 
the negotiating table if new WTO talks are to enhance the welfare of 
America's working men and women. Effective antidumping and anti-subsidy 
rules are a pillar of the United States' open-market policy and of the 
multilateral trading system. From its inception half a century ago, the 
GATT has provided that injurious dumping ``is to be condemned'' and has 
authorized remedies to offset and deter dumping and trade-distorting 
subsidies. These rules are designed to ensure a basic level of fairness 
in international trade and to prevent abuse. Without such rules, past 
successes in trade liberalization could not have been achieved and 
future progress on the core WTO agenda would become impossible. 
Allowing the fair trade rules to be weakened would inevitably lead to 
abuse of the world's open markets--particularly that of the United 
States, the world's most open market--and would rapidly undermine 
confidence in the WTO itself.
    Regrettably, in the job of defending the trade laws, Seattle was 
not an end-point but simply a milestone. Much work remains to be done. 
First, of course, continued vigilance is essential during any further 
discussions about launching a new Round. The same factors described 
above will spur continued efforts by certain WTO Members to reopen the 
antidumping rules, with a view to weakening them. Second, a pattern has 
emerged of trading partners seeking to accomplish through WTO dispute 
settlement cases what they could not gain in negotiations: the 
effective repeal of the U.S. trade laws. We discuss this further below.

              III. Issues the New WTO Talks Should Address

    The ``built-in agenda'' is already a broad and important one, more 
than enough by itself to occupy the next few years of trade 
negotiators' attention. The only topics that the U.S. Government should 
even consider adding to that built-in agenda are those that can be 
independently justified in terms of (1) likelihood that meaningful 
progress can be made and (2) where manufacturing is affected, favorable 
impact on America's manufacturing sector if progress is made. The U.S. 
proposals regarding industrial market access appear to meet that test. 
LICIT submits that the same is true of two other issues: reforming the 
WTO dispute settlement system, and disciplining anticompetitive private 
practices that impair market access.
    DSU Reform: There is an urgent need for reforms to the WTO Dispute 
Settlement Understanding (DSU). In several important respects, the 
United States has been badly served by the DSU during its first five 
years. In cases brought against U.S. measures, particularly challenging 
the application U.S. trade laws, panels have exceeded their mandate and 
invented obligations never accepted by the United States at the 
negotiating table. Meanwhile, cases brought by the United States have 
frequently failed to generate actual commercial results.
    The former category is particularly worrisome, as the willingness 
of panels to overreach seems to have tempted trading partners into a 
broad-based attack against America's trade laws. WTO statistics show 
somewhere between 15 and 20 distinct challenges, involving the U.S. 
antidumping and CVD laws, our safeguard law, section 301, and now 
apparently another case against section 337. This flood of cases has as 
its premise that the United States signed on to a package of agreements 
in 1994 which it was, and is, comprehensively violating--a premise that 
is not remotely tenable. These are not legitimate challenges but a 
brazen effort by other nations to achieve through dispute settlement 
concessions the United States was and remains, for very good reason, 
unwilling to make in negotiations.
    When panels participate in such an effort by making up rules and 
obligations, they undermine the legitimacy of the dispute settlement 
system and of the WTO itself. The United States should place a high 
priority on these ``defensive'' concerns in the next phase and all 
future phases of WTO activity.
    The U.S. Government should also seek increased transparency, via 
DSU amendments that: (1) require Members to submit, promptly after each 
submission to a panel, a public version sufficient to permit a full 
understanding of the arguments; (2) require panel and Appellate Body 
meetings to be opened to all WTO Members and to the public; and (3) 
allow affected private parties to participate meaningfully in panel 
proceedings. These changes would enhance the credibility and 
performance of the system by allowing panels and governments to benefit 
fully from the expertise of affected private parties who are normally 
the ``real parties in interest'' in WTO cases.
    Finally, 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 do not accept or agree with 
the resulting substantive rules that panels are supposed to enforce 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 insist on appropriate firewalls and should be prepared, if 
necessary, to use its funding of the Secretariat as a lever in that 
regard.
    Private Restraints of Market Access: Private and joint-public-
private restraints that impair market access have not received adequate 
attention at the WTO. This issue has long been an Achilles heel of the 
GATT/WTO system. The exchange of ``market access'' commitments by two 
countries presupposes that a functioning ``market'' exists within the 
territory of each--something that turns out not to be universally true 
in the case of WTO Members.
    The WTO agreements themselves do not directly guarantee access, but 
rather only discipline discrete categories of government actions that 
could otherwise limit access. The result is a package of agreements and 
commitments largely ineffectual in dealing with complex trade problems 
such as the closure of foreign markets by governments working with 
private monopolies and cartels. Private actors can close a market just 
as effectively as government agencies, and in both cases, from the U.S. 
perspective, the result is the same: bargained-for sales opportunities 
do not materialize. To make matters worse, since the entry into force 
of the WTO agreements, the U.S. Government has been unable to confront 
these barriers directly (outside the WTO system) out of fear that any 
measures undertaken to open the markets would be met with WTO-
sanctioned retaliation.
    Moreover, the WTO's government-focused approach uniquely 
disadvantages industries located in the United States, a country that 
vastly outstrips other WTO Members in the rigor of its antitrust 
enforcement and in general openness to imports.
    The current situation, in which market access is regularly promised 
but frequently not delivered, is corrosive on several levels and 
requires correction. Political support for multilateral trade 
liberalization, in the United States and abroad, depends on the degree 
to which trading partners are seen to have effectively opened their 
markets and extended meaningful, reciprocal trade benefits. By 
tolerating or encouraging anticompetitive practices, governments can 
avoid the adjustments that freer trade would otherwise require. As a 
result, markets never become truly contestable, and trade patterns do 
not improve. The WTO system cannot thrive if its putative benefits are 
undermined in this manner. The most viable long-term solution would be 
to attach to all WTO market access commitments a ``warranty'' that 
sales opportunities will not be undermined by the anticompetitive 
practices of local monopolies or cartels.
    The WTO Working Group on the Interaction between Trade and 
Competition Policy has been created to explore more modest or immediate 
solutions, but the dialogue held to date in that Working Group provides 
little reason for optimism. The primary problem has been too much focus 
on laws, and not enough on facts. The core concern of the WTO is market 
access. To achieve improved market access, the focus should be on the 
naming and removal of particular barriers--one country and sector at a 
time, if necessary--rather than a study of national legal tools 
available to promote competition.

                             IV. Conclusion

    Although many have viewed the Seattle Ministerial as a failure, it 
is important to realize that (1) the agenda at Seattle was mainly a 
procedural one and (2) the results were much less disastrous than they 
could have been. For the United States, Seattle proved the truth of the 
adage that sometimes, no agreement is better than a bad agreement. 
Talks on agriculture and services are set to go forward based on prior 
agreement, so that the core U.S. interest in moving forward with 
liberalization in these sectors was not fatally compromised by the 
failure to launch a ``Round.'' Meanwhile, the United States 
distinguished itself as the only major trading country that came to the 
Ministerial ready to move forward on trade liberalization--ready to 
talk about subjecting the world's vast agriculture and services trade 
to the WTO rulebook, rather than about re-writing the rulebook with a 
view to making it more difficult to counter unfair trading practices.
    Negotiators interested in providing the structure of a ``Round'' 
will eventually pick up where they left off in Seattle, and when they 
do, the United States must continue to stand firm in its commitment to 
block reopening of the WTO's basic fair trade rules. At the same time, 
the U.S. negotiators should redouble their efforts to achieve DSU 
reforms. At home, legislation should be enacted to discipline privately 
imposed import barriers so that market access commitments can become 
something other than hollow promises.
    LICIT looks forward to working with the Committee on Ways & Means 
to ensure that developments in the WTO, including any new multilateral 
negotiations, yield the maximum possible benefit for the American 
economy and its industrial sector.
      

                                


              National Electrical Manufacturers Association
                                          Rosslyn, VA 22209
                                                  February 10, 2000

The Honorable Philip M. Crane, Chairman
Trade Subcommittee
House Committee on Ways and Means
1104 Longworth House Office Building
Washington, DC 20215-6354

Dear Mr. Chairman:
    The National Electrical Manufacturers Association (NEMA) seeks 
multilateral tariff elimination for electrical products, be it via the 
energy sector of the WTO Accelerated Tariff Liberalization (ATL) 
initiative, or via regional groups and/or other opportunities as they 
arise. NEMA reaffirms this position despite the failure of the Seattle 
WTO trade ministers meeting to launch a new WTO negotiating round. Our 
position is explained more fully in the remainder of this letter, which 
I request that you add to the record of your February 8 hearing on the 
Seattle ministerial.
    NEMA is the largest trade association representing the interests of 
U.S. electrical industry manufacturers. Founded in 1926 and 
headquartered in Rosslyn, Virginia, its more than 500 member companies 
manufacture products used in the generation, transmission, 
distribution, control, and use of electricity. These products, by and 
large unregulated, are used in utility, industrial, commercial, 
institutional and residential installations. Through the years, 
electrical products built to standards that both have and continue to 
achieve international acceptance have effectively served the U.S. 
electrical infrastructure and maintained domestic electrical safety. 
Annual shipments total over $100 billion in value.
    Our perspective may be summarized in the following points:
     The US electrical products industry is extremely 
disappointed in the failure of the Seattle WTO meeting to reach 
agreement on the basis for a new round of global trade negotiations.
     NEMA's members are particularly disappointed in the 
failure to reach any agreement on improvement of industrial market 
access through a multisectoral accelerated tariff liberalization 
process (ATL) as proposed by the United States and other APEC members. 
As noted in a Commerce Department document prepared before the Seattle 
negotiations, the value of US exports in our sector alone that could 
have been positively affected by such an agreement is $40 billion 
annually.
     NEMA urges the US government to expeditiously work with 
the other APEC ATL sponsors to eliminate tariffs on the products listed 
in the 1998 APEC Energy Sector Initiative (ESI). Such an agreement 
should include all products that are used in the generation, 
transmission and distribution of electricity as defined in ATL's Energy 
Sector.
     Such agreements could be part of a larger multisectoral 
package as originally envisioned, or they could be contained in a 
single, sectoral agreement, such as the recent Information Technology 
Agreement.
     While NEMA does not propose to limit the geographical 
coverage of such agreements, in view of the present uncertainty 
regarding the launching of the new WTO round we would urge that 
alternative regional agreements again be explored. This would include 
revival of the APEC ESI and sectoral liberalization within FTAA 
negotiations. In pursuing such regional arrangements, we would urge 
that they be expanded to include the European Union. Indeed, any such 
arrangements should be open-ended, so that additional countries or 
regional groups could also join.
    Thank you for your consideration of these remarks. NEMA has greatly 
appreciated your leadership on trade matters, and we look forward to 
continued collaboration on tariff-related initiatives.

            Sincerely,

                                            Malcolm O'Hagan

Statement of Jim DiPeso, Forests Chair, Rainier Audubon Society, 
Auburn, Washington

    This statement is written testimony submitted by the 
Rainier Audubon Society for the Ways and Means Committee's 
hearing on the Seattle WTO Ministerial. The Rainier Audubon 
Society has approximately 1,000 members in south King County, 
Washington.
    Forest conservation is one of many environmental and social 
issues that concerned the thousands of peaceful activists who 
were in Seattle for the Ministerial. The Accelerated Tariff 
Liberalization agreement, or ``global free logging agreement'' 
as it was dubbed informally, raises serious issues concerning 
forest conservation. The immediate issue is that accelerated 
tariff phaseout would lead to increased consumption of wood 
products and increased depletion of forests that already are 
under stress worldwide.
    There is another cluster of concerns that relate to the 
WTO's disturbing policies regarding public health and 
environmental protection standards judged to be ``non-tariff 
barriers to trade.'' We are extremely concerned that the 
authority of national, state and even local governments to set 
standards and adopt policies to protect our forest resources 
could be undermined by the WTO's uninformed determination to 
remove ``non-tariff barriers to trade.'' We are concerned that 
in time a number of important forest conservation standards 
could be challenged and overturned, unless the WTO's rules are 
reformed. Examples of standards vulnerable to a challenge 
include:
     Safeguards against importation of invasive 
species, which wreak havoc on native plants and ecosystems.
     Restrictions on raw log exports, designed to 
protect old-growth forests.
     Government procurement standards that give 
purchasing preference to products from sustainably managed 
forests, products made with recycled content, or products 
manufactured in environmentally preferred processes, such as 
chlorine-free pulp production.
     Labeling and certification programs which give 
consumers meaningful choices by providing the information they 
need to identify sustainably produced forest products. In this 
vein, it is absolutely unacceptable for the rules of an 
unelected, supra-national institution to pre-empt the free 
speech guarantees in the Bill of Rights.
    Before further trade agreements are negotiated, WTO rules 
must be reformed to ensure that health and environmental 
standards will not be undermined in settlement of trade-related 
disputes. Examples of needed reforms include the following:
     Explicitly state that national and sub-national 
levels of government have the authority to develop and enforce 
public health and environmental standards.
     Shift the burden of proof in trade-related 
disputes to parties challenging health and environmental 
standards as ``non-tariff barriers to trade.''
     Explicitly state that health and conservation 
standards based on production methods are legitimate measures 
governments may take to protect their citizens and natural 
resources.
     Explicitly recognize the authority of national and 
sub-national governments to use social and conservation 
criteria in making purchasing decisions.
     Give a substantive role to international 
institutions with environmental expertise in settlement of 
trade disputes, including explicit recognition that governments 
may employ the precautionary principle in developing and 
enforcing health and environmental standards.
     Explicitly recognize the prerogative of 
governments and private organizations to provide accurate, 
objective consumer information through labeling and 
certification programs. Explicitly state that private U.S. 
labeling programs are protected by the free speech guarantees 
in the Bill of Rights.
    Thank you for your attention to our concerns.
      

                                


                 Redwood Coast Watersheds Alliance and     
                 Save the Redwoods/Boycott the Gap Campaign
                                                  February 20, 2000

Honorable Phillip M. Crane and Members
Subcommittee on Trade
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515

Dear Congressman Crane and Members of the Subcommittee on Trade:
    Many people have testified and written to you about the World Trade 
Organization (WTO) protests in Seattle in November 1999. I want to 
contribute to that record by telling you why I was in Seattle 
protesting the WTO, and what I personally witnessed in the streets of 
Seattle that week.
    There are two points that I want to stress:
    1. I witnessed unprovoked and brutal attacks by the police against 
peaceful protestors starting at 10:30 am Tuesday morning, November 30, 
and continuing through the morning, long before any vandalism occurred 
in downtown Seattle. This fact has been mostly lost or suppressed in 
mainstream news media reports, and it is vital to a proper evaluation 
of these events. I and the 50,000 other people who protested the WTO, 
including the 10,000 people who peacefully shut down the WTO meeting, 
conducted ourselves entirely peacefully and we are tired of the slander 
that we did not. We kept the peace even while we were beaten, hosed 
with pepper spray and shot with tear gas canisters and plastic bullets.
    2. We were demonstrating against an illegal meeting. The WTO is a 
group of unelected trade ministers who have the illegitimate power to 
eliminate our environmental, labor, health and human rights laws, 
without our consent and without our participation. The citizens of the 
United States have a right-and indeed a duty--to protest this violation 
of the United States Constitution.

                          Why I was in Seattle

    First of all, I went to Seattle to protest the illegal 
meeting of the WTO. The WTO has no legitimacy in my eyes to 
make decisions that overrule our national and local laws that 
protect workers, consumers, farmers, the environment and human 
rights. Yet the WTO is so powerful that I could think of no way 
to influence its exclusive and secret proceedings except by 
massive peaceful protest.
    If you had held a session of the U.S. Congress in secret to 
decide the future of United States, what would you expect to 
happen? Wouldn't you deserve massive protests? Wouldn't the 
citizens of this country have a right and a duty to stop that 
meeting? And if you made such a mistake of democratic 
procedure, wouldn't the right thing, the lawful thing, be to 
reverse that mistake, and open up your proceedings? That is all 
we asked of the WTO-lawful, democratic process.
    The Founders of this Republic believed that violent protest 
was legitimate to overthrow oppressive government-and they 
engaged in violent protest and in war, to secure me the rights 
that are established in the United States Constitution. We have 
had examples of peaceful resistance since that time-Mahatma 
Ghandi and Martin Luther King chief among them-who have shown 
that respect for human life is the highest value that we can 
hold, that such respect must be maintained even under extreme 
provocation, and that it produces a better form of change, a 
change in the human heart.
    That is the spirit in which I and 50,000 other people went 
to Seattle. Our purpose was to make clear to the WTO that it 
cannot continue to meet in secret, to overrule our laws and to 
remake our world on a global scale without our consent.
    The issues that brought us to Seattle are critically 
important to the future of our society and our world. These 
issues include the right to live, the right to work, the right 
to a healthy, productive environment, and the right to help 
determine political and economic policy in a democratic system.
    My group has a particular concern about the WTO ``Free 
Logging Agreement,'' which would eliminate tariffs on imported 
wood, no matter how that wood is logged. While our California 
Forest Practice Act has failed in its stated purpose of 
sustainability, the citizens of California have the right to 
reform that Act, and to institute new and better policies for 
the protection of our forests. As citizens of the United 
States, we also have the right to exclude from this market any 
wood product that results from the destruction of forests 
elsewhere in the world, or that threatens the health of our 
forests in any way, including by pestilence and unfair and 
unsustainable competition.
    Our planet's biosphere is being destroyed by 
thoughtlessness and greed. Our national and local environmental 
laws, and trade restrictions, are the only potential protection 
we have against destruction of the planet that we all depend 
upon for life. As with other WTO issues, this is a life and 
death issue, and a justifiable cause for civil disobedience.

        What I Personally Witnessed During the Seattle Protests

    I was part of the group that was peacefully protesting the 
WTO meeting at the Sheraton Hotel intersection at 10:30 am, on 
Tuesday morning, November 30. I was a support person and an 
observer-there to help insure everyone's peacefulness and 
safety. As a support person, the first thing that I tried to do 
was to clarify the situation with the police. There were 
several dozen Seattle police in riot squad gear, several 
mounted police and a gray armored tank that we soon found out 
contained pepper spray and tear gas equipment. The police were 
lined up across the intersection and up on the sidewalk, with 
billy clubs drawn. There were about 200 people in the 
intersection blocking traffic to the Convention Center. My 
group, the Save the Redwoods/Boycott the Gap affinity group, 
was standing face to face with the police line, in the 
intersection, in close proximity to the billy clubs. We had 
agreed to represent the environment at the WTO meeting. We 
carried the sign, ``Delegation for the Environment.''
    I spoke to one person whom the other police identified to 
me as the ``commander'' of the police line that was immediately 
in front of me on the sidewalk. I asked this commander three 
questions: Had an order to disperse been given in the 
intersection? Had an order to disperse been given where I was 
standing on the sidewalk? And was tear gas going to be used?
    To the first two questions, he answered no-no orders to 
disperse had been given. To the tear gas question, he answered 
that no order had come down to use tear gas and that three 
commanders in the hierarchy had to agree to such use.
    Shortly after my conversation with this commander, the 
police attacked the people in the intersection using pepper 
spray guns, tear gas guns and plastic bullets. This attack 
occurred without warning and without provocation. In fact, the 
Delegation for the Environment, which had been standing in a 
line directly in front of the police, had deliberately removed 
itself from that position in order not to be provocative to the 
police.
    Just before the attack, the police had been getting nervous 
and more aggressive. Several of our group were poked and hit 
with billy clubs before they withdrew. The Delegation for the 
Environment stepped aside, and gave up our intention of 
entering the Convention Center, in the interests of civility 
and peace-and by mutual agreement with the other protestors. 
The people in the intersection nearest to the police then sat 
down on the ground. In other words, we, and everyone there, 
went out of our way not to be provocative.
    Many of the intersection protestors were sitting on the 
ground, huddled together for protection. The police hosed them 
with pepper spray directly on their heads and faces, and then 
began shooting at their backs and heads with tear gas canisters 
and plastic bullets. They continued the attack even against 
people who were lying on the ground, totally disabled and 
extremely sick. This was the most violent and uncalled for 
attack against human beings that I have ever personally 
witnessed, and I shall never forget it. It was as if the police 
were exterminating insects.
    I also saw the police club several people during this 
police attack. These people had no weapons and were merely 
reacting emotionally to the chemical attack, and were yelling 
at the police to stop.
    A young man who was standing near me began to yell at the 
police during the attack. I put my hand on his shoulder and 
told him to remember Ghandi. He calmed down. I was also 
involved in helping an elderly Asian couple who said they were 
WTO delegates escape this scene. They, like I and everyone else 
who was near that intersection, got tear gassed. As the clouds 
of tear gas filled the streets, we helped these delegates over 
a wall to another street.
    I feared for my life that day in Seattle, though I was 
breaking no law myself, and though the people who were attacked 
in the intersection were breaking only a minor law, blocking an 
intersection. I witnessed similar attacks by the police against 
peaceful protestors at other locations in downtown Seattle on 
Tuesday morning and into the early afternoon. Downtown became 
so filled with tear gas that there was nowhere to go-nowhere to 
escape to. People who were attempting to leave downtown could 
not do so.
    Once again, I want to stress that these events occurred 
long before any windows were broken or other vandalism was 
committed downtown.

         The Sequence of Events--the Irresponsible TV Coverage

    That night the TV news showed these events in reverse order. They 
showed footage of windows being broken first, then the police ``getting 
tough'' and using tear gas-exactly the opposite of what happened. This 
very irresponsible journalism led many people to believe that the 
police violence was justified, and prevented an immediate stoppage of 
the police violence by public outcry. The police then went on a 
rampage, invaded the Capitol Hill neighborhood, and tear gassed and 
brutalized people sitting in cafes, in their homes, or out on their 
sidewalks.
    In the next couple of days, the police arrested hundreds of people 
for protesting the police state in downtown Seattle in which a person 
could be stopped on the sidewalk, ordered from the area, or arrested, 
merely for wearing an anti-WTO button. I saw that on television-a lone 
woman being ordered off the streets merely for wearing a button. She 
asked the police: ``What if this had been a pro-WTO button?'' The 
police did not reply to that.
    It seems to me that the police actions of the morning of November 
30 were intended to provoke a violent reaction. I'm thinking of the 
young man whom I calmed down during the first attack. How much of this 
sort of horror could he take without reacting and fighting back and 
trying to protect people? It is also evident to me that this police 
provocation largely failed. The 50,000 protestors in Seattle that day 
did not retaliate in kind. Almost all violence against people was 
perpetrated by the police themselves, starting at 10:30 in the morning 
on Tuesday.
    I've since learned that a few picket sticks and tear gas canisters 
were thrown at police in the midst of the police attacks. I find that 
reaction understandable, in view of what I saw the police doing--
although it does not follow the non-violence code. The police were well 
armored and wore gas masks. The workers in downtown stores where 
windows were broken likely felt fear and even terror, and I consider 
that to be violence against people. That violence, and the property 
damage, was the work of a small group of people who were acting in 
violation of the non-violence code, and also in direct conflict with 
the wishes of the 50,000 other protestors in Seattle, many of whom 
suffered serious police brutality without provocation and without 
retaliating in any way. I also think it's fair to say that the police 
themselves may have indirectly caused the later vandalism by creating 
tension and anger with their early and brutal attacks against people.
    This police brutality, and the subsequent mistreatment of peaceful 
protestors who were imprisoned, raise serious questions that need to be 
answered by the city of Seattle, by the state of Washington and by the 
federal government:
    1. Why did the police use massive brutal force against peaceful 
protestors on Tuesday morning, November 30, long before any vandalism 
occurred? Who gave those orders?
    2. Why didn't the police-who were everywhere downtown on late 
Tuesday afternoon-stop the vandalism? Why, instead of stopping the 
vandalism, did the police create a no-civil-rights zone, consisting of 
the entire downtown area, and start arresting and brutalizing everyone 
in their path? Once this police violence began, why wasn't it stopped? 
Who is responsible for failure to stop the police from rampaging 
through neighborhoods and escalating their violence and their massive 
violations of civil rights?
    3. Who is responsible for the false TV news stories on Tuesday 
evening, November 30? The TV reports were clearly wrong about the 
sequence of events-the police were not responding to any violence or 
vandalism on Tuesday morning, but rather were engaged in a deliberate 
and brutal attempt to curtail free speech. Did public officials have 
anything to do with these false TV stories?
    4. What role did federal officials play in these decisions?
    5. What role did federal officials play in the cruel and illegal 
treatment of peaceful protestors who were imprisoned?
    It seems that the police reserved their brutality and their arrest 
procedures for peaceful protestors who were breaking minor laws as an 
act of conscience and courage--or who were breaking no law at all--
while they allowed the few people who were doing property damage to go 
free. It also appears that the police brutality was a deliberate 
attempt to curtail the WTO protests, which in themselves were entirely 
peaceful. This was a political decision. Who made this decision?

                        An Example of Democracy

    On Friday night, I supported the young people who did a 
``sleep in'' on the Westin Hotel steps. The purpose of this 
spontaneous protest was to gain the release of the 600 peaceful 
protestors who had been kept in jail for several days without 
arraignment and without counsel. Many people in Seattle brought 
us blankets and food, and members of the Teamsters Union 
brought us coffee and cookies at 3:00 in the morning. I am very 
proud of these young people who showed such courage and 
persistence. They taught us all a lesson in democracy.
    Around 4:00 in the morning, the riot squad, which had been 
surrounding us at the Westin Hotel, was withdrawn-which I very 
much appreciated-and was replaced by the Seattle police in 
normal uniform who stated that these young people must move 
away from the Westin Hotel steps or be arrested.
    The patience of the Seattle police in this instance allowed 
for a lengthy, democratic discussion among us protestors about 
moving to another location, and resulted in a decision to move 
from the Westin Hotel and join the protestors in front of the 
Seattle jail.
    I think that, instead of threatening these young people 
with arrest and forcing them to move, the Seattle police should 
have immediately released the people in jail, and begun a 
dialogue and listened to our concerns. These young people, in 
my opinion, represent the best that democracy has to offer. In 
the middle of the night-amidst fear, tension and extreme 
fatigue-these young people conducted a lengthy and orderly 
discussion, in which all points of view were heard, and came to 
a decision about what to do. That is devotion to democracy! The 
WTO could have learned something from these young people, if 
only they had been willing to listen to them.
    We kept the peace at the Westin Hotel. We had a good time. 
We had good music--some heroic drummers who played for many 
hours, keeping peoples' spirits up. We meticulously cleaned up 
after ourselves, removing all garbage and sweeping the steps of 
the Hotel.

                  What Could Have Happened in Seattle

    Now I want to turn to what could have happened in Seattle. 
On November 30, about 10,000 people placed themselves in 
intersections in the downtown streets of Seattle, in a peaceful 
effort to prevent the WTO meeting from occurring without our 
participation. We did not want this extremely powerful group of 
trade ministers to meet in secret and decide our future.
    Because they were in fact deciding our future, we had a 
right to stop that meeting and insist that we be heard. We met 
for weeks in advance-and some protest leaders had been planning 
for months and years-to accomplish this purpose peacefully. 
What if Seattle had welcomed us? What if Seattle had said, 
``All right, 10,000 people is a whole lot of objection. Add in 
the 50,000 who marched and held rallies-and that's an 
overwhelming amount of objection. Maybe this WTO meeting 
shouldn't be taking place.''
    What if that had happened in Seattle? What if the governor 
and the mayor and the city council and the President of the 
United States had told the WTO, ``50,000 people is too many to 
ignore. You have to listen to them, you have to include them.'' 
What if our political leaders had stood up for the U.S. 
Constitution and the labor unions and the environment? What if 
they had told the WTO, ``This is what democracy looks like-get 
used to it''?
    Circumstances changed in Seattle when 50,000 peaceful 
protestors showed up. Our political leaders should have been 
more flexible in reacting to these changed circumstances. On 
Tuesday, when the WTO meeting was shut down, our political 
leaders should have taken a breath and said, ``Okay, this WTO 
meeting is no longer possible as planned. These protestors have 
a point.
    How can we address the undemocratic and unconstitutional 
nature of the WTO?''
    The United States and the city of Seattle could have been 
the arbiter of a profound change in global economic policy. 
Seattle would then have become synonymous with democracy, 
instead of with repression.
    What we got instead were platitudes, from President Clinton 
on down-insincere statements about the importance of the 
environment and workers' rights. Statements that no one 
believed. Statements that should have been made long ago 
accompanied by strong action. In fact, President Clinton, like 
his predecessor President Bush, and local officials--Washington 
Governor Gary Locke and Seattle Mayor Paul Schell--all approved 
of, and welcomed the WTO-having long ago sold this democracy 
down the river.

                               Conclusion

    November 30, 1999, is an historic date that will influence events 
for centuries to come. On that date, U.S. Citizens, in massive numbers, 
rebelled against corporate rule right here in the home of ``free 
trade''--sparking a widespread awakening of the American public. This 
was the beginning of a New American Revolution. What unfolded that day 
and in the subsequent days was the courage, intelligence and great good 
will of the revolutionaries. We accomplished this rebellion peacefully 
-despite the false news reports. In Seattle, it was the police who were 
violent and we, the people, who peacefully shut down the WTO.
    On the morning of November 30, as the riot squad was getting out 
the pepper spray hoses and the tear gas guns, at the Sheraton Hotel, I 
heard the following exchange between a protester and a riot squad 
policemen: Protestor: ``This is just like Tienamen Square.'' Riot squad 
police: ``No, it's not. We're not going to kill you.''
    We can laugh at this now--it has a sort of black humor to it. But 
it wasn't very funny when we were getting tear gassed. We need to know 
who told the police that they could use anything short of lethal force 
to stop these peaceful protests. In any case, sub-lethal force can be-
and was-life threatening. It can be-and was-utilized to suppress free 
speech and freedom of assembly, and our right to petition our 
government.
    There is more at issue here than a mistaken and illegal use of 
force by the police, but there is a common theme-abuse of power. The 
police were given too much power and they created mayhem in downtown 
Seattle, brutalizing many people who were not even involved in the 
protests. Our federal government made the same mistake with the WTO-
they gave it too much power. Indeed, they gave away whole sections of 
our Constitution. The abuses of ``free trade"-loss of jobs here, 
workers living in slavery in other countries, the assault on our 
environmental laws-are the inevitable result of that giveaway. Instead 
of our labor laws, and our environmental laws and our democratic ideas 
spreading across the world, we have abuse and piracy spreading across 
the world. This has to stop. We, the people, will stop it. I think we 
made that clear in Seattle.
    You, the members of the Congressional Subcommittee on Trade, and 
other members of Congress, should be asking yourselves the questions 
that we are asking: Do you want the WTO, an unelected group of trade 
ministers, to dictate the laws and the future of this country? Do you 
want a world in which there is no protection for the environment, for 
workers, and for your health and well-being? Do you believe in 
democracy?
    We urge the following actions by the House Subcommittee on Trade, 
in response to the events in Seattle during the week of November 30, 
1999:
    1. An investigation of the role played by federal officials in 
massive violations of the civil rights of citizens of the United States 
during the Seattle protests. Investigation of all such illegal activity 
by the police. Determination of who made the decisions. Recommendations 
toward the prevention of civil rights abuses in such situations in the 
future.
    2. A recommendation to Seattle officials of complete amnesty for 
all protestors who were arrested during the Seattle police riots. 
During the week of November 30, hundreds of people were unlawfully 
arrested by police forces who were themselves engaged in massive 
violations of the law. These protestors were held in prison for days 
without counsel or arraignment. They suffered fear and mistreatment in 
jail. They gave up their comfort and risked their lives for democracy. 
Although many charges against protestors have been dropped, Seattle 
prosecutors are continuing some legal actions. In all fairness, and to 
clear the air, all such prosecutions must cease.
    3. Endorsement of the letter of Congressmen George Miller (D-CA) 
and Henry Waxman (D-CA), now in circulation in Congress, which asks for 
specific reforms to current U.S. trade policy such that forest and 
environmental issues will receive greater representation. Recently, a 
federal court ruled that environmental representatives must be included 
on U.S. trade advisory committees that deal with forest products. This 
ruling, in a case brought by U.S. environmental groups, was appealed by 
the U.S. Trade Representative just after the Seattle Ministerial 
meeting in December-an example of our government's hypocrisy on these 
issues. The Miller/Waxman letter explicitly asks the Administration to 
withdraw that appeal.
    Thank you for your consideration of these matters.

            Yours sincerely,

                                               Mary Pjerrou

    cc: Congressman Mike Thompson; Senator Diane Feinstein; Senator 
Barbara Boxer
      

                                


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 investigate the significant ``lost opportunity'' we 
witnessed at the 1999 Seattle Ministerial.
    Last August, we held a hearing on our negotiating 
objectives at the upcoming Seattle Ministerial. Today, it is 
clear that 'Team USA' did not lay out an aggressive, strategic 
plan for Seattle.
    I am particularly interested in asking whether the coach of 
'Team USA,' President Clinton, used a play that wasn't in our 
play-book. A December 13th article in Newsweek states:
    ``In Seattle, faced with a challenge to one of his major 
accomplishments, the WTO, President Clinton bizarrely sided 
with the demonstrators -and presumable against his own 
officials who were the targets of the protests. In statements 
reminiscent of his famous squiggle on the Gulf War -'I guess I 
would have voted with the majority if it was a close vote. But 
I agree with the arguments the minority made' -the president 
explained that he supported the protesters bud didn't want to 
hobble free trade.''
    I was greatly disappointed when I left Seattle last 
December and returned home empty-handed to Minnesota. 
Throughout this recent recess, Minnesota business leaders, 
entrepreneurs, farmers and workers asked me what went wrong. I 
hope to have answers for them soon.
    We must regroup and make progress soon on the ``built-in 
agenda,'' and jump-start further liberalization trade in 
agriculture and services, as well as examine government 
procurement practices and the enforcement of intellectual 
property rights.
    Mr. Chairman, thanks again for calling this hearing. I look 
forward to hearing from our witnesses today about the causes of 
the impasse in Seattle and the impact of this failure on future 
WTO negotiations.
      

                                


    [By permission of the Chairman.]

Statement of Hon. Tran Van Thinh, RONGEAD, Lyon Cedex, France; and 
former Ambassador of the European Union

Seattle: more than a High Mass for trade, it must take up the challenge 
                       of economic globalization

                              Why Seattle?

    The objective announced for the new round of multilateral 
trade negotiations at Seattle is to boost development of trade 
in goods and services in order to sustain economic growth.
    As usual, the enthusiasm among members stirred by a new 
round remains somewhat damped due to differences of approach, 
loaded with ulterior motives. Arguments over taking into 
account the interactions between trade and other areas are on 
the increase.
    Negotiating rules and specific concessions giving greater 
access to individual markets, in order to secure the global 
growth of trade, inevitably touch highly sensitive areas, such 
as the environment and investment, related to trade. Opposition 
to the negotiated and contractual inclusion of links between 
these areas and trade, and their effects on it, is pointless. 
On the other hand, using the pretext of these links and effects 
for the purposes of fighting skirmishes, and recourse to 
unilateral and protectionist actions, is derisory. Where trade 
is concerned, these two attitudes amount to perpetuating 
incoherencies at a time when a rational, global and integrated 
approach is needed to grasp the phenomenon of globalization, 
with all its implications. Henceforth, the globalization of 
economies is irreversible, affecting every one of their 
characteristics and components. The real scope of globalization 
remains barely evident and poorly identified regarding its 
ramifications that concern every aspect of daily life, even 
that considered private. It not only involves the visible part 
of the iceberg, such as the circulation of goods, services, 
capital, technology and ideas, but also the submerged part, 
that of human beings, not forgetting diseases, vices, scourges, 
discontent, fraud, criminality and the forces of evil. The 
seeds of tension, violence, and conflicts, these incoherencies 
only fuel the chaos that reigns already over the 
interconnections generated by economic globalization. What is 
more, they magnify its negative effects and undermine its 
positive ones.

                        Sustainable development

    Benefit can be gained from awareness of the 
interconnectedness of life's realities, whether they be 
palpable or virtual, and the ability to take them into account 
and go beyond traditional and sterile incoherencies. They were 
understandable at a time of economic fragmentation and conflict 
between different and antagonistic economic and social systems. 
However, that era ended with the fall of the Berlin Wall. Now, 
the whole world is under the reign of the market economy and 
conclusions need to be drawn that match the scale and scope of 
this phenomenon. Whatever the case, the aim of expanding trade 
cannot be limited to simple economic growth, it must also 
contribute toward sustainable development.
    Sustainable development has been a byword since the Rio 
summit, which shed stark light on the harmful contradictions of 
the States that govern us and paralyze its effective 
implementation. Now, at Seattle, determination is required to 
get everyone, from governments to consumers, economic operators 
and civil societies, to accept sustainable development as the 
absolute priority. Its one and true objective must be punched 
home: it is to ensure balanced development between every 
country in the world and between every stratum of its 
populations. Indeed, equilibrium is the backbone of sustainable 
development. It erases the antiquated and artificial borders 
between the North and South, since almost every country now has 
its mega-rich and its cortege of very poor.
    Although globalization should lead to growth capable of 
making the poor dream, it in fact makes the rich richer and 
impoverishes the poor still further. What is more, urban 
violence, conflicts between governments, and economic crises 
will result in the erosion of our economies, in search of a 
costly and probably illusory new distribution of cards and 
rules at the price of new suffering mainly for the poor. The 
fact is that the days of impregnable fortresses of abundance 
and well-being are over. The attraction and envy they instill, 
thanks to information and communication technologies, condemns 
their existence through time. The West can diffuse its dreams, 
but it must eventually pay the price for the attraction of 
these same dreams on the poor, in terms of crime, clandestine 
immigration, etc.
    So, how should globalization be managed ? How can six 
billion differences between the world's inhabitants be managed. 
It is difficult enough today managing six billion differences 
(no human being the same), but what of tomorrow when there will 
be eight billion. . . ?

                    Common sense: the obvious remedy

Thinking, conceiving and acting globally in a world-wide economic 
environment

    The challenge of globalization is above all a psychological one for 
our thinkers, politicians, citizens and economic players. True, 
businesses already operate profitably in almost fully integrated, 
dominant financial markets. However, other sectors of the economy, 
especially trade in the traditional sense, remain in tow and tag along 
as best they can. The lesson of recent crises has not sufficiently 
highlighted the interconnections of capital transactions, in particular 
short term ones, with domestic and foreign trade. Likewise for the 
structure and management of the financial banking and monetary economy 
regarding their inextricable interconnections with the commercial and 
social economies, not forgetting environmental protection, labor, etc. 
The only positive--and modest--conclusion that can be made is the need 
to build a new international financial architecture. However, will this 
goal take into account the interconnections and interactions of finance 
with other sectors of the economy and other aspects of life or only, as 
in the past, confirm its dominance over all the other sectors with, in 
addition, dangerous tendencies toward a unipolar world based on single 
track thinking?
    The past habits of a fragmented and partitioned world are dying out 
slowly, since they are deeply anchored in government establishments and 
it will take a long time for the new customs of a border-less world 
with interdependent, interactive and united components to become 
accepted.
    A great step forward could be made with the elimination, at 
international level, made necessary by globalization, of the 
incoherencies and incompatibilities stemming from the inadequacy or 
even complete lack of coordination between international institutions 
with that jealously guard their specific areas of responsibility. This 
global non-coherence at all levels can be estimated, year in year out, 
as amounting to one tenth of world GNP; this is the cost of non 
coherent economic management on an international scale. Decisive 
progress could be triggered by achieving convergence between the 
different policies, actions and practices implemented by the various 
international institutions. A very timid attempt has been made at the 
level of the WTO, the IMF and the World Bank, i.e. the Ministerial 
Declaration of Marrakech in April 1994 on the ``Contribution of the 
World Trade Organization to Achieving Greater Coherence in Global 
Economic Policymaking'' at international level. The practical effects 
of this Declaration are modest and the good will and actions of the 
heads of these institutions born from Bretton Woods remain tributary to 
the degree of cooperation which the respective member states for whom 
they act decide to give them. What political weight do trade or 
environment ministers have in comparison with finance ministers in 
economic development strategy ? The influence of mandators on the 
actions carried out by international institutions, in particular 
financial ones, is decisive though little known. This sheds light on 
another element: although convergence at international level is 
necessary, it is even more vital upstream at national level.
    If this step forward toward convergence could be achieved under the 
right conditions, it would lead to coherent economic and social 
policies. This coherence implies the globalization of economic and 
social policy tools. This logic is faultless, but account needs to be 
taken of those with power and competencies who hold back or prevent 
progress.
    There are many pitfalls and the road is long but the convergence of 
economic and social policies is inevitable if economic globalization is 
to lead to sustainable development in our world, without disparities or 
distortions.
    The convergence and coherence of economic policies constitutes the 
foundation of cohesion for each and every people of Planet Earth, so 
that they can control economic globalization instead of being 
controlled by it.

Convergence is a minimum, coherence is a must, and cohesion is a hope.

    This is the revelation of common sense needed to deal with the 
implacable logic of economic globalization. Recently, no lesser person 
than Jim Wolfensohn proposed building a new international architecture 
for developmentin parallel with ``a new international financial 
architecture'' in order to give a voice to the poor. But how can 
cohesion be possible when a supposedly universal organization such as 
the WTO only represents three fifths of humanity, with thirty or so 
countries waiting on the sidelines for accession under discretionary 
conditions that appear arbitrary to say the least.
    In short, sustainable development is the objective and the basis of 
good governance.

My testimony is pertinent to this hearing, it is in complete support of 
that of Mr Jose Bove whose remarks correspond with my reflections and 
observations.

    I was among the active participants in the establishment of 
the World Trade Organization. I negotiated the Uruguay Round as 
Ambassador of the European Union and I have devoted half a 
century to the multilateral trading system, with participation 
ranging from the United Conference on Trade and Employment in 
Havana (1947-1948) until the Ministerial Conference of April 
1994 in Marrakech.

Two preliminary statements:

    Without a strong and fair multilateral trading system, 
trade may create tension and conflict that threaten state 
security. Even the strongest states, including the United 
States of America, are potentially vulnerable.
    In the aftermath of the Second World War, the USA was 
governed by statesment with vision. Today the United States has 
been rejuvenated and has achieved extraordinary economic and 
technological advances.
    However, the leadership necessary to channel economic 
globalization of the economy towards a sustainable development 
of the planet is lacking. Indeed the failure of Seattle sounds 
a warning that a new leadership is needed to initiate and drive 
the global governance of the planet.
    Below, I present what your Subcommittee may wish to 
consider as its broad goals starting with the Hearing of 
February 8, 2000.

The Fundamental Realization:

    The failure of Seattle was foreseeable. In this day and age 
where everything is connected to the economy both inside and 
outside of national borders, a viable solution to the problems 
of international trade does not lie in trade policies alone. A 
viable solution to the challenge of trade will be linked to 
financial, monetary, social, environmental, sanitary and 
wildlife protection policies on the national and international 
levels. Clearly, the failure of Seattle is due to the absence 
of an agreed global development strategy that considers the 
necessary inter-relationships between trade policies and 
policies related to the environment, investment protection, 
labor etc. . . The absence of arbitration and of a more all-
encompassing trade policy freezes corporate competition and 
plants the ``seed'' of failure. In addition to the urgent and 
fundamental need to incorporate additional policies inter-
relationships into negotiations on trade, another essential gap 
lies in the absence of transparency and of dialogue with civil 
society. Finally, the concept of disparity between the rich 
countries of the North and their poorer Southern neighbors must 
be considered and remedied. Poverty is still present in the 
North, just as wealth can also flourish in developing 
countries. These disparities must be addressed. These elements 
can be found in my first testimony.

            Sincerely yours,

                                             Tran Van Thinh
      

                                


Statement of Jose Bove

    Mr. Chairman, Thank you for this opportunity to provide 
testimony for your hearing on the outcome of the WTO 
Ministerial Meeting held last December in Seattle. I was 
privileged to represent my farmer's organization there and to 
have participated in many of the important events organized by 
civil society during that week.
    Of the many outcomes, I will focus on the way in which the 
Seattle meeting has awakened ordinary people all over the world 
to the need to become actively involved in global affairs. A 
new appreciation of the complexity of international issues 
exists among citizens, many of whom are offering positive 
solutions to some of the problems facing the World Trade 
Organization and world leaders. These creative ideas should be 
carefully considered.
    I am involved with a broad coalition of organizations from 
civil society all over the world who are working together to 
turn this new commitment into specific positive actions. 
Together we have created the Global Citizen Initiative to bring 
concerned individuals and organizations into the international 
arena and to facilitate institutional changes that will 
maximize the positive impact of this growing citizen interest. 
While we will initially be focusing on issues concerning trade 
policy, we are well aware of the need to broaden our work on 
trade as part of a broader vision of global governance.
    We have identified five critical themes and are developing 
these with our growing global network of concerned 
organizations (now consisting of over 2,000 civil society 
organizations and representing nearly every country in the 
world). We are targeting ideas that resonate on a global basis 
and that can form the basis of a consensus within civil society 
on key trade and global governance issues. This consensus will 
give us the basis to move forward.
    Our five major themes include:

1) Transparency and democratic procedures.

    We need to learn from events such as Seattle and to forge 
efficient and participatory approaches that involve civil 
society.

2) Bridging the gap between the rich and the poor.

    We are working on new approaches to help ensure that trade 
rules do not make the gap between rich and poor countries and 
rich and poor people even worse. Our goal is to find ways to 
turn trade policy into a positive force that can help end 
poverty.

3) Current and new issues in trade policy.

    This includes the specific topics currently under 
negotiation at the WTO, the so-called built-in agenda of 
agriculture, patenting of life, and services. There are also 
working groups on the more difficult trade issues such as 
environment, labor standards and human rights.

4) Negative impacts on food security.

    This includes a number of specific topics such as 
agricultural dumping, tariff escalation and the ways in which 
current trade policies are fueling the conversion of land from 
human food production to non-food uses or to luxury cash-crops.

5) E-commerce.
    The Internet is changing our entire business system, 
potentially rendering many of our current trade policies 
meaningless. At the same time, if it can remain free both 
politically and financially, the Internet appears to be one of 
the keys to making a truly democratic system of global citizen 
action. We have organized a working group to put forward 
proposals to maximize the positive political, social and 
commercial impacts of the Internet while avoiding the negative 
impacts that may come from a more restrictively controlled 
technology.
    As mentioned above, the goal of the Global Citizen 
Initiative is to bring about changes in the international 
framework through global consensus. The WTO Ministerial Meeting 
created a new awareness around the world about the critical 
role played international institutions and the importance of 
creating a new vision of global governance. The new citizen 
awareness that is manifest in our work, and in the concerns 
voiced at Seattle, presents a unique opportunity to make long-
term, positive changes for all.
    Mr. Chairman, thank you again for the opportunity to 
present these ideas and for organizing this hearing aimed at 
drawing lessons from Seattle. We believe that this event is an 
important first step towards a fairer, open and democratic 
system of global governance.

            Yours faithfully,
                                                  Jose Bove
                                   Member of Confederation Paysanne
                                                             France
      

                                


Statement of David Head, on behalf of Save Endangered Wilderness, 
Hatboro, Pennsylvania

    Dear Members of Congress,
    Congress has decided to take up the issue of ``What Went 
Wrong in Seattle.'' The issue has nothing to do with when and 
where trade makes good economic sense. The issue is democracy.
    Behind the benign sounding term ``Free Trade,'' lurks a 
juggernaut unprecedented in the history of mankind.
    Functionally, the World Trade Organization is an 
association of the world's most powerful transnational 
corporations. This association is, by their own boastful 
admission, ``writing the constitution for a global economy.'' 
Their goal is clear--that the ultimate governance of any and 
all issues that involve international trade or finance be 
removed from the hands of democratically elected governments, 
and placed in the hands of the world's corporate elite. They 
would further eliminate all public input, as well as public 
scrutiny.
    More than 500 corporate lobbyists sit on some 16 committees 
that advise the US Trade Representative. These committees 
aren't just closed to public interest groups, they are actually 
shielded from public scrutiny by national security secrecy 
laws. Citizen activists found it necessary to get a court 
order, in order to force US Trade Representative, Charline 
Barshefsky, to include any environmental advocates on the 
committees that advises her on forest products issues. The 
Clinton Administration is now appealing that court order.
    The judicial system of the WTO consists of panels, each 
comprised of three trade bureaucrats whose meetings are closed 
to the public. It is so skewed in favor of corporate interests 
that since it was created in 1995 the WTO has ruled that every 
environmental, health, or safety policy that it has reviewed, 
is an illegal trade barrier, that must be eliminated or 
changed. The effect of this has been that many governments 
faced with even the threat of a WTO challenge have backed down, 
and governments are reluctant to enact legislation that might 
be challenged.
    We have sacrificed millions of lives and spent trillions of 
dollars to defend our right to govern our own affairs. Our 
government is signing away that right in secret negotiations, 
behind closed doors.
    Do not think that what went wrong in Seattle was a fluke. 
What happened in Seattle is simply that the Titanic has just 
brushed ever so gently against a very very large iceberg.
    This is a far more powerful moment in history than most of 
us realize. Perhaps Congress should be asking what King George 
would say in retrospect, if he was asked ``what went wrong in 
Boston.'' Lincoln had a simple suggestion-``you can't fool all 
the people all the time.'' That's what went wrong in Seattle.
    Though the American people have grown complacent, even as 
they have grown cynically accustomed to political corruption, 
the spirit of democracy is not dead. The corporate conspirators 
who believe that their destined moment has arrived, are in 
reality awakening a giant that has lain dormant since the civil 
rights movement and Viet Nam.
    The monster will be stopped. It may come through massive 
demonstrations, riots or armed revolution. That will largely 
depend on congress and the President. But the human spirit will 
not surrender to a corporate world government.
    The fifty some thousand Union workers, environmentalists, 
human rights workers, and church representatives, who braved 
the police in Seattle and around the world, to stand up to the 
WTO and corporate tyranny, are in greater solidarity with the 
people, and stand for a far nobler cause than did our 
forefathers who dumped the King's tea in Boston Harbor. When 
the Ministerial ended, the demonstrators, except for the 
prisoners, went home, but do not think that it ended there. 
Religious and other human rights workers will not give up on 
human rights. Environmentalists will not relinquish to some 
autonomous corporate body, their right to defend the planet. 
And Union leaders know all too well that far from bringing 
prosperity, corporations brought slave labor conditions and 
sweat shops to America, wherein hundreds of thousands of 
workers died. It was not corporations that brought prosperity 
to America, it was strongly united workers.
    The Clinton Administration has promised a few bandages to 
patch up some specific areas of complaint. That will not solve 
the problem, nor will it placate the American people.
    Unless and until the WTO becomes a democratic institution, 
whose operations are open to full public participation and 
disclosure; until the WTO reverses past decisions and undoes 
the damages already done to public health, worker, 
environmental and human rights protection; until its judicial 
system puts people above corporations; and until elected 
governments are guaranteed the right to enact laws to protect 
people and all the other inhabitants of the earth, the WTO will 
remain an institution whose interests are opposed to the 
interests of the people of this nation and of the world, and 
the people will do whatever is necessary to stop it.
    Instead of asking ``What went wrong in Seattle?,'' everyone 
in Congress should be asking ``Which side will I be on--The 
People's or the Corporation's?,'' for that is how history will 
judge you.
      

                                


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 need 
for the Administration to strongly adhere to its position that 
the WTO Antidumping Agreement will not be subject to future 
bilateral or multilateral trade negotiations. As the recent 
steel import crisis has demonstrated, strong, effective and 
vigorously enforced trade laws are necessary to ensure that 
American industries and workers are not left defenseless 
against unfairly traded imports. Moreover, the unfair trade 
laws are essential to maintaining an open market policy in the 
U.S., and encouraging the same abroad.
    In the months leading up to the WTO Ministerial conference, 
the Administration's firm position was that the WTO Antidumping 
Agreement would not be the subject of negotiations. For 
instance, in its 1997 markup of fast track legislation, the 
Committee on Ways and Means approved without dissent a 
provision instructing U.S. negotiators to reject any agreement 
that would weaken existing disciplines against dumping and 
subsidies. Further, over 200 members of the House co-sponsored 
a resolution last year stating that the Congress would not 
consider legislation to implement a trade agreement that 
required changes to our trade laws. The Administration's 
actions in following through on its commitment to keep the 
renegotiation of our trade laws off the table is recognized and 
appreciated. At the same time, it remains vital that this 
position be re-affirmed and it made clear to our trading 
partners that the United States will not discuss changes to the 
trade laws.
Reasons for the Outcome of the WTO Ministerial

    The setbacks resulting from the WTO Ministerial conference 
in Seattle were caused by many substantive and logistic 
impediments which made the successful conclusion of 
negotiations difficult. The positions of our major trading 
partners, particularly the European Union and Japan, were 
untenable and a consensus with developing countries on the 
implementation of existing commitments was not reached. There 
is a general consensus, however, that the negotiations did not 
stall because of the American position on the antidumping and 
anti-subsidy rules. The U.S. position was set forth clearly and 
did not undermine efforts to begin a round on those issues ripe 
for negotiation by the WTO.

Further Attempts to Erode American Trade Remedies

    In the past few years, the U.S. integrated steel industry 
has been seriously injured by unprecedented surges of unfairly 
traded imports. In particular, countries which have recently 
suffered severe economic consequences--Japan, Korea, and 
Russia--have continued to target the U.S. market with dumped 
and subsidized imports. Often, these countries also benefit 
from protected home markets, thus exacerbating the effect of 
their unfair trade practices. The American industry's last line 
of defense against these illegal trade practices are the 
antidumping and anti-subsidy trade laws. Foreign unfair traders 
realize that the only significant obstacle to unfettered abuse 
of the U.S. open market is the trade laws. Their goal is to 
reopen the antidumping and anti-subsidy agreements in order to 
weaken them. The U.S. government correctly withstood these 
pressures.
    In light of their failed attempts, other countries, 
particularly Japan and Korea, are now trying to achieve through 
the WTO dispute settlement system what they could not achieve 
through multilateral negotiations. For instance, Japan has 
recently filed a complaint with the WTO concerning American 
antidumping measures on hot-rolled steel, and has threatened to 
file further WTO complaints concerning additional trade law 
cases duly resolved under the U.S. law consistent with our WTO 
obligations. The long and arduous WTO dispute settlement 
process has been initiated by the very same parties which have 
engaged in the unfair trading of steel. Rather than accept the 
orderly rule of law they seem determined to continue to 
litigate in defense of their own wrongdoing.
    Japan's objective in filing these complaints is to achieve 
the weakening of U.S. trade laws that they were unable to 
achieve in the recent WTO Ministerial. The U.S. government must 
aggressively defend the trade laws enacted by Congress and 
administered by the Executive Branch and courts against this 
pernicious assault through the WTO dispute settlement process. 
Allowing these laws to be weakened only favors those countries 
that benefit from their closed markets; strong trade laws are 
necessary to ensure open and fair trade worldwide. Further, re-
opening the WTO agreements after our position leading up to 
Seattle was made clear, and after complicated negotiations were 
concluded during the Uruguay Round, would only serve to 
diminish the credibility of U.S. negotiators among our foreign 
counterparts. The Congress too must re-affirm its position that 
it will not accept agreements that require changes to the U.S. 
antidumping laws.

American Steel Companies and Workers Need Strong Remedies 
Against Unfair Trade

    The American steel industry and steelworkers are seriously 
injured by unfair trade. American steel companies have invested 
over $50 billion to improve their plants and equipment. 
American steelworkers suffered the loss of over 250,000 jobs as 
the companies and labor worked together in the 1980's and early 
1990's to restructure the industry and make it the most 
efficient in the world. After having made the necessary 
investments to modernize the industry, American steel companies 
and workers are now being seriously injured once again. Since 
the beginning of the current import crisis, over 10,000 good 
U.S. steel jobs have been lost. The industry has suffered five 
bankruptcies since the import crisis began. As confirmed by the 
International Trade Commission's affirmative findings of injury 
in the recently filed hot-rolled and cut-to-length plate cases, 
and the high dumping margins and countervailing duty rates 
found by the Commerce Department, dumped and subsidized foreign 
steel are causing this damage.
    As a result of the petitions filed by the domestic 
industry, pursuant to the same antidumping and anti-subsidy 
laws that our competitors seek to renegotiate, only now are we 
beginning to see market adjustments as foreign imports must be 
sold at fair prices. Without the full force and effect of these 
laws, every indication is that massive foreign dumping and 
subsidization would persist, and cause greater injury. In 
short, further erosion of our trade laws would lead to further 
injury to the domestic steel industry and its workers.

The Global Trading System Needs Strong Antidumping and Anti-
subsidy Laws

    The antidumping rules are at the very foundation of the WTO 
and an essential element of the multilateral trading system 
because illegal trade practices distort the marketplace and do 
not allow for the benefits of fair and equitable global 
competition. The original GATT stated in Article VI that 
``dumping a is to be condemned if it causes or threatens 
material injury to an established industry in the territory of 
a contracting party or materially retards the establishment of 
a domestic industry.'' Strong antidumping and anti-subsidy 
rules are essential if global and regional open market policy 
objectives are to be achieved and maintained. Maintaining open 
trade requires the enforcement of fair trade.
    For these reasons, the current WTO unfair trade rules were 
comprehensively negotiated and concluded only after spending 
substantial effort and resources during the Uruguay Round. 
These rules were designed to ensure a basic level of fairness 
and to prevent abuse by countries with closed markets of other 
countries' open market policies. But these rules have barely 
been tested and certainly have not proven to be defective. Re-
opening negotiations on these laws would only undermine 
confidence in the WTO system and future negotiations.

Conclusion

    The United States has consistently made clear that the 
WTO's antidumping rules would not be subject to negotiation. 
Congress has also emphatically stated its position that the 
trade laws shall not be undermined by international 
negotiations. We commend this continued strong commitment to 
maintain effective WTO disciplines against unfair trade. 
American industries, and the global trading system as a whole, 
will suffer irreparably if the terms of the antidumping rules 
are renegotiated.
      

                                


Statement of United States Association of Importers of Textiles and 
Apparel, New York, New York

    The U.S. Association of Importers of Textiles and Apparel, 
USA-ITA, is pleased to have this opportunity to provide its 
views on the outcome of the WTO Ministerial in Seattle and what 
steps are necessary to achieve a more positive result in the 
future. USA-ITA participated as a non-governmental organization 
at the Ministerial meeting in Seattle and strongly supports the 
launch of a new round of multilateral negotiations.
    USA-ITA is an association founded in 1989 which now has 
more than 200 members involved in the textile and apparel 
business. USA-ITA members source textile and apparel products 
both domestically and overseas. Members include manufacturers, 
distributors, retailers, and related service providers, such as 
shipping lines and customs brokers. USA-ITA member companies 
account for over $60 billion in U.S. sales annually and employ 
more than one million American workers.
    It is the view of USA-ITA that multiple factors contributed 
to the inability of the ministers to reach agreement in Seattle 
on a declaration launching a new round. Textile issues were 
among those factors. Of course differences between the European 
Union and the United States, principally on agriculture, 
probably had the most to do with the breakdown of the Seattle 
Ministerial, but some of the ``credit'' also must go to:
        1) the developing countries, who made it clear that an unwieldy 
        and outdated WTO decision-making process was unacceptable (with 
        a small number of countries secretly making the most important 
        decisions in exclusive ``Green Room'' sessions and then forcing 
        the excluded countries to concur);
        2) the timing and location of the meeting: too close to the 
        next American election cycle and in the United States (which 
        therefore compelled the U.S. Government to serve as a host at 
        the same time it sought to implement a significant agenda);
        3) the failure of Geneva representatives to reduce the number 
        of questions left to ministers before Seattle;
        4) substantive differences between and among the developed and 
        developing countries on a variety of issues, including 
        textiles, where promised liberalization has yet to materialize; 
        and
        5) the comment by President Clinton indicating support for the 
        ultimate use of sanctions to enforce labor standards.
    USA-ITA rejects the attempts by labor and environment 
protestors to take credit for the failure of the ministers to 
reach agreement on launching a new round. While disruptive and 
inconvenient, their presence was not what determined the 
outcome of the meeting.
    It is apparent to USA-ITA that textile issues played a key 
role in the difficulties faced by the trade ministers in 
Seattle. We spoke extensively with the trade ministers of many 
of the developing countries that supply the U.S. market. 
Through our discussions with these officials, we know that the 
insistence by U.S. negotiators not to move on textiles led to 
much frustration and consternation within the developing world. 
Clearly, these members had little interest in initiating a new 
round of trade talks unless it included concessions on 
textiles, where the promises of liberalization provided by the 
Uruguay Round Agreement have yet to yield tangible results.
    The textile issues were framed well before the ministers 
arrived in Seattle and reflected the developing world's strong 
feeling of disappointment with the implementation of the 
Agreement on Textiles and Clothing (ATC) by the United States, 
in particular, and with the increased use of anti-dumping 
measures by the European Union. The developing country 
producers of textile and apparel products have plenty of 
reasons to be disgruntled:
     few textile and apparel products removed from the 
quota system (integrated into ``normal GATT rules''),
     annual increases in trade constrained by small 
growth rates,
     the introduction of numerous safeguard actions 
(new quotas) creating new restrictions, and
     the disruptive change in the U.S. rules of origin 
for textile and apparel products after the ATC was implemented.
    Several trade ministers specifically raised textiles during 
their statements at the opening Plenary Session of the 
Ministerial and, in the view of USA-ITA, their statements 
accurately summarized the frustrations of the developing world 
with respect to textiles trade. Thus, Hong Kong's Secretary for 
Trade and Industry noted that ``The begrudging manner in which 
the [ATC] is being implemented--including back-loading of 
integration, minimum growth rates, unjustified safeguard 
actions and harassment through anti-dumping--is probably more 
responsible, more than almost any other single factor, for the 
feeling that has emerged among developing countries that they 
have so far been denied the anticipated benefits of the Uruguay 
Round.''
    Similarly, Pakistan's Minister of Commerce, Industry and 
Promotion noted that ``developing countries have not gained any 
meaningful increase in market access in the key areas where 
they have a clear comparative advantage, especially textiles 
and agriculture. For many developing countries, the [ATC] was 
the centerpiece of the Uruguay Round Agreements. They were 
persuaded to go along with the ``single-undertaking'' in the 
expectation that progressive liberalization of textiles by the 
developed countries within the ten-year phase-out period would 
enable them to generate significant gains in exports and 
incomes. . . Unfortunately, these hopes were dashed. The 
integration programmes for the first two stages have not led to 
any meaningful liberalization. . . .''
    From the outset of the Ministerial meeting, however, U.S. 
negotiators made clear their determination to avoid making 
commitments on textiles, particularly if it involved quota 
liberalization, and therein lies a significant problem. This 
issue cannot be ignored if developing countries are to perceive 
a benefit from participating in a round that will require them 
to make further reforms in their trade policies.
    USA-ITA is disappointed that U.S. officials repeatedly 
insisted that those concerned about textile trade and assisting 
the least developed countries should be satisfied with the 
Administration's support for the Africa Growth & Opportunity 
Act and the Caribbean Basin Enhancement Act, which are 
currently being considered in the U.S. Congress. USA-ITA 
strongly supports that legislation because it would provide 
duty-free and quota-free entry into the U.S. for certain 
products--mostly apparel--made in qualifying countries. Recent 
comments by U.S. Government officials, including chief textile 
negotiator C. Donald Johnson and Assistant U.S. Trade 
Representative Rosa Whitaker, confirm that the Administration 
endorses the House version of the Africa legislation. However, 
the final content of the legislation remains to be seen. The 
Senate version would not provide meaningful benefits to sub-
Saharan Africa. The Senate bill, for example, would limit the 
benefits to apparel made from U.S. formed fabric from U.S. 
formed yarns, thereby greatly reducing the value of program for 
the participating countries. In any event, an LLDC initiative, 
while useful and a moderate step forward from the current 
situation, cannot replace the need for broader liberalization 
in the textile sector.
    The failure of the Ministerial Conference to produce a 
Declaration to launch a new trade round does not immediately 
threaten the life or health of the WTO as an institution. Nor 
does it threaten the 2005 deadline for completion of the quota 
phase-out process under the Agreement on Textiles and Clothing. 
USA-ITA continues to be confident that, at least with respect 
to WTO member countries, the termination of the ATC will be 
honored. However, the fact that most of the liberalization is 
delayed until January 1, 2005 creates the opportunity for new 
demands to be put forward before that date. Given the fact that 
most of the concessions made by developing countries during the 
Uruguay Round have implementation deadlines well ahead of 2005, 
the prospect that further concessions may be required before 
the benefits of the Uruguay Round have been obtained greatly 
limits the negotiating flexibility of these nations. Tangible 
benefits before 2005 would likely change this dynamic.
    So long as a new round is not initiated, USA-ITA and its 
member companies will be unable to achieve their objectives as 
well. These include additional access to new markets, the 
implementation of trade facilitation measures that reduce 
variations in procedures among different border authorities, 
and access to improved distribution systems. Obviously, the 
global expansion of other sectors of the U.S. economy, 
including agriculture, manufacturing and services industries, 
also is being impeded by the delayed start of a new round. 
Unless the very real concerns of the developing world are 
addressed, including their concerns vis-a-vis the highly 
contentious issue of textiles, these countries have no reason 
to agree to a new round where further concessions on their part 
will be required. We all will pay the price for such short-
sightedness.
    We look forward to the Ways & Means Committee continuing to 
play a leadership role on this important issue.
            Respectfully submitted by,
                                             Laura E. Jones
                                                 Executive Director
      

                                


Statement of Hon. Clayton Yeutter,\1\ Counsel, Hogan-Hartson L.L.P.; 
and former United States Trade Representative

                   The WTO: Where do we go From Here?

    Mr. Chairman and members of the Subcommittee, it is a 
pleasure for me to submit this testimony to you. Doing so 
brings back fond memories of many appearances before this 
Subcommittee through the years.
---------------------------------------------------------------------------
    \1\ Clayton Yeutter served as U.S. Trade Representative from 1985-
1989 and as U.S. Secretary of Agriculture from 1989-1991. He was 
heavily involved in the launch of the Uruguay Round in 1986. He is 
currently of Counsel to Hogan & Hartson, L.L.P., a Washington, D.C. law 
firm.
---------------------------------------------------------------------------
    It is easy to be a critic. It is especially easy to be one 
with the benefit of hindsight. Beyond that, focusing on the 
future is a much more fruitful exercise than bewailing the 
past. Nevertheless, it might be useful to delineate some of the 
mistakes of the recent Seattle Ministerial, if only to build a 
better foundation for the future. What follows is my personal 
opinion only, and the criticisms are aimed primarily at the 
policy making process of the present White House, rather than 
at Amb. Barshefsky, who is a fine U.S. Trade Representative.

In my view:

    l. The l999 ministerial meeting should not have been held 
in the U.S., an attractive locale for disruptive actions, as we 
learned by sad experience.
    2. The meeting should not have been chaired by the U.S. It 
is difficult to be an effective advocate when one also has 
chairmanship responsibilities.
    3. The U.S. chief of state should not have been there, 
other than to provide a formal welcome to the attendees. His 
presence was a motivation for the demonstrators, and his 
substantive presentation alienated the representatives of 
lesser developed nations. Any chance of reaching agenda 
consensus at Seattle disappeared at the conclusion of his 
presentation.
    4. The meeting should not have been held when policy 
positions of major trading nations were so divergent. One 
simply cannot bridge such huge differences at a three or four 
day ministerial meeting.
    5. The meeting should not have been held so soon after the 
arrival of the WTO's new Director General, Mike Moore. The 
Director General is an outstanding individual, with exceptional 
knowledge and experience, but no one can be expected to get up 
to speed on new round preparations in just a few weeks. It is 
the DG who must personally work on narrowing major policy 
differences, and Mr. Moore did not have time to do that.
    6. The meeting should not have been held so soon after the 
completion of U.S.-China negotiations on the latter's potential 
entry to the WTO. That was a major distraction for Amb. 
Barshefsky, and one that could have been avoided had the White 
House recognized what an excellent job she had done in the 
initial China negotiations several months earlier.
    7. The U.S. should have spent less time worrying about what 
the round would be called, and more time preparing for it. In 
particular, our relentless argument in favor of a limited 
agenda was not only counterproductive, but counter to our own 
interest in expanding trade and opportunity.
    8. The U.S. should not have taken antidumping off the 
table. That is a priority issue for many nations, both 
developed and developing, and our intransigence did not wear 
well. When we insist that issues sensitive to us will not be 
negotiated, it is not surprising that other nations respond in 
like manner. That almost guarantees that consensus on a 
negotiating agenda will not be reached.
    Failure of the Seattle ministerial provided the groups who 
were demonstrating an opportunity to claim credit for the 
outcome, and they've done so with great relish. It has also 
provided them with the momentum to try to disrupt WTO and other 
international meetings in the future. So the Seattle 
proceedings were a huge embarrassment for the U.S.
    The Seattle meeting was a debacle of major proportions, for 
it will delay WTO negotiations of consequence for at least a 
year and a half. There will be concomitant delayed benefits of 
more open trade, particularly for developing countries, but 
also for the most internationally competitive nations--and the 
U.S. is at the top of the latter list. It is ironic that we've 
shot ourselves in the foot at a time when we have more to gain 
from a new WTO round than any other nation in the world.
    In tennis terms, we had way too many unforced errors in 
Seattle, and we'd better figure out a way to avoid or eliminate 
such errors in the future. U.S. leadership in international 
trade is at a mighty low ebb, and that needs to change soon.

The Future

    So where does this now leave us? Let's concentrate first on 
the year 2000. In my opinion there is only a minimal chance of 
launching a new trade round prior to the U.S. presidential 
election.
    Nevertheless, there is plenty to do this year. Director 
General Moore can work hard on the major stumbling blocks that 
emerged in Seattle, engaging in a bit of shuttle diplomacy 
where that will be helpful. He'll not be able to resolve those 
differences this year, but just narrowing them appreciably 
would be a significant accomplishment.
    The Director General needs also to encourage countries who 
have not yet finalized their own negotiations with China on WTO 
admission to do so, promptly. Later in the year the WTO needs 
to bring this effort to its ultimate conclusion, with entry 
afforded both to China and Taiwan (almost simultaneously). The 
U.S. Congress needs to do its part, by approving the permanent 
grant of normal trade relations for China, on a timetable 
carefully coordinated with Director General Moore.
    China's behavior, on human rights and other issues, is far 
from exemplary. Its trade regime has its own shortcomings. The 
real issue, however, is whether progress on all such issues is 
more likely to occur if China is in the WTO, or outside, as it 
is today. I'm persuaded that we'll have a much greater chance 
to affect and influence that behavior once China is a WTO 
member, and thereby subject to international rules, than if it 
continues as an outsider, following its own rules. Absent WTO 
disciplines our trade leverage in China is limited to potential 
economic sanctions, and they typically hurt us more than they 
do ``the other guy.'' With China on the inside we'll have the 
much more comprehensive and powerful leverage of about l50 WTO 
member nations.
    The WTO should also proceed with preliminary skirmishes on 
agriculture and services, the two major issues on which 
``second tranche'' negotiations were agreed to in the Uruguay 
Round. There is a lot of hard work ahead in both those areas, 
for they are highly contentious and extremely sensitive 
politically. So the sooner that work gets underway the better. 
Otherwise they'll be a drag on the new round, just as they were 
on the last one.
    Turning to the post-U.S. election period, one of the 
highest priorities for the incoming administration should be to 
get a strong USTR team in place as quickly as possible. The 
rest of the world will be waiting for this.
    My own view is that the next administration should make 
fewer political appointments at USTR. That number has increased 
in recent years, and the result is an inevitable downgrading of 
USTR's top career negotiators. The latter typically have far 
more negotiating knowledge, experience and skills than the 
incoming political appointees. We ought to let them do their 
jobs--with broad political guidance, but not day to day 
political handwringing--for they're the best in the world!
    We also need to re-think our negotiating priorities for a 
new round, particularly the argument for a narrowly based 
agenda. We're certainly not going to accomplish anything 
multilaterally on issues that are omitted from a finally agreed 
agenda. Conceivably we could make progress bilaterally on such 
subjects, but that's hard sledding, and a terribly inefficient 
use of scarce negotiating talent. Therefore, let's be sure to 
get a comprehensive new round agenda that addresses all the 
trade issues that are likely to be globally important to the 
U.S. over the next decade.
    That means we need to get beyond agriculture, services, and 
industrial tariffs, the key issues we've denominated so far. 
Those are indeed significant, but I'd add:

    1. Revisions of Existing WTO Agreements -wherever that 
would be appropriate. That may open up issues in government 
procurement, standards, antidumping, and perhaps even some of 
the other agreements such as customs administration. But why 
not? We should feel free to raise issues in those areas that 
require additional negotiation, and so should any other WTO 
member country. After all, we spent hundreds of hours 
negotiating these Agreements in past rounds. We all should be 
willing to consider potential improvements in those Agreements 
where improvement is in order.

    2. Administration of Existing WTO Agreements and Other 
Provisions -In many cases where dissatisfaction exists with the 
performance of the WTO, the proper response may well be to 
foster the execution and administration of what was agreed to 
earlier. If corrective action is taken in that arena, a re-
negotiation of specific Agreements and other WTO provisions may 
not be necessary.

    3. Dispute Settlement -WTO dispute settlement is working 
much better than in the past, and far better than its critics 
are willing to admit. But with several years of experience now 
behind us, it is time to evaluate the mechanisms that were put 
in place during the Uruguay Round. If we can improve them by 
tweaking them somewhat or making them more transparent, we 
clearly should do so. Though the process is much faster, more 
decisive and more definitive than it was for decades, it is 
still too slow for a rapidly changing world. In my view it has 
also become too legalistic.
    With countries beginning to use dispute settlement much 
more than in the early years of the GATT, we also have a danger 
of disputes overwhelming the system. If the WTO cannot handle 
them in a satisfactory manner, the organization itself will 
suffer a severe loss in credibility. That suggests attempting 
to resolve more of these disputes through conciliation and 
arbitration, rather than with a full blown panel procedure.
    The WTO also experiences a credibility problem when nations 
refuse to take corrective action after losing in a dispute 
settlement proceeding. The aggrieved nation will have the 
privilege of retaliating against the offender, but that does 
not remove the grievance. And the sanction incongruously 
reduces international commerce, an undesirable result indeed. 
In this next WTO round we need to find creative ways to 
encourage and stimulate compliance with WTO rulings, while 
still respecting each nation's sovereignty. And sanctions ought 
to be trade enhancing rather than trade reducing.

    4. Investment -Over the past several years a major attempt 
has been made to draft a multilateral investment agreement 
under the aegis of the OECD. Regrettably, those efforts seem to 
have failed. We ought to bring them back to life in the WTO, 
where they should have been negotiated in the first place. A 
beginning was made in the Uruguay Round, and the venue was then 
shifted to the OECD. We ought to shift it back again.
    We should not underestimate the importance of sound 
investment rules. At a time when technology is drawing the 
world economy ever closer together, investment and trade rules 
go hand in hand. If one lags behind the other, this will 
inevitably have an adverse effect on economic growth. That 
means job creation will also lag, in developed and developing 
countries alike. We all have a stake in undertaking this task 
(which is why negotiations cannot be limited to the OECD 
nations), and in getting it accomplished in a timely way. The 
OECD proposals generated lots of criticism, much of it based on 
fallacious reasoning. It is time for everyone to recognize that 
the technological revolution is not going away, and that the 
efficient movement of capital will be critical to narrowing 
differences in economic well-being throughout the world. Too 
many nations today deliberately distort investment patterns. 
Some that are most in need of investment discourage foreign 
investment rather than encourage it. It is high time for 
rational thinking to prevail in this area, and that demands 
negotiation of a sensible WTO investment agreement. The U.S. is 
now seeking to meet this need via bilateral investment 
agreements, but that is far too slow a process.

    5. Open Markets for the LLDCs -The developed country 
members of the WTO have flirted in recent years with the 
concept of opening their markets fully to products and services 
from the lesser of the less developed nations. Director General 
Moore has been and is a strong advocate for this worthy cause. 
There is still trepidation among some developed country 
industries with respect to this proposal, but that trepidation 
is unfounded. In a new round the WTO will, of course, have to 
delineate specific parameters for determining which low income 
nations qualify, and when such nations are to be graduated from 
the benefits of this proposal. That should not be a formidable 
task, and developed nations need have no fear that they'll be 
inundated with imports from the LLDCs. This would be a splendid 
gesture by the developed world, deeply appreciated by those 
very poor countries, all of whom would prefer trade to aid. In 
addition, placing this issue on the agenda of the new round 
will instantaneously generate political support for the round 
from a substantial number of countries.

    6. New Controversies? -What is not on the negotiating 
agenda may be just as important as what is on it. Issues that 
are not ripe for negotiations should not be included. Forcing 
them on the agenda becomes an exercise in frustration and 
futility. The U.S. has been spinning its wheels on worker 
rights and environmental issues for the past several years, and 
neither of those issues is anywhere near ready for a new round 
agenda. The European Union has been doing the same with 
competition policy, and it is not yet ripe either.
    All three of those issues do have some relevance to 
international trade. In many instances the impact is nebulous, 
and it is often indirect and peripheral. But in some situations 
the impact is direct and meaningful. With the high level of 
interest that prevails for each of these subjects, a 
multilateral forum (or fora) should be available for people and 
organizations to discuss them. The preferred forum may or may 
not be the WTO, but it should be some international 
organization. Otherwise those who have strongly held opinions 
on these subjects will conclude that they are being stonewalled 
by the international community. That in turn will lead to 
conduct of the kind that was on display in Seattle.
    Competition policy issues obviously need to be vetted with 
Ministers of Justice from the WTO countries. Because of the 
interrelationship of these issues with those of antidumping, 
one could certainly justify a joint working group of justice 
and trade ministers to determine whether global standards are 
yet in order for competition policy--and, if so, where and how 
such standards should be negotiated. But we'll certainly not be 
ready for any such negotiations in the next WTO round.
    The ``worker rights'' issue is a legitimate one, for the 
world ought to be able to agree that some such rights are 
fundamental -in any country, rich or poor. The International 
Labor Organization (ILO) is the appropriate standards-making 
body in this area, but the ILO does not now have a mandate for 
implementing and enforcing ``fundamental'' worker rights. Such 
a mandate will obviously be highly controversial, as to if, 
when, how, and where implementation and enforcement are to take 
place. All of this merits discussion, perhaps as a joint ILO-
WTO effort, but it is not yet ripe for negotiations in any 
international fora.
    Environmental issues have such great breadth that I see no 
feasible way ever to negotiate meaningful WTO rules in this 
area. International harmonization of environmental standards is 
a laudable objective, but one that should be pursued in 
appropriate standards-making bodies, not in the WTO. In many 
instances, it may be far more sensible and practical to sort 
out environmental differences issue by issue, and in defined 
geographic areas, rather than battle through their complexities 
on a worldwide basis. It seems to me that the WTO's proper role 
at present is to be sensitive to environmental considerations 
in its deliberations and decisions. That suggests prudence in 
action and a willingness to listen, but it does not support a 
negotiating agenda.

WTO Governance

    The Uruguay Round dramatically broadened the spectrum of 
issues to be dealt with at the WTO, and significantly added to 
the complexity of its rules. Debate over the handling of 
matters such as worker rights, the environmental impact of WTO 
rules, and competition policy has the potential to broaden that 
spectrum still more. To me this suggests that the Director 
General needs to invite high level trade officials from the 
capitals to Geneva on a regular basis.
    This need not be (and should not be) l50 trade ministers, 
for not much will be accomplished by a l50 member committee. It 
should be a manageable group, representative of the WTO 
membership. The risk in this is that those who are excluded 
will be displeased, but that is a challenge that must be faced. 
(That risk can be mitigated by rotating at least some of the 
memberships on an agreed timetable.) Years ago this was done at 
the GATT through what was then called the Consultative Group of 
l8 (or the CG l8), and it worked quite well during its time. 
Something of this nature needs now to be resurrected by 
Director General Moore, to help him work through the delicate 
issues that are bound to confront the WTO in the coming years. 
The world just cannot wait for this to happen in a trade round 
conducted once a decade. Issues and potential consequences 
change much too quickly for that. The private sector is fast 
moving these days, and the public sector (including 
international organizations such as the WTO) must begin to 
match it in pace and agility. Slow moving, cumbersome, 
inflexible public entities will soon fade into oblivion.

Fast Track

    What does all this mean for fast track here in the U.S.? It 
means we ought to grant fast track authority to USTR and have 
confidence in its ability to do this job and do it right. The 
Congress will have ample opportunity to influence negotiations 
as they unfold, and prior to finalization of any package that 
will be brought back for Congressional approval. We're the only 
nation in the world that has tied the hands of their 
negotiators. And we've done so at a time when it is clearly in 
our national self interest to be negotiating. The risk, to the 
Congress and to the American public, of granting fast track 
authority is minuscule, and we ought to provide it. That said, 
I see no merit in granting such authority for matters--such as 
those I've discussed above--which clearly are not now ripe for 
negotiations, and are not likely to become ripe during the 
tenure of a new WTO round. Should that situation change, 
additional fast track authority can always be granted in the 
future.

Conduct of a New Round

    In light of what transpired in Seattle, how can the WTO 
launch a new round? By getting its homework done this year, and 
much of that burden will now fall on the shoulders of Director 
General Moore and his staff. If he can begin to generate 
consensus in support of an agenda such as the one I've outlined 
here, and if the accession of China and Taiwan can be completed 
later this year, I see no reason why a new round cannot be 
launched in 200l.
    Is another ministerial meeting necessary? Perhaps, but not 
necessarily. All WTO member nations have delegations in Geneva, 
and they ought to go to work with renewed vigor in the 
aftermath of Seattle. They should be embarrassed too, by what 
did and did not occur in the Seattle fiasco. If these 
delegations do their jobs well, with the full support and 
involvement of their trade ministries back home, it is 
conceivable (perhaps even probable) that a new round could be 
launched without another meeting of ministers, or with a pro 
forma session that could be held in Geneva rather than off-
site.
    The Seattle meeting's proposed timetable for a new round 
was three years. Can a broad based agenda be packaged for final 
approval in such a short timeframe? Probably not, so I'd rather 
opt for a four year wrap-up, as was done in the Uruguay Round. 
The latter took nearly twice that long, but the GATT had never 
before dealt with such a comprehensive negotiating agenda. With 
the experience of the Uruguay Round, and an agenda not quite so 
broad, the WTO should have a reasonable chance of finishing in 
four years this time around. If so, that would be a superb 
achievement.

Conclusion

    Neither the Congress, the Administration, or the American 
public should be mislead or intimidated by what occurred in 
Seattle. The demonstrators had little or no impact on the final 
outcome of the meeting. Virtually every demonstrator in Seattle 
will benefit from a more open trading system. Those of us who 
understand the benefits of free trade obviously have not 
delivered the open trade message in a persuasive manner to 
those who were marching in Seattle's streets. That is a 
challenge in itself, but it is beyond the purview of this 
hearing. What we must not do is turn inward, altering U.S. 
trade policy in a way that will come back to haunt all of us 
(including the Seattle demonstrators) in the future. That's 
what leadership is about, and it is imperative that we exercise 
it, with courage and principle.
    The success of the Uruguay Round, and its positive impact 
on millions of people in the U.S. and elsewhere around the 
world, provides a foundation on which to build. The trade 
policy path to a better world is generally quite clear, and a 
new trade round is on that path. We need now to help lead the 
world in that direction.
    We should, therefore:
    1. Recognize the mistakes of Seattle, and learn from them;'
    2. Focus this year on bringing China and Taiwan into the 
WTO, and in the process approve normal trade relations for 
China on a permanent basis;
    3. In the coming months help WTO Director General Moore to 
narrow agenda differences for a new round, and move forward 
with preliminary negotiations in agriculture and services;
    4. Early next year encourage the new Administration to get 
strong USTR leadership in place as quickly as possible;
    5. Then reach an agreed agenda broader than the one we 
advocated in Seattle, but exclude issues that are not ripe for 
negotiation;
    6. Determine appropriate international fora for 
deliberating issues such as worker rights, environmental 
protection, competition policy, and others that either are 
inappropriate for WTO negotiations are not yet ready for such;
    7. Grant fast track authority to the new Administration, 
under the conditions just described; and
    8. Set a timetable for concluding the new round, and make 
it our highest negotiating priority in international trade.
    Thank you, Mr. Chairman, for granting me the privilege of 
contributing these views for your consideration.

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