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





  IMPORTANCE OF TRADE NEGOTIATIONS IN FIGHTING FOREIGN PROTECTIONISM: 
                        ACTIVE U.S. INVOLVEMENT

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 4, 1999

                               __________

                             Serial 106-71

                               __________

         Printed for the use of the Committee on Ways and Means


                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
66-807                     WASHINGTON : 2000


_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402


                      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 February 19, 1999, announcing the hearing............     2

                               WITNESSES

American Farm Bureau Federation, Dean Kleckner...................    52
Baszile Metals Service, Barry Baszile............................    26
Business Roundtable, and Boeing Company, Philip M. Condit........    17
Coalition of Service Industries, and Chubb Corporation, Dean R. 
  O'Hare.........................................................    34
Council of the Americas, Washington Operations, Hon. William T. 
  Pryce..........................................................    63
Emergency Committee for American Trade, and Cargill, 
  Incorporated, Ernest S. Micek..................................     6
National Foreign Trade Council, Inc., and Foster Wheeler 
  Corporation, Richard J. Swift..................................    29
Gardner, Kevin, Cave City, Kentucky..............................    57
Staffing Innovations, Inc., Michael D. Ryan......................    66
Tramco, Inc., Leon Trammell......................................    60

                       SUBMISSIONS FOR THE RECORD

American Forest & Paper Association, W. Henson Moore, statement 
  and attachment.................................................    70
American Natural Soda Ash Corporation, Westport, CT, John 
  Andrews, Mike Murray, and John F. McDermid, statement..........    74
American Sugar Alliance, James W. Johnson, Jr., statement and 
  attachments....................................................    80
Gilbarco, Inc., Greensboro, NC, David Kaehler, statement.........    90
International Association of Machinists and Aerospace Workers, 
  Upper Marlboro, MD, R. Thomas Buffenbarger, statement..........    90
Rubber and Plastic Footwear Manufacturers Association, Mitchell 
  J. Cooper, statement and attachments...........................    92
Semiconductor Industry Association, George Scalise, statement....    96
United Brotherhood of Carpenters and Joiners of America, 
  Portland, OR, Michael V. Draper, statement.....................   102
U.S. Chamber of Commerce, statement..............................   103

 
  IMPORTANCE OF TRADE NEGOTIATIONS IN FIGHTING FOREIGN PROTECTIONISM: 
                        ACTIVE U.S. INVOLVEMENT

                              ----------                              


                        THURSDAY, MARCH 4, 1999

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

ADVISORY 
FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

February 19, 1999

No. TR-4

            Crane Announces Second Hearing in Series on the

                    Importance of Trade Negotiations

             in Fighting Foreign Protectionism: Active U.S.

                              Involvement

    Congressman Philip M. Crane (R-Il), Chairman of the Subcommittee on 
Trade of the Committee on Ways and Means, today announced that the 
Subcommittee will hold the second in a series of hearings on the 
importance of expanding trade and resisting protectionism through 
active U.S. involvement in trade negotiations. The hearing will take 
place on Thursday, March 4, 1999, in the main Committee hearing room, 
1100 Longworth House Office Building, beginning at 10 a.m. The first 
hearing in this series was announced on February 4, 1999, in release 
number TR-2.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. Any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The United States currently participates in three major 
multilateral and regional trade negotiations. At the December 1994 
Summit of the Americas in Miami, leaders of 34 Western Hemisphere 
democracies agreed to establish a Free Trade Agreement of the Americas 
(FTAA), in which barriers to trade and investment are progressively 
eliminated. They committed to begin the process immediately, make 
concrete progress by the year 2000, and conclude negotiations by no 
later than 2005. These negotiations were officially launched at the 
Second Summit of the Americas in Santiago, Chile, in April 1998.
      
    The Asia Pacific Economic Group (APEC) forum, an association of 21 
economies bordering the Pacific Ocean, working cooperatively to reduce 
barriers to trade and investment, has declared its intention to 
establish free trade and investment in the region by the year 2010 for 
developed countries and by 2020 for others. In November 1997, APEC 
members held a Joint Ministerial Meeting and Leaders Summit in 
Vancouver, where they identified 15 sectors in which they intended to 
cut tariffs and remove other barriers to trade. At the November 18, 
1998, Ministers and Leaders Meeting in Malaysia, countries agreed to 
move work on the tariff portion of nine of these sectors into the World 
Trade Organization (WTO), with the aim of completing an agreement with 
participation beyond APEC countries by 1999.
      
    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. The most visible accomplishment of this 
multilateral round was to establish the WTO to administer the GATT 
agreements and to settle disputes among WTO members.
      
    The Uruguay Round agreement calls for the resumption of 
negotiations by the year 2000 to further liberalize trade in 
agriculture and services, as well as on government procurement 
practices and enforcement of intellectual property rights. The next WTO 
Ministerial conference, which will be hosted by the United States 
November 30-December 3, 1999, is slated to consider the procedures and 
substance of the so-called ``built-in'' WTO agenda, as well as other 
matters of interest to WTO Members.
      
    At the hearing held on February 11, 1999, the Subcommittee received 
testimony from United States Trade Representative Charlene Barshefsky, 
who discussed the President's trade agenda.
      

FOCUS OF THE HEARING:

      
    The Subcommittee requests that witnesses address the adequacy and 
direction of the President's trade policy agenda and negotiating 
priorities for the remaining two years of this Administration.
      
    In addition, witnesses should focus their testimony on such issues 
as: (1) the potential impact of ongoing trade negotiations on jobs, 
wages, economic opportunity and the future competitiveness of U.S. 
manufacturers and service providers, (2) implementation and compliance 
with existing trade agreements, (3) prospects for an agreement to 
establish a FTAA, (4) the status trade talks under the auspices of the 
APEC Group, (5) negotiations on the so-called ``built-in'' agenda in 
the WTO, (6) ongoing WTO accession negotiations for China and other 
countries, and (7) the possibility of further bilateral trade 
negotiations with Europe, Chile, New Zealand, Australia, and other 
nations in the Pacific Rim region.
      

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, Thursday, February 24, 1999. The telephone request should 
be followed by a formal written request to A.L. Singleton, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515. The staff of 
the Subcommittee on Trade will notify by telephone those scheduled to 
appear as soon as possible after the filing deadline. Any questions 
concerning a scheduled appearance should be directed to the 
Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Subcommittee are required to submit 200 copies, along with 
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their 
prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade office, room 1104 
Longworth House Office Building, no later than Tuesday, March 2, 1999. 
Failure to do so may result in the witness being denied the opportunity 
to testify in person.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Thursday, 
March 18, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Trade office, room 1104 Longworth House 
Office Building, by close of business the day before the hearing.
      

FORMATTING REQUIREMENTS:

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

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

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

                                

    Chairman Crane. Good morning. This is the second in a 
series of hearing of the Ways and Means Subcommittee on Trade 
to consider the importance of expanding trade and resisting 
foreign protectionism through active U.S. involvement in trade 
negotiations.
    On February 11, Ambassador Barshefsky discussed the 
President's trade agenda for the remaining 2 years of this 
Administration. Today we are joined by CEOs from four major 
American companies, the president of the American Farm Bureau, 
and by three witnesses who will represent the interests of 
several small businesses and a family farm. I have asked 
today's witnesses to give us their thoughts on the adequacy and 
direction of the President's trade agenda. Recognizing that the 
United States is currently participating in five major trade 
initiatives, including the new WTO round, the Free Trade 
Agreement of the Americas, APEC, and the Trans-Atlantic 
Economic Partnership, I will be listening very closely for 
advice on priorities for the next 2 years.
    I recently read a speech given by Bill Gates in Seattle 
where he lays out the importance of trade negotiations for 
ensuring that the booming Internet trade remains tax-free and 
non-discriminatory, that U.S. intellectual property is 
protected, and that trade rules around the world are made more 
uniform. Because of the huge fixed costs associated with high 
tech industries of the 21st century, such as computers and 
software, their future survival will depend on the volume of 
sales inherent in global markets. As we have been saying, the 
United States needs to find new ways to sell to the 94 percent 
of the world's population that lives beyond our borders. Of 
course we can not conclude such negotiations without arming 
U.S. trade negotiators with the clout and the leverage they 
would realize from fast track negotiating authority.
    At the last hearing, I said to Ambassador Barshefsky that I 
am prepared to discuss with the Administration any specific 
ways in which it believes that my fast track bill, which the 
Administration agreed to in 1997, is somehow deficient. I will 
reiterate my call today to any critics to show me precisely 
where they believe my bill falls short, and to offer 
constructive and specific proposals that can garner bipartisan 
support.
    Because future trade agreements offer the best opportunity 
we have to expand and ensure the success of U.S. businesses and 
workers in the marketplace of the 21st century, we must do all 
we can to quickly pass fast track legislation. In the meantime, 
I hope that hearings such as this one today, will make crystal 
clear that all U.S. companies, workers, and consumers, stand to 
gain through trade agreements.
    I would now like to recognize the Ranking Minority Member 
of the Trade Subcommittee, Sander Levin, for any statement he 
would like to make.
    Mr. Levin. I thank you, Mr. Chairman. I will be very brief 
because we have two panels and we may have some votes. We want 
very much to get moving.
    This is part of what I hope will be an intensive dialog 
about where we should be going in terms of our international 
trade. We have a lot of changing currents within the 
international trade picture. The countries that we trade with 
are increasingly those who have very different structures than 
we do, both in terms of their capital structures, their labor 
structures, and environmental structures. In my judgment, we 
need to adapt to these changing currents and make sure that we 
have a trade legislative framework that is responsive to these 
changes and sensitive to them.
    As I have said before, I think we need to evolve a new 
consensus on trade. The one that we used to have broke down on 
various issues, including and especially this issue of how we 
respond to the different nature of trade, the different content 
of it, the evolving trade with evolving economies. I hope out 
of this dialog will come some new ideas. I think it would 
require a reshaping substantially of the fast track proposals 
that were offered a couple of years ago.
    But anyway, your testimony is an important part of this 
effort to have a renewed dialog, and I hope come to a new 
consensus on trade. So I join the chairman in looking forward 
to your testimony.
    Chairman Crane. Thank you, Mr. Levin. We will proceed in 
the order that you are indicated on the list of witnesses. I 
think you all have that before you. Mr. Micek, Mr. Condit, Mr. 
Baszile, Mr. Swift, and Mr. O'Hare. I would suggest that you 
try to keep your verbal presentations to around 5 minutes. Any 
printed statement will be made a part of the permanent record.
    [The opening statement of Hon. Jim Ramstad follows:]

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

    Mr. Chairman, thank you for calling this hearing today to discuss 
the importance of trade negotiations.
    Earlier this week, I met with Hennepin County Commissioner Randy 
Johnson, who was out in Washington, D.C. for the National Association 
of Counties meeting. One of the top issues he wanted to talk to me 
about was trade.
    Commissioner Johnson is working with a group in Hennepin County 
that is trying to be proactive on behalf of Minnesota's workers and 
businesses. They are concerned that the Twin cities region may become a 
victim rather than a player, in the new world economy. They are doing 
all they can to develop an aggressive strategy, involving the public 
and private sectors, to allow the Twin Cities to compete in the global 
economy. They know their strong international involvement is critical 
to the economy of Hennepin County, the rest of the state and everyone 
living there.
    I want to help in their effort. I want workers and employers in 
Minnesota to be able to compete with the rest of the world. I know when 
given a fair opportunity, they will succeed. I don't want them to be a 
powerless victim.
    But my support for Hennepin County and the rest of this nation is 
hampered if the Administration does not have fast track authority. 
Regardless of how ambitious the Administration's agenda for the next 
two years is, they won't be achieving much if Congress doesn't give 
them the authority to negotiate trade agreements and help American 
companies compete throughout the world. We'll only have the WTO dispute 
settlement process to protect what trade liberalization we have already 
achieved--not the power to knock down more unfair barriers to trade 
throughout the world.
    That's why I hope the Administration will submit suggestions to 
this Subcommittee soon on how best to craft legislation to extend the 
President this authority. I also wish all my colleagues in this House 
had the insight that Hennepin County has on the need for an aggressive 
approach and the importance of trade to our nation.
    Again, thank you for holding this hearing to highlight these 
issues. I look forward to hearing from our witnesses today, especially 
Ernie Micek, Chairman and CEO of Cargill and a good friend from 
Minnesota.

                                


    So we will with that, proceed with Mr. Micek.

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

    Mr. Micek. Thank you, Mr. Chairman, and good morning. My 
name is Ernie Micek. I am chairman and chief executive officer 
of Cargill, Incorporated. Cargill is a privately-held 
agribusiness company founded over 130 years ago in Iowa.
    Cargill is an excellent example of why the United States 
needs to support an open trading system, both at home and 
abroad. Just as greater trade and investment in overseas 
markets increasingly fuel growth in our national economy, 
Cargill's growth depends in large part on markets outside the 
United States. In the commodity businesses in which we 
participate, we need to be a global company to grow and 
succeed.
    But today, I am testifying as chairman of the Emergency 
Committee for American Trade on behalf of the heads of ECAT 
member companies, whose prosperity, like Cargill's depends on 
the continued expansion of U.S. international trade and 
investment. ECAT members are major American companies with 
global operations and represent all principal sectors of the 
U.S. economy. The annual sales of ECAT member companies total 
over $1 trillion, and the companies employ approximately 4 
million persons. ECAT companies, besides providing employment, 
add value in many important ways to the communities where their 
plants and offices are located.
    ECAT commends you, Mr. Chairman, and other Members of the 
Trade Subcommittee, for your leadership on the trade expansion 
initiatives. I am pleased to have the opportunity to testify 
before the Trade Subcommittee today on the importance of moving 
forward with a positive U.S. trade agenda and resisting the 
forces of protectionism. It was precisely this concern that led 
33 ECAT CEOs to join me in sending a letter to the President at 
the end of last year, stressing the need to pursue a positive 
trade agenda to promote the health of the U.S. economy. I would 
like to ask that a copy of the ECAT letter be entered into the 
record of this hearing.
    Above all else, ECAT member companies believe that a policy 
of expanding U.S. international trade and investment through 
bilateral, regional, and multilateral negotiations is essential 
to a sustained U.S. economic growth and standards of living. 
American companies, both large and small, are operating in a 
global economy that is increasingly concentrated outside the 
United States. In fact, 96 percent of the world's consumers are 
located outside of the United States. With the lowering of 
trade barriers and technological advances, American companies 
are increasingly able to reach these consumers. As a result, 
trade accounts for one-fourth of our gross domestic product. 
The agribusiness sector in which Cargill operates is a perfect 
example of this, as the products coming from one-third of 
America's acres are exported. But this number could be greater 
if it were not for the Asian crisis.
    Trade and investment have strengthened the U.S. economy by 
generating new economic activity here at home through research 
and development, and capital investments, as well as by 
creating better, higher paying jobs, as documented in ECAT's 
1998 study, Global Investments, American Returns. The trade and 
foreign direct investment of American companies has 
complemented rather than reduced economic activity in the 
United States in areas such as research and development, and 
investment in physical capital. American firms engaging in 
international trade and investment have provided important new 
business opportunities in the United States as they purchase 
over 90 percent of their intermediate inputs for their products 
from U.S. suppliers. At the same time, the foreign affiliates 
of American firms are an important market for U.S. product and 
services, accounting for 40 percent of U.S. exports. This new 
economic activity generated by U.S. trade and investment, 
promotes U.S. economic growth and higher U.S. standards of 
living overall.
    The ECAT publication includes case studies from 10 ECAT 
member companies. Cargill's case study describes our fertilizer 
business that has production activities concentrated in the 
United States. Our fertilizers are distributed to more than 20 
countries around the world. Our Florida facilities produce more 
than 4 million tons of phosphate per year, 75 percent of which 
is exported.
    What this means in human terms is that our fertilizer trade 
supports approximately 1,500 jobs at Cargill, and an estimated 
40,000 phosphate-related jobs in Central Florida. The company 
employees, whose jobs are supported by trade, do the best job 
of conveying the human side of trade.
    In the fall of 1997, just before the expected vote on trade 
negotiating authority, Jim Johnson, a maintenance mechanic and 
past president of the local union from our fertilizer operation 
near Tampa, took time off from his job to come to Washington to 
tell Members of Congress what trade meant to his job and his 
son's job at our Tampa plant. He urged Members of Congress to 
support trade negotiating authority so that the United States 
would not be left behind while the rest of the world continues 
to form trade alliances to its advantage.
    Jim hit the nail on the head, saying that the lack of trade 
negotiating authority kind of puts us in a position of having 
our tools around our neck instead of in our hands. Borrowing 
Jim Johnson's words, ECAT is concerned that unless the United 
States adopts a forward-looking, positive trade agenda, we will 
be left with our tools to expand trade investment around our 
necks, instead of in our hands. Simply put, the United States 
needs to press for our trading partners to take more 
challenging steps to open their borders to trade.
    The increase in America's standard of living that has 
occurred since World War II would not have been possible 
without U.S. political and economic leadership and maintaining 
an open trading system that has produced a dramatic rise in 
world trade. As our economy has become more closely integrated 
into the world economy, it is more important than ever that the 
United States, as the leader of the current economic order, not 
abandon its over one-half century of leadership of the world 
trading system. The gains we have made over the past half 
century could be lost if we do not maintain our commitment to 
an open trading system, and resist domestic and global 
pressures toward protectionism.
    The world achieved a great degree of global economic 
integration from the late 19th century until World War I. It 
was only in the early 1980's that the world reached and then 
exceeded the earlier level of international economic 
integration.
    As chair of ECAT, I have made trade education a continuing 
ECAT priority. In order to move forward on a positive trade 
agenda, we must re-engage the support of Congress, the 
Administration, and American workers and their families for 
trade expansion.
    Globalization is now an inescapable fact of life. We can't 
turn back the clock. While the global economic system is in its 
early stages in facing great challenges, it is up to us to have 
a positive leadership role that promotes greater economic 
opportunities for U.S. companies and their employees and their 
families. ECAT believes that a positive trade agenda should 
establish a clear set of objectives for the 1999 WTO 
Ministerial and a new round of WTO negotiations and commitments 
to achieve China's full integration into the international 
trading system and renewal of trade negotiating authority.
    This year, as host of the 1999 WTO Ministerial, the United 
States has the opportunity to exercise its leadership in 
launching a new round of trade negotiations that will advance 
trade liberalization well into the 21st century. In order to 
achieve this result, the upcoming ministerial agenda must 
remain focused on trade liberalization, advance a reasonable 
framework and scope for the new round, and must promote new 
initiatives that will create momentum for liberalization. We 
believe the United States must take the lead in this effort.
    U.S. business has an important role to play in ensuring the 
success of the ministerial, by encouraging the adoption in the 
United States of a positive agenda in making the case for the 
contributions of the WTO and to continuing trade 
liberalization.
    ECAT is joining with the Business Roundtable and other U.S. 
business organizations through an ad hoc coalition on a WTO 
Ministerial to coordinate business support for ministerial 
activities. ECAT also supports early action on several items, 
including CBI Parity, the African trade bill, and the 
miscellaneous tariff bill because they are important in and of 
themselves and in order to create momentum for the action under 
the broader trade agenda. The African Growth and Opportunity 
Act would provide a valuable platform for increasing U.S. 
commercial ties with sub-Saharan Africa. The CBI Parity bill 
would benefit both the United States and Caribbean economies.
    In pursuing a positive trade agenda, we must resist 
pressures to close our borders, despite the rising trade 
deficit. The world is watching us and the actions that we take. 
For instance, if we respond to rising steel imports, other than 
in accordance with procedures set out in our unfair trade 
remedies statutes and other than ways consistent with 
multilateral trading rules, we will set a dangerous precedent. 
Speaking both as chairman of ECAT and as CEO of a company that 
has a steel division, we must stand firm and reject 
protectionist measures or we will risk more retaliation.
    The United States and its trading partners must face the 
pressures on the open trading system by acting in accordance 
with the rules of the multilateral trading system. The United 
States will not succeed in this regard without the cooperation 
of our trading partners.
    So in summary, I and other members of ECAT, believe that 
efforts must continue to reach a bipartisan agreement on the 
extension of trade-negotiating authority that will ensure trade 
expansion into the 21st century. ECAT believes that armed with 
the positive trade agenda that we have outlined, Congress, the 
Administration, and the business community, will be best 
positioned to offer constructive alternatives to protectionist 
proposals. In both the short and the long-term, moving forward 
on a positive trade agenda gives us the greatest opportunity to 
guarantee that the trade and foreign direct investment of U.S. 
companies will continue to produce American returns in the form 
of greater U.S. economic growth and higher standards of living.
    I appreciate the opportunity to present ECAT's views. I 
would be happy to answer any questions that Subcommittee 
Members might have.
    [The prepared statement follows:]

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

                              Introduction

    My name is Ernie Micek. I am Chairman and Chief Executive Officer 
of Cargill, Incorporated. Cargill is a privately-held agribusiness 
company founded over 130 years ago in Iowa. Today the company is 
headquartered in Minneapolis, Minnesota, and is involved in marketing, 
processing, and distributing agricultural, food, financial, and 
industrial commodities throughout the world. We have some 80,000 
employees in more than 1,000 locations in 65 nations with customers and 
suppliers in approximately 130 more countries.
    Cargill is an excellent example of why the United States needs to 
support an open trading system both at home and abroad. Just as greater 
trade and investment in overseas markets increasingly fuel growth in 
our national economy, Cargill's growth depends in large part on markets 
outside the United States. We need to be a global company to grow and 
succeed.
    Today, I am testifying as Chairman of the Emergency Committee for 
American Trade on behalf of the heads of ECAT member companies, whose 
prosperity like Cargill's depends on the continued expansion of U.S. 
international trade and investment. ECAT members are major American 
companies with global operations and represent all principal sectors of 
the U.S. economy. The annual sales of ECAT member companies total over 
one trillion dollars and the companies employ approximately four 
million persons.
    ECAT commends you, Mr. Chairman, and other Members of the Trade 
Subcommittee for your leadership on trade-expansion initiatives. I am 
pleased to have the opportunity to testify before the Trade 
Subcommittee today on the importance of moving forward with a positive 
U.S. trade agenda and resisting the forces of protectionism. It was 
precisely this concern that led 33 ECAT CEOs to join me in sending a 
letter to the President at the end of last year stressing the need to 
pursue a positive trade agenda to promote the health of the U.S. 
economy. I would like to ask that a copy of the ECAT letter be entered 
into the record of this hearing.
    Before addressing the specifics of ECAT's views on the U.S. trade 
agenda, I want to discuss how the global trade and investment 
activities of American companies are producing significant returns for 
the U.S. economy. 

                  Global Investments, American Returns

    Above all else, ECAT member companies believe that a policy of 
expanding U.S. international trade and investment through bilateral, 
regional, and multilateral negotiations is essential to sustain U.S. 
economic growth and standards of living. American companies, both large 
and small, are operating in a global economy that is increasingly 
concentrated outside the United States. In fact, 96 percent of the 
world's consumers are located outside of the United States. With the 
lowering of trade barriers and technological advances, American 
companies are increasingly able to reach these consumers. As a result, 
trade accounts for one-fourth of our Gross Domestic Product. The 
agribusiness sector, in which Cargill operates, is a perfect example of 
this, as the products coming from one-third of America's acres are 
exported.
    Trade and investment have strengthened the U.S. economy by 
generating new economic activity here at home through research and 
development and capital investments, as well as by creating better, 
higher-paying jobs. As documented in ECAT's 1998 study, Global 
Investments, American Returns, the trade and foreign direct investment 
of American companies have complemented rather than reduced economic 
activity in the United States, in areas such as research and 
development and investment in physical capital. American firms engaging 
in international trade and investment have provided important new 
business opportunities in the United States, as they purchase over 90 
percent of their intermediate inputs for their products from U.S. 
suppliers. At the same time, the foreign affiliates of American firms 
are an important market for U.S. products and services, accounting for 
40 percent of U.S. exports. This new economic activity generated by 
U.S. trade and investment promotes U.S. economic growth and a higher 
U.S. standard of living overall.
    I think the best way to communicate what this really means is to 
look at actual company case studies and the lives of company employees 
whose jobs depend on trade and investment. The ECAT publication 
includes case studies from 10 ECAT member companies. Cargill's case 
study describes our fertilizer business that has production activities 
concentrated in the United States and product distributed to more than 
20 countries around the world. Our Florida facilities produce more than 
four million tons of phosphate per year, 75 percent of which is 
exported. Cargill's phosphate exports enable us to operate the Florida 
facility 24 hours-a-day, 365 days-a-year. If we had to rely on the U.S. 
market alone, our Florida plant would sit idle for most of the year and 
our production costs would increase.
    What this means in human terms is that our fertilizer trade 
supports 1,450 jobs at Cargill and an estimated 40,000 phosphate-
related jobs in Central Florida. The company employees whose jobs are 
supported by trade do the best job of conveying the human side of 
trade.
    In the fall of 1997, just before the expected vote on trade-
negotiating authority, Jim Johnson, a maintenance mechanic and past 
president of a local union from our fertilizer operation near Tampa, 
took time off from his job to come to Washington to tell Members of 
Congress what trade meant to his job and his sons'; jobs at our Tampa 
plant. Jim urged Members of Congress to support trade-negotiating 
authority, so that the United States would not be left behind while the 
rest of the world continues to form trade alliances to its advantage. 
Jim hit the nail on the head, saying that the lack of trade-negotiating 
authority ``kind of puts us in a position of having our tools around 
our neck instead of in our hands.''

                        A Positive Trade Agenda

    Borrowing Jim Johnson's words, ECAT is concerned that unless the 
United States adopts a forward-looking, positive trade agenda, we will 
be left with our tools to expand trade and investment around our neck 
instead of in our hands. The increase in America's standard of living 
that has occurred since World War II would not have been possible 
without U.S. political and economic leadership in maintaining an open 
trading system that has produced a dramatic rise in world trade. As our 
economy has become more closely integrated into the world economy, it 
is more important than ever that the United States not abandon its over 
half-century of leadership of the world trading system.
    The gains we have made over the last half-century could be lost if 
we do not maintain our commitment to an open trading system and resist 
domestic and global pressures toward protectionism. The world achieved 
a great degree of global economic integration from the late 19th 
century until World War I, during which time international trade and 
investment reached high levels. This period was followed by decades of 
global fragmentation caused by political conflicts, as well as 
protectionist trade policies such as the prohibitive U.S. Smoot-Hawley 
tariffs that helped bring on the depression of the 1930s. It was only 
in the early 1980s that the world reached and then exceeded the earlier 
level of international economic integration.
    Trade Education. As Chair of ECAT, I have made trade education a 
continuing ECAT priority. In order to move forward on a positive trade 
agenda, we must re-engage the support of the Congress, the 
Administration, and American workers and their families for trade 
expansion. ECAT's trade education initiative, called TradeWorks, is 
intended to rebuild the support of American workers, Congress, and the 
Administration for an open trade system and continued trade 
liberalization. It aims to achieve this objective by doing a better job 
of explaining why and how the global activities of American firms 
promote U.S. living standards and benefit the lives of company 
employees. First, it is seeking to broaden understanding of the 
critical role of both trade and investment in promoting economic growth 
and higher living standards in the United States. Toward this end, 
ECAT's study, Global Investments, American Returns, details the 
benefits that flow to the U.S. economy from trade and foreign direct 
investment. Second, the project is developing a set of educational 
materials and an efficient delivery system that will enable ECAT member 
companies to educate their workers, communities, and elected officials 
about the ways in which their worldwide operations help to raise U.S. 
living standards, and inform them about how international trade and 
investment better their lives. The name ``TradeWorks'' is taken from 
Cargill's own trade education program and conveys the simple idea that 
trade works to make our lives better.
    Elements of A Positive Trade Agenda. In this time of global 
economic challenges, the United States must lead by example in keeping 
its markets open and pursuing a positive trade agenda that promotes 
greater economic opportunities for U.S. companies and their employees 
and their families. ECAT believes that a positive trade agenda should 
establish a clear set of objectives for the 1999 WTO Ministerial and 
the new round of WTO negotiations, and commitments to achieve China's 
full integration into the international trading system and the renewal 
of trade-negotiating authority.
    ECAT also supports early action on several items, including CBI 
Parity, the Africa trade bill, and a miscellaneous tariff bill, because 
they are important in and of themselves and in order to create momentum 
for action on the broader agenda. The African Growth and Opportunity 
Act would provide a valuable platform for increasing U.S. commercial 
ties with sub-Saharan Africa. The CBI-Parity bill will benefit both the 
U.S. and Caribbean economies. CBI Parity can be an important part of 
re-building the economic infrastructure of Caribbean nations devastated 
by Hurricane Mitch.
    In pursuing a positive trade agenda, we must resist pressures to 
close our borders despite the rising trade deficit. The world is 
watching us. If we respond to rising steel imports other than in 
accordance with procedures set out in our unfair trade remedy statutes 
and other than in ways consistent with multilateral trading rules, we 
will set a dangerous precedent. Speaking both as Chairman of ECAT and 
as CEO of a company that has a steel division, we must stand firm and 
reject protectionist measures.
    ECAT's views on the major elements of this agenda are set out 
below. 

          The 1999 WTO Ministerial: Launching a New WTO Round

    This year as host of the 1999 WTO Ministerial, to be held in 
Seattle, Washington, the United States has the opportunity to exercise 
its leadership in launching a new round of trade negotiations that will 
advance trade liberalization well into the next century. In order to 
achieve this result, the upcoming ministerial agenda must remain 
focused on trade liberalization, must advance a reasonable framework 
and scope for the new round, and must promote new initiatives that will 
create momentum for liberalization. 
    The Seattle Ministerial. It is important that the United States 
work to ensure that the Seattle ministerial meeting is successful in 
producing a positive framework and agenda for the launch of the new 
round and in reinforcing both domestic and international support for 
the multilateral trading system.
    To create a positive framework for the new round, the focus of the 
ministerial agenda must be kept on trade expansion. The agenda should 
not be sidetracked by divisive issues such as labor, environment, 
competition policy, and investment on which there is little hope of 
gaining consensus within the WTO. On labor and environment, the United 
States should assume a constructive role and emphasize ways in which 
international cooperation and consensus may best be achieved. For 
example, the United States is pursuing an appropriate course on labor 
issues by increasing its support for the ILO and focusing its efforts 
to achieve a consensus on labor issues within that organization. If the 
United States allows contentious issues to dominate the ministerial, 
confidence in the global trading system and U.S. leadership will be 
undermined.
    To be successful, the ministerial agenda should also include a 
renewed effort to broaden WTO membership to include those emerging 
economies that are not yet subject to WTO rules. China, the largest 
emerging economy in the world, must be brought into the multilateral 
trading system. Its admission to the WTO on the basis of a 
commercially-acceptable protocol of accession should be given top 
priority on the ministerial agenda. The continuing financial 
instability in Asia and the slowdown in the global economy make it more 
critical than ever that China be subject to WTO rules and a participant 
in sectoral liberalization initiatives.
    Reaching an agreement on sectoral market access initiatives, such 
as the negotiations on the nine sectors covered under the Early 
Voluntary Sector Liberalization (EVSL) negotiations, at the time of the 
ministerial would help to make it a success and would provide momentum 
for liberalization negotiations in the new round. The EVSL initiative 
would result in the elimination of tariffs in chemicals, toys, medical 
equipment and scientific instruments, energy, fish and fish products, 
and forestry sectors in global trade. Similarly, progress at the 
ministerial in negotiations to remove non-tariff barriers in the 
information technology sector would also promote a successful meeting.
    U.S. business too has a role to play in ensuring the success of the 
ministerial by encouraging the adoption of a positive agenda and making 
the case for the contributions of the WTO in continuing trade 
liberalization. ECAT is joining with the Business Roundtable and other 
U.S. business organizations through an ad hoc coalition on the WTO 
ministerial to coordinate business support for ministerial activities.
    A WTO ministerial that produces a positive agenda backed by 
consensus will send a strong signal to global markets about the 
strength and vitality of the open trading system. A successful 
ministerial will encourage emerging economies to stay the course on 
trade liberalization.
    Success in Seattle will reinforce domestic support for the WTO. 
Under the Uruguay Round Agreements Act, the Administration is required 
to report to Congress next year on how the WTO has worked for American 
interests in the first five years of its operation. The law also 
provides that Congress can vote to revoke U.S. membership in the WTO if 
the WTO dispute settlement body rules against the United States three 
times in any five-year period. It is essential that the Administration 
be able to submit a positive report on the benefits of the WTO 
following a highly successful U.S. ministerial meeting.
    Finally, if the ministerial produces a trade-liberalizing agenda, 
U.S. support will build for renewal of trade-negotiating authority. One 
of the factors that has hindered progress on renewal has been the lack 
of a specific articulation of negotiating objectives. The 
Administration, the Congress, and the private sector are now engaged in 
the process of developing negotiating objectives for the new round, 
which will clarify areas in which negotiating authority is necessary.
    Standstill Commitment. To help U.S. trading partners resist the 
adoption of protectionist measures in response to global economic 
pressures, the United States should take the lead in urging that WTO 
members enter into a standstill on trade restrictive measures in 
advance of the ministerial. The United States could then propose that 
WTO members formally adopt a standstill commitment at the ministerial. 
Such a commitment would help safeguard the liberalization achieved 
under the Uruguay Round and subsequent sectoral negotiations and 
provide a positive foundation for future liberalization in the new 
round.
    Scope and Framework for Negotiations. A new round should be broad 
in scope, including negotiations mandated under the built-in agenda on 
agriculture and services, as well as negotiations to reduce industrial 
tariffs, promote business facilitation, and improve transparency in 
government procurement. The scope of the negotiations should also be 
flexible to allow the later inclusion of sectors or issues that are not 
currently ripe for negotiation.
    Negotiations should generally adhere to the WTO model of a ``single 
undertaking'' that requires all WTO members to observe the final 
agreements reached in a new round. At the same time, the framework for 
the new round should allow for agreements to be implemented as soon as 
they are finalized, rather than require that their implementation be 
delayed until all agreements are completed, as was the case in the 
Uruguay Round. It is also important to establish timetables to ensure 
that negotiations yield positive results within reasonable time 
periods.
    ECAT's views on the major areas that should be included in a new 
round are provided below.
    1. Agriculture. The agriculture negotiations should aim to secure 
substantial, progressive reductions in support and protection, 
including deep cuts in bound tariff rates and the elimination of export 
subsidies. Negotiations should seek a reduction in average tariff 
bindings over six years by 50 percent from current levels. Tariff peaks 
should be reduced to levels that will not prohibit imports. 
Negotiations should clarify that tariff-rate quotas are transitional 
measures and provide for their phase-out. Sectoral zero-for-zero tariff 
agreements should also be encouraged.
    The agriculture negotiations should seek a reduction in the 
aggregate measure of support beyond the Uruguay Round level. The United 
States also should seek to eliminate the monopoly control of state 
trading entities (STEs) and discipline their behavior.
    In connection with the launch of the agriculture negotiations, the 
Seattle ministerial declaration should endorse the initiative being 
developed within APEC to establish a global ``open food system.'' The 
initiative calls for putting the reform of food and agricultural 
policies at the top of the U.S. and global trade agendas. It is based 
on the premise that encouraging greater reforms in agricultural 
policies and promoting a more efficient global food system will 
encourage global economic development, as well as broader trade and 
investment in the goods and services sectors. The United States should 
advocate the establishment of a WTO working party to discuss the 
creation of a global ``open food system.''
    2. General Agreement on Trade in Services (GATS). The United States 
should pursue new negotiations to liberalize trade in services, 
particularly financial services, as part of a new round. Further 
liberalization of services trade will enhance global growth, assist 
developing countries in obtaining the necessary infrastructure to 
sustain development, and help restore investor confidence in global 
markets.
    One of the primary objectives of the services negotiations should 
be to encourage the creation of transparent, impartial regulatory 
regimes in local markets. The creation of such regimes is essential to 
make the GATS national treatment and market access commitments 
meaningful.
    In seeking expanded liberalization commitments, the United States 
should aim to limit reservations to the greatest degree possible. The 
United States should seek commitments to ensure national treatment and 
the right of establishment, eliminate restrictions on cross-border 
transactions, promote pro-competitive regulatory reform, and remove 
obstacles to the free movement of business personnel.
    3. Market-Access Negotiations. The new round should include market-
access negotiations to remove tariff and non-tariff barriers in a wide 
range of industrial sectors. The negotiations should include efforts to 
achieve tariff reductions in the nine EVSL sectors to the extent such 
reductions have not been finalized by the time of the ministerial. The 
market-access negotiations should also cover the six additional sectors 
identified in APEC for further liberalization, particularly food 
products.
    Textile and apparel tariffs, which remain very high relative to 
other industrial products, should also be included in market-access 
negotiations, with the goal of seeking further reductions before the 
termination of textile and apparel quotas in 2005. Finally, the 
negotiations should encompass efforts to broaden membership in the 
Chemical Tariff Harmonization Agreement (CTHA), with the understanding 
that no further reductions in chemical tariffs should be considered 
until all major chemical-producing nations are fully committed to the 
CTHA.
    4. Trade Facilitation. ECAT strongly supports the inclusion of 
business-facilitation issues on the ministerial agenda. The United 
States should seek a WTO agreement on trade facilitation that would 
encompass the adoption of a binding WTO agreement based on the rules 
contained in the International Convention on the Simplification and 
Harmonization of Customs Procedures (Kyoto Convention), a work program 
on trade facilitation, and a commitment to simplify rules of origin. 
The United States should encourage the WTO to focus its trade-
facilitation efforts on customs procedures and advocate the 
establishment of a WTO working group on the harmonization and 
simplification of customs procedures. The United States should also 
support the simplification and harmonization of non-preferential rules 
of origin so that they no longer create unnecessary trade impediments.
    5. Government Procurement. ECAT supports U.S. efforts to bring more 
countries into the WTO Procurement Agreement, to broaden its coverage, 
and to negotiate an agreement on transparency in procurement. The 
United States should seek to conclude an agreement on transparency by 
the time of the ministerial. It should include requirements regarding 
the transparency of procurement laws and regulations, adequate notice 
of bidding opportunities, use of objective criteria in preparing bid 
specifications and in evaluating bids, adequate dispute settlement, and 
WTO notification of preference levels.
    The transparency provisions of the Government Procurement Agreement 
should be harmonized with the text of a new transparency agreement.

                      China's Accession to the WTO

    Securing China's accession to the WTO on the basis of a 
commercially-viable protocol of accession is a priority for ECAT. The 
United States can no longer afford to have China, as the largest 
emerging economy in the world, outside of the global trading system. 
Fully integrating China into the global trading system will help to 
ensure that it plays a positive role in the global economy and provides 
broader market access for U.S. goods, services, and agriculture. 
China's accession to the WTO would be read by financial markets 
throughout the world as a vote of confidence in the international 
economy. It would also send a powerful signal to other Asian emerging 
economies about the value of maintaining open markets and adhering to 
multilateral trading rules in restoring global economic stability and 
growth.
    In advocating China's WTO membership, ECAT does not believe it 
should be at any price. China must be willing to make the necessary 
economic reforms and market-access commitments to create a 
commercially-viable protocol of accession that provides meaningful 
market access for U.S. goods, services, and agriculture. These 
commitments must be in addition to China's full implementation of 
existing liberalization commitments. If China agrees to such a 
protocol, the United States should support China's WTO membership and 
request that the Congress approve the permanent extension of normal 
trade relations (NTR) status to China.
    China's market holds enormous potential for U.S. goods, services, 
and agricultural exports. Since 1979, when the United States first 
extended most-favored-nation treatment to China, U.S. exports of goods 
and services have grown nearly twenty times, reaching $18 billion last 
year. Over the same time period, U.S. investment in China has grown to 
$25 billion. U.S. exports to China support more than 200,000 jobs in 
the manufacturing and agricultural sectors, as well as tens of 
thousands of jobs in the U.S. retail, services, transportation, 
marketing, consumer goods, and telecommunications sectors.
    The United States has just begun to scratch the surface of the 
China market. China is already the fourth largest market for U.S. 
agricultural exports. In recent years, China has imported large 
quantities of U.S. grains, cotton, poultry, vegetable oils, and other 
agricultural products. The American agricultural community views China 
as its most important growth market for the twenty-first century.
    There is vast potential too for further sales of U.S. non-
agricultural products and services. Even allowing for the impact of the 
Asian financial crisis, the purchasing power of China's middle class is 
expected to rise dramatically over the next decade. China also has huge 
developmental needs to improve the living standards of its population 
and is committed to spending over $750 billion on infrastructure over 
the next decade.
    Cargill has a substantial stake in the China market, as it is one 
of our largest markets for grain, proteins, fertilizers, and other 
agricultural commodities. Until recently, when a controversy arose over 
the presence of a fungus, TCK smut, in certain U.S. wheat, China was 
buying on average of 8- to 10-million tons of grain per year. Cargill 
also ships orange juice and phosphate fertilizer to China from our 
plants in Florida and exports cotton, corn, soybeans, soybean products, 
and meat to China. Cargill has investments in animal-feed plants, a 
bulk fertilizer plant, and a soybean-crushing plant in China and 
employs over 500 people in China.
    Doing business in China presents great challenges because of poor 
infrastructure and extensive market restrictions, including high 
tariffs, discriminatory sanitary and phyto-sanitary standards, and 
government control of pricing and distribution, as well as restrictions 
on trading rights. China's WTO accession offers the opportunity to 
negotiate firm commitments to remove such barriers and to secure 
further market access.
    The United States and China have an important window of opportunity 
early this year to reach a final agreement on the terms of China's 
accession to the WTO. If an agreement is not reached within the next 
few months, there is a real risk the process will be delayed for 
several years. Securing an early agreement on a commercially-viable 
protocol of accession must remain a priority on the U.S. trade agenda.

                 Renewal of Trade-Negotiating Authority

    Renewal of the President's trade-negotiating authority is also an 
integral part of a positive trade agenda, as it provides the basic 
infrastructure necessary to achieve further trade liberalization and 
other trade policy objectives. Over the past 25 years, the legislative 
extensions of trade-negotiating authority have been the primary 
mechanism for the executive and legislative branches to come together 
on a bipartisan basis to carry forward U.S. trade policy objectives. No 
mechanism has been created to take the place of this process since the 
expiration of the last extension of negotiating authority in 1994. As a 
result, a vacuum has been created and U.S. trade policy remains 
stalled, jeopardizing U.S. leadership in the global trading system and 
endangering the continued expansion of trade and investment.
    ECAT is recommending that the WTO ministerial and the launching of 
a new round be used as the rationale for a new positive trade agenda, 
even in the absence of trade-negotiating authority. While the United 
States may be able to move forward through the ministerial and 
immediate post-ministerial period without negotiating authority, our 
ultimate liberalization objectives cannot be achieved without it.
    The Seattle WTO ministerial offers the United States the 
opportunity to reassert its leadership within the WTO; however, unless 
the President is granted negotiating authority for agriculture, 
services, and any other areas to be included in a new round, the United 
States risks being left on the sidelines. Absent negotiating authority, 
it will be difficult for the United States to credibly participate in 
the new-round negotiations and achieve further liberalization in 
sectors of greatest interest to the United States. Our trading partners 
will reap the advantage.
    Renewing trade-negotiating authority is also necessary for the 
United States to reassert its leadership in regional trade negotiations 
such as the Free Trade of the Americas (FTAA) and the Asia Pacific 
Economic (APEC) Forum. Although the FTAA negotiations have been 
launched, serious questions remain whether our Latin American trading 
partners will be willing to enter into substantive negotiations beyond 
trade facilitation measures before the United States has trade-
negotiating authority. In addition, the lack of U.S. negotiating 
authority has given Brazil the opportunity to expand the Mercosur 
arrangement and to solidify its influence in shaping the trade agenda 
within the FTAA.
    Trade-negotiating authority is also essential to continue the 
sectoral liberalization process that the United States is encouraging 
through APEC under the 15 sectors identified under the EVSL initiative. 
The United States will not be able to implement fully the tariff 
reductions agreed to in the nine sectors covered under the EVSL 
initiative or the other six sectors that may be the subject of future 
negotiations. Similarly, the United States may lack authority to 
implement fully an agreement to reduce non-tariff barriers in the 
information technology sector under a second Information Technology 
Agreement (ITA II).
    The absence of a forward-looking trade policy backed by a grant of 
trade-negotiating authority is taking its toll on the competitiveness 
of U.S. goods, services, and agriculture. Since the expiration of 
negotiating authority in 1994, regional preferential trade arrangements 
among our competitors in Europe, Latin America, and Asia have 
mushroomed, putting U.S. products at an increasing disadvantage. For 
example, U.S. agricultural exports are losing out to South American 
competitors as a result of the preferential tariffs they enjoy under 
the Mercosur Agreement. Our Canadian, Asian, and European competitors 
are also continuing to gain advantage over the United States as they 
negotiate their own preferential arrangements with Latin American 
countries. The European Union has begun free-trade negotiations with 
Mexico and is close to initiating free-trade negotiations with Chile 
and Mercosur. It is also negotiating preferential agreements on 
standards with Asian countries. Canada now has its own free trade 
agreement with Chile, has entered into a cooperation agreement with 
Mercosur, and is rapidly expanding its market access in Latin America, 
thereby increasing the competitive challenge posed by Canadian exports 
to U.S. manufactured and agricultural exports.
    While we must not delay progress on developing other U.S. trade 
policy priorities in the absence of trade-negotiating authority, we 
must continue our efforts to build bipartisan support for such 
authority.

                          The Challenges Ahead

    The United States and its trading partners must face the pressures 
on the open trading system by acting in accordance with the rules of 
the multilateral trading system. The United States will not succeed in 
this regard without the cooperation of our trading partners. For this 
reason, ECAT believes that the United States should call upon its 
trading partners to support a standstill on the imposition of trade-
restrictive measures in advance of the Seattle Ministerial that will be 
formally adopted at the ministerial.
    The United States must also ensure that the integrity of the WTO 
and its dispute settlement process is maintained by insisting that the 
European Union and other major trading partners uphold the decisions of 
WTO dispute settlement panels. In preparing for the next ministerial 
and the possibility of a new round of multilateral negotiations, the 
United States must ensure that the framework and results of such 
negotiations strengthen WTO rules and expand market access for U.S. 
goods, services, and agriculture.
    In seeking a more constructive bilateral relationship with China, 
the United States faces the complex challenge of securing China's entry 
into the WTO on the basis of a commercially-viable protocol of 
accession, at a time when China is renewing its efforts to repress 
dissent and is imposing new restrictions on trade and investment.
    I and the other members of ECAT also believe that efforts must 
continue to reach a bipartisan agreement on the extension of trade-
negotiating authority that will ensure trade expansion into the twenty-
first century.
    Time will tell whether we will be able follow Cargill's Jim 
Johnson's advice about getting our trade policy tools from around our 
necks and into our hands. ECAT believes that armed with the positive 
trade agenda that we have outlined, the Congress, the Administration, 
and the business community will be best positioned to offer 
constructive alternatives to protectionist proposals. In both the short 
and long term, moving forward on a positive trade agenda gives us the 
greatest opportunity to guarantee that the trade and investments of 
U.S. companies will continue to produce American returns in the form of 
economic growth and higher living standards.
    I appreciate the opportunity to present ECAT's views and I would be 
happy to answer any questions subcommittee members may have. I would 
also like to ask that ECAT's comments to USTR on the 1999 WTO 
Ministerial agenda be entered into the record of this hearing.

                                

    Chairman Crane. Thank you, Mr. Micek.
    Mr. Condit.

  STATEMENT OF PHILIP M. CONDIT, CHAIRMAN AND CHIEF EXECUTIVE 
  OFFICER, BOEING COMPANY, SEATTLE, WASHINGTON, AND CHAIRMAN, 
    INTERNATIONAL TRADE AND INVESTMENT TASK FORCE, BUSINESS 
                           ROUNDTABLE

    Mr. Condit. Mr. Chairman, and Members of the Subcommittee, 
good morning. My name is Phil Condit. I am chairman and CEO of 
Boeing Company. I also have the privilege of serving as the 
Business Roundtable's chairman of the Trade and International 
Investment Task Force. It is my privilege to offer our views on 
the future direction of U.S. trade policy. I have asked that my 
written testimony be submitted in the record. I will just 
summarize my key points.
    I would also like to introduce the gentleman to my left, 
Mr. Barry Baszile, who is president of Baszile Metals Service, 
and aerospace supplier who has come from Los Angeles to testify 
this morning. He is the perfect example of a small business 
that depends heavily on trade. I will let him tell his story.
    Mr. Chairman, the United States clearly faces a number of 
fundamental choices on the direction of trade policy. Despite 
the fact that trade has never been more important to this 
Nation's economic growth, there continue to be questions on the 
wisdom of these efforts, the efforts to expand trade by 
negotiating new agreements and trying to break down barriers to 
U.S. exports.
    I would venture that those views are based upon concerns 
about whether trade benefits people broadly in the United 
States, whether U.S. firms and employees are actually 
benefiting from trade agreements, given the problems with 
compliance and enforcement. Clearly these are legitimate 
concerns. In fact, they must be addressed if we are to work 
together to build a national consensus for trade and continue 
to fuel our Nation's economic growth.
    Mr. Chairman, I would argue that America's trade agenda 
must be based on a set of fundamental principles. Let me see if 
I can outline what I believe those principles need to be. 
Principle No. 1. America must recognize the reality of a global 
economy and develop the trade and investment policies that 
enable us to navigate through the complexities of this global 
system. That involves both the financial institutions that are 
required to promote international economic stability, and the 
review of U.S. laws and regulations, including sanctions and 
trade statutes that ensure that they do not unnecessarily 
impede the ability of U.S. agriculture, industry, and their 
employees to compete in world markets.
    Principle No. 2. We must reaffirm U.S. leadership. The 
United States is the leader, and the world is looking to the 
United States for leadership.
    Principle No. 3, and probably the most important. Rules 
matter. The economic system of the world must be based on a 
rules-based system. Compliance and enforcement of those rules 
are required if this system is to work.
    Principle No. 4. Business must be a force for positive 
change in the global economy. We must contribute to 
implementing a trade policy that is win-win. That means we must 
work together to make sure that that global system benefits 
all.
    Mr. Chairman, while there are many issues that you and this 
Subcommittee will be considering, I would like to mention two 
in particular. The first is that we have a great opportunity to 
continue the process of trade liberalization and improve the 
rules during the upcoming WTO Ministerial in Seattle. This is 
the first time that ministerial will be held in the United 
States. It is a unique opportunity to demonstrate U.S. 
leadership and introduce a new round of trade negotiations.
    Second. The strength of the multilateral trading system 
depends on all key players being part of the system. I believe 
that it is strongly in our benefit to work hard to include 
China in that world trading system on a commercially meaningful 
basis. That will be a difficult and important negotiation, but 
one I believe is a real opportunity in the months ahead.
    I commend the Subcommittee for taking the important and 
leadership steps toward building a consensus that is required 
by holding this hearing. Thank you very much.
    [The prepared statement follows:]

Statement of Philip M. Condit, Chairman and Chief Executive Officer, 
Boeing Company, Seattle, Washington, and Chairman, International Trade 
and Investment Taskforce, Business Roundtable

    Mr. Chairman, Members of the Subcommittee, good morning. My name is 
Philip Condit. I am Chairman and CEO of The Boeing Company. I also have 
the privilege of serving as the Chairman of the Business Roundtable 
International Trade and Investment Task Force.
    I want to thank you for providing me and The Business Roundtable 
with the opportunity to share our views on the future direction of U.S. 
trade policy. Mr. Chairman, I would ask that my written testimony be 
submitted for the record and that I summarize the key points. I would 
also like to introduce Mr. Barry Baszile, President of Baszile Metals 
Services, who has come to Washington, D.C. from Los Angeles to testify 
with me today. Mr. Baszile is one of Boeing's small business suppliers 
and is a terrific example of how when Boeing exports its products to 
international customers, the benefits extend throughout the U.S. 
economy.
    Mr. Chairman, the United States today faces a number of fundamental 
choices in the direction of its trade policy. Despite the fact that 
trade has never been more important to this nation's economic growth, 
some continue to question the wisdom of efforts to liberalize trade. I 
would venture that their views are based upon concerns about whether 
the benefits of trade are broadly shared and whether U.S. firms and 
workers are actually benefiting from trade agreements.
    These are clearly legitimate concerns and need to be addressed. In 
fact, they must be addressed if we are to work together to rebuild a 
national consensus for trade and fuel the nation's economic growth.

         I. America Must Reach New Trade Agreements to Prosper

    Over the last several decades, successive Congresses and 
Administrations working together on a bipartisan basis have made 
significant and admirable progress in breaking down foreign trade 
barriers, benefitting our companies, workers, farmers and the country 
as a whole. However, the ever-changing global economy continually 
presents new opportunities and challenges. The United States must reach 
out for these opportunities and meet these challenges. To do so, the 
United States must continue to pursue trade liberalization, especially 
through new international agreements. If we are not in the vanguard, we 
risk falling behind other countries that are pursuing their own 
agendas.
    International trade agreements are needed to open foreign markets 
for American companies, workers and farmers. The United States has been 
the leader in working for open markets because we know that, with our 
market the most open in the world, and with our companies, workers and 
farmers the world's most competitive, we have the most to gain from 
removing foreign barriers to our goods and services through trade 
agreements and the most to lose if such barriers persist.
    However, despite recent trade agreements and improvements in world 
trade rules, foreign barriers remain and new ones continue to be 
erected. Many countries still impose significant tariffs on our 
exports. In an increasingly competitive global economy, these ``taxes'' 
can make the difference between success and failure in foreign markets.
    Moreover, as tariffs and traditional non-tariff barriers to our 
goods and services exports have fallen, new problems have emerged. For 
example, inadequate intellectual property protection, customs, and 
standards-related and other regulatory barriers have become a new set 
of problems for U.S. exporters and their workers. Our agricultural 
exports continue to face tariff and non-tariff barriers. Recent 
agreements have partially resolved some of these problems, but more 
progress is needed.
    Some interest groups have argued that given the deterioration in 
the U.S. trade balance in 1998, this is no time to begin new 
liberalization initiatives. But this is the wrong way to look at the 
issue. Launching new trade negotiations has the potential to stimulate 
economic growth in countries whose economies are suffering. That will, 
in turn, boost demand for American exports.
    The United States must lead in promoting trade liberalization for 
the undeniable reason that today we live in a global economy. The 
United States is the world's largest exporter. Our total exports were 
$931 billion in 1998. Total trade--imports plus exports--accounted for 
over $2 trillion in business activity, or nearly 24 percent of the size 
of the U.S. economy. More than 95 percent of the world's consumers live 
outside the United States, and the world's fastest-growing and most 
promising new markets are spread across the globe. There is no way that 
the United States can have a bright economic future if we do not 
actively pursue these foreign customers and markets.
    Trade is good for our economy, good for business, good for workers, 
good for farmers and good for consumers American companies, workers, 
and farmers have worked hard to compete in the global economy, and the 
United States has seen the positive results. U.S. exports continue to 
rise at an impressive pace--between 1996 and 1998, real exports were up 
30 percent from the 1993-1995 period. These exports are the engine 
driving economic growth and job creation in the United States. Export 
growth has accounted for about 27 percent of the nation's overall 
economic growth over the past ten years. During this time export growth 
outpaced the expansion of the economy as a whole. U.S. exports did slow 
in 1998 because of the Asia economic crisis, which highlights the 
reality that U.S. economic growth and stability depends increasingly on 
access to international markets.
    I have heard a lot of talk that trade is good only for big 
companies. This is just not the case as Mr. Baszile will explain in 
greater detail. Small- and medium-sized companies are active exporters 
too. In addition to directly exporting, many small- and medium-sized 
companies also supply large companies with products and services that 
are used in the production of exports. These suppliers are what we have 
referred to in the past as the invisible exporters.
    Trade is also good for American workers. Approximately 12 million 
U.S. jobs are supported by exports. Exports account, directly or 
indirectly, for about one in ten civilian jobs in the nation and about 
one in five manufacturing jobs. These export-related jobs are high-wage 
jobs. They typically pay 13 to 16 percent more than the average 
compensation.
    The United States cannot, and should not, ignore the real effects 
of job loss for individuals, regardless of the cause. But trying to 
freeze the U.S. economy in place is impossible and would not be in the 
interest of this or future generations. The United States needs to 
ensure that all Americans earn the education and learn the skills they 
need in order to be competitive in the global economy.
    Exports are particularly important for the nation's farmers. As a 
whole, the U.S. agricultural sector is more than five times as reliant 
on foreign trade as the U.S. economy. U.S. agriculture exports hit a 
record $60 billion in 1996 but have fallen since then due to economic 
crises and recessions in Asia and Latin America.
    Imports are also important to consumers by contributing to a 
vibrant, competitive economy and high standards of living. Imports can 
help keep inflation in check, which often translates into low interest 
rates, high investment, and hence high job creation. Imports also give 
consumers a greater choice of goods and services, including those not 
available domestically. They create jobs in areas such as retail, 
distribution, ports and transportation. Imports allow U.S. companies 
and employees to use the best technology from around the world, 
increasing their productivity and competitiveness and therefore leading 
to higher wages and creation of more U.S. jobs. Moreover, imports 
encourage competition and innovation.
    Because the United States is the world's most competitive nation, 
it has the most to gain from the global economy and from trade 
liberalization. In the 1980s and early 1990s, conventional wisdom held 
that the United States had been overtaken by Japan and Germany and 
might never regain its place as an economic leader. Today, the United 
States is back on top. Our economy has been growing faster than those 
in Europe and Japan. We are the world's biggest exporter of both goods 
and services. We have the highest budget surplus (as a percentage of 
gross domestic product) of any G-7 economy except Canada. We have 
created more net jobs in the past few years than all other G-7 nations 
combined, and our unemployment rate is below that of every other major 
industrial economy except Japan.
    The United States has the world's largest economy, the most 
productive employees, the best technology, and the most innovative 
people. That is why it is considered to be the most competitive large 
country in the world, as recently confirmed by the Global 
Competitiveness Report from the World Economic Forum. The United States 
is highly competitive in a range of important industries, such as: 
semiconductors, computers, computer software, aerospace equipment, 
applied materials, biotechnology, construction equipment, 
telecommunications and other information-based equipment and services, 
financial services, information services and entertainment. These are 
the technologies of today--and of the 21st century.
    The United States has done so well because its companies and 
workers have aggressively sought out the opportunities presented by the 
global economy. The U.S. Government needs to continue negotiating new 
international trade agreements and enforce existing agreements to 
ensure that U.S. companies and workers, and the products and services 
they produce, are given the opportunity to compete fairly and to 
prosper in the global economy. The United States has nothing to fear 
from a rules-based trading system.
    Because trade is so economically vital, the direction and execution 
of U.S. trade policy can make a big difference. The decisions that this 
Committee and the Congress will make in 1999 will have ramifications 
for decades to come. Recognizing this, we appreciate the opportunity to 
offer some views from the business community.

          II. U.S. Trade Policy Should be Keyed to Principles

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

 III. The Agenda: Strengthening the World Trading System and Expanding 
                        Coverage to New Players

    While there are many issues over which you and the Subcommittee 
will be deliberating during the weeks and months ahead as you define 
America's trade agenda, I would like to focus on two critical issues 
that go to the heart of what will continue to be the strength of our 
trade policy--that is, the rules-based trading system. These include: 
(1) launching a new round of trade negotiations at the WTO Ministerial 
meeting this fall in Seattle; and (2) bringing China into the trading 
system on commercially meaningful terms.

                    The Urgency of WTO Negotiations

    Initiating new multilateral trade negotiations in the WTO is vital 
for the United States and the global economy. Since the Uruguay Round 
negotiations were completed in 1993, the benefits of open trade for 
consumers and workers have been amply demonstrated. The new WTO has 
provided a framework for carrying on negotiations in selected sectors, 
for settling disputes, and for promoting communication between 
governments and stakeholders in the private sector. This record 
demonstrates that the trading system works. Now it is time to begin new 
negotiations to remove remaining barriers to trade and investment. 
Efforts are also needed to improve the WTO's rules and its dispute 
resolution process.
    It is important to launch new world trade negotiations in 1999 and 
not to allow differences in economic performance among countries, or 
election cycles their, delay start. The world waited seven years 
between the GATT Tokyo Round and the Uruguay Round. But today economic 
constant communication electronic commerce change is much more rapid. 
Because markets respond so quickly in our global economy, trade 
negotiations begin to generate economic benefits very quickly. Thus, 
further delay in starting new negotiations will postpone the economic 
stimulus that successful trade negotiations can deliver. Even worse, a 
lack of momentum for new trade talks may lead some governments to 
renege on previous liberalization commitments.
    Although some have criticized the WTO, the fact is that the WTO is 
an organization of governments who cooperate to reduce trade barriers 
and eliminate improper trade discrimination. A strong, successful WTO 
is in the U.S. interest because this rules-based system can be used to 
confront governments that discriminate against Americans who export 
goods, services, and capital investments.
    The WTO Ministerial to begin in Seattle on November 30 offers an 
opportunity for the U.S. Government to promote the launching of new WTO 
negotiations. This is the right moment to start new talks because the 
experience of the last few years shows several areas in which current 
WTO agreements can be built upon and improved. To assist trade 
negotiators in crafting an agenda for new WTO negotiations, we offer 
several recommendations for how U.S. interests can be best advanced.

               Suggested Agenda for New WTO Negotiations

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

The Built-in Agenda

    There are three parts of the Built-in Agenda--Services, 
Agriculture, and Tariffs.
    Services. Because world trade in services is increasing at a faster 
rate than trade in goods, the expansion of the Services Agreement 
should be a top priority in the next round. The problem in Services is 
that, at present, the General Agreement on Trade in Services provides 
only minimal disciplines.
    The WTO needs to begin this process by encouraging governments to 
ratify the Financial Services and Basic Telecommunications Agreements 
and to fulfill their commitments under them. Negotiations should also 
be launched to expand liberalization commitments under these two 
agreements. Among the high priority sectors for obtaining new services 
agreements are: all levels of distribution, transportation, 
construction, tourism, information technology, health care, 
advertising, express delivery, and business professional services.
    Agriculture. The Uruguay Round made notable progress in reducing 
agricultural trade barriers and making import protection more 
transparent. But there is far more to do in addressing policies that 
impede trade. Negotiations on agriculture are especially important 
because the prospects for developing countries of obtaining greater 
market access can encourage responsive commitments by these countries 
not only on agriculture, but also on other sectors of interest to 
industrial countries.
    Tariffs. Although average tariff levels have fallen as a result of 
trade negotiations, tariffs remain significant barriers in some 
sectors. This should be a high priority in new negotiations. High 
tariffs must be put on a timetable for reduction. When feasible, zero-
for-zero proposals should be considered and ``nuisance'' tariffs--those 
under 5 percent--should be eliminated.
Review and Strengthening of WTO Agreements

    Moving beyond the Built-in Agenda, the WTO should address several 
problems that have risen in the implementation of the Uruguay Round 
Agreements. Using the upcoming negotiations to improve the 
effectiveness of the WTO is the best way to strengthen the trading 
system for the challenges of the 21st century.
    The following is an overview of the major issues that need to be 
addressed:
    Intellectual Property. Even after the improvements achieved in the 
Uruguay Round Agreement on Trade-Related Aspects of Intellectual 
Property (TRIPS), significant gaps remain in the protection and 
enforcement of intellectual property rights--regarding patents, 
trademarks, copyrights, and trade secrets. Governments also need to 
focus on improving the enforcement of TRIPS obligations. For example, 
developing countries must honor their TRIPS obligations following the 
termination of the transition period ending January 2000.
    Subsidies and Countervailing Measures. The WTO Agreement on 
Subsidies and Countervailing Measures (SCM) was an important 
achievement of the Uruguay Round, and trade negotiators should resist 
proposals to weaken it. In addition, negotiators should consider ways 
to strengthen the Agreement; for example, by requiring developing 
countries to apply the same disciplines against export subsidies.
    Customs-Related Issues. Although often technical, national 
regulations regarding rules of origin, pre-shipment inspection, import 
licensing, and valuation can have a significant impact on business 
costs and trade flows. For example, the Uruguay Round provides for a 
work program on the harmonization of rules of origin. These efforts 
have been slow going. The trade ministers should renew their efforts to 
achieve such harmonization.
    Sanitary and Phytosanitary Measures. The WTO Agreement on Sanitary 
and Phytosanitary Measures (SPS) does not prevent governments from 
enforcing legitimate food safety and public health regulations. What 
SPS aims to do is to assure that governments do not block imports 
through unnecessary regulations either inadvertently or through 
inadvertence. Any attempt to water down these requirements should be 
opposed.
    More attention should be given to the provision calling for 
governments to base their SPS measures on international standards 
except when those standards fail to provide a high enough level of 
health protection. Greater harmonization of food safety standards will 
lead to a safer world food supply and will help achieve the dual goals 
of fewer trade restrictions and the avoidance of episodes in which 
protectionists blame tainted food on free trade.
    Technical Barriers to Trade. As tariff barriers fall, some 
governments and standard-setting organizations will be tempted to use 
technical standards as a substitute for tariffs in order to protect 
national industry. Recognizing this possibility, the Uruguay Round 
produced a new Agreement on Technical Barriers to Trade (TBT). These 
new disciplines have not yet been tested in WTO dispute settlement. 
Nevertheless, a number of concerns have arisen. For example, for 
standards seeking to fulfill health, safety, or environmental 
objectives, TBT lacks a requirement that such standards be based on 
scientific principles.
    Government Procurement. The Agreement on Government Procurement is 
not part of the WTO single undertaking but rather is a ``plurilateral'' 
agreement comprising only 26 of 133 WTO member countries. The upcoming 
Trade Round should review this status to see if the Procurement 
Agreement can be fully brought into the WTO. This is a huge sector 
totaling over $3 trillion a year worldwide.
    For those governments that do participate in the Procurement 
Agreement, efforts should be made to strengthen the Agreement by: (1) 
expanding coverage of subnational governments and government-controlled 
enterprises; (2) inclusion of additional service sectors; and (3) 
lowering the threshold for obligations to apply. The issue of 
developing country participation in agreement the Procurement Agreement 
should also be discussed. These countries may have the most to gain 
from transparent and fair procurement processes that make best use of 
their limited resources.
    Electronic or E-Commerce. E-Commerce does not appear to require 
unique trade rules, but because of the importance of this new sector to 
economic efficiency and growth, the WTO should give specific attention 
to it. A top priority at the Ministerial should be to make permanent 
the standstill regarding tariffs on electronic transmission. Another 
objective should be to ensure that MFN and national treatment are 
accorded to foreign providers of Internet and interactive services.
    Trade-Related Investment Measures. The WTO Agreement on Trade-
Related Investment Measures (TRIMs) is the thinnest of the WTO 
Agreements. Attention should be given to strengthening its provisions. 
One of the critical areas for discipline is the imposition of trade-
related investment measures, such as mandatory technology transfer 
requirements. Such requirements are trade-distorting and can often 
render new investment impossible.
    Transparency of Government Policies. Transparency requirements are 
currently spread throughout the WTO Agreements. The WTO should consider 
the negotiation of a general transparency agreement that would 
encompass tariffs, internal taxes, standards, sanitary measures, 
domestic regulations, subsidies and export incentives, export controls, 
procurement, agricultural policies, rules of origin, and other customs 
practices. Such an agreement could provide for clear publication of 
government rules and perhaps help to curtail bribery and corruption. It 
could also affirm the value of private sector participation in the 
rules-setting process.
    Dispute Settlement. The WTO's Dispute Settlement Understanding is 
the key to effective enforcement of WTO agreements. However, experience 
with the WTO dispute process has revealed several areas where the 
procedural rules need improvement. We recommend that trade negotiators 
consider whether the timetable for the panel process can be 
substantially streamlined perhaps by cutting down the time by 50 
percent. Right now, the biggest problem lies in the slow implementation 
of panel and Appellate Body reports over a 12-15 month period. While 
this period may already be too long, ``gaming'' by governments may drag 
out the compliance process even longer. The WTO needs to address this 
tactic in order to retain public confidence in the dispute settlement 
system.
    Trade and Environment. In 1994, trade ministers created a Committee 
on Trade and Environment. The WTO renewed that mandate in 1996. The 
Committee has held numerous meetings, but has made very limited 
progress. Later this month, the WTO is sponsoring a high-level meeting 
on Trade and Environment to review the issues and to stimulate new 
proposals.
    The WTO is not the right forum to negotiate international 
environmental policy. Attempting to do so would distract trade 
ministers from what should be their primary objective which is to open 
markets, prevent export subsidies, and stop trade discrimination. 
Recognizing, however, that unmanaged transborder environmental problems 
can sometimes become trade issues, the Roundtable endorses efforts by 
governments, working with interested stakeholders, to improve the 
effectiveness of multilateral environmental institutions and 
agreements.
    There are also a few environment-related issues that need to be 
addressed in the WTO, and governments should strive to make greater 
progress here. For example, the status of multilateral environmental 
agreements under trade rules needs to be clarified so that the WTO is 
not perceived in some quarters as an impediment to environmental 
protection. The problem of subsidies that harm the environment e.g., 
European agricultural subsidies deserves more attention, and the Trade 
Policy Review Mechanism might be used to cast a spotlight on such 
practices.
    Labor Issues. The issue of trade and labor rights has engendered so 
much controversy that it has eclipsed the real issue, which is 
obtaining more respect for internationally recognized labor standards 
around the world. During 1998, significant progress was made in Geneva 
when the International Labor Organization (ILO) adopted a Declaration 
on Fundamental Principles and Rights at Work. This was a landmark 
achievement for the ILO and exemplifies what The Business Roundtable 
called for in 1995 when the Roundtable urged that ILO programs be 
improved. Governments should continue to pursue multilateral efforts to 
promote labor standards. The organization of primary responsibility 
should be the ILO, but complementary activities in other organizations 
should not be ruled out, or insisted upon.
    An important labor standard is freedom from forced labor practices. 
The WTO is not oblivious to this heinous problem. Article XX(e) of the 
General Agreement on Tariffs and Trade has always allowed governments 
to ban imports of products made with ``prison labor.'' At this time, 
the applicability of this exception to products of forced labor remains 
uncertain. It may be timely for the WTO to clarify this ambiguity by 
affirming that governments may ban products made using forced labor. 
Doing so might help governments combat forced labor, a practice that is 
anathema to free market principles.
    Consideration should also be given to expanding GATT Article XX to 
deal with products made using child labor. This year, the ILO will 
complete a new Convention on exploitative child labor, and the 
definitions employed in this Convention might be utilized in modifying 
Article XX. It should be noted that Article XX would not permit 
punitive trade sanctions on unrelated products. Rather, Article XX 
would only permit an import ban on the product made using child labor.

New Initiatives

    A number of new rule-based WTO initiatives have been 
proposed such as investment and competition policy. These 
issues are important to the international economic system, and 
careful consideration should be given to determine whether 
these issues are ripe for WTO negotiations.
    Competition Policy. The globalization of business 
activities raises important questions about the extent to which 
foreign anticompetitive practices may undermine market access 
opportunities created by bilateral and multilateral trade and 
investment agreements. However, at this time, there are huge 
uncertainties as to the proper goals for a competition policy 
negotiation in the WTO and whether the WTO is the optimal 
forum. For example, what are the downsides and, conversely, the 
upsides of addressing market access problems through an 
international competition policy agreement in the WTO or other 
fora?
    Under these circumstances, it is premature to launch a WTO 
negotiation on competition policy. A more constructive approach 
would be to establish a new WTO work program that will focus 
more on exchanging information about the development and 
enforcement of appropriate antitrust laws.
    Investment. Achieving disciplines on how governments treat 
foreign investment is important to gaining the full benefits of 
the international economic system. If the WTO Ministerial 
decides not to launch comprehensive international investment 
negotiations, a constructive course now would be (1) to 
strengthen the WTO Agreement on Trade-Related Investment 
Measures by expanding it to include additional trade distorting 
investment measures, such as technology transfer requirements, 
and (2) to establish a WTO work program on investment that will 
focus more on exchanging information about how to structure an 
investment regime that will promote economic growth.

                         China's WTO Accession

    Mr. Chairman, over the next five weeks, the United States and China 
have a window of opportunity to accelerate the process of bringing 
China into the global trading system. As the largest emerging economy 
in the world, China can take on a pivotal role in helping to chart the 
course for recovery in Asia particularly in light of the continuing 
weakness in the Japanese economy. In addition, the growth of the Asian 
market is important to the United States and further opening China's 
market will lead to increased U.S. exports of goods, services and 
agriculture.
    Fully integrating China into global economic institutions, such as 
the WTO, is the best means to ensure that China will play a positive 
role in the global economy and provide broader market access for U.S. 
goods and services. In order to join the WTO, China should be required 
to enter into binding commitments to open its markets and abide by the 
disciplines of multilateral trading rules. The liberalization required 
under WTO rules would provide important new opportunities in the vast 
Chinese market, which will help maintain global economic growth. WTO-
mandated liberalization in China will also promote growth in China 
itself as the removal of discriminatory trade barriers creates new 
opportunities for economic activity and jobs. WTO accession would also 
provide another venue to encourage China to maintain a stable currency.
    While China's WTO membership is important because of the benefits 
it would provide to the American, the Chinese and the global economy, 
it would also be viewed by financial markets throughout the world as a 
vote of confidence in the global economic system. China's WTO 
membership would send a powerful signal to Asian economies and other 
emerging markets around the world the importance of maintaining open 
markets and adhering to multilateral trading rules if economic growth 
is to be maintained.
    In advocating China's WTO membership, we do not suggest that it be 
at any price. China must be willing to agree to a commercially viable 
protocol of accession, which provides meaningful market access for U.S. 
goods, services and agriculture. These commitments must be in addition 
to China's full implementation of existing liberalization commitments. 
If China agrees to such a protocol, the United States should be ready 
to support China's WTO admission and request that the Congress approve 
the permanent extension of normal trade relations (NTR) treatment so 
that U.S. firms and workers will be able to take full advantage of the 
market opening agreements that have been so paintstakingly negotiated.
    Bringing China into the global trading must remain one of America's 
greatest priorities. We ask for your continued leadership in achieving 
this goal by making it an integral part of your global economic 
strategy, and we commit our support to you to work to build support for 
permanent NTR trading status.

                             IV. Conclusion

    The next nine months will be very important in determining the 
future direction of U.S. trade policy. First, the United States will 
hopefully be successful in securing China's accession to the WTO on the 
basis of a commercially viable protocol of accession. This will help 
restore stability in Asia and strengthen the multilateral trading 
system by ensuring that key members of the team are all playing by the 
same rules. Second, we hope that the United States will provide the 
leadership necessary to launch new negotiations in the WTO to further 
liberalize trade and strengthen the WTO. I urge the Congress and the 
Administration to work together to reach a consensus on moving forward 
this year on these critical issues. And, I commend the Subcommittee for 
holding these hearings to help inform members of the Congress and the 
public about these vital issues and to continue the process of building 
a national consensus on America's trade policy.

                                

    Chairman Crane. Thank you, Mr. Condit.
    Mr. Baszile.

STATEMENT OF BARRY BASZILE, PRESIDENT AND OWNER, BASZILE METALS 
                SERVICE, LOS ANGELES, CALIFORNIA

    Mr. Baszile. Mr. Chairman, Members of the Subcommittee, 
good morning. I am Barry Baszile, the owner and president of 
Baszile Metals Service. Our main office is located in Los 
Angeles, California, and we have branch offices located in 
Seattle, Washington, and in York, Pennsylvania.
    First, I would like to thank you for the opportunity to be 
with you today to represent my company of 40 employees and our 
community. One of my primary reasons for being here with you 
today and the reason that I am so excited about this 
opportunity is to try and put a face on what you all hear so 
much about. That is, how international trade impacts the 
thousands of small businesses in communities scattered 
throughout this country.
    I can tell you that Baszile Metals Service is living proof 
that the benefits of participating in a global economy are not 
limited just to big business. Some 24 years ago, I founded 
Baszile Metals. Today, we are the only black-owned firm to 
manufacture parts, process and deliver aluminum sheet, plate, 
rod, bar, and extrusions to the aerospace and defense 
industries. I began my career making cold sales calls on large 
companies. Many of those companies, like Boeing, gave us a 
chance. The door was opened, and it was up to us to be reliable 
and provide quality products at competitive prices.
    I am fortunate to have a talented, dedicated workforce. 
These are people who really care about their jobs and their 
customers. They know that our products must be of the highest 
quality because lives depend on it. Over the past 24 years, our 
products have been a part of every Boeing model of commercial 
aircraft, NASA's space shuttle, the international space 
station, the F-15 and F-16 jet fighters. We are also a supplier 
for the Joint Strike Fighter program.
    Our customers have included the Boeing Company, Rockwell 
International, Northrop-Grumman, McDonnell-Douglas, Lockheed 
Martin, the Department of Defense, and NASA. We have even 
provided copper, nickel, and zinc to the Treasury Department 
for the coins. We are also a stocking supplier for bus brake 
and axle parts and brake assemblies and repair kits. The hard 
work and dedication of our employees has paid off. Last year, 
our company was selected as the Boeing Company's Small 
Disadvantaged Supplier of the Year. One of the reasons for our 
selection was our 97.6 percent on-time delivery record. We are 
extremely proud of our performance and of this recognition.
    I am keenly aware of the role that my customers play in the 
international marketplace, and how competitive it can be. Our 
role as a supplier is to deliver quality products on time and 
at competitive prices. However, I have another responsibility. 
That is to provide jobs and economic opportunity in my 
community. If possible, I would like to take just a moment to 
tell you how our association with companies like Boeing 
manifest itself in our inner city Los Angeles community.
    Our firm is transitioning into a true manufacturing 
company. Soon, we will not only be providing metals, but 
producing metal parts for our customers. We are building a 
10,000-square foot machine shop to produce precision parts. The 
people who make those parts will be individuals who could be 
classified as socially and economically disadvantaged. We are 
working hand-in-glove with Los Angeles law enforcement, black 
and Hispanic groups, the International Association of 
Machinists, and the United Auto Workers, to identify and train 
so-called ``deadbroke dads'' for jobs as machinists. Some of 
the men with this label are not deadbeats. What so many of them 
need are jobs to help them fulfill their obligations. We are 
going to do that. They need training to build a skill that they 
can take pride in and help restore their self respect as 
contributing members of the community. We are going to help 
them do just that.
    If I might, Mr. Chairman, I would like to talk about one 
more program that my company is involved in. In October, we 
announced the formation of a new non-profit organization called 
Welfare to Work Partners, to help address the critical needs of 
our inner-city community. Welfare to Work Partners will target 
crucial problems such as preparing welfare recipients to 
successfully enter the workforce by improving their academic 
competencies and life skills. Our goal is to enhance the level 
of bonding and emotional relationships between non-custodial 
fathers and their children, establish paternity, increase the 
fathers' earning capacity, and to improve community awareness 
of fatherhood. The Welfare to Work Partners program is off and 
running. We even have our own Website. You can find us at 
www.wwpartners.org.
    We are teaming with the successful Fast Track LA program, 
which is a unique program that provides classes to improve both 
academic and important life skills. As an inner city employer, 
I am sensitive to the needs to assist our employees in their 
own self-improvement and education. Baszile Metals has a 20 
station computer lab where our employees can work on programs 
designed to improve their English, reading, and math skills 
levels.
    My background and training was as a probation officer and 
social worker. Today I am a businessman working with some of 
our Nation's largest companies, including the country's largest 
exporter, the Boeing Company.
    Ladies and gentlemen, what I hope I have left with you 
today is what one company can do in its community as the result 
of having strong business partnerships with major companies to 
do business in the international marketplace. I encourage you 
to continue to find ways that we as a Nation can participate in 
fair and open trade with other nations, so that our employees 
and our communities can benefit.
    Thank you very much.
    [The prepared statement follows:]

Statement of Barry Baszile, President and Owner, Basszile Metals 
Service, Los Angeles, California

    Mr. Chairman, Members of the Subcommittee, good morning. I am Barry 
Baszile, the owner and President of Baszile Metals Service. Our main 
office is located in Los Angeles, California and we have branch offices 
located in Seattle, Washington and York, Pennsylvania.
    First, I would like to thank you for the opportunity to be with you 
here today to represent my company and our 40 employees, and our 
community. One of my primary reasons for being here with you today, and 
the reason that I am so excited about this opportunity is to try and 
put ``a face'' on what you all hear so much about. That is how 
international trade impacts the thousands of small businesses in 
communities scattered throughout this country. I can tell you that 
Baszile Metals Service is living proof that the benefits of 
participating in a global economy are not limited just to big business.
    Some 24 years ago I founded Baszile Metals. Today we are the only 
black-owned firm to manufacture parts, process and deliver aluminum 
sheet, plate, rod, bar and extrusions to the aerospace and defense 
industries. I began my business making cold sales calls on large 
companies. Many of those companies, like Boeing, gave us a chance. The 
door was opened and it was up to us to be reliable and provide quality 
products at competitive prices.
    I am fortunate to have a talented, dedicated workforce. These are 
people who really care about their jobs and their customers. They know 
that our products must be of the highest quality because lives depend 
on it. Over the last 24 years our products have been a part of every 
Boeing model of commercial aircraft, NASA's space shuttle and 
International Space Station and the F-15 and F-16 fighter jets. We are 
also a supplier for the Joint Strike Fighter program.
    Our customers have included: The Boeing Company, Rockwell 
International, Northrop-Grumman, McDonnell-Douglas, Lockheed Martin, 
the Department of Defense and NASA. We have even provided copper, 
nickel and zinc to the Treasury Department for coins. We are also a 
stocking supplier for bus brake and axle parts and brake assemblies and 
repair kits.
    The hard work and dedication of our employees has paid off. Last 
year our company was selected as The Boeing Company's Small 
Disadvantaged Supplier of the Year. One of the reasons for our 
selection was our 97.6 percent on-time delivery record. We are 
extremely proud of our performance and of this recognition.
    I am keenly aware of the role that my customers play in the 
international marketplace and how competitive it can be. Our role as a 
supplier is to deliver quality products, on time at a competitive 
price. However, I have another responsibility and that is to provide 
jobs and economic opportunities in my community.
    If possible I would like to take just a moment to tell you how our 
association with companies like Boeing manifests itself in our inner 
city Los Angeles community.
    Our firm is transitioning into a true manufacturing company. Soon 
we will not only be providing metals, but producing metal parts for our 
customers. We are building a 10,000 square foot machine shop to produce 
precision parts. The people who make those parts will be individuals 
who could be classified as socially or economically disadvantaged.
    We are working hand-in-glove with Los Angeles law enforcement, 
Black and Hispanic groups, the International Association of Machinists 
and the United Auto Workers to identify and train so called ``deadbroke 
Dads'' for jobs as machinists. Some of the men with this label are not 
``deadbeats.'' What so many of them need are jobs to help them fulfill 
their obligations . . . and we are going to do that. They need training 
to build a skill that they can take pride in and help restore their 
self-respect as contributing members of the community . . . and we're 
going to help them do just that.
    If I might, Mr. Chairman I would like to talk about just one more 
program that my company is involved in.
    In October we announced the formation of a new, non-profit 
organization called ``Welfare to Work Partners'' to help address the 
critical needs of our inner-city community.
    ``Welfare to Work Partners'' will target crucial problems such as 
preparing welfare recipients to successfully enter the workforce by 
improving their academic competencies and life skills.
    Our goal is to enhance the level of bonding and emotional 
relationships between non-custodial fathers and their children; 
establish paternity; increase the fathers' earning capacity and; 
improve community awareness of fatherhood. The Welfare to Work Partners 
program is off and running. We even have our own web site 
www.wwpartners.org.
    We are teaming with the successful Fast Track LA program, which is 
a unique training program that provides classes to improve both 
academic and important life skills.
    As an inner city employer, I am sensitive to the needs to assist 
our employees in their own self-improvement and education. Baszile 
Metals has a 20 station computer lab where our employees can work on 
programs designed to improve their English, reading and math skill 
levels.
    My background and training was as a probation officer and social 
worker. Today I am a businessman working with some of our nation's 
largest companies, including the country's largest exporter--The Boeing 
Company.
    Ladies and Gentlemen, what I hope I have left with you today is 
what just one company can do in its community as the result of having 
strong business partnerships with major companies to do business in the 
international marketplace. I encourage you to continue to find ways 
that we, as a nation, can participate in fair and open trade with other 
nations, so that our employees and our communities can benefit.
    Thank you.

                                

    Chairman Crane. Thank you, Mr. Baszile.
    Mr. Swift.

 STATEMENT OF RICHARD J. SWIFT, CHAIRMAN, PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, FOSTER WHEELER CORPORATION, CLINTON, NEW 
 JERSEY, ON BEHALF OF THE NATIONAL FOREIGN TRADE COUNCIL, INC.

    Mr. Swift. Mr. Chairman, and Distinguished Members of the 
Subcommittee, I am Dick Swift, the chairman and chief executive 
officer of Foster Wheeler Corporation, a global engineering, 
construction, and manufacturing company specializing in the 
process and power industries. I also serve as the chairman of 
the National Foreign Trade Council, a broad-based organization 
founded in 1914, of more than 550 U.S. companies having 
substantial international interests.
    I am appearing today on the Council's behalf. I would like 
to submit my detailed statement for the record and summarize my 
remarks for you now.
    I appreciate the opportunity to testify today. Foster 
Wheeler, like many other NFTC members, depends on its success 
in the international marketplace for the majority of its 
business. In fundamental respects, our Nation's economic 
strength has been due to our extensive trade and investment 
with other countries, and our willingness to remain open and 
unafraid of global competition. World Trade Organization trade 
ministers will meet in Seattle later this year, creating a real 
opportunity to advance America's economic interests and 
demonstrate bipartisan support for increased trade.
    Through a new round of multilateral negotiations, the 
United States can reduce barriers to agricultural trade, open 
trade in services, and give American business new access to 
other markets around the world. We can also strengthen and 
improve our existing WTO trade agreements and enforcement 
mechanisms. The NFTC has provided recommendations to the U.S. 
trade representative on future WTO negotiations that are 
included in my statement for the record.
    For decades, America has been the world's most powerful and 
articulate advocate of an open rules-based trading system. 
Today however, many have begun to doubt America's commitment to 
open trade. It is time to get back to the positive role of 
trade and demonstrate the leadership necessary to implement a 
forward-looking trade agenda. Congress has a vital role to 
play. Passage of a broad pro-trade bill would clarify and renew 
America's commitment to open markets and global growth. Such a 
package could strengthen the hand of our negotiators and the 
competitiveness of our business in the international 
marketplace.
    The bill should contain these elements. First, strongly 
endorse multilateral trade liberalization through comprehensive 
WTO negotiations and other bilateral and regional trade 
initiatives. Such liberalization would be a powerful stimulant 
to global economic growth and recovery.
    Second, renew traditional trade negotiating authority. This 
will provide our negotiators the tools they need to negotiate 
from strength, and allow major new trade negotiations under the 
WTO, FTAA, and APEC to proceed in a serious and meaningful 
manner. We recognize that there will be little progress until 
we address the environmental and labor issues that have been 
raised. We believe that a meaningful dialog must be started to 
move the process forward.
    Third, enact common sense sanctions reform. This will put 
in place a process for thoughtful and rational cost-benefit 
analysis before imposing counter-productive unilateral economic 
sanctions. The NFTC strongly endorses the sanctions reform 
legislation that will be introduced shortly and will be 
sponsored by the distinguished Chairman of the Subcommittee, 
Congressman Crane, along with Congressmen Dooley and Manzullo.
    Fourth, provide American exporters and workers with the 
tools they need to compete on a level playing field. This 
should include multi-year authorization for OPIC, the Export-
Import Bank, TDA, and the Trade Advocacy Center. These 
organizations provide tremendous economic return on a very 
small investment, and the services they provide are crucial for 
helping keep America competitive against foreign government 
supported exports in overseas markets.
    Fifth, reform cold war era trade laws such as Jackson-
Vanik, and grant multi-year Normal Trade Relations status to 
China and Vietnam. Provisions should also be made to grant 
permanent NTR to them upon accession to the WTO on a meaningful 
commercial basis.
    Finally, the bill should include provisions to renew and 
reform the Export Administration Act and the Trade Adjustment 
Assistance program. Congress may also wish to include 
preferential trade programs for less developed countries, such 
as those contained in the Africa Growth and Opportunity Act, 
and the Caribbean Parity legislation.
    In crafting a pro-trade bill, the NFTC strongly urges 
Congress to make sure that all of its provisions are consistent 
with our obligations under the WTO, and are market opening, not 
market closing.
    Mr. Chairman, the NFTC believes that enactment of a broad-
based, pro-trade bill will erase many of the doubts about our 
commitment to open trade, and increase America's 
competitiveness in the global market. The NFTC and its members 
stand ready to work with the Committee in developing and 
supporting such a package. Thank you.
    [The prepared statement follows:]

Statement of Richard J. Swift, Chairman, President and Chief Executive 
Officer, Foster Wheeler Corporation, Clinton, New Jersey, on behalf of 
the National Foreign Trade Council, Inc.

    Mr. Chairman and distinguished Members of the Subcommittee, I am 
Richard J. Swift, Chairman, President and Chief Executive Officer of 
Foster Wheeler Corporation. Foster Wheeler is a U.S.-based engineering, 
construction and manufacturing company specializing in the process and 
power industries. I am appearing today on behalf of the National 
Foreign Trade Council (NFTC), a broad-based organization of more than 
550 U.S. companies having substantial international operations and 
interests. At the beginning of this year, I became the Chairman of the 
NFTC.
    I appreciate the opportunity to testify today on U.S. trade policy 
and the trade agenda. I would like to begin by applauding the historic 
leadership role of the Ways and Means Committee in forging a 
bipartisan, pro-trade agenda for our nation. Such an agenda has never 
been more important.
    I would like to focus my remarks on three issues: (1) the 
fundamental importance of trade to the U.S. economy and the need for 
American leadership in fostering 
global growth; (2) the need to support American exporters, workers, 
farmers, and consumers through passage of a bipartisan pro-trade bill; 
and (3) the critical importance this year of a successful World Trade 
Organization (WTO) Ministerial Conference which launches new 
multilateral trade negotiations.

   1. Importance of Trade to the U.S. Economy and Need for American 
                 Leadership in Fostering Global Growth

    As the world's largest trader and most open, major market economy, 
the United States has benefitted enormously from expanding global trade 
and investment. In fundamental respects, our nation's economic strength 
at home has been due to our vibrant trade and investment with other 
countries and to remaining open and unafraid of global competition. The 
result has been the longest domestic economic expansion since World War 
II.
    The facts speak for themselves. More than one-third of America's 
economic growth during the 1990s was from exports. Trade now accounts 
for close to 25 percent of our GDP. Millions of workers depend on trade 
for stable, well-paying jobs. It's been said many times, but it bears 
repeating--only 4 percent of the world's population lives in the United 
States. American businesses, workers, farmers and consumers must 
continue to engage actively in global trade if our economy and standard 
of living are to grow and remain healthy.
    Like many NFTC members, Foster Wheeler depends on expanding trade 
and investment for a majority of its overall revenue. More than 60% of 
Foster-Wheeler's revenues are from our international activities. When 
Foster Wheeler grows globally, our domestic activities also thrive. 
These activities include millions of dollars in purchases from American 
small and medium business suppliers, who are often unaware that they 
are ``invisible exporters.''
    Let me give you one example. Two years ago, Foster Wheeler signed a 
contract to supply six steam generators for the Yancheng electric power 
project in China--the largest single boiler contract in Chinese 
history. The project is keeping at least 200 people employed at our 
Dansville, New York, facility. It's also generating millions of dollars 
in orders for suppliers of all kinds of products in 26 states. By the 
time it's complete, Yancheng will bring in $310 million in orders for 
America goods and services--orders that are already supporting hundreds 
of jobs across the country.
    Yancheng isn't just a success story for Foster Wheeler. It's a 
success story for American trade policy. We win such contracts because 
our government supports an open, rules-based global trading system. 
Those American jobs are possible because Congress supports normal trade 
relations with China. Suppliers all across the country are receiving 
those orders today due to continued congressional reauthorization of 
the Export-Import Bank, which provided critical financing.
    I would like to turn briefly to the positive role of imports and 
keeping the trade deficit in perspective. A primary cause of our rising 
trade deficit is because the U.S. economy is much stronger than many 
other major economies, which have been in severe recession, stagnation 
or a slower growth mode. The Asian financial crisis and the subsequent 
serious downturn in these and other key markets led to a decline in our 
exports last year. At the same time, the strength of the U.S. economy 
has kept U.S. demand for imports at a high level. This is what is 
driving our rising trade deficit. It is notable, however, that the 
deficit is still much smaller as a percentage of GDP than it was the 
last time our nation's trade deficit (goods and services) peaked in 
1987--1.98 % versus 3.27%.
    While recognizing that certain sectors of our economy have been hit 
hard by slower growth overseas and stronger imports, imports play a 
positive role in the U.S. economy. They provide consumer freedom of 
choice, fill a market demand that may not be available domestically, 
and are often incorporated as components into American-made final 
products. Imports also provide a healthy dose of competition. In fact, 
the competitiveness fostered by our openness to imports is one of the 
fundamental reasons our economy is as strong as it is today. Finally, 
the United States, like other countries, has trade laws to deal with 
injurious imports.
    American economic leadership in bolstering global economic growth 
and U.S. exports can help stem the rising U.S. trade deficit. This 
means stabilizing economies in turmoil in Asia and Latin America, 
keeping markets open, further liberalizing trade and investment, and 
making sure American exporters and workers have the necessary tools 
from our government to compete globally on a level playing field. These 
tools include establishing predictable and effective trade rules, 
negotiating market-opening trade agreements, halting the use of 
counterproductive unilateral economic sanctions, and providing 
competitive export and investment financing.
    There are also important indirect benefits from global economic 
engagement. Expanding trade and investment supports broader national 
objectives. It stimulates economic growth and development, which 
provides countries with the means to address other important objectives 
besides alleviation of poverty and basic economic survival. It improves 
workers lives. For example, affiliates of American companies abroad 
provide higher average wages and better benefits such as health care 
and housing. It improves the environment by incorporating higher 
environmental standards in new plants, by exporting environmentally 
advanced technologies, and by eliminating harmful subsidies, 
particularly in the agricultural sector. And finally, America's trade 
expansion, as well as trading regimes such as the WTO, spread core 
American values such as respect for the rule-of-law, openness, 
transparency and regulatory due process. Trade deserves much greater 
credit as a positive force for building better civil societies.

        2. The Need for a Positive, Bipartisan Pro-Trade Package

    For decades, America has been the world's most powerful and 
articulate advocate of an open, rules-based trading system. Today, 
however, many have begun to doubt America's commitment to open trade. 
Uncertainties about U.S. trade policy threaten to undermine many of the 
opportunities expanded trade could create for American business and 
workers. For example, the Administration's trade negotiating authority 
has lapsed. Our relationship with our fourth-largest trading partner, 
China, continues to be the subject of acrimonious debate every year. 
Far too often, America imposes unilateral trade sanctions in disputes 
with foreign countries, even our friends. Reauthorization and funding 
for vital agencies that promote U.S. exports is uncertain. Even 
American participation in organizations like the International Monetary 
Fund (IMF), the World Bank and the WTO itself cannot be taken for 
granted.
    It is time to get back to the positive role of trade, and 
demonstrate the leadership necessary to implement a forward-looking 
trade agenda. Congress has a vital role to play. Congressional passage 
of a broad pro-trade bill would help to clarify and renew America's 
commitment to expanding trade and fostering global growth. Such a 
package could strengthen the hand of our negotiators and the 
competitiveness of our businesses and workers in the international 
marketplace.
    The bill should contain these key elements:
     Strong support for advancing global trade liberalization, 
trade expansion and effective trade rules through comprehensive WTO 
trade negotiations, and other important bilateral and regional trade 
initiatives. Such action will serve as a powerful engine of growth 
domestically and globally.
     Renewal of traditional trade negotiating authority on a 
multi-year basis to provide America's trade negotiators the tools they 
need to get the job done from a position of strength and allow major 
new trade negotiations, including WTO, Free Trade Area of the Americas 
(FTAA) and Asia Pacific Economic Cooperation (APEC) trade talks, to 
proceed in a serious and meaningful manner. We recognize that there 
will be little progress on this matter until we address the 
environmental and labor issues that have been raised. We are prepared 
to sit down with the members of this Committee, the Administration, and 
others to engage in a meaningful dialogue that will move the process 
forward. I don't expect that we will agree on all the issues, but we 
have a mutual interest in resolving this impasse so that we can advance 
our national interests in the global economy.
     Common sense sanctions reform to put in place a process 
for thoughtful and rational cost/benefit analysis prior to the 
imposition of unilateral economic sanctions, and lifting current 
sanctions that are counterproductive and harmful to American exports 
and jobs. The NFTC strongly endorses the legislation that will be 
introduced as soon as next week by the distinguished Chairman of this 
Subcommittee, Congressmen Crane, along with Congressmen Dooley and 
Manzullo.
     Essential trade tools for American exporters and workers 
to compete on a level playing field. These should include multi-year 
reauthorizations for the Overseas Private Investment Corporation and 
the Export-Import Bank, as well as the programs of the Trade and 
Development Agency and the Commerce Department's Advocacy Center. These 
organizations provide tremendous economic return on a very small 
investment, and the services they provide are crucial to keeping 
America competitive against foreign government-supported exports in 
overseas markets.
     Reform of Cold War era trade statutes, such as the 
Jackson-Vanik amendment to Title IV of the Trade Act of 1974, by 
granting multi-year Normal Trade Relations (NTR) status to China, 
Vietnam and other covered countries, promoting their accession to the 
WTO in a commercially meaningful manner, and granting permanent NTR to 
them upon such accession.
     Reauthorization and reform of the Export Administration 
Act in a manner which recognizes current commercial realities of dual-
use technology in the global marketplace, and which places greater 
emphasis on viable multilateral solutions.
     Renewal and reform of the Trade Adjustment Assistance 
program to help dislocated workers obtain new skills and jobs, greater 
technical assistance to bolster International Labor Organization (ILO) 
initiatives, and support for effective implementation of the June 1998 
ILO Declaration on Fundamental Principles and Rights at Work.
     Preferential trade programs for less developed countries, 
including extension of the Generalized System of Preferences, the 
Africa Growth and Opportunity Act, Caribbean Parity legislation, and 
renewal of the Andean Trade Preferences Act.
    The NFTC and its members stand ready to work with the Committee and 
other groups in developing such a pro-trade agenda in a bipartisan 
manner.

  3. The Critical Importance of a Successful WTO Ministerial and New 
                               WTO Round

    Finally, I'd like to turn to one of the most important issues on 
our nation's trade agenda this year--the WTO Ministerial Conference and 
the launching of new WTO trade talks. The NFTC believes a successful 
WTO Ministerial is vitally important and that our government should be 
bold and farsighted in leading the way for comprehensive new WTO 
negotiations to advance global trade liberalization and strengthen 
existing WTO agreements.
    The NFTC submitted detailed comments to the United States Trade 
Representative last October on its recommendations for the scope and 
content of future WTO trade talks, and has submitted recent comments on 
upcoming WTO negotiations on government procurement issues. These 
comments are attached to this statement and we request that they be 
made part of the record.
    The NFTC supports the Administration's efforts to reach agreement 
by the time of the ministerial meeting, in a few key areas as a down 
payment for launching a more comprehensive, accelerated round of WTO 
negotiations. So-called ``deliverables'' should include a WTO agreement 
on the ``early voluntary sectoral liberalization'' initiative launched 
by APEC countries, an agreement on transparency in government 
procurement, conclusion of the second round of Information Technology 
Agreement negotiations, and a continued moratorium on tariffs on e-
commerce. The NFTC supports a new WTO Round that further opens and 
expands trade for American businesses, workers, and farmers. This 
should include mandated ``built-in'' negotiations on services and 
agriculture, industrial tariff reductions, improvements to existing WTO 
agreements and rules, and certain institutional changes to ensure the 
WTO is equipped for the 21st century.
    As members of the subcommittee are well aware, the WTO and its 
predecessor, the General Agreement on Tariffs and Trade (GATT), form 
the core foundation of an open and expanding multilateral trading 
system. It is rules-based, market-opening, and provides for effective 
dispute settlement. It has been key to fostering global growth and 
prosperity for over five decades. The Uruguay Round alone--the last 
round of multilateral trade talks which concluded in 1994--represented 
the largest global tax cut in history and forged unprecedented 
agreements in areas such as agriculture, services, intellectual 
property and dispute settlement.
    The upcoming WTO Ministerial in Seattle offers us a rare 
opportunity to demonstrate united American leadership on trade by 
showcasing its benefits, and by galvanizing support for comprehensive 
WTO market-opening negotiations and improvements to existing WTO 
agreements. Such action--setting the example and leading the way for 
further multilateral progress on trade--is one of the most important 
steps we can take to restore global growth and prosperity. Part of 
setting the example includes upholding existing WTO obligations. The 
NFTC urges all WTO members to agree to a ``standstill'' against new 
trade barriers.
    Historically, the United States has led the rest of the world in 
advancing multilateral trade liberalization. As the world's economic 
superpower, we must again step up to the plate. The NFTC is working 
with other major business groups, some of which are represented here 
today, helping the business community do its part to assure a 
successful WTO Ministerial.
    Mr. Chairman, thank you for the opportunity to share the NFTC's 
views on the U.S. trade policy agenda.
    [An attachment is being retained in the Committee files.]

                                

    Chairman Crane. Thank you, Mr. Swift.
    Mr. O'Hare.

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

    Mr. O'Hare. Thank you, Mr. Chairman. It is a pleasure to 
present the views of the Coalition of Service Industries, CSI, 
on priorities for expanding U.S. services trade.
    CSI believes that an open rules-based international trade 
system is essential to maintain U.S. economic prosperity, and 
that the World Trade Organization is absolutely essential to 
that system. The WTO has proven its value to the U.S. services 
sector by concluding good market access agreements on 
telecommunications and financial services. Nonetheless, the 
organization must improve implementation and enforcement of 
trade agreements already negotiated and increase the 
accessibility to the public. Strong U.S. leadership will be 
required to achieve these goals.
    Our coalition's very great interest in the WTO services 
trade negotiations, scheduled to start in 2000, the first 
comprehensive services negotiation ever undertaken, is 
explained partly by the fact that the United States is the 
world's largest exporter and importer of services. In 1998, 
U.S. services exports were $260 billion. Imports were $180 
billion. The trade surplus was $80 billion from services.
    CSI has produced at USTR's request, an initial statement of 
liberalization objectives in eight service sectors. I ask, Mr. 
Chairman, that this document be included in the record of this 
hearing.
    In essence, we seek the following general objectives. 
First, ensure the right to establish and to control ownership 
of our investments. Second, ensure national treatment for U.S. 
investors. Third, eliminate unnecessary restrictions on cross-
border transactions. Fourth, remove obstacles to the free 
movement of critical business personnel. Finally, promote pro-
competitive regulatory reform.
    What is pro-competitive regulatory reform? It means 
abandoning outdated forms of regulation by which governments 
limit the number of participants in a market, limit the 
introduction of new products, restrict market-based pricing, 
and discriminate against foreign firms.
    The next round of services negotiations must include reform 
of these out-dated regulatory practices. We made a start in 
this by including the 1997 U.S. Japan bilateral insurance 
agreement in the WTO financial services agreement. These 
provisions would create a pro-competitive regulatory 
environment in Japan, and were aimed at leveling the playing 
field for foreign insurers.
    Unfortunately, significant aspects of the agreement have 
not been implemented. The United States is engaged in other 
important trade initiatives that complement efforts in the WTO. 
Of these, our bilateral relationship with China is critical. We 
strongly support the Administration's effort to reach a WTO 
accession agreement that lets us participate fully in the 
Chinese market.
    As you are aware, U.S. negotiators are now in Beijing. We 
urge USTR to continue to insist that without commercially 
meaningful commitments on services, there simply can be no deal 
with China. And if China agrees to play by WTO rules, then the 
United States should provide normal trade relation status to 
China.
    In conclusion, Mr. Chairman, we believe the United States 
must continue to take the lead in multilateral and other 
efforts to eliminate trade and investment barriers, and 
establish an even stronger system of international trading 
rules centered on the WTO, and buttressed by national pro-
competitive regulatory supports. This will require extending 
broad multi-year trade negotiating authority to the President. 
We must ourselves avoid protectionist trade actions and we must 
build a strong domestic consensus that the benefits of open 
international trade outweigh its costs.
    CSI is helping build this consensus by holding the first 
World Services Congress in Atlanta on November 1-4, this year. 
In addition, CSI has helped lead a new coalition, the U.S. 
Alliance for Trade Expansion, USA Trade, to support the WTO 
Ministerial in Seattle. These hearings are an important step in 
developing a consensus on these issues, and we appreciate the 
opportunity to present our views. Thank you very much, Mr. 
Chairman.
    [The prepared statement follows:]

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

    It is a pleasure to appear today to present the views of the 
Coalition of Service Industries (CSI) on the importance of expanding 
trade and resisting protectionism through active U.S. involvement in 
trade negotiations, and on U.S. negotiating priorities for the next 
several years.
    CSI was established in 1982 to create greater public awareness of 
the major role services industries play in our national economy; 
promote the expansion of business opportunities abroad for U.S. service 
companies; advocate an increased focus on liberalization of trade in 
services in international trade negotiations; and encourage U.S. 
leadership in attaining a fair and competitive global marketplace. CSI 
represents a broad array of U.S. service industries including the 
financial, telecommunications, professional, travel, transportation, 
information and information technology sectors.
    It is timely and important that the Subcommittee review U.S. trade 
policy and the challenges now confronting it. Strong, focused United 
States leadership is, more than ever, essential in a world economy torn 
by financial shocks and economic dislocation. As the world's strongest 
economic power the U.S. must lead by example. We must pursue trade, 
investment and economic policies that encourage domestic and 
international growth. Just as we ask other countries to pursue sound 
policies, we must avoid protectionist actions that they might emulate.
    An open, rules based international trade system is essential to 
maintain U.S. economic prosperity, and the World Trade Organization is 
an absolutely essential element of that system.
    The WTO is first of all dedicated to promoting the market-driven 
economic principles that underlie our own economic success. It does so 
by providing a forum where governments commit themselves to reductions 
in trade barriers. The WTO is what its member governments make it. And 
the members of the WTO rely on constant, skilled U.S. leadership to 
keep the WTO moving ahead.
    In its first five years, the WTO has proven its value to the U.S. 
services sector by the negotiation of agreements on basic 
telecommunications and financial services. We are fortunate to have had 
the skillful, energetic leadership of Director General Ruggiero during 
this initial period. It is very important that he be replaced with a 
strong, highly able leader upon his retirement this April.

                         Challenges to the WTO

    While we believe it is essential to strengthen the role of the WTO 
in creating a level field where players can compete freely and fairly, 
the organization faces several major problems which U.S. leadership 
must help overcome.
    The first of these is the issue of the implementation and 
enforcement of trade agreements already negotiated. The WTO is an 
effective forum where governments negotiate agreements. By and large it 
has also been an effective forum where governments can bring complaints 
against those who do not abide by their agreements. But it has a long 
way to go to develop as an institution that ensures that trade 
agreements are implemented and commitments fulfilled. In part, this is 
a responsibility of member governments and the industries that benefit 
from agreements. CSI takes this role very seriously. Our Research and 
Education Foundation has mapped out a process for monitoring 
governments' implementation of the telecommunications agreement. We 
will be putting more effort into this in the future. Likewise, we will 
be closely tracking the implementation of the GATS financial services 
agreement, which entered into force on March 1st.
    A case in point is the WTO Financial Services Agreement that was 
concluded by 71 signatories on December 13, 1997. Those signatories 
agreed to file their formal acceptances of the agreement by January 29 
this year, and they agreed that it would come into effect on last 
Monday, March 1. In fact, 16 of the signatories were not able to file 
their acceptances by the deadline. The issue before our financial 
services industry was, therefore, whether to advise our government to 
support, or to oppose, entry into force of the agreement. On balance, 
we concluded that it would be in our overall interest to support it 
because most of the major 16 non-accepting countries would almost 
certainly do so in the next six months. In addition, according to the 
WTO, the governments that have accepted the agreement account for 
approximately 95 percent of global financial services activity. 
Nonetheless, it is disquieting that countries like Australia, Poland, 
Brazil and Luxembourg are not able to follow through on their 
commitments, on schedule.
    The second of these problems is the transparency and openness of 
the WTO. The President has called on the WTO to open its doors wider to 
the public. CSI wholly endorses this initiative and urges WTO member 
governments to take steps to increase the organization's accessibility 
to an interested public which has much at stake in the outcome of 
negotiations or the resolution of trade disputes.

                      Importance of Services Trade

    The growing economic strength of our service industries is the best 
argument for the continuing U.S. commitment to an open trading system 
in which the WTO plays a key role. The U.S. service sector is essential 
to domestic prosperity. In 1997, according to the Bureau of Economic 
Analysis of the U.S. Department of Commerce, the U.S. service sector 
comprised 77.2 percent of U.S. gross domestic product, and 78.8 percent 
of private sector employment (see graphs attached, Appendix A).
    In 1998, the U.S. created 2.9 million net new jobs, all in the 
service sector, slightly less than the 3.2 million service sector jobs 
created in 1997.
    The U.S. is the world's largest exporter and importer of services. 
In 1998, U.S. services exports were $260.3 billion, while imports were 
$180.8 billion, producing a trade in services surplus of $79.4 billion. 
Services comprise nearly 30 percent of U.S. exports.
    Those few statistics dramatically depict the value of opening 
markets abroad for the U.S. service sector.
    The U.S. is very competitive in virtually every category of 
services trade.
     Travel and tourism contributed over $25 billion to the 
services trade surplus in 1997. This is the largest sectoral 
contribution to the overall services surplus. In addition, travel and 
tourism support over seven million direct jobs and generate roughly $71 
billion in tax revenues for federal, state and local governments.
     Business, professional and technical services is a largely 
unrecognized powerhouse in American trade. In 1997, we exported more 
than $21 billion in these services and we had a $16 billion trade 
surplus. These data do not include the earnings from foreign 
investments and foreign affiliates, which are very substantial. Trade 
in business, professional and technical services--such as accounting, 
legal, engineering, architectural and consulting services--is 
especially important because it frequently paves the way for trade and 
investment in other service and manufacturing sectors.
     Telecommunications services are an integral component of 
operations of all businesses, and are essential in promoting domestic 
and global growth. Telecommunications services provide the necessary 
infrastructure for the development and continued expansion of the 
information society and electronic commerce. An estimated $725 billion 
in revenue was generated in 1997, and projections for the next five 
years indicate that traded telecommunications services will increase at 
about 20 percent annually for outbound calls from the U.S. to foreign 
markets.
     The information technology industry is also dependent on 
trade and trade expansion. The WTO estimates that over the next five 
years, sales over the Internet will double each year. To realize this 
robust growth will require countries to open their markets and allow 
the provision of cross border services in virtually every sector from 
financial services to healthcare.
     U.S. law firms, when billing foreign clients, produce 
exports. Overall U.S. legal services exports approach $1.0 billion.
     Foreign students coming to American schools, net after 
scholarship and local assistance, spent $8.3 billion in the U.S., which 
is a U.S. export. We have a surplus in trade in education services of 
$7.0 billion.
     Medical services rendered in the U.S. to foreign citizens 
produced an export surplus of $0.5 billion, although few doctors 
imagine themselves as U.S. exporters.

                   WTO ``Services 2000'' Negotiations

    These facts help explain our industries' very great interest in the 
new WTO services trade negotiations scheduled to start in 2000. These 
will be the first comprehensive services negotiations ever undertaken--
negotiations which offer U.S. service industries opportunities to 
expand market share by reducing barriers to entry and cross border 
trade, and to deal with new issues, such as regulatory reform, which 
would ensure our firms' ability to compete fairly in the local 
marketplace.
    But these new services negotiations will not occur in isolation. 
They will be combined with other issues. How these negotiations will be 
packaged is a matter of dispute between the United States and the 
European Union and Japan. They seek a comprehensive negotiation 
concluded by a ``single undertaking,'' in three years, ending by 2003!
    The Uruguay Round produced the General Agreement on Trade in 
Services (GATS) which states the general principles for freer world 
trade in services, and creates a very complex format for actual 
negotiations. In spite of the technical difficulties, the successes in 
telecommunications and financial services in 1997 showed that most 
countries now understand how to negotiate within the complicated GATS 
framework.

                     Content of the New Trade Round

    CSI believes that the United States should continue to advocate a 
new trade ``Round'' that permits us to capitalize on the momentum that 
we believe has been created through successful sectoral services 
negotiations. Emphatically we do not agree with the concept of an all-
inclusive round concluded by a single undertaking. We believe that this 
formula will almost inevitably result in a protracted negotiation that 
will impose unnecessary delays in obtaining market access for our 
companies.
    The President in the State of the Union Message called for an 
ambitious new WTO Round. We believe that his definition of ``Round'' is 
close to our own: a focus on market access issues including services, 
agriculture and goods and certain other issues required by the Uruguay 
Round agreement. This more constrained negotiation would have a better 
chance to conclude successfully in 2003. Other, broader issues could be 
initiated in 2000 but brought to fruition later through a ``rolling 
negotiation'' that could conclude after 2003.
    We believe it is highly important for the United States to pursue 
aggressively new negotiations to liberalize services trade. We believe 
this negotiating framework will lead to faster, better results for 
agriculture, goods and services.

  What Does the Services Sector Want from Services 2000 Negotiations?

    Previous services negotiations have yielded advances in 
telecommunications and financial services, but much remains to be done 
both in those, and a number of other sectors. All industries in the 
services sector continue to face uneven implementation of past 
commitments and continued impediments to free and fair trade, 
especially through regulatory systems that are used to limit 
competition.
    CSI established last fall a Services 2000 Working Group that 
produced a detailed initial statement of negotiating objectives for 8 
sectors: Distribution, Express Delivery, Financial Services, Health 
Care Services, Information Technology, Professional and Business-
Related Services, Telecommunications, and Travel and Tourism. I ask, 
Mr. Chairman, that this document be included in the record of this 
hearing following my statement.
    In essence, these requests distill into the following general 
objectives:
     Expand the scope of commitments countries undertake to 
liberalize services trade, by limiting the exceptions countries are 
permitted to take in their national schedules;
     Ensure rights of establishment and ownership for U.S. 
investors abroad, through wholly owned or other forms of business 
ownership;
     Ensure national treatment of U.S. companies abroad, so 
foreign investors have the same access to local and foreign markets as 
domestic companies;
     Eliminate unnecessary restrictions on cross border 
transactions;
     Promote pro-competitive regulatory reform focused on 
adequacy of appropriate and consistent rules, as well as transparency 
and impartiality of regulatory administration; and
     Remove obstacles to the free movement of critical business 
personnel.

                   Pro-Competitive Regulatory Reform

    The financial services industry in particular faces formidable 
barriers in countries with arbitrary and non-transparent regulatory 
systems. We see the desirability of negotiating ``pro-competitive'' 
regulatory principles that will complement market access commitments by 
providing for well-regulated financial systems. Regulatory requirements 
and restrictions too often deny foreign companies the opportunity to 
compete on an equal basis with domestic firms. A lack of transparency 
in regulations, along with uneven enforcement, undercuts the benefits 
of market access and often leads to weak and vulnerable financial 
systems.

What is ``pro-competitive regulatory reform?''

    Essentially it means abandoning outdated forms of regulation, by 
which governments limit the number of participants in a market, limit 
the introduction of new financial services products, restrict use of 
market-based pricing, and discriminate against foreign firms.
    We believe regulators should focus on three goals: ensuring the 
solvency of financial services firms, promoting the transparency of 
intra-company transactions, and improving the reliability of economic 
data that allows customers and investors to make better informed 
judgements about the soundness of financial institutions themselves and 
the quality of their investments.

                   The Japan-U.S. Insurance Agreement

    Particularly for the insurance sector, pro-competitive regulatory 
reform should be on the agenda for the GATS 2000 negotiations. We made 
a start in this by including the 1997 WTO U.S.-Japan bilateral 
insurance agreement in the WTO Financial Services Agreement. These 
insurance provisions deal solely with creating a pro-competitive 
regulatory environment in Japan and were aimed at leveling the playing 
field for foreign insurers in the Japanese insurance market. 
Unfortunately, significant aspects of the agreement have not been 
implemented. On July 1, last year, the USTR expressed its ``extreme 
disappointment'' with Japan's implementation of the agreement, but the 
issue remains unresolved. This is a matter of deep concern to the U.S. 
insurance sector and we have attempted to give every support to USTR's 
efforts to achieve compliance by the Japanese with their obligations 
under the bilateral agreement.
    The irony of the situation is the fact that, if these provisions 
were fully implemented by the Japanese, Japanese insurers, themselves, 
would eventually be in a far stronger financial and competitive 
position than they are today.
    Regulatory systems that promote competition and solvency will 
encourage financial services firms to introduce innovative products, 
reduce prices, achieve efficiencies in operations, improve the quality 
of services provided, attract capital for long term investments, 
introduce new technologies, and create new employment opportunities.
    By pressing to eliminate restrictions on foreign establishment or 
ownership and cross border transactions, by removing obstacles to the 
free movement of persons and by affirmatively promoting national 
treatment and pro-competitive regulatory principles, the United States 
will be helping to shape an agenda at the WTO that will produce genuine 
global economic liberalization with positive benefits for both U.S. 
business and consumers, as well as the liberalizing economies.

                        Other Trade Initiatives

    I would also like to address briefly some other trade initiatives 
that complement efforts in the WTO, and that are important in their own 
right.

China

    Our bilateral relationship with China is one of our most important. 
Over the past decade U.S. exports have increased over 20-fold and those 
exports are estimated to support more than 200,000 U.S. jobs.
    The effort to negotiate market access for U.S. services and goods 
has been a long-term concern that is now bound up in the effort to 
negotiate China's membership in the WTO. As the largest emerging 
economy in the world, China's integration into the rules-based 
international trading system is essential to ensuring that China 
undertakes the obligations and responsibilities of the trading system 
as well as receiving the benefits.
    We support the administration's effort to reach a commercially 
acceptable WTO accession agreement that will enable our companies to 
participate fully in the Chinese market. We believe that China's 
participation in the WTO is critically important not only for China, 
but also for the rest of the world.
    As you are aware, U.S. negotiators are now in Beijing in an effort 
to make progress toward this objective. We urge USTR to continue to 
insist that China accept that opening its services sector is equally 
important as reducing tariffs on merchandise. Without meaningful 
commitments on services, there simply can be no deal with China. And if 
China agrees to play by WTO rules, then the United States should be 
prepared to provide permanent extension of normal trade relations 
status to China.

Free Trade Area of the Americas (FTAA)

    In our own hemisphere, regional trade grew 15 percent in 1997--
twice the world average. Two-thirds of U.S. export growth has been in 
the Western Hemisphere. Countries in the region are negotiating with 
each other and the Europeans to secure the benefits of this trade 
expansion. The United States must now take the lead in pursuing trade 
and investment liberalization in our own hemisphere, if we want to 
receive the full benefits of the trade expansion that is underway, and 
to prevent our exporters being excluded from important new markets by 
trade agreements made between other countries in the Hemisphere.
    We support efforts to reach a hemispheric free trade area, which 
would ultimately expand NAFTA and include virtually all of North, South 
and Central America. FTAA represents an enormously ambitious 
undertaking that merits the full commitment of the U.S. government.

Asia Pacific Economic Cooperation (APEC)

    The APEC economies represent over one-half of total world 
production and almost one-half of world trade. U.S. bilateral trade 
with these economies is roughly two-thirds of all U.S. trade. The 
United States has been an active participant in the APEC effort to 
achieve free and open trade in the region. We have worked hard to 
ensure that the momentum generated by APEC's work to date is not 
derailed by the Asian financial crisis, and that APEC economies move 
forward to implement previously agreed market opening steps. We 
strongly support inclusion of pro-competitive financial services 
regulatory reform in the APEC work program.

                      Trade Negotiating Authority

    What will it take to implement a broad and ambitious trade agenda 
such as the above?
    CSI urges Congress to extend broad, multi-year trade negotiating 
authority to the President. Such congressional trade negotiating 
authority has come to be expected as a foundation that is necessary to 
conclude with credibility liberalization agreements with our trading 
partners.
    Another important step is to adopt domestic economic policies, 
including tax policies, that help create an environment that encourages 
competition and reduces the costs of competing overseas. Congress' 
support and leadership in revising and extending the deferral rules for 
U.S.-based financial services companies last year was a giant step 
forward in conforming U.S. tax rules to U.S. trade policies. Permitting 
deferral of active financial services income is essential to 
maintaining the competitiveness of our financial services firms. We 
urge you to further extend this provision this year.

                               Conclusion

    The economic interests of the United States dictate that we must 
take the lead in multilateral and other efforts to eliminate trade and 
investment barriers and establish a system of international trading 
rules buttressed by national pro-competitive regulatory supports. It is 
time to reinvigorate U.S. trade policy by extending to the President 
the trade authority he has traditionally been given to conduct 
negotiations. We must ourselves avoid protectionist trade actions. And 
we must attempt to create a strong domestic consensus that the benefits 
of open international trade outweigh the costs of continued engagement.
    The Coalition of Service Industries is helping build this consensus 
by organizing the first World Services Congress that will be held in 
Atlanta on November 1-4 this year. We hope to attract more than 2000 
business and government leaders, academics, and others to help 
construct a global consensus on the benefits of trade liberalization in 
services, and to support the launch of an ambitious services trade 
negotiation at the WTO Ministerial in Seattle at the end of November. 
We will welcome the participation of members of this Subcommittee and 
its staff in this important event.
    In addition, CSI has helped form a coalition to support the WTO 
Ministerial. Made up of trade associations and advocacy organizations, 
the U.S. Alliance for Trade Expansion (USATrade) represents $2 trillion 
in annual trade and over 150 million American farmers, workers, and 
consumers, and seeks to promote economic growth, job expansion, and 
higher living standards in the U.S. by rules-based multilateral trade 
liberalization through the WTO. We plan to have a strong presence 
representing our various constituencies at the Ministerial in Seattle.
    Our members strongly believe that expanding international trade and 
investment improves the lives of Americans and that continued U.S. 
leadership in strengthening the rules-based international trading 
system is the surest way to sustain our domestic economic strength. 
These hearings are an important step in developing a consensus on these 
issues.
[GRAPHIC] [TIFF OMITTED] T6807.001

                                

    Chairman Crane. Thank you, Mr. O'Hare. Thank you all for 
your presentations.
    For the panel generically, I would like to throw a question 
out. Ambassador Barshefsky testified last month that the 
Administration is seeking better coordination between the 
International Labor Organization, ILO, and the WTO. What, in 
your views, are the proper relationships between these two 
international bodies?
    Mr. Swift. Well, Mr. Chairman, if I could take a first 
crack at that. In my testimony I said that labor and 
environmental issues should be discussed meaningfully amongst 
the appropriate Members of the Administration and the Congress. 
The International Labor Organization is an international 
organization which addresses labor standards, and is the 
organization to do that, not the WTO. So if they could start 
talking together in a meaningful way, that is a very positive 
development, in my view anyway.
    Chairman Crane. Does anyone else have a view?
    Mr. Micek. Yes. I would just like to follow up on Mr. 
Swift's comments. ECAT supports the use of ILO as the 
appropriate forum to deal with international labor issues. We 
are concerned that if we just target only labor and 
environmental objectives without really dealing with the 
overall strategic issues that are a part of trade, we could get 
bogged down and miss a great opportunity.
    Chairman Crane. Any other views on that question?
    What is your advice on how labor and environmental issues 
should be handled in the negotiating authority? Anyone?
    Mr. O'Hare. Mr. Chairman, I would just like to comment that 
I think trade negotiations and certainly labor issues are in 
many respects independent issues. I think the ILO has been 
doing an extremely good job for decades. We shouldn't let trade 
issues overwhelm or overtake the progress that they are making 
in these areas. I view the two as very independent issues.
    Chairman Crane. Does anyone else have a view on that?
    Mr. Swift. If I could follow up on what I said earlier, the 
WTO is a trade organization. It should be a rules-based 
organization to govern how the international marketplace 
trades. Labor and environmental issues are not necessarily 
trade issues. The ILO is a better forum for labor issues than 
the WTO.
    Chairman Crane. A final question from me, and this is to 
Mr. Baszile. We hear from many labor union representatives that 
fast track and active U.S. involvement in trade negotiations 
are just big business issues that will end up hurting workers 
in small businesses. Why do you think small businesses should 
support fast track negotiating authority and active U.S. 
involvement in breaking down international trade barriers?
    Mr. Baszile. Mr. Chairman, small businesses, since I have 
been in business for the past 24 years, have been encouraged to 
export their products as much as they can. More importantly, 
our customer base is made up of people who export their 
products. So if we don't do it on a direct basis, we certainly 
benefit by the exporting activity of customers like Boeing and 
others. So we think it is very important.
    Chairman Crane. Well you are sitting amongst some giants 
there.
    Mr. Baszile. Yes, I am.
    Chairman Crane. We had a Trade Subcommittee hearing out in 
my district about 3 or 4 years ago. I have some big corporate 
headquarters there, Motorola, Ameritech, United Airlines, 
Sears, Kemper Insurance, and so forth. We are the fifth largest 
export State in the Union, Illinois. My district is probably 
No. 1 in the State. What was most revealing about that hearing 
is that better than 90 percent of our exports out of Illinois 
come from companies employing 500 or fewer.
    Mr. Baszile. That's right. One thing that I would just like 
to emphasize again, if we remember 83 percent of the jobs in 
this country are supplied by small business. So we are a 
continuing integral part of the global economy, and of course 
the strengthening of this economy in our country.
    While I might not be able to sell a plane to China, I 
certainly support Mr. Condit in his efforts. So therefore----
    Chairman Crane. With your component parts.
    Mr. Baszile. Absolutely.
    Mr. Condit. And without those, we can't do it. So it is 
very much a cooperative effort with our suppliers.
    Chairman Crane. I couldn't agree with you more.
    Mr. Levin.
    Mr. Levin. Welcome, to all of you. There has been some 
discussion here, especially in response to Mr. Crane's question 
about labor, about what I would call labor markets and 
environmental issues. I regret there is not a more diversified 
panel in that respect regarding that issue because we are going 
to have to confront it and do it effectively if we are going to 
move ahead on a broad-based trade consensus.
    I want to turn to other issues, but I would just urge you, 
Mr. O'Hare, and you, Mr. Micek, to take another look at the ILO 
and its record on labor market issues. To call it effective I 
think is totally unrealistic. Its record is not one of 
effectiveness on these issues. I don't think they are 
independent of trade issues. I think they are very much a part 
of them.
    Just look at the discussions we are having on Africa, and 
especially on CBI, where these labor market issues are very 
central to the debate over these bills, especially CBI. It has 
been the basis of the difference between the House and the 
Senate, cutting across party lines. So there is no use of 
pretending that just ship it to the ILO. That won't resolve it.
    I think, Mr. Swift, that your statement on page 4 is 
something that we all need to take seriously, where you say 
``We recognize that there will be little progress on this 
matter'' that is trade negotiating authority, ``until we 
address the environmental and labor issues that have been 
raised. We are prepared to sit down with the Members of this 
Committee, the Administration, and others, to engage in a 
meaningful dialog that will move the process forward.''
    If we do not take seriously your advice, I think we are 
going to simply reach another dead-end. There is no use in 
trying to finesse the issues or shove them off to the ILO. They 
have now a statement of principles. But in terms of embodying 
these in agreements, the ILO really doesn't have either the 
authority, and it surely doesn't have the history of doing it.
    But if I might, before my time is up, because I didn't want 
to lose this opportunity to talk about another issue that is 
really related to this issue of labor market issues, 
environmental issues. It isn't fast track, but it's China WTO. 
A number of you have said it has to be on commercially 
acceptable terms, we shouldn't simply rubber stamp what they 
want. Their structures on labor market, on capital markets, on 
environmental issues is so different, we better face up to 
them.
    So I want to zero in, now that I have this opportunity, Mr. 
Condit, to take one piece of it. That is the issue of transfer 
of technology. I don't want to ask you specifically about 
Boeing because some of that may be proprietary. But I would 
like your views.
    One of the issues, it seems to me with China that we 
haven't really faced adequately in talking about WTO, are their 
requirements for technology transfer. It seems to me we can't 
simply stand by idly and have this huge economy, China, place 
these requirements on American firms and therefore, American 
workers in terms of technology transfer and other things. Would 
you comment on that, please?
    Mr. Condit. All of these issues are very complex. For most 
of the companies that all of us represent the technology is a 
key part of our competitiveness. So the protection of that 
technology is important to us, as well as to the United States 
overall.
    On the other side, I do not perceive that as a defensive 
strategy. If we don't continue to move the ball forward, don't 
continue to advance our own technology, in the long term, we 
will not be winners in the world market. So reasonable 
limitations on technology transfer are not unreasonable; but if 
they get out of proportion, they will simply limit all of the 
action and nothing happens.
    So I guess my strongest feeling of all is that we continue 
as companies to take the initiative to continue to advance our 
own technologies. Then I am convinced we can continue to lead 
the world in competitiveness. But it takes good intellectual 
property rules. I think that is absolutely vital, but we need 
to avoid excessive technology transfer limitations.
    Mr. Levin. I think I get your meaning. When we talk about 
concern of requirements, especially evolving economies, that we 
transfer technology, I am not suggesting that by being 
concerned about it, we should drop our efforts to develop and 
to continue to develop our own technology. I don't see that 
those are necessarily or at all in conflict. But it seems to me 
that we better realistically raise these and confront these 
issues in the WTO China accession negotiations. I don't think 
your company or any other would say well let China accede and 
we'll talk about that issue after they are in the WTO.
    Mr. Condit. But let me argue the other side for just a 
second. I think it is important that we do move forward. So 
there is always this balance between getting the best agreement 
that you can get, and still getting one. I think that is the 
difficulty of any negotiation. I don't disagree that we need to 
address that subject. It does need to be there. On the other 
hand, we won't get a final solution. There will continue to be 
further negotiations, and will need to be.
    Mr. Levin. Thank you.
    Chairman Crane. Mr. Ramstad.
    Mr. Ramstad. Thank you, Mr. Chairman. I want to thank the 
Distinguished Members of this panel for being here today. We 
need to hear from you on these very, very critical issues. I 
was just trying to quantify in my mind how many millions of 
jobs your respective groups represent and what a chunk of the 
GDP you five people here today represent. I wasn't able to do 
it, but suffice to say, obviously when we have the Emergency 
Committee for American Trade, the Business Roundtable, National 
Foreign Trade Council, the Coalition of Service Industries, not 
to mention small business represented by Baszile Metals, we 
need to listen closely as you represent many of our 
constituents. Those points also need to be heard by the White 
House.
    One of my major disappointments, and I think major 
disappointment of our chairman and most people on this panel, 
is the failure to pass fast track. We see what is going on. We 
see how many major regional agreements have been entered into 
since fast track expired. We also see that we haven't been part 
of those major regional agreements.
    Yet I am still hopeful. By the way, let me also say that 
not all members of this panel share the Distinguished Ranking 
Member's views on the ILO. I certainly identify with your 
remarks, Mr. Micek, and yours Mr. Condit, as far as the ILO is 
concerned. But I think we have to get beyond that. That is 
certainly important.
    I just hope that a collaborative effort is made on the part 
of the White House. I, in my earlier years on this panel, 
worked with them on NAFTA and GATT. We worked together on a 
bipartisan, pragmatic, collaborative way, and got those done. 
Lately, however, I have been very disappointed. The 
Administration has sent signals to this Subcommittee that we 
have to make changes to last year's fast track legislation. But 
I am not sure, and I don't think anybody here on this panel is 
sure, what changes they want. So my question to any of you--and 
it is certainly good to see my good friend Ernie Micek, a 
leader on these issues back home in Minnesota--has anybody from 
the White House told you or your groups what changes need to be 
made in last year's last track legislation? Have they sat down 
or asked you to come down there to solicit your advice, your 
expertise for passing fast track legislation this year? Any of 
you? Ernie?
    Mr. Micek. Well, I have had some conversation. I think they 
are concerned about focusing just on fast track. But perhaps it 
can be part of the broader issue. That is why I think many of 
us believe that given the opportunity that we have here in this 
country with the WTO Ministerial being held in the United 
States, that fast track can be part of a bigger trade issue. 
Hopefully when we can see or more people can see the value of 
what WTO negotiations can produce, then they will also 
understand that to make this happen we do need fast track 
authority.
    I do want to step back for just a minute on the labor issue 
because my experience, and I have been around for 40 years in 
corporate America, tells me that we are better off being part 
of a process. With Boeing involved, ourselves, all the various 
companies represented here, we are better off and we have a 
better chance of getting environmental issues advanced, labor 
issues advanced when we are part of something than when we are 
excluded. To exclude us really does nothing to advance labor 
and environmental concerns.
    Mr. Ramstad. Thank you, Mr. Chairman.
    Chairman Crane. Mr. McNulty. Oh, he's not here.
    Mr. Jefferson.
    Mr. Jefferson. Thank you, Mr. Chairman. I don't want to 
start off with a defense of the White House on fast track. But 
I suppose I ought to utter some modicum of defense to say that 
the President has expressed his seriousness on this issue. He 
mentioned it in the State of the Union address. He is not 
oblivious to what happened last time though. When he attempted 
to get it done, it was a very difficult matter to get done. Of 
course it takes a lot of work on both sides of the aisle, and 
it is not just his sole responsibility to work on this issue.
    So as one who has in the past supported fast track issues, 
I think it is important to not single out the White House and 
beat them up over this issue as we try and find a way to deal 
with it.
    I want to ask a question in a different vein though. I 
found the discussion today instructive. I want to ask you about 
Africa. We have touched on our trade policies and goals in the 
Americas, in Europe, and in Asia. How important is it to you 
that the U.S. fashion a trade and investment policy in sub-
Saharan Africa? As representatives of the U.S. private sector, 
what are your thoughts on the importance of increased trade and 
investment in this region?
    Mr. Condit. Let me start by saying as a company, Boeing 
sees real reason to support that trade development. Obviously 
one of our primary products is providing equipment that moves 
people back and forth and promotes trade. But we see a very 
definite need to deal with trade on a global basis, not just a 
regional basis, but a global basis. That clearly would include 
sub-Saharan Africa.
    So we have been in support of that. The Roundtable is 
actively looking at that issue in terms of its support, and I 
suspect it will also be supportive.
    Mr. Jefferson. Yes, Sir?
    Mr. Micek. I think it is very important that we have a 
trade policy with Africa. I just don't see how the African 
people can be excluded from being part of the world community 
as we enter the 21st century. I believe the African trade act, 
as proposed, would give some opportunity for them to become 
part of the greater community.
    Our company, for example, has just within the last 2 
months, and I was there personally for the ground breaking 
ceremonies, are in the process of building a $50 million cocoa 
processing plant in Ivory Coast. We were welcomed there as a 
U.S. firm.
    One of the problems is I think in Africa for U.S. 
companies, so much of Africa historically is tied closely to 
Europe. U.S. companies really don't know that much about a 
number of the African nations. So I think any trade bill that 
gives the opportunity for the United States to become involved 
I think would be very important.
    Mr. Swift. If I could just comment on that. Foster Wheeler 
has ongoing operations in Africa. I would second what Mr. Micek 
said, that Africa is very much in the realm of the Europeans. I 
think that U.S. trade with Africa would be significantly 
enhanced if the kind of trade bill that we are discussing today 
was, in fact, enacted so that American companies would have 
better knowledge of the area, better ability to go in and 
compete against the European companies.
    Mr. Baszile. Mr. Jefferson, I have had some personal 
experience in trying to develop trade with African countries, 
most particularly on a smaller business basis. We have 
entertained several trade missions from Southern Africa and 
other parts of Africa in Los Angeles.
    I think what the small business community can do, and most 
particularly the minority business can do, is serve as role 
models as to how business is done. Some of most basic questions 
that we take for granted in this country are foreign to many of 
the people in Africa who now, especially Southern Africa, who 
have the freedom, but they don't have the know-how to make the 
system work for them.
    I personally went to Southern Africa, Swaziland and South 
Africa, to start an aluminum pots and pans manufacturing 
company. I was overwhelmingly received. We still work in that 
area.
    So I think the small business community, with the support 
of U.S. Government, can serve as a role model for many 
frustrated Africans who really are entrepreneurs, but they just 
do not have the wherewithal to make it happen.
    Mr. O'Hare. Mr. Jefferson, I would agree with all the 
comments made by the panel. I would point out that a trade 
policy with Africa is truly an essential part of dealing in a 
global economy today.
    As respect to industries that are near and dear to my 
heart, the insurance industry, there are still, depending upon 
what country in Africa you are referring to, some terribly 
restrictive laws governing the level of ownership that a 
foreign company can have in an African insurance company. This 
is also the case in many of the banking pieces of financial 
service industries. So you know, on that basis I think a trade 
policy that would encourage the very things that we have talked 
about this morning would be extremely useful for that part of 
the world.
    Mr. Jefferson. I thank you for your comments.
    Thank you, Mr. Chairman, for yielding to me.
    Chairman Crane. I would simply add a footnote to what was 
said. That is that the sub-Saharan African countries included 
in our bill number 48. There are over 700 million people there. 
Yet that is only about 2 percent of our current trade. It is a 
tremendous potential market. But again, getting our African 
Growth and Opportunity Act passed is one thing, but to start 
the negotiations requires fast track. So that is an essential 
component to going forward. I know Mr. Jefferson, I praise his 
efforts. He has worked very conscientiously on behalf of both.
    I would now like to yield to Mr. Condit's representative. I 
know that she is going to be inviting us all to come out to 
Seattle. Are we flying Boeing? Is that it, Jennifer?
    Mr. Condit. You better.
    Ms. Dunn. You bet. No other way.
    Chairman Crane. Ms. Dunn.
    Ms. Dunn. Thank you very much, Mr. Chairman. I am happy to 
welcome this panel this morning. It has been a fascinating 
discussion. I think each of us has had a lot of questions we 
won't be able to ask because there is not much time.
    But I am especially pleased that Phil Condit could be here 
because I have many employees who work for his company and live 
in my district. So Boeing's success is always a great joy to 
us. We are particularly happy to be hosting the WTO Ministerial 
in Seattle, called the Seattle Round. We want to call it that, 
the Seattle Round, because that will last for a good many 
years. There is no more appropriate place, I believe, in this 
Nation than the bright crescent of the Puget Sound area in 
which to host the WTO.
    I do, Mr. Condit, want to shift things back to China for a 
moment. There are some in Congress who are very concerned that 
in its eagerness to bring China to the table at the WTO 
Ministerial this fall, the Administration will cut a deal with 
China to bring it into the WTO. Others think that would be a 
very good thing, that we should move ahead, and it is 
critically important to have them at the table.
    I really want to get your views. You mentioned that a deal 
should be made only if the agreement were commercially viable. 
I would like to have your thinking on how important is it to 
have them with us in Seattle this fall? Ought we to go ahead 
and do that deal even though they may not be totally prepared 
for a session now? Should we hold out for more?
    Mr. Condit. As I said earlier, every negotiation is a 
balance. To say we want everything in this run I think would be 
a mistake because you won't get there. To say that accession 
ought to be there no matter what, would also be a mistake. 
There is a need for very specific conditions, but it is also 
important that China be part of the world trading community.
    Just by population and long-term economic force, we are 
much better off having them in the world trading system than 
outside. So the real issue is what are the key points, how do 
we make those key points, and then get an agreement. We use the 
words ``commercially meaningful'' which indicate this isn't 
just a giveaway, but it does mean we need to reach an 
agreement. I think it is very important.
    Ms. Dunn. Thank you. Well, we will be sorting that one out 
in the next few months.
    I want to also say, fast track has been touched on. It is 
vitally important to all of us. I think that you are going to 
find very strong support for fast track, at least on my side of 
the aisle in Congress. But the problem is that when we had our 
last vote on fast track, it was a lopsided vote. We lost that 
vote by 180 to 243. We are still deciding now how to proceed 
with fast track, many different approaches on this.
    I see, as I said, that there is good support on our side of 
the aisle. We brought the votes we needed the last time. The 
business community is obviously interested and engaged. 
Certainly the U.S. Trade Representative is very eager to have 
us move ahead with fast track. Other parts of the 
Administration though talk a lot, but they do not seem to 
produce the votes that we need when we need them.
    I am interested, Mr. Swift, in what you have said because I 
don't think I have heard it publicly before, that the business 
community may be willing to sit now and talk about further 
negotiations on labor and environment. There was some very 
strong language in the last fast track bill. So I am interested 
in hearing your point of view on how we would proceed here, and 
would we require, for example, that foreign nations change 
their environmental laws, their labor laws, in order to be part 
of our requirement under fast track? Or would that encourage 
them to begin to do other deals bilaterally with countries like 
the EU, instead of pursuing agreements with us?
    Mr. Swift. Well, when we made the comment that we think the 
people should sit down and discuss the labor and environmental 
issues, that is simply because if we don't sit down and discuss 
them, they will never be resolved.
    As we have said, the WTO is a trade organization. It is not 
specifically a labor or environmental organization. With 
respect to the environment, speaking as Foster Wheeler now, I 
would point out that even the Kyoto Accords recognize the many 
difference between developing and developed countries. So 
therefore, it is difficult to see how specific we can be in[to] 
fast track legislation.
    However, I do believe that if we say that we shouldn't 
discuss these issues, is putting our head in the sand. We think 
that the quicker that the Administration identifies exactly 
what it is thinking about, and creates a meaningful dialog, to 
the point where we can have an omnibus trade bill so that all 
of the things that are important to U.S. trade are covered, the 
better off we are.
    Everybody has been talking around the issue, speaking for 
myself, and I think that when people sit down and discuss it 
and find out exactly what people are really talking about, 
maybe some common ground could be found. But without that, I 
don't know how fast track is going to go forward.
    Ms. Dunn. Thank you, Mr. Chairman.
    Chairman Crane. Thank you.
    Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. Thank you to all of 
the panelists for being here.
    Let me ask a couple of questions if I have time to get 
through both of them. Before I do, if I could just add a few 
comments to what was said by Mr. Levin as well.
    On the whole labor and environmental debate, I think we are 
going to have to be a little bit more pragmatic. Mr. Swift, as 
Mr. Levin quoted some of your written testimony, I think you 
are accurate that the business community needs to sit down and 
discuss labor and environmental issues. If we don't come to 
terms with it, and really Members of Congress don't' come to 
terms with it, it is going to be very difficult for us 
ultimately to have a trade agreement that will have broad 
bipartisan support.
    With regard to the ILO, my concern with the ILO is that it 
has no teeth. There are no enforcement mechanisms in place. 
What it really does is state principle, but it has no way to 
engender practice of the standards that are set forth.
    If I can give you a real quick example. There are some 180 
or so conventions and standards that have been passed by the 
ILO over its some eight decades of history. Of those, there are 
seven that are considered core conventions: Two of them are on 
the prohibition of forced labor; two are on the right to 
organize and collectively bargain; one is on equal pay; one is 
on the elimination of discrimination; and one is on the 
abolition of child labor.
    At this stage, there are only 37 countries out of the 174 
countries that participate in the ILO who have signed those 
seven core conventions. The United States, by the way, is not 
one of those 37 countries. We have only signed on to two of 
those seven core conventions.
    So not only do we not have a mechanism to enforce what the 
ILO preaches, but we also find that there is very little 
participation in some of the principal conventions of the ILO. 
So to rely solely on the ILO to try to get us where we need to 
be on labor is very difficult. That is why I think Congress 
will have to grapple with that fact.
    The question I would like to ask has to do with a hearing 
that we had last week on steel. I would like to ask your 
opinion on something. On a bipartisan basis, we had members 
coming forward saying we need to do something quickly on steel, 
even to the degree of saying that we should do things that 
would violate WTO standards. But on a bipartisan basis we had 
members saying that. We have one bill that has over 180 
signatures, bipartisan, that would require us to do things that 
would, I believe, clearly ask us to do things that would 
violate WTO.
    I would like to know your impressions on what we should do 
on steel, given that what we have seen is that there has been a 
massive introduction of steel by a factor of two to three in 
some cases from some countries, and the impact it is having on 
the steel industry.
    Mr. Micek. Well, we are in the steel business. We also 
trade steel, originate steel. Actually I think this issue is a 
very complex one. But you have to look at it in the context of 
what has happened in the last 2 years, which started with the 
Asian crises, which then spread to Russia, and now to South 
America.
    I think what we have to resist is our instinct to retaliate 
with some legislation. We are much better off to enforce rules 
that are in place or to sit down with, whether it is the 
Russians or the Japanese or the Koreans, in terms of limiting 
the amount of steel imports that come in. Not too dissimilar 
from what we did with the Japanese auto industry several years 
ago.
    I think it would be a real mistake, particularly in the 
light of the upcoming WTO negotiations for the United States to 
do something that would just really run in the face of trying 
to negotiate or expand a new round of trade talks by putting in 
place unilateral trade restrictions. This would just send a 
very difficult, or really a poor signal to the rest of the 
world.
    Mr. Condit. Said another way, I think everybody at this 
table is a strong supporter of a rule-based system. So we need 
enforcement; we ought to use those mechanisms and go after them 
hard. Because without the enforcement, rules don't matter. But 
to create tools outside of that mechanism calls the fundamental 
system into question.
    Mr. Becerra. Thank you.
    Mr. Baszile. My experience as a metals processor and 
distributor, I can recall when the memorandum of understanding 
was signed with the Russians on aluminum ingot. I am deeply 
involved in ingot. Ingot is a commodity that is traded on the 
international market. It is suffering right now. No attempts 
are being made to curtail the import of ingot. I think it would 
be inconsistent with our trade policies if we took special 
measures to curtain the importing of steel.
    Further, being from Los Angeles, with two major harbors who 
are boasting about the revenues that are generated and the jobs 
that are created by the heavy import of metals like steel, I 
think it would be very detrimental to that region that we so 
vitally need.
    Mr. Becerra. Thank you.
    Mr. Chairman, thank you. I know my time has expired.
    Chairman Crane. Well, I want to thank all of our panelists.
    Mr. Levin. Mr. Chairman, let me just say one word or two 
words, if I might. There was a reference to Kyoto. I think it 
was 95 to nothing, or whatever the vote was in the Senate, that 
we should not proceed until the evolving economies were 
participants.
    So I think, and I have said to my friends in the business 
community, if that is your view of Kyoto, and I agree with it, 
there ought to be an understanding of the comments in your 
testimony, Mr. Swift, about tackling these environmental and 
labor market issues as we consider overall trade legislation.
    As you leave, to all of you who commented on a rule-based 
system and WTO, I hope you will convey that message to people 
in the minority and the majority who might be tempted to treat 
lightly this issue of a rule-based system as we consider any 
issue, including steel. Thank you.
    Chairman Crane. I want to thank you all for your 
participation, and encourage you all please to get the entire 
business community focused on communicating to employees now, 
especially in small business, like Mr. Baszile. Because it is 
so essential that we advance our own trade interests and it 
works for big corporations and the little guys, but especially 
for the little guys. That ultimately works to the benefit of 
all of us. So please keep up the good work, and stay in touch 
with us.
    With that, I will adjourn this panel and invite our next. 
Dean Kleckner, Kevin Gardner, Leon Trammell, the Honorable 
William Pryce, and Michael Ryan.
    Ms. Dunn [presiding]. Our welcome to the next panel. We are 
glad you could join us today. Before you start, Mr. Kleckner, 
with your testimony, I would like to call on our Member, Ron 
Lewis from Kentucky, who will say a few words about one of his 
constituents on this panel.
    Mr. Lewis.
    Mr. Lewis of Kentucky. Thank you, Ms. Dunn.
    I want to thank you for the opportunity to introduce a 
young farmer from my district, Kevin Gardner. Kevin, along with 
his wife Glenna own and operate an 800-acre farm in Barren 
County, Kentucky, where they grow corn, wheat, soybeans, 
tobacco, and alfalfa, hay. Kevin is with us today as chairman 
of the American Farm Bureau Federation, Young Farmer and 
Rancher Committee. In addition to Farm Bureau, Kevin serves on 
the IDEA board, Cave City Ag-Expo Task Force, and the Barren 
County Board of Education Long Range Planning Committee.
    It has been my pleasure to know Kevin since 1995. He is a 
member of my Agriculture Advisory Council Group, and in fact 
hosted one of our first meetings on his farm. Since then, he 
has been an outstanding source of information for me as I 
represent the farmers of the second congressional district.
    As Kevin is about to tell you, expanding global markets 
affect farms and farming communities of all sizes across this 
country. Their futures depend on their access to these markets 
and the ability to compete, and especially in this time of some 
surpluses.
    Kevin, thank you for taking your time to be with us today 
and share your experiences and your expertise in this area. 
Thank you.
    Mr. Gardner. Thank you.
    Ms. Dunn. Thank you very much, Mr. Lewis.
    We are delighted to have him as a new member of our Ways 
and Means Committee.
    Let's begin testimony then from Dean Kleckner. We will go 
in order.

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

    Mr. Kleckner. Thank you, Madam Chair, Members of the 
Committee. I am Dean Kleckner. I am president of the American 
Farm Bureau. I am the elected president. I am a farmer from 
northern Iowa. I grow corn, soybeans, and hogs on my family 
farm in northern Iowa.
    I welcome the opportunity to present this testimony before 
the Trade Subcommittee of the full Committee on the importance 
of trade negotiations in fighting foreign protectionism. We 
stress the need for congressional action on the following trade 
priorities. I am going to list six very briefly. I think I can 
do it in 5 minutes.
    First point, negotiating authority. The Freedom to Farm Act 
in 1996 began to phaseout farm price supports. It made us more 
dependent on the world market. Yet agriculture worldwide 
remains one of the most protected and subsidized sectors in the 
world economy. Congress simply must pass trade negotiating 
authority to enable our negotiators to create new export 
opportunities for farmers and ranchers. We are going to start 9 
months from today, Ms. Dunn, or it is going to end 9 months 
from today in Seattle, and we are not going to have a 
negotiating authority if we are not careful for our 
negotiators. I think they could be the laughing stock if that 
doesn't happen. In our country, they won't have it. However, I 
say such authority should not link environmental and labor 
issues to trade.
    Second point, negotiations on agriculture. We support in 
our organization, expediting the action on agriculture in the 
next WTO round. We must conclude a negotiation quickly to put 
U.S. ag producers on a level playing field with the rest of the 
world. We have four specific objectives in the next WTO round 
regarding ag. A, binding agreements to resolve sanitary issues 
based on science. B, provide tariff equalization and increased 
market access by requiring U.S. trading partners to eliminate 
trade barriers within specified timeframes. C, completely 
eliminate export subsidies within specified timeframes. Point 
D, shorten the dispute resolution procedures and processes.
    Third point, regarding enforcing trade agreements. We, the 
United States has brought more trade dispute settlement cases 
before the WTO than any other nation. We must take all action 
necessary to ensure that our trading partners comply, live up 
to the WTO rulings.
    Due to recent developments just 2 days ago in the U.S. case 
against the EU on bananas, I want to add a few remarks that 
aren't in the prepared testimony for the record. The U.S. ag 
community is very disappointed with the delay in the WTO 
arbitration panel's decision on the U.S. request to retaliate 
against the EU for not living up to its commitments. The WTO 
arbitration panel did not issue a final ruling on Tuesday as we 
had hoped. Our producers are counting on the WTO to make timely 
decisions on disputes concerning agriculture. We are already 
disappointed by the usual long process required for WTO 
disputes. The banana case has serious implications for the U.S. 
case against the EU on beef. The EU has stated that it will not 
comply with the WTO ruling on beef in May as required.
    We believe that the customs actions taken by STR yesterday 
regarding the banana case is a necessary first step. We hope 
that the United States will retaliate in full on the banana 
case in the near future, and will exercise its right to 
retaliate against the EU on beef if the May deadline passes.
    Fourth point, the area is sanctions. U.S. ag producers are 
closed off from several export markets due to unilateral 
sanctions, just us, just the United States. Our competitors 
relish the opportunity to access these markets without our 
competition. You know, they just lick their chops when we put 
on sanctions. U.S. producers, on the other hand, lose important 
markets and are branded as unreliable suppliers. That is for 
decades to come.
    We support sanctions reform that would exempt food from 
sanctions except in cases of armed conflict and provide market 
loss assistance payments for lost sales when sanctions are 
imposed.
    The fifth point, quickly. We have got to increase funding 
for export credit and market development programs. That is 
things like EP and M-A-P, MAP.
    The last one, Trans-Atlantic Economic Partnership or TEP, 
T-E-P. Congress and the Administration should closely review 
elements of the Trans-Atlantic Economic Partnership agreement 
between the United States and Europe to ensure that U.S. ag 
interests are adequately represented and that ag exports 
benefit from the TEP. We have real questions about that today.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

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

    Mr. Chairman and members of the Committee, I am Dean Kleckner, 
President of the American Farm Bureau Federation and a hog and soybean 
farmer from Iowa. The American Farm Bureau represents more than 4.8 
million member families in the United States and Puerto Rico. Our 
members produce every type of farm commodity grown in America and 
depend on access to customers around the world for the sale of over 
one-third of our production. U.S. agriculture is one of the few U.S. 
industries that consistently runs a trade surplus, posting a surplus 
every year since 1960.
    American farmers truly live and function within a global economy. 
When our customers face economic and fiscal crisis, as is now occurring 
in Asia, Russia and Brazil, agriculture is the first to feel the effect 
as our customers lose purchasing power. Economic crises and devalued 
currencies result in increased consumer prices, which directly 
translate into weakened market demand. Lost sales mean lower incomes 
for our producers and economic pressures on America's rural economies.
    The ability of U.S. agriculture to gain and maintain a share of 
global markets depends on many factors, including obtaining strong 
trade agreements that are properly enforced, and enhancing the 
administration's ability to negotiate increased market access, remedy 
unfair trading practices, and to adequately fund export credit and 
market development programs.
    We appreciate the opportunity to testify before the House Ways & 
Means Trade Subcommittee on the importance of trade to agriculture and 
stress the need for Congressional action on the following trade 
priorities:

                      Trade Negotiating Authority

    When Congress passed the 1996 Freedom to Farm Act, it phased out 
farm price supports, making U.S. agriculture more dependent on the 
world market. American farmers and ranchers produce an abundant supply 
of commodities far in excess of domestic needs and their productivity 
continues to increase. Exports are agriculture's source of future 
growth in sales and income.
    As you are well aware, U.S. agriculture is reeling from low 
commodity prices. Given an abundant domestic supply and a stable U.S. 
population rate, expanding existing market access and opening new 
export markets for agriculture is more important than ever. 
Agriculture's longstanding history of a balance of trade surplus will 
not continue if we are relegated to the sidelines as new negotiations 
in agriculture commence.
    Our negotiators must have negotiating authority to create new 
export opportunities for U.S. farmers and ranchers. Inaction--or 
sitting on the sidelines without negotiating authority--is 
unacceptable. Tremendous resources and efforts have been expended to 
create new markets during negotiations for the Uruguay Round and the 
North American Free Trade Agreement (NAFTA). Moreover, total 
agricultural exports account for nearly a million high paying jobs for 
U.S. workers--the vast majority of which are off the farm in processing 
and transportation.
    Global food demand is expanding rapidly and more than 95 percent of 
the world's consumers live outside U.S. borders. Despite significant 
progress in opening markets, agriculture remains one of the most 
protected and subsidized sectors of the world economy. In addition, 
U.S. agricultural producers are placed at a competitive disadvantage 
due to the growing number of regional trade agreements among our 
competitors.
    Negotiating authority is needed to comprehensively address high 
tariffs, trade-distorting subsidies, and other restrictive trade 
practices through further World Trade Organization (WTO) negotiations. 
Negotiating authority is also needed to pursue promising new 
opportunities for market opening trade agreements in Latin America, 
Asia and elsewhere.
    U.S. leadership of the global trade liberalization agenda has paid 
off for American agriculture. If the United States now leaves it to 
others to form new trade pacts and write future rules for trade, U.S. 
producers, processors, and exporters will be severely disadvantaged in 
the competitive marketplace of the 21st century.
    Congress must support negotiating authority for the President to 
ensure a more profitable future for U.S. farmers and ranchers. However, 
such authority should not link environmental and labor issues to trade. 
Whereas President Clinton emphasized the importance of trade during his 
State of the Union address, he also underscored his desire to include 
labor and environmental issues in trade agreements. We oppose such a 
linkage and stand united with leaders in Asia and Mexico, and Secretary 
Ruggiero of the WTO against using the WTO as a forum for resolving non-
trade related environmental and labor issues.

                            WTO Ministerial

    The United States will host its first ever WTO trade ministerial in 
December of this year. This ministerial will serve as the kickoff for 
the new negotiations on agriculture and other sectors in the WTO. As 
the host country for this ministerial, the United States and its trade 
policies will be in the spotlight. Securing negotiating authority 
before the ministerial commences will demonstrate to the world that we 
are committed to increasing trade liberalization and opening new 
markets for agriculture. Given the economic turmoil being experienced 
in many of our important export markets, the launching of new 
negotiations to further open markets has never been more important.

                    WTO Negotiations on Agriculture

    The American Farm Bureau supports expediting action on the next 
round for agriculture in the WTO. Our market is the most open in the 
world. We cannot sit idly by while our competitors trade openly in our 
market, but deny us access to their markets on equal terms. We must 
begin the negotiations and conclude them as early as possible to put 
U.S. agricultural producers on a level playing field with the rest of 
the world.
    Regarding specific objectives for the next WTO round, the 
negotiations must include binding agreements to resolve sanitary and 
phytosanitary issues based on scientific principles in accordance with 
the WTO Agreement on Sanitary and Phytosanitary Measures; provide 
tariff equalization and increased market access by requiring U.S. 
trading partners to eliminate tariff barriers within specified time 
frames; and make changes to trading practices that would facilitate and 
shorten dispute resolution procedures and processes.

                    Free Trade Area of the Americas

    The Free Trade Area of the Americas (FTAA) will bring together 34 
countries in an agreement designed to boost trade in the Western 
Hemisphere. Latin America is an important market for U.S. agricultural 
products. More than one-fifth of U.S. agricultural exports in 1998 went 
to Latin America, an amount that exceeded $11 billion. However, U.S. 
agricultural producers are at a competitive disadvantage due to 
existing preferential agreements in Latin America. We need the FTAA to 
level the playing field for our exports to the region.
    Regarding specific objectives, increased market access and 
transparency must be the lynch pins for all FTAA negotiations. In 
addition, all member countries must have fully complied with their 
international obligations prior to its implementation. The FTAA should 
cover all production sectors of the member countries' agricultural 
industries and no signatory should be permitted to protect any sector 
from meeting the terms of the agreement.

                   Asia Pacific Economic Cooperation

    The Asia Pacific Economic Cooperation (APEC) was established in 
1989 to promote greater economic and trade cooperation in the Pacific 
Rim. APEC member countries have agreed to establish free trade and 
investment in the region by the year 2020, with developed countries 
reaching for this goal by 2010.
    However, there have been several attempts by some APEC member 
countries to delay or halt the discussions on further liberalizing 
their agricultural markets. This cannot be allowed to happen. While the 
economies of many members in the Pacific Rim region have suffered 
economic downturns, most members recognize the value of liberalized 
markets and have not altered their APEC commitments. Achieving 
liberalization in APEC will be extremely important for the upcoming 
negotiations on agriculture in the WTO wherein we hope to achieve 
further market openings for agriculture. The United States must be 
active in APEC discussions and ensure that liberalization in 
agriculture maintains a high profile.

                       Enforcing Trade Agreements

    The United States has brought more dispute settlement cases before 
the WTO than any other nation. We must take all action necessary to 
ensure that our trading partners comply with WTO rulings. The 
obligation of compliance should not be taken lightly. Our trading 
partners cannot be allowed to unilaterally weaken the very principles 
that we negotiated in the Uruguay Round agreement.
    American agriculture will not have confidence in the multilateral 
trading system if WTO members are permitted to disregard dispute 
settlement findings, as the European Union is now doing in the banana 
and beef hormone cases.
    The United States and the European Union are now embroiled in a 
dispute regarding the European Union's compliance with the WTO ruling 
on bananas. This case is important to agriculture for many reasons. It 
is the first ruling to set limits on the application and administration 
of agricultural tariff rate quotas. It is the first action against the 
European Union--American agriculture's largest trading partner. Perhaps 
most important, it is the first case to test the effectiveness of the 
WTO when a losing party refuses to come into compliance with a WTO 
ruling. As such, it sets a crucial precedent for the WTO beef hormone 
case, in which the European Union has also made known its unwillingness 
to come into compliance.
    We encourage Congress and the Administration to take whatever 
actions are necessary in the banana and beef hormone cases to ensure 
successful, WTO-consistent outcomes that will help demonstrate the 
effectiveness of the system.
    We have an obligation to our producers to ensure that every 
available domestic and international trade remedy will be used to 
prevent unfair trading practices. To this end, we need Congress and the 
Administration to give priority to monitoring and enforcing all trade 
agreements and to working aggressively to end unfair trading practices 
whenever they are found.

                            Sanctions Reform

    In the last decade, democracy has ascended amidst economic 
liberation in Taiwan, Korea, Poland, Hungary, Slovenia, the Czech 
Republic, Chile, Argentina, Bolivia, Peru, Brazil, Uruguay and Ecuador. 
The opportunities for peaceful American engagement and influence in the 
world are greater than ever before. Yet, we are closed off from certain 
markets due to unilateral sanctions. Our competitors relish the 
opportunity to access these markets without competition from the United 
States due to sanctions. U.S. producers, on the other hand, lose 
important markets and are branded as unreliable suppliers for decades 
to come.
    For example, the Soviet grain embargo cost the United States about 
$2.8 billion in lost U.S. farm exports and U.S. government compensation 
to American farmers. When the United States cut off sales of wheat to 
protest the Soviet invasion of Afghanistan, other suppliers--France, 
Canada, Australia and Argentina--stepped in. They expanded their sales 
to the Soviet Union, ensuring that U.S. sanctions had virtually no 
economic impact.
    Sanctions and embargoes not only cost us in immediate loss of 
sales, but also enable our customers to find or develop other 
suppliers. Once this happens, it is very hard to win them back. A case 
in point is the growth of soybean production in South America, 
primarily Brazil, as a result of embargoes in the 1970s and 1980s.
    The United States has an unprecedented opportunity to promote its 
values throughout the world by peaceful engagement. Reaching out, not 
withdrawing behind sanctions or embargoes, is the best way to achieve 
change.
    The American Farm Bureau supports sanctions reform that would 
exempt food from sanctions, except in cases of armed conflict, and 
provide producers with market loss assistance payments for lost 
agricultural export sales when sanctions are imposed.
    We also support the Administration's recent changes to U.S. trade 
policy that will permit food and agricultural input sales to Cuba. It 
is imperative that the licensing regulations for this policy be written 
in such a way as to facilitate meaningful commercial trade.

                     Increased Funding for EEP/MAP

    Freedom to Farm increases the importance of maintaining and 
expanding access to foreign markets. However, in recent years, spending 
for export programs has declined, although funding for most programs 
was maintained at previous levels for fiscal year 1999. We must 
increase funding for these programs in order to remain competitive in 
the face of increasing international competition.
    We need to adopt a strategic approach to U.S. farm exports that 
includes increased export promotion and market development funding. 
Doing so will strengthen our hand as we prepare to launch the next 
round of agricultural negotiations in the WTO.
    We cannot place our producers at a competitive disadvantage in the 
world market. The United States should undertake a review of its 
existing agricultural export programs, improve their effectiveness and 
flexibility and fund these programs adequately.
    The American Farm Bureau Federation supports the reallocation of 
unobligated funds from the Export Enhancement Program to other programs 
such as the P.L. 480 food assistance program, the Food for Progress 
program, the Market Access Program, the Foreign Market Development 
program, or one of the section 416 commodity donation programs.

                Transatlantic Economic Partnership (TEP)

    The Transatlantic Economic Partnership establishes a regular 
dialogue between the United States and the European Union to seek to 
reduce trade barriers and to ensure closer cooperation in preparation 
for the 1999 WTO Ministerial Conference. Although the concept of the 
plan is commendable, on close examination, the TEP provides little that 
is new or substantive for agriculture. Moreover, elements of the plan 
cover areas of extreme importance to agriculture including food safety, 
plant and animal health, biotechnology and standardization of certain 
regulations that directly affect agriculture.
    The American Farm Bureau remains very concerned about several 
provisions of the plan and related dialogues that do not include U.S. 
agricultural representation. It is critical that Congress and the 
Administration closely review elements of the TEP to ensure that U.S. 
agricultural interests are adequately represented and that agricultural 
exports are not negatively impacted.

            Raising the Profile of Agricultural Trade Policy

    U.S. agriculture is a primary contributor to the nation's gross 
domestic product and is highly dependent on export markets for the sale 
of over one-third of its production. Farmers and ranchers need a strong 
voice in U.S. trade policy to ensure that agriculture's interests are 
being vigorously pursued.
    Creating a permanent position for the Special Agricultural 
Negotiator in the Office of the United States Trade Representative--
with the rank of ambassador--will elevate the importance of agriculture 
in the upcoming WTO negotiations on farm products and will place 
agriculture at the highest possible level for resolving trade disputes.
    U.S. agricultural producers are the most productive in the world. 
We need Congress and the Administration to act on agriculture's trade 
priorities so that U.S. farmers and ranchers can reap the rewards of 
their productivity and provide an affordable food supply to U.S. and 
world consumers.
    Thank you for the opportunity to speak on behalf of American 
agriculture.
    [An attachment is being retain in the Committee files.]

                                

    Chairman Crane [presiding]. Thank you, Mr. Kleckner.
    Mr. Gardner.

    STATEMENT OF KEVIN GARDNER, FARMER, CAVE CITY, KENTUCKY

    Mr. Gardner. Thank you. Mr. Chairman, and Members of the 
Committee, my name is Kevin Gardner. I operate a corn, soybean, 
and burley tobacco farm in Cave City, Kentucky. I bought my 
farm from my mother nearly 10 years ago when my father passed 
away. The farm has been owned and operated by my family since 
1792, when land was first granted out in our county. It has 
enjoyed mostly prosperous times during the last 200 years.
    I am here before you today to share my farming story with 
you, and to highlight the growing reliance that my farm and 
every other farm in the country has on access to foreign 
markets.
    Since I was a young boy, I dreamt of being a farmer. I 
would watch my dad cultivate the corn, operate the combine, 
harvest the soybeans and tobacco, and wean the baby pigs. My 
father was an honorable man. He was dedicated to his family, 
the farm, and his community. He operated the farm the best way 
he knew how, and did a good job. But he never had to worry 
about global financial crises closing down his markets or non-
tariff trade barriers shutting him out of the competition for a 
sale.
    Times have certainly changed. Farmers today are focused not 
only on what they grow and how they grow it, but where their 
end market is, which is increasingly becoming an international 
destination. Today's market is much more global in nature than 
the market my father faced. When I open up the morning 
newspaper and read about the news of the day, I am well aware 
that economic troubles in other countries, as well as good 
market news in faraway lands, affect me directly. We live in a 
global marketplace, and as farmers we need to be players in the 
global game.
    For example, I sell my corn to a local feed dealership and 
my soybeans to a local processing plant on the Ohio River. 
However, I feel the impact of the global corn and soybean 
prices when I sell these products to the dealership and the 
plant. A large portion of the soybeans I sell I deliver to the 
plant are exported to Japan, the Netherlands, Mexico, Taiwan, 
and Spain. Mexico, incidently, has become an important market 
for Kentucky farmers since the North American Free Trade 
Agreement was implemented.
    Take another example. My tobacco is sold at auction at a 
local warehouse. Five major tobacco companies buy U.S. burley 
tobacco at auction for processing. About half the tobacco is 
for use for U.S. consumption and the rest is exported.
    I am a strong supporter of free and fair trade. My future 
depends on it. I supported the Freedom to Farm, but note that 
we only got part of the deal that we were promised. We got the 
freedom to farm, but we did not get the freedom to sell. We 
continue to be shut out of important markets due to a number of 
factors. In short, U.S. farmers do not have the freedom to 
trade. I believe that our negotiators should be allowed to 
return to the negotiating table to level the playing field and 
to negotiate better access to more international markets.
    Would my life be different if our negotiators could knock 
down those phoney barriers and get rid of the subsidies on my 
competitors' exports, and open up markets for U.S. farmers? You 
bet it would. I would relish the opportunity to sell more corn, 
soybeans, and tobacco in the international marketplace if I 
knew I was truly squaring off with the competitor that didn't 
have two legs up on me before we even got out of the gate.
    To boil all this down, I am asking you, our elected 
representatives, to remember America's roots. We started out as 
an agrarian society and we built a strong Nation, the strongest 
in the world from very humble beginnings. Remember the farmer 
like me in the countryside. We are the most productive and 
efficient farmers in the world. Yet many export doors are 
closed for us for one reason or another. The President needs 
negotiating authority to re-open export market doors for U.S. 
agriculture.
    I would like to thank this Committee and especially my 
Congressman, Ron Lewis, for their efforts in opening U.S. 
trade. I thank you for this opportunity to testify.
    [The prepared statement follows:]

Statement of Kevin Gardner, Farmer Cave City, Kentucky

    Mr. Chairman and members of the Committee, my name is Kevin Gardner 
and I operate a corn, soybean, burley tobacco and alfalfa farm in Cave 
City, Kentucky. I bought my farm from my mother ten years ago when my 
father died. This farm has been owned and operated by my family since 
1792 when land was first granted out in our county and has enjoyed 
mostly prosperous times during that 200-year period.
    I am here before you today to share my farming story with you and 
to highlight the growing reliance that my farm, and every other farm in 
the country, has on access to foreign markets.
    Since I was a young boy, I dreamt of being a farmer. I would watch 
my dad cultivate the corn, operate the combine, harvest the soybeans 
and tobacco and wean the baby pigs. My father was an honorable man, 
dedicated to his family, the farm and his community. He operated his 
farm the best he knew how and he did a good job. But he never had to 
worry about global financial crises closing down his markets or 
nontariff trade barriers shutting him out of competition for a sale.
    Times have changed. Farmers today are focused not only on what they 
grow and how they grow it, but also on where their end market is--which 
is increasingly becoming an international destination. Today's market 
is much more global in nature than the market my father faced. When I 
open up the morning newspaper and read the news of the day, I am well 
aware that economic troubles in other countries--as well as good market 
news in far away lands--affect me directly. We live in a global 
marketplace and, as farmers, we need to be players in the global game.
    For example, I sell my corn to a local feed dealership and my 
soybeans to a processing plant on the Ohio River. However, I feel the 
impact of global corn and soybean prices when I sell these products to 
the dealership and the plant. A large portion of the soybeans I deliver 
to the plant are exported to Japan, the Netherlands, Mexico, Taiwan or 
Spain. Mexico has, incidentally, become an important market for 
Kentucky farmers since the North American Free Trade Agreement was 
implemented.
    Take another example. My tobacco is sold at an auction to a local 
warehouse. Five major tobacco companies buy burley tobacco at that 
auction for processing. About half of the tobacco is used for U.S. 
consumption, the rest is exported to countries like Germany, Japan, 
Turkey, the Dominican Republic, Belgium or the Netherlands.
    Up until last spring, I raised hogs in a farrow-to-finish operation 
and even specialized in early weaning pigs for the last two years of my 
operation. But in May of 1998, I had to close down my hog operation 
because the market died. The price for hogs fell below my cost of 
production due largely to excess domestic supply. Imports of Canadian 
hogs were also a factor.
    My point in sharing my hog story with you is not to say that I am 
trade protectionist. On the contrary. I support free and fair trade. My 
future depends on it. I supported Freedom to Farm, but note that we 
only got part of the deal that we were promised. We got freedom to 
farm, but we didn't get freedom to sell. We continue to be shut out of 
important markets due to a number of factors. In short, U.S. farmers do 
not have freedom to trade. I believe that our negotiators should be 
allowed to return to the negotiating table to level the playing field 
and negotiate better access to more international markets.
    A lot of export market doors have been shut due to high tariffs and 
nontariff barriers. For example, I grow Bt-corn and Roundup-ready 
soybeans. These are genetically modified crops--or GMOs. Europe has 
very limited access for these products and has slammed the import door 
closed on new varieties of GMO products. We need new rules on 
biotechnology in the World Trade Organization because Europe is the 
second largest market for U.S. agriculture. The phony barriers that 
Europe erects are hurting the average farmer in the countryside--
farmers like me. I feel the impact of Europe's anti-trade tactics when 
I sell my corn and soybeans to the local feed dealership and processing 
plant.
    Would my life be different if our negotiators could knock down 
these phony barriers, get rid of foreign subsidies on my competitors' 
exports and open more markets for U.S. farmers? You bet it would.
    I have seen first-hand the level of subsidies given to European 
farmers and supply managed programs for Canadian farmers. I have 
traveled to both Europe and Canada and have been struck by the amount 
of government support farmers in Europe enjoy. Farmers in Europe and 
Canada are my primary competitors. I cannot compete against the 
mountain of subsidies and supply managed programs that benefit my 
competitors.
    All I am asking for is that we negotiate new agreements that put 
our farmers on a more level playing field with the rest of the world's 
farmers. I would relish the opportunity to sell more corn, soybeans and 
tobacco in the international marketplace if I knew that I was truly 
squaring off with a competitor that didn't have two legs up on me 
before we even got out of the gate.
    To boil all this down, I am asking you, our elected 
representatives, to remember America's roots. We started out as an 
agrarian society. And we built a strong nation--the strongest in the 
world--from very humble beginnings. Remember the farmer--like me--in 
the countryside. We are the most productive and efficient farmers in 
the world. Yet too many export doors are closed to us for one reason or 
another. The President needs negotiating authority to reopen export 
market doors for U.S. agriculture.
    I would like to thank this Committee, and especially my 
Congressman, Ron Lewis, for their efforts in opening trade for U.S. 
farmers.
    Thank you for the opportunity to testify before you today.

                                

    Chairman Crane. Thank you, Mr. Gardner.
    Mr. Trammel.

STATEMENT OF LEON TRAMMELL, CHAIRMAN AND FOUNDER, TRAMCO, INC., 
                        WICHITA, KANSAS

    Mr. Trammell. Chairman Crane, Congressman Levin, Members of 
the Subcommittee on Trade, I am Leon Trammell, chairman and 
founder or Tramco, Incorporated, in Wichita, Kansas. Tramco 
creates jobs by selling and manufacturing conveying equipment. 
Our primary market is the cereal food processors, such as 
wheat, corn, soybean, and other oil seeds. I appreciate the 
opportunity to join you in this very important discussion.
    I founded Tramco in 1967 with the commitment to quality and 
customer satisfaction. Almost 25 years ago, Tramco embarked on 
its first out-of-country job. We were fortunate to be involved 
in a grain import and transfer facility in Alexandria, Egypt. 
When the project was completed, we realized that this modern 
facility halfway around the world had been responsible for 20 
percent of our business. That meant 15 new jobs for 1 year.
    Today we have installations in over 35 countries. Why are 
international markets important to Tramco? We could wave the 
flag and talk about helping the United States balance of 
payment, but the real reason our international partners are 
important is that we are an entrepreneurial company. We are 
always looking for additional sales. Foreign projects offer the 
greatest opportunities, and we create jobs.
    I am the guy who signs the paycheck four times a month for 
more than 160 families. I am the guy who approves expense 
reports on trips our employees take to maintain business 
relationships on four continents. I have employees who can take 
raw steel and turn it into the finest grain conveyors in the 
world. Their job depends on my ability to sell.
    I spoke at length about China in my written statement 
because of its great size, great potential, and severe 
restrictions. But the fact is, we must compete all over the 
world and we must win. The livelihood of Tramco's 160 families 
depend on it. Thousands of companies like mine and millions of 
jobs around the country depend on it. I simply can not 
understand why our government seems to be more intent on 
imposing economic sanctions and annual NTR renewals that our 
competitors don't follow than it is with allying us and our 
trade negotiators to get the best deal.
    I am a member of the U.S. Chamber of Commerce. The Chamber 
represents tens of thousands of entrepreneurs like myself as 
well as most large companies, corporations like those 
represented here today. I might add that two of those people 
that testified today, I get the waterfall effect from them. 
That's Cargill and Foster Wheeler. Eighty percent of our 
business is in grain processing and 20 percent is in general 
industry. The reason a company the size of Tramco can be in 35 
foreign countries is we go in on the coattails of those 
companies. Once we are there and we are established as a 
supplier to the Cargills and to the Foster Wheelers, it is 
easier for us to penetrate the rest of the market.
    Let me back up here. The Chamber of Commerce represents 
tens of thousands of entrepreneurs like myself, as well as most 
large corporations like those represented here. We all do 
business in our own way, but we all have a common goal, which 
are to stay in business and create jobs.
    To summarize, the U.S. Congress and Administration should 
do everything possible to expand the international marketplace. 
This means renewing fast track and rejoining trade 
negotiations. These negotiations should be about opening 
markets and creating jobs, not closing them. Any effort to 
restrict trade through protectionism should be rejected. We 
need to end our reliance on unilateral sanctions. This includes 
giving permanent NTR status to China and stop threatening to 
end it at the end of each year. Ending China's NTR status would 
be a major new sanction that would hurt Tramco, as well as 
those who seek more liberty in China, but it would not cause 
positive change in China.
    We need to maintain trade laws that are not themselves 
protectionist, but help us to open markets and end 
protectionism. Again, this is about jobs. This will give our 
negotiators more credibility, and the American public more 
confidence. Finally, we need to stay engaged in keep building 
relationships with our customers, not turn them off and on like 
a lightswitch at the end of each year.
    I will be pleased to answer any questions you might have, 
and thank you.
    [The prepared statement follows:]

Statement of Leon Trammell, Chairman and Founder, Tramco, Inc., 
Wichita, Kansas

    Chairman Crane, Congressman Levin, members of the Subcommittee on 
Trade. I appreciate this opportunity to join you in this very important 
discussion.
    The following information is provided as a written submission for 
the United States House of Representatives, Committee on Ways and 
Means, Subcommittee on Trade.
    These materials will provide a record on my thoughts on the 
importance of expanding trade, and resisting any protectionism in trade 
negotiations.
    As background, I am:
    Leon Trammell, Chairman and President, Tramco, Inc.
    We are located at 1020 East 19th Street, Wichita, Kansas 67214.
    Our 160+ employees are involved in the manufacturing and sale of 
high-production conveyors and conveying systems. Our primary market is 
in the ``cereal foods'' business . . . i.e., corn, soybeans, etc. We 
have been active in international sales for more than 20 years, and 
have been most active in the China market for the last 14 years.
    With your permission, it may be valuable to know of Tramco's 
background and introduction to ``international'' trade.
    Almost 25 years ago Tramco embarked on its first job outside of the 
United States. We were fortunate to be involved in a grain import and 
transfer facility in Alexandria, Egypt. When the project was completed 
and brought on-line, we realized that this modern facility--half way 
around the world--had been responsible for 20% of our business.
    As we said, this was ``good'' business.
    This one factor alone can be cited as the reason Tramco's quality 
products are now known around the world. As a company, we made 
international relationships and sales one of our primary missions.
    We also know that ``relationships'' must come before any prospect 
of ``sales.'' As such, we seem to have one of our employees getting 
their passport stamped on a monthly basis. And, while it is not 
unexpected to have a $5,000 bill at the end of each trip, we continue 
to make this investment in pure relationship building.
    I would now like to discuss the changes we have seen in the China 
market (specifically) since our first introduction to this 
international partner. (I highlight China for this example because, 
with our bidding, sales and installation activities currently in over 
35 countries, China is among the most restrictive.)
     Ten years ago, with roughly 1.3 billion citizens, almost 
80% of China's population was involved in farming. Today, after 
extensive industrialization, this number has dropped to between 65 and 
70%. While this drop is significant, the number of farmers--
850,000,000--is still more than three times the entire population of 
the United States. (As a point of reference, 100 years ago, 60% of the 
United States population was involved in agriculture. Today the number 
is 1%.)
     When we first went to China, the grain industry's idea of 
transporting grain was one farmer/gardener, one sack of grain and one 
bicycle. To be honest, there was no infrastructure. In fact, when grain 
was loaded on to ships (during the few years when China was an 
exporter) it was not unexpected for the farmer to carry sacks of grain 
on to a ship and dump them by hand in to the ship cargo areas.
     Ten years ago saw the beginning of the construction of a 
system of what we could call country elevators. Their primary purpose 
was to ship the grain to a centralized storage facility.
     We would like to believe that China is leaving a period of 
``labor intensity'' and entering a period of ``brain intensity.'' 
Obviously this shows great promise for a manufacturer of ``high-
quality, labor-saving'' equipment.
    Why are international markets important to Tramco? While we could 
``wave the flag'' and talk about helping the U.S. balance of payments, 
the real reason China and our other international partners is important 
to us is that we are an entrepreneurial company--always looking for 
sales--and foreign projects offer the most opportunity in the world.
    China is finishing up the greatest grain ``system'' expansion the 
world has ever known. It should be noted, due to peculiar aspects of 
the Normal Trading Relation status (NTR), no U.S. design and 
engineering firms have been involved in these projects. Most of the 
work resides in Canada, England, Australia and the Netherlands. (The 
major U.S. firms didn't get involved because they did not know if they 
would be able to operate under NTR from one year to the next.)
    Let me speak honestly about our feelings toward international 
activities in general, and granting permanent NTR status to China 
specifically:
     Our business is not based upon whim and caprice. The 
current NTR approach sometimes seems to be based upon whim and caprice.
     Americans understand that we cannot impose our religious, 
political and social views on China. It would appear as if Congress 
does not understand this.
     Our company's short-term planning is 12 to 18 months, and 
our long-term planning is five years. With the current NTR requirements 
with China, everything ends on December 31.
     Many of our clients realize that changing specifications 
in the middle of a project might necessitate changes in the product 
delivery schedule. With the NTR requirements, it doesn't matter how 
many changes are requested, everything ends on December 31.
     We like to think we are always ``in the ballgame'' when it 
comes to designing and delivering equipment. With NTR we have missed 
jobs because we couldn't deliver materials before the end of the year. 
This situation is brought about because, as the U.S. Congress threatens 
to withhold NTR status from China, their government threatens to impose 
a 40% duty on all equipment delivered from the U.S. While this has 
never happened, the threat always exists.
     The current NTR activities take away two qualities we 
expect in a long-term client relationship . . . continuity and 
consistency.
    It should be obvious from my comments to this point that I am a 
designer and builder of conveyor equipment . . . I am not a politician. 
While I vote every chance I get, I certainly do not understand the way 
our government chooses to make laws that hand-cuff our own small 
businesses who are trying to do businesses with China.
    For instance . . . why would the United States want a policy that 
would restrict our ability to compete? Do they think they are 
``punishing'' China? No. The world's largest potential marketplace will 
buy from some other country. The people being ``punished'' are our own 
manufacturers and engineering experts.
    Or, to paraphrase the general focus of this Ways and Means 
Subcommittee on Trade . . . I would urge you to do everything possible 
to expand trade, and resist the introduction of any form of 
protectionism in any trade negotiations.
    Who is Leon Trammell:
     I am is the guy who signs paychecks--four times a month--
for more than 160 families. I have employees who can take raw steel and 
turn it into the finest grain conveyors in the world. And, I am the guy 
who approves the expense reports on those trips to make sure my key 
people maintain their key relationships on four continents.
    The sad thing is that Tramco is not alone. I fully expect that you 
will receive similar comments from others who are just as frustrated by 
a restriction on trade through the inclusion of protectionism in trade 
negotiations.
    Let me thank you for the opportunity to express these thoughts and 
to show how passionate I am when it comes to establishing a ``level'' 
playing field. (I honestly do not want for Tramco to ever be given an 
unfair advantage. We have gained our reputation and success in the 
toughest arena of all . . . the free marketplace.)
    To summarize:
    1. The United States Congress should do everything possible to 
expand the international trade marketplace.
    2. Any effort to restrict trade, through protectionism, tariffs or 
short timetables should be rejected.
    3. On the subject of Normal Trade Relations status, I would support 
all efforts to give permanent NTR status to China.
    4. We should be able to continue our relationship-building in any 
country, while projecting beyond New Year's Eve.
    5. While we work well with engineering firms from Europe and 
Australia, it would be nice once-in-a-while to deal with companies who 
are a ``local'' call away.
    6. Finally, long-term relationships should not end on the last day 
of the year, and then restart when someone in Congress says they can 
recommence.
    Thank you for this opportunity to share some thoughts with United 
States House of Representatives Committee on Ways and Means, 
Subcommittee on Trade.
    Thank you.

                                

    Chairman Crane. Thank you, Mr. Trammell.
    Mr. Pryce.

STATEMENT OF HON. WILLIAM T. PRYCE, VICE PRESIDENT, WASHINGTON 
 OPERATIONS, COUNCIL OF THE AMERICAS, AND FORMER AMBASSADOR TO 
                HONDURAS FROM THE UNITED STATES

    Mr. Pryce. Good morning, Mr. Chairman, Congressman Levin, 
and Members of the Subcommittee. I am Bill Pryce, vice 
president of the Council of the Americas. The Council 
appreciates the opportunity to testify before you today. The 
Council of the Americas is the leading business organization 
dedicated to promoting regional economic integration, free 
trade and investment, open markets, and the rule of law 
throughout the hemisphere. The Council's membership represents 
the majority of U.S. private investment in Latin America. 
Members include manufacturing, natural resources, technology, 
communications, banking, and financial services firms.
    The Council was founded on the belief that the future 
prosperity of the hemisphere depends on the triumph of liberal 
economic policies such as free trade and open markets. Despite 
the recent turbulence in the global economy, it is clear over 
the last decade that the trend in Latin America has been in 
that direction. The result has been stronger democracies and 
greater market opportunities for U.S. companies. These are 
trends we should be encouraging.
    Last April, the presidents of the hemisphere's 34 
democracies agreed in Chile to open negotiations for a free 
trade area of the Americas, and to launch new initiatives to 
promote education, reduce poverty, and strengthen democratic 
institutions throughout the Americas. The Council believes that 
the FTAA represents a great opportunity for growth and 
development of the region. Trade leads to prosperity, and 
provides an enhanced ability to address the summit's broader 
social and political agenda.
    The Free Trade Area of the Americas represents a potential 
market of 800 million people. It is a huge market, for 
everything from cellular telephones to industrial machinery. 
U.S. trade with Latin America and the Caribbean is already 
growing faster than with any other part of the world. U.S. 
exports to Latin America have increased by more than 100 
percent since 1990, and are growing about twice as fast as 
exports to the rest of the world. The United States sells more 
to Brazil than to China, more to Central America than to 
Eastern Europe and the former Soviet Union combined, and more 
to the 14 million people of Chile than to the 900 million 
people of India.
    Last month, the Council was in Miami at the FTAA 
negotiations. Mr. Chairman, we heard once again directly from 
the negotiators that the lack of trade negotiating authority 
was an impediment to progress. The goal of reaching interim 
agreements by the year 2000 in order to achieve the concrete 
progress referred to in the Miami Summit appears increasingly 
difficult to achieve. While the lack of the President's trade 
negotiating authority is not the only cause, it certainly 
impedes our ability to get taken seriously. Although the FTAA 
process is not scheduled to come into effect until the year 
2005, the United States is in danger of losing ground in the 
region, and ceding opportunity to Canada and the European Union 
as they negotiate preferential trade agreements with the 
countries of Latin America.
    Mr. Chairman, I want to mention our most recent major trade 
agreement, the NAFTA. The North American Free Trade Agreement 
has been a clear success. In January, the Council released its 
NAFTA at Five Years report, which demonstrates even more 
strongly than before that this trade agreement has been 
beneficial for the United States. U.S. trade with our NAFTA 
partners grew 63 percent from 1993 to 1997, and stands are 
record levels. Since 1993, U.S. merchandise trade is up 93 
percent with Mexico, 51 percent with Canada. In 1997, U.S. 
trade with Canada totaled $354 billion, and with Mexico, $180 
billion. We now export more to our NAFTA partners than we do to 
the European Union and Japan combined.
    Since NAFTA went into effect, the United States has seen 
the unemployment rate drop to a 28-year low. We clearly have 
not seen a massive exodus of U.S. jobs to Mexico as some had 
predicted. In fact, NAFTA has led to more high quality, better-
paying jobs for U.S. workers. Without NAFTA, U.S. exporters 
would face Mexican and Canadian trade barriers they do not now 
confront. Without NAFTA, U.S. exporters would have been hit 
much harder by the Asian financial crisis. Just as exports to 
Asia plummeted, U.S. exports to Canada and Mexico soared. Half 
the manufactured goods export loss to Asia was made up by 
increased U.S. exports to Mexico and Canada, which grew by $10 
billion over the first 8 months of 1988. NAFTA has fostered 
growth in cross-border investment that has improved the 
competitiveness of American companies, and consequently, their 
ability to keep high-skill, high-wage jobs in the United 
States.
    The Council also believes that there are ways to improve 
NAFTA. For example, by funding its institutions and further 
implementing the agreement. By we also believe that NAFTA is 
unfairly blamed for some of the trends inherent in a changing 
world economy. Moreover, the agreement cannot be expected to 
carry all of the facets of a trilateral relationship on its 
back.
    Under NAFTA, U.S. business has benefited from greater 
efficiency, U.S. workers have benefited from the creation of 
high-wage, high-skill, export-related jobs, and U.S. consumers 
have benefited from lower prices and greater choice. These are 
trends we should continue to promote and extend throughout the 
hemisphere.
    In closing, the FTAA presents an opportunity to link the 34 
democracies in the Western Hemisphere by broadening and 
deepening relations in ways that benefit the U.S. economy and 
its citizens, as well as those of our hemispheric neighbors and 
partners. We need to do all we can to support it.
    Thank you very much.
    [The prepared statement follows:]

Statement of the Hon. William T. Pryce, Vice President, Washington 
Operations, Council of the Americas, and former Ambassador to Honduras 
from the United States

    Good morning, Mr. Chairman, Congressman Levin, and Members of the 
Subcommittee. I am Bill Pryce, Vice President of the Council of the 
Americas in charge of our Washington operations. The Council of the 
Americas appreciates the opportunity to testify before you today.
    The Council of the Americas is the leading business organization 
dedicated to promoting regional economic integration, free trade and 
investment, open markets, and the rule of law throughout the Western 
Hemisphere. The Council's membership represents the majority of U.S. 
private investment in Latin America. Members include manufacturing, 
natural resources, technology, communications, banking, and financial 
services firms.
    The Council was founded on the belief that the future prosperity of 
the hemisphere depends on the triumph of liberal economic principles 
such as free trade and open investment. Despite the recent turbulence 
in the global economy, I think it is clear that over the last decade 
the trend in Latin America has been in this direction. The result has 
been stronger democracies and greater market opportunities for U.S. 
companies.
    Mr. Chairman, these are trends that we should be encouraging and 
that is why I am here to speak to you today. As you know, the Summit of 
the Americas has begun the process of hemispheric integration. Last 
April, the Presidents of the hemisphere's 34 democracies met in 
Santiago, Chile and signed a document to open negotiations for a Free 
Trade Area of the Americas as well as to launch new initiatives to 
promote education, reduce poverty, and strengthen democratic 
institutions throughout the Americas. It is an ambitious agenda that 
will help to reduce the risks and barriers to investment in the 
hemisphere as well as create a more politically stable environment. The 
Council believes that the FTAA represents a great opportunity for 
growth and development in the region. Trade leads to prosperity and 
provides market-liberalizing countries an enhanced ability to address 
the summit's broader social and political agenda.
    The Free Trade Area of the Americas presents a potential market of 
800 million people to whom we can sell our goods and services. It is a 
huge market for everything from cellular telephones to industrial 
machinery. U.S. trade with Latin America and the Caribbean is already 
growing faster than with any other part of the world. U.S. exports to 
Latin America have increased by more than 100% since 1990 and are 
growing about twice as fast as exports to the rest of the world. The 
U.S. sells more to Brazil than to China; more to Central America than 
to Eastern Europe and the former Soviet Union combined; more to the 14 
million people of Chile than to the 900 million people of India.
    The Council believes that expanding this trading relationship is 
critical to U.S. corporate growth and overall economic health as well 
as to the development of Latin America. Last month the Council was in 
Miami at the FTAA negotiations. Although the FTAA process is in its 
early stages the groundwork is now being laid to create the world's 
largest free trade zone. However, the U.S. government can only lead 
successfully in this process if it is given the tools necessary to 
bargain with strength. Mr. Chairman we heard once again directly from 
the negotiators last month that the lack of trade negotiating authority 
was an impediment to progress.
    The goal of reaching interim agreements by 2000 in order to achieve 
the ``concrete progress'' referred to in the Miami Summit declaration 
appears increasingly difficult to achieve. And while the lack of 
President Clinton's trade negotiating authority is not the only cause, 
it certainly impairs our ability to reach business facilitation 
measures. Although the FTAA process is not scheduled to come into 
effect until the year 2005, the United States is in danger of losing 
ground in the region and ceding opportunities to Canada and the 
European Union as they negotiate preferential trade agreements with 
countries in Latin America.
    Mr. Chairman, while we are discussing the potential impact of 
ongoing trade negotiations on U.S. jobs, wages, economic opportunity 
and the future competitiveness of U.S. companies I thought I would 
mention the most recent major trade agreement that has positively 
impacted the U.S. economy and its workers--the NAFTA. Mr. Chairman, the 
North American Free Trade Agreement has been a success. In January, the 
Council released its ``NAFTA at Five Years'' report. The figures in 
this report confirm even more strongly than before that this trade 
agreement has been beneficial for the United States. Total U.S. trade 
with our NAFTA partners grew 63 percent between 1993 and 1997 and 
stands at record levels. Since 1993, U.S. merchandise trade is up 93 
percent with Mexico and 51 percent with Canada. In 1997, U.S. trade 
with Canada totaled $354 billion and with Mexico $180 billion. Since 
NAFTA went into effect, the United States has seen the unemployment 
rate drop to a 28-year low. We have clearly not seen a massive exodus 
of U.S. jobs to Mexico as some had predicted. In fact, NAFTA has led to 
more high quality, better-paying jobs for U.S. workers.
    Simply put, without NAFTA, U.S. exporters would face Mexican and 
Canadian trade barriers they do not now confront. And without NAFTA, 
U.S. exporters would have been hit much harder by the Asian financial 
crisis. Just as exports to Asia plummeted, U.S. exports to Canada and 
Mexico soared. Half of the manufactured goods export loss to Asia was 
made up by increased U.S. exports to Mexico and Canada, which grew by 
over $10 billion in the first eight months of 1998. NAFTA has fostered 
growth in cross-border investment that has improved the competitiveness 
of American companies and, consequently, their ability to keep high-
skill, high-wage jobs in the United States. Beyond the positive 
economic impact in the three NAFTA countries, the agreement has also 
encouraged economic reforms in Mexico.
    Mr. Chairman, the Council believes that there are ways to improve 
NAFTA. We lay out in our report some recommendations such as fully 
funding NAFTA's institutions and further implementing the agreement. 
But we also believe that NAFTA is unfairly blamed for some of the 
trends inherent in a changing world economy. The agreement cannot be 
expected to carry all facets of a trilateral relationship on its back. 
From the trade perspective there can be no doubt that NAFTA has been 
successful.
    Under NAFTA U.S. business has benefited from greater efficiency, 
U.S. workers have benefited from the creation of high-wage, high-skill, 
export-related jobs, and U.S. consumers have benefited from lower 
prices and greater choice. These are trends we should continue to 
promote and extend throughout the hemisphere. The FTAA presents an 
opportunity to link the 34 democracies of the Western Hemisphere by 
broadening and deepening relations in ways that benefit the U.S. 
economy and its citizens. Thank you very much.

                                

    Chairman Crane. Thank you, Mr. Pryce.
    Mr. Ryan.

  STATEMENT OF MICHAEL D. RYAN, PRESIDENT AND CHIEF EXECUTIVE 
     OFFICER, STAFFING INNOVATIONS, INC., ATLANTA, GEORGIA

    Mr. Ryan. Yes. Thank you, Mr. Chairman, for inviting my 
testimony on the importance of expanding trade, to resisting 
protectionism through active U.S. involvement in trade 
negotiations. I sit before you today as an example of our 
Government's commitment to SSMEs, in keeping them involved in 
the input process of global trade agreements, as well as being 
a product of the late Secretary Ron Brown's efforts.
    I am grateful to you and the Subcommittee as a whole for 
giving me this opportunity to speak as a small businessman on 
why it is crucial that the United States continue its ambitious 
trade agenda. Since over 80 percent of the world's economic 
consumption is outside of the United States, it is imperative 
that the U.S. negotiate and enforce agreements worldwide, which 
will create open and fair markets for U.S. products and 
services. This process of engagement will ensure our continued 
growth and standard of living into the 21st century. My 
testimony will touch on why an aggressive trade policy to open 
markets is important to small, medium, and micro businesses.
    My commitment and my company's commitment to staying 
involved in the trade policy process goes back many years. SII 
focuses on global information technology. Our areas of 
expertise range from project-based management software 
development, networking, communications, and technical support 
services. Issues affecting information technology companies on 
a global scale that challenge SII include areas which are being 
negotiated in a number of multilateral, regional, and bilateral 
agreements. In particular, intellectual property rights, duty 
free, electronic commerce, expansion of the information 
technology agreement under the World Trade Organization, 
continued liberalization under the Asian Pacific Economic 
Cooperation, and the Trans-Atlantic Business Dialog are very 
important to SII and other technology companies. Other areas 
include reduction of barriers in international personnel 
exchange, customs facilitation. It is imperative that a general 
consensus is reached regarding further trade liberalization and 
these other areas.
    SII's involvement during the past 4 years in trade policy 
includes my role as a U.S. delegate to APEC, TABD, and 
attending meetings and participation in trade mission with the 
U.S. Government. It is because of my expansion and ambitious 
efforts into the global marketplace and involvement in being a 
voice for small, medium, and micro businesses that I am 
speaking today in support of continued trade liberalization.
    A few issues that I wanted to make sure that I brought to 
the forefront this afternoon. First, being trade negotiation 
authority. In order for the United States to have credibility 
as we pursue our aggressive trade agenda, it is mandatory that 
the President be given negotiating authority to negotiate these 
trade agreements in good faith. We must get beyond partisan 
politics and do the right thing by giving our President this 
authority. If Congress does not like the deal being brought 
forward, of course they simply have the authority to vote it 
down. Granting negotiating authority which would allow the 
United States to be more effective in this process is not a 
nicety, it is a necessity. I urge Congress to act quickly to 
grant the President this authority.
    Intellectual property rights being the second issue. Since 
this is a growing line of business for my company with our 
global expansion, we must work to ensure all WTO members comply 
with their obligation to introduce full intellectual property 
protection by the year 2000. Global electronic commerce. 
Electronic commerce allows small businesses to break into and 
compete successfully in a global marketplace.
    International personnel exchange, which is a new issue that 
we brought up under the auspices of TABD this year. As a 
supplier of technical support services, restrictions on 
personnel exchange have an adverse effect on my ability to grow 
in many of the worldwide markets.
    Customs. The WTO should work to simplify and reduce 
burdensome customs and trade procedures. Both large and small 
companies lose money because of unnecessary red tape in the 
customs procedures worldwide.
    I also wanted to make sure that I brought to the forefront 
the importance of Africa. After several trips to Africa and 
exposure, SII is now identifying and researching opportunities 
in North Africa with countries such as Mauritania & Morocco, 
which has the distinction of having the oldest treaty with the 
United States in continuous force. The United States therefore 
should support the U.S.-North African Economic Partnership 
Initiative. In addition, I encourage Congress to swiftly 
approve the African Growth and Opportunity Act.
    APEC, TABD, and WTO, these forums provide the United States 
with an opportunity to shape the direction of trade 
negotiations in the future. The significance of these hearings 
are especially valuable at this time, recognizing that we are 
coming into a new millennium.
    I, on the way to Washington, coined two words, trying to be 
a little creative with this discussion. The first word that I 
coined, and it just kind of dropped in my mouth, was to be 
``millenniumized''. That's kind of a tongue twister. I kind of 
define that as those individuals and companies and countries 
that are prepared to embrace and meet the challenges of the 
next millennium head on.
    The next word that I have coined is ``millenniumated'', 
those individual companies and countries that are ill-prepared, 
overwhelmed, and engulfed by those challenges that the next 
millennium will hold.
    It will hold with its emergence, the ability to embrace our 
next generations with the outcomes of the decisions made today, 
or it may hold hostage our succeeding generations with 
restitution to pay for our indecisiveness and inability to 
reach consensus and establish global democratic economic 
uniformity. Countries will have to change the way they manage 
the growth with respect to globalization, and their past 
approaches to global economic expansion and trade agendas are 
not as valuable as they used to be. Only their ability to 
adjust and leverage that experience is.
    In conclusion, I recall hearing a story about Nelson 
Mandela, the president of South Africa. He was once asked how 
could you have spent 27 years of your life, for what reason 
would you compromise your existence? He said that when he was a 
little boy, his mother told him that there were three kinds of 
people in the world. The first kind comes in and leaves 
nothing. The second kind comes in and does bad things to 
people. The third kind comes in and leaves it just a little 
better than the way they found it. The moral imperative is 
obvious because we all have mothers.
    Thank you very much.
    [The prepared statement follows:]

Statement of Michael D. Ryan, President and Chief Executive Officer, 
Staffing Innovations, Inc., Atlanta, Georgia

    Thank you, Mr. Chairman, for inviting my testimony on the 
importance of expanding trade and resisting protectionism through 
active U.S. involvement in trade negotiations. I am grateful to you and 
to the Subcommittee as a whole for giving me this opportunity to speak 
as a small businessman on why it is crucial that the U.S. continue its 
ambitious trade agenda. Since over 80% of the world's economic 
consumption is outside of the U.S., it is imperative that the U.S. 
negotiate and enforce agreements worldwide which will create open and 
fair markets for U.S. products and services. This process of engagement 
will insure our continued growth and standard of living into the 21st 
Century. My testimony will touch on why an aggressive trade policy to 
open markets is important to small, medium and micro businesses.

                  Company Involvement in Trade Policy

    Staffing Innovations, Inc. (SII) focuses on global information 
technology. Our areas of expertise range from project based management, 
software development, networking, communications and technical support 
services. Currently, SII is engaged in a concerted global outreach 
business agenda that includes Asia, Europe, North Africa and the 
Caribbean. Issues affecting information technology companies on a 
global scale that challenge SII include areas which are being 
negotiated in a number of multilateral, regional and bilateral 
agreements. In particular, intellectual property rights, duty-free 
electronic commerce, expansion of the information technology agreement 
under the World Trade Organization (WTO), continued liberation under 
the Asian Pacific Economic Cooperation (APEC) and Transatlantic 
Business Dialogue (TABD) are very important to Staffing Innovations, 
Inc. and other technology companies. Other areas include reduction of 
barriers to international personnel exchange and customs facilitation. 
It is imperative that a general consensus is reached regarding further 
trade liberalization in these and other areas.
    SII's involvement during the past 4 years in trade policy includes 
my role as a U.S. delegate to the APEC conference, Transatlantic 
Business Dialogue (TABD) meetings and participation in trade missions 
with the U.S. government. It is because of my expansion into the global 
marketplace and involvement in being a voice for small, medium and 
micro businesses that I am speaking today in support of continued trade 
liberalization.

           Trade Expansion and its Effect on Small Businesses

    Trade Negotiating Authority. In order for the U.S. to have 
credibility as we pursue our aggressive trade agenda, it is mandatory 
that the President be given negotiating authority to negotiate these 
trade agreements in good faith. We must get beyond partisan politics 
and ``do the right thing'' by giving our President this authority. If 
Congress does not like the deal being brought forward, you have the 
authority to vote it down. Granting negotiating authority which would 
allow the U.S. to be more effective in this process is not a nicety--it 
is a necessity. I urge Congress to act quickly to grant the President 
this authority.
    Intellectual Property Rights. As a small business software 
developer, end-user piracy of software can severely affect my bottom 
line. Since this is a growing line of business for my company with our 
global expansion, we must work to ensure that all WTO members comply 
with their obligation to introduce full intellectual property 
protection by January 1, 2000.
    Global Electronic Commerce. Electronic commerce allows small 
businesses to break into, and compete successfully in global markets. 
Too often we have been closed out of these opportunities due to lack of 
capital to expand overseas. Electronic commerce provides smaller 
companies with a vehicle to sell their products or services globally 
without having to make a tremendous investment in capital therefore 
making the playing field more level. It is imperative that we preserve 
electronic trade over the Internet as duty free.
    International Personnel Exchange. Barriers to international 
personnel exchange continue to create significant impediments to global 
business. Issues such as a more efficient process of obtaining work 
permits for employees and spouses and excessive time in obtaining 
driver's permits are impediments to the growth of many businesses who 
rely on the ability to attract and retain qualified employees. As a 
supplier of technical support services, restrictions on personnel 
exchange have an adverse effect on my ability to grow in many of the 
worldwide markets.
    Customs. The WTO should work to simplify and reduce burdensome 
customs and trade procedures. Both large and small companies lose money 
because of unnecessary red tape in customs procedures worldwide.
    Africa. After several trips to Africa, SII is now pursuing 
opportunities in North Africa with countries such as Morocco, which has 
the distinction of having the oldest treaty with the United States in 
continuous force. The United States has not paid enough attention to 
our economic partnership with countries in North Africa and the rest of 
the continent. Therefore, I support the U.S.-North African Economic 
Partnership Initiative. In addition, I urge Congress to swiftly approve 
the African Growth and Opportunity Act.
    APEC, TABD and WTO. These forums provide the United States with an 
opportunity to shape the direction of trade negotiations in the future. 
We must enter these discussions with a new consensus on trade. As 
President Clinton said earlier in the year, we must find the common 
ground on which business, workers, farmers, environmentalists and 
government can stand together.

                               Conclusion

    In conclusion, we have an obligation as the most competitive 
economy in the world to continue to push for open and fair trade so 
that the entire global economy will prosper. Our decisions today will 
directly affect the next generation of world leaders in business as 
well as government. This reminds me of what Nelson Mandela once said. 
When he was a young boy his mother told him that there were three types 
of people in the world--the first kind comes into the world and leaves 
nothing; the second kind comes into the world and does bad things to 
people; and the third kind comes into the world and leaves it just a 
little better than the way they found it. The moral imperative is 
obvious. I feel strongly that our future growth and therefore the 
legacy we leave the next generation is tied to our ability to tap into 
the opportunities of a global market. Therefore, I urge Congress to 
work with the Administration to form a bipartisan consensus to support 
our ambitious trade agenda for the 21st Century.
    Thank you very much, Mr. Chairman and Members of the Subcommittee, 
for the opportunity to speak with you today.

                                

    Chairman Crane. Thank you.
    Mr. Lewis.
    Mr. Lewis of Kentucky. Yes. Thank you, Mr. Chairman. I 
wanted to ask Mr. Gardner to just kind of expand on the Freedom 
to Farm. You know, we passed the Freedom to Farm. I think that 
it has been a program that has been successful for the farm 
community. But you are absolutely right, it depends on opening 
markets, international markets to relieve some of the pressures 
that we are facing right now with surpluses.
    Could you expand on that just a little bit?
    Mr. Gardner. Yes. You know, as I mentioned, I think every 
farmer is for the Freedom to Farm. Even today we are still for 
the Freedom to Farm without the Government help. We want the 
freedom to be able to raise what we can. But the United States 
is only 4 percent of the population. The American farmer has 
become more and more progressive and more and more efficient. 
We just need an export market, a way to market our commodities. 
This world trade negotiation is very important for us, 
hopefully to open up the door for better trade in the future so 
we can get some of these commodities moving and have a better 
price.
    Mr. Lewis of Kentucky. It is especially important for the 
long run and for the short-term. Our surpluses are mounting and 
we need to get those markets. I agree. Thank you.
    Chairman Crane. I want to thank all of our witnesses for 
their testimony today. We look forward to working with you. We 
are down to about 6 minutes on the clock in there for this 
vote. So with that, the Committee stands adjourned.
    [Whereupon, at 11:56 a.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of W. Henson Moore, President & CEO, American 
Forest & Paper Association

    On behalf of its more than 200 member companies and related 
associations that engage in or represent the manufacturers of pulp, 
paper, paperboard and wood products, the American Forest & Paper 
Association (AF&PA) is pleased to provide this statement on the efforts 
of our industry to open markets and expand worldwide trade in forest 
products.
     American industry over the past year and a half has had to 
contend with massive and widespread devaluations of currencies of our 
trading partners, with a consequent unprecedented expansion of the U.S. 
trade deficit. For American industry, this gaping deficit is not an 
abstruse economic concept. It reflects quite simply the simultaneous 
decline in exports and the loss of domestic customers to foreign 
competitors--and is not sustainable. For our workers, it means that 
overseas factories are kept running on the strength of the robust U.S. 
economy while--taking our industry as an example--U.S. plants are 
forced to close. Current U.S. trade law harks back to an era of stable 
exchange rates under a Bretton Woods system which no longer today. We 
must take a new look at our trade laws to ensure they can address both 
root causes and effects of currency changes on U.S. markets.
     In recent decades, the U.S. has tolerated, and even 
encouraged, export led growth strategies by some of our trading 
partners--both developing and developed--because it served our nation's 
geo-political purpose. With the emergence of a new world power system, 
we must now question whether U.S. trade policy should offer up U.S. 
markets to support overseas economic development and political 
stability. We must also examine whether U.S. trade law--or the 
multilateral trading system--is equipped to deal with the export surges 
which these policies inexorably generate.
     American industries today often compete with first world 
production facilities located in third world economies. This 
necessarily requires a reexamination of our approaches to trade as aid, 
and to the competitive implications of lower labor and environmental 
standards.
    The title of this hearing--the importance of expanding trade and 
resisting protectionism--could well summarize U.S. trade policy over 
the past half century. Through successive Administrations, and with the 
support of both parties in the Congress, the U.S. government has led 
the multilateral effort to expand global trade and, consistent with our 
economic preeminence, taken the first step by reducing trade barriers 
and rooting out protectionist policies in our own economy.
    While this approach has served both the U.S. and the global economy 
well, we are facing competitiveness challenges today that were not 
contemplated by the visionary architects of the post-war system.
    In the testimony which follows, I will offer up the hard experience 
of the U.S. forest products industry--which entered this era globally 
preeminent and fiercely committed to free trade--as an object lesson in 
the need to revise our trade policy approaches to fit the exigencies of 
the new global economy. We will also take this opportunity to provide 
the Subcommittee with our recommendations for specific steps which 
should be taken to make U.S. trade policy--and U.S. trade law--more 
responsive to the competitive needs of America's basic manufacturing 
industries, including the U.S. forest products industry.
    In the process, I suggest that we handicap ourselves if we rely on 
old labels and brand as protectionism, even those attempts to restore 
market function through insistence on balance of benefits in trade 
agreements. In the new global economy, U.S. trade policy must be recast 
to emphasize the importance of expanding U.S. opportunities and 
resisting unequal trading arrangements.

                    Multilateral Trade Negotiations

    With U.S. and foreign sales in excess of $200 billion, our industry 
ranked earlier in this decade as among the most globally competitive of 
all U.S. manufacturing industries. Export sales are critical to the 
future growth and, ultimately, the survival of our industry. However, 
our experience stands as an unfortunate example of how U.S. acceptance 
of inequitable trade agreements on the sectoral level can undermine the 
competitiveness of even the strongest American industries.
    Going back to the Kennedy Round--and notwithstanding the best 
efforts of a generation of U.S. trade negotiators--our industry has 
been unable to achieve anything close to equivalent market access 
because our interests have repeatedly gotten lost in the larger 
dynamics of comprehensive multilateral trade negotiations. For more 
than two decades, the U.S. forest products industry has had its tariff 
protection sacrificed to win market concessions for other industrial 
sectors, while competitor countries in Europe, Asia and Latin America 
escaped making reciprocal concessions on our products.
    At the opening of the Uruguay Round, we decided that traditional 
approaches would perpetuate this disparity indefinitely, so we 
originated the zero-for-zero concept. This was an attempt to change the 
fundamental structure of trade negotiations in two important ways:
     it focused on reciprocal tariff eliminations within 
specific sectors;
     it moved away from a formulaic approach to an assured, 
level end point.
    Although our negotiators succeeded in getting agreement by a number 
of countries (U.S., Canada, EU, Japan, New Zealand, South Korea, Hong 
Kong and Singapore) to eliminate their tariffs on paper by the year 
2004, we were still disappointed in the results of the Uruguay Round 
because of:
     overly long phase out of paper tariffs--ten years instead 
of the usual five years;
     failure to achieve a zero-for-zero agreement on wood 
tariffs;
     no participation in the tariff agreement by developing 
countries--some of which are major competitors in forest products and 
provide the most attractive growth markets.
    Despite these disappointments, we remain convinced that the 
achievement of reciprocal market access within individual sectors must 
be a specific priority objective in future negotiations. At the same 
time, we urge the Subcommittee to take steps to ensure that future 
negotiations work toward a greater overall balance of benefits across 
our economy. To achieve this objective, we support Congressional 
efforts to renew the Administration's traditional negotiating 
authority.

                         Regional Negotiations

    Regional negotiations have an important role to play in driving the 
multilateral process. Last November, Ministers from 16 members of the 
Asia Pacific Economic Cooperation (APEC) forum agreed to move a nine-
sector trade liberalization package to the WTO for completion. 
Ministers further agreed to work constructively to conclude an 
agreement in the nine APEC priority sectors, including forest products, 
in time for the World Trade Organization Ministerial (WTO) in Seattle 
in November 1999.
    We strongly endorse the APEC initiative, which includes a proposal 
to eliminate all tariffs on paper and wood products between the years 
2000 and 2004, and we vigorously support Ambassador Charlene 
Barshefsky's commitment to achieving global participation under WTO 
auspices. However, European and Japanese resistance to anything short 
of a comprehensive trade agreement in the WTO could derail early 
agreement on the APEC package and again put our interests at risk of 
being traded away during a broad round of negotiations where any 
economic benefits to our exporters will not come for many years.
    The U.S. must not accede to European and Japanese pressure on this 
point. We must preserve and fortify the concept of sectoral 
negotiations, and the prospect of ``early harvest'' as an essential and 
non-negotiable element of any agreement on negotiating modalities. We 
strongly encourage the Congress to provide appropriate negotiating 
authority to implement sectoral agreements.
    Part of the effort to ensure that the standard of substantially 
equivalent market access is met must also focus on eliminating tariff 
disparities, such as those which have so disadvantaged our exports. We 
will aggressively seek to identify the elimination of tariff 
disparities as a priority negotiating objective.

                    Forest Products Trade with Japan

    The APEC forest products initiative offers U.S. exporters of paper 
and wood products an opportunity to gain substantial new market access 
in Asia and elsewhere but, as in the Uruguay Round, Japanese 
protectionism, particularly relative to wood products, threatens a 
promising agreement. When President Clinton met with Prime Minister 
Obuchi last September in New York, the Prime Minister explained that 
Japan could not take tariff action in the APEC context, but would do so 
in the WTO. Two months later, in Kuala Lumpur, the Japanese, along with 
trade ministers from 15 other APEC economies, agreed to refer the APEC 
trade liberalization package to the WTO. In an all too-familiar 
pattern, the Japanese government now attempts to deny that any such 
commitment was ever made and loudly proclaims its victory in resisting 
U.S. pressure to end its wood tariffs. This backsliding cannot be 
accepted. The U.S. must make clear its determination to conclude a WTO 
agreement covering all nine priority sectors in the APEC package, 
including forest products. This must be a prelude to the launch of any 
new round of negotiations on industrial tariffs, and collecting on the 
Japanese promise at Kuala Lumpur must be a top priority in our 
bilateral trade relationship.
    Our industry's frustration with Japan is long standing. In 1992, 
for example, the U.S. signed a market access agreement with Japan 
regarding paper products. It is a matter of record that there was not 
one single year in the entire five-year term of this agreement in which 
the USTR judged Japan to be compliant with its obligations under this 
agreement. Nevertheless, in 1997, Japan unilaterally refused to renew 
the agreement or even discuss its renewal. In the meantime, with an 
industry that is commonly considered to be a high-cost paper 
manufacturer, Japan's paper imports have declined and exports have 
increased.
    The lack of credibility which understandably surrounds Japanese 
trade commitments risks more cynicism regarding an ability to reach 
negotiated solutions to our market access problems with that country 
and must be addressed. The President's decision to renew Super 301 is 
an important step, but we encourage him to hold the Japanese leaders 
directly accountable for honoring the full range of their commitments--
beginning with their APEC commitment.

          An Integrated Approach to the Global Economic Crisis

    The Asian financial crisis has had a significant economic impact on 
the U.S. forest products industry. In 1998, the Asia-Pacific region 
accounted for some 28% of our industry's total exports of $18 billion 
down from a 40% share in 1997. In 1998, U.S. exports of wood products 
to the region were down a whopping 37%, wood pulp exports went down 
26%, and paper and paperboard exports were off 17%. In contrast, U.S. 
paper and paperboard imports from Asia went up 73% over the same 
period. At the same time, other major supplying countries have diverted 
greater amounts of wood and paper products from slumping Asian markets 
to the virtually tariff-free U.S. market.
    Trade must be an integral part of our response to economic turmoil. 
The U.S. has repeatedly assured countries in crisis that we will take 
their exports--but fairness for our industry and our workers requires 
that these countries also open their markets to our products. Trade 
liberalization, which will introduce economies and industries to the 
discipline of the marketplace, cannot be a lesser priority than other 
structural reforms.

                           New Global Issues

    Today, our industry faces new competitive realities. Even while we 
are hopefully nearing the end of our effort to eliminate tariff 
barriers, the U.S. industry finds itself at a disadvantage in 
international markets for a number of other reasons.
    First and foremost, the industry's raw material costs have been 
climbing due to domestic policy-imposed constraints on fiber supply. 
The availability of wood from our national forests has been cut 
dramatically, down 75% in the past decade. While a large portion of the 
forest land in the U.S. is privately held (over 60% is owned by farmers 
and other non-industrial owners), our ability to sustainably manage and 
harvest private timberland is being curtailed by environmental laws, 
regulations and legal actions.
    Secondly, required investments to meet domestic environmental 
regulations are increasing production costs and using capital that 
could otherwise be spent on modernizing the industry's plant and 
equipment. AF&PA estimates that 13% of the capital spent by the 
industry over the past 10 years went into environmental requirements, 
and that number will probably double over the next 5 years--and that 
does not include any spending for global climate change regulation. At 
the same time, our companies are having to compete with producers in 
other countries that do not have high environmental standards or strong 
enforcement regimes.
    Our industry is proud of the role it has played in achieving 
standards of environmental protection which are among the highest in 
the world, and we are committed to maintaining our environmental 
leadership in the future. By the same token, our industry offers some 
of the highest paying manufacturing jobs in the world, and we take 
equal pride in the role which our industry payrolls play in sustaining 
the many communities across the country in which we operate.
    For us to continue meeting our obligations to our workers and to 
the environment, while also maintaining our ability to compete in 
global markets, our government must work to level the international 
playing field. We must ensure that our competitors apply responsible 
environmental standards and forestry practices. The U.S. must also look 
at options to institute disciplines to prevent a new generation of 
trade barriers based on subjective environmental requirements that 
discriminate against products produced under equally stringent 
regulatory schemes.

                               Conclusion

    The U.S. paper and forest products industry has consistently 
supported policies designed to foster free trade, even in the face of 
past inequitable trade benefits on a sectoral level. We continue to 
believe that successful market access negotiations are the best 
antidote for protectionism. This is why the APEC initiative is so 
important, and why the U.S. must make the achievement of a WTO 
agreement covering all priority sectors in the APEC package, including 
forest products, the single most important deliverable out of the WTO 
Ministerial this November in Seattle. Any less an outcome must be 
viewed as a failed ministerial.
    In the absence of concrete market opening gains and the 
establishment of a more level playing field for our products, our 
industry will find it difficult in the future to find an economic 
rationale for supporting traditional negotiating approaches. When 
international negotiations result in tariff disparities, or domestic 
regulatory requirements put our companies at a disadvantage in the 
global marketplace, we will insist that balance be restored--in the 
name of economic equity, not protectionism. The very survival of our 
industry is at stake.
    [Attachment is being retained in the Committee files.]

                                

Statement of John Andrews, Mike Murry, and John F. McDermid, American 
Natural Soda Ash Corporation, Westport, CT

    This statement is filed on behalf of the American Natural Soda Ash 
Corporation (``ANSAC''), headquartered in Westport, CT. ANSAC is an 
export trading company comprised of six U.S. soda ash producers.
    This statement is filed in the context of the March 4, 1999 hearing 
before the Committee on Ways and Means Subcommittee on Trade regarding 
the importance of expanding trade and resisting protectionism through 
active U.S. involvement in trade negotiations.

                I. About Soda Ash and the U.S. Industry

    Soda ash (disodium carbonate) is the principal raw material for 
making glass. Mixing six parts sand to one part soda ash and heating it 
to 2,800 degrees yields molten glass which can be formed into any 
common application. The United States is blessed with unique natural 
deposits of trona, a soda ash raw material, in Green River, Wyoming and 
Trona, California, from which this country could supply world demand 
for 1,200 years.
    U.S. soda ash is the most competitive in the world. Most other 
countries produce soda ash through a synthetic process at costs many 
time higher and with major environmental pollution. However, U.S. soda 
ash exports are restricted in some markets through both tariff and non-
tariff barriers. Because soda ash is a basic chemical commodity 
required to make another basic chemical commodity, glass, even a 0.5 
percent premium in price can make a difference between a sale. U.S. 
soda ash exports have increased from about $120 million in 1981 to over 
$600 million in 1997, making soda ash this country's largest inorganic 
chemical export.

II. U.S. Government Trade Negotiating Priorities for Soda Ash: Seeking 
                     a ``Zero-for-Zero'' Agreement

    The Statement of Administrative Action (``SAA'') implementing the 
Uruguay Round Agreement outlined the objectives of zero-for-zero tariff 
elimination in key sectors, including soda ash. According to the SAA, 
``in some sectors, namely soda ash, complete duty elimination was not 
achieved. Obtaining further reductions in these sectors is a priority 
objective for U.S. multilateral, regional, and bilateral 
negotiations.'' While both the U.S. Congress and the Administration 
have identified soda ash as a zero-for-zero priority, under the 
Chemical Tariff Harmonization Agreement (``CHTA'') the soda ash 
harmonized rate is 5.5%. It is imperative that the Administration 
continue to pursue complete tariff elimination of soda ash tariffs in 
the context of bilateral, regional and multilateral trade negotiations.

              III. U.S. Soda Ash Exports to APEC Economies

    Over the past decade, U.S. soda ash exports to the 17 other 
``initial'' APEC countries have expanded from $310 million in 1990 to 
$540 million in 1997, a 75 percent increase.
    U.S. exports to APEC countries account for two third of U.S. 
exports. Though U.S. soda ash is the most competitive in the world, it 
satisfies only 25 percent of aggregate demand in the 17 other APEC 
countries.
    Soda ash is currently produced in seven of the 18 APEC economies, 
not including the U.S. A 150,000 MT soda ash plant may be built in 
Indonesia, and there is a potential for local production in Thailand. 
The soda ash production in these APEC economies uses the synthetic 
manufacturing process with higher costs and adverse environmental 
effects than natural U.S. soda ash. Thus, to enable a new soda ash 
manufacturing facility to survive will likely require significant 
import protection (e.g., high tariffs) to be competitive with U.S. soda 
ash.
    With the exception of China, soda ash tariffs in the 17 other APEC 
economies are relatively low, ranging from duty-free in Malaysia, New 
Zealand, and Singapore to 12 percent in China. The U.S. rate is 1.2 
percent ad valorem. Generally, the Uruguay Round was disappointing to 
the U.S. soda ash industry in that improved market access to APEC 
markets was not achieved.
    Among the 18 ``initial'' APEC countries, 1998 applied tariff rates 
are above the 5.5 percent CTHA rate in (1) Chile, (2) China, (3) Korea 
and (4) Taiwan.
    ANSAC continues to be concerned over the possibility that Indonesia 
will increase its current 5 percent tariff to the WTO bound rate of 40 
percent. Without such protection it is doubtful that the local producer 
can operate at a profit.

IV. China's Import Substitution and Predatory Pricing Policies Severely 
        Reduce U.S. Soda Ash Exports to China and Other Markets

A. Summary

    For over a decade, China, the largest synthetic soda ash producer 
in the world, has maintained an array of barriers (including 
discriminatory and prohibitively high net effect import fees as well as 
customs and distribution impediments) aimed at promoting its domestic 
soda ash industry at the expense of highly competitive U.S. soda ash. 
In 1997, U.S. imports accounted for only 1.4% of Chinese domestic 
consumption, down from nearly 30% in 1989 and by far the lowest in 
Asia. Between 1990 and 1997, as demand for soda ash increased 
significantly, China's production increased 239% while U.S. exports 
declined by nearly 80%, from 503,000 MT valued at $76 million to 
105,000 MT valued at $16 million. In 1998, U.S. exports to China were 
only about $7 million. The combination and effect of China's policies 
amount to an import substitution program which it agreed to eliminate 
in the 1992 U.S.-China Memorandum of Understanding (``MOU'').
    A reduction of China's 12% applied tariff to the 5.5% Chemical 
Harmonization Agreement level and elimination of distribution barriers 
would increase U.S. exports by roughly $55 million annually.
    While not specifically addressed in the Commission's report, an 
integral part of China's campaign to foster its state-owned soda ash 
industry has been an export drive achieved through sales at below the 
cost of production. China's 820% increase in exports between 1993-1997 
has been met with predatory pricing based trade remedy actions in 
countries which produce soda ash, such as Korea and India. In other 
important U.S. export markets which do not produce soda ash, China's 
predatory pricing has been keyed to increasing market share at the 
expense of U.S. soda ash. Even in the face of Asia's economic crisis, 
Chinese exports increased to Indonesia, Thailand, Malaysia, and the 
Philippines while U.S. exports to these key markets declined. China's 
predatory export pricing practices have a real and direct effect on 
U.S. exports to third markets and should, therefore, be addressed by 
the Commission.

B. China's Soda Ash Industry is Targeted by the Government

    At 7.3 million tons, China is the second largest soda ash producer 
in the world (behind only the U.S.) and the largest synthetic soda ash 
producing economy. Synthetically produced soda ash is very energy-
intensive and energy inputs in China have been subsidized for years. 
Ninety-five percent of China's soda ash producers are state-owned 
enterprises.
    The Chinese government (specifically the Chinese Ministry of 
Chemical Industry) continues to be actively engaged in regulating its 
soda ash industry at all levels, from pricing to production. For 
approximately 15 years China has implemented a broad campaign targeting 
its soda ash industry for development and ``by the mid-1980's the 
[Chinese] government had invested more than $1 billion in soda ash 
production.'' (Chemical Week, October 29, 1998. ``China Seeks Bigger 
Share of the Export Market'' p 37.) Even though its industry had been 
well established, in 1994 China's Vice Minister of Chemical Industry 
Siwei Cheng emphasized that the government would continue limiting 
import competition in this sector. More recently, in announcing China's 
ninth Five-Year Plan (1996-2000), which sets forth a comprehensive 
chemical industry policy, Cheng indicated that improvement in the 
domestic soda ash industry would be among the country's major chemical 
sector priorities.
    In 1998, there are more than 60 soda ash producers in China, with a 
combined annual capacity of 7.3 million tons. Ten of these plants 
account for 63% of total production. Only six of the over 60 plants are 
producing quantities significant enough to be competitive on a world 
scale. All of China's plants have operating costs in excess of current 
returns. Further, Chinese producers have increased their densification 
capacity while at the same time seeking to lower chloride content. 
These quality improvements have increased domestic production costs, 
increases which are clearly not reflected in the prices they charge 
their customers either domestically or in export markets. Between 1989 
and 1997 China's soda ash production increased by 239%.
    In 1998 the Chinese government realized it had overstimulated its 
soda ash industry and caused ``overproduction and disorderly 
competition'' which depressed local and export market prices by 20% 
between January and August, 1998. (China Economic News (Beijing). 
August 31, 1998. p 6. ``If this continues, the industry will lose RMB 
700-800 million (U.S. $85-96 million) domestically and U.S. $12 million 
in export earnings this year.'') Clearly the prices charged by the 
producers to the customers locally and in export markets bear no 
relation to prices that would be set by enterprises in a market/price-
oriented economy. Since January 1998 the government response to this 
has been to control production and dictate to its soda ash producers a 
minimum sales price of $130/MT FOB (RMB 1080) for domestic sales and 
$101/MT FOB (RMB 838) for export sales.
    More specifically, the China National Petroleum and Chemical Corps. 
and the China Soda Ash Industry association established a minimum FOB 
factory price of U.S. $130 MT (RMB 1080 MT) inclusive of the 17% VAT 
and U.S. $101 MT (RMB 838) FOB China port for export sales. It costs 
approximately U.S. $130 MT to produce soda ash in China. If the VAT tax 
were indeed factored into the local sales price, Chinese soda ash 
producers would be selling below their cost of production. Clearly the 
minimum export price is below China's cost of producing soda ash.
    While the minimum price would appear to counter the decline of 
prices, Chinese producers are circumventing the decree by quoting 
customers a factory delivered price (U.S. $125-U.S. $132.5) rather than 
an FOB factory price.

C. China's Soda Ash Tariff and Additional Import Taxes the 
Highest in Asia Pacific and Highest Chinese Inorganic Chemical 
Tariff

    China's Tariff Barrier (HTS 2836.20). Prior to 1990, U.S. soda ash 
entered China duty-free since the product was required by state-owned 
industries. Today, in its ongoing effort to promote its industry, China 
requires distributors to pay the so-called ``normal'' (as opposed to 
``special'') 35% ad valorem tariff on imports which, combined with the 
17% VAT, results in a 58% net effective import fee. End users such as 
China's glass companies pay the ``special'' 12% tariff, which results 
in a 31.04% net effective import fee. Since nearly all of China's 60 
soda ash producers are state-owned, the 17% VAT is not applied to the 
prices quoted to their customers and is simply an additional tax aimed 
at curtailing imports.
    Both the 58% and 31.04% net effective import fees applied to soda 
ash imports give local producers a significant price advantage, 
particularly for a basic chemical commodity such as soda ash. For 
example, factoring in the 31.04% net import fee, in order to compete 
with the $130 MT FOB factory minimum price U.S. soda ash would have to 
enter China at $99 MT CIF, a price that would be by far the lowest in 
the world. The U.S. has had to slash its prices in China's market to 
stand any chance of attracting customers. The 58% net effective import 
fee bars distributors from selling directly to customers, particularly 
small and medium-sized ones. The 31.04% and 58% net effective import 
fees are the most significant Chinese government barriers facing U.S. 
soda ash exports since they limit the market to exporting end-users 
such as glass companies who receive a tariff and VAT refund. 
    China's 35% tariff applied to distributors is the highest in the 
world. The 12% ``special'' tariff applied to non-distributors is among 
the highest in the world and are the highest in the Asia Pacific.
    Five of the above Asia Pacific countries produce soda ash 
(Australia, China, Japan, Korea, and Taiwan). Among the soda ash 
producing economies only China maintains a high tariff compounded by a 
high VAT which must be factored into the price ANSAC's distributors 
must charge their Chinese customers.
    As a result of China's tariff, VAT and distribution impediments, 
U.S. exports to China declined by $60 million between 1989 and 1997 and 
in the most recent 1998 calendar year declined to only about $7 
million. In contrast, 1998 U.S. exports to Brazil, a country which 
imposes an effective 13% tariff (10% applied tariff and 3% across-the-
board import fee) and consumes 92% less soda ash than China, were $36 
million.
    Soda Ash Tariff Highest Among China's Other Inorganic Chemicals. 
China's tariff levels applied to other inorganic chemical imports 
average 8-10%. It is clear China has singled out soda ash for special 
protection from imports.

D. Non-Tariff Trade Measures

    Distribution and Customs Barriers. In addition to the high tariff 
and VAT fee on imports, since 1990 China has introduced additional 
policies aimed at discouraging soda ash imports. Between 1990 and 1992, 
all imports of soda ash were subject to import licensing procedures and 
administrative review and approval by the Chinese government. Moreover, 
U.S. soda ash could only be distributed by the sole government 
designated distributor, Sino-Chem, which is part of the Ministry of 
Economic Relations and Trade.
    Currently, China maintains a complex and unpredictable web of 
import restrictions which are heavily dependent upon ``relationships'' 
(``guangsi''). These restrictions severely limit the level of imports 
as well as their distribution in China.
    Chinese customers who import soda ash and export the finished 
product (i.e. glass companies) are eligible to receive a waiver of the 
tariff and VAT. In order to receive this, they must have a ``Handbook'' 
stamped (i.e. approved); however, there is no guarantee approval will 
be given. For example, one end-user of U.S. soda ash which exports its 
finished product has still been unable to receive a refund on imports 
received in 1997. Overall, the exorbitantly high tariff and VAT 
effectively limit the purchase of imported soda ash to Chinese 
customers eligible to have the tariff and VAT fees waived.
    All soda ash imports take between 30 and 45 days to clear Chinese 
customs due to layers of ``red tape'' and bureaucratic delays at the 
ports. The delays are particularly acute when they involve imports 
eligible for duty and VAT waivers which are destined to customers 
outside of the port province. By comparison, in other Asia Pacific 
countries it takes only a few days to clear soda ash through customs.
    Finally, soda ash distributors are unable to store the product in 
bonded warehouses. This forces local distributors to pay the duty and 
VAT upon entering customs and absorb these costs until customers are 
found. This is yet another disincentive facing local distributors.
    Delay in Implementation of an Export Subsidy to Glass Companies 
Contingent Upon Purchasing Locally Produced Soda Ash. In mid-December, 
1998, China announced it will delay until December 31, 2000 a policy of 
granting a 9% tax refund (i.e. an export subsidy) to joint venture 
glass companies who purchase locally produced soda ash. Of the 
estimated 54,000 MT U.S. soda ash imported into China in 1998, roughly 
90% was purchased by China's glass industry. If the trade-distorting 
export subsidy for the glass industry is implemented, it will have a 
significant effect on U.S. exports to China.

E. U.S. Soda Ash Market Share in China is the Lowest in Asia

    In 1998, the U.S. share of China's soda ash was about 1.4% (by 
volume). This represented a 51,000 MT decline (valued at $9 million) in 
U.S. exports between 1997 and 1998. In 1989, prior to the time China 
targeted its soda ash industry for special protection, U.S. imports 
accounted for nearly 30% of Chinese domestic consumption. As a result 
of the import substitution policies pursued by the Chinese government 
for its soda ash industry, the U.S. 1.4% market share in China is 
significantly lower than in other Asian countries, even those which 
produce soda ash such as Japan, Korea and Taiwan.

F. China's Soda Ash Export Campaign

    An integral part of China's targeting of its soda ash industry has 
been to stimulate exports. As recently stated by Li Yongwu, China's 
Director of the State Bureau of Petroleum and Chemical Industry, 
``increasing exports is an important way to safeguard the sustainable 
growth of China's chemical industry.'' (Chemical Week, October 28, 
1998. ``China Seeks Bigger Share of the Export Market'' p. 37.)
    On January 1, 1996, ``in order to promote the exportation of 
products of certain industries,'' China's State Council introduced a 9% 
direct tax refund calculated at the FOB price for China's soda ash 
exports. Thus, if Chinese soda ash producers export $100 FOB of soda 
ash, they receive from the Chinese government a $9 tax refund. This is 
an undisguised and transparent policy aimed at increasing Chinese 
exports of certain favored industries such as soda ash.
    As a result, domestic soda ash producers do not have to pay the 35% 
or 12% tariff or factor into their price the 17% VAT. Further, they 
also receive an additional 9% tax incentive for export. The net effect 
of the tax advantages afforded China's state-owned producers has been 
to severely erode the pricing of soda ash in third markets at the 
expense of U.S. exports. The $101/MT FOB China port minimum export 
price translates into $118/MT CIF price at Asian ports. Since it costs 
FOB $138/MT to produce soda ash in China, the minimum export price is 
$35/MT below the cost of producing soda ash in China.
    As could be expected, the government's policies have been 
enormously successful (principally through below cost of production 
prices aimed at increasing market share) as seen by the more than 800% 
increase in exports between 1990 and 1997 (from 76,000 MTs in 1990 to 
623,000 MTs in 1997).
    The government's export drive has in some countries (e.g. India and 
Korea) been met with trade remedy actions. (Both Korea and India, which 
have their own soda ash industry, have successfully accused Chinese 
suppliers of predatory dumping. In the case of Korea, additional 
dumping duties of over 68% were initially imposed on Chinese imports 
exceeding specified levels. More recently, Korea has levied dumping 
duties on Chinese imports (ranging from 22-25%) below an established 
price (CIF $185 MT). In the case of India, in the spring of 1998, 
India's Monopolies and Restrictive Trade Practices Commission issued an 
order temporarily barring Sino-Chem from selling soda ash at predatory 
pricing levels.) In the past several years China has targeted markets 
which traditionally have been key to the United States. While China 
exports to over 30 countries, four of its priority markets have been 
Indonesia, Thailand, Malaysia and the Philippines, all of which have 
historically been growth markets for the United States.

    Indonesia. In 1996 and 1997, Indonesia--which does not produce soda 
ash)--was China's largest and this country's third largest (behind 
Mexico and Japan) export market. In 1998, China began an aggressive 
predatory pricing export campaign aimed at displacing U.S. exports. In 
January, 1998 the U.S. soda ash CIF price range in Indonesia was $155-
$170 MT. At that time, the quoting price of Chinese suppliers was CIF 
$150 MT. Chinese prices declined below the $130 MT cost of production 
in October, 1998 and below $120 MT in November, 1998. China's export 
drive has already yielded results, as China's exports to Indonesia for 
the first eight months of 1998 have exceeded total 1997 exports.
    Thailand. Similarly, in Thailand the U.S. CIF price range in 
January 1998 was $153-$173 MT. While in January China's average price 
was only marginally lower at $152 MT, by November its price dropped in 
excess of $30 MT, to $122 MT.

G. Lost U.S. Exports Attributed To China's Predatory Pricing.

    U.S. exports to Indonesia, Thailand, Malaysia and the 
Philippines have declined 10% to 45% since late 1996. While 
Asia's financial crisis has resulted in reduced demand for soda 
ash, China's predatory export pricing displaced U.S. soda ash. 
In 1997 and 1998 China's predatory pricing resulted in an 
actual increase in exports to these countries at the direct 
expense of U.S. exports. The presence of other competitors in 
these markets is negligible.
    The United States currently suffers a massive trade deficit 
with China, totaling an expected $60 billion in 1998. If that 
deficit is to be significantly reduced, it is essential that 
competitive U.S. exports not be foreclosed from the Chinese 
market by artificial barriers.
    The U.S. soda ash industry's problem is an important one 
not only because of the concern over China's efforts to limit 
U.S. exports that enjoy clear competitive advantages but 
because of the serious additional threat to key third markets.
    In addition, China will benefit from the elimination of its 
tariff and non-tariff measures. For many years Chinese 
consumers of soda ash have been eager to purchase U.S. soda ash 
because it would improve the quality of their product and 
increase the life of capital equipment since U.S. ash contains 
less corrosive impurities. These consumers--representing the 
Chinese glass, detergent, paper, and chemicals industries--will 
benefit from the elimination of trade barriers. The competitive 
pricing of soda ash will not only benefit these industries in 
international competition, but will benefit individual Chinese 
consumers who will be provided alternative choices for higher 
quality products.

                  V. India's Embargo of U.S. Soda Ash

    Since 1985 ANSAC has protested with the U.S. government India's 
market access barriers facing U.S. soda ash exports. These efforts have 
included nearly the entire range of market access trade remedy actions 
such as the GSP, ``Super 301,'' and USTR National Trade Estimate Report 
submissions.
    In 1993, due undoubtedly more to a general trade liberalization 
trend than to any specific interest in soda ash, the 1993/94 Indian 
Budget reduced the net effective soda ash import fee from 135.75 
percent to 112.75 percent. Concurrently, the India Glass Manufacturers 
Federation (``Glass Federation'') began to be squeezed by India's local 
soda ash producers, three of whom now control nearly 90 percent of the 
market. According to the Glass Federation, due principally to the 
closed import market, local soda ash prices increased about 40 percent 
between April 1991 and April 1993. The monopoly prices extracted by the 
local producers have been at the expense of India's glass manufacturing 
industry, which is responsible for 70,000 in glass plants and tens of 
thousands more in other sectors of the economy. With this, Indian glass 
companies began a campaign to convince their own government that the 
market should be opened to imports so that the three local soda ash 
producers would face price competition. As a result, the 1995/96 annual 
budget reduced India's applied tariff from 65 percent to 40 percent. 
While this was clearly a step in the right direction and enabled ANSAC 
to make a single shipment, the tariff was still among the highest in 
the world (only Pakistan's was higher). In fact, the 40% tariff, 
combined with other import fees, meant that a de facto embargo remained 
in place and India's average price for soda ash remained among the 
world's highest. The Central government's final tariff reduction was 
made in the 1996/97 Budget when the tariff went from 40 percent to 30 
percent ad valorem.
    India's local soda ash producers, known collectively as the Alkali 
Manufacturers Association of India (``AMAI''), were frustrated by their 
inability to convince India's Central Government to increase or 
maintain the soda ash tariff. When the 30 percent tariff was 
implemented in early 1996, ANSAC received an order for a 23,000 MT 
shipment which represented less than 2 percent of the total Indian soda 
ash market. In early September 1996, AMAI petition the Monopolies and 
Restrictive Trade Practices Commission (``MRTPC'') and obtained an ex 
parte order which prohibited ANSAC from exporting to India.
    AMAI's complaint before the MRTPC essentially alleges that ANSAC is 
attempting to sell at predatory prices below cost for the purpose of 
eliminating competition in the Indian market. However, the complaint 
contains no evidence on U.S. costs, which are actually the lowest in 
the world. Further, no evidence has been provided to the MRTPC as to 
how ANSAC's single sale is likely to drive local soda ash producers 
from the market.
    The complaint before the MRTPC is clearly unfounded and is a 
transparent attempt by the local producers to circumvent the Central 
Government's trade liberalization initiatives that have been taken 
since 1991. AMAI has also used the MRTPC as a vehicle for bypassing 
international trade rules embodied in the WTO's Antidumping Rules and 
to maintain their stranglehold on the market so as to keep soda ash 
prices high and continue their monopoly profits. It is particularly 
ironic that the very companies seeking to use the MRTPC as a venue for 
countering alleged anticompetitive practices are themselves seeking to 
perpetuate their own monopolistic behavior.
    The complaint includes certain baseless and unfounded allegations 
of dumping of soda ash. However, under Indian law, which closely 
follows the WTO model, the only competent authority to address a 
complain of this nature is the Designated Authority appointed by the 
Government of India under the country's Antidumping Rules. These Rules 
afford a fair opportunity to the complainant and to the party against 
whom the charge of dumping has been made to address the issues raised 
under the Antidumping Rules. They also include a provision requiring 
the Designated Authority to give notice to the government of the 
exporting company--in this case the Government of the United States. 
Since the complaint has been filed in the wrong forum, the United 
States Government has been denied the opportunity of refuting the false 
charges of dumping.
    AMAI fully realized that it could not prove material injury as 
required under the antidumping rules. Instead, fearful of legal 
competition, AMAI convinced the MRTPC to issue the injunction on the 
specious claim that ANSAC priced its 23,000 MT order at such a low 
price that it was clearly intended to monopolize the Indian market by 
driving out local producers. In point of fact, ANSAC's price was just 
barely competitive with prevailing prices charged by local producers.
    The U.S. soda ash industry is taking all lawful steps to have the 
MRTPC's Order vacated as soon as possible. But the wheels of justice 
are slow. In the meantime the Indian soda ash industry's abuse of 
process and the order they have secured stand contrary to Indian 
Government's trade liberalization initiatives, the government's 
obligations under the WTO's Antidumping Rules, and the interest of 
local glass and other industrial consumers whose competitive future 
depends upon access to high quality and reasonably priced soda ash.
    Approximately one year after the Commission issued its preliminary 
injunction against ANSAC, petitioner discovered that since June 1995 
the MRPTC Director-General of Investigation had been investigating the 
three dominant soda ash producers for cartel activity. In fact, in 
April 1997, the Director General concluded that there was substantial 
evidence that the three dominant producers are a cartel. A formal 
inquiry was opened before the MRTPC on August 7, 1997, two weeks before 
India's Supreme Court summarily rejected ANSAC's petition to vacate the 
injunction.
    In the three years since September 1996, ANSAC has lost a projected 
$25 million in U.S. exports. What ANSAC is asking for is not 
unreasonable, namely, that the preliminary injunction be lifted as soon 
as possible and that the Commission expeditiously and objectively 
review the facts in accordance with recognized principles of law.

                                

Statement of James W. Johnson, Jr., Chairman, American Sugar Alliance

                              Introduction

    Thank you for the opportunity to submit testimony for this 
important hearing. I am James W. Johnson, Jr., president of the United 
States Beet Sugar Association. I also serve as chairman of the American 
Sugar Alliance (ASA), of which my association is a member. The ASA is 
the national coalition of growers, processors, and refiners of 
sugarbeets, sugarcane, and corn for sweetener.
    The ASA has long endorsed the goal of global free trade because 
U.S. sugar and corn sweetener producers are efficient by world 
standards and would welcome the opportunity to compete on a genuine 
level playing field. Until that free trade goal is achieved, however, 
the United States must retain at least the minimal sugar policy now in 
place to prevent foreign subsidized, dump market sugar from unfairly 
displacing efficient American producers. This policy was substantially 
modified by Congress in the 1996 Farm Bill, but remains highly 
beneficial to American taxpayers and consumers.
    We note, Mr. Chairman, that you recently held a timely hearing on 
the plight of the U.S. steel industry. Our concerns are the same. We 
are efficient producers, but risk losing American jobs to the predatory 
trade practices of subsidized foreign producers. Like steel, American 
sugar farmers can compete directly against foreign producers. We cannot 
compete against foreign treasuries.
    While the ASA supports the goal of free trade, we have serious 
concerns about past agreements and about the structure of future 
multilateral or regional trade agreements. Listed below are our 
specific recommendations, followed by some background on the United 
States' role and standing in the world sugar economy and our evaluation 
of the effects of past multilateral and regional trade agreements on 
the world sugar market and on our industry. U.S. agriculture is 
extremely vulnerable as we approach the next trade round. If we are 
reckless, we risk converting American agriculture into a Rust Belt. If 
we negotiate carefully and rationally, however, there is enormous 
potential for responsible American producers to compete and prosper in 
a genuine free trade environment, free from the need for government 
intervention.

              Recommendations for Future WTO Negotiations

    The 1999 World Trade Organization (WTO) Ministerial will play a 
pivotal role in establishing the scope, parameters, and goal of the 
next multilateral trade round. Shaped by our experience and by the 
specific failures of past agreements, described later in this paper, 
the following are the ASA's recommendations for the Ministerial.
    1. Compliance with past agreements, in particular, the Uruguay 
Round Agreement (URA) of the WTO and the North American Free Trade 
Agreement (NAFTA), must be achieved before the United States forges any 
new agreements. The United States, and any other country that has 
surpassed its URA commitments, should be given credit for doing so 
before being required to make further cuts in the next trade round.
    2. The United States must not reduce its support for agricultural 
programs, particularly for import-sensitive crops such as sugar, any 
further until other countries have reduced their support to our level.
    3. Elimination of export subsidies, the most trade distorting of 
all practices, and of state trading enterprises (STE's), which were 
ignored previously, must be given top priority in the next trade round.
    4. The wide gap in labor and environmental standards between 
developed and developing countries must be taken into account in the 
next trade round, to provide both incentives and penalties that ensure 
global standards rise to developed-country levels, rather than fall to 
developing-country levels.
    5. A flexible, request/offer type of negotiating strategy must be 
followed in the next trade round, rather than a rigid, across-the-
board, formula approach. Only in this manner can we address the huge 
disparities in supports among nations and turn the United States' 
unilateral concessions to our advantage. We must provide foreign 
countries the incentive to reduce their government programs by 
promising to reduce ours further when, and only when, they have 
eliminated their export subsidies and STE's, and reduced their internal 
support and import tariffs to our levels.

               Background on U.S. Sugar Industry, Policy

    Size and Competitiveness. Sugar is grown and processed in 17 states 
and 420,000 American jobs, in 40 states, are dependent, directly or 
indirectly, on the production of sugar and corn sweeteners. The 
industry generates an estimated $26.2 billion in economic activity 
annually. A little more than half our sugar is produced from 
sugarbeets, the remainder from sugarcane. More than half our caloric 
sweetener consumption is in the form of corn sweeteners.
    The United States is the world's fourth largest sugar producer, 
trailing only Brazil, India, and China. The European Union (EU), taken 
collectively, is by far the world's largest producing region. It 
benefits from massive production and export subsidy programs.
    Sugar is an essential food ingredient and the U.S. sugar producing 
industry is highly efficient, highly capitalized, and technologically 
advanced. It provides 260 million Americans most of sugar they demand, 
in 45 different product specifications and with ``just-in-time'' 
delivery that saves grocers and manufacturers storage costs.
    Roughly 15-20% of U.S. sugar demand is fulfilled by duty-free 
imports from foreign countries, making the U.S. one of the world's 
largest sugar importers. Many of the 41 countries supplying our sugar 
are developing economies with fragile democracies and they depend 
heavily on sales to the United States, at prevailing U.S. prices, to 
cover their costs of production and generate foreign exchange revenues.
    Despite some of the world's highest government-imposed costs for 
labor and environmental protections, U.S. sugar producers are among the 
world's most efficient. According to a study released in 1997 by LMC 
International, of England, and covering the 6-year period ending in 
1994/95, American sugar producers rank 19th lowest in cost among 96 
producing countries, most of which are developing countries. According 
to LMC, fully two-thirds of the world's sugar is produced at a higher 
cost per pound than in the United States.
    During the last three years studied, 1992/93-94/95, the United 
States became the lowest cost beet sugar producer in the world. 
American corn sweetener producers are also the lowest cost of all 
caloric sweeteners in the world, and always have been the lowest cost 
producer of corn sweetener.
    Because of their efficiency, American sugar farmers would welcome 
the opportunity to compete against foreign farmers on a level playing 
field, free of government subsidies and market intervention. 
Unfortunately, the extreme distortion of the world sugar market makes 
any such free trade competition impossible today.
    World Dump Market. More than 100 countries produce sugar and the 
governments of all these countries intervene in their sugar markets and 
industries in some way. The most egregious, and most trade distorting, 
example is the EU. The Europeans are higher cost sugar producers than 
the United States, but they enjoy price supports that are 40% higher 
than U.S. levels--high enough to generate huge surpluses that are 
dumped on the world sugar market, for whatever price they will bring, 
through an elaborate system of export subsidies.
    World trade in sugar has always been riddled with unfair trading 
practices. These practices have led to the distortion in the so-called 
``world market'' for sugar. These distortions have led to a disconnect 
between the cost of production and prices on the world sugar market, 
more aptly called a ``dump market.'' Indeed, for the period of 1984/85 
through 1994/95, the most recent period for which cost of production 
data are available, the world average cost of producing sugar is over 
18 cents, while the world dump market price averaged barely half that--
just a little more than 9 cents per pound raw value. (See Attachment 
A.)
    Furthermore, its dump nature makes sugar the world's most volatile 
commodity market. Just in the past two decades, world sugar prices have 
soared above 60 cents per pound and plummeted below 3 cents per pound. 
Because it is a relatively thinly traded market, small shifts in supply 
or demand can cause huge changes in price.
    As long as foreign subsidies drive prices on the world market well 
below the global cost of production, the United States must retain some 
border control. This is a necessary and effective response to the 
foreign predatory pricing practices that threaten the more efficient 
American sugar farmers.
    Uniqueness of Sugar Market. Aside from the highly residual and 
volatile nature of the world sugar price, there are a number of factors 
that set sugar apart from other program commodities. These unique 
characteristics should be taken into account before sugar is lumped in 
with other commodities for across-the-board policy reforms.
     Grower/Processor Interdependence. Grain, oilseed, and most 
other field-crop farmers harvest a product that can be sold for 
commercial use or stored. Sugarbeet and sugarcane farmers harvest a 
product that is highly perishable and of no commercial value until the 
sugar has been extracted. Farmers cannot, therefore, grow beets or cane 
unless they either own, or have contracted with, a processing plant. 
Likewise, processors cannot function economically unless they have an 
optimal supply of beets or cane. This interdependence leaves the sugar 
industry far less flexible in responding to changes in the price of 
sugar or of competing crops.
     Multi-Year Investment. The multimillion-dollar cost of 
constructing a beet or cane processing plant (approximately $300 
million), the need for planting, cultivating, and harvesting machinery 
that is unique to sugar, and the practice of extracting several 
harvests from one planting of sugarcane, make beet or cane planting an 
expensive, multiyear investment. These huge, long-term investments 
further reduce the sugar industry's ability to make short-term 
adjustments to sudden economic changes.
     High-Value Product. While the gross returns per acre of 
beets or cane tend to be significantly higher than for other crops, 
critics often ignore the high cost associated with growing these crops. 
Compared with growing wheat, for example, USDA statistics reveal the 
total economic cost of growing cane is nearly seven times higher, and 
beet is more than five times higher. With the additional cost for 
processing the beets and cane, sugar is really more of a high-value 
product than a field crop.
     Inability to Hedge. The 1996 Freedom to Farm Bill made 
American farmers far more dependent on the marketplace. Growers of 
grains, oilseeds, cotton, and rice can reduce their vulnerability to 
market swings by hedging or forward contracting on a variety of futures 
markets for their commodities. There is no futures market for beets or 
cane. Farmers do not market their crop and cannot take delivery of beet 
or cane sugar. The hedging or forward contracting opportunities exist 
only for the processors--the sellers of the sugar derived from the 
beets and cane. These marketing limitations make beet and cane farmers 
more vulnerable to market swings.
    U.S. Sugar Policy Reforms. U.S. sugar policy was unilaterally and 
substantially reformed in the 1996 Farm Bill, far in excess of URA 
commitments. The key reforms: (1) Production controls (``marketing 
allotments'') were eliminated. (2) Government-provided non-recourse 
loans, or a government-guaranteed minimum price, are conditional and no 
longer guaranteed--unlike all other U.S. program commodities. This 
ensures long-standing Congressional intent that U.S. sugar policy be 
run at no cost to the U.S. Treasury. (3) The minimum import level, 
already about four times the minimum required by the URA, was 
effectively raised another 20%. (4) Sugar producers' burdensome and 
discriminatory marketing assessment tax was raised 25%, increasing 
expected annual revenues to the U.S. Treasury from U.S. sugar policy to 
about $40 million. (5) A 1-cent per pound penalty was established to 
discourage government loan forfeitures. (6) The U.S. committed to 
further support price reductions when other countries surpass their URA 
requirements, as the U.S. has done, and achieve levels equal to ours.
    The reformed sugar policy of the 1996 Farm Bill does retain the 
Secretary of Agriculture's ability to limit imports, and also provides 
a price support mechanism, though only when imports exceed 1.5 million 
short tons. The 1998/99 sugar import quota is only some 300,000 tons 
above that critical trigger level.

                 U.S. Sugar Industry's Free Trade Goal

    Because of our competitiveness, with costs of production well below 
the world average, the American Sugar Alliance supports the goal of 
genuine, global free trade in sugar. We cannot compete with foreign 
governments, but we are perfectly willing to compete with foreign 
farmers in a truly free trade environment.
    We were the first U.S. commodity group to endorse the goal of 
completely eliminating government barriers to trade at the outset of 
the Uruguay Round, in 1986. We understand we are the first group to 
endorse this same goal prior to the start of the 1999 multilateral 
trade round. We described our goals and concerns to the Administration 
in a letter in May 1997 to Trade Representative Barshefsky and 
Agriculture Secretary Glickman. A copy of that letter is attached 
(Attachment B).
    The ASA does not endorse the notion of free trade at any cost. The 
movement toward free trade must be made deliberately and rationally, to 
ensure fairness and to ensure that those of us who have a global 
comparative advantage in sugar production are not disadvantaged by 
allowing distortions, exemptions, or delays for our foreign 
competitors, as we are experiencing under the current agreement.
    To achieve a free trade transition process that is rational and 
fair, we offer the following thoughts on past agreements, and our 
concerns and recommendations regarding future negotiations.

                 Sugar and the Uruguay Round Agreement

    Little Effect on World Sugar Policies. More than 100 countries 
produce sugar and all have some form of government intervention. 
Unfortunately, these policies were not significantly changed in the 
Uruguay Round Agreement of the WTO.
    The URA inadequately addressed, or ignored:
     Compliance. Many countries have evaded or not yet even 
complied with their URA agricultural commitments. In sugar, for 
example, the EU has managed to isolate most of its sugar export subsidy 
program from URA disciplines. The Philippines has yet to meet its 
requirements for increasing minimum access levels to its sugar market.
    It was revealed at a WTO Analysis and Information Exchange Group 
meeting Geneva in September 1998, nearly four years since the inception 
of the URA, that a mere 17 of the 132 member nations have fulfilled all 
their notification requirements on domestic support, export subsidies, 
and market access. One must wonder how we can monitor compliance with 
WTO-mandated reductions in agricultural policies when the vast majority 
of countries will not even acknowledge which policies they have in 
place.
     Export Subsidies. The most distorting practice in world 
agricultural trade is the export subsidy. Export subsidies provide 
countries the mechanism to dispose of surpluses generated by high 
internal production subsidies. In the absence of export subsidies as a 
surplus-removal vehicle, countries would have to reduce their 
production supports. With export subsidies in place, countries can move 
surpluses into markets where they do not belong and depress market 
prices. Other countries are forced to respond with import barriers. In 
the world sugar market, subsidized exports by the EU alone amount to 
about a fifth of all the sugar traded each year.
    The URA did not significantly reduce the amount of sugar sold 
globally with export subsidies. The agreement failed to reduce the 
European Union's generous price support level and requires only a tiny 
potential drop in its substantial export subsidies.
     State Trading Enterprises (STE's). STE's are quasi-
governmental, or government-tolerated organizations that support 
domestic producers through a variety of monopolistic buyer or seller 
arrangements, marketing quotas, dual-pricing arrangements, and other 
strategies. These practices were ignored in the Uruguay Round, but are, 
unfortunately, common in the world sugar industry. Major producers such 
as Australia, Brazil, China, Cuba, and India have sugar STE's, but were 
not required to make any changes in the URA.
     Developing-Country Producers. Developing countries, which 
represent about 60% of world sugar production and trade, have little or 
no labor and environmental standards for sugar farmers, have no minimum 
import access requirements, and often have high import tariffs. 
Nonetheless, developing countries were put on a much slower track for 
reductions, or, in the case of the least developed countries, were 
exempted altogether from URA disciplines.
     WTO Non-Members. Important sugar-producing and importing 
countries such as China and the former Soviet republics are not WTO 
members, and need to do nothing under the URA. Yet, these countries 
represent some 40% of global sugar imports and 20% of production.
     Labor and Environmental Standards. The gap in government 
standards--and resulting producer costs--between developed and 
developing countries is well documented and immense, but was ignored in 
the URA. In sugar, the gap is particularly pronounced because, while 
the EU and the U.S. are major players, production and exports are 
highly dominated by developing countries, especially in the cane 
sector.
    Social Standards Gap. The differences in labor and environmental 
standards between developed and developing countries are wide.
    American sugar producers operate with the highest possible regard 
for workers and the environment. But we should not be penalized in 
multilateral trade negotiations for providing these costly protections. 
Foreign countries that do not provide such protections should not be 
rewarded. If we are attempting to globalize our economy, we should also 
globalize our worker and environmental protection responsibilities. If 
markets are to be liberalized, standards must be harmonized.
    In the next trade round, access to developed countries should be 
conditioned on developing countries' achievement and enforcement of 
higher labor and environmental standards. Such an incentive system 
could help ensure that the next trade round results in a race to the 
top, in protection of workers and the environment, rather than a race 
to the bottom. Attached is a press release issued by the ASA in support 
of President Clinton's remarks at the WTO in this regard last May 
(Attachment C).
    Widely Varying Levels of Support. Unilateral reforms to U.S. 
agriculture policy in the 1996 Farm Bill far exceeded U.S. commitments 
made the year before in the Uruguay Round. Furthermore, developing 
countries, which dominate world agricultural trade and particularly 
sugar trade, were subject to a slower pace of reductions, if any.
    As a result, the United States is way out in front of the rest of 
the world in removing its government from agriculture and has placed 
its farmers in a domestic free market situation. This gap makes 
American farmers uniquely vulnerable to continued subsidies by foreign 
competitors.
    It is key that American farmers not be penalized for attempting to 
lead the rest of the world toward free agricultural trade. American 
farmers must be given credit for the reforms they have endured.
    U.S. Sugar Surpasses URA Requirements. The United States is one of 
only about 25 countries that guarantees a portion of its sugar market 
to foreign producers and it has far surpassed its URA commitment on 
import access. The URA required a minimum access of 3-5% of domestic 
consumption. The United States accepted a sugar-import minimum that 
amounts to about 12% of consumption. In practice, U.S. imports in 1994/
95 and 1995/96 averaged 24%--double the promise we made in the URA, and 
about six times the global URA minimum.
    All this sugar imported from 41 countries under the tariff-rate 
quota (TRQ) enters the United States at the U.S. price, and not at the 
world dump price. Virtually all this sugar enters duty free. Just five 
countries (Argentina, Australia, Brazil, Gabon, and Taiwan) that lack 
Generalized System of Preferences status pay a minuscule duty of 0.625 
cents per pound.
    The United States calculated its above-quota tariff rate in the 
manner dictated by the URA. These tariff levels are totally WTO 
consistent, and are dropping by 15% over the 6-year transition period, 
as we promised they would in the Uruguay Round. This duty is frozen in 
the year 2000 and must not be reduced further until foreign countries 
have complied with their URA requirements, as the U.S. has done.
    Playing Field Lower, But Not More Level. The URA's formula-based 
approach called for across-the-board percentage reductions, regardless 
of the original level of price support, import barrier, or export 
subsidy. Countries with the most egregious barriers can maintain their 
advantage throughout the transition process. For example, if one 
country's price support were 40% higher than another's, and both 
reduced by the URA-mandated 20%, the 40% advantage would remain in 
place--the playing field has been lowered, but not leveled.
    Furthermore, the United States far surpassed its URA commitments, 
unilaterally dismantling its already minimal commodity program in the 
1996 Farm Bill, while many other nations with higher levels of 
government intervention have yet to even minimally comply. This has 
tilted the playing field even further to the disadvantage of efficient 
American farmers.
    Formula Driven Trade Strategy. For the many reasons outlined above, 
the rigid, formula-driven, or ``one-size-fits-all,'' approach for trade 
concessions does not work for agriculture in general, or for sugar in 
particular. Pursuing this approach would: (1) Fail to reduce the gap in 
supports between countries--lowering the playing field, but not 
leveling it; (2) Again give developing countries virtually a free ride; 
(3) Further diminish U.S. negotiating leverage, which was severely 
reduced through our unilateral concessions in the 1996 Farm Bill.
    To date, U.S. agriculture has led the world in trade barrier 
reductions and we are disadvantaged as long as the rest of the world 
fails to follow our example.

                          Sugar and the NAFTA

    The ASA is concerned that before the United States embarks on 
another multilateral trade round we must be cognizant of serious 
problems that remain with our primary regional trade agreement, the 
North American Free Trade Agreement (NAFTA). Evasion of NAFTA rules and 
violation of international trade rules by our North American trading 
partners have left many American sugar producers with a distrust of 
trade agreements and a serious reticence about entering into new ones.
    Canada. Sugar trade between the United States and Canada, which 
imports about 90% of its sugar needs, was essentially excluded from the 
NAFTA. U.S.-Canadian sugar trade is governed mainly by the U.S.-Canada 
Free Trade Agreement and by the WTO.
    Currently, Canada is threatening the integrity of U.S. sugar policy 
by circumventing the tariff-rate quota with a new product referred to 
in the trade as ``stuffed molasses''--a high-sugar product not 
currently included in U.S. sugar TRQ classifications. USDA has 
estimated imports of this product could add about 100,000 tons of non-
quota sugar to the U.S. market per year. That amount could grow if this 
loophole is not closed, further harming U.S. sellers of refined sugar 
and possibly threatening the no-cost operation of U.S. policy.
    Mexico. Mexico had been a net importer of sugar for a number of 
years prior to the inception of the NAFTA. Nonetheless, the NAFTA 
provided Mexico with more than three times its traditional access to 
the U.S. sugar market during the first six years, 35 times its 
traditional access in years 7-14, and virtually unlimited access 
thereafter. The NAFTA sugar provisions are summarized on the attached 
table (Attachment D).
    These provisions were negotiated by the U.S. and Mexican 
governments and contained in President Clinton's NAFTA submission to 
the U.S. Congress, which Congress approved in November 1993. The sugar 
provisions, as altered from the original NAFTA text, were critical to 
the narrow Congressional passage of the NAFTA.
    Nonetheless, Mexico is now undermining the integrity of the NAFTA 
by claiming the sugar provisions are somehow invalid. This questioning 
by Mexico has bred deep feelings of distrust in trade agreements among 
many American sugar producers.
    In addition, Mexico has not complied with a NAFTA requirement to 
phase out its tariffs on U.S. high-fructose corn syrup (HFCS). Instead, 
Mexico raised its tariffs on HFCS imports to levels approaching 100%. 
Mexico may also be violating international trade rules by sanctioning a 
restraint of trade agreement among Mexican sugar producers and soft 
drink bottlers to slow the pace of substitution of HFCS for sugar in 
Mexican soft drinks. (The ASA has filed a paper with USTR on this 
subject, ``Initiation of Section 302 Investigation on Mexican Practices 
Affecting High Fructose Corn Syrup,'' June 19, 1998.)
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Statement of David Kaehler, President, Gilbarco, Inc., Greensboro, NC

    Mr. Chairman and members of the Subcommittee, I am David Kaehler, 
President of Gilbarco North America, the leading producer of gasoline 
pumps and related equipment in the United States. Today, we would like 
to thank you, Mr. Chairman and the Subcommittee on Trade for the 
opportunity to present our views on the importance of the extension of 
trade negotiating authority and the impact that trade negotiations may 
have on our U.S. operations. Through this statement, we want to 
illustrate one particular area of great concern to Gilbarco, which we 
believe underlines the importance for U.S. companies and U.S. workers 
to have access to world markets.
    Gilbarco, Inc., is headquartered in Greensboro, NC, where we employ 
1,500 people who design, produce and ship gasoline dispensers and 
related equipment for the world. Indeed, we believe that our Greensboro 
factory is the largest of its kind anywhere in the World. About 20% of 
our U.S. production is shipped to 85 different countries, including 
South America.
    For several years our company has, through hard work and good 
fortune, been the leading supplier of gasoline dispensing equipment in 
South America. In response to our success, competitors have established 
manufacturing facilities within the Mercosur region of South America, 
thereby taking advantage of preferential tariff treatment offered in 
that trading bloc. In fact, the absence of a free trade relationship 
between the United States and the Mercosur countries today results in 
Gilbarco having to pay duties, ranging from 17% to 30%, on the products 
we export to these countries. As a result, we find ourselves at a 
serious price disadvantage.
    In order to maintain our number one market position in South 
America, we are currently alleviating the situation by cutting costs 
and sacrificing profits. However, this is clearly not a tenable long-
term solution. In the future, the problem could be solved by 
eliminating existing tariffs on U.S. exports through the successful 
negotiation of the Free Trade Area of the Americas (FTAA).
    Should free trade negotiations fail or extend too far into the 
future, we would have no alternative but to establish a manufacturing 
presence in South America. In this case, however, job opportunities 
would be shifted away from the U.S. and on to a foreign market. In 
fact, a new facility in South America could potentially impact about 
10% of our highly skilled, highly paid U.S. production workers in North 
Carolina. In addition, the domestic content of our products is greater 
than 80%. Our several suppliers throughout our region and the country 
would also suffer the loss of business as components for South American 
built gas pumps would be sourced in that region.
    The extension of trade negotiating authority will enable U.S. trade 
representatives to effectively negotiate ``final'' trade agreements; 
authority they must have in order to maintain a leadership role in the 
negotiations. The current situation places American companies, our 
products, and our workers at a competitive disadvantage. Indeed, while 
our trade negotiating authority has lapsed, competitor countries have 
engaged in negotiations and are concluding trade agreements without us.
    We urge the Congress to grant the Administration trade negotiating 
authority so that the United States can be a credible and effective 
partner in negotiating the FTAA to a successful conclusion. We also ask 
the Administration to exercise its leadership and to work with the 
Congress so that trade negotiating authority can be extended as soon as 
possible. Gilbarco, like most other manufacturers, looks forward to 
competing on a level-playing field with other global manufacturers 
because we believe that our workers are the most productive in the 
world, and our products of the highest quality.

                                

Statement of R. Thomas Buffenbarger, International Association of 
Machinists and Aerospace Workers, Upper Marlboro, MD

    The International Association of Machinists and Aerospace Workers 
respectfully submits this testimony to the United States House of 
Representatives Ways and Means Committee's Subcommittee on Trade. On 
behalf of our members and the tens of thousands of wood, pulp, paper 
and other timber-dependent workers nationwide, we wish to express our 
concerns for international trade policy in the global economy.
    The International Association of Machinists and Aerospace Workers 
represents over 700,000 workers nationwide including 20,000 woodworkers 
in the forest products industry. Our members are increasingly concerned 
with international trade agreements and the potential impacts to 
American industries, including forest products.
    The IAMAW supports global trade that promotes fair and equitable 
agreements between the U.S. and competing nations. The forest products 
industry is facing increased competitiveness from foreign countries. 
Restraints on fiber supply, environmental regulations and restrictions 
on market access, are all hampering our performance in the global 
community. Now more than ever, it is crucial that U.S. trade policies 
reflect the competitive needs of American industries.
    Forest product jobs are being threatened by a flood of foreign wood 
being dumped into American markets. Over the last year, we have 
witnessed similar threats in the steel industry. The crisis originated 
from illegal dumping, ineffective trade laws and the fact that U.S. 
trade policy does nothing to preserve our nation's industrial 
manufacturing base. Today, our brothers and sisters in the steel 
industry are struggling to survive, companies are being forced into 
bankruptcy and tens of thousands of workers are losing their jobs. The 
IAMAW wants to prevent a similar crisis in the forest products 
industry.
    The U.S. forest products industry is the largest producer of wood 
and paper products in the world and accounts for 8 percent of the U.S. 
manufacturing output. Our workers produce the raw materials and 
products that are used by consumers throughout the world, and we need 
trade agreements that promote our continued prosperity. Our concern 
lies with imbalanced trade agreements that provide our competitors with 
unfair advantages.
    Specifically, the IAMAW is concerned with the APEC negotiations and 
the proposals to eliminate all tariffs on wood products. We commend the 
Clinton Administration and the U.S. Trade Representative for their 
significant progress during the APEC negotiations, but are alarmed at 
Japan's continued refusal to open its doors to U.S. wood products. The 
United States cannot back down from these negotiations and must hold 
Japan accountable.
    While Japan has failed to meet its commitment, forest products 
workers in the United States continue to witness disastrous impacts to 
our industry. Asian tariffs on wood products are as high as 45 percent, 
whereas U.S. tariffs are at or near zero. Fair and open access to Asian 
markets is crucial to preserve the livelihoods of woodworkers across 
the nation. While Asian imports to the U.S. skyrocket, our exports to 
the region have fallen drastically, a 40 percent decrease of our 
industry's total exports of $21 billion. These trade barriers make it 
impossible to sell forest products abroad.
    Fairness to American workers requires the pursuit of accelerated 
market openings. Failure to eliminate Japanese trade barriers will 
exacerbate the increased flow of exports to this country as Asian 
economies attempt to export their way out of the region's financial 
crisis. Immediate steps must be taken to address the flood of under-
priced imported wood products coming into our market. U.S. workers must 
not be the victims of international financial collapse.
    U.S. negotiators and government officials must provide a level 
playing field for American industries as we compete in the global 
economy. Trade reform is crucial. Working Americans will support free 
trade agreements that are fair and equitable and provide us with the 
opportunity to prosper. As we move into the next century and a new 
global economy, we cannot leave American industry and our workers 
behind. We must negotiate sound trade policies that will provide the 
next generation, and many more to come, with the opportunity to achieve 
the American Dream.

                                

Statement of Mitchell J. Cooper, Counsel to the Rubber and Plastic 
Footwear Manufacturers Association

    The Rubber and Plastic Footwear Manufacturers Association (RPFMA) 
is the spokesman for manufacturers of most of the rubber-soled, fabric-
upper footwear, waterproof footwear, and slippers made in this country. 
The names and addresses of the Association's members are attached 
hereto.
    Rubber footwear is a labor-intensive, import-sensitive industry: 
Labor constitutes more than 40 percent of total cost; imports of 
fabric-upper footwear and of slippers take more than ninety percent of 
the U.S. market and imports of waterproof footwear take close to fifty 
percent. These imports come from countries where wages are from one-
fifteenth to one-twentieth of the level in the domestic industry.
    Two years ago the Trade Subcommittee conducted a similar 
examination of U.S. trade policy objectives and initiatives, and the 
RPFMA submitted its views. Little has changed since then, other than 
the fact that the position of the domestic rubber footwear industry 
vis-a-vis imports has worsened. This fact is demonstrated by Tables 1, 
2, 3, and 4 attached hereto, which show the year-to-year increase of 
imports of fabric upper and of protective footwear as a percentage of 
total consumption and also the decline in domestic production 
employment of rubber and plastic footwear producers and slipper 
producers.
    The remaining companies in this industry represent the survival of 
the fittest. They are convinced that their state of the art production 
facilities, the quality of their products, and their name brand 
recognition will permit them to continue manufacturing in this country 
provided that there is no further tampering with the current level of 
tariffs on competing imports.
    The rubber footwear industry recognizes that the health of our 
economy depends to a considerable degree on America's ability to export 
its products to other countries. Unhappily, the ability of low-wage 
foreign producers to compete in the labor-intensive industry which 
produces rubber footwear presents an enormous obstacle in the path of 
this industry's efforts to export its products. Accordingly, while we 
understand the desirability of ongoing and anticipated trade 
negotiations for the purpose of reducing barriers to trade, we urge 
that there be greater recognition that exceptions must be made for 
those few industries, such as rubber footwear and slippers, where a 
reduction in duties would clearly threaten the continued existence of 
what is left of domestic production.
    A major concern of this industry with respect to trade objectives 
and initiatives is the distinction between our Government's approach to 
such multilateral negotiations as the Kennedy, Tokyo, and Uruguay 
Rounds and its approach to such bilateral free-trade agreements as 
NAFTA. The rules for multilateral negotiations have permitted careful 
scrutiny of whether cuts in tariffs on specific Harmonized System items 
are warranted, whereas in bilateral negotiations the only flexibility 
has been in the length of time over which all duties would go to zero. 
Thus, in recognition of the unique import sensitivity of rubber 
footwear and slippers, the duties on the core items of this industry 
remained untouched in the Kennedy, Tokyo, and Uruguay Rounds. On the 
other hand, under NAFTA rubber footwear and slipper duties are being 
phased out over a period of 15 years (a period longer than that for 
virtually every other American industry, but at the end of which duties 
on imports from Mexico will have been eliminated).
    Unless current policy is modified so as to permit limited 
exceptions to duty-free treatment in bilateral negotiations, what is 
left of this domestic industry cannot realistically expect to survive. 
The validity of this statement is evidenced by our experience under the 
Caribbean Basin Initiative. CBI II removed the exemption from duty-free 
treatment which had previously existed for footwear from the Caribbean. 
The direct consequence of this change in the law has been that rubber 
footwear imports from the Dominican Republic increased from 200,000 
pair a year in 1990 to more than 12 million pair in 1997. Most of these 
imports are accounted for by American companies which closed plants in 
such states as Maine, Pennsylvania, West Virginia, and Georgia and 
shifted their production to the Dominican Republic.
    It is important to bear in mind that the duty-free treatment of 
rubber footwear from the Caribbean is currently limited to footwear 
whose components are manufactured in the United States. The dramatic 
surge in Caribbean shipments which has occurred despite the 
requirements of using domestic components more than justifies our 
concern about the enactment of any so-called CBI parity legislation 
which would extend duty free treatment to Caribbean footwear made with 
components from any other country.
    In previous bilateral trade negotiations the United States has 
relied on Article XXIV of the GATT in justification of its no-exception 
rule. The fact is however, that Paragraph eight of that Article defines 
a free trade agreement as one where ``the duties and other restrictive 
regulations of commerce . . . are eliminated on substantially all the 
trade between the constituent territories or products originating in 
such territories'' (emphasis added). If new bilateral negotiations 
would adhere to the ``substantially all the trade'' language in the 
GATT, the rules of engagement would be closer to those in multilateral 
negotiations where the unique needs of particular import sensitive 
industries can be taken into account. Our hope is that if and when this 
Congress grants the President fast-track authority, it will note the 
need for exceptions to total free trade.
    The history of past negotiations demonstrates that there are very 
few domestic industries whose survival is as threatened by imports as 
rubber footwear and slippers. Surely, the benefits that would otherwise 
accrue from a free trade agreement would not be diminished by excluding 
this minuscule fraction of one percent of this country's trade from 
duty free treatment. Accordingly, we urge that any structuring of 
policy objectives in upcoming trade negotiations should contain 
sufficient flexibility to permit the survival of an otherwise 
endangered domestic industry.
    In short, while we cannot quarrel with the Administration's 
objective of opening markets to American goods, we can and do quarrel 
with trade policy which does not take into account the legitimate needs 
of an industry, such as rubber footwear and slippers, which is faced 
with limited export opportunities and virtually unlimited imports.

                               Appendix 1

         Rubber and Plastic Footwear Manufacturers Association

American Steel Toe Co.

P.O. Box 959

S. Lynnfield, MA 01940-0959


Converse, Inc.

One Fordham Road

North Reading, MA 01864

(with a plant in North Carolina)


Draper Knitting Co., Inc.

28 Draper Lane

Canton, MA 02021-1598


Frank C. Meyer, Co.

585 South Union Street

Lawrence, MA 01843

(with plants also in New Jersey, Missouri, Maine, Mississippi, and 
Puerto Rico)


Genfoot, Inc.

Littleton, NH

  

  


Hudson Machinery Worldwide

Hudson Industrial Park

P.O. Box 831

Haverhill, MA 01831


Kaufman Footwear Corp.

Batavia, NY

  


LaCrosse Footwear Inc.

P.O. Box 1328

LaCrosse, WI 54602

(with plants also in New Hampshire and Oregon)


New Balance Athletic Shoes, Inc.

38 Everett Street

Allston, MA 02134

(with plants in Maine)


Norcross Safety Products

1136 2nd Street

P.O. Box 7208

Rock Island, IL 61204-7208


S. Goldberg & Co., Inc.

20 East Broadway

Hackensack, NJ 07601-6892


Tingley Rubber Corporation

200 South Avenue

P.O. Box 100

S. Plainfield, NJ 07080


                                


                    Table 1.--Shoes with Rubber or Plastic Soles/Fabric Uppers (SIC 30210 10)
                                         [Figures in Thousands of Pairs]
----------------------------------------------------------------------------------------------------------------
                                                  Production    Exports      Imports    Consumption   % Imports
----------------------------------------------------------------------------------------------------------------
1998*..........................................       31,300        8,500      286,600      309,400         93.0
1997...........................................       49,200        7,600      273,200      314,800         87.0
1996...........................................       51,400        6,600      266,100      310,900         86.0
1995...........................................       56,000       12,600      309,300      352,700         88.0
1994...........................................       59,300        8,200      300,500      351,600         85.0
1993...........................................       62,500        9,200      260,000      313,300         83.0
1992...........................................       92,700        9,500      257,000      340,200         76.0
1991...........................................       97,500        9,700      213,400      301,200         71.0
1990...........................................       89,700        8,700      199,200      280,300         71.0
1989...........................................       76,800       10,000      190,100      256,900         74.0
1988...........................................       76,700          900      157,700      233,500         68.0
1987...........................................       71,000          800      119,500      189,700         63.0
1986...........................................       57,900        1,000       99,100      156,000         64.0
1985...........................................       54,900          800       84,800      138,900         61.0
1984...........................................       64,516        1,120      107,685      171,865         62.7
1983...........................................       78,054        1,203      102,662      180,019         57.0
1982...........................................       92,896        1,367       99,032      194,398         50.9
1981...........................................       95,399        1,564      137,632      231,003         59.6
1980...........................................       97,516        1,694      120,746      216,207         55.8
1979...........................................       78,130        1,223      111,390      193,381         57.6
1978...........................................       79,278          644      172,700      253,683         68.1
1977...........................................       90,417          800      106,000      196,587         53.9
1976...........................................      115,354          700      115,400      234,471         49.2
1975...........................................      131,155          600       74,100      206,376         35.9
1974...........................................      146,500        1,010       67,352      210,838         31.9
1973...........................................      143,077           29       66,291      214,837         30.9
1972...........................................      159,399          105       58,020      217,314         26.7
1971...........................................      156,489          112       62,872      219,249         28.7
1970...........................................      144,276          129       49,726      193,873         25.6
1969...........................................      142,295          195       44,463      186,563         23.8
1968...........................................      152,257          239       49,200      201,218         24.5
1967...........................................      153,656          211       44,659      198,104         22.5
1966...........................................      157,491          167       35,060      192,384         18.2
1965...........................................      165,741          195       33,363      198,909         16.8
1964...........................................      162,151          225       29,063      190,989         15.2
----------------------------------------------------------------------------------------------------------------
*Preliminary
Source: Compiled from official statistics of the U.S. Department of Commerce


                          Table 2.--Rubber & Plastic Protective Footware (SIC 30210 20)
                                         [Figures in Thousands of Pairs]
----------------------------------------------------------------------------------------------------------------
                                                  Production    Exports      Imports    Consumption   % Imports
----------------------------------------------------------------------------------------------------------------
1998*..........................................       11,600        1,000        9,800       20,400         48.0
1997...........................................       15,500        1,000       11,000       25,500         43.0
1996...........................................       16,600        1,100        9,600       25,100         38.0
1995...........................................       17,400        1,300        9,900       26,000         38.0
1994...........................................       20,200        1,000       11,200       30,500         37.0
1993...........................................       17,800          700        9,700       26,700         36.0
1992...........................................       17,800          800        7,700       24,800         31.0
1991...........................................       15,600          900        8,000       22,700         35.0
1990...........................................       16,000          800        8,700       23,900         37.0
1989...........................................       13,700          600        8,200       21,300         38.0
1988...........................................       13,800          700        8,900       22,000         40.0
1987...........................................       11,100          800        9,600       19,900         48.0
1986...........................................       12,200          500       10,700       22,400         48.0
1985...........................................       16,500          400       12,800       28,900         44.0
1984...........................................       17,734          296       16,010       32,830         48.8
1983...........................................       15,459          305       13,373       26,562         50.3
1982...........................................       13,920          386       11,103       24,611         45.1
1981...........................................       10,652          551        7,485       18,028         41.5
1980...........................................       14,473          653        7,548       21,552         35.0
1979...........................................       23,531          645       12,544       36,517         34.4
1978...........................................       28,893          514       13,444       36,130         37.2
1977...........................................       23,380          400       10,700       34,402         31.1
1976...........................................       17,261          400        9,600       26,800         35.8
1975...........................................       16,135          300        4,100       20,600         19.9
----------------------------------------------------------------------------------------------------------------
*Preliminary
Official government figures on rubber and plastic protective footwear were not compiled for years earlier than
  1975.
Source: Compiled from official statistics of the U.S. Department of Commerce


                     Table 3.--Production Employment
                             [in thousands]
------------------------------------------------------------------------

------------------------------------------------------------------------
                  Rubber and Plastic Footware (sic 302)
1973.............................        26.3         1986          9.2
1974.............................        25.3         1987          9.3
1975.............................        22.3         1988          9.7
1976.............................        21.6         1989          9.2
1977.............................        20.9         1990          8.9
1978.............................        21.0         1991          8.8
1979.............................        19.9         1992          8.9
1980.............................        19.8         1993          8.9
1981.............................        19.0         1994          8.9
1982.............................        16.2         1995          6.4
1983.............................        14.1         1996          4.5
1984.............................        14.0         1997          5.5
1985.............................        10.9         1998         4.8*
------------------------------------------------------------------------



----------------------------------------------------------------------------------------------------------------
                                             1989   1990   1991   1992   1993   1994   1995   1996   1997   1998
----------------------------------------------------------------------------------------------------------------
January...................................    9.2    9.0    8.4    9.2    8.7    8.3    7.8    4.9    5.3    5.6
February..................................    9.3    9.1    8.7    9.4    8.9    8.8    7.8    4.7    5.3    5.3
March.....................................    9.3    9.2    8.7    9.4    9.1    8.9    7.5    4.6    5.6    5.3
April.....................................    9.2    9.1    8.7    9.4    9.4    9.2    7.2    4.6    5.5    5.2
May.......................................    9.1    8.9    8.8    9.2    9.6    9.4    6.8    4.7    5.6    5.1
June......................................    9.2    9.0    8.8    9.1    9.6    9.5    7.1    4.8    5.9    5.2
July......................................    8.8    8.6    7.6    8.8    9.2    8.8    5.8    3.7    5.1    3.8
August....................................    8.3    9.0    9.0    8.1    8.7    9.5    5.6    4.6    4.7    4.8
September.................................    9.5    8.9    9.2    8.2    8.4    9.0    5.4    4.5    5.9    4.5
October...................................    9.6    8.8    9.3    8.8    8.3    8.9    5.2    4.5    5.8    4.3
November..................................    9.4    8.9    8.8    8.8    8.4    8.1    5.1    4.4    5.8    4.3
December..................................    9.1    8.6    9.3    8.7    8.4    8.1    5.1    4.3    5.7   4.4*
----------------------------------------------------------------------------------------------------------------
*Peliminary figure
Source: Bureau of Labor Statistics, U.S. Department of Labor


                     Table 4.--Production Employment
                             [in thousands]
------------------------------------------------------------------------

------------------------------------------------------------------------
                           Slippers (sic 3142)
1973.............................       10.2         1986          4.4
1974.............................        9.7         1987          4.7
1975.............................        7.8         1988          4.6
1976.............................        7.2         1989          4.2
1977.............................        7.2         1990          3.7
1978.............................        7.5         1991          3.5
1979.............................        7.1         1992          3.2
1980.............................        7.5         1993          2.6
1981.............................        8.2         1994          3.0
1982.............................        7.5         1995          2.9
1983.............................        6.5         1996          2.1
1984.............................        6.0         1997          2.1
1985.............................        5.1    ...........  ...........
------------------------------------------------------------------------



----------------------------------------------------------------------------------------------------------------
                                   1989    1990    1991    1992    1993    1994    1995    1996    1997    1998
----------------------------------------------------------------------------------------------------------------
January.........................     3.6     3.0     2.7     2.5     2.1     2.4     2.5     1.8     2.2     1.3
February........................     4.3     3.7     3.4     2.8     2.4     2.7     3.0     2.3     2.1     1.6
March...........................     4.4     3.7     3.3     3.0     2.4     2.7     3.0     2.1     1.9     1.6
April...........................     4.4     3.8     3.6     3.1     2.6     2.9     2.8     2.0     1.9     1.7
May.............................     4.4     3.9     3.7     3.1     2.7     3.1     2.9     2.0     2.2     1.7
June............................     4.4     3.8     3.8     3.3     2.8     3.2     3.0     2.0     2.3     1.7
July............................     4.3     3.5     3.4     3.0     2.6     3.2     3.0     2.0     2.3     1.8
August..........................     4.6     3.8     4.0     3.7     2.9     3.3     3.1     2.1     2.3     1.7
September.......................     4.3     4.1     4.0     3.8     3.0     3.5     3.1     2.3     2.3     1.8
October.........................     4.5     4.2     4.0     3.8     3.0     3.5     3.0     2.3     2.2     1.8
November........................     4.1     3.7     3.5     3.3     2.8     3.2     2.8     2.2     2.1     1.6
December........................     3.6     2.8     2.6     2.4     2.3     2.7     2.2     2.0     1.5
----------------------------------------------------------------------------------------------------------------
Source: Bureau of Labor Statistics, U.S. Department of Labor
The above data is ``Unpublished Data'' compiled from the Bureau of Labor Statistics, and are not official Bureau
  Statistics. This data is for internal analysis only and should not be reproduced or published.

                                

Statement of George Scalise, President, Semiconductor 
Industry Association

    I appreciate the opportunity to present to the Subcommittee on 
Trade of the Committee on Ways and Means the views of the Semiconductor 
Industry Association (SIA) on the importance of active U.S. involvement 
in trade negotiations. I would like to focus my comments on three 
issues: (1) the agenda for the new round of multilateral trade 
negotiations under the auspices of the World Trade Organization (WTO) 
to be launched at this year's WTO Ministerial meeting in Seattle; (2) 
priorities for the ongoing negotiations on China's accession to the 
WTO; and (3) the importance of seeking early progress in eliminating 
tariffs in connection with the negotiations to create a Free Trade Area 
of the Americas (FTAA).
    Before discussing the SIA's position on these important issues, 
however, I would like to give some background on the U.S. semiconductor 
industry.

                   I. The U.S. Semiconductor Industry

    U.S. semiconductor makers employ 260,000 people nationwide, and the 
presence of the industry is widespread--35 states have direct 
semiconductor industry employment. And these are high paying jobs. The 
average wage in the semiconductor industry is approximately $55,000, 
nearly twice the average of private industry overall.
    Semiconductors are an increasingly pervasive aspect of everyday 
life, enabling everything from computers to automobiles to modern 
defense systems to the Internet which is, in fact, a world wide web of 
silicon chips. They have sparked the growth of the U.S. electronics 
industry, which provides employment for 4.2 million Americans in all 50 
states.
    According to Department of Commerce data, the chip industry 
contributes more to this country's GDP in terms of value added than any 
other manufacturing industry. The industry is both capital intensive 
and R&D intensive: indeed, our members must spend a third of their 
revenues on research and capital equipment, among the highest 
percentage of any industry in the world.
    These tremendous investments in R&D and capital equipment have 
yielded a direct benefit to consumers everywhere: the cost of our 
products continues to decline, and the functionality continues to 
increase. The increase in computing power has allowed the spread of PCs 
to homes, schools and small businesses, and it has enabled the 
explosion of the Internet and e-commerce. The Economic Report to the 
President last year pointed out that without the faster-than-average 
recent rate of decline in computer prices, overall inflation would have 
risen steadily since early 1994: instead, because of the fall in 
computer prices, inflation has actually decreased.
    While investing heavily in the industry's future competitiveness 
and technological capabilities, SIA members also have always actively 
sought to secure foreign market access for U.S. products. Because the 
semiconductor industry is so global in nature--roughly half of the U.S. 
industry's revenues are derived from overseas sales--the SIA has been 
dedicated since its inception to promoting free trade and opening world 
markets.
    For example, the U.S. industry has been at the forefront of efforts 
to eliminate tariffs on semiconductors and related products worldwide. 
At SIA's urging, the United States, Japan and Canada eliminated their 
semiconductor tariffs in the mid-1980s. Similarly, in the 1990s, SIA 
strongly supported the negotiation of the Information Technology 
Agreement (ITA), through which a total of 44 countries agreed to 
eliminate their tariffs on semiconductors and other information 
technology products.

                 II. The New Round of WTO Negotiations

    The SIA favors continued efforts in the WTO to promote greater 
trade liberalization, including in the areas of tariff elimination, 
duty-free and tax-free treatment of electronic commerce, services and 
investment. However, any new initiatives at the WTO should be 
consistent with and build upon the agreements reached in the Uruguay 
Round, rather than a renegotiation of the hard-won resolutions reached 
in those recent negotiations.

A. Recommended Areas for New WTO Negotiations

    1. Industrial Market Access. The SIA believes continued attention 
should be given to tariff elimination by WTO members. As noted above, 
44 countries and customs territories currently are signatories to the 
Information Technology Agreement (ITA), which provides for the 
elimination of tariffs on semiconductors and other information 
technology products. But a significant number of WTO member countries 
have yet to join this important agreement. The United States should 
encourage all WTO member countries to join the ITA as soon as possible 
and thereby permanently eliminate tariffs on semiconductors, 
semiconductor manufacturing equipment and related information 
technology products.
    In addition, the United States should urge countries negotiating 
for accession to the WTO to follow the lead of Taiwan and to join the 
ITA as an interim measure. China, for example--despite President Jiang 
Zemin's announcement last year that it would join the ITA ``as soon as 
possible''--has made little progress toward implementation. Every 
effort should be made to encourage China to fulfill its commitment.
    Continued attention should also be placed on the current ongoing 
review of the ITA to expand the product coverage of the agreement (ITA 
II). Every effort should be made to reach agreement among the existing 
ITA signatories to expand the product coverage of the agreement as soon 
as possible. For those countries that have yet to join the original 
ITA, it should also be pointed out that joining the original ITA would 
permit them to play an active role in determining the future direction 
of international efforts to expand the product coverage of the ITA.
    Expansion of the ITA to include additional products and signatories 
should be maintained as a separate process during the course of broader 
WTO multilateral negotiations. A clear goal for the end of any new 
multilateral negotiations, however, should be to make ITA participation 
mandatory for all WTO member countries.
    2. Duty-Free Treatment for Electronic Commerce. SIA supports U.S. 
efforts to urge WTO members to continue the current practice with 
respect to tariff treatment of electronic commerce. Currently, no WTO 
member considers electronic transmissions as importations and, 
consequently, no member imposes customs duties on those transmissions.
    Given the increasing importance of electronic commerce over the 
Internet, SIA believes that the United States should continue its 
leadership in this area, and--in addition to encouraging permanent 
implementation of duty-free treatment--should urge WTO members to 
commit to tax-free treatment of electronic transactions.
    3. Services: Distribution. The ability of U.S. firms to import, 
export and distribute goods in foreign markets is essential for 
ensuring true market access. Foreign government measures that force 
U.S. producers to sell through local distributors can add significant 
cost and adversely affect service, inventory, and delivery. The 
inability to deal directly with end-users is a particular problem in 
the semiconductor industry, where the design and development of 
application-specific chips requires extensive contact between 
semiconductor producers and the ultimate end-users of the chips.
    Therefore, as part of any new negotiations relating to services, 
the United States should seek commitments from all WTO members to 
permit companies of other WTO members to engage in distribution 
services without restriction. Especially in countries in the process of 
transitioning from centrally-planned to market-oriented economies, 
numerous restrictions on the ability of U.S. semiconductor firms exist. 
Similar commitments should be insisted upon with respect to all newly-
acceding WTO members. In fact, such commitments should be considered to 
be a fundamental obligation of WTO membership.
    4. Investment Rules. The freedom to engage in direct investment is 
critical to market access in many sectors and particularly for the 
semiconductor industry. Unfortunately, existing rules on Trade-Related 
Investment Measures (TRIMs) do not adequately discipline many of the 
restrictions placed on investment in various countries. U.S. 
semiconductor manufacturers frequently must grapple with policies (both 
official and unpublished ``administrative guidance'') restricting 
foreign ownership, including pressure to enter into joint venture 
agreements with local firms. These restrictions may be imposed not only 
as strict legal obligations, but also as quid-pro-quos for decisions by 
government officials at both the national and sub-national level. 
Regardless of their form, these measures are often used as levers to 
obtain transfer of technology from foreign firms.
    These measures can have a real and significant competitive impact 
on U.S. electronics firms, as advanced technology is often the key to 
competitive success. To the extent that our trading partners can 
maintain such measures, U.S. exports in the electronics sector, such as 
semiconductors, may be restricted. Moreover, such investment 
restrictions have a negative effect on the country imposing them, as 
they discourage the investment necessary to develop a local electronics 
industry on a commercially sound basis.
    Improving and expanding WTO rules on TRIMs therefore should be a 
part of any ongoing WTO negotiations, and should include strengthened 
provisions prohibiting WTO members from imposing investment 
restrictions--especially those which require a foreign enterprise to 
invest, enter into any form of joint venture arrangement with a 
domestic entity or to transfer any technology or intellectual property 
to a domestic entity. These strengthened provisions should also 
encompass measures which are mandatory or enforceable under domestic 
law or under administrative rulings, or compliance with which is 
necessary to obtain any approval or advantage.
    5. Trade and Competition Policy. Any ongoing work in the WTO on 
trade and competition policy should be focused on discouraging 
anticompetitive practices by and among firms, rather than--as some 
other WTO members have suggested--on reopening the WTO Agreement on 
Antidumping. If the WTO determines to continue work in this area--and 
it is properly focused on disciplining anticompetitive practices--SIA 
believes that attention should be given to the potential for 
anticompetitive purchasing arrangements by state-invested enterprises.
    State-invested enterprises--enterprises wholly or partially owned 
by central, provincial or local governments--can seriously interfere 
with competition in the markets in which they operate. Unfortunately, 
current WTO rules in this area are inadequate. The WTO's principal tool 
for addressing distortions in trade that arise from state-invested 
enterprises--Article XVII of the General Agreement on Tariffs and 
Trade--does not effectively cover the purchasing decisions of state-
invested commercial enterprises. In addition, such enterprises are not 
covered by the WTO Government Procurement Code because their purchases 
are for the purpose of manufacturing commercial goods rather than for 
government use.
    State-invested enterprises are particularly active in the 
electronics sector in many countries, and frequently control a 
significant share of the imports and exports of electronics goods. As a 
result, there is a significant risk that other state-invested 
enterprises will be encouraged by government officials to purchase 
semiconductors from other state-invested or domestic suppliers. Such 
discrimination could obviously have a very negative effect on U.S. 
semiconductor sales.
    Given the development of potentially strong state-invested 
electronics sectors--containing both semiconductor producers and 
consumers--and the inadequacy of Article XVII, the SIA urges stronger 
WTO rules that include affirmative obligations on the part of all WTO 
members to:
    (1) ensure that state-invested enterprises (including partially 
state-invested and recently privatized enterprises that were formerly 
state-invested) make purchases on the basis of commercial 
considerations; and
    (2) afford the enterprises of other WTO members adequate 
opportunity, in accordance with customary business practices in market 
economies, to compete for sales to state-invested enterprises.
    The SIA also believes that WTO members should be required to 
refrain from taking any measure, including administrative guidance, to 
influence or direct state-invested enterprises as to the quantity, 
value, or country of origin of goods purchased or sold, or otherwise 
impair the purchase or sale of goods. In addition, the WTO should 
review on a regular basis whether state-invested enterprises are in 
fact making purchases on the basis of commercial considerations.
    6. Rules of Origin Harmonization. In the Uruguay Round, WTO members 
agreed to pursue international harmonization of rules of origin based 
on the substantial transformation standard. The WTO Agreement on Rules 
of Origin (ARO) applies to all origin rules used in non-preferential 
trade applications, from collection of trade statistics to product 
marking to antidumping and countervailing duty measures. SIA believes 
this work program should be reviewed to ensure that it does not 
undermine the effectiveness of the U.S. antidumping law.
    Under existing U.S. practice for determining origin, semiconductors 
that are fabricated in one country but assembled in another country are 
treated differently for general trade purposes (such as for customs 
purposes) than they are for purposes of administering antidumping 
measures. The treatment of semiconductors in a general trade context is 
determined by rules of origin, which base a semiconductor's origin on 
the country where final assembly takes place. Antidumping 
investigations, on the other hand, employ fact-specific criteria to 
determine that a semiconductor is ``from'' the country of wafer 
fabrication (also known as diffusion). This is because a final assembly 
standard would allow exporters subject to antidumping orders to evade 
those orders by simply changing the country of final assembly--a 
relatively simple and inexpensive change in the semiconductor industry.
    Ongoing WTO efforts to harmonize rules of origin, however, may 
require the U.S. Government to change its current practice, so that it 
would no longer be able to employ these differing approaches. This 
requires the establishment of new rules of origin for semiconductors 
that will ensure that antidumping orders on semiconductors can continue 
to be effectively enforced. In the absence of ``decoupling'' as 
proposed below, only a rule of origin based on diffusion would ensure 
that antidumping orders on semiconductors can continue to be 
effectively enforced.
    SIA believes that fact-based scope determinations for antidumping 
purposes should be decoupled from general purpose rules of origin. 
While the WTO origin harmonization exercise must result in origin rules 
that facilitate international trade through easy-to-administer and 
consistently-applied criteria--it is equally important that the origin 
harmonization exercise not disrupt the existing ability of governments 
to administer antidumping and countervailing duty orders.
    To address this potential problem, some countries have proposed 
content-based origin rules for electronics products to ensure that 
their ability to impose antidumping or countervailing duty measures is 
not restricted. The European Union, for example, has proposed a 45 
percent value-add origin rule for all electronics products, even 
through such a rule could pose an obstacle to the free flow of trade in 
electronics goods.
    To prevent WTO adoption of onerous origin rules while at the same 
time ensuring the effective administration of antidumping and 
countervailing duty measures, SIA believes that WTO negotiators must 
pursue a ``decoupling'' approach that would allow administering 
authorities in antidumping and countervailing duty cases to use fact-
based criteria other than rules of origin in determining the scope of 
antidumping and countervailing duty measures. In turn, this would 
permit the WTO to adopt internationally harmonized rules for general 
trade that are different from, and not based upon, the standards used 
to administer antidumping and countervailing duty measures. This would 
also allow the harmonization of general purpose rules of origin in a 
manner that will facilitate, rather than encumber, trade, while also 
preserving an effective antidumping and countervailing duty remedy for 
all products.

B. Issues that Should Not be on the Agenda for the New Round: 
The WTO Antidumping Agreement

    SIA supports the maintenance of a strong and effective antidumping 
remedy as a critical component of the international trading system. The 
antidumping remedy is especially important with respect to the 
semiconductor industry given the history of injurious dumping in our 
sector.
    The WTO Antidumping Agreement permits WTO members to take remedial 
action against dumped imports, and prescribes international rules for 
the conduct of antidumping actions. These international antidumping 
rules were substantially revised in the Uruguay Round negotiations, 
which concluded in 1994. These revisions in the WTO rules required 
implementation in national legislation and regulations, which were only 
fully adopted in the United States last year.
    The Uruguay Round changes in the antidumping rules resulted in a 
number of new requirements, including special adjustments for 
calculating costs of products in the ``start-up'' phase of production, 
a review of antidumping measures after five years of being in effect, 
and higher de minimis thresholds for margins in antidumping 
investigations. All of these changes have made it more difficult for 
injured industries to obtain relief under the antidumping law, and the 
full consequences of these revisions have not yet been fully assessed.
    Given the relatively short amount of time that has passed since 
these recent substantial changes to antidumping rules in the Uruguay 
Round, it would be inappropriate at this time to launch a new 
international negotiation of an antidumping agreement. SIA therefore 
would strongly oppose new negotiations in this area as part of the WTO 
agenda.

                 III. China WTO Accession Negotiations

    SIA strongly supports China's bid to join the World Trade 
Organization (WTO), but only if that accession is accomplished on a 
commercially viable basis. The WTO accession negotiations provide the 
best means to obtain the fundamental structural reforms in China's 
economic and trade system necessary to ensure effective market access 
for foreign goods in China. In this regard, SIA has a number of 
specific concerns about trade and investment in China which we believe 
should be addressed in any agreement to admit China to WTO membership:
    Elimination of Tariffs. China currently imposes tariffs of 6-10% on 
imported semiconductors. These tariffs present a significant obstacle 
to U.S. exports to China. President Jiang Zemin pledged last October 
that China would join the Information Technology Agreement (ITA) ``as 
soon as possible.'' Unfortunately, to date there has been little 
progress on negotiating a specific Chinese tariff phase-out schedule to 
implement this commitment. Semiconductor tariff elimination is in 
China's interest because it would permit admission of the Chinese 
semiconductor industry into the World Semiconductor Council (WSC). The 
WSC was created by the 1996 U.S.-Japan Semiconductor Agreement, and is 
open to semiconductor industry associations from countries and regions 
that have eliminated, or agreed to eliminate expeditiously, tariffs on 
semiconductors.
    Purchasing by State-Invested Enterprises. State-invested 
enterprises control a significant share of the trade in electronics 
goods into and out of China. As a result of this active government role 
in the electronics sector, there is a significant risk that, as Chinese 
semiconductor production increases both in volume and quality, other 
state-invested enterprises will be encouraged by Chinese officials to 
purchase from domestic suppliers. Such discrimination could 
significantly burden or restrict U.S. semiconductor sales in China in 
the future. Given the potential long-term significance of state-
invested enterprises in the Chinese electronics sector, China's 
protocol of accession should include an affirmative obligation on the 
part of the Chinese Government to ensure that its state-invested 
enterprises make purchases on the basis of commercial considerations.
    Elimination of Investment Restrictions. Chinese foreign investment 
restrictions, including restrictions on 100 percent foreign ownership, 
export targets and local content requirements are often imposed as 
quid-pro-quos for decisions by government officials at both the 
national and sub-national level. For high tech industries like 
semiconductors, these measures are often used as levers to obtain 
transfer of technology from foreign firms. China's protocol of 
accession should include an explicit provision requiring China to 
refrain from taking any measure which requires a foreign enterprise to 
invest, enter into any form of joint venture arrangement with a Chinese 
entity, or to transfer any technology or intellectual property to a 
domestic entity, except in accordance with WTO rules.
    Trading and Distribution Rights. Chinese restrictions on ``trading 
rights'' (the ability to import and export from China) are significant 
impediments to U.S. semiconductor firms' ability to access the Chinese 
market, and, if not eliminated, may undermine the benefit of other 
trade liberalization measures agreed to by China. Equally important as 
the right to import is the right to distribute goods within China and 
provide after-sales service for those goods. The current system forces 
U.S. producers to sell through Chinese distributors and provide after-
sales service through a domestic Chinese entity. The inability to deal 
directly with end-users is a particular problem in the semiconductor 
industry, where the design and development of application specific 
chips requires extensive contact between semiconductor producers and 
the ultimate end-users of the chips.
    Protection of Intellectual Property Rights. China has enacted 
patent, copyright, and trademark laws, but their credibility requires 
strengthened enforcement. While there has been no piracy of 
semiconductor intellectual property to date, China's level of 
technological development does not yet permit it to manufacture 
advanced U.S. products or misappropriate U.S. chip designs. However, 
China's capabilities in the semiconductor sector are rapidly advancing. 
Therefore, China's protocol of accession to the WTO should commit China 
to abide by the obligations of the WTO Agreement on Trade-Related 
Intellectual Property Rights, without any transition period before the 
obligations are enforceable.
    Non-Market Economy Antidumping Rules. Chinese officials have cited 
the use of the U.S. antidumping law against Chinese exports as a 
``trade barrier'' they wish to see removed in the WTO accession 
negotiations. In particular, China is seeking to eliminate application 
of the non-market economy (NME) provisions of the U.S. antidumping law 
to Chinese exports, on the grounds that China is now a market economy. 
Without the NME provisions of the antidumping law in effect, Chinese 
state-invested enterprises could in the future make significant below-
cost sales of semiconductors in international trade, adversely 
affecting the U.S. semiconductor industry. A provision therefore should 
be included in China's WTO protocol of accession to permit the United 
States to continue to apply the NME provisions of the antidumping law 
to China. The current draft protocol includes proposed text to this 
effect, but it has not been agreed to by China.

     IV. Negotiations on the Free Trade Area of the Americas (FTAA)

    As noted above, one of the significant successes of U.S. trade 
policy in recent years is the Information Technology Agreement (ITA). 
At the urging of the worldwide information technology industry, the 
United States and 43 other countries have agreed through the ITA to 
eliminate tariffs on semiconductors and other information technology 
products in these countries by the year 2000. The ITA, which was 
negotiated under the auspices of the World Trade Organization, 
represents a landmark achievement in the development of global free 
trade. It has dramatically sped-up the process of eliminating tariffs 
on information technology products by scheduling complete elimination 
for over 92 percent of world information technology trade by 2000 and 
establishing procedures for eliminating tariffs on additional products.
    Despite its tremendous accomplishments, the ITA has some 
weaknesses--for example, only two countries in Latin America have 
signed onto this important agreement: Panama and Costa Rica. Thus, 
elimination of Latin American tariffs on semiconductors remains an 
important item of unfinished business for U.S. trade policy.
    Currently, tariffs on semiconductors in such key markets as Brazil, 
Argentina, and Venezuela, remain very high--with bound rates generally 
around 35 percent. Such high tariffs pose a significant barrier to U.S. 
semiconductor exports and also inhibit the development of information 
technology industries in these countries. Elimination of these tariffs 
will spur development of competitive electronics industries in Latin 
America, as it has in other nations. It will allow U.S. producers to 
sell advanced semiconductors to their Latin American customers at the 
lowest possible price, thereby both increasing U.S. exports and 
strengthening developing Latin American electronics industries.
    The benefit to Latin American countries of semiconductor tariff 
elimination is aptly illustrated by comparing developing countries that 
have pursued a high tariff strategy with those that have pursued a low 
tariff strategy for electronics. Looking around the world, those 
developing areas with low or no duties on electronics components and 
systems over the past two decades (Hong Kong, Taiwan, Singapore) have 
been successful in developing strong, dynamic information technology 
industries. Meanwhile, those developing areas with high duties (Latin 
America, India) have not been successful in developing their domestic 
electronics industries.
    Elimination of Latin American tariffs in semiconductors and other 
electronics goods would go a long way assisting the countries of Latin 
America in developing their own competitive industries. Joining the ITA 
would be the quickest way to accomplish this important reform. The FTAA 
provides another effective mechanism for reducing Latin American 
tariffs. While scheduled to be concluded no later than 2005, the FTAA 
calls for, among other things, the progressive elimination of tariffs 
and concrete progress toward achieving the agreement's objectives by 
2000.
    The SIA believes that one important way to demonstrate ``concrete 
progress'' in the information technology sector is for the countries of 
Latin America to join the ITA now, and agree to eliminate their 
information technology tariffs by 2000. Joining the ITA would not only 
allow the countries of Latin America to demonstrate their commitment to 
the FTAA process and enjoy the benefits of free trade more quickly, but 
would also demonstrate how the FTAA can support the WTO system, 
ensuring that regional trade liberalization would not proceed at the 
expense of cooperation with the broader world trading system. In fact, 
the business forum that preceded the most recent FTAA Ministerial 
meeting in San Jose, Costa Rica, explicitly endorsed immediate adoption 
of the ITA by Latin American countries. In addition, APEC's adoption of 
the ITA provides a precedent for immediate adoption of the ITA as a 
means to build momentum for a larger free trade region.
    The SIA believes that the United States should make near-term Latin 
American participation in the ITA a key element of its overall 
negotiating strategy for the FTAA. In addition, as the FTAA 
negotiations go forward, we urge that the United States press for 
strong provisions in the FTAA on protection of intellectual property 
rights, removal of barriers to foreign direct investment (including 
forced technology transfer requirements) and maintenance of strong and 
effective antidumping remedies.

                             V. Fast Track

    In addition, I would like to emphasize in the context of both the 
new WTO Round and the FTAA negotiations that the SIA strongly believes 
that fast track negotiating authority is crucial to reducing trade 
barriers that impede the development and growth of high-value-added 
U.S. industries such as the semiconductor industry. In addition to 
reducing tariffs around the world, U.S. trade policy must continue to 
be focused on eliminating non-tariff barriers. Fast track legislation 
is essential to U.S. efforts to reduce complex non-tariff barriers that 
remain as significant obstacles to our exports in many countries around 
the world. We therefore urge the Congress and the Administration to 
work together to enact bipartisan fast track legislation at the 
earliest possible opportunity.

                             VI. Conclusion

    The SIA welcomes this opportunity to present its views on the 
importance of active U.S. involvement in upcoming trade negotiations at 
the WTO and in the context of the proposed FTAA. U.S. leadership on the 
trade issues discussed above is critical to the continued health and 
growth of the U.S. semiconductor industry.

                                

Statement of Michael V. Draper, Regional Vice-President, United 
Brotherhood of Carpenters and Joiners of America, Portland, OR

    On behalf of the United Brotherhood of Carpenters and Joiners of 
America, I would like to thank the U.S. House of Representatives Ways 
and Means Committee's Subcommittee on Trade for the opportunity to 
share our thoughts on international trade policy in the global market.
    As a Regional Vice-President, I represent carpenters, lumber and 
sawmill workers, and pulp and paperworkers in the western United 
States. As construction workers, we literally build America, from 
skyscrapers to office buildings, from schools to the homes where our 
families reside. As forest product workers, we produce the raw 
materials and paper products offices around the globe used daily. While 
our industry adjusts to the grim reality of foreign competitiveness, 
our members are increasingly concerned with our ability to compete in 
international markets.
    Over the last several decades, the U.S. economy has experienced 
rapidly increasing flows of international capital, goods and services. 
While trade and the movement of capital across borders can bring many 
economic and social benefits, American workers are the first to feel 
the adverse effects from unfair trade policies. In recent years, United 
States' trade agreements have been accompanied by rising trade 
deficits, the loss of good jobs in the manufacturing sector, stagnating 
or falling wages for the majority of the workforce and decreasing job 
security. While working Americans support free trade and the global 
economy, international agreements must be drafted in a fair and 
equitable manner and include provisions that will protect our 
industries and our jobs.
    Today, our industry has found itself at a competitive disadvantage 
in international markets due to restraints on timber supply, 
environmental regulations and restrictions on market access around the 
globe. The Carpenters Union is increasingly concerned with bilateral 
trade imbalances and the ongoing cooperative agreements between the 
United States and Asia, including the Asia-Pacific Economic Cooperation 
negotiations. Asian companies rank among our largest competitors in the 
forest products industry. Many of these companies are growing 
vigorously. Much of that growth is occurring right here in the U.S. 
market, while our own exports to Asia are shrinking dramatically. As 
America's trade deficit reaches all time highs, and Asia's steep 
recessions cut into American exports, the weaker currencies have made 
Asian goods more attractive to U.S. buyers.
    Our industry is facing a barrage of foreign imports from 
competitors who are ``dumping'' resources into American markets in 
order to ease their economic woes. A flood of foreign wood, much of 
which has been illegally dumped into the American market, is 
threatening the jobs of hundreds of thousands of forest product 
workers.
    A formidable arsenal of trade barriers including tariffs, restrict 
U.S. companies from fair competition in Asian markets. While some Asian 
nations place tariffs as high as 40% on paper products and 45% on wood 
products, U.S. tariffs on those goods are at or near zero. Trade reform 
is crucial. Fair and open access to Asian markets is vital to preserve 
the livelihoods of the 1.6 million men and women working in the wood 
and paper products industry throughout the United States.
    Forest product exports have fallen drastically due to Japan's 
refusal to lift the barriers. Asian countries have been some of our 
best importers and constitute the world's fastest-growing markets for 
wood and paper products. In 1997, the region accounted for 40% of U.S. 
exports of wood and paper products. In the first ten months of 1998, 
the value of U.S. wood product exports to the Far East were down 40% 
from 1997. Paper and paperboard exports were off by 19%, while imports 
increased 74%. And during the first quarter of 1998, newsprint exports 
were down 25%, with imports skyrocketing by an alarming 700%. These 
imbalances are among the chief reasons why America's forest products 
industry has lost 80,000 jobs over the last decade.
    The Carpenter's Union applauds the Clinton Administration's efforts 
during APEC negotiations to eliminate wood tariffs, but Japanese 
negotiators still refuse to cooperate. The United States must stand 
firm and continue to demand tariff reductions. We cannot afford to 
trade our interests away. The livelihoods of American workers are non-
negotiable.
    The Carpenters Union is increasingly concerned with the direction 
of the APEC treaty and future tariff initatives. We need to construct 
and enforce international rules that encourage the best kind of 
competition. Americans cannot compete if the rules of international 
trade are unfair or if our trade laws are being violated without 
sanctions. We need to outline our priorities during trade negotiations 
and elevate the importance of U.S. industry and our workers.
    Working Americans built this country into what it is today. We are 
highly competitive and want to compete in the global market, but the 
same rules must apply to all players. Our economy is strong and the 
demand for our products, high. Let's create an even playing field for 
Americans, so we can sell our products around the globe and bring home 
the benefits to our nation, our home town communities and our workers.

                                

Statement of the U.S. Chamber of Commerce

    The U.S. Chamber of Commerce appreciates this opportunity to 
present its views on the importance of trade negotiations in fighting 
foreign protectionism. Our country has made fighting foreign 
protectionism a priority for decades. Ever since the Great Depression, 
presidents of both parties have made it our business to try to remove 
foreign trade barriers so companies and workers like ours would have a 
better shot at success.
    But congressional defeat of fast-track legislation last September 
represented a significant setback. It served to underscore the fact 
that, in recent years, the principal U.S. tendency on foreign economic 
policy has been to restrain or resist U.S. participation and 
integration into international commerce. For example, in its August 
1998 report on unilateral economic sanctions, the U.S. International 
Trade Commission noted forty-two separate U.S. laws that authorize 
economic sanctions for various purposes. But by rejecting renewal of 
fast-track for the first time since its inception in 1974, Congress 
deprived our trade negotiators of the single most important tool they 
need to continue their market-opening efforts.
    Maintenance of normal trade relations with China--the world's 
largest nation and one of its fastest growing economies--remains on a 
year-to-year footing. And in the face of continuing economic and 
financial crises that have already begun to spread from Asia to other 
regions, the U.S. remains reluctant--at best--to exercise the 
leadership that is expected of it in the International Monetary Fund 
and other international institutions.
    As the world changes, continuing U.S. engagement is becoming more 
important to the national interest, not less. New players are emerging 
on economic and political fronts. Economic issues are increasingly 
recognized as important at home and abroad as trade's share of national 
output grows. Economic and trade ``blocs'' such as the North American 
Free Trade Agreement (NAFTA), the European Union, the Asia-Pacific 
Economic Cooperation area (APEC), Mercosur, and others continue to gain 
prominence.
    The United States must either resume its leadership soon or 
abdicate to others. Trade's importance to the U.S. economy has grown 
enormously since 1959. The share of U.S. output purchased by foreigners 
has grown almost three-fold since then--as has the share of U.S. income 
used to purchase foreign goods and services. Over 95% of the world's 
population live outside of the United States. It should make common 
sense not only to trade with them, but also to work with other nations 
to solve international crises and promote expanding trade and sustained 
economic growth.
    Accordingly, our continuing struggle against foreign protectionism 
requires that we pursue both a regional and multilateral agenda for 
commerce abroad and a legislative agenda in the U.S. Congress which 
advances our interests in all of the world's major trading regions. But 
such leadership can be resumed only if certain fundamentals are 
attended to:
     The United States must resume its place at the trade 
agreement negotiating table so that markets can be further opened to 
U.S. business. This means providing U.S. negotiators with the tools 
they need to close deals and bring them home for expedited 
consideration by the Congress. Without such tools, other nations will 
continue to initiate negotiations and conclude agreements which 
establish preferential terms for our competitors, to the disadvantage 
of U.S. interests. For this reason, approval of ``fast track'' trade 
negotiating authority should rank at the top of the nation's 
international economic and business agenda for 1999.
     The United States must cease its continuing reliance on 
unilateral economic sanctions and Cold War-era controls on exports of 
widely available goods as foreign policy tools. History demonstrates 
that the primary result of such sanctions and export controls is to 
inflict economic injury on U.S. businesses and their workers while at 
the same time strengthening--rather than weakening--the intended 
targets of the sanctions and controls. But even more damaging in the 
long run, such sanctions and controls cast a lingering pall of 
unreliability over U.S. companies whose competitiveness is subordinated 
to often vague and counterproductive U.S. policy proclamations.
     The United States must meet fully its obligations to 
international financial institutions (IFIs) on which it must depend for 
stabilizing and growth-enhancing influence in the global economy. IFIs 
such as the International Monetary Fund are the only mechanisms through 
which global financial and economic crises can be effectively managed 
by several nations in a coordinated, complementary fashion. Similarly, 
the United States must provide sufficient financial resources for 
domestic U.S. trade development institutions (e.g., Eximbank, OPIC, 
Trade and Development Agency) that meet financing, insurance and other 
needs that are not fulfilled by the U.S. private sector. At the same 
time, the U.S. must work to ensure that these institutions are 
structured and directed to meet carefully defined objectives that are 
consistent with their overall missions. Care should be taken to prevent 
enactment or implementation of policies that might undermine, distract 
from or conflict with these institutions' missions.
     The United States must recognize the importance of 
maintaining viable trade remedy laws that are designed to eliminate, 
offset or obtain compensation for unfair trade practices or violations 
of international trade agreements by our competitors. Such remedies are 
necessary to enhance U.S. negotiators' leverage and credibility. They 
will also help instill public confidence in the system, so that a 
political mandate for future trade negotiations can develop. This will 
be easier to accomplish if appropriate checks and balances are 
effective.
     The United States must find a basis for addressing 
substantive labor and environmental concerns without holding U.S. 
competitiveness hostage to special interest efforts to achieve 
extraterritorial application of policy objectives that are not relevant 
to international commerce.

                 U.S. Regional Interests And Objectives

    Fighting foreign protectionism requires that the United States 
adopt and pursue clear objectives. Our stake in the world economy and 
in more open commerce is unmistakable. Reflecting this reality, the 
United States has properly and wisely engaged in major trade-
liberalizing negotiations in at least three major trading areas:
    In the Asia-Pacific region, the 18 member economies of the Asia-
Pacific Economic Cooperation (APEC) area represent over half of total 
world production and almost half of global trade. Two-thirds of U.S. 
bilateral trade last year was with APEC economies, whereas in 1980, 
APEC accounted for less than half of U.S. trade. In November 1994, 
leaders of APEC nations declared their commitment to achieving ``free 
and open trade'' in the region by the year 2020 in the case of 
developing countries and 2010 in the case of developed countries.
    The European Union (EU) and the United States are each other's 
single largest trading partner: in 1997 they traded goods worth ECU 
277.000 million--around 20% of world trade in goods. Last September, 
U.S. and EU negotiators agreed to a draft action plan on a 
Transatlantic Economic Partnership (TEP) which envisions negotiations 
and other forms of cooperation with the United States in many areas of 
mutual concern. The EU and U.S. have by far the world's most important 
bilateral investment relationship, and are each other's most important 
source and destination for foreign direct investment (FDI). The EU is 
the biggest investor in the U.S., accounting for 59% of total incoming 
foreign direct investment stock by 1996. At the same time, over half of 
the foreign direct investment stock in the EU originates in the United 
States.
    In the Western Hemisphere, regional trade grew 15% in 1997--twice 
the world average. Two-thirds of the growth in U.S. exports has been in 
the Western Hemisphere region. Recognizing this potential, nations 
throughout the hemisphere are negotiating with each other and with 
competitors from Europe and elsewhere to maximize their potential to 
capitalize on this trend. In 1994, with U.S. leadership, most Western 
Hemisphere nations agreed to pursue a Free Trade Area of the Americas 
(FTAA) by 2005. But absent effective U.S. participation in FTAA and 
other regional negotiations, other nations are likely to continue 
gaining at our expense as the trade benefits they negotiate with each 
other are not extended to U.S. products and services.

                         Negotiating Objectives

    The United States must continue to promote its economic interests 
regionally and worldwide through an aggressive negotiating agenda 
worldwide that can be summarized as follows:
     Faster elimination of tariff and nontariff restrictions on 
trade in manufactured goods, agriculture and services,
     Fewer investment restrictions,
     Improved intellectual property protection,
     More transparent and consistent regulations, standards and 
government procurement policies and practices,
     Modernized and simplified customs networks and procedures,
     Facilitation of electronic commerce, and
     Elimination of corrupt business practices.

                     Negotiating ``Rules Of Thumb''

    While specific details will vary from region to region, certain 
generic rules of thumb should apply to our trade-liberalizing efforts:
     As noted above, negotiators must target specific barriers 
and obtain remedies which will bring concrete benefits to business and 
consumers.
     Agreements in each area should be announced and 
implemented ``as concluded'' and not be held hostage to completion of 
all other agreements.
     U.S. and other negotiators should cooperate closely 
whenever possible to extend bilateral agreements to the multilateral 
trading system.
    As U.S. negotiators prepare for a third World Trade Organization 
(WTO) ministerial meeting in Seattle in November and December, they 
will need to focus on:
     implementation of existing agreements and work plans as 
formulated in the Uruguay Round Agreements.
     negotiation of new agreements in areas not fully addressed 
in the Uruguay Round Agreements, e.g., services, government 
procurement, subsidies, agriculture, competition policy and 
intellectual property.
     criteria for integration of the least-developed 
(especially poor) countries, taking into account special trade 
treatment their economic circumstances may justify.

                     U.S. Congressional Objectives

    In November 1998, the U.S. Chamber's Board of Directors promulgated 
a detailed set of legislative recommendations that it believes would 
bolster our ability to fight protectionism and otherwise achieve our 
objectives in world markets. All of them are important for various 
reasons. But Congress can assist our trade negotiators most directly in 
our battle against protectionism by taking positive action to:
    Renew fast-track trade negotiating authority along the lines of 
legislation approved in 1997 by the House Ways and Means Committee 
(H.R. 2621) or the Senate Finance Committee (S. 1269). Congressional 
defeat of fast track in September 1998 will result primarily in the 
continuing surrender of U.S. business and jobs to our competitors in 
global markets. While those competitors are continuing to negotiate 
mutually beneficial agreements unburdened by unilateral efforts to 
impose a social agenda, U.S. trade negotiators are unable to 
participate meaningfully without fast track. U.S. absence from the 
negotiating tables will result in growing disadvantages for U.S. firms 
and their workers arising from trade preferences obtained by our 
competitors.
    Renew China's ``normal trade relations'' (NTR) status by June 1999. 
The United States provides such treatment (previously mis-labeled 
``most-favored-nation'') to virtually every other trading nation. 
Indeed, the ``normalcy'' of this relationship is tautological, as it is 
characteristic of trade relations between virtually all trading 
nations. Ending normal trade relations with China would result in a 
several-fold increase in tariffs on Chinese products, almost certain 
retaliation against U.S. products, and new market advantages for our 
Asian and European competitors.
    Make China's normal trade relations (NTR) status permanent. The 
annual NTR (previously known as ``most-favored-nation'' or MFN) renewal 
process itself casts a continuing pall over China-U.S. commercial 
relations--without regard to the actual outcome. Historically, pending 
China-U.S. deals were in effect held up or suspended for weeks before 
each MFN vote until it could be confirmed that the vote would be 
``positive.'' U.S. firms' reputations continue to suffer vis-a-vis 
their competition. It is time to enact such legislation as may be 
necessary to make permanent that status.
    Ensure provision of sufficient financial resources for U.S. trade 
development programs (e.g., Eximbank, OPIC, Trade and Development 
Agency) that meet financing, insurance and other needs that are not 
fulfilled by the U.S. private sector. Foreign subsidization of their 
``national champions'' and other trade interests via preferential 
financing and government ``guidance'' challenges U.S. interests as much 
as traditional trade barriers and restrictions. In a perfect world 
there would be no such subsidies. But in the real world, such subsidies 
abound. Until meaningful, verifiable action to end such subsidies is 
taken, we must be prepared to lead the playing field. Accordingly, the 
U.S. should (1) provide sufficient funding to these entities to ensure 
that they can carry out their missions, (2) ensure that these 
institutions are structured and directed to meet their defined 
objectives but not others, and (3) prevent implementation of policies 
that might undermine or conflict with the trade development missions of 
these programs.
    Prospectively mandate the application of a series of ``cost-
benefit'' measurements and evaluations that must be considered in the 
economic sanctions decision-making phase and before implementation of 
such sanctions. How can we persuade our trading partners to open their 
markets when we impose non-trade-related unilateral sanctions against 
them? Such criteria should include: (a) will the sanctions work; (b) 
what are the resultant economic costs to U.S. industry and agriculture; 
(c) will the sanctions result in a serious backlash against other U.S. 
humanitarian, security, and foreign policy objectives; and (d) have 
other policy alternatives such as multilateral initiatives or diplomacy 
been tried and failed? In the 105th Congress, H.R. 2708 (Hamilton et 
al.) and S. 1413 (Lugar et al.), the ``Enhancement of Trade, Security, 
and Human Rights through Sanctions Reform Act,'' were models for 
legislation that would achieve these objectives. We expect similar 
legislation to be re-introduced in this Congress very soon, if that has 
not already happened.
    Re-establish tariff benefits of the original Caribbean Basin 
Initiative and provide Caribbean countries trade benefits similar to 
those provided Mexico under NAFTA. Failure to provide those benefits--
such as proposed in the last Congress in H.R. 2644 (Crane et al.), the 
``United States-Caribbean Trade Partnership Act''--will encourage new 
competitive challenges from Far Eastern textile manufacturers, whose 
products are subject to far less North American value-added, e.g., 
cutting, distribution and marketing, than those produced by Caribbean 
manufacturers.
    Enact long-term Generalized System of Preferences (GSP) 
reauthorization legislation and strictly enforce GSP eligibility 
criteria. GSP was first enacted in 1974 as a means to assist developing 
countries grow through expanded trade as opposed to aid. In recent 
years, the consensus for income-based preferential trade treatment has 
given way to concerns over the competitive impact in the U.S. market of 
such preferences, and GSP has been renewed only for short-term periods 
and with lapses in its application that destabilize commercial 
relationships that depend on the program. While such concerns are 
legitimate, as long as GSP is an instrument of U.S. foreign economic 
policy, the competitiveness of U.S. companies should not be undercut by 
the lack of clarity and certainty that has already resulted from lapses 
in the GSP program.


                                
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