[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]



                               before the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                            FEBRUARY 7, 2002

                           Serial No. 107-57

         Printed for the use of the Committee on Ways and Means

                     U.S. GOVERNMENT PRINTING OFFICE
79-584                       WASHINGTON : 2002
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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
RON LEWIS, Kentucky
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 
further refined.

                            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, 
  statement......................................................    79
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, 
  statement......................................................    96
Semiconductor Industry Association, George Scalise, statement....   101
United States Association of Importers of Textiles and Apparel, 
  New York, NY, statement........................................   105



                       THURSDAY, FEBRUARY 7, 2002

                          House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    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:]



                                                CONTACT: (202) 225-1721
January 29, 2002
No. FC-13

                     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 


    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.


    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 
hearing record.
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://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 
noted above.


    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 economy.
    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 
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 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 
see them.


    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.


    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 
legislation through.
    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 
other components.
    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 
orderly fashion.
    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-
Saharan Africa.
    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 
bill, 18-3.
    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 
long term.''
    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 
economic growth.
    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 
with Russia.
    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 
before noon.
    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 
this issue?
    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 
do so.
    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.
    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 
reasons why----
    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 
adjustment process.
    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 
tell us----
    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 
overseas prices.
    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 
our economy.
    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 
like citrus?
    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 
the WTO.
    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 
of initiative?
    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 
Magreb countries.
    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 
I'm honestly----
    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 
negotiations underway?
    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 
appreciate it.
    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 
section 301.
    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 
useful approach.
    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 
be changed.
    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 
responses follow:]
    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 
sweeteners; 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 
discriminatory policies?
    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, 
say, 2004.
    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?
Answer 1:
    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 
good progress.

    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 
Answer 2:
    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?
Answer 3:
    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 
sensitive commodities.
    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 
Answer 4:
    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 
general principles.
    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 
year ahead?
    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 
domestic producers.
     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?
Answer 1:
    (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?
Answer 2:
    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 
your decision?
    (c) Have you already sought during the U.S.-Chile FTA negotiations 
to expand the scope of investor protections similar to NAFTA Chapter 
Answer 3:
    (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?
Answer 4:
    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.
Answer 5:
    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?
Answer 6:
    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?
Answer 7:
    (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 
Answer 8:
    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' 
Answer 9:
    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.
Question 1:
    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 
the WTO.
Question 2:
    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
                                                    USTR Ambassador

                   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 
Organization (WTO);
     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 
Trade Commission.
     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 
Wheat Board.
    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 
Committee files.]


    [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.
Global Challenges
    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 
classification system;
       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 
Reporting Rules;
     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 
innovation process;
     LEnsure balanced opportunity for the primary suppliers and 
developers of technology to participate in decision-making, e.g., 
national treatment;
     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
    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.
                  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 
industry globally;
    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. 
trading partners.
    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 

                                                         Lyn Withey
                                                 Chairman, ISAC #10
                                Vice President, International Paper
                           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
                            MINORITY OPINION
    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 
tariff elimination.


           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 
consistently enforced.
    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 
weakening--whether through:

     La new World Trade Organization (WTO) round of global 
trade negotiations;
     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 
structural problems;
     Lmassive global excess steelmaking capacity--roughly 250 
million metric tons, or more than twice the size of the total U.S. 
steel market.

    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 
December 1997;
     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 
customer-focused industry.
    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 
found injury.

       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 
and markets.
       LIt will serve the long-term interests of U.S. steel 
using industries.
       LIt will benefit the overall U.S. economy and U.S. 
national security.
       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 
last resort.
    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 
WTO allows.

    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 
trading system.
    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. 
AD/CVD laws;
     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.

    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 
international trade.
    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 
Leadership pledged

          ``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 
Asian exporters.
    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 
the debate.
    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 
floor action.
    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 
against expropriation;
     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 
Development Agenda.
    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 
been forthcoming.
    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 
frequently refers.
    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 


                                                     Washington, DC
                                                   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 
the region.
    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 
Western Hemisphere.
    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, 
        up 229%.
  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----

     L270 jobs
     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 
and Senate.
    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 
Bankruptcy Code.
    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 
Prospective Repeal
    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:


  (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.
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 
VII. Conclusion
    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 
3/22/51/62/61/67/81/52/52/6 3/22/59/43/57/22/63/32/63/32/51/5 
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 
trade program.
    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
                                              Senior Vice-President
                                               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 
multilateral negotiations.
    We appreciate this opportunity to share Mattel's views with the 
Committee on Ways and Means.


    Statement of the National Electrical Manufacturers Association, 
                           Rosslyn, Virginia
    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 
crucial area.
     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 
this project.
      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. 
small businesses.
     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. 
regulatory standards.
     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 
of Representatives.
    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

    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 
delivered electronically.

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.

Dispute Settlement

    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 
further impaired.
    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.

Bilateral Issues

    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 
U.S. makers.

    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.