[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]
PRESIDENT BUSH'S TRADE AGENDA FOR 2002
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FEBRUARY 7, 2002
Serial No. 107-57
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
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
C O N T E N T S
Advisory of January 29, 2002, announcing the hearing............. 2
United States Trade Representative, Hon. Robert B. Zoellick...... 12
SUBMISSIONS FOR THE RECORD
Advanced Medical Technology Association (AdvaMed), statement..... 59
American Apparel & Footwear Association, Arlington, VA, statement 62
American Forest & Paper Association, statement and attachments... 64
American Iron and Steel Institute, statement..................... 68
American Textile Manufacturers Institute, statement.............. 75
Association of American Chambers of Commerce in Latin America,
Bolivia, Republic of, Her Excellency Marlene Fernandez del
Granado, letter................................................ 83
Brazil-U.S. Business Council, U.S. Section, statement............ 84
Faleomavaega, Hon. Eni F.H., a Representative in Congress from
American Samoa, statement...................................... 86
Goss Graphic Systems, Inc., Westmont, IL, Joe Gaynor, statement
and attachment................................................. 89
H.J. Heinz Company, Pittsburgh, PA, Michael D. Milone, letter.... 91
Mattel, Inc., El Segundo, CA, statement.......................... 95
National Electrical Manufacturers Association, Rosslyn, VA,
Semiconductor Industry Association, George Scalise, statement.... 101
United States Association of Importers of Textiles and Apparel,
New York, NY, statement........................................ 105
PRESIDENT BUSH'S TRADE AGENDA FOR 2002
THURSDAY, FEBRUARY 7, 2002
House of Representatives,
Committee on Ways and Means,
The Committee met, pursuant to notice, at 11:00 a.m., in
room 1100 Longworth House Office Building, Hon. Bill Thomas
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
FROM THE COMMITTEE ON WAYS AND MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
January 29, 2002
Thomas Announces a Hearing on
President Bush's Trade Agenda for 2002
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
President Bush's trade agenda for 2002. The hearing will take place on
Thursday, February 7, 2002, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from United States Trade
Representative Robert B. Zoellick. However, 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.
From November 9-14, 2001, trade ministers representing 140
countries met at the Fourth World Trade Organization (WTO) Ministerial
Conference in Doha, Qatar, where an agreement was reached to launch a
new round of multilateral trade negotiations. A schedule for
negotiations will be formulated shortly, and the United States and its
trading partners will be tabling negotiating proposals. In addition,
negotiations to establish the Free Trade Area of the Americas (FTAA)
are reaching a critical stage with the approaching deadline of May 15,
2002, for initiating market-access talks.
Negotiations to establish bilateral free trade agreements (FTAs)
with Singapore and Chile are scheduled to conclude later this year. All
of these negotiations cover agriculture, services, industrial tariffs,
and investment, to name a few of the sectors where the United States
stands to gain new export opportunities.
At the same time, the Administration is considering other possible
FTAs to improve U.S. access to foreign markets. On December 6, 2001,
the House passed H.R. 3005, a bi-partisan bill to renew the President's
authority to present legislation implementing trade agreements to
Congress for approval without amendment (otherwise known as Trade
Promotion Authority). This legislation contains extensive negotiating
objectives and consultation requirements. H.R. 3005 was approved by the
Senate Finance Committee, as amended, on December 18, 2001.
In announcing the hearing, Chairman Thomas stated: ``A tried and
true medicine for a weakened economy is expanding trade, and the House
has moved ahead to grant President Bush and Ambassador Zoellick the
tools that need to open foreign markets to U.S. products and services.
Right now, as we await Senate action, markets are being pried open in
Latin America, Asia, and Europe, for the goods and services of our
competitors. Our trading partners are signing new trade agreements
monthly that leave the United States out. As the Senate considers H.R.
3005, the Committee will be engaged in close consultations with the
Administration on priorities for the new round of WTO negotiations, the
FTAA, and on additional negotiations to establish free trade agreements
with close trading partners and allies. We will actively encourage the
Senate to deliver tools needed by the Bush Administration to ensure
that future trade agreements include, rather than exclude, the United
FOCUS OF THE HEARING:
The hearing is expected to examine current trade issues such as:
(1) the President's trade agenda in light of House passage of H.R.
3005, (2) the success of the WTO Ministerial Meeting in Doha, (3)
prospects for the FTAA, (4) H.R. 3009, a bill passed by the House to
extend and expand the Andean Trade Preference Act, which is awaiting
Senate action, (5) the functioning of the WTO dispute settlement system
and cases that have been brought against the United States, including
the challenge to the Foreign Sales Corporation and Extraterritorial
Income Exclusion rules, (6) the steel safeguard determination due March
6, (7) progress in negotiations to establish trade agreements with
Singapore and Chile, (8) other potential candidates for free trade
agreement negotiations such as Australia, New Zealand, and Central
American countries, and (9) the pending accession of Russia to the WTO
and H.R. 3553, a bill to remove Russia from Title IV of the Trade Act
of 1974, the so-called Jackson-Vanik amendment.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Due to the change in House mail policy, any person or
organization wishing to submit a written statement for the printed
record of the hearing should send it electronically to
``[email protected]'', along with a fax copy to
202/225-2610 by the close of business, Thursday, February 21, 2002.
Those filing written statements who wish to have their statements
distributed to the press and interested public at the hearing should
deliver their 200 copies to the full Committee in room 1102 Longworth
House Office Building, in an open and searchable package 48 hours
before the hearing. The U.S. Capitol Police will refuse unopened and
unsearchable deliveries to all House Office Buildings.
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
1. Due to the change in House mail policy, all statements and any
accompanying exhibits for printing must be submitted electronically to
``[email protected]'', along with a fax copy to
202/225-2610, in Word Perfect or MS Word format and MUST NOT exceed a
total of 10 pages including attachments. Witnesses are advised that the
Committee will rely on electronic submissions for printing the official
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://waysandmeans.house.gov.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
Chairman Thomas. If our guests could find seats, please.
Good morning to all of you.
Welcome, Ambassador Zoellick. Thank you for joining us
This is the Committee's fourth hearing this week on the
President's budget; and, as I have said, the President has
stated three very clear goals in the context of his fiscal year
2003 budget plan: win the war, protect the homeland and revive
The events of September 11 have challenged us in many ways,
and we are being tested militarily and in our domestic economy
and our commitment to remain engaged on the world economic
stage. As we work to revitalize the economy, nearly 8 million
people remain unemployed. We believe free trade will fuel the
engines of economic growth and create new jobs and new income
here and abroad--I am sorry. You guys ready to go?
The United States is the world's largest exporter and for
good reason. Our firms and workers are highly productive and
committed to competing and winning in international commerce.
Competition breeds innovation, and innovation leads to new and
better-paying jobs. International trade agreements generate
economic growth, spawn technological advances and help to
advance American foreign policy objectives. One of every $4 in
the U.S. economy is linked to trade. Twelve million Americans
owe their jobs to exports. Each trade agreement excluding the
United States represents an opportunity lost for American
business and the workers they employ.
Those who complain about unfair treatment we receive abroad
or unfair advantages enjoyed by their international competitors
should see the importance of moving forward with negotiations.
Unless we aggressively negotiate in our own interests, we will
face the same disadvantages in the future.
We cannot negotiate, however, unless Congress gives the
President the tools he needs. Senate passage of Trade Promotion
Authority (TPA) passed by the House last year would complete
Congress' commitment that American business have a fair chance
to compete and win in the international arena. We will actively
encourage the Senate to deliver tools the President needs to
ensure America stays competitive.
The Senate has also not yet passed the Andean Trade
Promotion Act and the Drug Eradication Act, part of a
comprehensive approach to fight the illegal drug trade that
continues to plague that region, indeed, our Nation as well.
This bill will offer the people of these nations--Colombia,
Peru, Bolivia, Ecuador--the opportunity to develop legitimate
businesses, rather than engage in the production of illegal
In December, the Foreign Sales Corporation (FSC)
replacement, the Extra Territorial Income Exclusion Act of
2000, was ruled an illegal export subsidy by the World Trade
Organization (WTO). I intend to hold full Committee hearings
and a series of subcommittee hearings to examine the issue, and
the Committee will undertake the necessary and appropriate
legislative steps to meet our WTO obligations.
We must preserve the international competitiveness of U.S.
interests. We have railed long and hard against those who do
not comply to international agreed-upon rules. It is then in
our own interest when we have received the judgment against us
to make sure that we comply with those rules as well.
Mr. Ambassador, you succeeded in breaking through the WTO
deadlock that had prevailed since Seattle. As a result, we have
an agreement on the need for a comprehensive 3-year negotiation
covering the range of trade barriers in agriculture, especially
services, industrial tariffs and investment. This Committee
will work closely with you to develop priorities for the new
round of WTO negotiation, the Free Trade Area of the Americas
(FTAA), the indicated Singapore and Chilean free trade
agreements (FTA) and, hopefully, additional negotiations that
we can agree on and you have been able to arrange for us so
that we can continue creating new arrangements with our close
trading partners and allies.
At this point, I would recognize briefly the gentleman from
Illinois, the Chairman of the Trade Subcommittee.
[The opening statement of Chairman Thomas follows:]
Opening Statement of the Hon. Bill Thomas, a Representative in Congress
from the State of California, and Chairman, Committee on Ways and Means
Good morning. Welcome, Ambassador Zoellick, and thank you for
joining us today. This is the Committee's fourth hearing this week on
the President's budget. And, as I've said, the President has stated
three very clear goals in the context of his fiscal year 2003 budget
plan: win the war, protect the homeland, and revive the economy.
The events of September 11 have challenged us in many ways. We are
being tested militarily, in our domestic economy, and in our commitment
to remain engaged on the world economic stage. As we work to revitalize
the economy, nearly eight million people remain unemployed.
We believe free trade will fuel the engines of economic growth and
create new jobs and new income here and abroad. The United States is
the world's largest exporter, and for good reason. Our firms and
workers are highly productive and committed to competing and winning in
international commerce. Competition breeds innovation, and innovation
leads to new and better paying jobs.
International trade agreements generate economic growth, spawn
technological advances and help to advance American foreign policy
objectives. One of every four dollars in the U.S. economy is linked to
trade; twelve million Americans owe their jobs to exports. Each trade
agreement excluding the United States represents an opportunity lost
for American business, and the workers they employ.
Those who complain about unfair treatment we receive abroad or
unfair advantages enjoyed by their international competitors should see
the importance of moving forward with negotiations. Unless we
aggressively negotiate in our own interests, we will face the same
disadvantages in the future. We cannot negotiate, however, unless
Congress gives the President the tools he needs.
Senate passage of Trade Promotion Authority--passed by the House
last year--would complete Congress' commitment that American business
have a fair chance to compete and win in the international arena. We
will actively encourage the Senate to deliver tools the President needs
to ensure America stays competitive.
The Senate has also not yet passed the Andean Trade Promotion and
Drug Eradication Act--part of a comprehensive approach to fight the
illegal drug trade that continues to plague that region, and indeed,
our nation as well. This bill will offer the people of these nations--
Colombia, Peru, Bolivia, Ecuador--the opportunity to develop legitimate
businesses, rather than engaging in the production of illegal drugs.
In December, the Foreign Sales Corporation Replacement, the
Extraterritorial Income Exclusion Act of 2000, was ruled an illegal
export subsidy by the World Trade Organization. I intend to hold full
committee hearings and a series of subcommittee hearings to examine the
issue, and the Committee will undertake the necessary and appropriate
legislative steps to meet our WTO obligations. We must preserve the
international competitiveness of U.S. interests.
We have railed long and hard against those who do not comply with
internationally agreed upon rules. It is in our own interests when we
have received a judgment against us to make sure that we comply with
those rules as well.
Mr. Ambassador, you succeeded in breaking through the WTO deadlock
that had prevailed since Seattle. As a result, we have an agreement on
the need for a comprehensive three-year negotiation, covering a range
of trade barriers in agriculture especially, in services, industrial
tariffs, and investment.
This Committee will work closely with you to develop priorities for
the new round of WTO negotiations, the Free Trade Area of the Americas,
the indicated Singapore and Chilean Free Trade Agreements and hopefully
additional negotiations that we can agree on and that you've been able
to arrange for us so that we can continue creating new arrangements
with our close trading partners.
At this point, I would recognize, briefly, the gentleman from
Illinois, the chairman of the trade subcommittee.
Mr. Crane. Thank you, Mr. Chairman. I want to join in
warmly welcoming Ambassador Zoellick to the Committee and to
commend him on the impressive breakthrough he achieved at the
World Trade Organization Ministerial meeting in Doha. As you
know, I led a delegation of 19 from this Committee to Seattle
in 1999, where we observed firsthand the deadlock and suspicion
among our trading partners in the WTO.
Mr. Ambassador, at Doha you cleared away a black cloud on
the horizon of our international economic strength. Americans
are once again leading at the international negotiating table.
The paychecks of hard working folks in plants and on farms
across this country will be more secure as the result of the
markets the new Doha Round can open.
As they say at Cape Canaveral, ``We've got a launch.'' We
also have a schedule and an outline of what can be achieved in
terms of reducing unfair disparities in tariffs faced by
American companies, discriminatory rules governing services
unfamiliar and burdensome products standards and regulations
and unnecessary threats to their investments.
Finally, you succeeded getting countries to commit to a
deadline of 2005, and if I could do one thing today, it would
be to urge you to stick to that date. It is great to have you
before us today knowing that the Committee and the House have
made the hard choices necessary to pass Trade Promotion
Authority and we are only awaiting action on the other body.
The rapid 18 to 3 bipartisan approval in the Finance Committee
tells me that we struck the right balance in the House even
from where I sit at one end of the seesaw.
Last year at this time when getting Trade Promotion
Authority out of the House was in question, our economic future
as a country was also warned out. Now I believe Congress may be
very close to giving you and the President the tools you need.
Our trading partners have been very active in opening and
expanding markets for their exports, and I am optimistic we are
positioning ourselves to do the same.
I believe that this year 2002 will be a significant year
for the United States trade policy. We look forward to
enhancing the Andean trade bill, concluding bilateral FTAs with
Singapore and Chile which were initiated by President Clinton,
initiating several other FTAA negotiations, achieving key
milestones in negotiations to establish a Free Trade Area of
the Americas and positive movement in many WTO matters,
including agriculture services and industrial tariffs. The year
ahead in trade holds the promise of job creation, economic
growth and making the world more secure by expanding commercial
ties among countries that should be doing more to work
I look forward to working, or hearing from you first and
working with you on our trade priorities along with President
Bush, and I thank you, Mr. Chairman.
[The opening statement of Mr. Crane follows:]
Opening Statement of the Hon. Phillip M. Crane, a Representative in
Congress from the State of Illinois
Thank you, Mr. Chairman. I want to join in warmly welcoming
Ambassador Zoellick to the Committee and to commend him on the
impressive breakthrough he achieved at the World Trade Organization
(WTO) Ministerial meeting in Doha.
As you know, I led a delegation of nineteen from this Committee to
Seattle in 1999 where we observed first hand the deadlock and suspicion
among our trading partners in the WTO. Mr. Ambassador, at Doha you
cleared away a black cloud on the horizon of our international economic
strength; Americans are once again leading at the international
The paychecks of hard-working folks in plants and on farms across
this country will be more secure as the result of the markets the new
Doha Round can open. As they say at Cape Canaveral: ``We've got a
launch.'' We also have a schedule and an outline of what can be
achieved in terms of reducing unfair disparities in tariffs faced by
American companies, discriminatory rules governing services, unfamiliar
and burdensome product standards and regulations, and unnecessary
threats to their investments. Finally, you succeeded getting countries
to commit to a deadline of 2005 and, if I could do one thing today, it
would be to urge you to stick to that date.
It is great to have you before us today knowing that this Committee
and the House have made the hard choices necessary to pass Trade
Promotion Authority, and that we are only awaiting action in the other
Body. The rapid 18-3 bipartisan approval in the Finance Committee tells
me that we struck the right balance in the House, even from where I sit
near one end of the seesaw. Last year at this time, when getting trade
promotion authority out of the House was in question, our economic
future as a country was also more in doubt. Now, I believe, Congress
may be very close to giving you and the President the tools you need.
Our trading partners have been very active in opening and expanding
markets for their exports and, I am optimistic we are positioning
ourselves to do the same. I believe that this year, 2002, will be a
significant year for United States trade policy. We look forward to
enacting the Andean Trade bill, concluding bilateral FTAs with
Singapore and Chile which were initiated by President Clinton,
initiating several other FTA negotiations, achieving key milestones in
negotiations to establish a Free Trade Area of the Americas (FTAA), and
positive movement in many WTO matters including agriculture, services,
and industrial tariffs.
The year ahead in trade holds the promise of job creation, economic
growth, and making the world more secure by expanding commercial ties
among countries that should be doing more to work together. I look
forward to hearing about the trade priorities as you and President Bush
Chairman Thomas. Prior to hearing from you, Mr. Ambassador,
I will recognize the gentleman from New York, Mr. Rangel, for
an opening statement.
Mr. Rangel. Mr. Chairman, I intend to pass and to yield to
Sandy Levin, but before I do I want to join with you in
congratulating our trade representatives on these international
efforts on behalf of our country.
I also would want to point out that this Committee in
particular takes great pride in the unity that we have in the
past shown in terms of our trade policy as the Congress tries
to--in terms of foreign policy, and I think that the trade bill
with China as well as the Caribbean Basin Initiative (CBI) and
the opportunities that we have made and you continue to expand
in Africa throws away our party labels and makes us proud to
provide the leadership that is expected of us by the House
Having said that, it is apparent that on many tax policies
especially as relates to FSC and in certain areas how we treat
labor and environment and investments for U.S. firms that you
know, as I do, that there are basic policy differences between
our parties politically.
I want to thank you for the time you spend with me and
Democrats, but I also want to ask you publicly to consider
whether or not you can attempt to use your good office and that
of the Administration to try to break down the political
positions that both sides of the aisles of this Committee finds
it so easy to lock ourselves into. And it is going to take a
little more than just the shuttle that you so effectively ride
between Democrats and Republicans, but it really means that if
the President is talking about bipartisanship, he should know
that it stops when it gets to this Committee. And so I hope you
would consider that.
One of the examples, of course, is that some people believe
that when you win by one vote and you have a half dozen
Democrats it is bipartisan. It is OK with me because I can be
just as political as anyone else. But it would seem to me when
you go into an agreement with the Caribbean countries and then
find out you have to renege on that agreement in order to pick
up a vote that we should expect the Administration would resent
this type of behavior no matter which party is the offending
It is my understanding that you have taken the position
that this measure would have little commercial impact on the
Caribbean countries. Well, this is not the position taken by
the Caribbean countries, and I do hope that at some time and
point we might be able to review what the Congress has done
that does violence to what you are supposed to be doing
representing all of us.
I would like to yield to Mr. Levin to get involved with
more substantive issues. Thank you.
[The opening statement of Mr. Rangel follows:]
Opening Statement of the Hon. Charles B. Rangel, a Representative in
Congress from the State of New York
I want to join with Chairman Thomas in congratulating our trade
representative on his international efforts on behalf of our country. I
also would want to point out that this Committee takes pride in the
unity that we in the past have shown in terms of our trade policy, as
the Congress tries to show unity in terms of foreign policy. And I
think that the trade bill with China as well as the Caribbean Basin
Initiative and the opportunities we have made as we continue to expand
in Africa throws away our party labels and makes us proud to provide
the leadership that is expected of us by the House Members.
Having said that, it is apparent that on many tax policies--
especially as they relate to FSC and, in certain areas, how we treat
labor and the environment and investment for U.S. funds--you know as I
do that there are basic policy differences between our parties
I want to thank you for the time that you have spent with me and
Democrats, but I also want to ask you publically to consider whether or
not you can attempt to use your good offices and those of the
Administration to try break down the political divisions that both
sides of the aisle of this committee find ourselves so easily locked
into. And, it is going to take a little more than the shuttle that you
so effectively provide between Democrats and Republicans. What it
really means is that, if the President is talking about bipartisanship,
he should know that it stops when it gets to this Committee. And I hope
that you would consider that.
One of the examples of that is when some people believe that, when
you win by one vote and you have a half a dozen Democrats, it is
bipartisan. It is o.k. with me because I can be just a political as
anyone else. But it would seem to me that when you go into an agreement
with the Caribbean countries and then find out that you have to renege
on that agreement in order to pick up a vote, that we should expect
that the Administration would resent this type of behavior, no matter
which party is the offending party.
It is my understanding that you have taken the position that this
measure would have little commercial impact on the Caribbean countries.
Well, this is not the position taken by the Caribbean countries. And I
do hope that, at some point in time, we might be able to review what
the Congress has done that does violence to what the U.S. is suppose to
do representing all of us.
Mr. Levin. Well, I am not sure I can be more substantive
than you, Mr. Rangel, but thank you for yielding and for your
comments in truly the substance of trade. It was necessary to
launch a new round at Doha, although there were some serious
omissions and many vaguenesses.
We welcome you here today, Ambassador. Your role was
clearly important in the launch of Doha and I commend you for
that. Doha followed several years of hard work, and I emphasize
that, and progress, and I emphasize that also, on the trade
front. Cambodia, CBI, Africa, Vietnam, China permanent normal
trade relations (PNTR), U.S.-Jordan FTA.
It is important to note those efforts for two reasons. One,
and very importantly, they were developed in a broad bipartisan
manner, and that is the only way we can move ahead productively
on international trade. That is why I respectfully suggest that
it is counterproductive to indicate, as you do in your
testimony, that the thrust for trade liberalization had been
lost before 2001 or that it was necessary to restore American
I don't believe that leadership had been lost. Indeed,
there have been new energy in 1999 and 2000 on important issues
of trade. Negotiations in 1999 and 2000 grappled with the
integration among other issues of core labor and environmental
standards into trade agreements. The list of successful
initiatives is impressive: The textile and apparel agreement
with Cambodia, which included positive incentives for the
enforcement of labor standards--and our staff was there and
reported back that it is working; the efficacy of the
legislation which expanded trade with Africa and the Caribbean
countries while strengthening the labor provisions and building
upon complement charities in the textile and apparel industry
of our country; the China PNTR legislation which we worked on
for a year, and that was the key, I think, to moving the issue
within the WTO, which recognized the importance of the trade
remedy laws and which created a commission to monitor the rule
of law, human rights and labor rights in China. And the U.S.-
Jordan agreement, which included provisions on core labor and
environmental standards enforceable in the same way as any
other provision in the agreement.
As I see it, the Fast Track bill that passed the House was
a serious step backward from this progress, as was the exchange
of letters relating to the Jordan agreement, and also the
failure to even raise the labor standards issue prior to Doha
and at Doha through a working group on labor. The Rangel
substitute that garnered 161 votes would have sustained the
momentum in these areas as well as addressing, and I emphasize
this, other key issues. I expect that its equivalent will be
introduced within the next week or so in the U.S. Senate, and
unlike the procedure that was adopted here that did not even
allow us to introduce the bill on the Floor as a substitute for
full debate, there will be ample time to debate that and other
proposals in the Senate.
On Monday, this last Monday, Representatives Bentsen and
Eshoo along with Mr. Rangel, Mr. Matsui, myself, and others
introduced a bill to renew trade adjustment assistance (TAA)
and to improve it. We need those reforms, including a strong
health provision. However, improved TAA should not be used as a
rationale to pass a flawed Fast Track bill. We need to get
right both trade policy and a safety net for those who are hurt
by the impact of international trade. We need to shave trade
policies to both maximize its benefits, and there are many, and
minimize its detriments, and there surely are some, and not
only help those who lose out.
There are some, and I understand and respect their opinion
though I very much disagree with it, who do not believe that we
need to shave trade policy in this regard. In a sense, that is
the basic issue confronting this issue on steel. One approach
is to simply let the market run its course no matter what the
consequences and rely only on a safety net to catch all those
who suffer the consequences. My own judgment is that such an
approach would be bad for the Nation, bad for our Nation's
economy and bad for the many adversely affected companies,
workers and communities.
We have--I am almost done, Mr. Chairman--we have a much
better alternative. With a sensible, balanced set of policies,
with broad perspectives and open minds rather than narrow
thinking, we can do better in this case and in general in our
approach to trade issues on a truly bipartisan basis.
I appreciate that you journeyed over here to talk to Mr.
Rangel and to me over the recess. I encourage you to continue
to work with us on the specifics on each of the issues as they
emerge. I also urge the Administration to exercise its
leadership in the legislative process to build a truly
bipartisan consensus on trade policy. It will by no means be
easy, but if we confront the tough issue head on, real progress
can be made. Thank you.
[The opening statements of Mr. Levin and Mr. Ramstad
Opening Statement of the Hon. Sander M. Levin, a Representative in
Congress from the State of Michigan
It was necessary to launch a new Round at Doha although there were
some serious omissions and many vaguenesses. We welcome you here today,
Ambassador--your role was clearly important in the launch at Doha, and
I commend you for that.
Doha followed several years of hard work and progress on the trade
front: Cambodia; CBI; Africa; Vietnam; China PNTR; U.S.-Jordan FTA. It
is important to note these efforts for two reasons. One, and very
importantly, they were developed in a broadly bi-partisan manner--and
that is the only way we can move ahead productively on international
trade. That is why I respectfully suggest that it is counterproductive
to indicate as you do in your testimony that the ``thrust for trade
liberalization had been lost'' before 2001 . . . or, ``that it was
necessary to restore American leadership.'' I do not believe that
leadership had been lost.
And two, indeed, there had been new energy in 1999 and 2000 on
important issues of trade. The negotiations in 1999 and 2000 grappled
with the integration--among other issues--of core labor and
environmental standards into trade agreements.
The list of successful initiatives is impressive:
Lthe textiles and apparel agreement with Cambodia, which
included positive incentives for the enforcement of labor standards.
Our staff was there and reported back it is working;
Lthe Africa-CBI legislation which expanded trade with
Africa and the Caribbean countries, while strengthening the labor
provisions and building upon complementarities with the textile and
apparel industry of our country;
Lthe China PNTR legislation--which we worked on for a year
and was the key in moving the issue within the WTO--recognized the
importance of the trade remedy laws and created a Commission to monitor
labor rights in China; and
Lthe U.S.-Jordan agreement, which included provisions on
core labor and environmental standards enforceable in the same way as
any other provision in the agreement.
The Fast Track bill that passed the House was a serious step
backward from this progress, as was the exchange of letters relating to
the Jordan agreement and also the failure to even raise the labor
standards issue prior to Doha, and at Doha, the working group on labor.
The Rangel substitute that garnered 161 votes would have sustained
the momentum in these areas, as well as addressing other key issues. I
expect that its equivalent will be introduced within the next week or
so in the U.S. Senate. Unlike the procedure that was adopted here, that
did not even allow us to introduce the bill on the floor as a
substitute with full debate, there will be ample time to debate that
and other proposals in the Senate.
On Monday, Reps. Bentsen and Eshoo, along with Mr. Rangel, Mr.
Matsui, myself and others introduced a bill to renew Trade Adjustment
Assistance and improve it. We need those reforms, including a strong
health provision. However, improved TAA should not be used as a
rationale to pass a flawed fast track bill. We need to get right both
trade policy and a safety net for those who are hurt by the impact of
international trade. We need to shape trade policy to both maximize its
benefits--and there are many--and minimize its detriments--and there
clearly are some--and not only help those who lose out.
There are some, and I understand and respect their opinion though I
very much disagree with it, who do not believe that we need to shape
trade policy in this regard. In a sense, that is the basic issue
confronting this country on steel. One approach is to simply let the
market run its course, no matter what the consequences, and rely only
on a safety net to catch all those who suffer the consequences. My own
judgment is that such an approach would be bad for the nation, bad for
our nation's economy and bad for the many adversely affected companies,
workers and communities.
We have a much better alternative. With a sensible, balanced set of
policies, with broadened perspectives and open minds rather than narrow
thinking, we can do better--in this case and in general in our approach
to trade issues, on a truly bi-partisan basis.
I appreciate that you journeyed over here to talk to Mr. Rangel and
to me over the recess. I encourage you to continue to work with us on
the specifics of each of the issues as they emerge. I also urge the
Administration to exercise its leadership in the legislative process to
rebuild a truly bi-partisan consensus on trade policy. It will by no
means be easy, but I think that if we confront the tough issues head-
on, real progress can be made.
Opening Statement of the Hon. Jim Ramstad, a Representative in Congress
from the State of Minnesota
Mr. Chairman, thank you for calling this important hearing on the
President's trade agenda for opening foreign markets for American
In this difficult and challenging time, it is absolutely critical
to job creation and our economic security to expand trade and market
America's goods and services to the world's consumers.
The House took an important step forward in December when it passed
Trade Promotion Authority for the President. I hope the Senate will act
soon on this critical tool for American job creation.
Over 25% of the growth in our national economy over the last decade
is tied directly to international trade. Exports from my home state of
Minnesota have increased over $6 billion in the last decade. Over
270,000 jobs in Minnesota manufacturing exist because of trade, and
trade-related jobs pay 13 to 18% more than other jobs.
The U.S. is rapidly falling behind in our efforts to sell our
products abroad. We are a party to just 3 of the nearly 130 free trade
agreements currently in force around the world. And while our
competitors continue to negotiate free trade agreements with the rest
of the world, the U.S. remains outside the process because of a lack of
Trade Promotion Authority for our President.
I appreciate Ambassador Zoellick's testimony today concerning the
trade challenges and opportunities ahead. I admire his excellent
leadership of USTR, which has already led to a successful WTO
Ministerial Meeting in Doha, progress on laying the groundwork for a
Free Trade Area of the Americas, and successful free trade agreement
negotiations with our close trading partners.
I look forward to working with the Administration and my colleagues
on a trade agenda that will create high-quality jobs and open markets
for American businesses and workers.
Thank you, Mr. Chairman.
Chairman Thomas. Thank you very much.
Mr. Ambassador, welcome. Through no preplanning or
collusion in any way, I understand this is the first
anniversary of your swearing in as Ambassador, so I take the
opportunity to welcome you on your first anniversary. Thank you
for appearing before us again. Any written statement you have
will be made a part of the record, and you address us in any
way you see fit.
STATEMENT OF THE HON. ROBERT B. ZOELLICK, UNITED STATES TRADE
Mr. Zoellick. Thank you, Chairman and Mr. Rangel and
Chairman Crane and Mr. Levin, for both informal and formal
opportunities to be with you. This Committee's work has been
absolutely crucial in allowing us to regain momentum on trade
to open markets for America's farmers, ranchers, workers and
families. And I want to thank to start off, Chairman, in
particular your role with Trade Promotional Authority and also
the attention you are devoting to the FSC issue because it has
been critical for us.
And I want to thank Mr. Rangel for--I know the FSC issue is
a difficult one and I appreciate your effort to try to be of
assistance on this and also the role you played in putting
together the AGOA, African Growth and Opportunity Act, bill,
along with Mr. Levin and others, which I think has been a real
foundation for our relation with Africa. I am going to be going
there next week and I appreciate your help with that.
I also want to thank Mr. Levin for making the trek to Doha
with us. I know it wasn't easy and it was very important to
have you on the scene. I appreciated it and I appreciate we had
some chance to work together, and I am also pleased that we
were able to extend at the end of this year the Cambodia
provisions that you referred to and which you contributed much
I would like to thank Mr. Tanner and Mr. Jefferson for
their leadership on TPA. Together, I think all of our comments
fit on one point and that we have made some headway in the year
2001 but we have got some more work to do.
There are a number of key components to our strategy.
First, we are building momentum for liberalization and we are
doing so on multiple fronts. We are trying to create a
competition in liberalization with the United States as the
center of a network because frankly it will help U.S.
leadership and will give us more leverage to get more things
Globally we have the launch at Doha, but I also think we
all take some pride in finally getting China in the WTO after
15 years and Taiwan after 9 years. I know this took a lot of
work before I was on the scene with PNTR, Mr. Levin, Mr.
Matsui, and Ms. Dunn, in terms of trying to get that piece of
And I think now the good news is that the Doha agenda is
off to a pretty quick start. In the past week we have started
in Geneva to get the negotiating framework in place. Regionally
we have the Free Trade Area of the Americas, and here is an
incredible opportunity to create the largest free trade area in
the world among 34 democracies.
We will start this spring with the market access
negotiations, and later this year after the Brazilian
elections, the United States and Brazil, two of the biggest
economic powers, will be the cochairs to move this forward.
Bilaterally a number of you referred to Jordan and Vietnam,
and we are pleased we got those passed. Those weren't so easy
along the way and that was an accomplishment of last year.
We are now obviously trying to complete the Chile and
Singapore Free Trade Agreements started by President Clinton.
And this is one, as I mentioned to you, as we move in the final
stage it is significantly importance to get the guidance from
this Committee on some of the sensitive provisions.
As I noted in the testimony, we are looking at the
possibilities with you of new free trade agreements. The
Caribbean Basin Trade Partnership Act passed by the Congress
encourages us to look at free trade with Central America, and
the President spoke about our interest in moving forward with
that. The AGOA bill talks about our interest in free trade with
Africa, which would be a tremendous breakthrough for that
continent and our relations with it.
And frankly we do have some catching up here to do. The
European Union (EU) has 29 free trade and customs agreements,
22 of which they negotiated in the nineties, and they are
negotiating 12 more while we have 3. Mexico has 8 free trade
agreements with 32 countries. The Japanese are moving ahead and
even the Chinese just coming into the WTO are now pursuing a
free trade agreement with the countries of Southeast Asia. So
our movement is none too soon.
Second, we are enforcing agreements in managing disputes
because while we pursue new agreements we recognize we have to
actively defend our interests by pursuing and enforcing
vigorously our trade laws, and here I want to be very clear in
assuring each and every one of you we will use all the tools at
our disposal to fight unfair practices.
We are also trying to manage disputes in ways that solve
problems and achieve results. I know a lot of you have an
interest in softwood lumber. Mr. Collins has talked to me about
that. And then we have the critical challenge of the follow-
through on China and Taiwan's accession because particularly in
the case of China, we recognize this is a transformation of a
country of 1.3 billion people and it is not going to be easy
and we need to work together on it.
Third, we are trying to broaden the circle of trade
opportunity, and here in particular there is an opportunity
with developing nations. This is vital to build support for the
global trading system, but it is also vital in these countries
to support reform and rule of law in dealing with fundamental
problems of poverty. Developing nations became key to putting
together the coalition that was successful at Doha, and they
will be key in anything else we do in the WTO. Indeed, all you
have to do is look at the newspapers and you read about the
reach of terrorism these days, you have a sense of how if this
is going to be a long-term war and President Bush has clearly
made clear that that is going to be a challenge for this
generation, then we are going to have to address some of the
Spig Ruginski made a comment over the weekend that I
thought was powerful. He said, look, it is quite clear that
poverty is not the root cause of terrorism, but it does provide
fertile fields. And so, in that way, economic development and
growth is a key component. The United States, I am proud to
say, has been leading the efforts to try to help poor nations
obtain the tools to participate in the global economy. Last
year the United States spent $555 million on capacity building
because for a lot of these countries, take the African and
Caribbean which I work with Mr. Rangel, they don't have people
who can attend the negotiations and they certainly don't have
the ability to follow through. So this is an element that I
hope we can work on together.
We also believe in renewing and expanding the preferential
agreements. This Committee took an important step in terms of
the Andean Trade Preference Act, but I think it is highly
unfortunate that it did expire after 10 years. And those four
Andean countries are hurting right now at the same time they
are trying to deal with the scourge of narcotics.
The Committee also had some efforts to try to strengthen
AGOA, which we support, and I hope we can over the course of
the coming months. I also don't want to lose sight of the
generalized system of preferences, something that the Congress
put in place about 26 years ago and which also expired last
year, and that deals with 123 developing countries and 19
territories. That expired September 30 and so those countries
now do not have the benefits.
There is also the possibility of bringing in new members.
One of the ones that is most exciting is Russia. Our enemy
during the Cold War now is going through the process of
actually joining the WTO, adhering to the rules, and I hope to
make progress on this this year.
Fourth, we are reaching out to key stakeholders. This in
part involves a lot of listening, building networks, educating
and acting. We are pushing on all fronts for America's farmers
and ranchers, working with this Committee, but also with the Ag
Committee. We are seeking to help industries and workers become
competitive and adjust to change. This is an area that I know
is close to the heart for a number of you in the steel
industry, Mr. English, Mr. Houghton, and Mr. Cardin, who I have
talked to about this.
This is the Administration that launched the 201, and we
are now in the final stages of that process. But I also want to
point out that we have used these safeguards in other areas
like wheat gluten and lamb, working out solutions that I think
are important. Textiles is obviously a very sensitive area.
This is another one where we are committed to the phaseout of
the Apparel and Textile Agreement that will end quotas in 2005,
but it has not been easy in this industry, and I have worked
with Mr. Collins and others in terms of that adjustment.
A number of you have mentioned trade adjustment assistance,
and Mr. Levin stressed this. I know the importance of this to
many of your Members, and I just want to make clear, I am in
full and emphatic agreement about the need to have good trade
adjustment assistance programs if we are going to have a
successful trade policy. And as my statement points to, and I
hope my colleagues at the U.S. Department of Labor and the
White House have also emphasized, I think there is a lot of
common ground here that we can move forward on. I talked about
this in the Senate yesterday, and I hope we will be able to
have a product before long that we can all be proud of.
Also, part of reaching out is meeting with different
groups, business, environment, labor leaders on a range of
these issues. I was pleased, given the unusual security
circumstances at Doha, that we were able to set up webcasts for
the first time so we are able to draw in a lot of our advisers
who couldn't make it to the scene.
I know a number of you, Mr. Doggett and others, have
emphasized the North American Free Trade Agreement (NAFTA)
Chapter 11. This issue came up in the course of all the Trade
Promotion Authority bills. I just want you to know, I am in the
process of meeting with all sides on this, the business
community, the non-governmental organizations (NGOs), and
others, to try to understand and sort through what we know is a
tough issue. But reaching out also involves building the case
for trade and correcting some misinformation. And here I think
the American public suffer because they don't know what the
benefits of cutting tariffs do.
For example, drawing on work of our predecessors in the
Clinton Administration, we pointed out the very simple fact
that the benefits of NAFTA in the Uruguay Round amount to about
$1,300 to $2,000 a year for the average family of four in
America. That is a hefty tax cut and it comes from growth and
cutting tariffs. The University of Michigan has done a study,
just a preliminary look at cutting just the tariffs on
industrial goods and agriculture as part of a Doha agenda, and
their estimate, admittedly a rough cut, is $2,500 a year for a
family of four in America.
If you look at particular sectors, Mr. Brady has an
agriculture sector, one in three acres in America is planted
for export; 25 percent of gross cash farm receipts are for
export. So America's farmers depend on a healthy trading
Fifth and finally, Chairman, as you know, we have tried to
work hard to connect our trade system to our values. Free trade
is about freedom, and it is about opportunity and rule of law
and openness, but we also have issues that we need to deal
with; for example, the crisis in public health in parts of the
world, and I was very pleased and proud working with a number
of you that in the Doha meeting we were able to come up with a
statement that I felt went a long way toward reconciling that
there are flexibilities in intellectual property that we need
to use to deal with problems like HIV/AIDS, malaria, and
tuberculosis in the countries of Africa and elsewhere because
if these countries are plagued by epidemics there will be no
economic growth and free trade won't be sufficient for them.
At the same time, we have to preserve intellectual property
because the advances in this field are enormous in terms of
their opportunity, including, as I have talked with some chief
executive officers recently, the prospect of a vaccine for AIDS
and what an extraordinary development that will be, but it
won't happen unless intellectual property is protected.
There are other win-win ideas. I was pleased that World
Wildlife Fund and some other environmental groups worked with
us on fish subsidies at Doha. We are also trying to work with
the small business community much better in our country and
others and draw them into the trade system.
So to sum up, we have a very full trade agenda ahead. We
are looking forward to completing Trade Promotion Authority as
soon as possible so we can move forward on all fronts to tear
down barriers, open markets globally, regionally and, very
important for me, to have a framework of guidance from the
Congress of your objectives and have the procedures. We are
moving ahead on many crucial and, I know, sensitive issues. The
Foreign Sales Corp., steel, softwood lumber, high fructose corn
syrup, and in Geneva among our other goals we are going to push
for a home run on agriculture, which is key to our agenda for
trade. Thank you, Mr. Chairman.
[The prepared statement of Ambassador Zoellick follows:]
Statement of the Hon. Robert B. Zoellick, United States Trade
Mr. Chairman, Representative Rangel, and Members of the Committee:
I would like to open by thanking each of you for the time,
attention, and support that you and your staffs have given to me and my
Last year the Committee accomplished much in a number of areas, so
we are most appreciative of the energy you have devoted and the efforts
made to place trade policy on America's priority agenda. Together, we
have made a good start.
At the start of last year, the global trading system was under
stress. The nations of the world had failed to launch new global trade
negotiations in Seattle in 1999, the effort to bring China and Taiwan
into the World Trade Organization had stalled, and Congress had twice
failed to grant the President the trade negotiating authority that had
lapsed in 1994. Numerous contentious trade disputes were piling up and
the benefits of trade had been lost in the public debate. The thrust
for trade liberalization had lost energy.
Against this backdrop, and with your help, President Bush pressed
an activist strategy to regain momentum on trade. As he explained:
``Our goal is to ignite a new era of global economic growth through a
world trading system that is dramatically more open and more free.'' By
doing so, we can improve the job opportunities, incomes, productivity,
purchasing choices, and family budgets of America's workers, farmers,
ranchers, small businesspersons, and entrepreneurs.
The President has promoted the agenda for trade liberalization on
multiple fronts: globally, regionally, and with individual nations.
This strategy creates a competition in liberalization with the United
States as the central driving force. It enhances America's leadership
by strengthening our economic ties, leverage, promotion of fresh
approaches, and influence around the world.
Seizing the Global Initiative
A. Launching New Global Trade Negotiations
In 2001, the United States played a leading role in the launch of
new global trade negotiations at Doha in November, overcoming the
obstacles that plagued the prior effort in Seattle. We benefited
greatly from the consultations and guidance we received in advance of
the Doha meeting. I also deeply appreciated the personal support I
received from my conversations with Chairman Thomas while we were in
Doha and from Sandy Levin's extra effort to join us and discuss the
fluid events on the scene. A Ways and Means session arranged by
Chairman Thomas and Representative Rangel provided a useful opportunity
for me to brief Committee Members on the results shortly after we
returned from Doha.
The new WTO negotiating mandate lays the groundwork for an
ambitious trade liberalization agenda in key sectors, especially
agriculture, manufacturing, and services, targeted to be completed by
In agriculture, to achieve a program of fundamental reform, we
committed to comprehensive negotiations aimed at: substantial
improvements in market access; reductions of, with a view to phasing
out, all forms of export subsidies; and substantial reductions in
trade-distorting domestic support.
In manufacturing, we secured a negotiating mandate to reduce or
eliminate tariff and non-tariff barriers on industrial products,
ensuring that the United States can pursue a variety of tariff
liberalization initiatives, such as landmark agreements like the
Information Technology Agreement (ITA). The mandate is comprehensive--
no sectors or products are excluded from the outset for any WTO member.
And in services, the Doha Declaration sets a rigorous timetable for
the pursuit of open markets in a number of key sectors for the United
States, including telecommunications, financial services, audio-visual,
express delivery, and other distribution services.
Many U.S. groups assisted us in the preparation of these
negotiating mandates, and we are delighted by their strong statements
of support after Doha. They have emphasized the interconnection of this
work with economic recovery in America and around the globe.
At Doha, we also made significant progress in a number of other
areas, some of which I will discuss later in this statement:
LWTO members adopted a political declaration that
highlights provisions in the TRIPs agreement that provide Members with
the flexibility to address public health emergencies, such as epidemics
of HIV/AIDS, tuberculosis and malaria.
LThe Doha Declaration includes a mandate to launch
negotiations aimed at eliminating environmentally harmful fish
subsidies and increasing market access for environmental goods and
services. The agreement also includes an important new mandate to
enhance the mutual supportiveness of multilateral environmental
agreements (MEAs) and the WTO rules by strengthening the relationship
between the two, institutionally and substantively.
LIn the area of e-commerce, the declaration ensures that
the WTO will remain active in this important and dynamic area through
the continuation of its work program, while extending the ongoing
moratorium on imposing customs duties on electronic transmissions. This
work program will provide an opportunity for the United States to
continue its efforts to press other countries to avoid unnecessary
measures that would impede the growth of e-commerce.
LThe review of WTO rules explicitly states that any
negotiation of trade remedy laws will preserve the basic concepts,
principles, and effectiveness of existing agreements, as well as their
instruments and objectives, enabling us to pursue an offensive agenda
against the increasing use of these laws against U.S. exporters while
also addressing the underlying trade-distorting practices.
LThe declaration includes an agreement providing for
enhanced transparency in WTO Member government procurement procedures.
This program should lead to improved disciplines in government
purchases, making an important contribution to combating corruption.
LThe declaration states a commitment to enhance
cooperation between the WTO and the International Labor Organization.
To help maintain the momentum after the Doha agreement, the WTO
economies agreed that Mexico will chair the WTO ministerial in 2003. As
the incoming chair, Mexico can assist in promoting the pace of the new
One of the important WTO entities in the months ahead will be the
Trade Negotiations Committee. That committee took a number of useful
steps at its meeting on February 1. It appointed the WTO Director-
General to chair the committee's work (in an ex-officio capacity) until
the January 2005 deadline set for the completion of the negotiations.
This guarantees the committee will receive the necessary attention at
the WTO's highest level. And the TNC adopted a structure for the
negotiations that will help the negotiating process move forward in an
In 2002, we will press forward with these negotiations, advancing
new and detailed proposals to open further the world's agriculture,
services, and manufacturing markets. We will also be advancing our
affirmative agenda for reforming WTO trade rules and the dispute
settlement system, and building on the opportunities presented by the
new environmental negotiating mandate.
The United States will place special emphasis on our continued
effort to insure the involvement of least developed nations, in order
to assist them secure the benefits of trade and to keep all WTO members
invested in the process. We will work with the WTO and others to
provide the tools and training needed to help these nations participate
more actively in the global trading system. In particular, developed
nations, multilateral development banks, and other international
institutions--such as UNCTAD and the World Intellectual Property
Organization--should supply technical assistance to build the capacity
of poorer countries to engage effectively in negotiations and the
subsequent implementation of trade agreements. By providing such
support, we will be helping these nations to integrate with the global
economy--a key part of the strategy for economic development--while
also strengthening the rules-based trading system.
B. Completing the Accession of China and Taiwan to the WTO
Last year, the United States also played a key role in breaking
through logjams to complete the historic accessions of China (after a
15-year effort) and Taiwan (after a 9-year effort) to the WTO. This
achievement built on the work of four U.S. Administrations,
particularly that of Charlene Barshefsky, from whom I inherited an
excellent bilateral agreement. Throughout 2001, we solved the
multilateral dimension concerning agriculture, trading rights,
distribution, and insurance, while navigating the extreme political
sensitivities to enable China and Taiwan to join the WTO within 24
hours of one another.
These agreements integrate two of the world's largest economies
into the rules of the WTO trading system and provide U.S. exporters
with expanded access in growing markets ranging from automobiles and
telecommunications to agriculture and chemicals. As a result, the
President certified the requirements set by Congress through the
leadership of Chairmen Thomas and Crane and Ranking Members Rangel and
Levin and this Committee in the passage of the legislation extending
Permanent Normal Trade Relations to China.
In 2002, the Bush Administration will work closely with other
countries, as well as a private sector network we are interconnecting,
to monitor China's and Taiwan's compliance. The backing we have
received from the Congress--in terms of resources and attention--has
been and will remain fundamental to the achievement of our mission. We
will work with our businesses and with China and Taiwan to address
problems and take action if necessary.
C. Advancing Russia's Accession to the WTO
The United States has begun a new era in its relations with Russia.
Whether in the realms of security, foreign policy, or economics,
President Bush has emphasized the need to move beyond Cold War
strictures and stereotypes. As the President said in November during
his meeting with President Putin, ``we're working together to break the
old ties, to establish a new spirit of cooperation and trust so that we
can work together to make the world more peaceful.''
To contribute to this vision for the 21st century, in 2002 we will
continue our intensified effort to assist Russia's preparations to join
the WTO. President Putin has made WTO membership and integration into
the global trading system a top priority; we will support Russia as it
promotes reforms, establishes the rule of law in the economy, and
adheres to WTO commitments for a more open economy. This effort needs
to include action by the Duma to establish an effective legal
infrastructure for a market economy.
It is our expectation that the WTO will prepare a first draft
Working Party report on Russia's accession in the first quarter of this
year. We will work with Minister Gref--in cooperation with the EU and
our other WTO counterparts--to address the gaps. Throughout this
process, we look forward to consulting closely with the Congress and
this Committee in particular.
To close out the history books of the Cold War, the President has
urged the Congress to finally end the application of Jackson-Vanik to
Russia. It has been over a decade since I worked on the unification of
Germany with a fading Soviet Union that expired in 1991. Furthermore,
Russia has been in full compliance with Jackson-Vanik's emigration
provisions since 1994. My colleagues at the State Department and the
NSC are, of course, consulting closely with various groups on the
protection of freedom of religion and other human rights in conjunction
with this action.
I understand that the first inclination of some might be to keep
the Jackson-Vanik law in reserve as we negotiate Russia's accession to
the WTO. I think this course would be a mistake, and would work against
U.S. commercial and foreign policy interests. The Russians acknowledge
they must abide by the WTO's rules, and we and 143 other economies will
insist on that course as their WTO negotiations proceed. Yet the
Russians are understandably sensitive about Jackson-Vanik, which places
their trade relations with us in a different category. To use Jackson-
Vanik in this way would signal that we still treat Russia as a former
foe, not a possible friend. Working closely with the Congress, we will
stress the need for Russia to offer fair market access--for example in
agriculture--but we should do so according to the rules to which we
maintain Russia should adhere. Congress exercises substantial oversight
in these negotiations through existing consultation provisions.
Pressing the Regional Initiative: The Free Trade Area of the Americas
In April 2001, at the Quebec City Summit, the President inaugurated
a reinvigorated push for free trade throughout the Americas. A number
of Members of the Committee joined him to express their support and
represent important perspectives.
At Quebec City, the leaders of 34 democracies of the Western
Hemisphere agreed to proceed with detailed draft negotiating texts and
to complete work no later than January 2005. Once implemented, the FTAA
will be the largest free trade zone in the world.
The United States and its FTAA partners are working commitedly
toward this goal. By mid-May 2002, we will launch market-access
negotiations on agriculture, industrial goods, services, investment,
and government procurement. In October, trade ministers will meet in
Quito to review the revised negotiating texts and to determine how to
move forward. Upon the close of the Quito meeting, the United States
and Brazil will begin a co-chairmanship of the FTAA process, providing
an opportunity for cooperation with a key partner and economic power as
the pace of negotiations accelerates.
Throughout the year ahead, we will also persist in our efforts to
make the public case for NAFTA's benefits and consider additional ways
to deepen integration throughout the Americas. NAFTA has been a case
study in globalization, along a 2,000-mile border, by demonstrating how
free trade between developed and developing countries can boost
prosperity, economic stability, productive integration, the development
of civil society, and even democracy.
Moving Forward: Bilateral Free Trade Agreements
In 2001, the Congress approved the U.S.-Jordan Free Trade Agreement
with broad support, establishing America's third free trade zone, and
our first with an Arab country. The Congress also passed the Bilateral
Trade Agreement with Vietnam, achieving a principal goal of America's
decade-long agenda to normalize relations with our former foe. Many of
you played key roles in the development of these agreements and then
shepherded the final packages successfully.
In 2002, we intend to complete free trade agreements with Chile and
Singapore. Each of these agreements offer new opportunities for U.S.
businesses and workers and will send a message to the world that the
United States will press ahead with those that are committed to open
markets--whether in the Western Hemisphere, across the Pacific, or
beyond the Atlantic. As we move these FTA negotiations toward
completion in the months ahead, we want to work closely with this
Committee so we can try our best to address your concerns and
In 2002, working with the Congress, we also hope to initiate talks
on new bilateral free trade agreements. These agreements can open up a
new front for free trade. They can create models of success that help
reformers, break new ground for liberalization in changing or emerging
sectors (e.g. biotech, high tech--including IPR-related sectors--and
services), build friendly coalitions to promote trade objectives in
other contexts (e.g. biotech, SPS topics), add to America's trade
leverage globally, underpin links with other nations, and energize and
expand the support for trade. New trade agreements also present fresh
opportunities to find common ground at home, and with our trading
partners, on the nexus among trade, growth, and improved environmental
and working conditions.
Our aim is to achieve free trade agreements with a mix of developed
and developing nations in all regions of the world. As the President
announced in January, and as Congress urged in the Caribbean Basin
Trade Partnership Act, we want to explore a free trade agreement with
the countries of Central America. Many Members of Congress have written
me to express strong support for an FTA with Australia. I met with
Australian Trade Minister Mark Vaile last week to discuss how best to
move forward towards this goal, recognizing the need in particular to
work on agricultural issues. The Africa Growth and Opportunity Act
(AGOA) also urges us to advance the negotiations of FTAs with sub-
We are weighing these and other possibilities to extend free trade.
We look forward to discussing these matters with the Committee and
would benefit from your thoughts on these or other possible FTAs. It is
our hope that we could use such an agenda to try to achieve the goals
in the bills passed by the House and the Finance Committee.
The Executive-Congressional Partnership: Trade Promotion Authority, the
Andean Trade Preference Act, and the Generalized System of Preferences
The Constitution vests the Congress with the authority ``To
regulate Commerce with foreign Nations.'' It also extends the powers to
the President to conduct relations with other countries. These two
grants need to be reconciled effectively.
After 150 years of contentious Congressional trade debates over
tariffs, culminating in the disastrous experience of the Smoot-Hawley
bill, the Congress tried a different approach in 1934: The Reciprocal
Trade Agreements Act, which created a new partnership between the
Congress and the Executive branch to lower barriers to trade.
This partnership has been the foundation of America's economic and
trade leadership ever since. In 2001, the Bush Administration honored
this rich tradition by working hand-in-hand with the Congress to open
markets; we will build on this relationship in the year ahead.
Frequent, substantive consultation is the hallmark of an effective
trade policy. It helps to ensure that the Executive branch and the
Congress work together to achieve America's trade objectives.
A Congressional grant of Trade Promotion Authority would strengthen
and guide the Executive-Congressional partnership, as it creates and
formalizes new consultative mechanisms throughout the trade negotiation
process. In 2001, we are grateful that the House of Representatives
passed Trade Promotion Authority legislation and that the Senate
Finance Committee gave a strong bipartisan endorsement to a similar
We are pressing to open 2002 with the prompt completion of
Congressional action on TPA. We are pleased Majority Leader Daschle has
pledged early action. By enacting TPA after a seven-year lapse of
authority, Congress can promote America's global leadership and give
the President the tool he needs to strike the best trade agreements for
America's farmers, workers, families, and consumers. The revival of
this trade authority--which prior Congresses granted to the previous
five Presidents--will also contribute to our economic recovery by
enhancing our ability to open the world's markets for U.S. exports and
lowering the costs of supplies for American families and businesses.
For all the benefits of trade, I recognize that trade can also lead
to adjustment challenges. For this reason, the Bush Administration
strongly supports reauthorization of Trade Adjustment Assistance (TAA)
programs, which provide assistance for workers who lose their jobs
because of trade. The Administration wants to work with Congress to
improve the programs to make them more effective.
In particular, the Administration would like to consolidate TAA and
NAFTA-TAA; ensure more rapid processing of petitions and delivery of
services; and better coordinate Federal agencies and local authorities
to improve delivery of all Federal assistance to communities and
individuals affected by trade. Our primary objective is getting people
back in jobs as quickly as possible, so we would like to work with
Congress to create better incentives for reemployment. We also want to
address concerns over limitations on the ``shift-in-production''
benefits provided by current programs. And we would like to work with
Congress to address other areas that may not be adequately addressed at
We also urge the Congress to reauthorize and expand the Andean
Trade Preference Act--a vital program for the four Andean developing
country democracies on the front lines of the fight against narcotics
production and trafficking. ATPA was enacted in 1991, and its
expiration after ten years has caused real hardship for friendly
countries with little margin to spare.
Finally, we respectfully hope to press the Congress to reauthorize
the expired Generalized System of Preferences, a 26-year old U.S.
program to promote economic growth in 123 developing nations and 19
territories by providing duty-free treatment for certain exports to the
United States. The expiration of GSP access on September 30--shortly
after September 11--raises anxieties around the developing world that
the United States is ignoring the conditions that can become breeding
grounds for those whose purpose is destruction, not construction and
Working with Developing Nations
A free and open trading system is critical for the developing
world. As President Bush has pointed out, ``Open trade fuels the
engines of economic growth that creates new jobs and new income. It
applies the power of markets to the needs of the poor. It spurs the
process of economic and legal reform. It helps dismantle protectionist
bureaucracies that stifle incentive and invite corruption. And open
trade reinforces the habits of liberty that sustain democracy over the
Last year, we began the important implementation of the far-sighted
African Growth and Opportunity Act, which Congress enacted in May 2000.
As you know, AGOA extends duty-free and quota-free access to the U.S.
market for nearly all goods produced in the 35 eligible beneficiary
nations of sub-Saharan Africa. In 2001, the United States lifted all
duties on eligible apparel products exported from 12 AGOA nations to
the United States. The Administration is fully committed to AGOA's use
and expansion: It opens the door for African nations to enter the
trading system effectively, increases opportunities for U.S. exports
and businesses, supports government reforms and transparency, and
widens the recognition of the benefits of trade in the United States.
Indeed, we support prompt Congressional action on legislation that will
clarify and strengthen current provisions in the African Growth and
Opportunity Act. Next week, I am traveling to Kenya, South Africa, and
Botswana to listen and learn more about Africa's needs, while conveying
America's support for Africa's economic and political reforms and our
interest in greater trade.
Through AGOA and other preferential trading ties, such as the
Caribbean Basin Trade Partnership Act, we will support efforts to build
the capacity of developing countries to take part in trade
negotiations, implement complex trade agreements, and use trade as an
engine of economic growth. The United States devoted more than $555
million in trade-related capacity-building assistance to developing
countries during fiscal 2001--more than any other single country. We
will continue to work with other agencies of the U.S. Government, such
as AID, and with multilateral and regional institutions, such as the
World Bank, the Inter-American Development Bank, the African
Development Bank, and the WTO to help developing nations to board the
ship of trade so as to reach the shore of prosperity, opportunity,
jobs, better health, the rule of law, and political reform. Congress'
advice, encouragement, and support is vital to this endeavor.
Monitoring and Enforcing Trade Agreements
For the United States to maintain an effective trade policy and an
open international trading system, our citizens must have confidence
that trade is fair and works for the good of our people. That means
ensuring that other countries live up to their obligations under the
trade agreements they sign. Over the past year, we have aggressively
monitored and enforced our agreements, reaching settlements benefiting
American producers, exporters, and consumers in sectors such as
entertainment (motion picture and television programming), high-
technology (software and telecommunications) and agriculture (bananas,
soybeans, lamb, rice, livestock, dried beans, stone fruit, fresh fruits
and vegetables, processed foods, citrus, stuffed molasses, and wheat
In 2002, we will seek to resolve favorably other trade disputes in
a way that best serves America's interests. Among the most prominent
cases are: softwood lumber with Canada; beef with the European Union;
the Foreign Sales Corporation WTO case brought by the EU; and
sweeteners with Mexico. To avoid large trade retaliation against U.S.
exporters and the risks of spiraling conflict, we and other departments
will need in particular to consult and work with the Congress closely
to determine an approach to the recent FSC decision.
We plan a special effort around the world to address technology
regulations (e.g., biotech) and science and health measures that impede
farm exports and the productive development of agriculture.
Trade Laws Against Unfair Practices
Given America's relative openness, we can only maintain domestic
support for trade if we retain strong, effective laws against unfair
practices. This Administration has used and backed the use of these
In Doha, working closely with the Commerce Department, we stressed
and pressed this point vigorously. We then advanced an offensive agenda
in this area. We targeted the increasing misuse of these laws,
particularly by developing countries, to block U.S. exports. During
1995-2000, there were 81 investigations by 17 countries of U.S.
exporters. Chemical, steel, and other metal producers are the most
frequently targeted U.S. industries, although U.S. farm products are
increasingly the victims. At present, there are over 60 orders against
American companies in effect. The new negotiations launched at Doha
will help us address significant shortcomings in foreign anti-dumping
and countervailing duty procedures by improving transparency and due
Finally, the Doha Declaration makes clear that trade remedy laws
are essential tools and should not be undermined. We won agreement that
the new negotiations will preserve the concepts, principles, and
effectiveness of the international provisions on which we rely, as well
as the instruments we use. Moreover, the United States insisted that
any discussion of trade remedy laws must also address the underlying
subsidy and dumping practices that give rise to the need for trade
remedies in the first place.
The Importance of Safeguards
Maintaining public support for open trade means providing
assistance to those industries that find it difficult to adjust
promptly to the rapid changes unleashed by technology, trade, and other
forces. We will continue our commitment to the effective and creative
use of statutory safeguards, consistent with WTO rules, to assist
American producers. Used properly, these safeguards--for example,
Section 201 of the Trade Act of 1974--can give producers a vital
breathing space while they restructure and regain competitiveness.
The Bush Administration has pursued innovative approaches with
safeguards. For example, while ending the safeguards for the U.S. wheat
gluten and lamb industries last year, we also provided them with
additional financial assistance over a period of 2-3 years. The effect
has been to assist them in following through on their transitions to
competitiveness, while also helping to insulate our exporters from
trade retaliation. The European Union agreed to lift its duties on U.S.
corn gluten imports as part of our action on wheat gluten.
In June, the Administration requested a safeguards investigation by
the U.S. International Trade Commission into whether increased imports
were causing serious injury to the U.S. steel industry. Many of you
urged this and the prior Administration to take this step, and we were
pleased to work with you to do so after your unsuccessful efforts in
the 1990s. The President's request was one part of a larger U.S. global
steel initiative that also included the launch of new negotiations with
our trading partners to eliminate inefficient excess capacity in the
world's steel industry and to enhance international discipline over
subsidies and other measures that distort markets.
On December 19, the International Trade Commission issued a report
containing its recommendations. A plurality of the commissioners
recommended various remedies for many of the steel product categories.
The Administration has been reviewing the ITC's recommendations, as
well as the views of a diverse collection of steel companies, labor
unions, steel consumers, port authorities, and exporters. We recently
received supplementary information from the ITC pursuant to a request I
made last month on behalf of the Administration. We of course welcome
further input from this Committee and the Congress. Based on this
information, I expect the President will decide on a course of action
in coming weeks.
Aligning Trade with America's Values
America's trade agenda needs to be aligned securely with the values
of our society. Trade promotes freedom by supporting the development of
the private sector, encouraging the rule of law, spurring economic
liberty, and increasing freedom of choice.
The trade system also needs to be alert to other challenges. Poor
countries cannot succeed with economic reform and growth if they are
eviscerated by pandemics. From its first days, this Administration
recognized this economic, health, and social reality. We stressed that
the international WTO Agreement on intellectual property (the TRIPs
accord) contains flexibilities for developing nations to obtain access
to critical medicines to help address public health emergencies, such
as HIV/AIDS, tuberculosis, and malaria. The Administration played a key
coalition-building role--working closely with African nations and
Brazil, as well as with the pharmaceutical companies--to develop a
special political declaration at Doha that highlights these
Flexibility on intellectual property, and lower-priced medicines,
must be part of a larger global response to health pandemics, involving
education, prevention, care, training, and treatment. The United States
is the largest bilateral donor of funds for HIV/AIDS, tuberculosis, and
malaria assistance, providing over $1 billion per year on related
research, much of which helps to address developing country problems.
(This represents nearly 50 percent of all international HIV/AIDS
funding.) The United States was the first contributor, and remains the
largest, at $500 million, toward the international ``Global Fund to
Fight AIDS, TB and Malaria,'' which will allocate its first grants in
We are also stressing that it would be a tragedy and health setback
if the promotion of the flexibilities within the TRIPs accord degraded
into an assault on intellectual property. Effective protection of
intellectual property is critical for developing nations, because we
need to find and develop cures for diseases that ravage their
societies. Similarly, biotechnology holds out tremendous potential for
the developing world: It can increase food security and food production
through higher yields and the reduction of fertilizer and insecticide
inputs. New discoveries will add vitamins to foods, and counter
malnutrition and disease. Furthermore, the local protection of
intellectual property rights establishes the foundation for an
attractive investment climate for industries of the future. Indeed, as
developing countries have implemented the intellectual property
protections in TRIPs, they have begun to benefit from increased
technology transfer and investment--two key factors in long-term
There are other areas where we are working to ensure our trade
policies are supportive of related meritorious purposes. USTR has
worked closely with Members of Congress on legislation that would
support international efforts to stop trade in ``conflict diamonds''
(diamonds traded by rebel movements to finance conflict aimed at
undermining elected governments). The bill approved by the U.S. House
of Representatives in late November achieves this objective consistent
with our international obligations. We will continue to work with other
agencies and the Senate sponsors of the legislation to resolve any
remaining issues and to help bring the Kimberley Process (the
international negotiations aimed at preventing trade in conflict
diamonds) to a successful conclusion.
A Cleaner Environment and Better Working Conditions
Free trade promotes free markets, economic growth, and higher
incomes. And as countries grow wealthier their citizens demand higher
labor and environmental standards. Furthermore, governments have more
resources and incentives to promote and enforce such standards.
In 2001, we charted progress on incorporating labor and
environmental concerns into U.S. trade policy. The U.S.-Jordan Free
Trade Agreement is the first U.S. free trade accord to include
enforceable environmental and labor obligations in the body of the
agreement. The Administration also affirmed an executive order, and its
implementing guidelines, for conducting environmental reviews of trade
agreements. As part of this policy, USTR is conducting environmental
reviews of the U.S.-Chile and U.S.-Singapore free trade agreements, the
Free Trade Area of the Americas, and the WTO's new negotiating agenda.
The House and Senate Trade Promotion Authority bills contain
provisions that will incorporate labor and environmental concerns into
U.S. trade negotiations. We are drawing on this guidance--and would
welcome additional insights--as we are pursuing these topics in our
current FTA negotiations. Similarly, I am conducting discussions with
NGOs and the business community to ascertain how we can address
concerns posed about investment provisions involving private action.
Working with our NAFTA partners last July, we issued additional binding
interpretations for NAFTA panels that define more precisely the bases
for their reviews.
As I noted earlier, the United States played a leading role in
forging the compromise to incorporate environmental concerns into the
new global trade negotiations. I have already discussed with numerous
countries the critical importance of proceeding creatively and
positively on this Doha agenda, because I believe it offers significant
opportunities. We can take practical steps that show that good
environmental policies and sound economics can be mutually supportive.
In addition, we should create a healthy ``network'' between
multilateral environmental agreements (MEAs) and the WTO, enhancing
institutional cooperation and fostering compatible, supportive regimes.
If we succeed, this precedent may be helpful in interconnecting the WTO
with other specialized organizations, such as the ILO on labor policies
and the WHO on health issues.
The Bush Administration has a sound track record of using our trade
preference programs, and our trade negotiations, to improve working
conditions in the context of trade liberalization. In May, the
Guatemalan Congress enacted a significant package of reforms to the
country's labor law following a U.S. review of the country' s labor
practices conducted under the Generalized System of Preferences
program. In December, the United States and Cambodia extended our
Bilateral Textile Agreement, including an increase in the quota for
textile exports from Cambodia in recognition of Cambodia's progress in
reforming labor conditions in factories over the past three years. And
in our negotiations for free trade agreements with Chile and Singapore,
in accordance with the objectives in the TPA legislation, we will seek
a meaningful set of cooperative provisions that will advance labor and
environmental protection and projects, while promoting open markets.
We know the importance of these topics for many Members of the
Committee, and we want to work with you to explore new approaches that
break through old stereotypes. Some are concerned about a ``race to the
bottom,'' although others point to the benefits of trade and openness
in spurring growth, productivity, higher incomes, and enhanced scrutiny
of working and environmental conditions. Some stress the need to
safeguard America's sovereign rights to select our own standards, while
others want to deploy trade agreements to compel others to negotiate
the standards we prefer. Some believe that the influence and investment
of U.S. companies abroad will lead to higher standards and codes of
behavior, while others fear the reach of globalized companies. It is
our goal to use the TPA bills Congress has forged to bridge the
differences, build a stronger consensus, and make a real, positive
difference around the world.
Conclusion: Challenges on the Trade Horizon
The United States has made considerable progress on the trade
agenda in the past year, but still must do more to catch up with our
trading partners. The European Union now has 29 regional and bilateral
free trade or special customs agreements, 22 of which it negotiated in
the past decade, and is in the process of negotiating with 12 more
countries. Mexico sped past the United States after NAFTA to complete
eight free trade agreements with 28 countries. Japan has completed a
free trade agreement with Singapore and is exploring options with the
ASEAN nations, Canada, Mexico, Korea, and Chile. Even China, just into
the WTO, is pursuing an FTA with the ASEAN countries.
Altogether, there are 130 regional free trade and customs
agreements in the world; the United States is a party to only three.
There are 30 free trade agreements in the Western Hemisphere; the
United States is a party to only one. In recent years, when the rules
of trade have been set, the United States has frequently not been at
the negotiating table.
In addition, there is a constant threat of markets closing and
barriers rising. During periods of economic downturn and uncertainty,
it is most important to affirm the drive toward free trade. In the
past, governments have often resorted to protectionism in short-sighted
attempts to shield their local industries from competition. In the face
of these challenges, we must be even more vigilant in order to move
Opening markets, and liberalizing commerce, injects fresh dynamism
and energy into the U.S. economy. Open trade cuts taxes on businesses
and consumers. For example, NAFTA and the Uruguay Round agreements have
resulted in higher incomes and lower prices for goods, with benefits
amounting to $1,300 to $2,000 a year for the average American family of
There is even more to be gained. A University of Michigan study has
reported that new global trade negotiations focused on tariff
reductions on industrial and agricultural products could deliver an
annual benefit of nearly $2,500 for American families.
We will continue to make this case for the benefits of trade.
Expanded trade--imports as well as exports--improves our well being:
Exports accounted for 25 percent of U.S. economic growth from 1990-2000
and support an estimated 12 million jobs; these jobs are estimated to
pay 13 to 18 percent more than other jobs. Trade also promotes more
competitive businesses--as well as more choices of goods and inputs,
with lower prices.
A free and open trading system is critical to a number of sectors
of the U.S. economy. In U.S. agriculture, for example, one in three
acres are planted for export and nearly 25 percent of gross cash sales
are generated by exports. The value of U.S. exports of agricultural
products is expected to be $54.5 billion this year. U.S. farmers and
ranchers are 2\1/2\ times more reliant on trade than the rest of the
Last year, the Administration and the Congress together restored
America's trade policy leadership all around the globe. There is no
doubt the United States is back at the free trade table. In the year
ahead, the Bush Administration will work in close consultation with the
Congress to build on this leadership through the ongoing implementation
of an activist agenda that seeks to vanquish the barriers to free trade
and magnify the opportunities for growth and prosperity. By opening new
markets, together we will be contributing to the enhancement of
democracy, liberty, security, innovation, political coalitions,
economic growth, and openness in the United States and throughout the
Chairman Thomas. Thank you, Mr. Ambassador. As I indicated,
the Foreign Sales Corporation issue will occupy some time
before this Committee, hearings, both full Committee and
subcommittee, examining legislative options. What we will be
requesting from the Administration will be relatively close
communications on what strategies the Administration is going
to be pursuing. And I don't want any lengthy discussion now,
but clearly at the Ambassador's choice he could either offer
some brief comments, but I certainly expect shortly some
written indication of the direction of the Administration's
strategy so that we can coordinate the very real need to
respond to this decision.
I might ask in that context, you have had communications
with appropriate officials since a decision has been rendered,
they are still in the process of determining the dollar
amounts. What is the climate post decision?
Mr. Zoellick. Well, let me, Chairman, try to address the
first one. We are very pleased with the prospect of working
with the Congress, however all of you determine we can,
obviously that involves heavily the Treasury Department, Office
of Tax Policy, and the senior people there. But we as an
Administration are trying to come up with interagency proposals
on this and would be delighted to work with you and we
appreciate your leadership on it.
In terms of the climate, Chairman, the frank answer is it
is uncertain, as I think we have had a chance to talk among
ourselves. This is an issue that has been around for a while.
The United States had some of its legislation challenged, and
we lost, we lost on appeal, and there was another round. And so
frankly, my read of the situation is that the European Union,
while not eager to retaliate, needs a sense that the United
States is going to take the steps to come into compliance. They
recognize this is an extraordinarily difficult issue, and it
won't be done easily. That is why I think steps like hearings
or other actions, things we can do from the Administration,
will show good faith in taking on the topic.
The problem is we do have some near-term deadlines. By the
end of April the WTO will have an arbitration panel that will
decide the amount that the EU can retaliate. The EU has pushed
for about $4 billion based on some revenue estimates dealing
with the FSC. We are obviously going to push very hard for a
lesser number based on various arguments we make partly related
to the trade effects. But by that time period there will be an
amount that the European Union can retaliate, and then we face
a question can we hold off that process by showing that we are
taking this on. I believe there is a chance to do it from my
conversation with Commissioner Lamy, I know others here have.
But, I think we can only do so if we show there is a serious
and good faith effort, Chairman.
Chairman Thomas. Well, I don't think anyone believes that
the approach ought to be to simply ignore the decision. But at
the same time, as we investigate ways in which we change our
Tax Code, somebody has to take into consideration the season. I
know oftentimes when I sat down with Europeans or even with
others in discussing our abilities to move forward, if it isn't
in the first or the second or the third sentence, the fourth
sentence includes a phrase something like the elections in
France or the elections in Germany, and that we have to be
sensitive during this period because they are having
presidential or legislative elections in a particular European
None of us are going to use the fact that this is in fact
an election year and a fairly important one in this country as
an excuse not going forward because we are going to go forward
with hearings. But somebody has to put it in the context that
we are addressing this, and we will address it in a fundamental
way, in a very difficult climate. And I am hopeful that as you
continue to discuss this issue with others, that the context in
which the House is attempting to move forward and resolve the
problem, not patch it over, not come up with another gimmick
but fundamentally resolve it, understand that this is not a 3-
week or even a 6-month pursuit.
Second, I am pleased that the President, all of us are
pleased with the President's push for permanent normal trade
relations with Russia. My concern is, and I have introduced
legislation to that effect, during the long and arduous, as you
described, process with China, I thought that the normal trade
relations (NTR) vote was a useful one to frequently check and
require people to make sure that the process of negotiating
with China was a truly rigorous one and did not slide off to a
politically convenient structure because you were able to do so
because you didn't have the NTR votes taking place.
And I do want to put in context the fact that with Russia
we want to make sure that there are no foreign policy pressures
or other departmental pressures in making agreements, that it
has to be as firm and as sound as it was with China in dealing
And lastly, the President going to China, you had indicated
the importance of agriculture. Here we have an opportunity to
stress with someone who is and will be a major competitor in
the agricultural area that there is sanitary and FAO or Food
and Agriculture Organization sanitary requirements, their
biotech regulations all need careful scrutiny if we are going
to continue this growing and I believe mutually beneficial
relationship. I know you will be in there scrapping. But we
want the President to know that these are issues that ought to
be on the front burner with the Chinese because these
agreements need to be closed quickly.
With that, I will turn to the gentleman from New York.
Mr. Rangel. I think I have said most of all the nice things
about you that I can this morning. So we might as well get to
the other issues, and that is that when you are negotiating for
the United States with the WTO in this FSC problem you are not
to be heard to say that the President is not in charge of taxes
or the Treasury is not in charge or taxes or it is the Congress
or it is the Committee on Ways and Means, you are carrying our
flag. And as it relates to overseas, in order to avoid an
appearance of disunity here, it appears to me, Mr. Ambassador,
that you are going to have to bring a team to work with this
Committee. When I say Committee, I mean Republicans and
Democrats, because if it appears as though the majority has a
permanent solution to this problem that the minority disagrees
with, that is going to be just as public as it should be as
relates to our Committee work.
So I would strongly suggest that you might want to put
together a team from the executive branch to meet with us
informally as a Committee to share with us your concerns so
that we can as nearly as possible read from the same page,
because there are all types of potential solutions to this
problem but it doesn't mean that the end of today that we can
all read from the same page.
And so, I know what you have been up against and you have
done a tremendous job in trying to work between the Chairman
and me, but that is OK for domestic stuff. But as it relates to
dealing with the European Union I hope we can find at least an
attempt to find a way that we can work more closely together. I
discussed this with you privately. I just want to thank you for
your agreeing to try to do that.
Mr. Zoellick. Mr. Rangel, just to add to what you and I
have discussed, I want the whole Committee to know what I
explained to Commissioner Lamy. We as an Administration will be
putting together a task force, whatever one calls it, that is
an interadministration group. Obviously the tax policy is the
heart of it, but there are Commerce and U.S. Trade
Representative (USTR) and others are very deeply involved. One
of the things that I told him was that we would also be in
consultation with tax policy experts, the business community,
reaching out--we know this is a difficult problem--and then to
try to come up with our series of ideas or proposals within
some limited period of time, which we haven't yet defined.
I also told him that we would, through that group or
another group, also want to have a similar discussion with
Europeans, and here not only the Commission but with the Member
States where the tax authority arises, because I know a number
of you from both sides of the aisle have a sensitivity to
making sure there is a level playing field here for tax
And so if we are going to be able to put something
together, together we need to try to do it so that the
Europeans understand that this is finally over, we get it done.
So the third part obviously is, however the Committee and
others want to try to work with us, we would be delighted to
try to do so. What I want to emphasize here, I don't mean to
suggest this is by any means an easy problem. And what I hope
to do with the two of you and others on the Committee is
frankly take our good faith action in tackling it, and I think
the Europeans understand this is a big, big problem. As I have
said to them, what would happen if the WTO said France had to
change its tax law, how quickly would you be able to turn that
around, going to the Chairman's point.
So I think we can win some time here, and I won't hazard a
speculation exactly how long if we work on it together. That is
what I have tried to get launched here. I will do my best to
work with you on it.
Mr. Rangel. Thank you.
Chairman Thomas. The Chair notes that we are beyond second
bells on a 15-minute vote. It will be followed by a 5-minute
vote. And so we will probably not be able to sustain the
Committee by having Members go over and come back. So Mr.
Ambassador, if you will allow us, the Committee will stand in
recess until as soon as we can get back, hopefully shortly
Mr. Crane. [Presiding.] Our Chairman cannot get back here
right now, but we will continue and, as I understand it, I am
next in line since Charlie already got his 5 minutes. Is that
Mr. Rangel. If you are the Chairman, whatever you have to
say I would bend over backward to make it so. I yield for the
Mr. Crane. I thank you so much for that. I am meeting with
Yugoslavian President Kostunica this afternoon, and one of the
questions or the most important question from his perspective,
of course, is reinstating NTR for Serbia and Montenegro. The
Administration already has the authority to reinstate NTR but I
am told we need to pass legislation. What is your position on
Mr. Zoellick. Chairman, we support the effort to try to
restore the NTR for Yugoslavia, and we have been working with
the Department of State in terms of trying to address the
concerns that were reflected in the 1992 legislation to try to
Mr. Crane. Second question deals with your expressed
interest in pursuing free trade agreements with especially our
Latin American countries, but also I have heard of potential
FTAs with Australia and New Zealand and South Africa and
Morocco. What criteria are you using to identify potential
candidates for bilateral FTAs?
Mr. Zoellick. Well, Chairman, I am particularly pleased you
asked this because this is a topic that I wrote, as you know,
to you, Chairman Thomas, Mr. Rangel, and Mr. Levin that I hoped
we could get a good dialogue going forward.
The starting point is that Congress has passed legislation
in the Caribbean Basin Trade Partnership Act that urged us to
focus on the possibility of a free trade agreement with Central
America. And the President spoke about our interest in pursuing
that with the five Central American countries. In addition,
AGOA also encouraged us to look at possible free trade
agreements with African countries. And the South African Trade
Minister has expressed an interest in exploring this perhaps in
the context of the South African Customs Union. And that is one
of the items I hope on my trip to Africa to explore it further.
But beyond that, Chairman, there are a number of benefits
for this, I think. One is whether we can create some models of
success; whether we can, for example, advance some of the trade
agenda in a particular area; for example, in the high-tech
area, intellectual property rights area, whether we can catch
up in market access. For example, right now, Chile has an 8
percent tariff that doesn't apply to Canada but does apply to
us, so we are losing vegetable oil and wheat and potatoes and
other things. We also can use this to build support on other
issues; for example, on biotech that a number of Members are
interested in sanitary or the FAO sanitary issues. Another one
is to support economic reform.
And what I think would be my suggestion is that we try to
have an array of developing in developed countries in different
parts of the world so we can create a network and show that the
United States is willing to look for free trade in Latin
America, in Africa, in Southeast Asia and in other quarters.
Obviously, there is a dimension of this that could help our
foreign relations. For example, Jordan was a free trade
agreement, our first with an Arab country in the Muslim world.
It is important to do that at this time. And Morocco would
offer another possibility. So those are some of the criteria
that we are looking at, but it is an area where I very much
want to have a good consultation and dialogue with Congress.
Mr. Crane. And a massive effort will be required for China
to comply with all its commitments and as part of its WTO
accession. And for the United States to monitor and seek
compliance with these commitments, China must create or revise
and enforce scores of laws and regulations. What is the
Administration doing to establish a system for promoting
Mr. Zoellick. With the help of the Congress, which at the
time that it passed PNTR gave some additional resources not
only to USTR but to commerce and others, we are trying to do
this at a number of levels. One is we have an interagency group
that has taken each of China's commitments and assigned it to
an agency, and we have monthly meetings where we track the
follow up on that. But, in addition, we are trying to reach out
to the private sector, because in a country of 1.3 billion
people, a lot of the information will be gathered by American
businesses in China. And we are trying to link into that
network so we can identify the problems at an earlier point and
try to resolve them.
Third, we are trying to work with other countries. The WTO
itself has a special process related to China's follow-through,
but with Europe and with other countries we have a common
interest in this delivery.
And let me just emphasize this point most of all, Chairman,
because it is one that Chairman Thomas raised. This is going to
be a very long road. This is a country that is going through a
huge transformation and in many cases what Beijing decides is
not necessarily what the provinces will do. So we are going to
have work on these. And while we are certainly willing to take
the dispute resolution process as necessary, I do hope we can
try to pursue this in a problem-solving mode.
In the area of soybeans and biotech, which Chairman Thomas
mentioned, I just want to reassure you, the interest starts at
the top. When President Bush was in China for the Shanghai APEC
or Asia Pacific Economic Cooperation meeting, he emphasized the
importance of that issue. And we got some headway on that one
as an interim measure, but we are now focusing very heavily on
the Chinese implementation of their biotechnology regulations.
Mr. Crane. Thank you very much Mr. Ambassador.
Mr. Stark. Thank you, Mr. Chairman. Mr. Ambassador, I would
like to just touch on a topic. I have questions about FSC but
another problem that seems to have invaded Capitol Hill has
been the corporate ethics and some of the problems that many
people have had recently with 401(k)s and accounting and so
forth. And I wonder if it is your intention to voluntarily come
to Congress and testify about your employment with the Enron
Corporation and disclose all that you know, both formally and
informally, to help us figure out what to do to see that that
kind of thing doesn't happen again.
Mr. Zoellick. Mr. Stark, I am pleased to disclose all that
I know. And as a starting point, I served on an advisory
council, and I recused myself on all matters dealing with
Enron. And before I left for India, I was asked by the Indian
press whether I would push the issue and I told them I couldn't
because I was recused. In addition, I was a stockholder and all
this was disclosed at the time of my confirmation, and I sold
my stock at a loss.
Mr. Stark. My concern is that you are probably aware of
things that went on in the company when you were there. I am
not suggesting that there was anything improper about your
present position and your former position with Enron, but I am
sure that you have a lot of helpful information that would be
useful to us as we try and resolve this issue in the future.
Mr. Zoellick. Perhaps, but again, I know this is an
important and sensitive topic and I know it is one there are
hearings on right now. I served on an advisory Committee that
met twice a year. This involved people like Paul Krugman of the
New York Times. And so while I am happy to try and cooperate in
any way we can in trying to deal with this issue, when you
said--you used the words that said ``my participation,'' or
some such words----
Mr. Stark. As I say, I knew you were on some kind of a
board--but no more than the average person about what went on.
On the FSC generally, there is I am going to say 20 or 30 major
corporations in this country that get close to the $4 billion
benefit from FSC. And however you are able to negotiate that--
these same companies, by the way, probably get 80 percent of
the Ex-Im Bank guarantees and they probably get the majority of
the AMT or alternative minimum tax giveback of 25. So they are
quite comfortably compensated by our Tax Code.
If, as many of us feel, we are going to at best negotiate,
what can you suggest to us or how can you assure us that if in
fact there is $4 billion of retaliation, let's say, or whatever
it is, that that money will be paid by the corporations who
have enjoyed the benefit and not by all the average people in
America that you are saying maybe saved a thousand bucks
because of NAFTA. It seems to me whatever we come up with, that
the people who got the tax benefit ought to end up somehow
paying for whatever retaliatory penalties we have to pay. Does
that sound fair to you?
Mr. Zoellick. The problem with it, Mr. Stark, is that is
not the way the trade retaliation works. The trade retaliation
would not be a payment. This would be the EU's right to raise
tariffs on products. So it wouldn't be payments. And one of the
Mr. Stark. Exactly, Mr. Ambassador, what I am getting at.
That the people who got the benefit, who have the $4 billion in
their pocket, these large American corporations would be the
ones who would be retaliated against.
Mr. Zoellick. We don't know that. Unless we work something
out with the Europeans, it is their choice.
Mr. Stark. There is certainly a way we could compensate.
Let us assume that all of the tariff retaliation comes against
agricultural products. Wouldn't it be fair then to raise the
taxes on the corporations who got the $4 billion and distribute
it through the Tax Code to the small farmers, for instance, who
might suffer. All I am saying is, don't you think it would be
worth our effort to make a good effort to see that we don't
further hurt the average American who is already paying for the
$4 billion that these big corporations are getting?
Mr. Zoellick. A lot of average Americans work for those
companies and they get their paychecks. All I can say is I
think we need to resolve this problem or else we are going to
get retaliation against us.
Mr. Stark. As well we should, and we got caught.
Mr. Crane. The time of the gentleman has expired. Mrs.
Mrs. Johnson OF CONNECTICUT. Thank you, and welcome, Mr.
Ambassador. I wanted you to enlarge a little bit on how you see
the negotiations going forward in regard to trade remedies and
the great importance we put on our laws that allow us to
protect ourselves against what we usually refer to as unfair
trade barriers. And this will be a big issue in the upcoming
round. And I would like to hear how you think that is going to
Mr. Zoellick. Well, first, we believe that effective trade
remedy laws are absolutely critical. And we not only supported
them but we have supported their use. And whether it be
softwood lumber or steel, or other categories, indeed I made
some suggestions yesterday about possibilities of doing this
against the Canadian Wheat Board. So we think it is a key part
of our overall trade policy.
At Doha, we did not agree to change our trade remedy laws.
And we, of course, didn't change the laws. What we set out
first was an offensive agenda because a number of countries are
putting laws like this in place without the due process,
without the procedures. And they are increasingly being used
against American companies. In fact, there are about 60 orders
in place right now against American companies and they tend to
focus most on chemical, steel, other metal firms, but also
being used against agriculture. For example, our poultry
industry is very concerned about this.
Our first step is to make sure that whatever is done in
this area, it gets others to have a better performance and up
to the standards that we have.
Second, Congresswoman, there have been a number of
decisions in the WTO which frankly we, and I think most of the
Members of this Committee, disagree with. For example, they
have not given, in our view, the due deference that should be
given to the U.S. International Trade Commission (ITC) or the
government in terms of a standard of review. And frankly, we
would like to get those and some of those changed.
What we also agreed in Doha was very important from our
point of view, was that there is--that we will not undermine
the concepts, the effectiveness and principles that underlie
these laws. And indeed we went back and fought again and said
also the instruments which are applied. We also said if there
is any discussion of these laws, you can't look at the remedy
without looking at the disease. We have to go to the underlying
problem of subsidies and dumping. So that is the framework for
which the future of the Doha agenda will go forward.
And, again, our emphasis is primarily on the offense agenda
because one of the issues that this Committee and all of us
will be dealing with in the future is more and more countries
are using these laws and they are going to be using them
against American exporters and you are going to hear about it
and I am going to hear about it.
Mrs. Johnson OF CONNECTICUT. Thank you very much.
Mr. Crane. Mr. Houghton.
Mr. Houghton. Thank you, Mr. Chairman.
Mr. Ambassador, I would like to talk about two points: one,
about the general trade laws; and, second, about 201. I was not
at the Senate hearing that you were at. But I think in
questioning, Senator Rockefeller asked you about some of our
trade laws, particularly in antidumping. And I think you said,
well, there are certain things we have to negotiate and
therefore we are prepared to put certain things on the table.
You may want to comment on that, because I was not there.
But I would hope that you wouldn't put the antidumping laws on
the table or really change our trade laws. Those are so
important. And some of us who have been on the other side of
this thing, being in business, have found ourselves really in
very difficult straits. And I am not going to mention any
names, but having been in business and being sort of thrown to
the winds by our trade representatives at other times, it is
good in terms of negotiating points--we will give you this, we
will give you that--but the people who were given, it is very
difficult. And that involves a lot of jobs. So I want to put in
a plea for you to be very careful in terms of that. You may
want to comment on that.
The second thing is in terms of 201. I am not a great
historian but I do remember that in 1934--and, yes, I was alive
in 1934--that Franklin Roosevelt and Cordell Hall organized the
whole concept of relief for various industries. In other words,
if an industry--the reason Congress gave the President that
authority to be able to negotiate and be able to give relief,
that he would give relief if an industry was in trouble.
And I know there are an awful lot of suggestions about
steel. And as you know the statistics as well as I do, 39 or 40
companies are now in bankruptcy. But one of the things that I
worry about is that when the President makes a decision,
whatever that decision is, that he will do it in a meaningful
way and not just have sort of a cosmetic approach. In other
words, there are some suggestions now that with steel imports
coming in at the usual number, the usual amount, that you would
let those come in and then you would give a 25 percent tariff
for everything surged over that.
That would be wrong, I think, because what it does is
everybody is lining up and creating a tremendous surge, which
would be unfortunate. So you may want to comment on both those
Mr. Zoellick. Let me touch on the steel one first, Mr.
Houghton. As you know, President Bush and this Administration
initiated this 201 because we believe that safeguards have an
important role. Members of this Committee were pushing for this
for the prior years and could never get the initiation. And
just to further underscore that, we worked last year to try to
work out some of the safeguard issues related to the lamb and
wheat gluten industries. And this is based on the same
strategic principle that you mentioned, which is there are
times in which markets move more quickly than industries and
the communities that live off them can adjust.
And so I am a firm believer that we need to have safeguard
laws, but in a way that helps the adjustment process. The
favored one that is pointed to in the 201 industry is the
Harley Davidson industry, how it turned around. But we also
have to be careful because it could just be a form of
protectionism and that doesn't help anybody adjust. But if we
have a restructuring plan and include time for an industry to
catch its breath, I think that is an important part of the
In steel, after we received the ITC's recommendations--and
as you know, they varied somewhat by Commissioner--we had very
good discussions with all branches of the industry. The ports
look at it a little differently. And some of the other users
obviously have concerns. But what I can assure you is this is
something now that is at the Cabinet level of discussions. We
look at it very thoroughly, about the effects on the economy
and on this industry. So it is getting a very serious
examination. And I know the President has a personal interest
in it from discussing it with him, and we are on track to try
to get the decisions in early March.
Mr. Houghton. Before you leave that, Mr. Ambassador, I
guess my point is that if you do have relief, it ought to be
real relief and it shouldn't be gobbled up with different
proportions and surges and things like that. This is an
industry--and I never was in the steel industry but I identify
with them totally--that is not fat and happy. They really have
done almost a resurrection of what they have been about in
years in the past. And frankly they do need some help here,
some real help.
Mr. Crane. The time of the gentleman has expired.
Mr. Zoellick. I will speak briefly because I think part of
my answer to Mrs. Johnson was on a similar point about the
trade remedy laws. And what I was emphasizing is we know how
important they are. I would not take your characterization or
my exchange with Senator Rockefeller as being an accurate
description of reality.
But here is the other situation that we face and then we
will fight to protect these and I believe they need to be
As I mentioned, there are two other things. One is at Doha.
There were 141 countries that wanted us to at least discuss
this topic. And so yes, we had to make a discussion should we
crater the round--and that is what it would have involved--or
should we try to craft what I think is a darn good agenda in
terms of our offensive points without giving anything up
And the other point I will put on the table here is that we
are going to need to figure out a way to get other people to
improve their laws while protecting ours because there is now a
gap. American lawyers, God bless them, and they have been going
around the world helping other countries to put these in place,
and they have nowhere near the standards, transparency, due
process, that we have. And we are going to hear about it to
increasing degrees, and that is what we will target in the
Mr. Crane. It is hard for any of us to believe that you
were running your business back in 1934.
Mr. Houghton. I didn't say that.
Mr. Crane. Mr. Levin.
Mr. Levin. I am tempted to take up Mr. Houghton's question.
Let me just say that I am not sure how people will read your
answer, but I think the feeling is clear, as I stated in my
opening statement, that just providing a safety net isn't
enough. And I guess the Europeans have now suggested something
that is essentially a way to finance a safety net.
Let me also, on the countervailing duties on antidumping,
just indicate that I hope very much that we will be emphatic
that we will not agree to renegotiate what we negotiated in
great detail, at great length during the Uruguay Round. And the
problem is that the language within the Doha agreement, I think
is read by many people as essentially saying everything is on
the table. And it may well be the judgment was we had to agree
to that or else the round wasn't going to proceed. But that is
the way it has been interpreted. And it is quite different the
way it was worded in article 28 from the provisions, for
example, on competition--and you know this, you negotiated it--
where a decision to proceed had to occur by explicit consensus.
And essentially there is no such language in the antidumping
provisions, the provisions on rules.
But I don't want to make it more difficult for you. So let
me just go on and just say a couple of other things quickly. On
Chapter 11, we have talked about this and you and I have talked
about other areas of disagreement and I won't go into them, the
labor and environment provisions et cetera.
An investment in our bill that we brought up, we had some
very specific provisions. And what I would like you to do, if
you would, is to send to us your analysis of those provisions.
We have talked about them, but we have never had any written
communication as to any objections you have as to how we laid
out what should be the negotiating objectives on Chapter 11. If
you would do that, it will help the dialogue.
And in that regard, getting to Chile, we talked a little
bit about this, but if you could give us a somewhat more
specific timetable as to when you think the investment
provisions will be taken up--you said you are going to be
talking about market access next month--I forget, but if you
could tell us the timetable on investment and also on the labor
and environment provisions, just the timetable. We have our
differences but let us see if we can possibly move ahead.
So let me talk for one minute about agriculture. Could you
Mr. Zoellick. About what?
Mr. Levin. Agriculture. Could you tell us how you think the
present discussions or work on the farm bill could affect the
negotiations on one of the two or three key sensitive issues,
and some people think may be the most sensitive--I think there
are others--in the next year or two?
Mr. Zoellick. Certainly, Mr. Levin. Since you mentioned the
EU proposal, I don't want you to misstate it because I am not
sure you would like it if you really looked into it. It is the
idea of taxing the steel industry for a fund. That is what the
Europeans did, and I am not sure our steel industry would be
very excited about having a new tax imposed on it.
Mr. Levin. And the tax would essentially go to pay legacy
costs. So that only addresses the safety net. I am not saying
it is a good idea, but only addresses the safety net issue and
not the basic issues of whether we want a steel industry, how
it is structured, et cetera.
Mr. Zoellick. And, Mr. Levin, I would be pleased on the
written points on Chapter 11. What I would urge we also do is
we talk about it more, because I looked at a number of those
points and I think they are focusing on a lot of the same
issues that we are focusing on. I may feel, for example, that a
required appellate level for an agreement that is not likely to
have many appeals might be something that is not a workable
approach, but we need to address that issue in some other way.
So we will try to follow that up.
On your farm bill question, obviously, the Department of
Agriculture is in the lead in terms of trying to deal with
that. And you know, we support forward-looking farm
legislation, as the President has made clear, that helps both
the prosperity of our farmers but also meets our WTO
There is language in the House farm bill that authorizes
the Secretary of Agriculture to make necessary adjustments if
our spending exceeds WTO limits. And right now, the USDA or
U.S. Department of Agriculture staff is working with the
Committee to get a sense of how that would be administered, how
it would work in the process. So it has been, you know--our
emphasis is in the Administration that we need to have a farm
program that allows us to meet the needs of farmers but also
meets our international obligations and helps us to continue to
move forward in terms of eliminating export subsidies, reducing
production support and opening markets around the world. And I
have talked with Members on both sides of the aisle on that in
the Ag Committee about trying to do that.
Mr. Crane. The time of the gentleman has expired. Mr.
Mr. Ramstad. Thank you, Mr. Chairman.
Mr. Ambassador, congratulations on your 1-year anniversary,
and thank you for your outstanding leadership as our Country's
Trade Representative. Certainly the President has the best and
brightest on his trade team, and I certainly applaud the work
that you are doing.
I want to raise an issue that is critically important to
America's medical technology industry, very important segment
of our economy as you know. And as you also know, on December
12, the Japanese Ministry of Health and Welfare adopted foreign
reference pricing, commonly known as FRP, which is a new
pricing policy going into effect April 1 which allows the
Ministry to cut reimbursements for medical devices based on the
Our country has long opposed FRP schemes. They discriminate
against the U.S. medical device community. They failed to
recognize the high costs of doing business in Japan. Now, the
way in which it was quickly adopted also violates U.S.-Japan
trade agreements according to all neutral observers.
Congress, in a bipartisan way, has expressed its strong
opposition to FRP. Letters have been sent from Senate and House
leaders, Republicans and Democrats alike. Speaker Hastert and
Representatives Dunn and Blunt raised their concerns during
their trip in January last month. Secretary O'Neill has raised
his concerns, as has your Deputy Huntsman.
Despite all of the efforts by Congress and the
Administration, the Japanese do not appear willing to alter
their proposal, which would be a huge, a huge setback to the
progress that has been made over the last 15 years in opening
up Japan's protective marketplace. Now since the MOSS or
Market-Oriented Sector Selective trade agreements in 1986,
aggressive U.S. trade policy has turned $100 million device
trade deficit into a $1.3 billion trade surplus today. And we
need that strong United States leadership to continue.
I know--we all know the President will be visiting Japan on
February 17. And my question to you, Mr. Ambassador, I believe
is a very, very critical one. If this policy is not removed by
then, that is, the time of the President's visit to Japan on
February 17, will the President raise our serious concerns and
our strong opposition to FRP during his visit?
Mr. Zoellick. First, Mr. Ramstad, thank you for your kind
words. I obviously can't say what the President will or won't
do. I work for him and not vice versa.
Mr. Ramstad. Will you encourage him to raise this?
Mr. Zoellick. Yes. And indeed, he has helped and pressed on
a number of trade issues, as I have mentioned, on these visits.
He has always--frankly, it is a big help to me, more than
willing to me to try and push these.
I will say that we have been working closely with the
industry, as you know, and others--in addition, you know,
Secretary Evans and Ambassador Baker--Senator Baker has been
pushing it very vigorously. And I think there have been
discussions this week, Mr. Ramstad, that are making some
headway with the industry.
But we know the importance, and it is a critical industry
for the United States and also it is an unfair pricing system.
So we will work with the industry with it and I will certainly
also talk to the White House and the President as they go
Mr. Ramstad. The fact that you are encouraging the
President to raise this is very encouraging to us certainly,
and he is aware of the terrible consequences of such a policy;
is that correct?
Mr. Zoellick. Yes, I am sure.
Mr. Ramstad. And just met, as I think you did or your
Deputy Huntsman, with a number of Chief Executive Officers
(CEO) from Medtronic--from Minnesota's medical valley, Silicon
Valley--from Representative Thurman's district who were here.
And this truly, this FRP scheme truly, truly has devastating
consequences. I can't speak in strong enough terms as to how
devastating to this critical industry, to our country, and to
So I am certainly glad we are on the same page. Appreciate
the fact that you are going to encourage the President himself
to raise this when he is visiting Japan on February 17, because
this is so important to a big part of our economy and to the
medical device community. So thank you very much, Mr.
Mr. Crane. Mr. Tanner.
Mr. Tanner. Thank you, Mr. Chairman; and, Ambassador, thank
you for being here. And I have got three items I would like to
mention. They are enforceability issues, and I know we all
agree that whether we are for or against a particular bill, the
enforceability of what we have is important to both the
supporters and the nonsupporters of what we are trying to do
So let me just mention these, if I could, and then you
could respond. As you know, the House has passed and the Senate
is considering to renew the extension of trade benefits to
Andean countries. We have a telecommunications company that is
involved in a dispute with Colombia. I have talked to you about
it before and we get a lot of promises and assurances and so
forth from the Colombians but nothing changes. Deadlines have
passed without resolution. I understand that their own laws are
not being followed with respect to the enforcement or execution
of a judgment.
And my question is even though we have Andean Trade
Preferences Act (ATPA) concessions, there is some
conditionality in that regime where benefits could be suspended
or lifted for a particular country. And I hope that we can give
the attention it deserves to this situation, because it is one
of really shocking noncompliance if one could use those terms.
Second, Korea has some new biotech regulations with respect
to corn and soy items that many feel are regulations that are a
barrier to trade and are done to stifle competition. Has to do
with documentation, certification and so forth. I understand
someone in your office has recently met with the Koreans and,
if so, if you could give us the status of that involving corn
chips and so on.
And then, finally, the EU has had a moratorium on biotech
products from our agricultural sector. I understand they--the
EU has recently suggested that they would start their approval
process later this year having to do with such issues as
traceability, labeling requirements and so forth. And if you
could give us the status on that and where we are with that. It
relates to the Korean situation as well. Thank you.
Mr. Zoellick. Sure. Well, first on the Colombian matter, as
I know you have been pushing this issue and we have been
working with you on it, I have written President Pastrana, and
I have written Colombian Trade Minister Ramirez, and she
responded in a way that she thought they were moving it
forward. In fact, I saw her just this past weekend and raised
it with her. She is going to be moving onto another post so I
will have to follow up with somebody else in the process.
But I thought the next step is actually--we will meet with
Nortel and get their side about why they don't think it is
moving in the process, and then we will work with the
Colombians further as we go forward. The ATPA right now, since
it has not been passed, we can't use it in that way, but we can
use it in terms of trying to get it passed. And the Colombians
have been responsive in some other areas like acrylic fibers.
I will point out one point and this is an issue of perhaps
interest to Mr. Levin and Mr. Doggett as well. This is one of
the reasons that the investor provisions are a double-edged
sword. This is a company that employs people in your district
that wants to have investor provisions and wants to have them
enforced. Some other people are then a little leery about how
those work. So this gives you a little sense of the balance we
need to strike here.
On the Korea biotech, I know generally about the work we
have been trying to do with the Korea biotech. I don't know
particularly about the corn one, so I will have to follow up on
that one. You are right. It is definitely related to the larger
problem out of the EU. And I am glad you raised it because I
want to put a real focus on this this year, because biotech is
so critical not only for our industry and our employment, but
it is critical for the development of agriculture around the
world, including a lot of developing countries. And frankly the
EU sort of stymieing of this is totally unacceptable
economically, and I think morally, because in many developing
countries around the world, this will be what leads to
increased yields, less use of fertilizer; you know, the
development of nutrients in a lot of these products.
So I was in Europe in December. I talked to four or five
commissioners on this. And frankly, Mr. Tanner, they are not
going to move. And one of the things I am considering is
bringing a WTO action against the fact that they are not
approving products. And I am working right now to talk with
other countries around the world to see if we might do so.
That is separate from the traceability and labeling. Right
now, they are not approving a darn thing. But on top of that
would be the traceability and labeling rules, and frankly we
think they are unworkable. So we are also trying to work with
industry to see how we can fix those.
Mr. Crane. The time of the gentleman has expired. Mr.
Mr. Cardin. Let me thank you for the way you have had an
open door policy with Members on both sides of the aisle and
the way you have consulted with us. We very much appreciate
that in the way you are conducting your office. Let me just
mention two issues that we talked about before so that I can
just advance these issues.
First on steel, we have talked about that frequently and I
want to thank the Administration for the actions that it has
taken. The key decision, of course, will be made next month, or
by next month, on what remedy to seek in regards to the damages
that were caused on our companies. I would just urge you to
take advantage of at least recommending to the President a
tariff significant enough that it will deal with the true cost
of steel. And I would urge you to look in the range around 40
percent. I would also urge that you look at that revenue as
being used to help deal with the legacy cost.
As you know, the European countries do not have to incur
the costs of our trading partners, incur the costs because
there is a social cost in their country, and that makes it
difficult for U.S. steel to be competitive with the high legacy
And last you have probably been the leader in encouraging
the restructuring of the steel industry in the United States,
and we have had different views on that over time. But I would
urge you to look at the antitrust laws to see if there is a
concern there and what we are trying to work out on the
restructuring and whether we need to look at some
recommendations in that regard so that the restructuring can
move forward in an orderly way.
And then on the second issue that we have talked about, and
that is the permanent normal trade relations with the former
republics of the Soviet Union. I look forward to working with
you as we advance that legislation.
I would just caution that when we looked at PTNR for China
it was with a strong WTO accession agreement, and that made it
a lot easier for some of us to move forward in that area.
I would also point out that each of these republics are
different and it would at least be helpful for us if we
consider them independently. And with China, we put in a strong
monitoring commitment on human rights, which is important in
some of the former Soviet Union. So I would just urge, as this
process unfolds, look for a way that we can bring broad
consensus to the legislation that the Administration seeks. And
I thank you for your help.
Mr. Zoellick. Would you like me to--let me take the last
one first, because we haven't really discussed it today and I
think it is very important and I appreciate your help and I
take your counsel about looking at these individually. In the
case of Russia in particular, one thing just so you know how
the Administration looks at this, is that this is an important
step in recognizing the Cold war is over. I mean it has been 10
And so, as you know, the history of the Jackson-Vanik with
Russia and China were always different. In terms of Russia, it
had focused on immigration and human rights. And Russia has
been in compliance since 1994. So the focus that we have had--
and I look forward to working with you--is on human rights and
religious groups to make sure we try to get the assurance that
we need to be able to go forward. I would distinguish that, and
if someone said, look, we like to keep this as a club over
Russia as it gets into the WTO--and I want to try and explain
why I think that would be a mistaken idea.
President Putin and the other Russians have said, look, we
want to play by the same rules everybody else does. And so we
will agree whether it is agriculture or other topics, but
please don't use something that distinguishes us from the Cold
war as Jackson-Vanik would. We are in the midst of 20 other
applications. And this I think would be counterproductive if we
use it in that way, and particularly we don't need it because
the WTO accession requires a consensus, not only us, other
countries. We have the ability to say no unless they take the
And so I have had a number of meetings with the Russians in
the nitty-gritty detail of this. They are making efforts to
comply. We want to bring them into the system. We won't do it
unless we have the right market access, agricultural
communities are particularly concerned about this, and deal
with the subsidy and other issues. But I think it would be
wisest to focus the Jackson-Vanik issue on its origin with
Russia, the immigration, the human rights, the freedom aspects.
And I know that is one you worked on and I will be pleased to
work with you in the future.
Mr. Cardin. I understand that and I think that makes good
sense. Looking forward to working with you.
Mr. Zoellick. Then on steel, obviously we are at a point
when we are looking at the full range of remedies. As you know,
the ITC commissioners, some suggested tariff rate quotas, some
of them suggested higher tariffs. We are looking at the full
And on the issues of legacy costs there are different ways
to try to address this and we are looking at the full range. As
you know, USX or the United States Steel Corporation proposed
basically $13.5 billion over 10 years to deal with six
companies. One of the issues we have to look at is what about
the other six companies where you have workers that are
similarly situated. And this has also led, I think, to a focus
on wherever one goes about the programs for the workers, for
example. You know, the Administration has had a proposal about
a refundable tax credit for health insurance. Pension funds as
you know, by and large for retirees, are covered by the PBGC or
Pension Benefit Guaranty Corp. The numbers we have is that it
should cover about 93 percent of the pensions. But I think one
of the issues we will have to balance here is some fairness not
only on steel companies but other companies. And for what it is
worth, Congressman, my view on this is that try to focus the
aid on the people who are going through the change.
Mr. Crane. The time of the gentleman has expired. Ms.
Mrs. Thurman. Thank you, Mr. Chairman. Thank you, Mr.
Ambassador, for being with us and staying for a rather long
time as well. And we especially appreciate it down here on this
row, because a lot of the time our guests have to leave and we
never get an opportunity to ask questions. So we do appreciate
you being here.
Ambassador, I just have a couple of issues that have been
brought to me and as I can see from the line of questioning,
other Members of this Committee have brought specific issues
because of specific contacts they have had with people. And,
quite frankly, I am always amazed at just how big this county
is and the kinds of things we do and the kind of trade that
goes on. There is so much going on.
But in saying that, as you know, during the negotiations
over TPA there was a lot of concern in Florida specifically
dealing with our citrus industry and other agriculture
industries. Evidently there are some questions dealing with
some of the cartel practices that I guess the Senate has maybe
brought up to you. We just would like to know whether or not
you plan to negotiate remedies to eliminate cartel practices
and how do you plan to address them.
And then, second, with the TPA, while it gives you the
tools to expand trade through U.S. and foreign tariff
reductions, there are many unsubsidized U.S. agricultural
commodities which have been forced to address what we believe
to have been unfair imports repeatedly. Will you commit to us
to avoiding U.S. tariff reductions for those commodities which
have been faced with dumped and subsidized import competition
Third, and I did get a memo, and I actually was surprised
because I didn't remember hearing much about this during even
TPA on the tariff reductions, how many other countries actually
use this? And it was alarming to me that we weren't able to
negotiate any of that when we were doing some of it, but on the
idea why we would take a position that ties our hands on the
issue and harms our import-sensitive industries while our
trading partners take the opposite course in their own self-
interest. And this is on our tariffs.
And then in the FTAA, are you prepared to sacrifice
unsubsidized agricultural industries like citrus for the sake
of a negotiating principle which only the United States
Then the last comment that I need to make, it has come to
my attention that in Florida, as you can imagine, we have a lot
of people doing business in Peru and other areas. And it came
to my attention that there is a business over there that has
actually been trying to work with the government to take care
of an issue where they feel like they have been harmed in
telecommunications. And I guess the Senate actually put some
language in their Committee report that is asking USTR to
closely examine these matters and determine whether Peru should
be designated as an ATPA beneficiary country because of these
particular--I guess there are about three or four different
cases. One just happens to come from Florida.
On the telecommunications issue, you might be familiar with
it, Telephonico--maybe not.
Mr. Zoellick. Let me try on some of these. I think they are
interconnected. There is a general theme of the citrus industry
which wouldn't surprise me.
Mrs. Thurman. I didn't think it would.
Mr. Zoellick. I think at least on the second and the fourth
as I had them, there is language in the Trade Promotion
Authority bill that establishes a series of additional
procedures to deal with sensitive products, and citrus was kind
of the lead in the train on this. And it would require that as
we undertake any negotiations and if we want to try to
negotiate any reductions in tariffs, we have to go to the
National Trade Commission and have various reports done and
then explain the logic for moving forward. And then, of course,
it states clearly that any ultimate decision in change of
tariffs belongs to the Congress and not us. And I would be
happy again to give you more information about those
On the cartel point, I am not 100 percent sure I have this,
but it is our negotiating position that we want to try to
address the problems of state trading monopolies and state
trading enterprises. This is most actively in the news actually
related to the Canadian Wheat Board. And I think the practices
are wrong. And I am actually talking with the wheat industry
again tomorrow about some options we might be able to take
dealing with that, using our unfair trade laws and maybe also
On the Peru and telecommunications issue, I am afraid I
don't know the precise points. Mr. Tanner mentioned--I don't
know if it was with the Nortel and Colombian case, but I will
be pleased to look into it with you.
I would say, again, and you can share this with your
colleague, Mr. Doggett, this is one of the issues--why we have
difficulty on these investment issues is that we want to try to
protect our investors abroad and make sure they get the
protection that foreigners get here. And sometimes that creates
a little complexity in the legal regimes we have.
Mrs. Thurman. To note this, it was in the Senate language
on page 31. And that will give you an area to go to.
Mr. Crane. The time of the gentlewoman has expired. Mr.
Mr. English. Thank you, Mr. Chairman. And, Ambassador, it
is a privilege to have you here to comment upon, in the wake of
the President's budget submission, our trade priorities. I want
to congratulate you on the extraordinary job you have done in
the last year. I thought your predecessor set a very high
standard and I think you have done a remarkable job of
strengthening our trade policy within a very short time and
without as much cooperation from Congress as we and this
Committee would have liked.
I have a couple of specific issues that I would like to
raise with you. One, I would like to once again congratulate
the Administration for launching its 201 action in steel. I
realize this entailed a great deal of political capital on your
part, that this was a controversial move in some areas of the
business community and manufacturing.
As someone who represents a district that both produces
steel and also has steel-consuming manufacturers, I appreciate
the challenge that you faced in crafting that policy and that
you have a final upcoming decision. As Chairman of the steel
caucus, I would urge you to go to the President and urge him to
pursue an aggressive solution to the 201 action, one that while
I realize will create some animosities with some of our trading
partners, one that I think is necessary for us to preserve on a
level playingfield our domestic steel manufacturers. You are
welcome to comment.
Mr. Zoellick. Well, I think the key point that you added,
Mr. English, and thank you for your kind words on this, is that
regardless of complaints from trading partners, safeguards
provisions are acceptable under WTO rules. And we have been
going back to the ITC to make sure we try to do this as cleanly
as we can to proceed in accordance with those rules. And if we
have the industry undertaking the restructuring as they will
need to become competitive, I think safeguards are appropriate.
That is something that my Cabinet colleagues and I will be
discussing with the President in the nature and the form. And
as you probably point out, there is a balance here. You have
different users and you have different steel industry companies
that are developing different business plans in how they are
trying to approach this. But I would really thank you and your
leadership with the steel caucus all year for working with us
on this so we can try to deal with what we know has been a
difficult problem for many communities in America.
Mr. English. One of the other issues that is frequently
associated with steel and other heavy manufacturing is the
status of our antidumping laws. And I know you have had some
very difficult decisions to make on this as the Doha
negotiation progressed. I wonder if you would care to comment
on whether the Administration would be open to some ideas being
advanced not only by myself, but by Mr. Levin and Mr. Cardin
and Mr. Houghton, to potentially within the WTO standards
strengthen our antidumping laws, take out some of the--take out
or replace some of the provisions that have been proven to be
antiquated and/or create problems. We have not had a major
overall of our antidumping laws in quite a few years, and I
don't count in this the minor revisions that were made in 1994.
I think a major overhaul of our antidumping laws has not been
done since the seventies.
Would the Administration be open to entertaining this kind
Mr. Zoellick. Well, first, we would certainly be pleased to
discuss this with you and others on the Committee. And just to
give you a sense of the importance of this, the House passed a
resolution before we went to Doha that we looked at and
followed very closely in terms of our approach in dealing with
these issues in the WTO context.
On the domestic front, as you know, the Commerce Department
applies these laws, and so I have to defer a little bit here to
my colleague, Secretary Evans, but we work very closely
together and we would be pleased to get into dialogue on these
laws and how they could be improved and strengthened,
obviously, in accordance with our WTO obligations.
Mr. English. As the author of the House resolution, I am
grateful you followed it religiously.
And one last point I would like to make. I noticed you
recently visited Morocco. I was delighted to see that. My own
view is that Morocco is potentially a good partner that we can
engage in a bilateral trade agreement along with some of the
other Magreb countries: Tunisia; potentially, Egypt. Would you
like to comment on the potential for a bilateral or
multilateral initiative here?
Mr. Zoellick. Also, Mr. English, I don't know if you were
on this trip. Mr. Gephardt preceded me, and I know that he was
interested in trying to express help in terms of strengthening
U.S. trade with Morocco. So perhaps we can even get a broader
base here. And I talked with Mac Collins about how he tried to
promote some paper from Georgia in terms of sales.
Morocco is a country that has pushed forward with economic
reforms and pushed forward with political reforms as well.
There will be parliamentary elections. So at a time there is
turmoil in the Magreb, I personally feel and I think all of us
have a sense that it would be extremely good for the United
States if we could strengthen the reform process in a way that
also opens markets.
The Europeans have preferential access. We have lost out in
various areas. So I think we can do good and do well at the
same time through this negotiation. And I do believe that the
Magreb made--there may be a window through some of the other
You mentioned Egypt. And here we have had discussions, but
I will also just share with you the need that we have to be
realistic with Egypt. Right now, Egypt has not implemented some
of the WTO obligations in terms of intellectual property and
customs and other areas. We want to support Egypt and want to
try to help Egypt but, going to Chairman Crane's questions
about standards, one of the standards I look at is whether a
partner is ready. And a good test as to whether they are ready
is whether they are willing to follow through on the reforms
and their current obligations. Morocco has. Egypt has some work
ahead of it.
Mr. Crane. Gentleman's time has expired. Mr. Doggett.
Mr. Doggett. Thank you Mr. Chairman, and Ambassador in the
last year when you have come before this Committee on two
occasions, I have voiced my very strong concerns about the
misuse of the investor State dispute provisions by multi
nationals to challenge governmental actions that were designed
to protect the water we drink and the food that we eat. But,
during that year, there have been few public signs that
anything is being done about it, though I was pleased there
some cosmetic clarifications last July that were announced. And
I believe that the concerns of every major environmental
organization in the United States remain the same as when I
raised this issue with you last year.
I know that within the last few days, as you testified, you
met with one part of the environmental community to offer some
trial balloons about how to address this concern.
But of course the Methonex case concerning the pollution of
the water supply in California is still pending. The recent
Lindane case is pending now, where there is a challenge to a
Canadian pesticide ban evn though the same pesticide is banned
in the United States, by an American company that involves
health and safety. Last week, a Chilean official was reported
in the trade press to have said that Chile doesn't like the
wording of Chapter 11 either. Given the threat to our
environment and safety, the Chilean's stated concerns, and the
year you have had to act, can you commit today that you will be
personally urging that any trade agreement with Chile or any
other agreement that you plan to negotiate and submit to
Congress in the near future will have significant reforms in
the investor-state issue?
Mr. Zoellick. Well, one thing I really differ with I guess,
Mr. Doggett, in your statement is the notion of we are just
raising trial balloons. I am in a very serious dialogue with
people based on the concerns that you had, Sandy Levin and
others have raised with both the business and environmental
community. And let me tell you, what I am struggling with, and
I'm honestly struggling with it, is we have a balance here,
because on the one hand we want to try to make sure, as we have
had testimony today from your colleagues----
Mr. Doggett. And I will be glad for you to supplement. I
understand the need for the balance. That's what I asked about
last year, so there is no conflict between what I am urging and
the concern you raised with reference to Mr. Tanner, whether
there was a contract breach. But what I want to know, is there
going to be something you are urging to have happen in this on
the Chilean agreement that you say you will be submitting?
Mr. Zoellick. We haven't decided on our position, because
Mr. Doggett. After a year, you have not decided which way
to go on it?
Mr. Zoellick. Well, one of the things that happened during
the course of the year, Mr. Doggett, is I was getting advice
from this Committee in terms of the TPA process, and I wish it
would have happened earlier but it didn't happen until
December. So working on that guidance, and I am trying and I am
reaching out the best I can, Mr. Doggett, to get ideas, and I
think it is best that I not decide until I do.
Mr. Doggett. Thank you, Mr. Ambassador. If you haven't
decided, I can quite accept that as the answer, though I am
troubled by it. I know that you are aware of the Public
Broadcasting System special that Bill Moyers did called
``Trading Democracy.'' The Deputy Chief Negotiator of NAFTA,
there before of course you were in charge, was quoted on the
program as saying, ``If expropriation means anything that
diminishes the value of your investment, then that is probably
a big mistake because that is just too greedy.''
And I wonder if you agree with that view: Does NAFTA
require compensation anytime governmental health and safety
regulations diminish profits.
Mr. Zoellick. What I feel, Mr. Doggett, is we need to do
two things. One is make sure that American investors abroad get
the same protection that foreign investors get in the United
States. And the second thing we need to do is to make sure that
our ability to have health and safety, environmental
regulation, is not compromised in any way. And that is what we
are trying to do.
Mr. Doggett. Does that first principle mean that you also
subscribe to the view that foreign investors should have more
rights with regard to property than American citizens do?
Mr. Zoellick. No. And that is one of the reasons that we
are trying to work to see, given the framework of these
agreements--and you know it is important, but this is a serious
topic and I want to deal with it seriously, and I believe we
need to as well. We have had about 60 of these agreements and
bilateral investment treaties. There are about 1,600 of these
around the world. And one of the things we have to be careful
about is also not leaving the United States in a bad position
compared to other investors.
Mr. Doggett. Since the yellow light is on and I welcome
your supplementation, am I correct that in a NAFTA arbitration
panel, it is possible for a foreign corporation to deny this
Committee, the public, and the press from reading legal briefs
that are submitted, even if you personally think that the
foreign investor's filing should be public?
Mr. Zoellick. I have to check on that, because one of the
things we did in July was to try to make sure we opened up the
documentation for the agreements. So one of the things in July,
when you thought we weren't acting, might have been able to
address this. But also I would say it is my view that all of
these should be opened and the hearings should be opened up as
Mr. Doggett. And I urge you to begin with Chile. Just
finally, Mr. Chairman, some have suggested that you were
involved in plans to settle the Loewen v. United States case as
soon as the fast track vote is over with. Are there any
Mr. Zoellick. Is this the----
Mr. Doggett. The Mississippi Supreme Court case. You are
not consulted about it in any way?
Mr. Zoellick. I monitor the case because I know that it is
an important case, but I don't think we are part of it.
Mr. Crane. The time of the gentleman has expired. Mr.
Mr. Pomeroy. I thank the Chairman. Mr. Ambassador, I think
the President chose well when he selected you to be the Trade
Representative, and I think you are doing a very good job on
behalf of the Administration, on behalf of all of us. That is
to say, we will always agree about the philosophical directions
of your--the way you take your responsibilities. By and large I
have found you personally, and your staff, particularly
Ambassador Allen Johnson, to be very responsive to the issues
that I have had relative to the North Dakota agriculture. I
Coming up next week is a termination that you will be
making on this 301 petition brought against the Canadian Wheat
Board. We are waiting with bated breath about what might happen
there and appreciate the fact that tomorrow, you will be
meeting with a number of Senators and some House Members--
although most of us, unfortunately, will be clearing out of
town without votes on this question--to further discuss it
prior to the ruling.
There were some responses that you made yesterday that I
find a little troubling as you testified at the Senate Finance
Committee in terms of your thoughts on this matter. We have
visited in the past, Mr. Ambassador, about the range of
options: What do you do when you have an entity, Canadian Wheat
Board, a state-subsidized monopoly, where it is illegal to sell
wheat other than through this monopoly if you are in western
Canada, and this monopoly we believe routinely exercises
internal subsidies? Can't prove it because they adamantly
refused us access to their books and have taken, in my opinion,
extraordinary lengths to secure utter secrecy in internal
And finally, the ongoing frustration then resulting from
languishing market price for wheat and the demise of the durham
wheat market in particular for U.S. farmers have really brought
this situation to a very serious point that has caused very
extensive evaluation of what our options might be. The section
301 wasn't picked in a vacuum; it was picked after very
thorough deliberation in terms of the elements of establishing
the case and then establishing the remedy under antidumping or
a countervailing duty. It was exhaustively deliberated and
determined that really the only shot was to go and sit for the
You hold your responsibilities at a very important point in
time because issues that have--I mean that have been out
there--they are fully ripe and they come to a point where they
have to be resolved. Sometimes it seems to me that reality
causing political forces is at a totally different track than
the regimen of international trade laws, and somehow you have
got to span those two. You have got to deal with real reality
and the political consequences coming from it, as well as apply
your expertise as our trade negotiator.
I am telling you that it is my sincere evaluation of the
stakeholders in this question in North Dakota and through the
northern tier of wheat production that anything less than a
holding or finding under 301, the difficulty in establishing
tariff rate quota to deal with it, is not going to be
responsive to what they are hoping for. It is understood that
that is going to be challenged, that that is going to involve a
challenge that would even involve a risk of being overturned--
WTO. But that is where they are, and that is the way they think
this has to advance. And I wanted to bring you that message in
these final days before you must make your determination. I
would be interested in anything you care to say on the record.
Mr. Zoellick. First, Mr. Pomeroy, let us make sure if we
can, if you are not going to be able to be there tomorrow, that
we have a chance to follow up by phone, because I want to
compliment you because you have been leader on this and we have
learned an awful lot from you and we very much appreciate the
engagement as we have gone through.
Let me tell you how I briefly see it today, and I will
discuss with your colleagues, is that the 301 just gets us the
information and we work with you and others to try and really
do a much more thorough job about trying to dig and get as much
information surveys, and then to release that publicly. And
then the question is what do we do with it.
The problem with the tariff rate quota, there is no doubt
that under our NAFTA regulations and with a little bit more of
an increase in the tariff under our WTO obligations, that we
would be in violation, and then that means automatically they
retaliate against us, probably the Ag commodities. Maybe some
that hurts against North Dakota and it is not a durable
So, then, the question is what can we do? And what I was
putting forth yesterday, and I hope we can talk with the
industry about it a little bit more, is I know some of their
initial look at the antidumping countervailing suit--we think
there is some additional information gained through the 301
process that is worth a look to see whether this might be a
And indeed we looked at--and I know, because we are talking
about farmers that don't necessarily have the ability to bring
actions--but we have looked at other States who have supported
groups, citrus in Florida for one, to be able to bring action.
And I wanted to share our thoughts about one offensive route.
The other offensive route that we have talked about with
you is the WTO case. And I talked about this with Chairman
Bachus yesterday. And this is a very uncertain area in the WTO
set of rules. And so there is no, you know, sort of clearance,
and we may or may not be successful, but I think by pushing the
issue in that route as well, we would be in a position to
heighten it for the third element of the offensive, which is to
do this in the context of the Doha agenda. And this is where we
are good to have the round going because, look, I think these
are monopolies and I think they are rotten and I think they
allow various types of credits and subsidies and they ought to
And so we have a rules-based system as it is and, as you
probably said, that is what we have to try to address. Just so
you know, Mr. Pomeroy, we can talk about this more. I am not
saying one or the other. I am looking at all three. And they
might be able to help and interrelate with each other. And I
know the tariff rate quota looks facially appealing.
But what I can't get over is if it is a violation, it won't
last. Then where does it leave the North Dakota wheat industry?
And that is kind of a summary of how I am looking at it. I feel
and I felt for a long time that this State monopoly ought to be
Mr. Pomeroy. I will call you and I appreciate that
Mr. Crane. The time of the gentleman has expired, and with
that all time has expired, and we want to commend you, Mr.
Ambassador, for your endurance and we look forward to working
with you over the course of this year. And we are guardedly
optimistic that we will be able to make positive
accomplishments, thanks to your efforts. And with that, the
hearing stands adjourned.
[Whereupon, at 1:35 p.m., the hearing was adjourned.]
[Questions submitted from Messrs. Rangel and Tanner, Shaw,
Jefferson, Doggett, and Ryan to Ambassador Zoellick, and his
Questions for U.S. Trade Representative Robert B. Zoellick From
Congressmen Rangel and Tanner
European Union (EU) biotechnology policies are already costing U.S.
corn growers over $200 million in lost exports. The new EU trace-
ability and labeling proposals and the continuation of the moratorium
on new product approvals put at risk.
L$1.2 billion in soybean exports;
LNearly $2 billion in export of consumer-oriented food
LOver $120 million of vegetable oils, starches and
L$550 million of corn gluten feed (CGF) and other feed
That makes biotechnology issues in U.S.-EU trade major issue,
potentially involving more than $4 billion. And that figure does not
take into account the trade problems the United States is facing in
other countries as a result of copycat legislation, nor the adverse
effects of EU policies on the development of the U.S. biotech industry.
Given the current problems in the farm economy, our producers cannot
afford to take a multibillion-dollar hit.
In the view of the economic stakes, shouldn't the resolution of
unfair or discriminatory biotech trade policies of U.S. trading
partners be a high trade priority for the Administration?
Biotechnology is a top priority for the Administration.
Biotechnology is but a refinement of the continuing process of
agricultural innovation that has for generations been fundamental to
American prosperity, and indeed to human welfare around the world.
Biotechnology could help us feed and strengthen hundreds of millions of
malnourished people, especially in developing countries. It could
reduce the need for agricultural chemicals that burden the environment.
And it could provide vitamins and nutrition to counter diseases that
plague the poor.
The EU's biotechnology policies--the unjustified approvals
moratorium and proposed traceability and labeling regulations--put in
jeopardy continued agricultural innovation and all of its potential
social and economic benefits. Their policies put at risk open trade in
agro-food products. Their policies are a threat to farmers around the
world. I have been raising these issues on my trips around the world--
in Africa, in Latin America, and in Asia--and have found that many
share our concerns about the EU's pernicious policies.
I recently met with the House Biotech Caucus to discuss the issue
and how to move forward. I look forward to continuing to work with
Congress on this high priority issue.
What is the Administration's strategy for dealing with such
Resolving the obstacles resulting from the EU biotech policies is
indeed a very high priority. First, the President has on several
occasions raised with European heads of government our concerns about
the EU moratorium. Secondly, I and other senior officials have raised
numerous times our concerns about EU policies with key European
Commissioners and national government ministers. Thirdly, I raised the
issue in meetings in Geneva with the Cairns Group countries and with
African countries--in both cases I explained our concerns, and our
interest in working together with these countries to persuade the EU to
change its policies. Fourthly, during my trips to Africa, Latin America
and Asia, I have raised our concerns at every opportunity about the
importance of biotechnology and the dangers of EU policies.
We understand that European Union (EU) officials have told you that
they stand a better chance of restarting the approval process later
this year, after new legislation is implemented. Weren't we told the
same thing two years ago after those same rules were to be proposed?
Why should we believe that the moratorium will be lifted this year
without a formal WTO complaint by the U.S.?
You are correct. EU officials have suggested any number of times
that they may shortly be able to resolve their biotech approvals
And, yes, the Commission has suggested that, after the October
implementation date of their new approvals legislation, they might be
able to recommence the process of reviewing approval applications--that
would mean that the earliest any approval decisions could be made would
be late 2003.
As you point out, the EU's track record suggests grounds for
skepticism that the Commission will actually keep to this schedule. We
are accordingly considering closely whether it is necessary to bring a
WTO challenge to the EU moratorium. But to pursue a challenge, it would
be important that we build public support by, for example, highlighting
harmful effects of EU policies on the ability of developing countries
to ensure food security and achieve economic independence. In
considering whether, when and how to proceed with a WTO challenge, I
have been having conversations with industry, agricultural, and NGO
leaders, and with Congressional members.
Aren't several EU Member States demanding that the new traceability
and labeling proposals be implemented before new approvals are granted?
Please explain why implementation of the new traceability and labeling
proposals would not make all U.S. biotech products unmarketable in the
EU, thus negating the benefits of restarting the approval process.
Yes, we understand that some European officials have suggested that
the traceability and labeling regulations must be in force before
allowing approvals proceed. That reasoning, given the plausible date of
adoption of the regulations, could mean postponing approvals until,
We are indeed concerned that the traceability and labeling
proposals, if adopted in current form, would have the effects you
suggest. These proposals would require that a food product be labeled
as containing or derived from ``Genetically Modified Organisms'' (GMOs)
even where the product is substantially the same in characteristics,
structure and attributes as its conventional counterpart, and even
where biotech material is no longer detectable. Such government-
mandated labeling, where there are no significant differences between
the modified and conventional products, could be construed by consumers
as, in effect, a government warning, and would hence be misleading.
We are working closely with USDA and the State Department to raise
our concerns with Commission and member state officials, and to argue
for market-driven consumer-information labeling along the lines of
recent draft FDA guidance on non-biotech claims. Moreover, as noted, I
have discussed the labeling issues during my trips to Africa, Latin
America, and Asia, and we will continue to work to build broad
international support in our criticisms of the European initiatives.
Questions for U.S. Trade Representative Robert B. Zoellick From
Congressman Clay Shaw
[FYI: parts of this question go well beyond Singapore FTA negotiations
and, I believe, beyond USTR's function.]
1. As the lead House sponsor of Seaport Security legislation, I am
interested in better coordination between Federal agencies on achieving
homeland security objectives, which are vital to Florida as a
crossroads of commerce. In reviewing recent statements by Customs
Commissioner Bonner, discussing U.S. Customs Service's desire to
enhance homeland security by pushing more of the inspection and
intelligence gathering offshore to our trading partners' points of
origin/transit, how much higher a priority is this going to be for USTR
in ongoing and upcoming trade negotiations? Are we continuing to make
progress in our FTA negotiations with Singapore in achieving better
cooperation on transshipment and other national security and trade law
enforcement objectives? Will such national security concerns raise the
priority of engaging certain trading partners in trade liberalization
talks, beyond the immediate benefits to commerce?
In our negotiations with Singapore, USTR continues to place a very
high priority on ensuring that the FTA will include commitments that
will help address transshipment concerns, particularly through
enhancing cooperation on customs matters. We are making good progress
in these negotiations with Singapore. I stressed the importance of this
issue, particularly the role of information sharing, in a letter to
Singapore Trade Minister Yeo last September. This year (February 18-
20), I sent the head of the U.S. Singapore FTA negotiations and the
USTR lead for customs negotiations to Singapore to address the full
range of customs matters, including transshipments. We received
excellent cooperation from the Government of Singapore. While we will
need to continue work with Singapore on customs cooperation issues in
the context of our FTA, we believe our efforts to date are yielding
2. I understand my Florida colleague, Senator Bob Graham, submitted
a question at yesterday's hearing in the other body, and I would
similarly appreciate knowing the answer: the Senate version of TPA
contains a section, ``Certain Other Priorities,'' which directs the
President during negotiations to remedy market distortions that lead to
dumping and subsidization including, among other things, cartels.
Cartel practices have distorted international markets in processed
citrus and other agricultural commodities. Senator Graham noted that
U.S. anti-trust laws would not allow such anti-competitive practices
among U.S. firms, nor should we tolerate it from our trading partners.
Do you plan to negotiate remedies to eliminate cartel practices, and
how do you plan to address them, and if so, how would you go about
At the insistence of U.S. negotiators, express language was
included in the Doha agreement to give us the ability to address in
upcoming WTO rules negotiations the trade-distorting practices of our
trading partners that give rise to the need to apply our antidumping
and countervailing duty remedies. The bottom line is that we have a
mandate that will allow us to pursue an aggressive, affirmative U.S.
agenda, aimed at preserving the existing rules and getting at the
underlying causes of these unfair trade practices. Under the procedure
specified in the Doha agreement, we are now working on identifying
particular foreign trade-distorting practices, which could include
cartels and government subsidies, that we will seek to correct in
upcoming negotiations, and we welcome guidance from you and other
Members as to particular foreign practices that we should be
In addition, the United States has identified establishing
disciplines on agricultural state trading enterprises as a priority in
the WTO negotiations. In particular, we have proposed ending monopoly
(single desk) export and import privileges of state trading
enterprises, increasing transparency in state trading enterprise
operations, and ending government financing authorities that support
state trading enterprise activities.
3. While the TPA gives you the tools to expand trade through U.S.
and foreign tariff reductions, there are many unsubsidized U.S.
agricultural commodities which have been forced to address unfair
imports repeatedly. Will you commit to avoiding U.S. tariff reductions
for those commodities which have been faced with dumped and subsidized
import competition, like citrus?
The United States, just like other countries, needs to be mindful
of potential impacts of free trade agreements on import sensitive
industries. An important element of H.R. 3005 is the extensive process
whereby the Administration consults with Congress on negotiations
affecting import sensitive commodities.
H.R. 3005 Section 3(a)(2) states that the President may not use his
independent proclamation authority to reduce tariffs on certain import
H.R. 3005 Section 4(b)(2) establishes a consultative process that
the Administration would need to follow for negotiations affecting
certain import sensitive commodities. This process includes:
1. Before negotiations begin, the Administration would
identify import sensitive commodities and consult with the Ways
and Means, Finance, and Agriculture Committees on the
appropriateness of further tariff reductions on these items,
taking into account the impact of such tariff reductions on the
U.S. industry. The Administration would also identify products
that face unjustified sanitary and phytosanitary barriers.
2. The Administration would request probable economic effect
advise from the ITC on the impact of tariff reductions for the
industry producing the product and the U.S. economy as a whole.
3. The Administration would notify the above Committees of
those products on which USTR intends to seek further tariff
liberalization and the reasons for such.
4. After commencing negotiations, the Administration would
identify any additional items where USTR intends to seek
further tariff liberalization or other countries' tariff cut
Through this process, Congress and the Administration will be
working closely together on negotiations affecting agricultural
tariffs. In addition, U.S. trade laws, including section 201,
antidumping and countervailing duty statutes, provide important
mechanisms to protect industries injured by unfair trade practices,
dumped or subsidized imported products.
4. It is my understanding that many countries have exempted import-
sensitive products from tariffs elimination in free trade agreements,
yet USTR has held the objectives, through its interpretation of WTO
Agreements, to seek elimination of all tariffs in any free trade
agreement. If our trading partners continue to take an opposite course
in their own self-interest during FTAA negotiations, will you seek
similar insulation for unsubsidized agricultural industries, like
citrus, or have the U.S. stand alone as a matter of negotiating
In launching the Free Trade of the Americas (FTAA) negotiations at
San Jose, Costa Rica in 1998, Ministers agreed that ``all tariffs shall
be subject to negotiation'' and `` consistent with the provisions of
the WTO . . . to progressively eliminate tariff and non-tariff
barriers, as well as other measures with equivalent effects, which
restrict trade between participating countries.'' Subsequently,
Leaders, Ministers and the Trade Negotiating Committee (TNC) have set
out more detailed work programs and guidance consistent with these
Over the past year, the Negotiating Group on Agriculture (NGAG) has
focused on developing the data and framework that will guide future
product-by-product market access negotiations. Thus, there have not
been discussions concerning the specific treatment of any product,
including citrus. The NGAG has prepared its recommendations on methods
and modalities for the tariff negotiations for review and decision by
the TNC April, so that the detailed market access negotiations can be
initiated by May 15 as agreed to by Ministers in Buenos Aires last
Questions for U.S. Trade Representative Robert B. Zoellick From
Congressman William J. Jefferson (D-LA)
First, let me commend you on your upcoming trip to sub-Saharan
Africa. It is my understanding that you will be one of the first, if
not the first USTR, to travel to this important region. As one of the
Chairs of the African Trade and Investment Caucus, I have followed
closely the Administration's efforts to implement AGOA as well as the
efforts of sub-Saharan countries to comply with the bill's eligibility
criteria. Now that the bill is law, the U.S. must ensure that the
objective of stimulating regional economic development and growth is
LWhat is your assessment of impact of the AGOA legislation
on the sub-Saharan region? The most recent ITC and USTR reports
indicate that AGOA has enable SSA countries to attract billions of
dollars of much needed investment.
I would also like to reiterate my concerns regarding the pace of
AGOA implementation. For example, sub-Saharan beneficiary countries
need additional assistance from the United States to meet the stringent
customs and visa requirements in the legislation. Currently, only a
handful of SSA countries designated as beneficiaries have been
certified as eligible to ship apparel products since the effective date
of October 1, 2000. Many of the countries are willing to upgrade their
customs systems to comply with the law; however they need additional
technical assistance from the United States to undertake this important
My staff and their colleagues at other Washington agencies and our
overseas posts have worked to ensure that all AGOA-eligible countries
that wish to receive apparel benefits can implement the necessary
customs and visa requirements. We understand that these requirements
can be stringent, but we believe this is essential both to prevent
illegal transshipment and to ensure that the full benefits of AGOA
accrue to producers in sub-Saharan Africa. As of March 1, 2002, 15
countries have been certified as eligible to ship apparel products to
the U.S. under AGOA. Submissions from seven additional countries are
LFirst, is the Administration fully committed to the AGOA
II language we included along with the Andean Trade legislation? These
provisions are needed to address the implementation concerns that have
been voiced by SSA countries and U.S. companies attempting to utilize
the AGOA program.
The Administration supports AGOA II provisions that were passed by
the House as part of legislation reauthorizing the Andean Trade
Preference Act. We believe these provisions will provide significant
new benefits to eligible sub-Saharan African countries and further our
efforts to promote sustainable economic growth and development in the
LSecond, I am also interested in knowing about the
resources you have allocated for SSA countries in the way of technical
assistance and trade capacity building? We discussed the need to ensure
adequate resources for trade capacity building when you testified on
the Andean bill last year. I was pleased that you agreed with me this
is a priority for USTR.
Technical assistance and trade capacity-building are essential to
help sub-Saharan African countries participate fully in the global
economy and realize tangible benefits from AGOA. Overall, between 1999
and 2001, the United States provided $192 million in trade capacity-
building assistance to the region. AGOA has been a particular focus of
our efforts. For example, as part of the more than $10 million in new
trade capacity-building initiatives unveiled during my recent trip to
Africa, I announced $3.5 million to help the COMESA and SADC countries
in eastern and southern Africa take full advantage of AGOA
This year, we are also planning four additional regional AGOA
training seminars in for eastern, western and central Africa. Seminars
we have organized in the past--20 so far--have been very successful.
The first two seminars will be held this month in Yaounde, Cameroon and
Kampala, Uganda. They will include U.S. private-sector participation.
The seminars will focus on areas identified by many African countries
as challenges to their efforts to realize tangible benefits from AGOA.
These include specific mechanisms to establish commercial partnerships
and linkages with the U.S.; resources to finance trade; small and
medium-size business development; and economic/regulatory reforms and
initiatives to enhance AGOA's benefits. USTR staff will also travel to
Burkina Faso this month to consult with the West African Economic and
Monetary Union (WAEMU) Secretariat on AGOA and the upcoming trade
capacity building seminar on regional integration in west Africa that
USTR will sponsor in Washington this June.
LLastly, in addition to the benefits of the AGOA, what
other trade initiatives are you proposing for sub-Saharan Africa in the
As you know, AGOA specifically calls for the negotiation of free
trade agreements with interested countries in sub-Saharan Africa.
During my recent trip to the region, I discussed the possibility of a
free trade agreement with my counterparts from the Southern African
Customs Union (SACU) countries (South Africa, along with Botswana,
Lesotho, Namibia and Swaziland). Established in 1910, SACU is the
world's oldest customs union. It is also our largest export market in
sub-Saharan Africa, with sales totaling more than $3.1 billion in 2001.
SACU Trade Ministers responded very favorably to the prospect of an
FTA--as did President Mbeki of South Africa, President Mogae of
Botswana, and members of the U.S. and southern African business
communities. SACU Ministers plan to discuss this opportunity among
themselves over the next couple of months. If both sides decide to move
forward, we will reconvene to discuss a framework for further progress.
I look forward to working with Members of Congress on this initiative
as we move ahead.
As you are aware, the Port of New Orleans is concerned about
actions pending within the Administration that might result in the
imposition of tariffs and/or quotas on the import of steel products
into the United States. The Port is the number one gateway in America
for the steel import trade, and over 8,600 jobs within the greater New
Orleans region are dependent upon that trade. Steel imports have been
declining at an alarming rate over the past several years, and any
government-imposed restrictions would only further aggravate the loss
of transportation-related jobs in the Louisiana maritime community.
During the President's visit last month to the Port of New Orleans, he
readily stated that ``trade is a jobs issue.''
Ambassador Zoellick, we both fully understand that free trade is
the engine that powers the Nation's economy. In selecting a remedy in
the Steel 201 case, how much consideration will be given to the
negative impact of the imposition of tariffs and/or quotas on ports-
based economies, like we have in New Orleans?
LThe Administration and the President fully considered the
potential impact on steel consumers and ports in the Section 201 steel
remedy announced on March 5th.
LThe Administration has fashioned the relief to exclude
certain steel products for which no relief is necessary at this time.
The level of relief provided for each product was also limited to the
level needed to provide relief for the domestic industry.
LThe Administration has also worked with U.S. steel
consumers and producers on excluding foreign steel products from the
Section 201 relief that are not available in the U.S. market from
LThe Administration was presented with a full range of
economic information from interested parties in the Section 201,
including economic studies that produce dramatically different results.
Studies estimating job losses as a result of the Section 201 are
subject to all of the vagaries and imprecisions of economic modeling.
Informed judgment must be used when considering such studies or models
in formulating policy.
LThe Administration considered the quantitative economic
evidence, as well as qualitative factors when it formulated its Section
201 recommendation to the President, and this evidence was ultimately
weighed by the President in his decision. In fact, I met personally
with the ports and was selected Port Person of 2002.
How much consideration is being given to non-tariff or non-quota
LIn line with the U.S. International Trade Commission
(ITC) determination that steel imports have been a substantial cause of
serious injury, or threat thereof, to the U.S. steel industry and the
ITC's recommendation to impose tariffs as the remedy for most product
categories, the President decided to impose tariffs ranging from 8
percent to 30 percent on certain steel products. As required by WTO
rules, these tariffs decline over the period of the relief.
LThe relief also includes a tariff rate quota (TRQ) on
imports of semifinished steel products known as slabs. Under this TRQ,
5.4 million short tons of semifinished slabs will be allowed to enter
duty free. The out of quota tariff will be 30 percent.
Lastly, while the Administration may decide to implement tariffs or
additional quotas on imported steel products, I am convinced that this
is a reactionary and shortsighted policy. What else is being done to
prevent unfair trade in steel at the multilateral or bilateral level?
LThe President's steel initiative announced on June 5,
2001, has three elements: (1) initiate the Section 201 investigation;
(2) conduct discussions with other steel producing countries to
encourage the market-based reduction of excess inefficient steel-making
capacity worldwide; and (3) initiate negotiations to eliminate
subsidies and other government market-distorting practices in the steel
LWe are very pleased with the progress made thus far in
implementing the last two objectives and plan to continue to pursue
them vigorously. Talks in the OECD on March 13th-15th on reduction of
excess inefficient capacity and initiating negotiations to eliminate
subsidies and other market-distorting practices went well.
LThe long-term solution to the problems faced by the U.S.
steel industry and steel industries abroad depends on the elimination
of global inefficient excess capacity and market-distorting practices.
LWe are urging our steel trading partners to continue to
cooperate in solving these issues.
Questions for U.S. Trade Representative Robert B. Zoellick From
Congressman Lloyd Doggett
Investor-State Dispute Provisions
1. Foreign investor rights. On February 7, 2002, when you testified
before the Ways and Means Committee, I was pleased that in your
testimony you agreed that foreign firms should not enjoy greater
property rights than Americans have, but,
(a) is it true that foreign investors are currently claiming rights
in NAFTA tribunals that exceed the rights available to Americans in
similar circumstances before American courts?
(b) is it true that NAFTA Chapter 11 authorizes greater property
rights for foreign firms than those available to Americans under
Federal takings jurisprudence?
(a) Just as in U.S. domestic legal proceedings, parties that
initiate proceedings under NAFTA Chapter 11 may choose the claims and
arguments they wish to make. Like plaintiffs before U.S. courts,
however, investors who bring complaints before NAFTA tribunals will not
prevail unless their claims and arguments meet the applicable legal
(b) No. U.S. ``takings'' jurisprudence provides rights that are
equal to or exceed those available under the expropriation provisions
of the NAFTA and our numerous bilateral investment treaties. By
contrast, the domestic law of many of our treaty partners provides U.S.
investors far less protection from arbitrary, uncompensated
expropriations than that prescribed in the NAFTA or our BITs. That is a
key reason why those agreements are so important.
2. Diminution of value. Do you believe NAFTA requires compensation
if a government measure enacted to protect our health, security,
safety, or environmental resources causes only modest reductions in a
foreign corporation's revenue?
We understand this question to ask whether a measure of the type
you describe would amount to an expropriation subject to compensation
under the NAFTA. The answer is no.
3. Chile. On February 7, 2002, in testimony before the Ways and
Means Committee, you stated that you had ``not decided'' whether to
include any significant investor reforms in the U.S.-Chile FTA.
(a) What factors are you evaluating that will determine whether you
include significant investor reforms in this agreement?
(b) When will you let me know of your decision and the basis of
(c) Have you already sought during the U.S.-Chile FTA negotiations
to expand the scope of investor protections similar to NAFTA Chapter
(a) The United States has not yet completed, and therefore has not
presented to Chile, a complete set of investment positions, because we
are continuing to examine how we can improve in the U.S.-Chile FTA on
the provisions of our existing investment agreements. To this end, we
are considering the full range of suggestions that we have heard from
the Congress, nongovernmental organizations, the business community, as
well as all interested U.S. Government agencies.
(b) Both our interagency discussions of this issue and our
negotiations with Chile are continuing. At the same time, we have been
consulting closely with the Ways and Means and other Congressional
committees to develop improvements that address the investment
negotiating objectives set forth in the respective TPA bills. We intend
to continue to keep the committees informed of our progress.
(c) The question appears to be premised on the assumption that the
NAFTA provides investors greater protection than that afforded under
earlier U.S. investment agreements. We do not believe that is the case.
4. Authority to preempt. Do you believe that, following a
determination by a NAFTA tribunal that the Federal Government is
obligated to pay compensation to a foreign investor, the Federal
Government is empowered to sue to preempt a state or local law on
grounds that it violates a provision of Chapter 11?
The question of whether the Federal Government is empowered to
enforce Chapter Eleven, or any other provision of the NAFTA, is a
matter of U.S. law. The extent of the Federal Government's authority is
not linked to any determination by a NAFTA tribunal. In this regard,
you may wish to refer to the relevant provisions of the North American
Free Trade Agreement Implementation Act and accompanying Statement of
Administration Action, which the Congress approved.
5. Interagency process. Not all Federal agencies apparently share
the enthusiasm some have for using NAFTA Chapter 11 as a model for
future trade agreements.
(a) Please provide a copy of all memoranda or position papers
provided to the USTR as a part of the interagency review of investment
(b) Please note all the concerns raised to date in this review
process, including but not limited to: opinions on an exhaustion of
remedies requirement, the scope of ``expropriation,'' ``investment,''
and ``investor'' and all other procedural and substantive reform ideas.
(c) Finally, identify fully and specifically who has or is
participating in this review process and who they represent.
Please see answer to question 3.
6. Supreme Court decisions. In Loewen v. United States, a Canadian
investor is challenging not just an action by a trial court, but an act
of the Mississippi Supreme Court. Do you believe a NAFTA tribunal is
empowered to order the payment of compensation to a foreign investor
who challenges an opinion issued by any court in this Nation, including
the U.S. Supreme Court?
International law has long recognized that a country may be held
internationally responsible when its court system, including its
highest courts, denies justice to a foreign national. Throughout the
history of the Republic, the United States has repeatedly asserted
claims against other countries for denials of justice by their courts
to U.S. citizens. On the other hand, the standard for establishing a
denial of justice is quite high and, as a result, cases in which
compensation has been awarded for denial of justice have been very
The United States has received relatively few claims that U.S.
courts have denied justice to a foreign citizen. It is our expectation,
based on historical experience and the high standards of U.S. courts,
that few claims of a denial of justice by the U.S. courts will be made,
and fewer still will be sustained.
7. Closed NAFTA process. On February 7, 2002, I asked you if
Members of the Ways and Means Committee, watchdog groups, and the press
would always have access to all parties' legal memoranda and other
submissions filed with a NAFTA arbitration panel. You said you were
``not sure'' and that last summer's ``clarification'' may have
addressed this issue.
(a) Please provide a comprehensive answer to this important
question since the ``clarification'' is apparently not clear enough for
you to clearly state whether access is permitted.
(b) On February 7, 2002, you stated that you believed all NAFTA
investor-state arbitration tribunals should be open to the public. Why
have you not publicly urged our two NAFTA partners to promptly open the
(c) Will the U.S.-Chile FTA reflect your commitment to openness of
the investor-state dispute process?
(a) The NAFTA Commission's clarifications reflect a commitment by
the three NAFTA governments to make virtually all documents submitted
to, or issued by, a dispute settlement panel available to the public.
This means that an investor's initial claim, its subsequent pleadings,
and the defending government's responses will generally be available to
the public. It also means that the views of any interested groups that
have submitted ``friends of the court'' briefs, and any views that a
NAFTA government that is not a party to the dispute has submitted to
the tribunal will generally be made available to the public. The State
Department maintains a website that makes all such available
documentation accessible to the public.
Under the trilateral clarification, information that is business
confidential or that is exempt from disclosure under domestic law will
continue to be protected. These are the sorts of materials that would
commonly be removed from the public versions of documents filed in a
U.S. court. In addition, some specific arbitral rules regarding the
disclosure of information will continue to apply. For example, one set
of arbitral rules available to the parties restricts the release of
minutes from the hearing without consent of the parties. However, it is
U.S. policy in each case against it to seek full transparency
throughout the proceedings.
(b) We have urged our NAFTA partners to agree to open Chapter 11
proceedings to the public.
(c) Please see answer to question 3.
8. Deference. While you may personally believe that some of the
pending NAFTA claims based on state and local government actions are
frivolous, panels are agreeing to hear the full cases on the merits.
(a) Do you believe that investment agreements should include a
presumption or principle of deference to government measures similar to
the rational basis standard used by U.S. courts?
(b) U.S. courts have defined takings in terms of specific
situations. Has your office compiled a list in any form of ``egregious
behaviors'' or clearly wrongful acts that should result in compensation
based on the experience of American investors abroad? If so, please
provide a copy of that list.
(c) Do you believe that investment agreements should include a
presumption that nondiscriminatory measures enacted to protect our
health, security, safety, and environmental resources do not require
Please see answer to question 3.
9. Tobacco and trade.
(a) In all future tobacco-trade discussions, will you commit to
consulting with the relevant Federal agencies, including the CDC, to
evaluate the potential health impact of changes to trade agreements?
(b) If a Federal agency concludes that changes to tobacco trade
policy will adversely affect public health, will you commit to not
pursuing those changes?
(c) Please list all tobacco trade matters since July 2001 that have
involved your office. Please include the foreign government concerned
and a summary of the dispute. Note whether your office consulted with
any Federal agency regarding whether the policy would adversely affect
public health and provide me with a copy of the Federal agencies'
USTR routinely consults with relevant Federal agencies, including
the Centers for Disease Control (CDC) and other offices within the
Department of Health and Human Services (HHS), on trade issues
involving tobacco and tobacco products. Through the formal interagency
mechanism for developing trade policy, of which HHS is a member,
Federal agencies work to reach agreement on recommended actions and
approaches that USTR should take on trade issues. The health policy
expertise and active participation of CDC/HHS in this process helps
ensure that we accurately assess the health implications of a
particular trading partner's tobacco policy and that our positions on
tobacco trade issues are informed and balanced and do not conflict with
either U.S. health-based policies or undermine the legitimate health-
based policies of our trading partners. Each issue is evaluated on a
case-by-case basis taking into account the views of relevant agencies.
USTR has not been involved in any tobacco trade-related disputes
since July 2001. Three tobacco trade matters have arisen since that
time, on which decisions were made in conjunction with relevant Federal
agencies, including CDC/HHS, on the appropriate approach to take:
In September 2001, the Administration considered a request from the
government of Indonesia to designate twelve additional products, that
included tobacco (HTS 2401.20.57), for benefits under the Generalized
System of Preferences (GSP). After interagency deliberation, the
decision was made to exclude tobacco from the list of products for
which GSP was granted.
In February of this year, the U.S. Embassy in Warsaw requested
guidance from Washington agencies regarding correspondence from Phillip
Morris that expressed concern over a proposal within the government of
Poland to raise the tariff on unprocessed tobacco from 30% to 105%.
Interagency deliberations, that included CDC/HHS, produced a
recommendation that Embassy Warsaw not make representations to the
Government of Poland. There was no information to indicate that the GOP
proposal to raise the tariff on unprocessed tobacco intended to treat
imports of U.S. product differently from imports from other countries,
and the Government of Poland is permitted under its Schedule of
Concessions to raise the tariff on unprocessed tobacco to its notified
bound rate of 105 percent.
In November 2001, as part of broader deliberations about the U.S.-
Chile Free Trade Agreement, agencies considered how to handle tobacco
and tobacco products in the negotiations. These negotiations are
Office of the United States Trade Representative
Washington, DC 20506
March 29, 2002
The Honorable Paul Ryan
U.S. House of Representatives
Washington, DC 20515-4901
Dear Congressman Ryan:
Thank you for your recent letter regarding our investigation of the
Canadian Wheat Board (CWB) in a Section 301 case. I appreciate your
concern, and certainly agree, that U.S. millers and pasta makers must
have access to sufficient supplies of a specific quality of durum wheat
to operate their businesses. The objectives of the actions that we
announced on February 15 are not to restrict trade but to ensure free
and fair trade for millers, consumers and producers of wheat. Enclosed
are both the news release and the findings of the investigation.
One of the main complaints by U.S. wheat growers is the existence
and operation of the Canadian Wheat Board (CWB). Such State Trading
Enterprises are not tolerated by the United States and should be
eliminated. However, since Canada is a NAFTA partner, why has the
existence of the CWB not been brought up before the World trade
Organization? What is the USTR's rationalization for handling this
In response to your first question, state trading enterprises
(STEs) are permitted under international trade agreements. In fact, the
United States does have STEs which are notified under rules of the
World Trade Organization (WTO). Article XVII of the General Agreement
on Tariffs and Trade establishes disciplines under which STEs are to
act in order to be consistent with the principles of non-
discrimination. Our concern with the CWB is that it is a monopoly STE
with monopoly control of all western Canadian wheat exports and
shipments for human consumption. The CWB is able to unfairly compete
with U.S. wheat producers and undermines the integrity of the trading
system, because it is insulated from commercial risks, benefits from
subsidies and special privileges, has a protected domestic market and
has competitive advantages due to its monopoly control over a
guaranteed supply of wheat.
Two of the actions that we are pursuing reflect your suggestion to
pursue the CWB in the WTO. First, USTR will examine taking a possible
dispute settlement case against the CWB in the WTO. Second, the United
States is committed to pursuing comprehensive and meaningful reform of
monopoly state trading enterprises, such as the CWB, in negotiations in
It is my understanding that U.S. millers buy durum wheat from
Canada because the U.S. cannot grow enough domestically to meet pasta
production needs. In fact, in 15 of the last 15 years, U.S. durum
production was insufficient to meet total usage. Further all durum
wheat grown in the U.S. is not milling quality. According to the North
Dakota Wheat Commission, only 49 percent of the domestic durum wheat
crop was milling quality. Combined with the fact that the International
Trade Commission found that in 59 out of the last 60 months, Canada has
sold durum wheat at prices above domestic durum wheat prices, upon what
data is the USTR Section 301 case based that warrants action taken
against Canadian durum wheat growers?
In response to your second question, the North Dakota Wheat
Commission (NDWC) alleged unfair trading practices of the CWB not only
in the U.S. market, but also in third country markets. The NDWC
requested that we impose an immediate tariff rate quota (TRQ) on
imports of Canadian wheat. We recognized, however, the need of U.S.
millers and pasta makers to have sufficient supplies of durum at an
acceptable quality. In addition, imposing a TRQ on imports of Canadian
wheat would significantly detract from our reform objectives for the
CWB during the same period we are trying to build an international
consensus to support these objectives. Imposing a TRQ on wheat from
Canada could open the United States to a challenge under the WTO or the
North American Free Trade Agreement. For these reasons we elected not
to impose a TRQ on imports of Canadian wheat.
As we work to ensure that Canada meets its international
obligations, we will also ensure that the needs of U.S. millers and
pasta makers are met. I look forward to working closely with you to be
sure we achieve these goals.
Robert B. Zoellick
OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C. 20508
For Immediate Release
February 15, 2002
Richard Mills (202) 395-3230
United States to Pursue Action Against Monopolistic
Canadian Wheat Board
WASHINGTON--Responding to a complaint filed by the North Dakota
Wheat Commission (NDWC), U.S. Trade Representative Robert B. Zoellick
announced today that the United States will pursue multiple avenues to
seek relief for U.S. wheat farmers from the trading practices of the
Canadian Wheat Board (CWB), a government monopoly trading enterprise.
USTR also today released an ``affirmative finding'' that reviews
the results of its investigation, details the CWB's monopolistic
characteristics, and describes the steps USTR intends to take to
address this issue.
``The government of Canada grants the Canadian Wheat Board special
monopoly rights and privileges which give it competitive advantages
that hurt U.S. wheat farmers,'' said Zoellick. ``We agree with North
Dakota wheat farmers that Canada's monopolistic system disadvantages
American wheat farmers and undermines the integrity of our trading
system. We are committed to using all effective tools at our disposal
to stop the Canadian monopoly wheat board from hurting our farmers. We
will undertake several strong initiatives, working with producers in
North Dakota and others in the wheat industry, to address our problems
with the Canadian Wheat Board.''
USTR will aggressively pursue a four prong approach to fight for a
level playingfield for American farmers:
LFirst, USTR will examine taking a possible dispute
settlement case against the Canadian Wheat Board in the World Trade
LSecond, the Administration will work with the North
Dakota Wheat Commission and the U.S. wheat industry to examine the
possibilities of filing U.S. countervailing duty and antidumping
petitions with the U.S. Department of Commerce and U.S. International
LThird, working with industry, USTR will also identify
specific impediments to U.S. wheat entering Canada and present these to
the Canadians so as to ensure the possibility of fair, two-way trade.
LFourth, these short-term actions are complemented with
the Administration's ongoing commitment to vigorously pursue
comprehensive and meaningful reform of monopoly state trading
enterprises in the WTO agriculture negotiations. Those negotiations
gained new momentum with the launch in November of the Doha Development
Agenda, set to conclude by 2005.
This decision is in response to a petition filed by the North
Dakota Wheat Commission in September 2000 under section 301 of the
Trade Act of 1974. USTR undertook an unprecedented 16-month
investigation examining the practices of the monopoly Canadian Wheat
Board. In addition to inviting public comment twice on the
investigation, USTR requested that the U.S. International Trade
Commission (ITC) examine the competitive practices of the Canadian
Wheat Board in the U.S. market and overseas. As part of its
investigation, the ITC held a public hearing, requested public comments
and pursued multiple avenues to obtain information on the Canadian
USTR has decided not to impose a tariff rate quota (TRQ) at this
time since such an action would violate our NAFTA and WTO commitments,
could result in Canadian retaliation against U.S. agriculture, and
would not achieve a durable solution or a permanent change to the
market distortions caused by the monopoly of the Canadian Wheat Board.
[The USTR ``Affirmative Finding'' is being retained in the
[Submissions for the record follow:]
Statement of the Advanced Medical Technology Association (AdvaMed)
AdvaMed represents over 800 of the world's leading medical
technology innovators and manufacturers of medical devices, diagnostic
products and medical information systems. Our members are devoted to
the development of new technologies that allow patients to lead longer,
healthier, and more productive lives. Together, our members manufacture
nearly 90 percent of the $71 billion in life-enhancing health care
technology products purchased annually in the United States, as well as
50 percent of the $165 billion in medical technology products purchased
globally. Our industry enjoys a trade surplus of $7.1 billion vis-a-vis
our trading partners.
Innovative medical technologies offer an important solution for
industrialized nations, including Japan and European Union members that
face serious health care budget constraints and the demands of aging
populations. Advanced medical technology can not only save and improve
patients' lives, but also lower health care costs, improve the
efficiency of the health care delivery system, and improve productivity
by allowing people to return to work sooner.
However, when regulatory policies and payment systems for medical
technology are complex, non-transparent, or overly burdensome, they can
significantly delay or deny patient access to the latest, state-of-the-
art innovations. They can also serve as non-tariff barriers, preventing
U.S. products from reaching patients in need of innovative health care
AdvaMed applauds President Bush's support of international trade
initiatives. We thank the Ways and Means Committee, and the House, for
their leadership on passing H.R. 3005 to renew the President authority
to reduce tariffs and non-tariff barriers throughout the globe. It
should be extended to ensure further work on regional and global trade
negotiations, including the Free Trade Area of the Americas (FTAA), the
Asia-Pacific Economic Cooperation (APEC) forum, and the World Trade
Organization (WTO). In addition, the President and U.S. Trade
Representative (USTR) should use this authority to continue to pursue
bilateral trade agreements in the medical technology sector with our
major trading partners.
AdvaMed believes the USTR, Department of Commerce (DOC) and
Congress should monitor regulatory, technology assessment and
reimbursement policies in foreign health care systems and push for the
creation or maintenance of transparent assessment processes and the
opportunity for industry participation in decision making. We look to
the Administration and Congress to actively oppose excessive
regulation, government price controls and arbitrary, across-the-board
reimbursement cuts imposed on foreign medical devices and diagnostics.
Continued U.S. Leadership Urgently Needed to Fight Trade Barriers in
For the medical technology industry, the Bush Administration's
efforts with Japan under the U.S.-Japan Partnership for Economic Growth
are critical for maintaining access to the Japanese health care market.
After the U.S., Japan is the largest global market for medical
technologies at $24 billion. U.S. manufacturers annually export over $2
billion to Japan and manufacture another $6.5 billion in the region for
the Japanese market. These statistics are good indicators of our
industry's global competitiveness in the field of medical technology
and it strongly underscores the importance of critical ongoing efforts
with the U.S. Government to open the Japanese market further to cost-
saving and life-enhancing medical technologies.
In 1986, U.S. Government leadership began to help pry open Japan's
protective and costly marketplace for medical devices under the MOSS
trade agreements. Since then, with the help of the Administration and
Congress, we have turned a $100 million medical device trade deficit in
1997 into a $1.3 billion trade surplus today.
In November 2001, however, Japan took steps that constitute a
significant setback in the progress that has been made over the last 15
years in the medical device sector. On December 12, 2001, the Japanese
Ministry of Health and Welfare (MHLW) adopted a new pricing policy that
includes ``foreign reference pricing'' (FRP). Effective April 1, 2002,
the new policy allows MHLW to cut reimbursements for medical devices
based on the overseas price of the same or a similar medical
The U.S. Government and Congress has long opposed FRP schemes,
which discriminate against the U.S. medical device industry and fail to
recognize the high costs of doing business in Japan. Twice the number
of sales representatives as in the U.S. are required to generate the
same sales revenue in Japan. The cost of doing business is
substantially high; Japan has a multi-layered distribution system
between the manufacturer and the hospital; and unique to Japan, the
price of technology in Japan includes after-sales service components.
The process by which the FRP proposal was adopted by MHLW on
December 12th runs contrary to U.S.-Japan trade agreements, which call
for consultation with industry when Japan seeks regulatory/
reimbursement policy changes that could have a substantial impact on
U.S. industry. Industry was given only 5 days notice before the policy
was adopted in December.
Temporary cuts to reimbursements for medical devices in Japan will
do little to address the impending financial situation facing Japan's
health care system. Medical devices represent only 7.5% of overall
healthcare costs in Japan. Foreign reference pricing will discourage
the use of advanced medical technologies--which can actually improve
the efficiency and quality of the health care system.
The U.S. medical device industry is looking to the highest levels
of the Bush Administration to exert leadership in getting MHLW to
modify its December 12th policy and remove FRP.
In addition, the Bush Administration's efforts with Japan under the
U.S.-Japan Partnership for Economic Growth are critical for achieving
further market-opening measures in Japan's healthcare market,
LReimbursement policies that are more responsive to the
innovation process, such as:
LMeasures to expedite the coverage, payment and access
to brand-new-to-Japan medical technologies (category C2), as per
earlier trade agreement commitments;
LAvoidance of excessive price control measures as a
policy means to control overall healthcare spending, focusing instead
on the creation of payment categories that are more reflective of the
differences in technologies; and
LJapan should encourage more reimbursement decisions
based on foreign clinical data, as well as create a cost-sharing system
for any clinical trials required in Japan.
LStreamlined and transparent safety approval procedures,
including (but not limited to):
LBetter definitions and criteria within the product
LImproved ``pre-consultations'' process and use of a
standardized ``checklist'' of submission contents to clearly identify
requirements prior to application submission; Also, better
documentation practices within MHLW on discussions with industry (to
avoid misunderstandings and to create binding decisions);
LResolution over the longstanding issue over materials
characterization and acceptance of biocompatibility tests of materials
conducted according to international standards;
LBetter harmonization with Global Harmonization Task
Force recommendations in areas such as ``adverse event reporting''
where Japan is implementing unique and burdensome requirements on
Europe: Seek Appropriate Policies That Improve Patient Access to
Innovative Medical Technologies
Efforts to oversee foreign policies impacting the export and sale
of U.S. medical devices abroad should also focus on the European Union
(EU). U.S. manufacturers export nearly $8 billion annually to the EU
and maintain a $3.6 billion trade surplus with the EU. Within the EU,
Germany ($16 billion) and France ($7 billion) are the largest markets
for medical devices.
In the EU, enforcement of current trade agreements is key. The
U.S.-EU Mutual Recognition Agreement (MRA) must be fully implemented.
Bringing healthcare products to the market faster is an important
priority consistent with the protection of public health and the
reduction of regulatory costs and redundancy. The medical device
industry was disappointed that the MRA transition was not completed by
December 2001 and was extended for two years, until December 2003. The
European Commission (CEC) should be encouraged to take all proper
measures to ensure that the MRA is operational by the end of newly
extended transitional period of December 2003.
In addition, European Member States should be encouraged to adopt
policies for their health technology assessment (HTA) decisions
affecting medical technologies that are transparent and timely, and
industry participation should be allowed. U.S. firms, as the leaders in
innovative medical technologies, stand to suffer disproportionately
from unnecessarily long delays in HTA decisions in Europe.
AdvaMed supports the Safe Harbor agreement struck between the EU
and U.S.--an agreement that promises the uninterrupted data flow from
the EU to the U.S. The agreement, reached in response to the 1995 EU
Data Privacy Directive, provides additional flexibility (along with
specific data privacy contracts or compliance with the actual directive
itself) for U.S. firms to continue to receive data from their
subsidiaries in Europe and/or EU-based companies. AdvaMed and its
member companies look forward to working with both sides on
implementing the agreement in such a way that supports transatlantic
business and economic activities and, in particular, supports
industry's efforts to research, develop, and bring to market medical
technologies that offer great promise for patients on both sides of the
Utilize Multilateral Opportunities to Establish Basic Principles to
Expand Global Trade and Patient Access to New Technologies
A primary goal of all economies is to provide high quality, cost
effective healthcare products and services to all citizens. The
mission, and sovereign right, of a government's regulatory agency is to
oversee the efforts of medical technology manufacturers to ensure that
their products are safe and effective. Another mission is to ensure
their citizens have timely access to state-of-the-art, life-saving
equipment and that compliance procedures are efficient and effective.
To further expand patient access to safe and effective medical devices
and ensure cost effective regulatory compliance, USTR should seek to
ensure that regulatory agencies around the world make their policies
and practices conform to the relevant and appropriate international
trading rules established by the World Trade Organization (WTO).
Toward that end, member economies should agree to make their
medical device regulatory regimes conform to these guiding principles:
LAcceptance of International Standards;
LConformity/Provision of Transparency and National
LUse of Harmonized Quality or Good Manufacturing Practice
LRecognition of Others Product Approvals (or the Data Used
for Those Approvals);
LDevelopment of Harmonized Auditing and Vigilance
LUse of Non-Governmental Accredited Expert Third Parties
Bodies for Inspections and Approvals, where possible.
Similarly, many economies require purchases of medical technologies
to take place through centralized and/or government-administered
insurance reimbursement systems. To ensure timely patient access to
advanced medical technologies supplied by foreign as well as domestic
sources, member economies should agree to adopt these guiding
principles regarding the reimbursement of medical technologies:
LEstablish clear and transparent rules for decision-
LDevelop reasonable time frames for decision-making;
LData requirements should be sensitive to the medical
LEnsure balanced opportunity for the primary suppliers and
developers of technology to participate in decision-making, e.g.,
LEstablish meaningful appeals processes.
Utilize Multilateral and Regional Forums to Eliminate Tariff and
NonTariff Barriers to Trade that Unnecessarily Increase the
Cost of Health Care
Many countries maintain significant tariff and nontariff barriers
to trade for medical technology. Such barriers represent a self-imposed
and unnecessary tax that substantially increases the cost of health
care to their own citizens and delays the introduction of new, cost-
effective, medically beneficial treatments. For example, the medical
technology sector continues to face tariffs of 15-20% in Mercosur
countries (Argentina, Brazil, Paraguay, Uruguay), 9-12% in Chile, Peru,
and Colombia, and 6-15% in China.
The new WTO round launched in November is an important opportunity
for the United States to secure global commitments on lowering tariff
and nontariff barriers for the medical technology sector. We encourage
the U.S. Government to build upon the zero-for-zero tariff agreements
achieved in the Uruguay round by securing zero tariff agreements with
Latin America and Asia as well.
AdvaMed appreciates the shared commitment by the President and the
Congress to expand international trade opportunities, as well as the
Committee's leadership in passing H.R. 3005. We look to the President
and his Administration to aggressively combat barriers to trade
throughout the globe, especially in Japan. AdvaMed is fully prepared to
work with the President, USTR Ambassador Zoellick, the Department of
Commerce, and the Congress to monitor, enforce and advance
multilateral, regional and bilateral trade agreements particularly with
our key trading partners.
Statement of American Apparel & Footwear Association, Arlington,
Thank you for providing us an opportunity to present testimony to
the Committee on the 2002 Trade Agenda.
The American Apparel & Footwear Association (AAFA) is the national
trade association representing apparel, footwear, and other sewn
products companies and their suppliers, which compete in the global
AAFA's mission is to promote and enhance its members'
competitiveness, productivity and profitability in the global market by
minimizing regulatory, legal, commercial, political, and trade
Representing two of the industries that are on the front lines of
globalization--apparel and footwear--our association maintains a unique
vantage point on many of the questions confronting the Committee this
morning. Below, we offer our perspectives on some of these issues.
Trade Promotion Authority
AAFA very strongly supports swift enactment of legislation (H.R.
3005) to provide the President trade promotion negotiating authority.
We cannot over emphasize the importance of this legislation to our day-
to-day operations. Every day, our members face tariff and non-tariff
trade barriers--some erected by our own government and some erected by
other governments--designed to keep our products from easily reaching
our customers. The Uruguay Round, which saw the integration of textiles
and apparel into the disciplines of the world trading regime for the
first time, represented important liberalization in this regard. But
more needs to be done.
TPA--by providing a trade negotiating mandate from Congress to the
Administration and by guaranteeing a smooth procedure to consider
resulting trade agreements if the Administration follows this mandate--
is precisely what we need. It will enable the Administration to move
forward on existing trade commitments, including the Doha Development
Round and the Free Trade Area of the Americas, while undertaking new
commitments, such as those envisioned with five economies in Central
America. As our negotiating partners weave together a network of free
and preferential trade arrangements, U.S. products and U.S. brands
remain stranded. Only by approving TPA can our negotiators have the
decisive mandate they need to pursue our interests and dismantle trade
barriers that keep us from our customers.
But granting TPA by itself is not enough to initiate the necessary
market openings that our industries need. The Administration must be
directed to follow through to reduce and eliminate tariff and non-
tariff barriers that block access to our important markets. We note
that, whereas tariffs have been reduced for many products worldwide,
they remain extremely high for footwear and apparel. In the United
States, for example, textiles, apparel and footwear pay 50 percent of
all import duties collected by the U.S. Customs service but only
account for 8 percent of all imports. Many other countries have similar
Moreover, we can no longer hide behind the restrictive rules of
origin that prevent many footwear and apparel goods from qualifying for
the benefit of future free trade agreements because some of the inputs
that were used in the manufacture of those goods originated outside the
free trade area. We encourage the Committee to exercise its oversight
responsibilities to ensure that the evolving Singapore and Chile free
trade areas, which the Administration has itself defined as a precedent
for future free trade discussions, not perpetuate such restrictive
rules and requirements.
Andean Trade Preference Act (ATPA) Renewal and Expansion
AAFA strongly endorses the renewal and meaningful expansion of ATPA
legislation to include apparel and footwear products. Without ATPA
extension and expansion, the four Andean nations will gradually see the
economic viability of many of their legitimate export industries
undermined by the lucrative drug trade since their ability to penetrate
the U.S. market depends largely upon preferential access.
We have previously testified before the Subcommittee on Trade that
ATPA expansion must be simple, flexible, and of a long term nature to
ensure the best results. We believe H.R. 3009--as approved by the House
on November 16, 2001--accomplishes this goal. It keeps the underlying
program active, while expanding it to include a number of previously
excluded products in a commercially meaningful way. This legislation
provides significant incentives for real products and will lead to
continued as well as new investments in the region. Without that
legislation, we will continue to see the Andean nations lose market
share and export opportunities, which will make them more vulnerable to
the destabilizing effects of the illicit narcotics trade.
The loss of this trade base translates into lost commercial
opportunities for U.S. and Andean nations combined. In the past year
alone, imports of apparel from Andean nations have dropped by more than
10 percent. As these countries have produced less clothing for export,
they have employed less people and have also purchased fewer inputs
from the United States, with U.S. textile and apparel cut part exports
to the region declining by double digits over the previous 12 months.
Caribbean Basin Trade Partnership Act (CBTPA)/African Growth and
Opportunity Act (AGOA)
We support H.R. 3009 also because it would enact several long-
sought and much needed corrections and clarifications to the Caribbean
Basin Trade Partnership and African Growth and Opportunity Acts. Those
two bills were enacted after lengthy struggles in May 2000. We were
proud to be part of the team that fought so hard for their enactment.
Our companies are now working to use those provisions to bring about
the investment and trade-based growth that was envisioned by the
Congressional authors of these two important bills.
Unfortunately, a number of errors and interpretative problems
prevent the bills from being implemented fully in a manner intended by
Congress. The last two titles of H.R. 3009 fix many of these problems.
We were pleased that this Committee took advantage of the movement of
H.R. 3009 to advance legislative fixes for these problems and we urge
Congress to complete the job when it completes work on H.R. 3009. We
also urge Congress to take action on needed fixes that will clarify the
intent of the CBTPA brassiere provision and eliminate an arbitrary
provision that excludes socks from CBTPA benefits.
Thank you for your time and attention to these important matters.
Statement of the American Forest & Paper Association
U.S. FOREST AND PAPER PRODUCTS INDUSTRY'S
TRADE NEGOTIATING OBJECTIVES
The American Forest & Paper Association (AF&PA) appreciates this
opportunity to comment on the Administration's 2002 trade agenda. AF&PA
is the national trade association representing the producers of paper,
pulp, paperboard and wood products, as well as growers and harvesters
of this Nation's forest resources. Our industry employs approximately
1.7 million people in 42 states, with an annual estimated payroll of
$51 billion, and annual sales of more than $250 billion.
The U.S. forest products industry is deeply involved in the global
market. In 2001, exports of U.S. wood and paper products exceeded $19
billion. Imports amounted to $33 billion. As detailed in subsequent
portions of our statement, for literally decades, we have been trying
to level the international playing field for our products. Several
initiatives identified in the Administration's trade agenda are very
important in that regard.
However, since 1997, mounting distortions in foreign exchange
markets, and the increasing strength of the dollar in particular, has
virtually overwhelmed all other considerations of market access. It is
generally accepted that the dollar today is 25%-30% overvalued. This
amounts to a self-imposed 30% tariff on all U.S. exports. This number
exceeds the current levels of tariffs--up to 15-20%--which some foreign
countries actually impose on our products and which could be removed
through trade negotiations.
The ``strong dollar tariff'' also applies to U.S. domestic
shipments, with the result that foreign competitors now have a major
cost advantage in our home market--magnified in industries such as ours
where U.S. tariffs are low or zero. The impact of the overvalued dollar
on the U.S. forest products industry has been devastating.
U.S. paper industry exports were down by $1.5 billion in 2001 from
the 2000 level. Imports were lower as well last year--off $900
million--but they were $3.3 billion higher than in 1997. Therefore, the
U.S. trade deficit in paper industry products has ballooned from just
$273 million in 1997 to $3.8 billion in 2001. While domestic demand for
paper grew by 3.5 million tons 1997-2000, more than 90% of these
additional sales went to foreign suppliers. More than 50 paper mills
have shut down since 1998 and job losses have exceeded 30,000.
For wood products, the combined effect of weakening exports markets
and surging imports has put unprecedented downward pressure on wood
product prices in the U.S., forcing many lumber producers and
wholesalers out of business. Approximately 20 mills with a capacity of
1.7 billion board feet were shutdown permanently in 2001. Since 1998,
the lumber and wood sectors have lost 23,000 jobs. Exports have
declined by 16.6% over the past year, accounting for a $100 million
loss. Since 1997, exports have declined by 27%. Moreover, despite an
increase in consumption of softwood lumber, 65% of the increase in
softwood lumber demand between 1995 and 2001 was met by imports.
Traditional wisdom argues that, while exchange rates fluctuate over
time, tariffs are forever. The argument suggests that short-term
strategies can address exchange rate effects and tariffs should be
regarded as the structural, long-term concern. In this case, however,
traditional wisdom has proved a less-than-reliable guide. The normal
adjustment triggers--burgeoning U.S. trade deficit, lower U.S. interest
rates, slowing U.S. growth--have not worked. The persistence of the
overvalued dollar has forced industries, including our own--to close
plants. Other industries have moved production facilities offshore.
The overvalued dollar is having the effect of hollowing out U.S.
industry. When tariff barriers are ultimately eliminated--starting in
2005 in the FTAA or the WTO for example--some U.S. industries simply
may not have the capacity to translate market access gains into export
The Omnibus Trade and Competitiveness Act of 1988 recognizes the
nexus between exchange rates and the benefits the U.S. actually
realizes from trade agreements. It requires regular monitoring and
reporting of potential currency manipulation by other countries. Such
actions can rob the U.S. of negotiated market access rights and, at the
same time, unfairly advantage foreign suppliers in the U.S. market.
Today, there is clear evidence that some foreign governments, to
establish competitive advantage for their industries, are manipulating
foreign exchange values. These countries--particularly Japan, China,
South Korea and Taiwan--have accumulated dollar holdings well in excess
of recognized or necessary reserve requirements for the purpose of
depressing the value of their currencies and maintaining export price
AF&PA believes the relationship between exchange rates and trade
policy must be subject to further scrutiny in light of the current,
sustained overvaluation of the U.S. dollar. It is important that Trade
Promotion Authority (TPA) legislation also deal with the effects of
exchange rate fluctuation that can negate the economic benefits of any
tariff reductions negotiated by the U.S. on behalf of U.S. industry.
The House bill provides for the establishment of consultative
mechanisms among parties to trade agreements to protect against
currency manipulation by foreign government. We believe this is an
important safeguard to ensure that the U.S. realizes the benefits they
negotiate on behalf of U.S. manufacturers and strongly support its
Turning to more traditional negotiating objectives, the U.S. forest
products industry has long sought the opportunity to compete on an
equitable basis for world markets. For decades, the elimination of
foreign tariffs has consistently been our number one priority. Our
industry was among the first to agree to the elimination of tariffs in
our sector and we originated the zero-for-zero concept introduced in
the Uruguay Round.
Unfortunately, the Uruguay Round Agreement didn't produce the level
playing field we were seeking: developed countries committed to
eliminate paper tariffs over a lengthy 10-year period (by January 1,
2004) rather than the normal 5-year phase-out period. Wood products
tariffs were only cut by an average of 28%. Tariff escalation--
maintaining higher tariffs on value added products--was not addressed.
Moreover, developing countries did not make any commitments to reduce
tariffs and continue to maintain very high bound tariff rates on our
The Uruguay Round Agreements Act (URAA) recognized the flaws in the
Uruguay Round results. It specifically identified the elimination of
tariffs on paper and wood products, and other zero-for-zero sectors, as
a U.S. negotiating objective to be pursued as a priority matter. The
URAA also provided the Administration with the requisite authority to
conclude agreements in this area. Since then, little has happened.
As a result, the U.S. forest products industry has lost ground in
relation to its major global competitors, particularly Brazil,
Indonesia, and Malaysia. A number of countries in Europe, Asia and
South America have used tariff walls to build world-class projects, at
times supported by government financial aid, which compete with U.S.
suppliers both at home and abroad.
Attached are resolutions adopted by the Industry Sector Advisory
Committee on Paper and Paper Products (ISAC #12) and the Industry
Sector Advisory Committee on Wood Products (ISAC #10). These
resolutions spell out the industry's negotiating objectives very
clearly: we are seeking the earliest possible elimination of tariffs on
our products and we urge USTR to pursue this objective--with urgency--
in every available venue.
In terms of some of the broader themes outlined in the Committee's
request for comments, we offer the following:
LWTO/industrial market access--Paper and wood products
should be priority deliverables for early sectoral tariff negotiations
in the Doha Development Round. Among the new, detailed proposals the
U.S. will submit, we urge USTR to include a plan to achieve early
results in forest products and other zero-for-zero sectors. The goal
should be to conclude the first phase of negotiations within one year
of the Doha ministerial. We believe that the delivery of early,
concrete results in sectors such as ours will broaden public support
for the negotiations as a whole.
We remain concerned that the negotiating mandate in industrial
tariffs must not be compromised by references to non-reciprocity for
developing countries. Especially since a number of developing countries
in Asia and South America have burgeoning world-class, export-oriented
forest products industries, and these constitute the main class of
countries that have not made any commitment to eliminate tariffs. It is
critical that developing countries fully participate in the industrial
tariff negotiations and that they commit to the same product coverage
and phase out periods as do developed countries.
LRussian WTO accession--AF&PA believes the URAA mandate
regarding the achievement of zero-for-zero agreements in specified
sectors must apply to the pending Russia WTO accession negotiations. We
urge USTR to remain steadfast in pressing for zero-for-zero treatment
in wood and paper products. We believe the zero-for-zero mandate also
applies to comprehensive tariff negotiations with countries such as
Poland, Hungary and Romania, especially to offset preferences to the
LFree Trade Area of the Americas--AF&PA urges USTR to
ensure that the negotiating modalities agreed to later this year will
foster sectoral negotiations and, particularly that tariffs on all wood
and paper products be identified for immediate elimination on
implementation of the agreement.
LFree Trade Agreements--AF&PA urges USTR to conclude the
pending FTA with Chile as rapidly as possible and to use the forest
products tariff approach (elimination of tariffs on all products in the
sector immediately on implementation of the agreement) as a template
for other agreements. We urge USTR to adopt an aggressive approach to
tariff elimination, with particular emphasis on priority countries/
areas such as Japan and Korea (wood), ASEAN, MERCOSUR, Central America
and India. We would also support early agreements with Australia and
New Zealand. For countries with existing or pending agreements with the
EU, we urge USTR to ensure that such agreements provide for equalized
tariff treatment on implementation.
AF&PA, and our member companies, fully support Administration
efforts to open overseas markets for our products. We are working with
our collegial industrial organizations in other countries to broaden
business community support for a global tariff free environment for our
At the same time, we join with the growing ranks of U.S.-based
manufacturing industries in identifying the overvalued dollar as the
single most compelling threat to U.S. global competitiveness. Urgent
and effective action to restore the U.S. dollar to a level, which
reflects the underlying fundamentals, is essential to restoring a
globally competitive U.S. manufacturing sector.
INDUSTRY SECTOR ADVISORY COMMITTEE
ON LUMBER AND WOOD PRODUCTS--ISAC 10
Whereas, The priority objective of the wood products industry in
the Uruguay Round of multilateral trade negotiations was the
elimination of wood tariffs;
Whereas, The Uruguay Round Agreement fell short of this objective
when no agreement was reached to go to zero on wood products tariffs
and tariff escalation worldwide locked the U.S. wood products industry
in a competitive disadvantage;
Whereas, Tariff escalation remains the most significant
overwhelming barrier in all of our priority markets;
Whereas, The Uruguay Round Agreements Act (URAA) identified the
accelerated implementation and extension of the zero-for-zero
agreements in wood and other sectors as a priority trade objective and
provided the Administration with the requisite authority to reach
agreements to this end;
Whereas, The Industry Sector Advisory Committee on Lumber and Wood
Products (ISAC #10) has determined that the continued existence of
tariff barriers represents a major market access problem for our
Whereas, The continuing lack of any progress on eliminating wood
tariffs since 1994 has put the U.S. wood industry at a competitive
disadvantage and has fostered the expansion of production capacity and
employment outside of the United States;
Resolved, that the Secretary of Commerce and the United States
Trade Representative make the early achievement of zero tariffs on wood
products an urgent priority for upcoming trade negotiations with U.S.
Specifically, ISAC #10 urges that:
Lthe elimination of tariffs on wood products be identified
as an early deliverable in industrial tariff negotiations conducted
under the auspices of the World Trade Organization (WTO). Preparatory
work should begin immediately and be conducted with sufficient
expedition to ensure that an agreement can be achieved and implemented
at an early date;
Lthe elimination of tariffs on wood products be identified
as an early deliverable from U.S. FTA negotiations, particularly those
with Chile and other FTAA members. In the case of Chile, the
elimination of wood tariffs should go into effect immediately, to put
U.S. suppliers on an equal footing with Canadian companies, who have
benefited from zero tariffs since 1997;
Lthe U.S. Government strictly monitor and enforce China's
reduction of tariffs on wood products in compliance with its WTO
accession agreement and take every opportunity to achieve further
reductions down to zero at an early date.
The U.S. wood products industry is proud of its record of
environmental stewardship and sustainable forest management practices
and supports trade policies that promote enforcement of domestic
environmental laws and encourage improvements in environmental
Chairman, ISAC #10
Vice President, International Paper
INDUSTRY SECTOR ADVISORY COMMITTEE
ON PULP AND PAPER
Whereas, The priority objective of the paper and paper products
industry in the Uruguay Round of multilateral trade negotiations was
the elimination of tariffs on paper and paper products by 1999;
Whereas, The Uruguay Round Agreement fell short of this objective.
Only the European Union, Canada, Japan, Australia, New Zealand and
Korea agreed to eliminate tariffs on paper and paper products--over an
extended time period ending in 2004. Important U.S. trading partners in
Latin and South America, as well as Asia, made no commitment to
eliminate tariffs on these products;
Whereas, The Uruguay Round Agreements Act (URAA) identified the
accelerated implementation and extension of the zero-for-zero
agreements in paper and other sectors as a priority trade objective and
provided the Administration with the requisite authority to reach
agreements to this end;
Whereas, The Industry Sector Advisory Committee on Paper and Paper
Products (ISAC #12) has determined that the continued existence of
tariff barriers on paper and paper products in Europe, Latin and South
America and China represents the principal market access problem for
our industry globally;
Whereas, The continuing lack of any progress on eliminating paper
tariffs since 1994 has put the U.S. paper industry at a competitive
disadvantage and has fostered the expansion of production capacity and
employment outside of the United States;
Resolved, that the Secretary of Commerce and the United States
Trade Representative to make the early achievement of zero tariffs on
paper and paper products an urgent priority for upcoming trade
negotiations with U.S. trading partners.
Specifically, ISAC #12 urges that:
Lthe elimination of tariffs on paper and paper products be
identified as an early deliverable in industrial tariff negotiations
conducted under the auspices of the World Trade Organization (WTO).
Preparatory work should begin immediately and be conducted with
sufficient expedition to ensure that an agreement can be achieved and
implemented at an early date;
Lthe elimination of tariffs on paper and paper products be
identified as a early deliverable from U.S. FTA negotiations,
particularly those with Chile and other FTAA members. In the case of
Chile, the elimination of paper tariffs should go into effect
immediately, to put U.S. suppliers on an equal footing with Canadian
companies, who have benefited from zero tariffs since 1997;
Lthe U.S. Government strictly monitor and enforce China's
reduction of tariffs on paper and paper products in compliance with its
WTO accession agreement and take every opportunity to achieve further
reductions down to zero at an early date.
ISAC #12 recognizes that trade liberalization in the forest
products sector has a fundamentally positive effect on environmental
quality. The U.S. paper industry is proud of its record of
environmental stewardship and supports trade policies that promote
enforcement of domestic environmental laws and encourage improvements
in environmental practices.
Maureen R. Smith
Chairman, ISAC #12
Vice President, American Forest & Paper Association
We have always held that tariff elimination has the potential to
cause harmful environmental impacts when it is conducted in the absence
of adequate environmental safeguards. We have advocated that these
potential impacts should be adequately assessed and that necessary
safeguards should be in place prior to further tariff elimination.
Executive Order 13141 on the Environmental Review (ER) of Trade
Agreements, calls for an ER to be conducted for proposed trade
agreements such as those being considered here. International norms for
credible and effective environmental assessment hold that they should
be done prior to, and inform the decision in question. If the proposed
``early deliverable'' of tariff elimination occurs prior to the
completion of an ER, this will contravene these international norms and
compromise the credibility of the process. We therefore believe that an
ER on industrial tariff negotiations in the context of WTO-related
activities and FTA's should be completed and that the necessary
safeguards should be put into place prior to any early deliverable of
Statement of the American Iron and Steel Institute
The American Iron and Steel Institute (AISI), on behalf of its U.S.
member companies who together account for more than two-thirds of the
raw steel produced annually in the United States, is pleased to provide
comments to the House Committee on Ways and Means on President Bush's
Trade Agenda for 2002.
Trade Liberalization: Need to Rebuild Public Consensus on Trade
There is a vital need for the Bush Administration to rebuild a new
public consensus in support of free and fair rules-based trade. In this
regard, to avoid a further undermining of public support for new free
trade initiatives, it is essential that the Administration:
Lenforce strictly U.S. trade laws and counter serious
import injury where it is clearly determined (as in the steel Section
201 ``safeguards'' case); and
Lresist firmly the growing pressures from foreign
governments to weaken further international disciplines--and U.S.
laws--against injurious, unfairly traded (dumped and subsidized)
A national consensus on expanded international trade can only be
achieved (and sustained) when trading rules are fair, clear and
Strong trade laws, strict trade law enforcement, the countering of
import injury and the preservation of fair trade rules all serve the
free trade agenda. Unless the public believes that what is being
expanded is fair trade, efforts to achieve further trade liberalization
cannot succeed. The best way to reverse the erosion of public support
for further trade liberalization and to restore a national consensus in
support of freer trade is through strong trade laws, strictly enforced.
Rules-based trade and effective U.S. trade laws, properly enforced,
prevent the exporting of unemployment to this country. A strong
bipartisan majority of the Congress understands this, and AISI's U.S.
member companies greatly appreciate the continuing strong support of
the Congress, including many House Ways and Means Committee Members. We
thank you for your support of an effective steel Section 201 remedy,
and also for your very clear message of no further trade law
La new World Trade Organization (WTO) round of global
Lthe WTO dispute settlement process, which is sorely in
need of reform;
Lregional negotiations such as the Free Trade Area of the
Americas (FTAA); or
Lbilateral free trade agreement (FTA) negotiations such as
those with Chile and Singapore.
Steel Crisis: Need for Strong 201 Remedy
As the President recognized when he initiated the steel Section 201
investigation in June 2001, the 201 was a last resort for an American
steel industry that had been engulfed by an unprecedented crisis
largely not of its own making. This ongoing crisis, as the President
correctly recognized when he announced his Steel Action Plan on June 5,
2001, is the direct result of:
La 50-year legacy of foreign government intervention in
the steel sector;
Lpervasive steel market-distorting practices worldwide;
Lun-addressed foreign economic and steel industry
Lmassive global excess steelmaking capacity--roughly 250
million metric tons, or more than twice the size of the total U.S.
This has all led to the U.S. steel industry's current catastrophic
condition. Over the past 4 years of crisis, we have witnessed:
Lthe three highest steel import years in U.S. history in
1998, 1999 and 2000;
Lthe largest surge of unfairly traded steel imports in
Lthe worst steel price depression in history, with import
values and U.S. prices sinking to unsustainable lows;
L27 steel U.S. company bankruptcies or shutdowns since
Lover 50 U.S. steel plants and related facilities closed
in the past 24 months alone;
Lthe loss of nearly 44,000 U.S. steel worker jobs since
January 1998, with almost 10,000 of these coming in January 2002, which
saw the largest monthly rise in lost jobs in more than a decade.
America's steel companies, steel communities and related industries
have lost tens of thousands of real jobs over the past 4 years due to
unfair and disruptive steel imports sold in violation of international
rules and U.S. laws. This is in stark contrast to the theoretical loss
of jobs in U.S. steel using industries predicted by 201 opponents--
losses that will never actually occur, since they are based on a flawed
economic model using extreme and unrealistic assumptions.
This is not the way market-based trade is supposed to work. Between
1980 and the onset of the current steel crisis, the U.S. steel industry
literally reinvented itself. By 1998, we had become a new industry
producing new steels, using new equipment and employing new processes.
Thanks to over $60 billion in modernization investments since 1980 and
a costly and painful restructuring of all aspects of steel operations,
a new U.S. steel industry had by 1998 emerged as a highly competitive,
technologically advanced, low cost, environmentally responsible and
The past 4 years should have been the best of times for an American
steel industry restored to world class status, which in recent years
has added over 20 million tons of new, state-of-the-art steel capacity.
Instead, we have a national steel emergency caused by a tidal wave of
injurious, unfairly traded and disruptive steel imports.
In response to our imports-driven crisis, the U.S. International
Trade Commission (ITC) has now ruled unanimously in the Section 201
steel investigation that increased imports have been a ``substantial
cause of serious injury'' to the U.S. steel industry. The ITC has also
recommended that steel trade remedies be applied. It is now up to the
President to decide on or before March 6 what to do in the national
AISI is convinced that President Bush and his Administration have a
unique, historic opportunity, not just to counter import injury in the
U.S. steel market, but also to create a lasting solution to the root
causes of the U.S. and world steel crisis.
We urge the House Ways and Means Committee and all Members of
Congress to send a strong, clear message to the President and his
Administration. The message is that:
LThe United States can no longer be the WORLD'S STEEL
LThe U.S. steel industry has suffered unprecedented import
injury, and should be granted, under our WTO-consistent Section 201
safeguards law, a much-needed time-out from the current crisis
LThere should be a 4-year tariff of at least 40 percent on
the full range of carbon and alloy steel products where the ITC has
LA strong and uniform steel tariff remedy is needed to
stop effectively, and to reverse, the serious injury that has occurred.
LIt is essential to restore the U.S. steel industry to
health, to enable it to consolidate and continue to restructure and to
allow it to do what is needed to invest in new technologies, products
LIt will serve the long-term interests of U.S. steel
LIt will benefit the overall U.S. economy and U.S.
LIt is necessary to the success of the President's
multilateral steel initiatives, because only a strong 201 tariff remedy
will encourage foreign governments and producers to deal seriously with
their un-addressed steel sector structural problems and imbalances.
LThere should also be industry efforts to work together
and with the Congress and the Administration to help develop and enact
legislation that removes barriers to steel industry consolidation and
rationalization in the United States.
LThe long term goal should be a lasting solution to the
international steel trade problem: the Administration's multilateral
steel initiative at the OECD to reduce inefficient and excess global
steelmaking capacity and to remove steel trade-distorting practices
worldwide deserves everyone's continued support.
The Administration is right that it is time to get governments out
of steelmaking. It is time to end foreign government ``targeting'' and
subsidization of steel, foreign government market barriers to imports
of steel and steel-containing products and foreign government
toleration of private cartels, as well as other anticompetitive
behavior and corruption in the steel sector.
These trade-distorting practices were examined in great detail in
the ground-breaking July 2000 Commerce Department study, ``Global Steel
Trade: Structural Problems and Future Solutions.'' The bottom line is
that unfair trade practices enabled less efficient foreign steel
companies to produce at levels not supported by market forces, to
maintain artificially high steel prices in their home markets and to
dump unprecedented quantities of steel in the United States and in
North America as a whole. Then, after more than 200 antidumping (AD)
and countervailing duty (CVD) orders, the Section 201 case became a
The steel crisis, therefore, holds important lessons for our
Nation's post-Doha trade agenda. The case of steel shows why it is
critical to enhance, not weaken, U.S. trade laws. The lessons learned
by U.S. steel producers are that, now, more than ever, we must support:
Lprompt and strict enforcement of U.S. trade laws;
Lmodernization and enhancement of these laws in a WTO-
consistent manner; and
Lpreservation of effective international disciplines
against unfair trade.
New Global Trade Negotiations
For many years, the bipartisan position of the U.S. Government has
been to support continued multilateral trade liberalization, based on
no further weakening of the WTO's AD/CVD rules. AISI and many other
U.S. industries continue to support this position. Our consistent
message can be summed up in three words: RULES-BASED TRADE.
No Trade Law Weakening Through New Doha Round of WTO Negotiations
Prior to the WTO Doha Ministerial Conference, the final proposals
submitted by other governments made it clear that the ultimate goal of
Japan and many other countries is the gutting of U.S. laws against
unfair trade. Foreign unfair traders view the AD/CVD laws as the one
remaining major obstacle to their unfettered abuse of the open U.S.
market. They do not want to see usable U.S. laws against unfair trade.
The WTO's Antidumping Agreement and its Subsidies and
Countervailing Measures (SCM) Agreement were extensively rewritten only
7 years ago and, in the period leading up to Doha, AISI and other
industries urged the Administration to resist firmly foreign government
pressures to put revisions to these Agreements on the agenda of new WTO
negotiations. Notwithstanding our concerns that it would be a serious
policy mistake to allow any opening up of AD/CVD rules in new WTO
negotiations, the decision at Doha was to include AD/CVD rules in the
new round negotiating agenda.
The Administration, to its credit, has continued to stress that it
has no intention of allowing U.S. AD/CVD laws to be weakened through
new WTO negotiations. The Administration points out that it has an
``affirmative'' agenda on WTO rules, which includes talking about (1)
the unfair foreign trade practices that give rise to the use of AD/CVD
laws in the first place and (2) the ways in which other countries' AD/
CVD laws fall short (lack of transparency, due process, etc.).
AISI and its U.S. member companies will continue to support trade
liberalization, if--and only if--there is no further weakening of fair
trade rules. Thankfully, in recent years there has been overwhelming
bipartisan support in the Congress for preserving effective
international disciplines and U.S. laws against unfair trade. In
particular, we appreciate:
Lthe bipartisan letter to President Bush last year signed
by nearly two-thirds of the Senate, expressing ``strong opposition to
any international trade agreement that would weaken U.S. trade laws.''
Lthe House-passed resolution last year endorsed by over
400 Members, urging U.S. negotiators to preserve the effectiveness of
U.S. trade laws and avoid trade law weakening agreements.
Lthe post-Doha letter to the President last year signed by
9 Senators, reiterating that ``we should not be discussing U.S. trade
laws at the WTO . . . [and] looking for `reassurance that this
Administration will not agree to any changes in U.S. laws that regulate
unfair foreign trade practices.' ''
The task now, however, is to help the Administration make the most
of its affirmative agenda on rules. Trade adjustment assistance (TAA)
should be extended and strengthened to deal with workers who are laid
off as a result of expanded trade. At the same time, we need to
redouble our efforts to avoid trade-related unemployment before it
occurs. We can best do that by maintaining and enhancing our trade
laws. In light of the decision on rules taken at Doha:
LThe Congress must send a strong and unmistakable message
to U.S. negotiators, in new Trade Promotion Authority (TPA)
legislation, that it will not approve agreements or adopt legislative
provisions that weaken in any way America's vital laws against unfair
LThe Congress should clarify that, in this ``Doha
Development Round,'' it does not support the view that developing
countries should be granted ``special and differential treatment'' with
regard to AD/CVD rules, because the WTO should not be promoting
development through the use of unfair trade practices--and because the
claim that developing countries' legitimate export trade is being shut
off by AD/CVD measures has no basis whatsoever in fact.
LThe Congress must ensure that the WTO fully adheres to
the words in the Doha Ministerial Declaration which say that, in a new
trade round, negotiators will ``preserve the effectiveness of the
instruments and objectives of the WTO's Antidumping and Subsidies/
Countervailing Measures Agreements.''
LThe relevant Congressional Committees of jurisdiction
must engage in a direct and thorough review of any negotiations related
to AD/CVD laws; U.S. negotiators should be required to discuss with the
Committees all proposals to change these laws before any actual
negotiation of such proposals takes place; and unless the Committees
give specific approval, the United States should not engage in
negotiations regarding such proposals.
LThe President should commit not to submit for
Congressional approval any agreement that requires weakening changes to
U.S. AD/CVD laws and enforcement policies--``fast track'' or Trade
Promotion Authority must not be taken advantage of to speed passage of
trade law weakening amendments.
LThe Congress should also enact immediately new AD/CVD
provisions, which strengthen these laws in a manner consistent with the
existing WTO Agreements. Rather than allow trade law weakening,
Congress should ensure that U.S. trade laws are as strong as what the
The Doha Round's discussion on rules will occur in two phases.
During phase one, countries will identify the key issues that they
would like to see discussed. For our part, we pledge to work closely
with other industries to provide to the Administration an affirmative
priority listing of ways in which the WTO AD/CVD Agreements should be
strengthened and international disciplines against injurious dumping
and trade-distorting subsidies made more effective. We also plan to
highlight how unfair foreign trade practices in steel and other
sectors--not AD/CVD laws--are the real problem in international trade.
LWe will urge the Administration to work together with
other NAFTA governments to encourage countries in Asia and other
regions with serious market access problems to eliminate all barriers
and anticompetitive practices and to open their markets fully to
imports of steel and steel-containing products. Achieving open markets
in all major steel producing and trading nations serves the interest of
both steel producers and consumers globally.
LWe will work with other ``zero tariff'' U.S. industries
to ensure that Brazil and all other major steel producing and trading
nations eliminate their steel tariffs immediately. Since the U.S. is
among those countries that are already committed to going to zero on
steel tariffs by January 1, 2004, this is needed to level the playing
field in international steel trade.
LWe will work with Members of Congress to develop an
effective WTO-consistent remedy against country and product switching
by irresponsible steel traders.
LWe will work with other U.S. industries and with the
Congress, both to identify the implications of the negotiating
proposals tabled by other countries and to enact WTO-consistent
amendments that make U.S. trade laws more effective.
Whether the Administration addresses steel trade-distorting
practices through the Doha Round discussion on rules or through a
separate effort to achieve a sector-specific agreement (an
international steel agreement to ensure that steel trade in the future
is free and fair in all markets), the same principle must apply:
existing trade laws must not be weakened in any way. The goal is not to
discipline the remedies we need to defend against unfair trade. The
goal must be to strengthen those remedies and to achieve the highest
possible level of discipline against unfair trade.
No Trade Law Weakening Through WTO Dispute Settlement
It is not just the negotiating proposals of other governments that
are putting the WTO--and continued U.S. support of the WTO--at risk.
Public support for the WTO is also fast eroding because the current WTO
dispute settlement system threatens U.S. trade laws and U.S.
A thorough overhaul of the WTO dispute settlement system is
urgently needed. Part of the problem is that, in recent WTO panel
decisions on trade law issues, agreed WTO standards and limits on
panelists' authority have been abused or exceeded. U.S. steel producers
support WTO dispute settlement reform, including:
Lgreater transparency in the WTO dispute settlement
Lprivate party participation at WTO panel hearings;
Lreform of the WTO panel selection process.
As it stands, WTO panels are creating new international rules--
which is beyond their authority--and ignoring agreed standards. Under
the existing dispute settlement system, foreign panelists who are often
hostile to U.S. trade laws have routinely rejected U.S. trade remedies
and have imposed new and, in some cases, very severe limits on the use
of trade laws. No challenged safeguards measure has ever been upheld by
the WTO. Similarly, countries have mounted repeated successful
challenges to U.S. AD/CVD measures, obtaining through dispute
settlement what the U.S. refused to accept in negotiations. Even when a
country fails to achieve all it seeks in its appeal of U.S. trade law
relief, there is often a net weakening of U.S. law. This is what
occurred in Japan's appeal of U.S. AD duties on hot rolled steel--in
spite of this being arguably the worst case of injurious dumping ever.
This attack by unfair traders and the WTO dispute settlement system
on U.S. laws and rules to address unfair and disruptive trade must
stop. The time has come for Congress to re-examine the fundamental
issue of U.S. commitment to binding dispute settlement. So far, the
experiment has proved a disaster for U.S. trade laws. The recent U.S.-
Jordan free trade agreement includes non-binding dispute settlement. We
think Congress should give serious consideration to expanding this
We believe it is now essential that Congress insert itself into the
WTO dispute settlement process to protect the sovereignty of the United
States and to ensure that the positions the U.S. negotiated--and that
Congress subsequently enacted into law--are not eroded by WTO dispute
settlement bodies. In this regard, AISI wishes to thank those Members
of the House who have placed a premium on urging the Administration to
develop an early strategy to fix this serious problem before it is too
late. The Congress can help in three ways to address the problem of a
WTO dispute settlement system that is undermining U.S. trade laws.
LFirst, it can join the Administration in support of WTO
dispute settlement reform, including reform of the panel selection
process, greater transparency and allowing concerned private parties to
participate in panel proceedings.
LSecond, it can support the provision of more government
resources and resolve to defend U.S. trade laws in WTO appeals in
Geneva. In order to counter the efforts of unfair traders to use the
WTO dispute settlement process to undermine our fair trade rules, the
Administration must combine diplomatic and litigation efforts and begin
to defend much more aggressively the trade laws enacted by Congress.
LThird, it can support prompt enactment of legislation to
establish a WTO Dispute Settlement Review Commission. First proposed in
1995 by Senators Dole and Moynihan, such a Commission would be an
important first step in reining in the WTO dispute settlement system
and ensuring that future WTO panels do not exceed or abuse their
No Trade Law Weakening Through WTO Accessions
AISI's U.S. member companies agree that Russia and other nations of
the Commonwealth of Independent States (CIS) should be accepted into
the WTO, but only on commercially viable terms. In this regard:
LAs was done in the case of China's accession, WTO members
should have the right to continue to apply nonmarket economy AD
methodology until steel and other key sectors of the CIS economies
become fully market-oriented.
LThe CIS countries should end immediately all direct and
indirect steel subsidies that distort trade, and adhere immediately to
all of the disciplines in the WTO Subsidies Agreement.
LAs was done in the case of China's WTO accession, a
special safeguard should be put into the CIS accession protocols that
enables other WTO members, during a transition period, to act against
market disruption caused by a surge of CIS imports.
LIn addition, there must be close monitoring of China's
and Taiwan's WTO commitments to ensure that they are being strictly and
promptly complied with and fully implemented.
Key Points to Remember about Global Trade Negotiations on Rules
Japan and other countries that maintain sanctuary markets for their
domestic steel industries and tolerate cartels and other
anticompetitive behavior want to weaken the WTO's AD rules. Countries
that continue to subsidize their inefficient industries want to weaken
the WTO's CVD rules.
For more than 50 years, countries have been allowed to use AD/CVD
laws to counter injurious unfair trade, because these laws help ensure
that more efficient domestic producers are not weakened or destroyed by
less efficient foreign firms. These laws serve the long term interest
of customers, consumers, the economy, free trade and the multilateral
In recognition that 201 steel trade relief is coming, that massive
world steel overcapacity still exists and that the United States will
no longer be able to be used as the WORLD'S STEEL DUMPING GROUND,
foreign countries would be well advised to re-evaluate their past
support for trade law weakening through the WTO. In the meantime, the
steel industry in the NAFTA region continues to speak with one voice on
the need to preserve effective AD/CVD laws. It is the united position
of AISI's Canadian, Mexican and U.S. members that we:
Lsupport free trade and open markets;
Lsupport the effective fair trade rules that make them
Lsupport reform of the WTO dispute settlement system; and
Loppose all efforts to put AD/CVD rules on the negotiating
table--whether in a new WTO round, the FTAA or new bilateral FTAs.
The FTAA and Regional Trade Negotiations
In April of 2001, AISI joined with our colleagues in the Latin
American Iron and Steel Institute (ILAFA) and submitted to the Sixth
Business Forum of the Americas an unprecedented joint position
statement on the FTAA by a hemispheric sector. Together with the
Brazilian steel industry, we even included a short section on the issue
of trade laws in our joint submission. It simply says that, ``The trade
laws of each Western Hemisphere country should be enacted and applied
according to the criteria of transparency, due process and procedures
that are consistent with World Trade Organization (WTO) rules . . .
[and] On the subsidy issue, the negotiations should aim at improving
the level of discipline established in WTO rules.''
AISI supports the ongoing negotiations to achieve an acceptable
FTAA. We have long supported the view that, if it is done right,
further trade liberalization in the Western Hemisphere could yield
significant benefits to competitive U.S. steel producers and their
world-class domestic customers.
Ironically, it is the other side on the trade law issue that is
endangering the prospects for both the FTAA and a new WTO round. We
believe that the Administration understands this, that it wants to see
the FTAA and other free trade initiatives succeed, and that it shares
our view that effective rules and disciplines against unfair trade
serve the cause of free trade.
As a strong and early supporter of the North American Free Trade
Agreement (NAFTA), AISI is concerned that public support for the NAFTA
has eroded. It is worth recalling that the U.S. Government was
unwilling to see AD/CVD laws weakened in the NAFTA, which is a region
where we share contiguous borders and where economic integration is
well advanced. Yet, even so, public support for the NAFTA is slipping.
The need to avoid trade law weakening of any kind in the FTAA is
strongly supported by AISI's entire North American membership. In
February of 2001, AISI's Canadian, Mexican and U.S. member companies
urged our respective governments to ``agree to nothing in an FTAA that
would lead to less effective trade laws in the NAFTA region or to any
diminution of trade law rights in North America.''
There Must Be No AD/CVD Weakening of Any Kind in the FTAA
This bedrock principle of no FTAA weakening of existing AD/CVD laws
means that any trade law weakening proposals should be immediately
rejected by the U.S. Government as a total non-starter. Instead, just
as in the Doha Round, our government should make it clear that the real
issue in international trade is dumping, closed markets, trade-
distorting subsidies and private anticompetitive behavior--not the U.S.
laws that the Congress has enacted to counter foreign unfair trade.
Therefore, the Administration should insist that other countries in the
Lopen up their home markets;
Leliminate their trade-distorting subsidies; and
Lend their private anticompetitive practices in sectors
such as steel.
In addition, if any FTAA country, in negotiations with the United
States, recommends that the U.S. agree to eliminate, weaken or amend in
any way U.S. AD/CVD laws, the only acceptable U.S. Government response
should be that:
LThere will be no substantive changes of any kind in U.S.
LThere will be no extension of the NAFTA's Chapter 19
binational panel AD/CVD appellate process to other FTAA countries; and
LThe only subject with respect to trade laws where there
is something to talk about is the need for greater transparency and due
process in the way other FTAA countries administer their AD/CVD laws.
Accordingly, we commend the Administration for its proposal, tabled
at the July meeting of the FTAA negotiating group on subsidies,
antidumping and countervailing duties. That proposal would replace a
proposed separate FTAA AD/CVD chapter with a single statement that
countries reserve the right to use AD/CVD remedies consistent with WTO
The Bracketed FTAA ``Draft Chapter'' Would Devastate U.S. Law
What we find in the bracketed AD/CVD negotiating text of the FTAA
are suggested changes from other governments that would have a
devastating impact on U.S. trade laws, as they would apply to FTAA
Simply put, the draft FTAA Chapter on Subsidies, Antidumping and
Countervailing Duties (``Draft Chapter'') is so badly flawed, there can
be only one U.S. Government response: total rejection.
Instead of leading to a higher level of FTAA discipline against
unfair trade than exists currently in the WTO--which ought to be the
goal--the proposed changes, taken as a whole, would lead to weaker AD/
CVD rules in the FTAA than in the WTO. The stated ultimate objective
would be to eliminate AD measures entirely once the FTAA is established
and goods are circulating among FTAA member countries ``fundamentally
free of restrictions.'' In the meantime, the proposed changes would:
Lendorse all but the most severely injurious dumping and
subsidization by FTAA members;
Lmake U.S. AD/CVD laws essentially unusable against
injuriously dumped and subsidized imports from FTAA countries;
Lraise serious WTO (most-favored-nation) concerns among
non-FTAA countries about trade diversion and discriminatory treatment;
Lmake it harder to get relief against unfairly traded
goods from all regions.
The bottom line is that the Administration should send a clear,
immediate and unmistakable signal to our FTAA negotiating partners
LThe Draft Chapter and its myriad forms of trade law
weakening will never be accepted by the United States in whole or in
LNeither the Administration nor the Congress nor the
American public will ever accept the Draft Chapter's approach to AD/CVD
laws, which is ``death by a thousand cuts''; and
LThis campaign to try to use the FTAA to weaken AD/CVD
laws is damaging public support in the U.S. for the FTAA.
Message to Brazil and Other Trade Law Opponents
An FTAA should promote freer, rules-based, trade--not turn the U.S.
market into a dumping ground. This will be a free trade agreement, not
a customs union or a common market, and it is worth noting that South
America's steel producers have used AD law against each other, even
within the MERCOSUR customs union. An FTAA will not eliminate unequal
conditions of competition or the potential for trade-distorting
practices. It will lead, we hope, to growing economic integration in
our hemisphere and, to the extent that dumping diminishes over time as
a result of this increased integration, to a decrease in the need to
turn to AD law, as it has in the NAFTA region.
Bilateral Free Trade Agreement Negotiations
Whether the bilateral FTA is with Chile or Singapore or some other
country, it is an almost sure bet that the other country will attempt
to get special treatment with regard to U.S. trade laws.
No Trade Law Weakening Through Bilateral FTAs
The exact same points that apply to the global trade negotiations
in the WTO Doha Round and in the hemispheric negotiations to achieve an
FTAA apply to bilateral FTAs. Thus, AISI and its U.S. members will
strongly oppose any effort to try to use bilateral FTAs to eliminate or
weaken AD/CVD rules and other U.S. trade laws in bilateral trade with
the U.S. The United States should agree to no language in any FTA that
would lead to less effective U.S. trade laws or to any diminution of
U.S. trade law rights.
No Weakening of Steel Buy American Rules Through Bilateral FTAs
In addition to trade laws, a second major area of significant
concern to AISI's U.S. member companies is the need to preserve WTO-
legal steel Buy American rules, whether in a new global round of trade
negotiations or in regional or bilateral FTAs.
AISI's U.S. members support enhanced foreign government procurement
opportunities for U.S. firms, especially steel's U.S. customers. Thus,
we would like to see prospective FTA countries assume commitments to
promote more open access to entities and greater transparency in the
government procurement bidding process. At the same time, given the
failure of many foreign governments to live up to their existing
government procurement obligations--and given the lack of equitable
results achieved to-date from government procurement liberalization--
AISI's U.S. members remain totally opposed to any weakening of current
steel Buy American rules.
With respect to FTAs and government procurement, the NAFTA stands
as a model of how to make additional, incremental progress in this area
of a kind that AISI's U.S. members support. It achieves progress by
providing for greater transparency, higher thresholds and a bid protest
* AISI appreciates this opportunity to provide written comments to
the House Ways and Means Committee on President Bush's Trade Agenda for
2002, and stands ready to supply any additional information the
Committee might wish to have.
Statement of the American Textile Manufacturers Institute
This statement is submitted on behalf of the American Textile
Manufacturers Institute (ATMI), which is the national trade association
for the U.S. textile industry. Our industry employs approximately
450,000 workers throughout the United States.
As we stated to this Committee when it held a similar hearing
exactly eleven months ago today, we are an industry that is
simultaneously a major exporter and one that is deeply impacted by
foreign imports. As such, we believe that our country's trade policy
should be motivated by principles of fairness and equity. Much of what
we said in our statement last year still applies. In particular, we
would like to reiterate three basic principles which we believe should
govern U.S. trade policy and trade agreements affecting textiles:
(1) Ltrade agreements must be fair and equitable to the domestic
(2) Ltrade agreements must be enforceable; and
(3) Lthe U.S. Government must exhibit the will to enforce trade
These principles have not changed since we submitted that statement
March 7, 2001.
What has changed since that date is that over 100 U.S. textile
mills have closed and over 60,000 U.S. textile workers have lost their
jobs.\1\ Today, the U.S. textile industry is experiencing its worst
economic crisis since the Great Depression. Undoubtedly, the U.S.
recession and the aftermath of the attacks on September 11th have made
things worse, but our industry's primary problem stems from unfair
trade and exchange rate policies, particularly as they concern the
Asian exporting countries.
\1\ For more information, see the Textile Crisis section of ATMI's
Web site (www.atmi.org).
The Over-Valued Dollar
Sharp and troubling job losses are not just occurring in textiles.
The Nation's entire manufacturing base has been eroded by an enormous
and destructive increase in the value of the dollar. Since 1996, the
dollar has increased by 30% in value on a trade-weighted basis--and
against the currencies of the top ten Asian textile exporting
countries, the increase has averaged 40%. This has caused imports to
surge as currency changes have led to artificially low prices for
manufactured goods from abroad. At the same time, U.S. manufacturing
exports have fallen dramatically as American goods have been priced out
of market after market.
In textiles, prices for textile imports from Asia have dropped by
as much as 38% since 1996. For manufactured goods as a whole, the
import prices have dropped by 20%. A resulting import surge has caused
a wave of bankruptcies and layoffs in the manufacturing sector--the
National Association of Manufacturers (NAM) estimates that more than
400,000 manufacturing jobs have been lost in the last year solely
because of the over-valued dollar's impact just on U.S. manufacturing
exports. NAM says that the over-valued dollar, which is now approaching
the devastating levels of the mid-1980s, has become U.S.
manufacturing's number one problem.
The Administration should abandon its ``strong dollar'' policy and
move judiciously in concert with other countries to gradually bring the
value of the dollar down to normal, historical levels. This step would
probably have a more beneficial long-term impact on the entire U.S.
manufacturing sector, including textiles than any other action the
government could take.
[GRAPHIC] [TIFF OMITTED] T9584A.001
On a side note, regarding the political viability of future trade
agreements, the rise of the dollar and the enormous pain it has caused
in manufacturing across the country is a key reason that trade
agreements have become dirty words with much of the America's working
class. In a world where U.S. tariffs average in the single digits,
entire industries can be devastated by changes in the dollar's value
such as we have seen recently. When the dollar's extraordinary rise--
and the flood of imports it triggers--causes hundreds of thousands of
workers to lose their jobs in a single year, then any kind of trade
agreement, however well-meaning, becomes increasingly anathema to the
American public. It is time for the U.S. trade agenda to recognize that
currencies and currency manipulation are a major factor in
In light of our economic crisis and the enormous dislocation in our
industry, it is with a real sense of urgency that we address some of
the issues noted in the committee's press release announcing this
hearing, in the order listed in the press release.
1. The President's Trade Agenda and House Passage of H.R. 3005
President Bush, Commerce Secretary Donald Evans and the House
Republican Leadership all made certain commitments to textile state
House Members related to the vote on trade promotion authority (TPA).
ATMI believes that these promises must be fulfilled by Congress and the
Administration without any compromise or further delay. To do otherwise
would be an unconscionable breach of trust and call into question why
textile state Members of Congress should allow the President to
negotiate trade agreements without maintaining Congress' ability to
modify the legislation implementing such agreements.
These commitments have been thoroughly documented, and now our
industry is watching to see whether and when these promises will be
honored. An issue of immediate concern, and one that is directly within
the jurisdiction of this Committee, is the signed commitment by Speaker
Hastert, Majority Leader Armey, and Majority Whip Delay to Rep. Jim
DeMint of South Carolina. In this commitment, the House Republican
``to bring no future bills with trade provisions to the House
floor until the Trade and Development Act of 2001 (sic) is
corrected to require that U.S. knit and woven fabrics be
required to undergo all dyeing, finishing, and printing
procedures in the United States in order to qualify for
benefits under the Caribbean Basin Trade Partnership Act,'' and
``that this same requirement for dyeing, finishing and printing
will be included on (sic) any Andean Trade Preferences Act that
contains additional textile preferences before it is considered
again by the full House.''
Please note that this pledge refers to correcting the Trade and
Development Act, not to weakening it or gutting it as critics have
charged. Further, we would like to emphasize that this interpretation
of where dyeing, finishing and printing must be done is the same
interpretation taken by the Customs Service with respect to the NAFTA
agreement and what is known as 807-A trade. It has now become an issue
of commitment by Congressional leaders.
2. The Success of the WTO Ministerial Meeting in Doha
ATMI is concerned that the WTO Ministerial Declaration and other
documents agreed to in Doha by the U.S. and other WTO members will
encourage Asian exporters to keep their textile markets closed. Despite
assurances by Administration officials that the U.S. can still demand
that large developing countries open their own closed markets, the Doha
agreement will make it more challenging to do so.
The U.S. textile industry needs and should have access to those
Asian markets that keep out foreign textiles using high tariffs and
non-tariff barriers. However, the Doha agreement does not prohibit
India and other countries from continuing to hide behind protective
barriers while simultaneously enjoying far greater access, and seeking
even greater access, to our markets at the expense of U.S. textile
The ministerial document states that developing countries will be
allowed to focus future talks on products of their choice. So-called
developed country ``tariff peaks'' will be a target, and yet most Asian
countries will argue that the document protects their own markets, even
though they maintain tariffs of 50 percent or more on many products.
This is nothing but allowing Asian markets to remain closed to U.S.
textile exports while continuing to open the U.S. market further to
USTR and the Department of Commerce should be commended for their
efforts in resisting entreaties to change the terms of the WTO
Agreement on Textiles and Clothing (ATC) and thus grant India, Pakistan
and other countries unjustified access to the U.S. textile market as an
incentive for them to participate in the trade negotiations. Such
inducements just to prevent these nations from walking out in Doha
would certainly have been unwarranted. However, we are concerned that
the outrageous demands by India and a few others to liberalize the ATC
have been placed on the agenda for further discussion. We again call on
the United States government to re-clarify that it will use its WTO
veto authority to block these demands from moving ahead. The U.S. has
carried out its commitments under the ATC and that should be the end of
We also continue to urge that the United States adopt specific
objectives and guidelines concerning U.S. textile and apparel tariffs.
These objectives must include freezing U.S. textile and apparel
tariffs, and forcing Asian and other countries to bring their tariffs
down to U.S. levels and remove their non-tariff barriers without delay.
It has been eight years since the Uruguay Round promised to provide
access to foreign markets for U.S. textile products. Yet, almost every
Asian textile market, as well as many others, remain entirely or mostly
closed to U.S. exports. These closed markets include India, Pakistan,
Thailand, the Philippines, Indonesia, Brazil and Argentina among many
others. Some nations have even added new barriers to U.S. textile
exports, despite their Uruguay Round obligations. This inequity must be
\2\ For more information, see ATMI's report ``Promises Unkept'' at
We also remain concerned that the United States has, despite clear
sentiment in Congress to the contrary, agreed to allow U.S. laws
against dumping, subsidies and other unfair trade practices to be
placed on the agenda for upcoming negotiations. After all remaining
textile and apparel quotas are completely phased out on January 1,
2005, our trade laws will be the industry's defense against unfair and
illegal trade practices. Like many in Congress and in other sectors
affected by unfair trade practices, we strongly urge that the U.S.
Government reject any efforts to weaken U.S. trade laws.
3. Prospects for the FTAA
Regarding a Free Trade Agreement for the Americas, we renew our
request that the government create a subgroup within the market access
negotiating team dedicated to textile and apparel issues. This has been
previously done with every major multilateral negotiation to date
involving textile and apparel trade, including the Uruguay Round, NAFTA
and the U.S.-Canada FTA. The issues involved in textile and apparel
market access, which include rule of origin, quotas, possible
transshipments, Customs verification teams and the negotiation of over
1,500 tariff lines, are so technical and detailed that a dedicated sub-
group on textile market access is absolutely necessary for a successful
While ATMI is still considering whether to take a formal position
on an FTAA, in general terms we believe the agreement must be fair and
beneficial to U.S. textiles, it must have enforceable rules and the
government must be willing to enforce those rules. Again using NAFTA as
a guide, the textile and apparel rules in an FTAA must have origin
requirements that prevent countries outside the agreement from becoming
beneficiaries. The rules must also allow for cross-country Customs
verification and have reciprocal tariff phase-outs. Enforcement is key;
each time that free trade is expanded, the opportunity for goods from
outside the free trade region to enter illegally is expanded as well.
4. H.R. 3009 (The Andean Trade Expansion Bill)
As clearly stated in our testimony to this Committee last year,
H.R. 3009, the Andean Trade Expansion Bill, would cost thousands of
U.S. textile jobs at a time when our industry is already reeling from
its worst economic crisis since the 1930s.
We are pleased that the Committee acted on one of the arguments we
made against the bill when it was before the Committee last October.
That version contained language that would have let Andean apparel,
using fabrics formed anywhere in the world, enter the U.S. free of
duties and quotas. This obvious loophole, which we pointed out prior to
Committee consideration of the bill, was finally corrected prior to
However, the Committee did nothing to correct the other flaws in
the bill, as noted below:
LThe bill grants duty-free treatment to an enormous amount
of apparel assembled in the Andean of regional fabric--nearly one
billion square meter equivalents annually by 2006--rather than U.S.
fabric. Allowing such a huge amount of apparel made of regional instead
of U.S. fabric will cause further job losses in the U.S. textile
LThe bill does not even require that the Andean apparel be
``wholly'' assembled in an Andean beneficiary country. Thus, most of
the assembly processes could be done in China or other Asian countries,
with very limited work (such as sewing a side seam on a shirt) done in
the Andean region. This would result in China and other large textile
producing countries in the Far East realizing most of the benefits, not
the Andean countries, and certainly not the U.S.
LFinally, unrelated to the Andean region, H.R. 3009
doubles the volume of Sub-Saharan apparel that can be made from
``regional'' or third country fabric. This amendment to the African
Growth and Opportunity Act (AGOA) will benefit Asian fabric and yarn
producers and severely limit the possibility of U.S. textile exports to
AGOA countries and a meaningful economic partnership developing between
U.S. textile producers and African apparel makers.
As the House approved this bill by only a narrow margin, we are
urging the Senate not to approve its version of the bill because any
compromise in conference with such an egregiously flawed House-passed
measure would still be harmful to U.S. textiles. We urge the Committee,
particularly in light of our industry's current economic crisis, to
reconsider and forward to the House a new bill, simply extending for
another four years the Andean Trade Preference Act that just expired.
5. Progress in Negotiations to Establish A Free Trade Agreement with
We continue to stress that the proposed free trade agreement with
Singapore is not equitable or fair because it would give duty-free
access for textiles and apparel from Singapore at the expense of U.S.
textile producers. The market for U.S. textile and apparel products in
Singapore is tiny, and there is no prospect for substantially increased
U.S. textile exports to Singapore.
In addition, the agreement would not actually benefit manufacturers
in Singapore because, according to the U.S. Customs Service's own
reports, Singapore cannot physically produce anywhere near the amounts
of textile and apparel goods it is currently exporting to the U.S. In
other words, these items are obviously being illegally transshipped
through Singapore from manufacturers in China and other countries in
Asia. As Singapore officials have refused for years to cooperate in
anti-transshipment efforts, what we would have would not be a U.S.-
Singapore FTA, but instead a de facto U.S.-Singapore-China-etc. FTA. We
recommend that textiles and apparel be removed from the FTA.
Recent news reports indicate that Singapore is trying to use these
negotiations to create a back-door entry to the U.S. for goods produced
on the Indonesian islands of Batam and Bintam. We oppose this expansion
of the negotiations and urge the Committee to do the same.
6. Potential FTA with Certain Central American Countries
On the matter of an FTA with various Central American countries, we
question the need for beginning such negotiations less than eighteen
months after the Caribbean Basin Trade Partnership Act (CBTPA) went
into effect. All five of the nations identified by the U.S. Trade
Representative's Office for possible inclusion in these negotiations
are CBTPA beneficiary nations. It would seem more prudent to allow
apparel manufacturers in these countries to continue to develop
economic partnerships with U.S. textile producers, as provided for
under CBTPA, before rushing to establish new relationships and rules.
The American Textile Manufacturers Institute views the trade agenda
for 2002 as one containing a great many issues that could cause serious
damage to U.S. textile producers and our associates. Any further harm
would come at a time when we are already in an unprecedented economic
crisis. Accordingly, we urge the Committee and the Congress to
recognize the concerns we have voiced in this testimony and to adhere
to our recommendations with respect to textile trade policies.
Statement of the Association of American Chambers of Commerce in Latin
The Association of American Chambers of Commerce in Latin America
(AACCLA) welcomes the opportunity to submit a statement on President
George W. Bush's trade agenda for 2002. The following statement will
focus on the trade agenda for the nations of the Americas and its
implications for economic reform, growth, and prosperity throughout the
AACCLA is a leading advocate of increased trade and investment
between the United States and Latin America. Representing 23 American
Chambers of Commerce in 21 Latin American and Caribbean nations, the
association's 20,000 member companies manage over 80 percent of all
U.S. investment in the region.
The Prize is Slipping Away
At the start of the 21st Century, the prize long sought by AACCLA's
leadership is in danger of slipping from our fingers--namely, the prize
of a hemisphere enjoying sustainable economic growth based on private
enterprise and open trade. A number of factors explain why this goal
remains elusive. First and foremost, the fact that the President of the
United States has been forced since 1994 to direct U.S. trade policy
without Trade Promotion Authority (TPA) has sapped the credibility of
Washington's efforts to forge a closer trade and investment
relationship with our hemispheric neighbors.
At the same time, much of Latin America has forgotten its
commitment to serious economic reform, and many governments that seek
foreign investment or better access to U.S. markets are reluctant to
tackle the structural reforms that are the basis of growth.
The U.S. trade agenda and Latin America's reform agenda are
undeniably linked. Both the United States and Latin America need a
renewed commitment from government officials and business leaders if
our nations are to achieve the dream of a hemisphere united in
prosperity and economic freedom.
Free Trade for the Americas
President Bush came to office at a time of high hopes for advocates
of greater trade between the nations of the Americas. He set the
objective of making this a ``Century of the Americas,'' with the Free
Trade Area of the Americas (FTAA) as the cornerstone of this audacious
The basic rationale for the FTAA remains strong. Hemispheric free
trade will boost economic growth and reduce poverty throughout the
hemisphere. It will provide an opportunity to re-energize economic
reform throughout the Americas, and it will confirm a shared commitment
to the market-opening policies that create the conditions for growth.
The FTAA will encompass 34 nations with over 800 million citizens.
Its collective GDP will exceed $13 trillion. The FTAA will:
LEliminate existing tariff and non-tariff barriers and bar
the creation of new ones;
LRemove other restrictions on trade in goods and services
as well as investment unless specifically exempted;
LHarmonize technical and government rule-making standards;
LExceed World Trade Organization disciplines, where
LProvide national treatment and investor safeguards
LEstablish a viable dispute settlement mechanism; and
LImprove intellectual property rights protection.
The North American Free Trade Agreement (NAFTA) offers an excellent
preview of the benefits promised by the FTAA. Since the NAFTA came into
force, trade between the United States and Mexico has tripled to about
$250 billion per year. Annual trade between the United States and
Canada has doubled to over $400 billion. This explosion in trade has
allowed companies in all three NAFTA countries to generate millions of
new jobs. The NAFTA is one of the main reasons why U.S. companies
generated over 20 million new jobs in the 1990s.
While enhanced competition in the marketplace has led to job losses
in some industries, the new, trade-related jobs that have been created
tend to provide better pay than the jobs that were lost. Studies show
that some 12 million U.S. jobs rely on exports, and these positions pay
13 to 18 percent more than other jobs.
As Ambassador Zoellick has pointed out, the combined effects of the
NAFTA and the Uruguay Round trade agreement that created the World
Trade Organization (WTO) have increased U.S. national income by $40
billion to $60 billion a year. Thanks to the lower prices that these
agreements have generated for such imported items as clothing, the
average American family of four has gained between $1,000 to $1,300
from these two pacts.
TPA and U.S. Credibility
While these benefits are recognized by government officials and
business leaders throughout the Americas, many in Latin America have
lately come to perceive the United States as veering toward
protectionism. Even in the aftermath of the watershed December 6
approval of TPA by the House of Representatives, opinion leaders from
Brazil to the Dominican Republic have charged the United States with
hypocrisy for professing support for free trade while dragging its feet
on the hemispheric trade agenda.
Above all, the fact that the President of the United States lacks
TPA has lent credibility to the charge that our country is not serious
about entering into new trade agreements. TPA empowers U.S. officials
to negotiate trade agreements that the Congress can approve or reject--
but not amend. Without TPA, governments around the world will continue
to doubt the resolve of U.S. negotiators as they pursue bilateral
agreements, regional deals such as the FTAA, and the WTO's Doha
There are other reasons why the charge of protectionism leveled
against the United States has some validity. Last December, for
instance, the U.S. Congress allowed the 10-year-old Andean Trade
Preference Act to lapse despite broad support in both chambers for
trade and private enterprise as a tool to deter the narcotics trade.
But nothing is as important as TPA. Without it, the United States
can continue in its role as an important commercial partner for Latin
America and the Caribbean. But the prospect of a hemispheric
partnership that will deliver economic growth, generate jobs, and raise
incomes for all the Americas will remain a mirage without TPA.
The United States is already paying a high price for its inertia on
the trade agenda. Since TPA lapsed in 1994, other nations around the
world have been busy weaving a spiderweb of free trade agreements. Over
130 regional trade agreements are currently in force worldwide. The
European Union has signed at least 27 free trade agreements, and Mexico
alone has signed over 32. However, the United States has free trade
agreements with just four countries: our two NAFTA partners--Canada and
Mexico--plus Israel and Jordan.
Particularly in the Americas, the spiderweb of free trade
agreements that emerged in the 1990s threatens to put U.S. companies at
a competitive disadvantage. Basically, other nations are negotiating
trade agreements that provide preferences for their firms over our own.
Chile is a perfect example. Today, companies from Canada, Mexico,
and a number of other countries enjoy duty-free access to the Chilean
market. But because U.S. exporters still pay Chile's highest duty of
seven percent, American companies are losing hundreds of millions of
dollars in potential sales every year. As many people have observed,
this is like starting a basketball game seven points behind.
More Reform, Not Less
If the United States has some work to do to regain its status as a
credible partner, so do our neighbors in Latin America and the
Caribbean. The bottom line for the region is that there is an urgent
need to jump-start the economic reform process. This is especially true
for the structural reforms that have been postponed again and again in
country after country.
Argentina is a case in point. The U.S. media have been quick to
offer their back-of-the-envelope analysis of Argentina's economic
collapse. Unfortunately, the conventional wisdom leaves much to be
desired. Many of these overnight experts say that a decade of unbridled
free-market policies ended in tears for Argentina. They say that too
much deregulation and too much privatization finally imposed too much
pain on a weary population.
This is nonsense. The reforms that Argentina did carry out helped
its economy and its people a great deal. But the reforms it
procrastinated--and a dose of bad luck--are responsible for the
country's current predicament.
Consider the widely maligned 1-to-1 peg of the peso to the dollar.
The decision to anchor the peso to the dollar was made in 1991 amid
labor strikes and fears of a military coup. The result was almost
immediate success. The peg restored credibility to the peso, reigned in
hyperinflation, and brought the first economic stability to that
country in our lifetimes. Argentina enjoyed half a decade of impressive
economic growth. There is no doubt that the peg outlived its
usefulness, but it did enormous good as long as its discipline was
Consider, on the other hand, the reforms Argentina failed to
tackle. The country's political system provided no control over
spendthrift state governors. The country's rigid labor laws never got
the comprehensive reform they need, and in some instances privatization
led to the creation of new private monopolies instead of competitive
Argentina makes an easy target, but the list of reforms that have
yet to be tackled is long in just about every country in the region.
Consider Brazil. The Heritage Foundation/Wall Street Journal Index of
Economic Freedom writes that in Brazil, ``economic development remains
thwarted by over-regulated domestic markets that attract little
capital, as well as a convoluted and punitive tax code.''
Consider Peru. The Office of the U.S. Trade Representative cites
the ``weakness of government institutions'' and explains that
``Executive Branch ministries, regulatory agencies, and the judiciary
lack the resources, expertise, and independence necessary to carry out
their respective duties.''
Consider Venezuela. President Chavez approved a package of
draconian economic laws in November that so frightened and enraged the
public that the country's major business organizations and leading
labor unions joined forces in a national strike.
A tour through the region would reveal that the ``second
generation'' reforms long called for have stalled in most countries,
undermining investor confidence and generating economic instability.
Latin American governments should look upon Argentina's troubles today
and say to themselves: ``There, but for the grace of God, go I.''
The NAFTA Example
In this context, it is critical to emphasize that the reform agenda
is closely tied to the trade agenda. The connection between the two is
best illustrated by the way economic reform in Mexico preceded and
energized the negotiations for the NAFTA.
Mexico joined the GATT in 1986, and an entire first generation of
economic reforms took place in the late 1980s and early 1990s.
Privatization of state-owned enterprises, efforts to restrain
inflation, and the passage of laws to protect intellectual property--
all were advanced before the NAFTA negotiations drew to a close.
Through these reforms, the Mexican government demonstrated its
commitment and seriousness of purpose to its negotiating partners in
the United States and Canada.
It would be wrong to suggest that Mexico today has entered some
kind of nirvana. Much remains to be done. Referring to the country's
judiciary, for instance, the U.S. Department of State reports that
``corruption, inefficiency, and disregard of the law are major
problems,'' and it notes that specific proposals for reform have not
But it is clear that Mexico took a great leap forward with the
NAFTA. Today, Mexico exports twice as much as Brazil, even though the
South American giant has an economy twice the size of Mexico's. After
growing by nearly 8% in 2000, Mexico today has followed its northern
neighbor into a recession, but it is a North American recession
characterized by a contraction of less than 1% of GDP. It is not a
classic Latin American recession, in which economies can contract by 5-
10% of GDP.
Latin America urgently needs to rededicate itself to a vigorous
program of economic reform in preparation for the FTAA. Support for a
new generation of reform must come in great measure from local
leaders--and not from Washington. But the priorities on the region's
economic reform agenda are clear--fostering property rights, making
labor laws more flexible, strengthening judiciaries, fixing fiscal
sinkholes like Argentina's states, and modernizing regulatory
institutions. This is the agenda that cannot wait.
What Can the United States Do?
Nor can the United States afford to sit on the sidelines: the trade
agenda calls for U.S. leadership today more than ever. The good news is
that there are a number of fronts on which the United States can move
LQuick renewal of the Andean Trade Preference Act is
imperative. Its lapse looks alarmingly like a display of absent-
mindedness on the part of the U.S. Congress. If the act is not renewed
soon, literally tens of thousands of jobs will be lost in the Andean
countries. It is also critical that the list of products that gain
access to the U.S. marketplace on a duty-free basis be expanded, above
all to include textiles and apparel. The same treatment should also be
afforded to leather goods, canned tuna, and footwear.
LCompleting negotiations and winning Congressional
approval of the Chile-U.S. Free Trade Agreement this year is more
important than ever as a sign that the United States stands ready to
forge closer ties with the countries of this hemisphere, starting with
those that take the lead in reforming their economies.
LIndeed, the United States must show a willingness to
engage in bilateral negotiations with any Latin American country that
is prepared to move forward. President Bush took a positive step last
month when he announced that the United States and five Central
American countries will explore a free trade agreement.
LIt is undeniable that some countries will be ready for a
free trade agreement with the United States before others, and we
should be honest about this. The Bush Administration should consider
establishing a system that will get the Free Trade Area of the Americas
up and running as soon as possible, but allow countries whose economies
are lagging to be phased in over time.
LFinally, and clearly at the top of the ``To Do'' list for
the United States, the Congress must pass Trade Promotion Authority.
Without it, the United States is a bystander in the game of
international trade. But this is no game--the prosperity of our country
and our hemisphere is too serious.
Events in the Americas since September 11 show that in some
respects we already are the hemispheric familia to which President Bush
Brazil's President Cardoso demonstrated great leadership when he
called after September 11 for activation of the Rio Treaty, which
describes an attack on one Western Hemisphere nation as an attack on
all. The entire hemisphere stood with the United States, sending a
ringing message of sympathy and support.
Nor is the economic outlook all black. Throughout the hemisphere,
inflation has fallen from triple and quadruple digits a decade ago to
single digits today. While threats to democratic rule persist in some
places, it is impressive to observe how thoroughly democracy has taken
root in most countries. With a few exceptions, the prospect of rolling
back the substantive economic reforms of the 1990s remains a threat,
not a reality.
Most heartening of all is the prospect of seeing Trade Promotion
Authority approved by the U.S. Congress. We call on the Senate to move
quickly to give U.S. negotiators the authority they need to bring home
trade agreements that will open foreign markets. American workers,
consumers, and businesses are counting on you to bring these
opportunities within reach.
The Association of American Chambers of Commerce in Latin America
will work day and night to make the case in the United States for
approval of TPA while arguing staunchly for a renewed commitment to
market-based economic reform in Latin America. Working together, the
nations of the Americas can truly make this the ``Century of the
February 4, 2002
The Honorable Bill Thomas
The Honorable Charles Rangel
Committee on Ways and Means
United States Congress
Washington, DC 20515
Dear Mr. Chairman and Representative Rangel:
I am writing to you today in the context of your hearing on the
Bush Administration's trade agenda. I want to first thank you on behalf
of my government for all you have done to help promote trade between
Bolivia and the other nations of the Andean region and the United
States. Such trade is literally an economic and political lifeline for
As you know, Bolivia has been an ally to the United States in its
effort to help the nations of the Andean region in the war on drugs. We
believe this effort has made Bolivia a regional success story. As part
of a cooperative effort with the United States and the other nations of
the Andean region, in 1997, Bolivia instituted its five-year anti-drug
plan, the so-called ``Dignity Plan.'' When plan began, Bolivia was the
second major producer of coca in the world. There were 45,800 hectares
of coca plants in Bolivia. In the three years that the plan has been in
existence, Bolivia has eliminated more than 90% of coca production in
the Chapare region of Bolivia. This region was formerly the largest
area of illicit coca production in Bolivia.
Unfortunately, the drug trade created a significant informal sector
within the Bolivian economy, accounting for approximately 3.86% of GDP
in 1997. This illegal economic activity went beyond generating direct
levels of employment. It also fostered economic activity in
transportation, trade and industry.
In the last four years, since the implementation of the Bolivian
anti-narcotic ``Dignity Plan,'' the country has lost $370 million due
to the reduction of the gross value of coca, and $230 million due to
the added value given to this industry. This amounts to the equivalent
of 60% of Bolivia's exports. All of this is extremely significant in a
nation with a GDP of $8 billion.
In addition, this illegal, underground economy has had social and
political effects as well. The elimination of this scourge, while
clearly the right thing to do, has put a severe strain on the Bolivian
government and its people.
As you know, the Andean Trade Preference Act was designed as the
trade instrument in the fight against drugs. It was meant as an
incentive to lure peasants away from the coca planting to produce and
export other legal products.
Because of the economic strain that Bolivia is facing, for the ATPA
to help Bolivia in a significant way, it must be as comprehensive as
possible. In the decade since its inception, Bolivia has accounted for
only about 3.5% of the total ATPA exports to the United States.
Unfortunately, this is not enough to make a difference.
Therefore, I want to thank the Committee and the House of
Representatives for passing a broad-based bill that would benefit
Bolivia, as well as the United States and the nations of the region.
While such an effort would help the Andean nations, the effect of this
approach will be negligible to the U.S. textile industry. A 1999 ITC
trade report states that apparel imports from the ATPA countries only
accounts for 1% of all U.S. textile imports. Further, in general, the
study concluded, ``ATPA is likely to continue to have minimal future
effects on the U.S. economy in general.''
We urge the Congress and the Administration to pass as expansive a
bill as possible. Increasing exports to the United States could be of
real help to Bolivia and its people and to the overall effort to fight
narco-terrorism. A strong and prosperous Bolivia is in the interest of
both of our nations.
I take this opportunity to present to you, the assurances of my
highest personal esteem and consideration,
Marlene Fernandez del Granado
Ambassador of Bolivia
Statement of the Brazil-U.S. Business Council, U.S. Section
The Brazil-U.S. Business Council welcomes the opportunity to
provide a written statement concerning President George W. Bush's trade
agenda for 2002. The Brazil Council's statement will focus on the need
for more engagement and cooperation between the United States and
Brazil as the leaders in the Western Hemisphere and reiterates the
pivotal role the approval of Trade Promotion Authority will play in the
pursuit of regional prosperity and free trade agreements with other
Brazil's Importance in the Western Hemisphere Should Not be
Brazil is the fifth largest country in the world, with a total
landmass of over 8.5 million square kilometers and a population of
approximately 170 million people. Brazil is located in South America
and covers a full 48% of its area. In the last decade, the country has
undergone a series of reforms and a stabilization program that has
positioned it as the most important country and the largest economy in
the Americas after the United States and Canada.
Brazil has also embraced globalization by being an active member of
the World Trade Organization and playing a key role in the formation of
the Southern Cone Common Market (Mercosul) along with Argentina,
Paraguay and Uruguay. Brazil is committed to negotiating a Free Trade
Area of the Americas (FTAA) by 2005, along with 34 nations in the
Brazil is the U.S.'s 11th largest export market and still growing.
Among the developing countries, Brazil has become the second principal
destination for foreign direct investment (FDI) flows since 1996,
second only to China. Nearly 25% of this FDI comes from U.S companies.
The level of U.S. corporate interest in Brazil reflects the degree to
which Brazil has succeeded in opening its market to foreign trade and
investment and stabilizing its economy. Under the leadership of the
Cardoso administration, Brazil has implemented important constitutional
reforms that have opened key sectors of the Brazilian economy to
foreign competition and investment. These actions have led to a boom in
U.S. direct investment in Brazil, concentrated in the
telecommunications, automotive, electrical energy and petroleum
U.S. Must Seize the Moment for the 21st Century of the Americas
In the wake of the Argentine crisis, Brazil Council members feel
strongly that the Bush Administration should breathe new life into its
goal of making the 21st century the ``Century of the Americas'' by
reaching out to Brazil and making the development of a positive
bilateral commercial agenda a top priority. Steps like forging a common
approach to agriculture in the WTO, facilitating the movement of
business people between our two countries while ensuring security at
our borders and making important trade laws available in both languages
are good ways to begin creating a new chapter in the bilateral
TPA is Crucial to Maintain Credibility and Momentum for the FTAA
In the trade area, the passage of Trade Promotion Authority (TPA)
is a top priority for the Brazil-U.S. Business Council, and we commend
President Bush's leadership in helping pass this important legislation
through the House of Representatives in December of 2001. Passage of
TPA in Congress is crucial for maintaining U.S. credibility with its
trading partners and for continuing the momentum for FTAA and WTO
negotiations. First, because the U.S. president has not had Trade
Promotion Authority since 1994, Brazil and other developing countries
have become skeptical of the U.S. commitment to negotiate bilateral and
multilateral trade agreements and argue that the U.S. is not serious
about entering in ``good faith'' negotiations. Secondly, we need to
keep the momentum for the FTAA and WTO negotiations. FTAA market access
discussions are expected to begin in April of 2002, and a new round of
WTO negotiations was launched during the Doha Ministerial last year.
Negotiations for both the FTAA and the WTO are set to conclude by 2005,
and we must not lose the momentum achieved thus far.
In fact, Brazil and the United States will co-chair the FTAA
negotiations starting in October. The U.S. should see this as an
opportunity to build and expand on the common areas of interest with
not only Brazil, but also other developing countries in the hemisphere.
Moreover, advancing the negotiation of the FTAA is also critical
because Mercosul is aggressively moving to advance negotiations with
our competitors in the region and in Europe. These agreements would
give them preferential access to the Brazilian market and could
facilitate the erosion of the U.S. market share in Brazil. In fact,
Spain has taken a significant slice of FDI in Brazil, right behind the
U.S., with over 17% of average share of investments.
In addition, we would like to underscore the importance of
communicating to our partners in Brazil what the bill means for them.
It is critical that we reverse the conventional wisdom in Brazil that
the current TPA bill is a step back for trade liberalization if we are
going to successfully complete the FTAA. Instead, we want to
communicate to our trading partners, especially Brazil, that the bill
is a sign that the U.S. is committed to pursuing prosperity in the
hemisphere and its ability to move forward on trade agreement
negotiations with other countries in the Americas.
2002 is Key for Future of Bilateral Relationship
2002 is a critical year for the future of Brazil-U.S. trade and
investment. When Brazilians go to the polls in October they will not
only be deciding who their next President will be but will be setting
the course for the future economic policy of the country. The Brazil-
U.S. Business Council will continue to work with the Cardoso
Administration to ensure the implementation of critical economic
reforms before the end of the year. The Council will also work to
promote and communicate its members' priorities to the new Brazilian
Administration and hopes the U.S. Government will see this as an
opportunity to build stronger ties with Brazil in pursuit of economic
growth in the region.
Brazil's importance for the hemisphere is clearly demonstrated by
its engagement in global and regional trade agreements as well as its
growing attractiveness for foreign direct investment. It is also clear
that Brazil and the U.S. are moving forward along a path to a stronger
commitment in the hemisphere. We salute President Cardoso's leadership
after September 11 in calling for the activation of the Rio Treaty
stating that an attack on one Western Hemisphere nation is an attack on
all. This message of support and sympathy signifies that both countries
can achieve a great deal through cooperation.
In order to ensure the continued economic growth and prosperity in
the region and the world, we must not lose sight of the FTAA and WTO
negotiations. However, we must first secure passage of TPA in the U.S.
Congress, not only to send a message to our trading partners that we
are serious about the negotiations, but also to maintain our
credibility as a leader in the world.
Established in 1976, the Brazil-U.S. Business Council is the most
influential U.S.-based business organization focused on strengthening
trade and investment between Brazil and the United States. The U.S.
Section of the Council represents the majority of the largest U.S.
corporations invested in Brazil and operates under the aegis of the
U.S. Chamber of Commerce. The Brazil Section of the Council is managed
by the Brazilian National Confederation of Industry in Brazil, based in
Rio de Janeiro.
Statement of the Hon. Eni F.H. Faleomavaega, a Representative in
Congress from American Samoa
As a member of the U.S. House International Relations Subcommittee
on the Western Hemisphere, I fully support Andean efforts to curb drug
production. However, as the Ranking Member of the House International
Relations Subcommittee on East Asia and the Pacific, I believe any
trade policy we enact must be fair and non-discriminatory. Whether or
not canned tuna is included in the Andean Trade Preference Expansion
Act (ATPEA) is a matter of global concern. Thailand, Indonesia, the
Philippines, Vietnam, Cambodia, Brunei, Malaysia, Singapore, Lao, and
Myanmar recognize that preferential trade treatment for the Andean
countries will adversely affect the ASEAN tuna industry. ASEAN member
countries also contend that granting duty-free trade benefits to one
region at the expense of another could be seen as a discriminatory
practice to developing countries, including ASEAN member countries
which do not receive any trade preferences regarding canned tuna.
For the U.S. Territory of American Samoa, the issue is also
complex. More than 85% of American Samoa's economy is either directly,
or indirectly, dependent on the U.S. tuna fishing and processing
industries. Two canneries, Chicken of the Sea and StarKist, employ more
than 5,150 people or 74% of the workforce. If canned tuna from Ecuador
and other Andean countries is given the same preferential trade status
as canned tuna from the U.S. Territory of American Samoa, more than
5,000 workers in American Samoa will be at risk.
Although H.J. Heinz, parent company of StarKist, has tried to
dismiss our concerns and pretend that the ATPEA will not affect
American Samoa, it is important for members of Congress to understand
that the ATPEA will affect our local economy. As Star Kist has
repeatedly stated, the only market for tuna from American Samoa is the
U.S. Therefore, duty-free treatment for canned tuna from Ecuador and
other Andean countries equals financial problems for American Samoa.
The CEO of Chicken of the Sea has already stated that if canned tuna
from Andean countries is given the same preferential trade status as
canned tuna from American Samoa, production in American Samoa will be
at immediate risk. As Star Kist has repeatedly testified, ``a decrease
in production or departure of one or both of the existing processors in
American Samoa could devastate the local economy resulting in massive
unemployment and insurmountable financial problems.''
Growth of the Andean Tuna Industry
To understand the serious implications this legislation holds for
American Samoa, we must first take a look at the growth of the tuna
industry in Ecuador and other Andean countries. According to industry
analysts, since the enactment of the ATPA in 1991----
Tuna factories in the Andean countries have increased from 7 to 23,
Production capacity has increased from 450 to 2,250 tons per day, up
Direct employment has increased from about 3,500 to 12,500 new
employees, up 257%.
Exports to the U.S. have grown from about $15 million to over $100
million annually, up 567%.
In the past ten years, the Andean tuna fishing fleet has also grown
from about 20 to 90 fishing vessels. Today, the Andean Pact
countries control more than 35% of the catch in the Eastern
Pacific Tropic (EPT).
In terms of production, Ecuador and Colombia have the capacity to
jointly process 2,250 tons of tuna per day.
2,250 tons per day 5 days (or 240 days per year) = 540,000
tons of tuna or 48.6 million cases per year.
American Samoa processes about 950 tons of tuna per day.
950 tons 5 days per week (or 240 days per year) = 22,800
tons of tuna or 20.5 million cases per year.
48.6 Andean cases + 20.5 million Samoan cases = 69.1 cases per year.
Given the fact that the U.S. only consumes 48 million cases per
year, the Andean countries have the production capacity to supply the
entire U.S. market and wipe out the economy of American Samoa. Add to
this the fact that labor rates in the Andean countries are $0.69 per
hour and less. In American Samoa the labor rates are $3.26 per hour. If
Ecuador and other Andean countries are given limitless access to the
U.S. tuna market, American Samoa will be priced out of the market
What Congress Needs to Know
The U.S. has NEVER extended duty-free treatment to canned tuna from
a country that has the capacity to supply the entire U.S. market place.
I think it is also worth noting that the Southeast Asian Nations and
Mexico are so concerned about Ecuador ruling the U.S. market that they
have hired independent lobbying firms in Washington to protect their
interests and represent their views before the U.S. Congress.
Ecuador is also continuing its lobbying effort. Ecuador's Minister
of Foreign Affairs, the Honorable Heinz Moeller, has visited with the
White House Administration, the Secretary of Commerce, the U.S. State
Department, and with key Members of Congress to gain support for the
inclusion of canned tuna in the ATPEA.
Minister Moeller also contacted my office and requested a meeting
to discuss the matter in further detail. On January 22, 2002, Minister
Moeller and I met in my Washington office. Accompanying the Minister
was the Ambassador of Ecuador, the Honorable Ivonne A-baki, and other
Chief Ministers. The Ecuadorian Delegation shared its concerns about
the on-going drug problem in Latin America and made a compelling
argument that expanded trade benefits would assist the Andean countries
in curbing drug production. Although I want to be helpful to Ecuador in
its efforts to curb drug production, I continue to believe that the
issue of preferential treatment for canned tuna should be debated on
its own merits. I do not believe a discussion about tuna should be
couched in the rhetoric of an anti-drug campaign.
However, if Congress chooses to make the debate about drugs, then I
want the record to reflect that American Samoa does not grow drug
crops. American Samoa does not export drug crops. Our economy, whether
up or down, is in no way associated with drug production. American
Samoa does not need and has not asked for preferential treatment to rid
itself of illegal trade. Instead, American Samoa has built on the
principles of fair trade. More than 100 years ago, we established
relations with the United States and freely pledged our allegiance to
uphold the principles of democracy. More than 40 years ago, we welcomed
the tuna fishing and processing industry to our remote islands. We
worked, we toiled, we built. Today, our economy is more than 85%
dependent on the U.S. tuna industry.
I do not believe American Samoa should now be placed at a trade
disadvantage because it has no past or present affiliation with drug
production. I do not believe American Samoa should be penalized for
practicing the principles of fair trade. The fact of the matter is
whether or not canned tuna from Ecuador is given preferential trade
treatment has little to do with whether or not drug production in Latin
America will be curbed.
Beyond this, Ecuador is not lacking for products or commodities to
export. In fact, Ecuador has substantial oil resources and a GDP
purchasing power parity of $37 billion. Ecuador exports $5.6 billion in
products and commodities, including petroleum, bananas, shrimp and
coffee. According to some analysts, two-way trade between the United
States and the Andean region has more than doubled to $28.5 billion a
year since enactment of the Andean trade agreement in 1992. With this
kind of growth, are we really supposed to believe that Ecuador has to
corner the tuna market in order to fight the drug war?
I believe it is important for the U.S. Congress to know that
Ecuador is rapidly becoming the 3rd largest supplier of albacore to the
U.S. If Ecuador is allowed duty-free access, it will become the largest
supplier of light meat tuna to the U.S. No matter what others may
contend, this will affect the local economy of American Samoa. With
labor rates of $0.69 and less per hour in the Andean countries,
American Samoa will not be able to remain cost competitive.
Although the U.S. Territory of American Samoa cannot protect its
market-share indefinitely, the concerns of the Territory must not be
marginalized. Parameters of fairness and equity must be established.
Compromise must be supported. If Congress fails to defend U.S.
interests, American workers will be displaced. For every million cases
that enter the U.S. duty-free, American Samoa will lose----
L$18 million in processing revenue
L$5 million in utilities, overhead, local economy
L$1.5 million in wages
LThousands of dollars in lost tax revenue
The U.S. tuna fishing fleet will also be forced out of business.
The U.S. tuna fishing fleet currently supplies about 90% of the catch
used by the canneries in American Samoa. This catch is caught in the
Western Pacific Tropic (WPT). If operations in American Samoa are
forced to close or downsize, the U.S. fishing fleet will lose the WPT
market. Furthermore, the U.S. tuna fishing fleet will NOT be allowed to
fish in the Eastern Pacific Tropic (EPT) because all available fishing
licenses in the EPT have already been claimed by Mexico, Ecuador, and
other Andean countries.
In an effort to expand canned tuna trade benefits to the Andean
Pact countries and ensure the continued viability of the U.S. tuna
fishing and processing industries, I have worked to build a bi-partisan
base of support for compromise. In October of last year, the U.S. House
took up H.R. 3009 without a hearing and passed the ATPEA with the
understanding that a compromise would be reached on the issue of canned
tuna. Congressman Bill Thomas, Chairman of the House Ways and Means
Committee, gave me his personal assurances that he would work with me
to protect American Samoa.
In December, the Senate Finance Committee considered S. 525. Prior
to the mark-up, Senator Daniel Inouye (D-HI), Senator Daniel Akaka (D-
HI), Senator Frank Murkowski (R-AK), Senator Ted Stevens (R-AK) and
Congressman Randy ``Duke'' Cunningham (R-CA) joined me in sending a
letter to Senator Max Baucus, Chairman of the Senate Finance Committee.
In this letter, we expressed our opposition to the inclusion of canned
tuna in S. 525.
We also worked with Chicken of the Sea, Bumble Bee, and the U.S.
tuna boat owners to craft a compromise amendment that would help the
Andean countries and protect American Samoa. Although Star Kist
objected to our compromise, we gathered enough votes to secure its
passage. Senator John Breaux (D-LA) was kind enough to offer the
amendment. Senator Majority Leader Tom Daschle (D-SD), Senator Max
Baucus (D-MT)--Chairman of the Senate Finance Committee, Senator Orrin
Hatch (R-UT)--Ranking Member on the Senate Finance Subcommittee on
International Trade, Senator John Rockefeller (D-WV), Senator Frank
Murkowski (R-AK), Senator Kent Conrad (D-ND), Senator Blanche Lincoln
(D-AR), Senator Robert Torricelli (D-NJ), Senator Olympia Snowe (R-ME),
and Senator Craig Thomas (R-WY) supported our compromise in a 11-9
The Breaux amendment offers a duty-free window for canned tuna
exports of up to 20% of U.S. domestic production. The compromise
amendment also includes a source of origin provision, patterned after
the European Union's agreement with the Andean Pact countries, to
ensure that all tuna entering the U.S. duty-free is caught by Andean or
U.S. flag ships. Chicken of the Sea, Bumble Bee, and the U.S. tuna boat
owners support this amendment. Star Kist does not. To date, Star Kist
has offered no compromise of its own. Ecuadorian boat owners, however,
have agreed to support our source of origin provision.
We have included this source of origin provision because more than
56% of the flag ships in the Eastern Pacific Tropic (EPT) are non-
Andean. We have also included it because Ecuador is rapidly becoming
the third largest exporter of canned/pouch albacore to the U.S. yet
harvests very little of the raw tonnage. In fact, nearly 39% of all
albacore is harvested by Japan. Taiwan harvests 27%. The EU harvests
15%. The U.S. harvests 7%. Much of this albacore is caught in the
Western Pacific Tropic (WPT) and is off-loaded in American Samoa.
However, if Ecuador gets unlimited, duty-free access, albacore will be
unloaded in Ecuador and the ATPEA will become an avenue for Japan and
Taiwan to gain duty-free access to the U.S. market.
As a case in point, Star Kist recently purchased 1,000 tons of
albacore in Taiwan at a retail value of approximately $7 million and
shipped it on the Longshoon to Ecuador. Needless to say, Star Kist is
the only U.S. tuna processor that opposes our source of origin
About Star Kist
In August of 2001, when the U.S. Senate Finance Committee held a
hearing on the matter of the ATPEA, Star Kist testified. Although Star
Kist is the largest employer in American Samoa, Star Kist at no time
informed our local legislature, the Governor's office, or my office
that it intended to support an international trade measure that would
wreak havoc in the global tuna industry and cause insurmountable
financial problems for our Territory.
Star Kist, of course, is under no obligation to inform any of us of
its intent. However, after a 40-year relationship together, common
courtesy dictates that Star Kist would have considered our views and
asked for our input before arbitrarily supporting a trade agreement
that seriously threatens our way of life. Star Kist maintains that it
did not inform any of us because the ATPEA will not affect us.
My friends, the U.S. Congress knows that the ATPEA will affect
American Samoa. Ecuador knows. Mexico knows. The Southeast Asian
nations know. The U.S. State Department knows. The Office of the U.S.
Trade Representative knows. Chicken of the Sea knows. Bumble Bee knows.
The U.S. boat owners know. The ATPEA will affect American Samoa.
Since August of 2001, I have taken American Samoa's case to the
House, to the Senate, to the public, to the people. In October of last
year, more than 10,000 residents of American Samoa joined me in this
effort. In November, the Governor of American Samoa pledged his
support. In February 2002, the American Samoa Legislature also decided
to support our position of compromise.
As with any trade agreement, I believe it is incumbent upon the
beneficiary countries to ensure that they are complying with the
requirements associated with preferential trade. Although some have
suggested that the source of origin provision in the compromise
amendment may not be enforceable or administrable, current law requires
all importers of canned/pouch finished goods to provide documentation
listing origin of the raw material. All vessels fishing in the EPT are
required to register with the Inter-American Tropical Tuna Commission
(IATTC) and are identified by flag, vessel, capacity and name. When the
vessels off-load their catch at the canneries, the canneries are able
to determine whether or not the tuna was caught by Andean or U.S. flag
ship. For enforcement purposes, the U.S. Customs would only have to do
an occasional audit to ensure that the canneries are in compliance.
I am hopeful that the U.S. Customs Service will support occasional
audits of the Andean canneries. For the information of the Committee,
recent reports confirm that more than five containers loaded with tuna
cans were found to contain approximately 1,600 lbs. of cocaine. The
cocaine shipments originated from Ecuadorian canneries and were shipped
from Manta, Ecuador to the Port of Vigo. At the cannery site,
authorities also found machinery used to process tuna loaded with
While it is in the interest of the United States to support Andean
efforts to curb drug production, we must not turn a blind eye to
reality. Our desire to be helpful must be tempered by common sense and
compromise. The compromise supported by the Senate Finance Committee is
fair and reasonable. It is a constructive solution to a complex issue.
It is a good-faith effort that deserves the support of both the House
I thank Chairman Thomas for his willingness to consider the needs
of American Samoa. I also thank Congressman Rangel for his tireless
support. In this time of national crisis, I am hopeful that the
Committee will continue its effort to move this legislation forward in
a way that expands opportunities for the Andean countries and ensures
the continued viability of the U.S. tuna fishing and processing
Statement of Joe Gaynor, Goss Graphic Systems, Inc., Westmont, Illinois
This testimony is submitted on behalf of Goss Graphic Systems,
Inc., of Westmont, Illinois (``Goss''). Goss opposes enactment of H.R.
3557 in its current form. If the United States amends or repeals the
Antidumping Act of 1916, 15 U.S.C. Sec. 72 (``the Act''), to conform
its laws to decisions by World Trade Organization (``WTO'') dispute
settlement panels, the changes to the Act should be prospective only,
so as not to deprive U.S. companies of vested rights and remedies. Goss
urges Congress to satisfy the United States' international obligations,
but in a manner that does not deprive U.S. companies of their legal
rights. Retroactive repeal as proposed by H.R. 3557 would harm Goss and
would harm the United States in future trade disputes. A more detailed
legal analysis follows this statement.
Goss and the 1916 Antidumping Act
Goss is one of the few U.S. companies with first-hand experience
with the 1916 Antidumping Act. For more than 100 years, Goss has been a
global leader in the manufacturing of web offset printing presses for
the newspaper and commercial printing industries. Goss is proud of the
fact that so many of the newspapers from which Americans get their
daily news are printed on Goss presses.
During the early 1990s, Goss increasingly found itself competing
with low-priced presses imported from Japan and Germany. These imported
presses were being sold in the U.S. market at prices far less than Goss
believed they cost to produce. Goss filed antidumping petitions against
large newspaper printing presses from Japan and Germany, and won. The
U.S. Department of Commerce determined that the foreign producers had
been dumping their large presses on the United States market by selling
the presses here at less than their cost of production. The U.S.
International Trade Commission unanimously found that those unfairly
traded imports threatened injury to the U.S. industry. The Department
of Commerce imposed antidumping duties of 30-62% on imports of large
newspaper printing presses from Germany and Japan. Goss was hopeful
that, with antidumping orders in place, fair trade would resume and it
would recover from the injuries caused by the unfair dumping.
Despite the presence of the antidumping orders, Goss continued to
lose sales to dumped imports. As a result, Goss was forced to close
down U.S. facilities and lay off hundreds of valued U.S. workers. In
1999, the company sought to reorganize under Chapter 11 of the
At that point, Goss concluded that the German and Japanese
producers were literally trying to drive it out of business. This is
exactly the sort of situation the 1916 Antidumping Act was intended to
address. The Act provides that, if a foreign company is dumping
merchandise in the United States, with the intent of injuring or
eliminating a U.S. industry, a U.S. producer can sue in district court
for treble damages. The standard of proof is substantial, and the 1916
Act has been used very rarely. Nonetheless, Goss was convinced that its
case met the standard.
In early 2000, the company filed a suit under the Act in the U.S.
District Court for the Eastern District of Iowa against four foreign
printing press manufacturers and their U.S. subsidiaries, alleging that
the defendants had illegally dumped their products in the United States
with the intent of injuring or destroying the U.S. industry. The suit,
which is still pending, seeks damages for unfair dumping that took
place starting in 1995, long before the EU and Japan began their
challenge in the WTO to the 1916 Act. Significantly, in March 2001, the
Federal judge overseeing Goss' suit denied the defendants' motions to
dismiss the case. Goss has invested a great deal of money and resources
prosecuting its claims in this case, which has now been pending for
almost two years.
The impact of the unfair and illegal dumping on Goss, its
shareholders and workers has been disastrous. After emerging from
bankruptcy in 2000, Goss filed for bankruptcy again in 2001. It has
entirely closed its manufacturing facilities in Reading, Pennsylvania
and ceased the vast majority of production work in Cedar Rapids, Iowa.
Hundreds of U.S. workers have lost their jobs.
Goss can still recover. Goss International Corporation, with
backing from an investment consortium, announced its purchase of Goss'
assets on February 18, 2002. This investment is important for the
continued success of Goss' business and its efforts to rebuild,
especially when combined with the damages Goss hopes to recover from
its 1916 Act suit. Indeed, Goss believes that it must win its 1916 Act
case if there is to be any prospect of reopening the Cedar Rapids
plant. A retroactive repeal of the 1916 Act would make this impossible.
The WTO and the 1916 Act
In an action unrelated to Goss' suit, the European Union and Japan
filed complaints with the WTO, alleging that the 1916 Act was
inconsistent with the obligations of the United States under the
General Agreement on Tariffs and Trade (``GATT'') and the Antidumping
Agreement. The WTO panels ruled that the 1916 Act was inconsistent with
these measures, but only after Goss had filed its lawsuit in Federal
district court. The WTO Appellate Body affirmed the panels' findings.
The United States accepted these results and undertook to make the
changes necessary to bring its law into compliance with the WTO.
Retroactivity and WTO Precedent
To conform to the WTO dispute panels' findings, the U.S. Trade
Representative proposed repeal of the 1916 Act. Chairman Thomas
introduced H.R. 3557 to accomplish this. This bill repeals the law for
pending as well as future cases. There is only one such active case--
The WTO panel reports did not require retroactive repeal in order
to bring U.S. law into conformity with U.S. WTO commitments. The
panels' determinations stated only that U.S. law in its current form
was inconsistent with the international obligations of the United
States. Nothing in the WTO panel reports or in WTO rules or precedent
requires the U.S. to reach back and take away Goss' right to recover
for illegal dumping that occurred years before the panel's rulings or
compliance deadlines. Indeed, it would be most unusual for a WTO panel
to identify what a country must do to bring its laws into compliance
with WTO commitments.
The WTO consistently has accepted actions having prospective effect
as adequate to satisfy a country's obligations. The attached legal
analysis demonstrates that the WTO does not require retroactive repeal
of inconsistent laws. Amending or repealing the 1916 Act prospectively
is more than adequate to comply with the dispute panels' rulings, and
the United States has no reason to take the extra, unprecedented step
of making changes retroactively. The United States has even less reason
to take such action where, as here, a U.S. company and U.S. workers
would suffer as a result.
Retroactive repeal in response to the WTO panel reports would also
set a dangerous precedent for the U.S. and the entire WTO dispute
resolution system. Consider, for example, the billions of dollars of
additional sanctions that could be sought if complaining countries were
able to reach back and seek relief for ``subsidies'' granted under the
U.S. foreign sales corporation law since 1995.
As demonstrated in the attached legal analysis, retroactive repeal
of the 1916 Act is also contrary to U.S. legal tradition and public
Therefore, Goss urges Congress to make any repeal of the Act
prospective only. If the United States follows this course, it will be
in compliance with its WTO obligations.
If Goss is allowed to pursue its case based on illegal dumping that
occurred between 1995 and 2001, there would be no basis for trade
sanctions or other relief against the United States. If the EU and
Japan appealed to the WTO for such relief, they would have to prove
appropriate trade damages. In this context, they would need to
establish that the prospective-only repeal of the 1916 Act caused a
chilling effect on future trade. Because Goss' suit only seeks damages
for past dumping, it is inconceivable that the continuation of the suit
would have any adverse impact on future imports. Thus, there is no
reason for Congress to reach back and enact a retroactive repeal.
Congress can bring the United States into full conformity with the
WTO panel decisions, while preserving Goss' rights, through a simply
drafted piece of legislation. Congress should amend H.R. 3557 to
provide as follows:
SECTION 1. REPEAL OF THE 1916 ACT.
(a) REPEAL--Section 801 of the Revenue Act of 1916 (as enacted by 39
Stat. 798), is repealed.
(b) EFFECT OF REPEAL--The repeal of such Section 801 by subsection
(a) shall not apply to nor affect any action filed under
Section 801 prior to the date of the enactment of this Act.
This amendment would make repeal of the 1916 Act apply as of the date
of enactment, and would satisfy U.S. WTO obligations. It also
would allow Goss to pursue its remedy to recover damages
suffered as a result of years of predatory dumping--injuries
that were suffered long before Japan and Europe challenged the
1916 Act. Illegal dumping has caused Goss to lose sales and
profits, experience two bankruptcies and close key facilities.
Hundreds of U.S. workers have lost their jobs. Fundamental
fairness requires that Congress protect existing rights by
making any changes to the 1916 Act prospective only.
WTO PRECEDENT AND U.S. LAW MANDATE PROSPECTIVE ONLY
APPLICATION OF ANY LEGISLATIVE CHANGES REQUIRED TO
CONFORM U.S. LAWS TO WTO OBLIGATIONS
I. The Letter and Spirit of the WTO System Call For Prospective
A prospective-only application of any measure to bring the 1916 Act
into conformity is entirely consistent with the rules and policies
governing the WTO dispute resolution system. Nothing in the law
governing GATT or the WTO requires the United States to reach back six
or seven years and retroactively take away rights and remedies that
existed during that period. The U.S. Court of International Trade has
recognized that the GATT includes no provision for retroactive
relief.\1\ Indeed, the WTO dispute resolution system is premised on the
assumption that prospective compliance in response to an adverse WTO
ruling is the most that can be required or expected. The WTO Dispute
Settlement Body (``DSB'') routinely directs parties to bring offending
laws into compliance by established deadlines; thus, it eliminates
inconsistent trade practices from that point forward, not
\1\ Cementos Anahuac del Golfo, S.A. v. United States, 689 F. Supp.
1191, 1213-1214 (Ct. Int'l Trade 1988).
The DSB took such action in the Beef Hormones case, for example,
when the arbitrators based the damage award on what they determined to
be the amount of hormone-treated beef the United States and Canada
could have expected to export to the EU had the hormone ban been lifted
on May 13, 1999--the date established by the DSB for EU compliance with
the WTO's ruling.\2\ Significantly, the arbitrators calculated the
level of nullification and impairment based on prospective exports
after the expiration of the reasonable time period granted to the EU
for compliance. The WTO did not provide for any retroactive remedy
concerning exports lost prior to the deadline for compliance.
\2\ European Communities--Measures Concerning Meat and Meat
Products (Hormones), Decision by the Arbitrators, WT/DS26/ARB (July 12,
1999) para. 38.
II. Retroactivity is Inconsistent With WTO Procedures and Would
Establish A Dangerous Precedent
Retroactive application of a conforming measure is highly unusual
in the WTO system. In fact, the WTO has deviated only once from its
standard prospective damage calculation, in a heavily criticized case
regarding Australian automotive leather. There, the WTO directed the
repayment of subsidies granted prior to the issuance of the WTO panel
decision.\3\ Members uniformly regard this decision as an aberration
that exceeded the dictates of WTO and international law. In fact, the
United States, the complaining party in the case, itself stated that
the remedy went beyond what it had requested or believed to be
\3\ Australia--Subsidies Provided To Producers and Exporters of
Automotive Leather, WT/DS126/R (May 25, 1999); WT/DS126/5 (June 18,
1999); WT/DS126/6 (July 8, 1999); WT/DS126/11 (July 31, 2000).
A retrospective remedy in regard to the 1916 Act would set a
dangerous precedent for future trade disputes. Trade relations and the
implementation of WTO remedies already are sufficiently difficult
without the added complexity involved in mandating their retroactive
For example, Congress repealed the offending portions of the U.S.
foreign sales corporation law prospectively only.\4\ In that case and
others like it, a retroactive repeal could have devastating effects.
For example, a retroactive repeal that reached back and invalidated
years of tax benefits granted under the prior law would impose
literally billions of dollars in additional taxes on U.S. companies who
legitimately relied on the state of the law at the time. Congress
obviously has not taken such action with respect to the foreign sales
corporation law. It should not set a precedent with retroactive repeal
of the 1916 Act that could be used to force similar action in the
foreign sales corporation matter or in other trade disputes.
\4\ The ongoing controversy associated with the foreign sales
corporation case has nothing to do with the timing of the repeal, i.e.
whether it was prospective or retroactive in nature. See United
States--Tax Treatment For Foreign Sales Corporations, WT/DS108/AB/R,
(Feb. 24, 2000); WT/DS108/25 (Feb. 4, 2002); Sections 5 (a) and (c) of
the FSC Repeal and Extraterritorial Income Exclusion Act of 2000, Pub.
L. 106-519 (``FSC Act'') (amendment applies only to transactions after
compliance period; lengthy transition period exists).
III. Prospective Application is Consistent With U.S. Law
U.S. law also supports the prospective-only application of any
measure to bring the 1916 Act into conformity with U.S. WTO
obligations. Non-retroactivity is a venerable principle inherited from
English common law. The U.S. Supreme Court has spoken clearly regarding
retroactivity, finding that ``the presumption against retroactive
legislation is deeply rooted in our jurisprudence, and embodies a legal
doctrine centuries older than our Republic.'' \5\ The Supreme Court has
further stated that:
\5\ Landgraf v. USI Film Products, 511 U.S. 244, 265 (1994).
Elementary considerations of fairness dictate that
individuals should have an opportunity to know what the law is
and to conform their conduct accordingly; settled expectations
should not be lightly disrupted. For that reason, the
``principle that the legal effect of conduct should ordinarily
be assessed under the law that existed when the conduct took
place has timeless and universal appeal.'' \6\
\6\ Id. at 265 (quoting Kaiser Aluminum & Chemical Corp. v.
Bonjorno, 494 U.S. 827, 855 (1990)).
Retroactive statutes are ``not favored in the law.'' \7\ Given this
presumption, Congress should make the repeal of the 1916 Act
retroactive only if necessary to comply with the WTO. It is not.
\7\ Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988).
Goss is seeking damages for dumping which started in 1995, four
years before Japan and the EU even requested consultations with the
United States regarding the 1916 Act. Complying with the WTO's
decisions on the 1916 Act does not require extinguishment of a cause of
action that accrued, or a case that was filed, prior to the effective
date of any repeal.
IV. Congress Has Mandated A Presumption Against Retroactivity
Congress itself has codified the presumption against retroactivity
in 1 U.S.C. Sec. 109, which provides that the repeal of a statute will
not extinguish causes of action that already have accrued:
The repeal of any statute shall not have the effect to
release or extinguish any penalty, forfeiture, or liability
incurred under such statute, unless the repealing Act shall so
expressly provide, and such statute shall be treated as still
remaining in force for the purpose of sustaining any proper
action or prosecution for the enforcement of such penalty,
forfeiture, or liability. . . .\8\
\8\ 1 U.S.C. Sec. 109.
Retroactive repeal of the 1916 Act would strip Goss of the
substantive rights it held when it filed the complaint. Congress may
not simply legislate retrospectively without regard for due process.\9\
To do so would be not only fundamentally unfair, but would deny Goss
its reasonable expectation of pursuing a claim for relief under the
1916 Act. Such a course of action would directly contravene not only
the U.S. Supreme Court but also Congress itself.
\9\ Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16-17 (1976).
Further, Congress may not strip vested property rights from a
private (corporate) citizen without implicating Fifth Amendment Takings
Clause issues. The Supreme Court has approved such deprivation of
vested property rights only in extremely limited circumstances, such as
for a public use, upon payment of just compensation, or given clear
evidence of prior congressional intent to apply a law
retroactively.\10\ None of these circumstances are applicable here.
\10\ Landgraf, 511 U.S. 244, 246, 266, 282-283 (1994).
Finally, the Supreme Court has ruled that retroactivity must not
deny parties due process.\11\ Only a ``rational legislative purpose,''
the likes of which does not exist in favor of retroactive repeal of the
1916 Act, may overcome such a high threshold test.\12\ On the contrary,
retroactive repeal of the 1916 Act would strip Goss of the substantive
legal rights it held when it filed the complaint. Goss would be denied
its reasonable expectation of seeing the case through to its natural
conclusion. Such a result is fundamentally inconsistent with the idea
of due process.
\11\ Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S.
717, 730 (1984).
\12\ Id. at 717.
V. Retroactivity and Public Policy
Retroactive repeal of the 1916 Act is bad public policy.
Retroactivity deviates from the public policy goal of allowing cases
filed under valid laws to reach their natural conclusions. Should
Congress retroactively repeal the 1916 Act, it would do more than upset
Goss' settled expectations. It would establish a standard for such
behavior in the future. This would mean that no litigant could rest
assured that a case filed pursuant to a valid law would necessarily
reach trial. Additionally, Congress cannot advocate the explicit
contravention of established U.S. and WTO precedent without a forceful
public policy reason to do so. No such reason exists here.
VI. The Solution Lies in Prospective Repeal and Trusting the WTO System
Prospective repeal of the 1916 Act would bring the United States
into full compliance with the rulings of the WTO's Dispute Settlement
Body. WTO dispute resolution mechanisms provide the parties with the
means to resolve any differences resulting from such action. The EU and
Japan are frequent participants in WTO dispute resolution and are quite
familiar with the governing procedures.
Should Congress adopt prospective repeal, the EU and Japan will
have the right to file a protest in the suspended arbitration
proceeding. Continued resolution of this trade dispute at the WTO is
preferable, however, to retroactive repeal of a U.S. law when such
action is not required under the WTO. Keeping the debate at the WTO
also would allow the parties to address the key issue of appropriate
The potential liability of the United States is highly speculative.
Pursuant to Dispute Settlement Understanding (``DSU'') Article 22.4,
any countermeasures (i.e., suspension of concessions or other WTO
obligations) must equal the ``nullification and impairment'' of
benefits incurred by one party as a result of the other's breach of WTO
obligations. Therefore, should prospective repeal of the 1916 Act
result in a judgment entered or settlement in favor of Goss, the EU or
Japan would have to prove that such a judgment or award constitutes
trade damage under the WTO for which the United States might be
accountable. Proof of such trade damage would be difficult, if not
Retroactive repeal of the 1916 Act would be contrary to both WTO
and U.S. practice and precedent. Retroactive repeal of the 1916 Act is
simply not required in order to bring U.S. law into conformity with our
Nation's WTO obligations. Retroactive repeal would unnecessarily
disadvantage companies such as Goss that filed claims based on laws
valid at the time. For these reasons, Goss urges Congress to adhere to
WTO and U.S. legal precedent and provide that any amendment or repeal
of the 1916 Act take effect prospectively only.
H.J. Heinz Company
Pittsburgh, Pennsylvania 15219-2857
February 6, 2002
The Honorable Bill Thomas
Committee on Ways and Means
United States House of Representatives
Washington, DC 20515
RE: February 7 Hearing on Administration's 2002 Trade Agenda
Mr. Chairman and Members of the Committee:
I am writing on behalf of the H.J. Heinz Company--a global leader
in the food industry with almost $10 billion in annual sales, over
40,000 employees and some of the best brands in the business including
Heinz ketchup, Ore-Ida potatoes and Star Kist tuna.
Last year, the Ways and Means Committee approved legislation (H.R.
3009) that would extend and expand the Andean Trade Preference Program.
Heinz actively supports that legislation and was pleased that the full
House has passed it as well. Heinz's support for the legislation is due
in large measure to its inclusion of processed tuna as a preference
item under an expanded ATPA program. Although the inclusion of
processed tuna in the legislation has become a point of controversy, we
urge the Committee to continue to support the House-passed version and
to insist on the inclusion of tuna when the issue is considered in
conference with the Senate.
Tuna is already included as a preference item under both NAFTA and
the CBI program. In neither case was its inclusion controversial
because, despite claims to the contrary, the U.S. tuna industry has
already moved offshore. The last full-scale U.S. mainland cannery was
closed by Thai Union (which owns Chicken of the Sea) last year. Other
than a small Bumble Bee automated canning line in Southern California
(which cans tuna loins imported from Ecuador at an effective duty rate
of only 1.5%), the only remaining U.S. tuna canneries are in Puerto
Rico and American Samoa. The Puerto Rico facility, which is owned by
Bumble Bee, announced last year the layoff of half of its 800
employees. 1/167/163/323/69/41/27/47/2 3/327/27/2x-31/6
5/329/323 1/12/62/63/31/23/62/67/25/2 2/62/37/2
7/41/12/59/29/21/6 2/62/5 2/33/31/32/3 7/41/11/22/5
9/22/59/4 9/323/23/61/15/22/5x-0 Indeed,
Bumble Bee is building a cannery in Trinidad to take advantage of CBI
In American Samoa, however, the situation is somewhat different.
Star Kist has the largest tuna cannery in the world on American Samoa
where 2,700 people are employed. Thai Union has a smaller American
Samoa cannery that employs about 2,500. We at Heinz/Star Kist have
stated repeatedly that passage of the ATPEA will not have an adverse
effect on our American Samoa facility. Although Thai Union has stated
that passage of ATPA would result in layoffs at its American Samoan
cannery, this claim is in direct conflict with sworn testimony Thai
Union gave in American Samoa last year. In its testimony before the
American Samoa Tax Exemption Board in which Thai Union sought a new
local tax exemption for its cannery, Thai Union promised that if the
tax exemption were granted, they would invest at least $16 million in
American Samoa and 1/167/163/31/53/27/21/11/67/2
7/29/43/57/42/59/47/21/52/6 2/62/37/27/2 1/2
2/54/67/2 3/81/8 3/57/23/27/21/52/6 over the next ten
years. Importantly, Thai Union did not condition its commitment to this
investment and employment on excluding processed tuna from the Andean
Finally, environmental groups active on fishery conservation and
``dolphin safe'' issues support the inclusion of tuna in the Andean
Trade Preference Program. Ecuador is the only nation in Latin America
and the Caribbean to be certified by the U.S. Department of Commerce as
in compliance with the Marine Mammal Protection Act and Eastern Pacific
tuna conservation measures. To quote the leading environmental group on
dolphin-safe fishing (Earth Island Institute), ``By reducing tuna
tariffs for Ecuador, Congress can reward that country for their efforts
to protect dolphins. Furthermore, by reducing tuna tariffs . . .
Congress can provide incentives to other nations to protect marine
Mr. Chairman, as you know, the current Andean Trade Preference
Program expired in December. I want to compliment you on your
Committee's action to secure passage of H.R. 3009 last year. And I urge
you to keep the pressure on to ensure final passage and enactment of
legislation expanding ATPA, including tuna, as soon as possible.
Michael D. Milone
CEO--Star Kist Foods
Statement of Mattel, Inc., El Segundo, California
This statement is submitted on behalf of Mattel, Inc. in connection
with the February 7 hearing conducted by the House Committee on Ways
and Means regarding the U.S. trade agenda. Mattel strongly supports the
continued elimination of trade barriers globally, and believes that the
enactment of legislation renewing the President's trade promotion
authority (TPA) will play a critical role in achieving this objective
by providing a needed impetus to pending multilateral, regional and
bilateral trade negotiations. Of these, the most important to Mattel is
the new round of multilateral trade negotiations under the WTO that was
launched last November in Doha. Within this new round, the company
attaches the highest priority to the earliest possible conclusion of
zero-for-zero sectoral agreements on toys and other products.
Headquartered in El Segundo, California, Mattel is the world's
largest toy company with 2001 sales of $4.8 billion in over 150
countries. Mattel has 29,000 employees, of whom 6,000 are in the United
Mattel and other U.S. manufacturers of toys are the most
competitive in the world, and would stand to reap major benefits from
the further dismantling of global trade barriers. Also benefiting
directly from a reduction of trade barriers would be the 32,400 U.S.
workers employed by the U.S. toy industry.
The U.S. toy industry achieved its position as the world's leader
by combining high value-added domestic operations, such as product
design, engineering and strategic marketing, with substantial
production overseas. As a result, a large portion of U.S. toy
companies' product lines are manufactured overseas, but even those toys
incorporate important U.S. value. In the case of Mattel, that value
includes the critical functions of product conceptualization and
design, design and development engineering, and strategic marketing
that are performed for the company's worldwide operations by the
approximately 1,900 workers at its El Segundo headquarters.
With only 3 percent of the world's children living in the United
States, U.S. toy companies must turn increasingly to foreign markets
for industry growth. Although the United States has the largest toy
market in the world, the growth in domestic sales by U.S. toy companies
has been modest in recent years, reaching $23 billion in 2000. However,
sales by U.S. toy companies in foreign markets (including U.S. exports
and sales by overseas subsidiaries) have expanded at a rapid pace,
totaling an estimated $6.0 billion in 2000.
While the toy industry has been successful in penetrating overseas
markets, that growth frequently has been limited by significant trade
barriers. For example, most major developing country markets throughout
the world are protected by tariffs of 20 percent or more on toys. These
high tariffs will remain in effect even after the final concessions
from the Uruguay Round of WTO negotiations are implemented in 2004.
In addition, while the United States, the European Union, Canada,
Japan and Korea agreed to participate in a zero-for-zero agreement on
toys under the Uruguay Round, this agreement left much to accomplish.
While the United States immediately eliminated its tariffs on all toy
categories, the other four countries participating in the agreement
excluded several major toy categories from their tariff elimination
commitments. For example, both the European Union and Japan have left
in place tariffs on categories accounting for over half of their
respective total imports of toys. Since these economies represent the
largest overseas markets for most U.S. toy companies, these gaps pose a
major continuing problem.
In an effort to build on the Uruguay Round zero-for-zero agreement
on toys, Mattel and the U.S. toy industry in 1996 enlisted the aid of
the U.S. Government to secure the inclusion of toys in the
consultations on early voluntary sectoral liberalization (EVSL)
conducted under the auspices of the Asian-Pacific Economic Cooperation
(APEC) forum. APEC leaders in 1998 then forwarded these EVSL talks,
which covered toys and seven other sectors, to the WTO for final
agreement. First known in the WTO as the Accelerated Tariff
Liberalization (ATL) initiative, these sectoral talks now are being
considered for inclusion in a possible zero-for-zero initiative in the
newly launched round of WTO negotiations.
There is a strong consensus among global toy industries for
concluding a new zero-for-zero agreement on toys, ranging from the
European toy industry to those of 15 APEC countries. Moreover, much of
the work required to craft a zero-for-zero agreement on toys has
already been completed through the earlier APEC process. In short, the
parameters of an agreement are already in place and a ``critical mass''
of participating countries has already been identified.
What is needed now is for WTO negotiators to step forward and
conclude zero-for-zero agreements on toys and other sectors where
international consensus can be readily achieved. In particular, Mattel
urges that negotiators seek the accelerated conclusion of these zero-
for-zero agreements in advance of the completion of the rest of the
round, with the goal of finalizing the agreements by the Fifth WTO
Ministerial meeting to be held in Mexico in mid-2003. These sectoral
agreements can serve as an early concrete signal of WTO members'
commitment to a successful round, with the specific commitments made as
part of the zero-for-zero agreements to be implemented on a provisional
basis and considered an integral part of countries' overall commitments
in the new round.
In addition to concluding a sectoral zero-for-zero agreement on
toys, Mattel is seeking the deepest possible reduction in those foreign
tariffs on toys that will remain following the completion of the zero-
for-zero agreement. Assuming the sectoral agreement is concluded along
the lines currently envisaged, the primary focus of these follow-on
negotiations would be the high tariffs maintained by those countries
that do not participate in the zero-for-zero agreement on toys. These
are likely to include many Latin American countries, including the
major markets represented by Brazil, Argentina and Mexico.
In conclusion, Mattel strongly supports the ongoing efforts of the
United States to reduce global trade barriers. In particular, Mattel
urges the U.S. Government to secure a sectoral zero-for-zero agreement
on toys as quickly as possible as part of the new round of WTO
We appreciate this opportunity to share Mattel's views with the
Committee on Ways and Means.
Statement of the National Electrical Manufacturers Association,
NEMA is the largest trade association representing the interests of
U.S. electrical industry manufacturers. Its mission is to improve the
competitiveness of member companies by providing high quality services
that impact positively on standards, government regulation and market
economics. Founded in 1926 and headquartered in Rosslyn, Virginia, its
more than 400 member companies manufacture products used in the
generation, transmission, distribution, control, and use of
electricity. These products, by and large unregulated, are used in
utility, industrial, commercial, institutional and residential
installations. Through the years, electrical products built to
standards that both have and continue to achieve international
acceptance have effectively served the U.S. electrical infrastructure
and maintained domestic electrical safety. Annual shipments exceed $100
billion in value.
General and Multilateral Issues
LTrade Promotion Authority (TPA): NEMA favors quick
approval of trade agreement negotiating authority during the second
session of the 107th Congress. Over the past four years, the
President's lack of such authority not only impeded the
Administration's ability to negotiate agreements, but has been invoked
by many of our trading partners as an excuse to delay real negotiations
on opening their markets. Especially in the current economic climate,
we must remove this barrier to trade liberalization and leadership by
giving President Bush broad ``fast-track'' authority as soon as
LTariff Elimination: The world-wide elimination of tariffs
on electrical products is a basic NEMA goal. We therefore urge the U.S.
to pursue tariff elimination for electrical products in all fora,
including the new round of World Trade Organization negotiations on
reduction and elimination of tariffs on non-agricultural goods, or via
regional groups and/or other opportunities as they arise. In addition,
WTO members should agree to implement so-called ``zero-for-zero''
agreements to eliminate tariffs on electrical products as soon as
possible, preferably on an early provisional basis with immediate
effect until these ``Free'' tariff rates are bound into the new round's
final concluding agreement.
L NEMA also urges the U.S. to push for completion of the second
phase of the Information Technology Agreement (ITA-2), which would
eliminate tariffs on a wide range of IT items, including some NEMA
products. NEMA also supports continued efforts by U.S. officials to
expand the membership of the existing ITA and to negotiate accelerated
tariff elimination for electrical products under the North American
Free Trade Agreement (NAFTA).
LEnergy Services Liberalization NEMA supports
liberalization of trade in energy services, in order to allow more
people worldwide to enjoy high quality, affordable energy, and also to
provide new opportunities to those energy service and electricity
providers who use the equipment made and services provided by NEMA's
members. Thus, NEMA is an active member of the industry coalition
campaigning for the inclusion of commitments on energy services in the
WTO's ongoing negotiations on services. NEMA's primary perspective is
that of the industry that provides the equipment and products used to
build and maintain electrical energy systems, but many NEMA members are
active providers of energy services as well. The liberalization that is
good for utilities is also good for our manufacturers, service
suppliers, and for the users of electricity. USTR has included energy
services in its proposals for the WTO services negotiations and we look
forward to continued efforts from the Bush Administration and support
from Congress to secure commitments from our trading partners in this
LTransparency in Government Procurement: Although at Doha
WTO members put off beginning negotiations on it until the next
Ministerial, we look forward to increased leadership from USTR and
Congress in pursuing a WTO agreement. The U.S. has been a leader of
efforts to achieve a WTO agreement to make government procurement more
open and transparent. Preferences for local companies on the part of
host governments, as well as a lack of transparency in awarding
contracts, have served to unfairly exclude U.S. companies on countless
occasions. It is time for U.S. entities to be able to compete on equal
footing with domestic suppliers.
L NEMA also urges the Bush Administration to increase efforts to
obtain full implementation and enforcement of all signatories to the
1999 OECD Anti-Bribery Convention and the 1997 OAS Convention on
LWTO Technical Barriers to Trade (TBT) Agreement: NEMA
supports the concepts outlined in the WTO TBT Agreement and believes
that all countries should implement, to the fullest extent, the
obligations outlined there. These obligations include: standards
development processes that are transparent and include participants
from all interested parties; a conformity assessment system that
upholds the principles of most-favored nation treatment (meaning equal
treatment in all countries); and national treatment (meaning equal
treatment of domestic and foreign products, as well as test
laboratories conducting conformity assessment services) in the
application of testing and certification procedures.
L In addition, the U.S. Government must continue working to
dispel the misinterpretation that the use of the term ``international
standards'' in the WTO TBT agreement applies only to International
Electrotechnical Commission (IEC), International Standards Organization
(ISO) and International Telecommunications Union (ITU) standards. An
interpretation should also include widely-used norms such as some North
American standards and safety installation practices. Misinterpretation
can be disadvantageous to U.S. businesses' efforts to sell in global
markets. Moreover, the importance of openness and transparency are lost
when focus is only on those three standards bodies. The Bush
Administration must continue vigilant monitoring of our WTO partners to
ensure their adherence to their TBT commitments.
LOpposition to Mutual Recognition Agreements (MRAs): In
NEMA's view, the use of MRAs should be limited and considered only as
an alternative for conformity assessment needs when applicable to
federally regulated products such as medical devices. MRAs are not the
answer to conformity assessment needs in non-regulated areas; if
anything, they serve to encourage the creation of unnecessary product-
related regulation. In this regard, while we strongly objected to the
inclusion of an electrical safety annex in the U.S. MRA with the
European Union a few years ago, we are pleased that the Administration
has either excluded electrical products from subsequently negotiated
MRAs or refused to sign on to any such accords that include them. We
look forward to a continuation of that stance.
LWTO Accessions: NEMA also hopes for greater progress in
bilateral negotiations with WTO accession candidates. NEMA appreciates
the ongoing negotiations with Saudi Arabia and urges continued emphasis
on standards and TBT issues. NEMA representatives traveled to Saudi
Arabia in May 2000 to strengthen dialogue with Saudi Arabian Standards
Organization (SASO) officials--especially with a former NEMA employee
in place as the new U.S. standards attache in Riyadh--and will continue
to develop a cooperative relationship to ensure market access for
products made to NEMA standards. USTR should also seize the opportunity
for renewed emphasis on negotiations to bring Russia and Ukraine into
the WTO. Although membership is years away for both countries, U.S.
leadership is needed to ensure that progress toward that end continues
at a reasonable pace and both countries reinvigorate their long
processes of legal and economic reform and institution-building.
European Union Regulatory Initiatives and WTO Disputes
LRegulatory Cooperation: NEMA supports continued work
toward a U.S.-EU agreement on Principles for Regulatory Cooperation.
This agreement could not be worked out in 2001, but both sides should
strive to complete an agreement at least by the time of the U.S.-EU
summit in spring 2002.
L As we and other industry associations noted in a June 2001
paper for U.S. Trade Representative Robert Zoellick, and as noted in
greater detail below, the EU is increasingly establishing regulations
that are not justified by available technical evidence and whose cost
is not proportionate to intended consumer or environmental benefits.
Typically, these regulations are developed with procedures that are not
transparent to all stakeholders, including the U.S. electrical
manufacturing industry and other trading partners. Further,
stakeholders find they have no way to hold EU authorities accountable
for the regulations produced. In short, the EU's regulatory process
fails to meet applicable international obligations as set forth in the
Agreement on Technical Barriers to Trade of the World Trade
L Our industry is committed to working with the Administration,
through engagement with the EU on questions of governance and
regulatory disciplines, to find solutions to its systemic regulatory
problems, ensuring justification, transparency and openness in
development of directives, as well as ``national treatment'' and
accountability in their application.
LProposed EU Substance Bans and ``Take Back'' Legislation
(WEEE, EEE): In 2002, the EU is poised to complete two new directives
that pose market access barriers for U.S. electrical and electronics
products by raising costs and allowing differing standards and
procedures among the 15 member states. The first directive addresses
take-back and recycling of Waste Electrical and Electronic Equipment
(WEEE) while the second, known as the ROHS (Restriction on the Use of
Hazardous Substances) directive, would impose bans on the use of
certain substances currently used in manufacturing without providing
sufficient basis for processes to identify any needed substitutes.
L In addition, the Commission's Enterprise Directorate is
developing its own Electrical and Electronic Equipment (EEE) directive,
which would require manufacturers to comply with a series of
requirements throughout the life-cycle of a product. The need for such
a directive is questionable and the views of the U.S. Government and
U.S. industry should be taken into account by DG Enterprise, especially
during this development stage.
L NEMA urges the Bush Administration and Congress to clearly
identify these measures as serious potential trade barriers and to seek
an accommodation that would emphasize rational, cooperative and
science-based measures as alternatives to broad-brush regulatory
LEU Council Recommendations on Electro-Magnetic Fields
(EMF): In 1999, the European Union issued recommendations that set EMF
exposure limits for the general public over a range of frequencies.
Member states may provide for a ``higher level of protection'' than in
the recommendations, and thus can adopt more strict exposure limits.
Extensive U.S. Government research on low frequencies recently
concluded that ``the scientific evidence suggesting that ELF/EMF
exposures poses any health risk is weak.'' Similar conclusions have
been made from health risk studies in other countries.
L Manufacturers on both sides of the Atlantic have warned their
authorities through the TABD process that EMF could potentially become
a major point of contention between the U.S. and Europe. NEMA has
notified the Commerce Dept. that EU member state implementation of the
EU Council EMF recommendations would create a substantial barrier to
trade by restricting the free movement of goods, which would severely
affect U.S. electrical manufacturing interests. NEMA supports the TABD
position that EMF exposure standards must be harmonized
internationally. The U.S. Government must continue its efforts to work
with the leaders in the EU Commission and in the member states to avoid
another trans-Atlantic trade dispute.
LImplementation of the Electrical Safety Annex of the
U.S.-EU MRA: As previously mentioned, NEMA opposed negotiation of the
Electrical Safety Annex to the U.S.-EU MRA because it adds no value to
the existing electrical safety systems in the U.S. and EU. The
historical record of electrical safety, based on private-sector-
promulgated standards and conformity assessment system, is a good
indicator that private-sector approaches are successful. The U.S.
Occupational Safety and Health Administration (OSHA) NRTL (Nationally
Recognized Testing Lab) Regulations call for OSHA accreditation of
conformity assessment bodies (CABs). EU CABs can be accredited by OSHA
for testing and certifying EU products to U.S. voluntary standards for
OSHA recognition in the workplace. In 2001, OSHA granted NRTL-status to
a German lab and thereby demonstrated the integrity of its approach, in
which EU applicant CABs are given the same consideration as U.S. CABs.
The Bush Administration should continue to maintain this OSHA NRTL
independence while working with the EU to achieve better understanding
of the U.S. position.
L``Carousel'' Retaliation Lists: NEMA does not consider it
appropriate for electrical products to be included among those EU
exports assessed 100% retaliatory tariffs as a result of unrelated
disputes in the WTO. Our view is that our industry's products should
not be caught up in another sector's ongoing, potentially escalating
impasse, and we have made this position clear to USTR.
LForeign Sales Corporations (FSC/ETI) Dispute: NEMA
supported U.S. efforts to resolve this dispute by repealing the old FSC
provision and installing a new regime (known as Extraterritorial Income
or ETI) while seeking to ensure that U.S. exporters suffer no
disadvantages. NEMA has urged its EU counterparts to support a
resolution of the dispute over the FSC-replacement law so that products
in our industry do not become entangled in a cycle of retaliatory
tariff hikes on both sides of the Atlantic. NEMA encourages both the
U.S. and the EU to manage the dispute responsibly and to avoid any
escalation of tensions.
The Americas and Asia-Pacific
LFree Trade Area of the Americas (FTAA) Talks,
Particularly the Negotiating Group on Market Access (NGMA): Although
talks toward the 2005 creation of an FTAA shift into a higher gear in
early 2002, NEMA looks forward to continued leadership from the
Administration and Congress. NEMA also encourages all FTAA countries to
implement customs facilitation measures to which they have already
agreed. Moreover, NEMA urges the U.S. to convince the Hemisphere's
countries that any standards and conformity assessment provisions
included in an FTAA must mirror the WTO TBT Agreement. NEMA will
continue to be engaged in the process and exchange views with its
industry counterpart associations throughout the Americas.
LNAFTA Implementation and Tariff Issues: Although Mexican
tariffs on U.S. electrical products will reach zero in 2003, NEMA is
exploring further possibilities for industry consensus on earlier
tariff elimination for specific product sectors. Also, with an office
in Mexico City, NEMA is well positioned to work with U.S. authorities
to monitor and influence the Mexican standards development process for
electrical products to ensure that Mexican norms do not act as barriers
to U.S. products.
L NEMA is becoming very involved in the standards and conformity
assessment processes in Mexico. The country is developing 20 to 30 new
electrical product standards each year and is moving in the direction
of making all of its standards mandatory. The authorities do accept and
take into account public comments on proposed standards; however, a
document that has been substantially revised based on public comments
may not be circulated for final public review prior to publication as a
mandatory standard. Moreover, a standard adopted as mandatory can
incorporate by reference another voluntary standard without any public
review or comment opportunity. NEMA would welcome the Mexican standards
authority's application of consistent and transparent procedures in the
consideration and adoption of NOM standards, which directly affect
market access for many proven commercial products.
L Mexico was required under its NAFTA obligations starting
January 1, 1998, to recognize conformity assessment bodies in the U.S.
and Canada under terms no less favorable than those applied to Mexican
conformity assessment bodies. Mexico has indicated that it is willing
to conform to these obligations only when the Government of Mexico
determines that there is additional capacity needed in conformity
assessment services. So far no U.S. or Canadian conformity assessment
bodies have been recognized by Mexico for conducting conformity
assessment on most products that are exported from the U.S. and Canada
to Mexico. This procedure does not meet the intent of Mexico's NAFTA
obligations, serving to protect their conformity assessment bodies and
Mexican manufacturers from fair competition from U.S. and Canadian
exports into Mexico.
LU.S.-Chile Free Trade Area: In 2002, the U.S. and Chile
should complete and enact a high quality bilateral free trade
agreement. Given the small size of the Chilean economy and the
precedent setting benefits of such an agreement, completion of the
Chile FTA should be completed expeditiously, and need not await passage
of trade negotiating authority legislation. In addition, USTR should
continue to discuss ways open up trade with the Mercosur countries
(Brazil, Argentina, Paraguay and Uruguay) in advance of the FTAA.
LU.S.-Central America FTA: NEMA applauds President Bush's
initiative to explore negotiations on a free trade agreement with Costa
Rica, El Salvador, Guatemala, Honduras and Nicaragua. Once launched,
negotiations should result in a high-quality FTA that opens Central
American markets for electrical products and energy services, provides
complete transparency in government procurement, and spurs progress in
the FTAA process.
LU.S.-Singapore FTA: The U.S. Government should complete a
free trade agreement with Singapore as soon as is practical, taking
full account of industry input. This agreement should include an
investment chapter, cover energy services, and provide for complete
transparency in government procurement.
LAPEC Standards: NEMA is actively involved in bringing a
greater understanding of conformity assessment alternative processes to
the region and looks forward to the second round of National Institute
of Standards and Technology workshops in 2002 for Asia-Pacific Economic
Cooperation forum member countries.
U.S. Government Resources
LMonitoring, Enforcement and Overseas Presence: NEMA
applauds the Administration and Congress for their successful efforts
to bring China and Taiwan into the WTO. NEMA welcomes the opportunity
to help our member companies take advantage of the market-opening entry
of China and Taiwan into the rules-based international trading system
and will work with USTR, the Commerce Department, and Congress to
monitor and ensure compliance.
L The U.S. Government needs to do more than simply reach
favorable trade accords; it also needs to be vigilant in making sure
that other countries live up to their commitments to foster openness,
transparency and competition. In this regard, our view is that the
Commerce Department's Standards Attache program should be expanded and
fully funded. Likewise, we greatly appreciate the assistance provided
by Foreign Commercial Service (FCS) offices abroad, and hope that FCS
activities will receive ample support in the years ahead.
L With the support of a Market Development Cooperator Program
(MDCP) grant from the Commerce Department, NEMA opened offices in Sao
Paolo, Brazil and Mexico City, Mexico in 2000. The MDCP is an
innovative public/private partnership whose grant budget should be
expanded so that more organizations can enjoy its benefits. NEMA looks
forward to continuing its close cooperation with the Commerce Dept. on
L Similarly, the Bush Administration and the 107th Congress
should continue the trend in recent years of reasonable increases in
funding and staff of the U.S. Trade Representative's Office to better
allow it to more effectively negotiate, monitor and enforce trade
LExport-Import Bank Reauthorization: NEMA regrets that Ex-
Im's authorization was allowed to lapse in 2001 and urges Congress to
reauthorize it as soon as possible with adequate funding. Failure to do
so would leave U.S. companies alone to face competitors armed with the
aggressive export financing regimes of European and Asian governments.
Exports assisted by Ex-Im Bank help to support hundreds of thousands of
U.S. jobs and ninety percent of Bank-supported transactions assist U.S.
LCustoms Modernization and Enforcement: Last year,
Congress made an important first step in appropriating funds for the
U.S. Customs Service's long-overdue reform of its automated systems. We
look forward to further congressional support this year for this vital
initiative. In addition, we urge to continued vigilance from the
Customs Service in ensuring imported electrical products meet U.S.
L``Buy America'' Procurement Regulations: Majority U.S.-
content restrictions on non-sensitive electrical products should be re-
evaluated in the context of both the increasingly global economy and
potential savings. By restricting access to the U.S. market, these
restrictions also have the reciprocal effect of disadvantaging U.S.
companies seeking to sell into foreign markets.
LEconomic Sanctions Reform: NEMA supports passage of
legislation that would establish a more deliberative and disciplined
framework for consideration and imposition of economic sanctions by
Congress and the Executive branch. In addition, existing economic
sanctions should be reviewed to determine if their effectiveness
justifies the costs to U.S. jobs and industries.
LExport Administration Act Reauthorization: NEMA supports
congressional efforts to enact updated legislation that meets the U.S.
need for an efficient, transparent and effective export control system.
Statement of George Scalise, Semiconductor Industry Association
Mr. Chairman, Members of the Committee, thank you for the
opportunity to provide this statement on U.S. trade policy. My name is
George Scalise and I am the president of the Semiconductor Industry
Association (SIA). This statement will discuss the new round of World
Trade Organization (WTO) negotiations launched at Doha last year. To
begin, I'd like to give you some background on the SIA and its members,
which will help explain why the new WTO Round is so important to
America's semiconductor industry.
The SIA represents over 90 percent of America's semiconductor
industry. Today, the U.S. industry is the most competitive in the
world, with more than 50 percent of world market share. More than 50
percent of our members' revenues is derived from overseas sales, and
foreign markets are expected to continue growing in importance. Where
American chipmakers are able to compete fairly--in markets unencumbered
by trade barriers--we are successful. As a result, eliminating barriers
to trade and further opening world markets is vital to our industry.
SIA has a long history of active support for trade liberalizing
initiatives such as the Uruguay Round, the Information Technology
Agreement (ITA) and China's accession to the WTO. Since the beginning
of the 107th Congress, SIA has worked to gain support and passage of
trade promotion authority (TPA, H.R. 3005) by the Congress. We commend
your leadership which allowed for the passage of TPA by the U.S. House
SIA will continue to press for and support further market opening
initiatives, including the new round of WTO negotiations. For the new
round, it is imperative to continue to make progress toward a further
opening of markets under a rules-based system--it is equally vital that
we not lose ground in areas like the trade laws. These combined
objectives will best serve the macroeconomic purpose of stimulating
confidence and growth in international trade.
The New Round
I believe that the new WTO round can be relied upon to liberalize
trade, resulting in significant benefits for the semiconductor
industry. Some of the benefits--such as tariff elimination--will be
direct. Other benefits in areas such as services liberalization will be
indirect. As you well know, the United States is fortunate to have an
extremely strong and talented trade negotiating team, and we look
forward to working with that team and supporting them in their efforts
to secure market opening benefits. Unfortunately, in addition to
working on opening markets, our trade negotiators will also be faced
with an extremely difficult challenge--maintaining strong U.S. trade
laws in the face of extreme pressure from our trading partners to
weaken those laws. They will also have to deal with proposals on
competition policy that could lead to excessive foreign government
intervention abroad that could damage America's most competitive
Maintenance of U.S. Trade Laws
As you know, the antidumping remedy is especially important with
respect to the semiconductor industry given the history of injurious
dumping in our sector. In the mid-1980's, Japanese dumping of DRAMs
drove nine of eleven U.S. semiconductor producers out of this segment
of the market; one company was driven out of business altogether. U.S.
chipmakers are the most competitive in the world--and consistently are
very successful in competition with foreign producers who trade fairly.
Fortunately most do, but there are occasions when some engage in
dumping, which the current international trading rules condemn, and the
results can be devastating. The WTO's antidumping rules foster
competition, creating an environment in which success is determined by
which companies have the best products, technology, and manufacturing
capabilities, and not those who sell below cost of production or price
discriminate to gain export market share.
Without the remedies provided by the antidumping law, our industry
would not be the world leader it is today. One example of this is an
outgrowth of the EPROM dumping case in the mid-1980's. The U.S.
successfully defended against Japanese dumping of EPROMs, and U.S.
companies remained viable competitors in this market as a result. The
current large and fast growing market for ``flash'' semiconductors
evolved from EPROMs and U.S. companies are the most successful in this
market. This situation would likely be very different today if the
EPROM dumping had not been stopped. The same can be said of DRAMs,
where today the U.S. is home to only one manufacturer but it is one of
the most--if not the most--competitive DRAM company in the world.
Without the antidumping laws, this very successful and competitive
company could have been driven out of the business.
Manufacturing DRAMs and other advanced semiconductors requires
billions of dollars of investments in plant, equipment and research and
development--it is vital that the companies that make these investments
be able to compete on a fair basis in order to recoup their enormous
investments. The antidumping laws as they are structured today help
insure that fair competition is possible. No one can take an objective
look at the world's semiconductor market today and not conclude that
there is vibrant competition resulting in long term, consistent
increases in benefits for consumers. This is a direct result of
preserving competitors from the destruction caused by dumping.
The antidumping rules in their current form were the result of
heated and arduous negotiations between the United States and other WTO
members during the Uruguay Round. They represent a hard fought
compromise--one that has worked to allow those companies that operate
in a fair and open market economy to compete on an equal footing with
their foreign competitors. Regrettably, the United States was the only
WTO member that opposed the reopening of the antidumping rules. The
Doha Ministerial Declaration that was ultimately issued states that WTO
members ``agree to negotiations aimed at clarifying and improving'' the
WTO agreement on antidumping, but that any negotiations will preserve
this agreement's ``basic concepts, principles, and effectiveness'' and
its ``instruments and objectives.'' We must make sure that these
principles, instruments, and objectives are preserved in all respects.
New negotiations on antidumping will, I fear, be extremely
difficult. All the current proposals for revisions to the antidumping
agreement call for significantly weakening the ability of industries in
the United States and abroad to use domestic antidumping laws to offset
unfair trade practices. A WTO Ministerial Conference memorandum listing
issues to be addressed in the negotiations identifies 13 specific
issues to be negotiated related to antidumping rules--these proposals
are focused on limiting the discretion of national antidumping
authorities to determine dumping margins. Such a move threatens to
undermine the consensus in favor of market liberalization and it will
undermine support for the WTO if countries can engage in dumping that
cannot be effectively offset.
Maintaining strong trade laws--which helps insure that America's
chipmakers can compete on the basis of their technological capabilities
and product offerings--is vital to the health of the U.S. semiconductor
industry. Our negotiators will have a tremendous challenge before them
during the new WTO round--SIA is ready to support them in any way
possible during these negotiations.
The House of Representatives passed a resolution by a 410-4 vote
just before the Doha Ministerial that called on the President to
preserve the ability of the United States to enforce rigorously its
trade laws and to avoid agreements which lessen the effectiveness of
domestic and international disciplines on unfair trade. If the WTO
rules governing antidumping narrow the ability of the United States to
maintain its antidumping remedy, it is highly unlikely that Congress
would approve the results of this Round of negotiations. That would be
tragic. But it is avoidable if the U.S. negotiators are firm.
Tariff Reduction and Elimination
The Ministerial Declaration issued at the end of the conference
launches a new round of negotiations to reduce or eliminate tariffs on
non-agricultural goods, especially on products of export interest to
developing countries. While this is potentially very promising, the
document notes that the negotiations should allow ``less than full
reciprocity'' for developing countries to reduce tariffs. This precept
is inconsistent with so-called ``zero-for-zero'' negotiations to
eliminate tariffs in certain sectors, including information technology.
The Information Technology Agreement (ITA)--which eliminates tariffs on
information technology products--was not specifically mentioned in the
Declaration. SIA believes that all WTO members should join the ITA as
soon as possible, especially Latin American countries, and we would
like to see this goal pursued within the new round. We firmly believe
that this is in the best interests of economic development.
Undoubtedly, it was a similar exercise of enlightened self-interest
that led China to join the ITA as part of its WTO accession process.
Competition policy is the subject of an ongoing dialogue within the
WTO, and negotiations may be launched after the next WTO Ministerial
meeting in 2003. Current discussions in the WTO's Trade and Competition
Policy working group, meanwhile, are to continue clarifying ``core
principles'' of competition policy, including transparency, non-
discrimination, procedural fairness, and cartels, as well as internal
WTO procedural issues, such as providing developing countries with
technical assistance to be able to participate meaningfully in the
discussions. The discussions are to take account of the needs of
developing countries, where ideally competition policy will be used to
create properly functioning home markets.
While this area of discussion has the potential to yield benefits,
it is also an area that poses enormous risks and must be approached
with extreme caution. Competition policy could be used to make
successful foreign firms vulnerable to attacks on the basis of alleged
``abuse of dominant position.'' It would be very damaging to
international trade if new WTO competition policy rules provided WTO
sanction for abuses of competition policy measures to protect and
promote domestic industries. Most of the competition policy discussion
so far has been grounded in theory rather than in a factual examination
of the specific barriers to international trade and investments that
need to be remedied. Before attempting new international disciplines,
it is necessary to understand the dimensions of the problems posed for
trade by the absence of competition rules and/or their enforcement in
so many markets around the world.
A decision on whether or not to launch negotiations on competition
policy after the next ministerial in 2003, along with negotiations on
trade and investment, government procurement, and trade facilitation
(the so-called ``Singapore issues''), has not yet been finalized.
According to the Declaration, these negotiations are to start after the
Fifth Ministerial, when a decision on negotiating procedures is to take
place--a decision to launch these talks will require a consensus on the
The chief reason that no formal international trade organization
was formed after the Second World War was the attempt to include
provisions that addressed so-called ``restrictive business practices.''
Competition policy negotiations pose a very high risk for the future of
an open international trading system. Competition policy can easily
become an unregulated substitute for antidumping, where the rules and
practices are well defined, and could even undermine the protection of
intellectual property, a hard-won gain from the last major round of
international trade negotiations.
Electronic commerce and internet applications have been key demand
drivers in the semiconductor industry over the past few years, and it
is very important that the rules governing trade in this area remain as
open as possible. The WTO Ministerial Declaration recognizes the new
challenges and opportunities for trade brought about by e-commerce, and
notes the importance of creating and maintaining an environment which
is favorable to the future development of electronic commerce.
U.S. negotiators in Doha sought and won a commitment to maintain
the moratorium on customs duties through the next ministerial in 2003.
SIA stands ready to support our negotiating team in securing a
permanent tariff moratorium, and we encourage them to continue pursuing
rules that breed competition and growth in this important area. We
believe international agreement should be reached to ensure that
electronically delivered goods should receive no less favorable
treatment than similar products delivered in physical form and that
their classification should ensure the most liberal treatment possible.
Governments should refrain from enacting trade-related measures that
impede e-commerce. Where regulations are necessary, governments should
insure that they are transparent, non-discriminatory and employ the
least trade-restrictive means available. Further, because of the great
growth potential from e-commerce-based services, the U.S. should seek
improved market access and national treatment commitments for a broad
range of services, such as telecom and financial services, which can be
Trade-Related Investment Measures (TRIMS) Agreement
U.S. chipmakers often face complex rules and requirements when
making investments overseas--they may be required to enter joint
ventures or transfer technology in exchange for permission to invest
and gain market access. The freedom to engage in direct investment is
critical to market access for the chip industry, and to the development
goals of developing countries. Unfortunately, existing WTO investment
rules do not adequately discipline many of the restrictions placed on
investment in various countries.
Improving and expanding WTO rules on TRIMS should be a part of the
new round of WTO negotiations. In particular, rules should be adopted
to prohibit requirements that foreign firms enter joint ventures, or
transfer technology or intellectual property, in exchange for market
access. These strengthened provisions should encompass not only
measures that are mandatory or enforceable under domestic law or under
administrative rulings, but instances where compliance is necessary to
obtain any approval or advantage.
Trade and investment is supposed to be the subject of negotiations
to start following the next ministerial conference to be held in 2003--
launching these talks, though, will require a consensus that may be
challenging to achieve. But it is in the interest not only of the
United States, but also of developing countries, to have international
rules that protect investors' rights, as such rules will encourage high
tech investment in developing countries.
Trade-Related Aspects of Intellectual Property (TRIPS) Agreement
As an R&D intensive industry, we are very concerned about the full
and effective protection of intellectual property rights. The TRIPS
Agreement negotiated as part of the Uruguay Round represented a major
advance in the protection of intellectual property (IP). The agreement
began the process of improving worldwide IP protection and allowed for
staged implementation over the course of a decade. Some developing
countries have been trying to delay implementation of their
obligations. Failure of such countries to fulfill their commitments
from the Uruguay Round makes it less likely that the expected
commercial gains for the WTO members that have met their commitments
will be realized. In addition, failure to adopt promised IP protections
is likely to actually undermine the development objectives of the
countries seeking to weaken the WTO's intellectual property
protections. We support the full implementation of TRIPS as soon as
possible by all countries, including developing countries.
Some WTO members also question whether TRIPS implementation
requires ``transfer of technology on fair and mutually advantageous
terms.'' Any effort to mandate the transfer of technology must be
resisted, as such mandates not only weaken IP protection, but will also
discourage foreign-direct investment and the commercially-driven
transfer of technology that is essential to economic development in
many parts of the world.
I am afraid that the WTO Dispute Settlement process represents a
growing problem for the international trading system. Unfortunately, it
appears to be ineffective against informal barriers to trade of the
kind that the semiconductor industry faced with its major competitor in
the 1980s and it is curtailing the use of America's trade remedies. The
dispute settlement system is legislating new obligations for WTO
members that were not agreed at the bargaining table. A more
responsible dispute settlement process is badly needed. If it is not
achieved, the ability to obtain further market opening could be
undermined and the availability of justifiable trade remedies will be
The Declaration launches negotiations aimed at ``improvements and
clarifications'' of the Dispute Settlement Understanding based on work
done so far and that will continue, with the goal of agreeing on
measures by May 2003. The Declaration and the memorandum do not
specifically add to the work program currently underway, but allow
consideration of ``additional proposals.'' There have been significant
problems with Dispute Settlement in the antidumping and countervailing
duty law areas, particularly with respect to standard of review, and
these problems should be addressed. We are hopeful that these talks
will in fact yield the desired improvements to the dispute settlement
The current WTO rules on adjusting for indirect taxes--which
yielded the recent decision against the U.S. Foreign Sales Corporation
(FSC)--have no basis in economics. Direct (income) taxes and indirect
(sales, VAT) taxes do not have a different incidence on goods, and yet
they are treated differently by the WTO. The former may not be rebated
on export and charged on imports, while the latter may be--this
disparity in treatment creates an un-level playing field. Any new round
should formally remove the discrimination against the rebate of direct
taxes, as this is a significant detriment to the United States and may
subject U.S. exports to WTO-sanctioned trade retaliation.
SIA has long supported fair and open trade--where our companies can
compete on the basis of market principles, unencumbered by trade
barriers, they are tremendously successful. We strongly support a
positive new round of trade negotiations, and believe it has the
potential to further open markets and improve the global trading
system. While we support further opening markets, we urge extreme
caution in areas such as antidumping and competition policy--
improvements in the current international trading system must not be
purchased at the expense of the existing rules and current level of
liberalization. This is particularly important as we begin to integrate
China into the WTO--the U.S. secured a very strong bilateral agreement
regarding the terms for China's accession to the WTO, and these
tremendous gains must not be undercut in the process of negotiating a
new WTO round. SIA stands ready to fully support the negotiating team
from the United States Trade Representative's Office and the Department
of Commerce--and we believe they can ultimately bring home an agreement
that benefits U.S. industry.
With the right results, I am confident that Congress will approve
new agreements reached with the strong majorities that once
characterized passage of packages of trade agreements. Your support and
ours must not be taken for granted, but it should be expected if the
advice that you and the private sector give is really listened to. It
is our faith in the active involvement of the Congress and the private
sector in the trade agreements process, and the strong positive results
achieved in the past that give SIA the basis for its strong support of
Trade Promotion Authority. America's high technology manufacturers--
including semiconductor makers--have benefited greatly from the
agreements concluded in the past utilizing fast track negotiating
Statement of the United States Association of Importers of Textiles and
Apparel, New York, New York
The U.S. Association of Importers of Textiles and Apparel, USA-ITA,
an association founded in 1989, represents U.S. importers, retailers,
manufacturers and other companies involved in the textile and apparel
business. We are pleased to have this opportunity to address the trade
agenda for 2002. Between negotiations and legislation, the trade agenda
this year is potentially immense, and USA-ITA member companies will be
directly affected by these trade policy decisions.
The last year has been a difficult one for the importing and
retailing sector of the U.S. economy. While consumer confidence appears
to be rebounding, U.S. consumers have always been extremely price and
value conscious, and the current economic conditions have compelled
U.S. importers and retailers to trim further their already slim profit
margins. In the apparel sector in particular, where the extensive
system of quotas and high duty rates already add to the costs
(including increased compliance and paperwork costs) that must be
passed on to consumer, the economic slowdown has hit especially hard,
with a number of retailers experiencing bankruptcies, resulting in
massive layoffs of workers.
An expansion of trading opportunities, through the reduction and
elimination of trade barriers, offers a means for our members to reduce
costs, participate in expanded sourcing options and investigate
enlarged marketing prospects. For these reasons, USA-ITA members
strongly support legislation and negotiations designed to liberalize
The extensive protection offered textiles and apparel has a
tremendous impact on our member companies and U.S. consumers. It has
consistently resulted in a situation in which textile and apparel trade
policy decisions have been considered separate and apart from all other
trade policy decisions. However, in less than three years, the
international regime for textile and apparel products will be phased
out and these goods will be fully integrated into normal trading rules.
Therefore, it is essential that the Congress and the Administration
begin now to reorient their decision-making processes to treat textile
and apparel products like all other goods, in both negotiations and
Trade Promotion Authority
Specifically, USA-ITA strongly supports trade promotion authority
(fast track negotiating authority) for the President. Negotiating
authority is essential to ensure continued momentum on the many
international trade negotiations in which the United States is already
involved. With the launch of the Doha Development Agenda in the World
Trade Organization and forward progress on free trade agreement
negotiations with Singapore and Chile, as well as regional agreements
such as the Free Trade Area of the Americas and now a possibly more
immediate agreement with Central American countries, there are many
opportunities for the U.S. to reduce trade barriers for U.S. goods and
services. These are particularly important in the apparel sector, where
U.S. importers and retailers cope with multiple sources of supply and a
large variety of complicated origin rules. These agreements offer the
opportunity for USA-ITA members to consolidate and simplify operations
and expand into new markets.
In dealing with these trade negotiations, USA-ITA strongly urges
the Committee to support a process that treats the textile and apparel
sectors as part of the whole rather than as a separate issue. Under the
terms of the Agreement on Textiles and Clothing, these sectors are
scheduled to be integrated into the normal WTO rules on January 1,
2005. In accordance with that plan, the time has come to stop treating
textiles and apparel as a separate negotiation, particularly with
respect to elimination of tariff and non-tariff barriers. Instead, USA-
ITA supports the inclusion of these sectors in a ``zero-for-zero''
tariff initiative as part of the Doha negotiations. USA-ITA members
would like to sell their goods throughout the world, and the
elimination of barriers such as high duties are essential to the
achievement of that goal. However, we must be prepared to lift our
barriers as well, and a zero for zero initiative makes clear that the
United States is sincere in its demands for market access.
In the apparel sector, the U.S. has typically proposed--and
obtained--extremely long periods for the gradual phase-out of duties in
the context of free trade agreement negotiations. USA-ITA strongly
urges a change in this position. As we approach 2005 and a relatively
quota-free world, duty rates will be a much more significant factor in
sourcing decisions and therefore their elimination is essential for the
success of preference arrangements.
In the case of the Western Hemisphere, our proposed FTAs, such as
with all 34 countries or with the five Central American countries, some
apparel products already have the benefit of unilateral duty-free entry
into the U.S. market. For these products, the FTAs should include
immediate duty-free treatment. To go from unilateral duty-free
treatment to negotiated 10- or 15-year gradual duty reductions is not a
means for enticing business with these trade partners. Therefore, it is
imperative that FTAs negotiated in this hemisphere do not result in
even temporary duty increases. Instead, goods duty-free under
unilateral preferences should be duty-free from the outset of
negotiated FTAs. In the post-quota world, the U.S. importer community
is going to be looking to make longer term sourcing commitments, and
any lapses or delays in duty benefits for this region may result in
permanent exclusion from U.S. buyers' business plans.
FTAs within the Western Hemisphere also offer the possibility of
uniform origin rules, as opposed to the dizzying variety of rules that
have been generated by a U.S. Congress trying to appease competing
constituencies, regardless of whether they are logical or make business
sense. The NAFTA origin rules, while not perfect, would work in the
context of a Free Trade Area of the Americas, because those rules would
offer the necessary flexibility for manufacturers to source yarns and
fabrics with which to produce finished garments from within the 34
participating countries. Unfortunately, NAFTA rules will not work in
the context of the FTA being negotiated with Singapore, because
Singapore does not produce the yarns and fabrics with which to produce
finished garments. For Singapore, USA-ITA urges the Committee to
support a more flexible origin rule, which would allow for the use of
inputs from other suppliers within the ASEAN.
CBTPA and AGOA, Andean Trade Preferences Act
USA-ITA members also look forward to enactment of improvements to
the Caribbean Basin Trade Partnership Act and the African Growth and
Opportunity Act, as well as to enactment of an Andean Trade Preference
Act that includes benefits for apparel products. The CBTPA is greatly
in need of improvement because its limited terms undermine the benefits
originally expected under the new law. Instead of expanding trade, the
CBTPA has instead had the effect of contracting trade.
The CBTPA obviously has been no panacea for the CBI region. Apparel
imports from the CBI are down three percent for the year ending
November 2001 compared to the year ending November 2000. When you look
at the individual countries, it is apparent that those CBI countries
most dependent upon production sharing arrangements with U.S. companies
have been hurt the most since the CBTPA went into effect. Meanwhile,
those who are least dependent upon production sharing arrangements,
because they offer ``full package'' goods--from yarn or fabric to the
finished garment--are actually doing well in this tough retail
environment. Compare the experiences of the Dominican Republic and
Guatemala: The Dominican Republic is a major 807 manufacturer while
Guatemala typically does both cutting and sewing to create the final
product. The Dominican Republic has seen its trade in apparel decline
in 2001 while Guatemala continues to grow.
From the perspective of USA-ITA, a primary lesson of the CBTPA is
that the U.S. cannot engineer new competitive advantages by limiting
sourcing options. Instead, it should be seeking to capitalize on
existing competitive advantages. Under the CBTPA, benefits are
available only for apparel made from U.S. fabric from U.S. yarns and
for a limited quantity of apparel made from regional fabric so long as
that regional fabric was knit or woven from U.S. yarns. Given the
generally higher cost of U.S. fabrics and U.S. yarns, the ability of
CBI manufacturers to meet price points required for the products they
are capable of producing has been greatly undermined. Many CBI
producers have determined that the only way they can meet the price
points of the value-minded U.S. consumer is to use non-U.S. fabrics and
yarns, and therefore not participate in the CBTPA. And, of course, a
lesson also has been sent to the U.S. manufacturers of those fabrics
and yarns, because they have not seen the expanded sales they believed
would come from such a strict requirement for preferences.
Regrettably, the domestic textile industry continues to try to
distort sourcing options. Thus, the Congress is now faced with trying
to identify how to implement the ``DeMint letter,'' under which U.S.
formed fabrics from U.S. formed yarns also must be dyed, printed and
finished in the U.S. in order for apparel cut and sewn in CBTPA
beneficiary countries to receive duty-free access to the U.S. market.
Revision of the CBTPA, and incorporation of such limitations into
legislation to expand the ATPA to apparel products, will not assist the
U.S. mill industry. To the contrary, USA-ITA fully expects that this
provision will only curtail sales for U.S. mills.
The ATPA legislation provides a significant opportunity for the
U.S. Administration and the Congress to demonstrate that they have
learned from the experiences of the CBTPA. Whether the Andean countries
will be able to expand their business in the United States is directly
dependent upon when and what ATPA expansion bill is enacted into law by
the U.S. Congress. Legislation identical to what was approved for the
Caribbean and Central American countries under the CBTPA--as the Senate
has proposed--will inevitably do nothing to encourage business between
the U.S. and Andean manufacturers. That is both because of the flaws in
the CBTPA and the distinctions between the apparel produced by the
Caribbean/Central American region and the Andean region.
Unlike the CBI region, the ATPA countries tend to produce full
package tailored goods, rather than basic garments suited to simple
assembly operations. The Andean countries, unlike the CBI countries,
also have established yarn spinning and fabric making capabilities. Not
permitting the Andean countries to capitalize on these assets under a
preference program is to ensure that the preference program will be
unusable. And if Andean apparel production does not expand, that does
nothing to help U.S. mills, U.S. yarn spinners, and U.S. cotton growers
to expand sales.
Moreover, even assuming that the House version of ATPA enhancement
becomes law, unilateral benefits, such as those provided under CBTPA
and proposed under ATPA, are only temporary provisions. These
provisions should be the starting point for a negotiated and unlimited
term free trade agreement, as a means of providing the necessary
permanence and security businesses require. If it should appear that
the hemisphere-wide FTAA cannot be implemented before an ATPA
enhancement law expires, USA-ITA urges consideration of a smaller
arrangement, such as an FTA between the U.S. and the ATPA countries,
just as the U.S. is proposing an FTA with the Central American
countries, as an interim measure.
Pakistan: In the wake of the tragic events of September 11, USA-ITA
strongly urges the Committee to support steps that could counter a
sense of business uncertainty that now hangs over the countries
surrounding Afghanistan, particularly Pakistan which has proved itself
as a key ally.
Our industry views Pakistan as an important source of goods, but we
also must minimize business risks, especially in light of the difficult
economic situation. The Administration and the Congress already have
delayed providing Pakistan products tariff concessions that could
provide an important impetus for maintaining and moving business to
that country, with the Administration providing only minimal quota
increases in a few apparel categories. USA-ITA urges the Congress to do
what the Bush Administration has not done. Providing short-term trade
concessions, such as duty reductions for a one-year period, would
signal to Pakistan and its leaders that their stance in support of the
United States is appreciated.
It also would mean jobs for Pakistani workers, assuring stability
in a country where unstable conditions surely have contributed to the
terrorist threat felt by our Nation. Significantly, such concessions
would not hurt U.S. manufacturers. To the contrary, additional business
for Pakistan would come at the expense of other Asian suppliers, not
Vietnam: USA-ITA is extremely dismayed by reports that the Bush
Administration is seeking to initiate negotiations with Vietnam to
establish quotas on apparel produced in Vietnam. The most recent U.S.
Census Bureau data shows that apparel imports from Vietnam in 2001 are
down by more than 6% compared to 2000, and are even less than in 1999.
Surely this miniscule level of trade (0.17% of total U.S. apparel
imports, making it the 53rd largest supplier) cannot be threatening
U.S. makers. Instead it appears that the Committee for the
Implementation of Textile Agreements, CITA, is looking to establish
quotas simply for the sake of establishing quotas. The basis for the
U.S. textile program has always been to address problems of market
disruption caused by increased imports, while permitting developing
countries to share in expanded export opportunities. That policy should
not change now.
The U.S. apparel importing community is looking forward to
developing and expanding sourcing from Vietnam for a number of
important reasons. First, the implementation of the Agreement on
Textiles and Clothing has not afforded our members the ability to
expand sourcing from the most desirable suppliers at the same pace as
the growth in the U.S. market. This situation has arisen primarily
because the terms for textile and apparel exports from WTO member
countries have been set since January 1, 1995, based upon trade
patterns in place before the ATC went into effect. As a result, our
members are forced to continue seeking new sources of supply to meet
the demands of the American consumer.
Second, even new suppliers have been restrained by the United
States. For example, about two and a half years after entering the U.S.
market (because its products became eligible for Column 1 duties),
Cambodian apparel became the subject of a bilateral textile agreement
establishing quotas on 24 apparel categories. The ability of U.S.
importers to source from Cambodia has been greatly compromised as a
result, because many of the quota levels established for Cambodia are
insufficient to meet the needs of individual companies.
Third, the demands of the market combined with the limitation of
quota restrictions have compelled some in the import community to focus
upon suppliers that would otherwise be undesirable. For example, some
companies were forced to view Burma/Myanmar as a source of supply
largely because garments at the appropriate price point from their
other suppliers of choice are capped. Burma served as an alternative to
these countries because it is a WTO member, and therefore the U.S.
Government may seek new restrictions only if it complies with the terms
of Article 6 of the ATC. Vietnam offers an alternative to Burma, but
only if Vietnam's trade is permitted to expand to a level essential to
make it commercially viable.
Fourth, the newly normalized trade relationship with Vietnam offers
U.S. companies tremendous opportunities to sell into the Vietnamese
market, taking advantage of lower tariffs and the elimination of non-
tariff barriers and non-transparent regulations. However, the ability
of Vietnam to afford American goods and the demand for American goods
and services is directly dependent upon the foreign exchange Vietnam
will earn by exporting products to the U.S. market. Seeking quotas on
Vietnam's apparel exports to the U.S. market, especially before that
trade even has the opportunity to develop, will clearly impair the
ability of Vietnam to afford U.S. goods and services.
Actions by the Administration to seek a textile agreement with
Vietnam now also could destroy the incentive for foreign investment in
Vietnam, which Vietnam needs to build new state of the art factories.
Those new factories mean sales for U.S. companies producing
earthmoving, construction and road building equipment, for U.S.
companies involved in providing basic telecommunications equipment and
services, and for U.S. banks and insurance firms servicing and
financing such projects. Foreign investment in the apparel sector, in
particular, also means the importation of a wealth of knowledge
regarding respect for the rule of law, including compliance with U.S.
legal requirements, and good working conditions. The companies most
interested in investing in Vietnam's apparel sector are those with
experience in meeting the codes of conduct established by major
American brands, all of which are members of our associations.
The trade agenda for 2002 is an ambitious one, but its
implementation is essential if the United States is to maintain its
leadership role in promoting global economic security. USA-ITA looks
forward to enactment of trade promotion authority and the Andean Trade
Preferences Act as the first steps toward achievement of that agenda,
and to signs that both the Congress and the Administration are now
ready to end the decades-long era of discriminating against textile and
apparel trade. In particular, USA-ITA urges the Committee to strongly
support assistance to key allies like Pakistan and to ensure that the
Administration resists pressures to discriminate against the
development of apparel trade by Vietnam.