[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
              IMPLEMENTATION OF U.S. BILATERAL FREE TRADE 
                  AGREEMENTS WITH CHILE AND SINGAPORE

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 10, 2003

                               __________

                           Serial No. 108-24

                               __________

         Printed for the use of the Committee on Ways and Means






                   U.S. GOVERNMENT PRINTING OFFICE
91-677                       WASHINGTON : 2004
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800, 
DC area (202) 512-1800 Fax: (202) 512-2250 Mail: stop SSOP, Washington, 
DC 20402-0001




                      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               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana               JIM MCDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
                    Allison H. Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel

                                 ------                                

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman

E. CLAY SHAW, JR., Florida           SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York               CHARLES B. RANGEL, New York
DAVE CAMP, Michigan                  RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California             JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa

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



                            C O N T E N T S

                              ----------                              

                                                                   Page

Advisory of June 3, 2003, announcing the hearing.................     2

                               WITNESSES

Office of the U.S. Trade Representative, Hon. Peter F. Allgeier, 
  Deputy U.S. Trade Representative...............................    19

                                 ______

Air Courier Conference of America, and Federal Express 
  Corporation, David W. Spence...................................    79
American Federation of Labor and Congress of Industrial 
  Organizations, Thea M. Lee.....................................    87
Biggert, Hon. Judy, a Representative in Congress from the State 
  of Illinois....................................................    16
Blumenauer, Hon. Earl, a Representative in Congress from the 
  State of Oregon................................................    10
Business Software Alliance, and Borland Software Corporation, 
  Keith Gottfried................................................    60
Carnegie Endowment for International Peace, John Audley..........    95
Entertainment Industry Coalition for Free Trade, and Recording 
  Industry Association of America, Joseph Papovich...............    74
Oxfam America, Gawain Kripke.....................................    83
Qualcomm, Incorporated, Jeff Jacobs..............................    55
Sessions, Hon. Pete, a Representative in Congress from the State 
  of Texas.......................................................    13
U.S. Chamber of Commerce, and Tramco, Inc., E. Leon Trammell.....    51
U.S.-Singapore Free Trade Agreement Business Coalition, and Exxon 
  Mobil Corporation, Bob Haines..................................    65

                       SUBMISSIONS FOR THE RECORD

Adler, Prudence S., Association of Research Libraries, joint 
  letter (see listing under American Association of Law 
  Libraries).....................................................   105
American Association of Law Libraries, Robert L. Oakley; American 
  Library Association, Miriam M. Nisbet; Association of Research 
  Libraries, Prudence S. Adler; Medical Library Association, Mary 
  M. Langman; Special Libraries Association, Douglas Newcomb; and 
  Digital Future Coalition, Peter Jaszi; joint letter............   105
American Chamber of Commerce in Singapore, Singapore, Kristin E. 
  Paulson, statement.............................................   107
American Library Association, Miriam M. Nisbet, joint letter (see 
  listing under American Association of Law Libraries)...........   105
Association of Food Industries, Inc., Jeffrey S. Levin, statement   109
Association of Research Libraries, Prudence S. Adler, joint 
  letter (see listing under American Association of Law 
  Libraries).....................................................   105
Automotive Trade Policy Council, statement.......................   112
Bismarck, Alexander von, Environmental Investigation Agency, 
  statement......................................................   130
Bohannon, Mark, Software & Information Industry Association, 
  letter.........................................................   137
Chilean-American Chamber of Commerce, Las Condes, Santiago, 
  Chile, statement...............................................   113
Cressy, Peter H., Distilled Spirits Council of the United States, 
  Inc., statement................................................   115
Damond, Joe, Pharmaceutical Research and Manufacturers of 
  America, statement.............................................   133
Digital Future Coalition, Peter Jaszi, joint letter (see listing 
  under American Association of Law Libraries)...................   105
Distilled Spirits Council of the United States, Inc., Peter H. 
  Cressy, statement..............................................   115
Electronic Industries Alliance, Arlington, VA, statement and 
  attachment.....................................................   116
Environmental Investigation Agency, Alexander von Bismarck, 
  statement......................................................   120
Federation for American Immigration Reform, Dan Stein, statement.   126
Haidet, Michael K., Timken Company, Canton, OH, letter...........   141
High-Tech Trade Coalition, statement.............................   128
Jackson, Selina E., UPS, statement...............................   147
Jaszi, Peter, Digital Future Coalition, joint letter (see listing 
  under American Association of Law Libraries)...................   105
Langman, Mary M., Medical Library Association, joint letter (see 
  listing under American Association of Law Libraries)...........   105
Levin, Jeffrey S., Association of Food Industries, Inc., 
  statement......................................................   109
Medical Library Association, Mary M. Langman, joint letter (see 
  listing under American Association of Law Libraries)...........   105
National Association of Manufacturers, statement.................   130
National Electrical Manufacturers Association, Rosslyn, VA, 
  statement and attachment.......................................   132
Newcomb, Douglas, Special Libraries Association, joint letter 
  (see listing under American Association of Law Libraries)......   105
Nisbet, Miriam M., American Library Association, joint letter 
  (see listing under American Association of Law Libraries)......   105
Oakley, Robert L., American Association of Law Libraries, joint 
  letter (see listing under American Association of Law 
  Libraries).....................................................   105
Paulson, Kristin E., American Chamber of Commerce in Singapore, 
  Singapore, statement...........................................   107
Pharmaceutical Research and Manufacturers of America, Joe Damond, 
  statement......................................................   133
Software & Information Industry Association, Mark Bohannon, 
  letter.........................................................   137
Special Libraries Association, Douglas Newcomb, joint letter (see 
  listing under American Association of Law Libraries)...........   105
Stein, Dan, Federation for American Immigration Reform, statement   126
Thomas, Randi Parks, United States Tuna Foundation, statement....   144
Timken Company, Canton, OH, Michael K. Haidet, letter............   141
United States Tuna Foundation, Randi Parks Thomas, statement.....   144
UPS, Selina E. Jackson, statement................................   147
Waxman, Hon. Henry A., a Representative in Congress from the 
  State of California, statement.................................   148


 IMPLEMENTATION OF U.S. BILATERAL FREE TRADE AGREEMENTS WITH CHILE AND 
                               SINGAPORE

                              ----------                              


                         TUESDAY, JUNE 10, 2003

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:00 p.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-6649
FOR IMMEDIATE RELEASE
June 3, 2003
No. TR-3

                       Crane Announces Hearing on

              Implementation of U.S. Bilateral Free Trade

                  Agreements with Chile and Singapore

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on implementation of the United States 
bilateral free trade agreements (FTAs) with Chile and Singapore. The 
hearing will take place on Tuesday, June 10, 2003, in the main 
Committee hearing room, 1100 Longworth House Office Building, beginning 
at 1:00 p.m.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. Invited witnesses will include Ambassador Peter Allgeier, 
Deputy United States Trade Representative. Also, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee or for inclusion in the 
printed record of the hearing.
      

BACKGROUND:

      
    The Chile and Singapore FTAs will be the first trade agreements 
considered by the Congress under the fast track procedures outlined in 
Trade Promotion Authority (TPA). TPA was approved by the 107th Congress 
and signed into law in August 2002 (P.L. 107-210).
      
    The United States and Singapore began FTA negotiations in December 
2000, and the talks were officially concluded in January 2003. On 
January 30, 2003, President Bush notified Congress of his intent to 
enter into the Singapore FTA. The text of the Singapore FTA was 
released to the public on March 7, 2003. Under TPA procedures, 
President Bush was able to sign the FTA 90 calendar days after his 
notification, or at any time after May 1, 2003. The FTA was signed on 
May 6 at the White House by President Bush and Singaporean Prime 
Minister Goh Chok Tong.
      
    The concept of an FTA with Chile has been proposed for many years. 
In December 1994, the three leaders of the United States, Canada and 
Mexico announced their intention to negotiate Chile's accession to the 
North American Free Trade Agreement (NAFTA), and those talks formally 
began in June 1995. However, fast track authority had lapsed and the 
talks stalled. Since that time, both Mexico and Canada have concluded 
bilateral FTAs with Chile, and U.S. exporters have been losing business 
in Chile to competitors from both countries. On December 11, 2002, the 
Administration announced that an FTA had been reached in principle with 
Chile, and on January 30, 2003, President Bush notified Congress of his 
intent to enter into the Chile FTA. The text of the Chile FTA was 
released to the public on April 3, 2003. United States Trade 
Representative Robert Zoellick and Chilean Foreign Minister Soledad 
Alvear are scheduled to sign the FTA on June 6 in Miami, Florida.
      
    In announcing the hearing, Chairman Crane stated, ``Since the 
landmark passage of Trade Promotion Authority last year, U.S. trade 
negotiators have concluded bilateral free trade agreements with Chile 
and Singapore. These agreements show how, after a lapse of 8 years, TPA 
has enabled the United States to finally pursue new trade opportunities 
for U.S. businesses, farmers, and workers. The Chile and Singapore free 
trade agreements are both comprehensive, state-of-the-art agreements, 
and I look forward to Congressional approval as quickly as possible.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on Congressional consideration of the Chile 
and Singapore FTAs and the benefits that both agreements will bring to 
American businesses, farmers, workers, and to the U.S. economy.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Bill Covey at (202) 225-1721 no later than the close of 
business on Wednesday, June 4, 2003. The telephone request should be 
followed by a formal written request faxed to Allison Giles, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Subcommittee on Trade will notify by telephone 
those scheduled to appear as soon as possible after the filing 
deadline. Any questions concerning a scheduled appearance should be 
directed to the Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Committee are required to submit 200 copies, along with an 
IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, of 
their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade office, room 1104 
Longworth House Office Building, no later than close of business on 
Friday, June 6, 2003, in an open and searchable package. The U.S. 
Capitol Police will refuse sealed-packaged deliveries to all House 
Office Buildings. Failure to do so may result in the witness being 
denied the opportunity to testify in person.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    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 on Tuesday, June 24, 2003. 
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 Subcommittee on Trade in room 1104 
Longworth House Office Building, in an open and searchable package 48 
hours before the hearing. The U.S. Capitol Police will refuse sealed-
packaged deliveries to all House Office Buildings.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. 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 WordPerfect 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. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.
      
    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 CRANE. Will everyone please take their seats. 
Welcome to this hearing of the Subcommittee on Trade of the 
Committee on Ways and Means, to focus on the recently completed 
Chile and Singapore Free Trade Agreements (FTAs) and the 
benefits that both agreements will bring to American 
businesses, farmers, workers, and to the U.S. economy.
    The Chile and Singapore FTAs are the first trade agreements 
to be considered by the Congress under the procedures in the 
landmark Trade Promotion Authority (TPA) (Trade Act of 2002, 
P.L. 107-210) legislation passed last year. The conclusion of 
these two agreements represents a watershed in U.S. trade 
policy. They are the biggest U.S. free trade deals since the 
North American Free Trade Agreement (NAFTA) was signed over 10 
years ago. Both agreements promote U.S. economic interests and 
substantially achieve the negotiating objectives set out in 
TPA. These state-of-the-art, comprehensive agreements establish 
high standards in market access for goods, services, e-
commerce, intellectual property rights investment, and 
competition. On market access, all tariffs and quotas on all 
goods will be eliminated, no exceptions.
    Singapore's origins are based on trade. In 1819, Sir 
Stanford Raffles recognized Singapore's prime location as a 
trans-shipment port, and he established it as a trading station 
for the British East India Company. Singapore has since become 
one of the world's most prosperous countries with strong 
international trading links and one of the world's busiest 
ports.
    Since Singapore already has 99 percent free trade and 
goods, U.S. negotiators focused on removing Singaporean 
restrictions on a wide range of services. Singapore agreed to a 
negative list approach, meaning all sectors are subject to 
liberalization unless a party excludes them. This negative list 
approach is a good precedent to set, and I hope we can continue 
to make that approach part of all of our trade agreements.
    Chile also has a market-oriented economy based upon open 
trade. The country is a model of how open trade and/or sound 
economic policies can lead a country toward development and 
democracy. Under the Chilean agreement, 85 percent of bilateral 
trade and consumer and industrial products become duty-free 
immediately upon entry into force, with most remaining tariffs 
eliminated within 4 years.
    The investment sections in both agreements provide strong 
protections for U.S. investors, while also making improvements 
to the NAFTA chapter 11 model called for in TPA by providing 
more transparency, public input in the dispute, and mechanisms 
to improve the investor state process by eliminating frivolous 
claims.
    On intellectual property rights and enforcement, Singapore 
and Chile both agreed to many provisions that go beyond the 
disciplines in the World Trade Organization (WTO) agreement on 
Trade-Related aspects of Intellectual Property rights (TRIPS), 
particularly on high-tech digital issues. The agreements set a 
high standard of protection for trademarks, copyrights, 
patents, and trade secrets, and established a tough enforcement 
regime for piracy and counterfeiting. Unfortunately, I still 
have concerns with Singapore related to chewing gum with direct 
impact on a well-known Chicago-based company. I had hoped that 
this issue would be resolved by now, and I strongly encourage 
Singapore to comply with the spirit of the FTA text by allowing 
therapeutic chewing gum to be sold in Singapore without a 
prescription.
    Other than that issue, I strongly support both FTAs, and I 
look forward to their House passage before the August recess. I 
believe these trade agreements mark win-win deals for the 
United States and two important allies, and I expect they will 
both be approved by the Congress with strong bipartisan 
support. Now I yield to our distinguished Ranking Member on the 
Subcommittee, Mr. Levin.
    [The opening statement of Chairman Crane follows:]
  Opening Statement of the Honorable Philip M. Crane, Chairman, and a 
         Representative in Congress from the State of Illinois
    Welcome to this hearing of the Ways and Means Trade Subcommittee to 
focus on the recently completed Chile and Singapore free trade 
agreements, and the benefits that both agreements will bring to 
American businesses, farmers, workers, and to the U.S. economy. The 
Chile and Singapore FTAs are the first trade agreements to be 
considered by the Congress under the procedures in the landmark Trade 
Promotion Authority legislation passed last year.
    The conclusion of these two agreements represents a watershed in 
U.S. trade policy. They are the biggest U.S. free trade deals since the 
North American Free Trade Agreement was signed over 10 years ago. Both 
agreements promote U.S. economic interests and substantially achieve 
the negotiating objectives set out in TPA. These state-of-the-art, 
comprehensive agreements establish high standards in market access for 
goods, services, e-commerce, intellectual property rights, investment, 
and competition. On market access, all tariffs and quotas on all goods 
will be eliminated--no exceptions.
    Singapore's origins are based on trade. In 1819, Sir Stamford 
Raffles recognized Singapore's prime location as a transhipment port, 
and he established it as a trading station for the British East India 
Company. Singapore has since become one of the world's most prosperous 
countries with strong international trading links and one of the 
world's busiest ports. Because Singapore already has 99% free trade in 
goods, U.S. negotiators focused on removing Singaporean restrictions on 
a wide range of services. Singapore agreed to a ``negative list'' 
approach--meaning all sectors are subject to liberalization unless a 
Party excludes them. This negative list approach is a good precedent to 
set, and I hope we can continue to make that approach part of all of 
our trade agreements.
    Chile also has a market-oriented economy based upon open trade. The 
country is a model of how open trade and sound economic policies can 
lead a country toward development and democracy. Under the Chilean 
agreement, 85% of bilateral trade in consumer and industrial products 
becomes duty-free immediately upon entry into force, with most 
remaining tariffs eliminated within 4 years.
    The investment sections in both agreements provide strong 
protections for U.S. investors while also making improvements to the 
NAFTA chapter 11 model called for in TPA by providing more 
transparency, public input in the dispute, and mechanisms to improve 
the investor-state process by eliminating frivolous claims.
    On intellectual property rights and enforcement, Singapore and 
Chile both agreed to many provisions that go beyond the disciplines in 
the WTO Agreement on Trade Related Aspects of Intellectual Property 
Rights, particularly on high-tech digital issues. The agreements set a 
high standard of protection for trademarks, copyrights, patents, and 
trade secrets, and establish a tough enforcement regime for piracy and 
counterfeiting.
    Unfortunately, I still have concerns with Singapore related to 
chewing gum with direct impact on a well-known Chicago-based company. I 
had hoped that this issue would be resolved by now and I strongly 
encourage Singapore to comply with the spirit of the FTA text by 
allowing therapeutic chewing gum to be sold in Singapore without a 
prescription.
    Other than that issue, I strongly support both FTAs and I look 
forward to their House passage before the August recess. I believe 
these trade agreements mark win-win deals for the United States and two 
important allies, and I expect they will both be approved by the 
Congress with strong bipartisan support.

                                 

    Mr. LEVIN. Thank you, Mr. Chairman. I am glad we are here 
today to examine the Chile and Singapore FTAs. These will be 
the first FTAs, as we know, brought back under the fast track 
legislation passed last year. Also, the Administration has 
talked about and has begun using these agreements as a 
template, a model, for other negotiations. So, I think these 
two are deserving of very close and careful attention.
    It is important, as we begin, to note significant positive 
provisions in both agreements. Both agreements include strong 
and comprehensive commitments by Chile and Singapore to open 
their goods, agriculture, and services markets to U.S. 
producers. Both agreements include commitments that will 
increase regulatory transparency and add to the benefit of U.S. 
investors, intellectual property holders, businesses, and 
consumers.
    While some of the provisions in the Chile and Singapore 
FTAs can serve as templates for other agreements, a number of 
provisions clearly cannot. In some instances this is because 
the provision, while workable in the Chile or Singapore 
context, is not appropriate for FTAs with other countries where 
very different circumstances prevail. In other cases it is 
because the policy being pursued by the Administration is just 
plain wrong. In fact, one of the biggest threats to smooth 
passage of the Chile and Singapore FTAs is the concern that the 
Administration is beginning to use some of their provisions as 
models for other FTAs, for example, the U.S.-Central America 
Free Trade Agreement (CAFTA), where the conditions make it 
inappropriate to do so.
    I will mention a number of the issues of concern briefly. 
First, the Singapore FTA includes the so-called Integrated 
Sourcing Initiative (ISI). If the Administration's and the 
Singapore government's stated purpose of the ISI was to help 
Indonesia--a policy, I think, that has merit--then we should 
find a more targeted way of doing so. Although the 
Administration likes to talk about this special rule of origin 
as if it applies only to two Indonesian islands, in fact any 
country in the world can take advantage of it.
    Also, to date the Administration has never publicly 
discussed one of the two features of the ISI that raises the 
most concerns: The fact that ISI components from any country 
may be treated as Singapore content for purposes of helping 
other goods benefit from the FTA. I think we need a better 
understanding of the ISI, and the Administration should give 
assurances that the ISI list will not be expanded without 
congressional approval--and how such a system would work.
    Clearly enough questions have been raised about the wisdom 
of the ISI, that this should be rejected as a precedent for 
other FTAs. The H-1B-type provisions in the Chile and Singapore 
agreements also have raised concern. The basic problem, as I 
see it, is that the Administration has created a program that 
allows an immigrant to stay in this country permanently under 
the guise of a temporary visa program. I have supported and do 
support immigration, and have supported increases to the H-1B 
cap in the past. However, before we start creating hybrids of 
the temporary H-1B program and the existing permanent 
employment-based visa programs, we should understand why we are 
pursuing this policy, how these provisions will work when fully 
enacted into U.S. law, how they will impact U.S. immigration 
patterns, and how they would impact U.S. workers.
    The labor and environmental provisions in the Chile and 
Singapore FTAs are of significant concern. There are separate 
dispute settlement rules to place arbitrary caps on the 
enforceability of these provisions. I believe this is a 
mistaken approach--this dual dispute settlement approach--the 
difficulties of which would only be magnified if used as a 
precedent for future FTAs involving very different 
circumstances.
    This is doubly true of any attempt to use in future FTAs 
the ``enforce your own law'' standard used in Chile and 
Singapore. The context in Chile and Singapore today is 
important, as it was in the case of Jordan. The laws of Chile 
and Singapore today essentially reflect core internationally 
recognized labor rights. How they are applied does vary in the 
two countries, reflecting the different general characteristics 
of Chile and Singapore. At the same time, there is little 
practical concern that these countries would backtrack.
    These situations, in any event, are very different from 
many other FTA negotiating partners, including most Central 
American countries and many others that would be a part of a 
Free Trade Area of the Americas (FTAA). Use of the ``enforce 
your own law'' standard is invalid as a precedent, indeed as a 
contradiction to the purpose of promoting enforceable core 
labor standards when a country's laws clearly do not reflect 
international standards, and when there is a history not only 
of nonenforcement, but of a hostile environment towards the 
rights of workers to organize and bargain collectively.
    I recently went to Central America to experience the 
situation there firsthand. The Administration's tabling in the 
CAFTA negotiations of the ``enforce your own law'' standard is 
counterproductive in those countries. It would reward countries 
with the worst standards and will miss an opportunity to allow 
workers to participate actively in their workplace in these 
countries which historically--these efforts, these 
opportunities for workers, which historically in every Nation, 
including our own, has been necessary for the development of a 
broad middle class.
    There are several other issues that have been raised, and 
about which we need a response from the Office of the U.S. 
Trade Representative as well, and I will name just a few of 
them: Whether the intellectual property provisions lacking in 
the current state of U.S. law--making it much more difficult 
for Congress to change those rules in the future--are 
appropriate; whether the U.S. Trade Representative adequately 
ensured that foreign investors will not have greater rights 
than provided under U.S. law; whether the U.S. Trade 
Representative and the U.S. Department of the Treasury's 
efforts to eliminate a country's flexibility to impose, on an 
emergency basis, temporary capital controls--which was modified 
after criticism from a number of economists and several of us 
in the Congress--is sound policy and should be pursued in 
future FTAs; whether more can be done by Singapore to stop the 
trans-shipment of illegally harvested timber.
    So, I hope the testimony today will discuss the significant 
benefits of Chile and Singapore FTAs as well as respond to 
these important issues and questions.
    Finally, we need to consider whether and how outstanding 
questions can be addressed through the implementation language. 
I worked actively with many others on the legislation 
implementing the Uruguay Round agreements. The congressional 
efforts and input into that legislation were important for its 
ultimate passage. They were achieved by use of the long-
standing precedent of a mock markup, the legislation to be 
considered under fast track rules before it is introduced. I 
hope that this approach will be used for the Singapore and 
Chile FTAs. I look forward to discussions regarding this aspect 
as this Subcommittee and the full Committee move forward on the 
Singapore and Chile FTAs. Thank you, Mr. Chairman.
    [The opening statement of Mr. Levin follows:]
Opening Statement of the Honorable Sander M. Levin, a Representative in 
                  Congress from the State of Michigan
    Thank you, Mr. Chairman. I am glad that we are here today to 
examine the Chile and Singapore Free Trade Agreements. These will be 
the first FTAs brought back under the fast track legislation passed 
last year. Also, the Administration has talked about and has begun 
using these agreements as a template for other negotiations. So I think 
they are deserving of very close and careful attention.
    It is important to note significant positive provisions in both 
agreements. Both agreements include strong and comprehensive 
commitments by Chile and Singapore to open their goods, agricultural, 
and services markets to U.S. producers. Both agreements include 
commitments that will increase regulatory transparency and act to the 
benefit of U.S. investors, intellectual property holders, businesses, 
and consumers.
    While some of the provisions in the Chile and Singapore FTAs could 
serve as templates for other agreements, a number of provisions clearly 
cannot be. In some instances, this is because the provision, while 
workable in the Chile and Singapore contexts, is not appropriate for 
FTAs with other countries, where very different circumstances prevail. 
In other cases, it is because the policy being pursued by the 
Administration is just plain wrong.
    In fact, one of the biggest threats to smooth passage of the Chile 
and Singapore FTAs is a concern that the Administration is beginning to 
use some of their provisions as models for other FTAs, for example the 
CAFTA, where the conditions make it inappropriate to do so.
    I will mention a number of the issues of concern briefly. The 
Singapore FTA includes the so-called Integrated Sourcing Initiative 
(ISI). If the Administration and the Government of Singapore's stated 
purpose of the ISI was to help Indonesia--a policy I think that has 
merit--then we should find a more targeted way of doing so. Although 
the Administration likes to talk about this special rule of origin as 
if it applies only to two Indonesian islands, in fact any country in 
the world can take advantage of it.
    Also, to date, the Administration has never publicly discussed one 
of the two features of the ISI that raises the most concerns--the fact 
that ISI components from any country may be treated as Singapore-
content for purposes of helping other goods benefit from the FTA. I 
think we need a better understanding of the ISI. And the Administration 
should give assurances that the ISI list will not be expanded without 
congressional approval, and how that would work. Clearly, enough 
questions have been raised about the wisdom of the ISI that it should 
be rejected as a precedent for other FTAs.
    The H-1B-type provisions in Chile and Singapore also have raised 
concerns. The basic problem, as I see it, is that the Administration 
has created a program that allows an immigrant to stay in this country 
permanently under the guise of a temporary visa program. I support 
immigration, and have supported increases to the H1-B cap in the past. 
However, before we start creating hybrids of the temporary H1-B program 
and the existing permanent employment-based visa programs, we should 
understand why we are pursuing this policy, how these provisions will 
work when fully enacted into U.S. law, how they will impact U.S. 
immigration patterns, and how they will impact U.S. workers.
    The labor and environmental provisions in the Chile and Singapore 
FTAs are of significant concern. There are separate dispute settlement 
rules that place arbitrary caps on the enforceability of these 
provisions. I believe this is a mistaken approach, the difficulties of 
which would only be magnified if used as a precedent for future FTAs 
involving very different circumstances.
    That is doubly true of any attempt to use in such future FTAs the 
``enforce your own law'' standard used in Chile and Singapore. The 
context in Chile and Singapore here is important, as it was in the case 
of Jordan. The laws of Chile and Singapore essentially reflect core 
internationally recognized labor rights. How they are applied does vary 
in the two countries, reflecting the different general characteristics 
of the two nations. At the same time, there is little practical concern 
that these countries will back track.
    These situations in any event are very different from many other 
FTA negotiating partners, including certainly most Central American 
countries and many others that would be a part of an FTAA. Use of the 
``enforce your own law'' standard is invalid as a precedent--indeed is 
a contradiction to the purpose of promoting enforceable core labor 
standards--when a country's laws clearly do not reflect international 
standards and when there is a history, not only of non-enforcement, but 
of a hostile environment towards the rights of workers to organize and 
bargain collectively.
    I recently went to Central America to experience the situation 
there first hand. The Administration's tabling in the CAFTA 
negotiations of the ``enforce your own law'' standard is 
counterproductive in those countries. It would reward countries with 
the worst standards and will miss an opportunity to allow workers to 
participate actively in their workplace in these countries, which 
historically in every nation, including our own, has been necessary for 
the development of a broad middle class.
    There are several other issues that have been raised and about 
which we need a response from USTR, as well.

    1. LWhether the intellectual property provisions--locking in the 
current state of U.S. law, making it much more difficult for Congress 
to change those rules in the future--are appropriate;
    2. LWhether the USTR adequately ensured that foreign investors will 
not have greater rights than provided under U.S. law;
    3. LWhether USTR's and Treasury's effort to eliminate a country's 
flexibility to impose on an emergency basis temporary capital controls, 
which was modified after criticism from a number of economists and 
several of us in the Congress, is sound policy and should be pursued in 
future FTAs;
    4. LWhether more can be done by Singapore to stop the trans-
shipment of illegally harvested timber.

    So, I hope the testimony today will discuss the significant 
benefits of the Chile and Singapore FTAs as well as respond to the 
important issues and questions that have been raised.
    We need to consider whether and how outstanding questions can be 
addressed through the implementing legislation. I worked actively with 
many others on the legislation implementing the Uruguay Round 
Agreements. The congressional efforts and input into that legislation 
were important for its ultimate passage. They were achieved by use of 
the longstanding precedent of a mock markup of legislation to be 
considered under fast track rules before it is introduced. I hope that 
this approach will be used for the Singapore and Chile FTAs and look 
forward to discussions regarding this aspect, as this Subcommittee and 
the full Committee move forward on the Singapore and Chile FTAs.

                                 

    Chairman CRANE. Gentlemen, watch the little light in front 
of you. When you see it turn, try and wrap up your remarks if 
you can. With that, let me introduce our first witness, the 
Honorable Earl Blumenauer from Oregon. Thank you, Mr. Levin.

STATEMENT OF THE HONORABLE EARL BLUMENAUER, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. BLUMENAUER. Thank you, Mr. Chairman, Ranking Member 
Levin. We appreciate your continued leadership and insight in 
these important issues of our trade agreements. I think the FTA 
with Chile is an opportunity to illustrate the benefits of free 
trade, to take it out of the textbooks and put it into 
practice, while at the same time reinforcing and rewarding the 
behaviors and practices which are important to the U.S. 
objectives--particularly in the Western Hemisphere. Latin 
America, literally in our back yard, has been an area of major 
U.S. concern since the promulgation of the Monroe Doctrine 
almost 200 years ago. A Chilean agreement would send a positive 
message that the United States places a high regard on efforts 
to improve institutional frameworks that support democracy, 
environmental protection, improved labor standards, and market 
reform. Chile is making progress on all of those areas, and the 
agreement, in fact, encourages them to do more.
    In Chile, however, we are losing market share because they 
have entered into FTAs with other countries, including both of 
our North American partners, Canada and Mexico. The experience 
I have seen in my own State illustrates the problem. Since 
Canada has a special relationship, and the United States 
doesn't, a State like mine that is involved with forest 
products, lumber, and paper products is at a disadvantage. A 6-
percent Chilean tariff makes a difference in the Northwest, 
where I am from.
    Likewise, in my community we have high-value manufactured 
goods such as those produced by Boeing and Freightliner, which 
use American unionized employees, and high-skill and high-
paying jobs. Freightliner, which manufactures trucks in my 
district, has for years been trying to enter the Chilean market 
with their Argosy trucks. They have not been able to compete 
with trucks from the European Union that do not face the same 
tariff problems. They have had to transfer Oregon jobs to 
Mexico, which does have an FTA, to be able to enter the market. 
This FTA will help eliminate that problem.
    Already most of the agricultural products imported from 
Chile are not subject to major barriers. Since we are on a 
different growing cycle than Chile, located in the Southern 
Hemisphere, their agricultural products do not necessarily 
compete directly with ours. In fact, we can provide more 
choices for our consumers at lowest costs.
    Technology remains a mainstay in the Pacific West. In my 
State it is the leading industry. Much of it destined for 
export. The agreement with Chile represents an opportunity to 
improve markets at a time of great economic stress in that 
industry.
    These are textbook examples of comparative advantage if we 
remove the barriers that currently restrict our goods. Products 
in our community are going to be more competitive. The 
alternative has been, and will continue to be, to lose the 
market to other countries in Latin America, Canada, or the 
European Union.
    Mr. Chairman, one thing that I do want to put on the table, 
though, is that there are going to be winners and losers. Given 
the dramatic difference in size, we are not going to be 
dramatically impacted, but at a time of economic upheaval, 
there will be dislocations, and we need to be sensitive to it. 
I hope in the course of your deliberations we can continue to 
be sensitive to the concerns of our constituents--that we deal 
with issues like trade adjustment assistance and make sure that 
it is real. During the recent discussions that we had about 
TPA, there were major concerns that we all heard from our 
constituents to make sure that trade agreements don't undercut 
labor and environmental regulations in a race to the bottom. In 
a continent beset by environmental problems, Chile has been a 
leader in the environmental arena. In fact, it has in its 
constitution a goal of a pollution-free environment 
constitutionally enshrined.
    In the area of labor standards, Chile has also been a pace-
setter in Latin America. It has ratified all eight of the 
International Labor Organization (ILO) conventions. Mr. 
Chairman, I am hopeful that we can also appreciate, in terms of 
dislocation, that the United States needs to use this as a 
mirror to look up to us. We are concerned--and you have been a 
champion, both you and Mr. Levin--in terms of being able to use 
the power of trade to be transformational. We continue to have 
our own barriers in areas like textiles and agriculture that 
restrict access to our markets--which, ironically, if we were 
able to relax, would have twice the benefit to these developing 
countries as all the aid that is provided. Of course, we are 
not alone in this regard. We are certainly joined by Japan and 
the European Union. I am hopeful that this discussion, this 
debate, the work of this Subcommittee, can help us look again 
at what we need to do in order to be consistent and thoughtful 
in our approach.
    Mr. Chairman, in a sea of Latin American instability, a 
Chilean agreement is an important step forward, and signals how 
we can keep our commitments and trade agreements while 
protecting core American values. I appreciate your leadership 
and your action.
    [The prepared statement of Mr. Blumenauer follows:]
    Statement of the Honorable Earl Blumenauer, a Representative in 
                   Congress from the State of Oregon
    The free trade agreement (FTA) with Chile is an opportunity to 
illustrate the benefits of free trade--take it out of the textbooks and 
put it into practice--while at the same time, rewarding and reinforcing 
behaviors and practices which are important to United States 
objectives, particularly in the Western Hemisphere. Latin America, 
literally in our backyard, has been an area of major U.S. concern since 
the promulgation of the Monroe Doctrine, almost 200 years ago. A 
Chilean agreement would send a positive message that the U.S. places a 
high regard on efforts to improve institutional frameworks that support 
democracy, environmental protection, improved labor standards, and 
market reform. Chile is making progress in all of these areas. In a sea 
of Latin American instability, a Chilean agreement is an important step 
forward and signals how we can keep our commitment in trade agreements 
while protecting core American values.
    In a country like Chile, we are losing market share because they 
have entered into FTAs with other countries, including both of our 
North American partners, Canada and Mexico. The experience of Oregon 
illustrates the problem. Since Canada now has a special relationship 
and the U.S. doesn't, a State like mine is at a disadvantage with 
lumber products. The 6 percent Chilean tariff on U.S. paper products 
makes a difference to the Pacific Northwest.
    We also have many high-value manufactured goods, such as those 
produced by Boeing and Freightliner, which use American unionized 
employees--high-skill and high-paying jobs. Freightliner, which 
manufacturers trucks in my district, has been trying to enter the 
Chilean market for years with their Argosy trucks. They have not been 
able to compete with EU trucks that do not face the same tariffs as 
U.S. products. Freightliner had to transfer Oregon jobs to Mexico, 
which does have a trade agreement with Chile, so they could compete in 
the Chilean market. A U.S.-Chile free trade agreement would give 
Freightliner the direct ability to compete in the Chilean marketplace 
without sacrificing U.S. jobs.
    Already, most of the agricultural products imported from Chile are 
not subject to major tariff barriers. We have an opportunity, going the 
other way, to be able to open new markets for the Pacific Northwest, as 
well as other regions. Because America is on a different growing cycle 
than Chile, located in the Southern Hemisphere, their agricultural 
products do not necessarily compete directly with our own. In fact, we 
can provide more choices to our consumers at lower costs.
    Technology remains a mainstay of West Coast economies. In Oregon, 
the leading industry is high-tech, much of it destined for export. The 
agreement with Chile represents an opportunity to improve markets at a 
time of great economic stress.
    These are textbook examples of comparative advantage if we remove 
the barriers that currently restrict our goods. Products in our 
community are going to be more competitive under a free trade 
agreement. The alternative has been and will be to lose the market to 
other countries in Latin America, Canada, or Europe.
    An important part of this equation is how we encourage innovation, 
stability, and environmental protection in a continent where it appears 
that such attributes are in short supply. It is no secret that 
economies all over Latin America are suffering. There is political 
instability and there are serious environmental problems that threaten 
vast ecosystems. One of the major concerns of our constituents is to 
assure our trade agreements don't undercut labor and environmental 
regulations in a ``race to the bottom.'' On a continent beset by 
environmental problems Chile has been a leader in trying to proactively 
address these challenges. Indeed, the goal of a pollution free 
environment is written into the constitution.
    In the area of labor standards, Chile is also a pace-setter. Chile 
has ratified all eight of the International Labor Organization 
conventions, while the U.S. has ratified only two. For us to reward the 
progress in these two key areas with the first free trade agreement 
south of Mexico is an important signal.
    Another important area of consideration with the future of trade 
relationships is protectionism on the part of the world's richest 
countries. We, along with the European Union and Japan, have been 
highly protective of our own domestic agricultural markets by heavily 
subsidizing our products and establishing trade barriers. The irony is 
that rich countries giving access to their markets in the areas of 
agriculture and textiles would provide twice the economic benefit to 
these developing countries than what we give them in direct aid.
    There may be some modest disruption to our producers with the free 
trade agreement, but there are remedies to these occasions. Again, 
using my State as an example, raspberry producers were injured when 
frozen raspberries from Chile entered the U.S. at below-market prices. 
There was a finding in the last Congress that they had been involved in 
dumping frozen raspberries into the U.S. market to the detriment of our 
domestic growers. We were able to work with the U.S. International 
Trade Commission to prevent frozen raspberries from being sold at less 
than fair value. There are protections in the system that work to 
prevent illegal practices, while we reap the benefits of open and fair 
trade.
    There will also be modest disruptions simply because Chile will 
have a comparative advantage in the production of certain goods. 
However, in a depressed economy even small losses are significant. It 
is important, therefore, for us to be serious about Trade Adjustment 
Assistance, to make sure that we do provide the necessary benefits to 
affected workers and we continue to modify the program to improve its 
effectiveness for those who are harmed by the opening of trade. We also 
cannot turn our back on middle- and lower-income working families that 
will be most at risk. We can help them by making sure our economic 
policies--whether it's spending money on further tax cuts or funding 
education and healthcare programs--deal with the needs of these 
families first rather than those who are the most well off in society.
    I am convinced this agreement helps pull together what we are 
trying to accomplish within our own markets as well as encouraging 
other countries to respond in a positive fashion. As I look at its 
impacts on my region, I am confident that it holds benefits for Oregon 
and the country as a whole, and sends the signals we want to be sending 
to the rest of the world.

                                 

    Chairman CRANE. Thank you. The time of the gentleman has 
expired. Our next witness, the Honorable Pete Sessions from 
Texas.

 STATEMENT OF THE HONORABLE PETE SESSIONS, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. SESSIONS. Thank you, Mr. Chairman and Ranking Member 
Levin, and also the Members of the Subcommittee on Trade who 
are present today. Mr. Chairman, I would like to thank this 
Committee for the opportunity to come and provide testimony 
concerning the Singapore FTA. I would also like to ask 
unanimous consent that my full statement be included in the 
record.
    Chairman CRANE. Without objection, so ordered.
    Mr. SESSIONS. Thank you, Mr. Chairman. I would also like to 
note, Mr. Chairman, that today we have in the crowd, joining us 
today, Franklin Lavin, who is the Ambassador of the United 
States to the Republic of Singapore. Mr. Lavin is here in 
Washington to be a part of not only this hearing, but also to 
aid in the passage of this important FTA.
    As you know, Mr. Chairman, the President signed this 
agreement with Singapore. The United States and Singapore are 
two nations that share a mutual respect for the rule of law and 
wish to establish a procedure that creates an open, fair, 
transparent, and responsive process for the trade between our 
great nations. This is a comprehensive, forward-looking 
agreement with a large, modern, and significant trading partner 
and ally.
    The United States already exports a large amount of 
electronics, high-tech manufacturing products, industrial 
machinery, and equipment to Singapore. American companies also 
export a great deal of services to Singapore, including 
financial services, computer telecommunications, professional, 
and express delivery services, all of which are extremely 
important to this country and to Singapore.
    Singapore has also been an active partner in prosecuting 
the war on terror by cracking down on terrorist activities and 
money-laundering in their country, and their own domestic 
financial institutions. Singapore is also a strong ally of the 
United States, with our two countries participating in joint 
military training exercises and sharing Singaporean military 
bases since 1992.
    This agreement gives increased market access to a number of 
American industries, and establishes an orderly process for 
ensuring regulatory transparency and investor protections for 
American companies and individuals doing business in Singapore.
    The agreement also updates Singapore's intellectual 
property law. As Thomas Lipscomb noted in today's Wall Street 
Journal op/ed page, and I quote, ``entertainment content is now 
America's largest export, and information is the basis of more 
than half of our gross domestic product.'' This agreement also 
updates Singapore's copyright and patent law to ensure that the 
creators of new intellectual property reap the rewards of their 
innovation. It updates that country's trademark regime to 
reflect new market realities, and this is all enforced by a 
robust enforcement regime designed to criminalize the willful 
infringement of copyrights, and impose tough punishments on 
intellectual property pirates.
    The agreement accomplishes the laudable goals of providing 
regulatory transparency in Singapore and increasing market 
access to this country for American products, while providing 
first-class environmental and labor protections. I would like 
to congratulate not only the U.S. Department of State, but also 
the U.S. Trade Representative on their successful completion of 
negotiations with their Singaporean colleagues, and for their 
hard work in producing such a comprehensive and forward-looking 
agreement.
    Last, I appreciate being given the opportunity to have my 
views heard before this Committee, and urge all my colleagues 
on both sides to not only focus upon this agreement as an 
important agreement, but also one that might be used on a 
continuing basis as a way for us to judge FTAs. I thank the 
Chairman for allowing me to be here, and I will be available 
for questions.
    [The prepared statement of Mr. Sessions follows:]
Statement of the Honorable Pete Sessions, a Representative in Congress 
                        from the State of Texas
    Thank you, Mr. Chairman, for this opportunity to provide my 
comments on the U.S.-Singapore Free Trade Agreement (USSFTA), which is 
being considered today by the Committee on Ways and Means. I appreciate 
being invited here to testify before the Committee on the important 
issue of expanding free trade, and to voice my support for the USSFTA, 
for the proposed U.S.-Chile agreement, and for free trade generally.
    I am enthusiastic about the USSFTA, and I believe that there is a 
good reason that President George W. Bush and Prime Minister Goh Chok 
Tong signed this agreement on May 6, 2003. The USSFTA establishes 
standards for United States-Singapore trade that provide legal 
protections that are the same or are similar to existing U.S. law, and 
which reflect the respect for the rule of law that our two countries 
hold in common. The USSFTA sets a great precedent for enacting future 
free trade agreements with countries and regions that share our values 
and wish to engage in lawful and robust commerce with America through 
an open, fair, responsive and transparent process.
    The USSFTA is a broad, comprehensive and substantive agreement 
between the United States and its largest trading partner in Southeast 
Asia. In fact, as America's 11th largest trading partner in 2001, 
American bilateral trade with Singapore amounted to over $32 billion--
with Singapore serving as a large export market for American 
electronics, high-tech manufacturing, industrial machinery and 
equipment manufacturers. Singapore also serves as a large market for 
many of America's service industries, including financial, computer, 
telecommunications, professional and express delivery services, all of 
which are extremely important to our economy.
    Another important component of our bilateral trade with Singapore 
that should not be overlooked is our mutual trade in agricultural 
products, which represents a net trade surplus for the United States. 
In 2002, American farmers exported around $259 million worth of food 
products to Singapore--including fruits, nuts, vegetables and poultry 
meat. By removing and binding all of its tariffs--including its 
agricultural tariffs--at zero, Singapore will open its markets to 
American agricultural products and create new opportunities for 
American farmers to sell their produce to a nation whose small size 
(255 square miles) prevents it from being able to grow for itself the 
amount of food its citizens consume.
    In addition to being an economically significant and modern trading 
partner with similar values, Singapore is also an excellent candidate 
to end the 8-year Trade Promotion Authority (TPA) lapse because of 
Singapore's close relationship with the United States and its eager 
participation in the War on Terror. In September 2001, Singapore 
demonstrated its resolve to combat terrorism by establishing an Inter-
Agency Task Force on Anti-Terrorism to review and to improve its 
existing anti-terror laws. It has also aggressively targeted the 
terrorism-related activities of clandestine groups within its borders 
and increased vigilance of money-laundering in its domestic financial 
institutions.
    Singapore and the United States also enjoy close military ties, 
including ongoing participation in joint training exercises between the 
respective Armed Forces of both countries. Singapore has allowed U.S. 
military aircraft and naval vessels to use its military facilities 
since 1992, served as an active Member of the Coalition of the Willing 
in Operation Iraqi Freedom, and allowed U.S. military ships and 
aircraft to call at Singapore and to use its military bases and air 
space. Singapore also offered to provide the successful Coalition in 
Iraq with a medical team from the Singapore Armed Forces for deployment 
in Iraq or Kuwait if their expertise and service became necessary. The 
USSFTA is simply another way for America to demonstrate its interest in 
building even closer ties with a nation that has long been a solid 
friend and an ally.
    Of course, in addition to increasing strategic relations with a 
long-time ally, the economic merits of the U.S.-Singapore Free Trade 
Agreement stand firmly on their own. The agreement will give American 
firms increased market access across the entire Singaporean services 
sector, ensuring that American firms are treated as fairly and 
equitably as domestic firms. To ensure a level playing field for 
American companies, the agreement establishes strong and detailed 
disciplines on regulatory transparency through open and transparent 
administrative procedures designed to recognize interested parties' 
concerns before regulations are issued. American investors will also 
receive rights under this agreement, including due process protections 
and the right to receive a fair market value for any expropriated 
property. An impartial and transparent public dispute settlement panel 
will then enforce these protections on behalf of American investors.
    The agreement offers substantial benefits for American financial 
institutions by removing the license quota on the number of U.S. banks 
with Qualifying Full Bank (QFB) privileges, with Wholesale Bank (WB) 
privileges, and by removing the limit on the number of branches that an 
American bank may operate. It will also permit the cross-border supply 
of trade in reinsurance by brokerage, in corporate finance advisory 
services to corporations and investors, and allow for the expedited 
availability of insurance services. These new and expanded powers will 
help American financial institutions and financial services providers 
to compete on a level playing field for Singaporean deposits and 
investments while strengthening the level of engagement between the 
U.S. and Singapore in the financial services arena.
    The USSFTA is also a modern, forward-looking agreement that updates 
Singapore's intellectual property law and brings it in line with 
American standards. It updates Singapore's copyright and patent law to 
prevent circumvention and to ensure that the creators of new 
technologies and inventions reap the rewards of their innovation. It 
updates the country's trademark regime to reflect the new market 
realities of branding and product identity-building, while enhancing 
protection for well-known trademarks. All of these enhanced protections 
will be complimented by a robust enforcement regime that criminalizes 
the willful infringement of copyrights and imposes tough punishments on 
piracy.
    This agreement accomplishes the laudable goals of providing 
regulatory transparency in Singapore and increasing market access to 
this country for American companies while providing first-class 
environmental and labor protections. I would like to congratulate the 
United States Trade Representative on the successful completion of 
negotiations with their Singaporean colleagues and for their hard work 
in producing such a comprehensive and forward-looking agreement. I 
appreciate being given the opportunity to have my views heard before 
this Committee today, and I urge all of my colleagues on both sides of 
the aisle to support this important agreement. Thank you, Mr. Chairman, 
for your time and for the leadership on trade that you have 
demonstrated by holding this important hearing.

                                 

    Chairman CRANE. Thank you very much, Mr. Sessions. We also 
want to pay tribute to Frank Lavin for his participation, our 
Ambassador to Singapore. With that, I----
    Mr. LEVIN. Mr. Chairman, I think, also, the Ambassador from 
Singapore to the U.S., Ambassador Chan, is here.
    Chairman CRANE. Oh, very good. Very good. With that, now, I 
would like to ask our next witness to testify, the Honorable 
Judy Biggert from my home State of Illinois, and a neighbor. 
Judy.

 STATEMENT OF THE HONORABLE JUDY BIGGERT, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Ms. BIGGERT. Thank you very much, Chairman Crane and 
Ranking Member Levin, Members of the Committee. Thank you for 
allowing me and my colleagues to testify today in favor of 
these two outstanding trade agreements. While I strongly 
support both the Singapore and Chile agreements, I would like 
to specifically address my comments today to the particular 
merits of the agreement with Chile. Perhaps most importantly, I 
would like to comment on some of the disinformation and myths 
that have been circulating about this agreement.
    First of all, I would like to congratulate President Bush, 
Ambassadors Zoellick and Allgeier, and all the hard-working 
members of our negotiating teams at the Office of the U.S. 
Trade Representative and the U.S. Department of Agriculture, 
and other agencies. What they have written, along with their 
Chilean counterparts, is a comprehensive, well-balanced, state-
of-the-art agreement that will benefit both nations.
    Second, I would like to point out that this is not a 
partisan agreement. My friend and colleague Mr. Blumenauer is 
one of many Members from the other side of the aisle who are 
strong proponents of this agreement. I am happy to point out 
that former Presidents Bill Clinton and George Bush both shared 
our current President's vision of an FTA of the Americas with 
Chile as an early partner.
    Third, this is a good agreement that covers a particularly 
wide range of products and services. Not only does it address 
the liberalization of merchandise trade, it also includes 
groundbreaking areas such as e-commerce, express delivery 
services, strong copyright and trademark protections, and an 
across-the-board liberalization of trade and services. In 
short, there is something for everyone to like in this 
agreement.
    That is the good news. The bad news is that not all of the 
Members have yet focused their attention on this agreement, and 
so there remain some troublesome myths and bits of 
misinformation out there that we are working to dispel. For 
instance, some Members who are unfamiliar with Chile and its 
labor laws question whether the labor provisions in the 
agreement are strong enough. The fact that Chile has rewritten 
and strengthened its labor laws, reaffirmed its obligations as 
a member of the ILO, and committed in this agreement to a key 
binding obligation not to fail to effectively enforce its labor 
laws through a sustained or recurring course of action or 
inaction. Labor protections within Chile and within this 
agreement are strong and sound.
    Since it is an FTA, other Members instinctively question 
whether it preserves environmental protections. This FTA 
includes provisions requiring parties to establish high levels 
of environmental protection and not to weaken or reduce 
environmental laws to attract trade or investment. It provides 
for dispute settlement, and for environmental cooperation 
between the parties.
    Last, some Members have said that Chile doesn't deserve 
this agreement. They say if Chile really wanted free trade with 
the United States, she should have cast her votes with us back 
when the United Nations Security Council took up the U.S.-
sponsored resolutions regarding Iraq. Those who would make this 
argument are missing the point. It is not a question of whether 
Chile deserves this agreement. The point is that the United 
States deserves this agreement.
    The FTAs are not gifts that we dispense to favored allies 
in exchange for their vote in international bodies. The FTAs 
are mutually beneficial arrangements that serve the national 
economic interests of both parties, Chile and the United 
States. Without free trade with Chile, U.S. producers and 
service providers will continue to lose business to our foreign 
competitors. Chile already has in place FTAs with Mexico, 
Canada, Mercosur, and the European Union. That means that while 
our exporters are paying tariffs on all products, firms 
exporting from those countries that have FTAs with Chile enjoy 
free trading partnership treatment.
    The damage to our trading position has been obvious. 
Between 1997 and 2002, when exporters from those countries 
enjoyed preferential access to the Chilean market, U.S. exports 
to Chile dropped 41 percent from $4.3 billion to $2.6 billion. 
According to the U.S. Chamber of Commerce, companies ranging 
from Coca Cola to Xerox, McDonald's to Owens Corning, and 3M to 
Sara Lee, have lost hundreds of millions of dollars to firms 
based in countries that have FTAs with Chile. There is no doubt 
in my mind that with an FTA in place, we will reverse this 
trend and begin to regain our former share of Chile's market. I 
certainly plan to vote for this agreement and work to encourage 
my colleagues to support it with their votes. Thank you very 
much.
    [The prepared statement of Ms. Biggert follows:]
 Statement of the Honorable Judy Biggert, a Representative in Congress 
                       from the State of Illinois
    Chairman Crane, Ranking Member Levin, Members of the Committee, 
thank you for allowing me and my colleagues to testify today in favor 
of these two outstanding trade agreements. While I strongly support 
both the Singapore and Chile agreements, I would like specifically to 
address my comments today to the particular merits of the agreement 
with Chile. Perhaps more importantly, I would like to comment on some 
of the disinformation and myths that have been circulating about this 
agreement.
    First, I want to congratulate President Bush, Ambassadors Zoellick 
and Allgeier, and all of the hard-working members of our negotiating 
teams at USTR, USDA, and other agencies for their achievements. I know 
how many days, nights, weekends, hours and miles they had to spend away 
from their families, and I want them to know how much we appreciate 
their extraordinary efforts. What they have written, along with their 
Chilean counterparts, is a comprehensive, well balanced, state-of-the-
art agreement that will benefit both nations.
    Second, I want to point out that this is not a partisan agreement. 
As evidenced by the presence here of my friend and colleague from 
across the aisle, Earl Blumenauer, there are many Members of both 
parties who are strong proponents of this agreement. And I am happy to 
point out that former Presidents Bill Clinton and George Bush both 
shared our current President's vision of a free trade agreement of the 
Americas, with Chile as an early partner.
    Third, this is a good agreement that covers a particularly wide 
range of products and services. Not only does it address the 
liberalization of merchandise trade, it also includes ground-breaking 
areas such as e-commerce, express delivery services, strong copyright 
and trademark protections, and an across-the-board liberalization of 
trade in services.
    In short, there is something for everyone to like in this 
agreement.
    That's the good news. The bad news is that not all Members have yet 
focused their attention on this agreement, and so there remain some 
troublesome myths and bits of misinformation out there that we are 
working to dispel.
    For instance, some Members who are unfamiliar with Chile and its 
labor laws question whether the labor provisions in the agreement are 
strong enough. The facts are that Chile has recently rewritten most of 
its Pinochet-era labor laws, reaffirmed its obligations as a member of 
the International Labor Organization (ILO), and committed in this 
agreement to a key, binding obligation not to fail to effectively 
enforce its labor laws through a sustained or recurring course of 
action or inaction. Labor protections within Chile and within this 
agreement are strong and sound.
    And because it is a free trade agreement, other Members 
instinctively question whether it preserves environmental protections. 
But this free trade agreement includes provisions requiring parties to 
establish high levels of environmental protection, and to not weaken or 
reduce environmental laws to attract trade or investment. It provides 
for dispute settlement and for environmental cooperation between the 
parties.
    And last, some Members have said that Chile doesn't deserve this 
agreement. They say that if Chile really wanted free trade with the 
United States, she would have cast her votes with us back when the 
United Nations Security Council took up the U.S.-sponsored resolutions 
regarding Iraq.
    But those who would make this argument are missing the point. It is 
not a question of whether Chile deserves this agreement. The point is 
that the United States deserves this agreement.
    Free trade agreements are not ``gifts'' that we dispense to favored 
allies in exchange for their votes in international bodies. Free trade 
agreements are mutually beneficial arrangements that serve the national 
economic interests of both parties--Chile and the United States.
    Without free trade with Chile, United States producers and service 
providers will continue to lose business to our foreign competitors. 
And once we lose business to competitors, those competitors become 
stronger in other markets.
    Chile already has in place free trade agreements with Mexico, 
Canada, Mercosur, and the European Union. That means that while our 
exporters are paying tariffs on all products, firms exporting from 
those countries that have FTAs with Chile enjoy free-trading partner 
treatment.
    The damage to our trading position has been obvious. Between 1987 
and 1997, U.S. exports to Chile soared from $770 million to over $4.3 
billion dollars, increasing at an average annual rate of 19 percent.
    In contrast, between 1997 and 2002, when exporters from those 
countries enjoyed preferential access to the Chilean market, U.S. 
exports to Chile contracted 41 percent to $2.6 billion dollars. 
According to the U.S. Chamber of Commerce, companies ranging from Coca 
Cola to Xerox, McDonald's to Owens Corning and 3M to Sara Lee have lost 
hundreds of millions of dollars to firms based in countries that have 
free trade agreements with Chile.
    And since the entry into force of Chile's FTA with the European 
Union just 4 months ago, U.S. companies have been losing contracts, 
business, and opportunities to even tougher competitors in Chile.
    There is no doubt in my mind that with a Chile Free Trade Agreement 
in place, we will reverse this trend and begin to regain our former 
share of Chile's market. I plan to vote for the agreement and to work 
to encourage my colleagues to support it with their votes.
    Thank you.

                                 

    Chairman CRANE. Thank you very much. Now, I will yield to 
anyone on our side who may have a question or a comment. Anyone 
with questions on our side? Mr. Levin, on your side?
    Mr. LEVIN. I guess not. Thank you very much for your 
testimony, helping to kick this off. We will have ample time to 
discuss and further probe your comments. Thank you.
    Chairman CRANE. Thank you all. Appreciate that. With that, 
we will call our next witness, the Honorable Peter Allgeier, 
Deputy U.S. Trade Representative. You may proceed when ready, 
Mr. Allgeier.

STATEMENT OF THE HONORABLE PETER F. ALLGEIER, DEPUTY U.S. TRADE 
    REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE

    Mr. ALLGEIER. Thank you very much, Mr. Chairman. First of 
all, Mr. Chairman and Mr. Levin, Members of the Subcommittee--
--
    Chairman CRANE. Do you have your microphone turned on?
    Mr. ALLGEIER. The light is on.
    Chairman CRANE. Can somebody----
    Mr. ALLGEIER. Does that work?
    Chairman CRANE. Yes.
    Mr. ALLGEIER. Okay. Just need it closer. Chairman Crane, 
Mr. Levin, Members of the Subcommittee, thank you very much for 
the opportunity to testify today and for your continued 
guidance and support as we seek to open additional markets for 
U.S. manufacturers, service providers, farmers, ranchers, and 
workers. We appreciate your leadership, Mr. Chairman, and 
greatly value the close cooperation that we have experienced on 
trade issues with the Congress.
    I would also like to thank the previous panel, 
Representatives Blumenauer, Biggert, and Sessions, for their 
support of these two agreements. I have a longer statement that 
I would ask become part of the record.
    Chairman CRANE. Without objection, so ordered.
    Mr. ALLGEIER. Thank you. During the past 2 years, we have 
worked together to reenergize the U.S. trade agenda. Passage of 
the bipartisan Trade Act of 2002, with its TPA, of course, was 
a major turning point in this effort. This will lead to 
economic benefits for all Americans, and many others around the 
world.
    I welcome this opportunity to review the accomplishments of 
the first agreements that will be submitted under TPA, the FTAs 
with Chile and Singapore, and to present the Administration's 
requests for favorable consideration of legislation needed to 
implement these FTAs.
    These two agreements reflect that bipartisan effort to 
conclude trade agreements with two important trading partners. 
Both agreements were launched under the Clinton Administration, 
and concluded under the Bush Administration. President Bush and 
Prime Minister Goh signed the U.S.-Singapore FTA on May 6. 
Ambassador Zoellick and Minister Alvear signed the Singapore 
one last Friday.
    These two agreements share two distinctions. First, they 
are the first FTAs concluded by the Administration of President 
Bush, and they are the first agreements concluded by the United 
States in Asia and in the Southern Hemisphere. Both provide 
commercial and political benefits for the United States and our 
new FTA partners.
    I would like to highlight two key messages that flow from 
these agreements. The first is that the Chile and Singapore 
agreements set examples for comprehensive state-of-the-art 
FTAs; examples in the sense that they are responsive to the 
technological advances that we have seen in our economy over 
the last decade, responsive in the sense that they position us 
for greater competitiveness in a world of global sourcing, in a 
world in which knowledge is the key factor of production.
    The second key message is that these agreements are 
attentive to the full range of U.S. interests: agriculture, 
industry, services, consumers, small business people, labor, 
environment, and those who are concerned with due process and 
good governance.
    The U.S.-Singapore FTA will enhance, further, an already 
strong and thriving commercial relationship with Singapore. It 
is comprehensive in scope, covers aspects of trade in goods, 
services investment, government procurement, protection of 
intellectual property, competition policy, and the relationship 
between trade, labor, and the environment. This builds upon the 
basic foundation of NAFTA and the WTO, but it moves beyond them 
and improves them in a number of ways. It can serve as a 
foundation for other possible free trade areas in Southeast 
Asia, as envisaged in President Bush's Enterprise for the 
Association of Southeast Asian Nations (ASEAN) Initiative.
    The Chilean agreement is equally comprehensive and state-
of-the-art. As the previous speakers mentioned, it will level 
the playing field where U.S. providers of goods and services 
have been at a competitive disadvantage because of the FTAs 
that Chile already has with a number of trading partners, 
including the European Union. The National Association of 
Manufacturers estimates that the lack of a U.S.-Chile FTA 
causes U.S. companies to lose at least a billion dollars 
annually in exports to that country. With the FTA we can ensure 
that we enjoy market access, treatment, and prices and 
protection at least as good as our competitors.
    I would like to say a word about the FTA process. These are 
the first agreements to be implemented under the TPA procedures 
set out in the bipartisan Trade Act of 2002. The U.S. Trade 
Representative has worked--the Administration has worked to 
ensure that the process of developing U.S. proposals and 
concluding the FTA has been open and transparent. We have held 
public briefings. We have consulted at least 240 times with 
Members of Congress and staff. We have held more than 100 
meetings with our public sector advisors, of which there are 
more than 700. We have sought public comments in the 
negotiations as they have proceeded. Proposed texts were made 
available to Members of Congress, staff, and our public sector 
advisors prior to giving them to our negotiating partners. In 
December 2002, we made available to Congress and our statutory 
advisors the draft text. At that time we also put up summaries 
on our public website. Then, when we finished the legal scrub, 
of course, we provided the full text of the agreement to the 
public, posting those on our public website as well.
    Both the Singapore and Chile agreements will act as 
catalysts for our efforts to expand trade in Asia and in the 
Southern Hemisphere. As I said, they are examples. We will not 
necessarily use each and every article as a photocopy that will 
be simply put before a country and have it insert its own name. 
We have to take into account the different circumstances in 
other negotiations, but they do set an example of the kind of 
level of ambition and comprehensiveness and thorough treatment 
that we would envision in future FTAs.
    We look forward to working with the Congress not only in 
the implementation of these agreements, but also as we move 
forward with the other negotiations on our agenda--and indeed 
as we move forward to implement those agreements. Mr. Chairman, 
thank you very much for allowing me this opportunity to 
testify. I look forward to responding to the comments and 
questions of you and the other Members. Thank you.
    [The prepared statement of Mr. Allgeier follows:]
    Statement of the Honorable Peter F. Allgeier, Deputy U.S. Trade 
        Representative, Office of the U.S. Trade Representative

INTRODUCTION

    Mr. Chairman, Mr. Levin, and Members of the Subcommittee, thank you 
for the opportunity to testify today and for your continued guidance 
and support. We appreciate your leadership, Mr. Chairman, and greatly 
value the close cooperation we have experienced on trade issues with 
the Congress.
    Without the help of the Members of this Subcommittee and excellent 
staff, I would not have the privilege of testifying here today on the 
U.S.-Singapore and U.S.-Chile Free Trade Agreements (FTAs). During the 
past 2 years, we have worked together to reenergize the U.S. trade 
agenda. Passage of the Trade Act of 2002 (Trade Act), including Trade 
Promotion Authority (TPA), was a major turning point in that effort, 
which will lead to economic benefits for all Americans and many others 
around the world.
    The Administration has used TPA to launch major new trade 
initiatives designed to expand trade and open markets globally, 
regionally and bilaterally. We initiated new WTO negotiations in Doha 
and have since presented bold proposals in agriculture, industrial 
products and services. We have FTA negotiations underway with 
Australia, Central America (CAFTA), Morocco, and the South African 
Customs Union (SACU). We have announced our intent to begin 
negotiations on an FTA with Bahrain early next year. We have also 
launched the President's Enterprise for ASEAN Initiative and a Middle 
East trade initiative. We will not stop there.
    I welcome this opportunity to review the accomplishments of the FTA 
and present the Administration's request for favorable consideration of 
legislation needed to implement the FTA later this year. Attached to my 
testimony are summaries of the main provisions of each agreement.
    The U.S.-Singapore and U.S.-Chile FTAs reflect a bipartisan effort 
to conclude trade agreements with two important trading partners. Both 
agreements were launched under the Clinton Administration--with 
Singapore in November 2000 and with Chile in December 2000--and 
concluded under the Bush Administration. President Bush and Singaporean 
Prime Minister Goh signed the U.S.-Singapore FTA on May 6, 2003, at the 
White House. Ambassador Zoellick and Chilean Foreign Minister Alvear 
signed the U.S.-Chile FTA on June 6, 2003, at the Vizcaya Mansion in 
Miami.

U.S.-SINGAPORE FTA

    The U.S.-Singapore FTA is a solid agreement. It is the first FTA 
President Bush has signed with any country and our first with an Asian 
nation. This agreement provides commercial and political benefits for 
both the United States and Singapore. Strengthening economic ties helps 
secure strong political interests.
    The U.S.-Singapore FTA will enhance further an already strong and 
thriving commercial relationship. Singapore was our 12th largest 
trading partner last year. Annual two-way trade of goods and services 
between our nations exceeded $40 billion. Expanding this trade will 
benefit workers, consumers, industry and farmers. Independent analyses 
found significant economic gains will result from the FTA for the 
United States and Singapore.
    The FTA is comprehensive in scope and covers aspects of trade in 
goods, services, investment, government procurement, protection of 
intellectual property, competition policy and the relationship between 
trade and labor and environment. This FTA builds upon the basic 
foundation of the NAFTA and WTO agreements and improves upon them in a 
number of ways.
    The U.S.-Singapore FTA can serve as the foundation for other 
possible FTAs in Southeast Asia. President Bush envisaged this prospect 
when he announced his Enterprise for ASEAN Initiative (EAI) last year.
    The Administration looks forward to working with Congress on the 
legislation needed to implement this FTA. We hope to be in a position 
to submit this legislation after further work with the Congress.

U.S.-CHILE FTA

    The U.S.-Chile Free Trade Agreement is a state-of-the-art 
agreement, setting the stage for further trade integration in the 
hemisphere.
    It makes sound economic sense for the United States to have a free 
trade agreement with Chile. Although Chile was only our 36th largest 
trading partner in goods in 2002 (with $2.6 billion in exports and $3.8 
billion in imports), Chile has one of the fastest growing economies in 
the world. Its sound economic policies are reflected in its investment 
grade capital market ratings, unique in South America. Over the past 
15-20 years, Chile has established a vigorous democracy, a thriving and 
open economy built on trade, and a free market society. A U.S.-Chile 
FTA will help Chile continue its impressive record of growth, 
development and poverty alleviation. It will help spur progress in the 
Free Trade Area of the Americas, and will send a positive message 
throughout the world, particularly in the Western Hemisphere, that we 
will work in partnership with those who are committed to free markets.
    Moreover, a U.S.-Chile FTA will help U.S. manufacturers, suppliers, 
farmers, workers, service providers, consumers and investors achieve a 
level playing field. Chile already has FTAs with Mexico, Canada, 
Mercosur, and--since February--the EU. As a result, its trade with 
these economies is growing while American companies are being 
disadvantaged. Indeed, the U.S. share of Chilean imports has dropped 
from 23% in 1998 to 16% in 2002. The National Association of 
Manufacturers estimates the lack of a U.S.-Chile FTA causes U.S. 
companies to lose at least $1 billion in exports annually. The United 
States needs an FTA with Chile to ensure that we enjoy market access, 
treatment, prices and protection at least as good as our competitors. 
Consumers will benefit from lower prices and more choices.
    As Ambassador Zoellick said, ``The U.S.-Chile FTA is a partnership 
for growth, a partnership in creating economic opportunity for the 
people of both countries.'' Chile has opened its markets and welcomed 
competition. As a result, it is one of the freest economies in Latin 
America.
    The result of Chile's openness has been the best growth record in 
Latin America, averaging over 6 percent per year through the nineties. 
This growth enabled Chile to cut its poverty rate in half, from 45 
percent in 1987 to 22 percent in 1998. The U.S.-Chile FTA will help 
Chile sustain this growth and will send a strong signal to the 
hemisphere that the United States wants to work in partnership to 
promote mutual economic growth.

FTA PROCESS

    The U.S.-Singapore and U.S.-Chile FTAs are the first agreements 
that will be implemented under the TPA procedures set out in the Trade 
Act. Even before receiving Congressional guidance under the Trade Act, 
the process of developing U.S. proposals and concluding the FTA was 
open and transparent. USTR held public briefings, consulted frequently 
with Congress and private sector advisors, and sought public comments 
on the negotiations as they proceeded. Proposed texts were made 
available to Members of Congress and advisors in advance of their 
presentation to our negotiating partners. The Congress and our 
statutory advisors had access to the full drafts of the Singapore and 
Chile FTAs in December 2002. USTR also posted summaries of the FTAs on 
our public web site. The full texts of each agreement were posted on 
the USTR public website as soon as the preliminary legal review of each 
agreement was completed, which was March 6, 2003, for the agreement 
with Singapore and April 3, 2003, for the agreement with Chile.
    As with other agreements, such as NAFTA and the WTO Agreements, our 
private sector advisors are required to submit reports to the 
President, the Congress, and the USTR providing their assessments of 
the extent to which the FTA achieves the objectives, policies and 
priorities set out in the Trade Act. For the Singapore and Chile FTAs, 
only one of the thirty-one advisory committees opposed the agreements.

SUPPORTING OUR EFFORTS TO EXPAND TRADE WORLDWIDE

    Last October, President Bush announced the Enterprise for ASEAN 
Initiative (EAI) in recognition of this important region. The EAI 
offers the prospect of FTAs with individual ASEAN nations, leading to a 
network of FTAs in the region. The U.S.-Singapore FTA can serve as the 
foundation for these other possible FTAs. The ASEAN includes the 
largest Muslim country in the world--Indonesia--as well as other 
countries with large Muslim populations, including Malaysia, the 
Philippines and Brunei.
    The President is committed to making progress under the EAI as a 
framework for deepening our trade and investment relationship with 
ASEAN. The United States expects a potential FTA partner to be a member 
of the WTO and to have a Trade and Investment Framework Agreement 
(TIFA) with the United States. Since announcement of this initiative, 
the United States has signed TIFAs with Thailand and Brunei. The trade 
ministers of these countries, as well as Philippines and Indonesia, 
with which the United States already has TIFAs, have met regularly to 
address specific bilateral issues and coordinate on regional and 
multilateral issues.
    Likewise, the conclusion and signing of the Chile FTA has provided 
momentum to other hemispheric and global trade liberalization efforts 
by breaking ground on new issues and demonstrating what a 21st century 
trade agreement should be. We continue to move forward with the 
centerpiece of our hemispheric integration strategy, the Free Trade 
Area of the Americas (FTAA). We maintain our strong commitment to the 
negotiation of a broad and robust FTAA by January of 2005.
    The U.S.-Chile FTA and the Central American Free Trade Agreement 
(CAFTA) will serve as building blocks for the FTAA. They will give both 
sides greater access to each other's markets at an earlier date than is 
possible under the FTAA. At the same time, these bilateral FTAs 
strengthen ties and integration, demonstrating the additional benefits 
available through the FTAA.

CONCLUSION

    The U.S.-Singapore and U.S.-Chile FTAs are the most comprehensive 
and up-to-date trade agreements the United States has concluded. These 
FTAs command widespread support in the private sector and makes 
progress in achieving each of the relevant objectives, purposes, 
policies and priorities that the Congress identified in the Trade Act.
    With continued Congressional guidance and support, this 
Administration is pursuing an ambitious and comprehensive trade policy. 
We will continue to move forward bilaterally, regionally, and globally. 
Together, we can show the world the power of free trade to strengthen 
democracy and promote prosperity.
    The Administration looks forward to working with this Subcommittee 
and the full Congress in enacting the legislation necessary to 
implement these Agreements. Thank you, Mr. Chairman. I would be pleased 
to respond to questions.

SUMMARY OF THE U.S.-SINGAPORE FTA
Market Access for Services

    Singapore is one of the world's most sophisticated services 
economies, and a services hub for the fast-growing Southeast Asian 
region. The U.S.-Singapore FTA will accord substantial market access to 
U.S. firms across the entire spectrum of services, subject to very few 
exceptions. The FTA uses a so-called ``negative list'' approach, in 
which all service sectors are liberalized unless a specific reservation 
is taken in the Agreement. This technique, which we successfully used 
in the NAFTA, provides for maximum liberalization of services markets.
    Singapore will treat U.S. services suppliers as well as its own 
suppliers or other foreign suppliers, and U.S. services firms will 
enjoy fair and nondiscriminatory treatment. Such nondiscrimination will 
be achieved through strong disciplines on both cross-border supply of 
services (such as those delivered electronically, or through the travel 
of services professionals across borders) as well as the right to 
invest and establish a local services presence.
    Importantly, services market access is supplemented in this FTA by 
strong and detailed disciplines on regulatory transparency. U.S. 
services suppliers have found that market access commitments may be 
less meaningful without parallel commitments by trading partners to 
regulatory transparency. Under the FTA, Singaporean services regulators 
must use open and transparent administrative procedures, consult with 
interested parties before issuing regulations, provide advance notice 
and comment periods for proposed rules, and publish all regulations.
    New market access commitments apply across a broad range of 
sectors, including, but not limited to, banking, insurance, securities 
and related services; computer and related services; direct selling; 
telecommunications services; audiovisual services; construction and 
engineering; tourism; advertising; express delivery; professional 
services (architects, engineers, accountants, etc.); distribution 
services, such as wholesaling, retailing and franchising; adult 
education and training services; environmental services; and energy 
services. U.S. firms also have the ability to own equity stakes in 
entities that may be created if Singapore chooses to privatize certain 
government-owned services.
    Some achievements of the FTA in certain services sectors are 
highlighted below.

    L  Banking: The financial services chapter includes core 
obligations of nondiscrimination, most-favored nation treatment, and 
additional market access obligations. Singapore's current ban on new 
licenses for full-service banks will be lifted within 18 months, and 
lifted within three years for ``wholesale'' banks that serve only large 
transactions. Licensed full-service banks will be able to offer all 
their services in Singapore at up to 30 locations in the first year 
that the agreement is in effect, and at an unlimited number of 
locations within two years. Locally incorporated subsidiaries of U.S. 
banks can apply for access to the local Automated Teller Machine (ATM) 
network within two-and-a-half years, and branches of U.S. banks get 
access to the ATM network in 4 years.
    L  Insurance: Under the FTA, U.S. insurance firms will be able to 
establish subsidiaries, branches or joint ventures. Singapore is 
expanding the cross-border insurance services it allows, and U.S. firms 
will be able to sell marine, aviation and transport (MAT) insurance, 
reinsurance, to provide insurance brokerage of reinsurance and MAT 
insurance, and to provide insurance auxiliary services. A new principle 
of expedited availability of insurance services in the FTA means that 
prior regulatory product approval will not be required for all 
insurance products other than life insurance, Central Provident Fund 
related products, and investment-linked products sold to the business 
community. Expedited procedures will be available in other cases when 
prior product approval is necessary. The FTA specifies that U.S. 
financial institutions may offer financial services to citizens 
participating in Singapore's privatized social security system under 
more liberal requirements.
    L  Securities and Related Financial Services: The FTA specifies 
that U.S. firms may provide asset/portfolio management and securities 
services in Singapore through the establishment of a local office, or 
by acquisition of local firms. In addition, U.S. firms may supply 
pension services under Singapore's privatized social security system, 
with liberalized requirements regarding the number of portfolio 
managers that must be located in Singapore. And U.S.-based firms may 
sell portfolio management services via a related institution in 
Singapore. Under the FTA, Singapore will treat U.S. firms the same as 
local firms for the cross-border supply of financial information, 
advisory and data processing services.
    L  Express Delivery Services: The FTA contains important provisions 
relating to express delivery services. It provides for liberalization 
of express delivery services and other related services (that are part 
of an integrated express delivery system) that will allow a more 
efficient and expedited express delivery business in Singapore. 
Singapore also commits that it will not allow its postal service to 
cross-subsidize express letters in an anti-competitive manner with 
revenues from its monopoly services.
    L  Professional Services: The FTA specifies that Singapore will 
ease restrictions on U.S. firms creating joint law ventures to practice 
in Singapore, and will recognize degrees earned from certain U.S. law 
schools for admission to the Singapore bar. Singapore will reduce 
onerous requirements on the make-up of boards of directors for 
architectural and engineering firms. And capital ownership requirements 
for land surveying services will be eliminated. In addition, the FTA 
liberalizes the requirements for registration and certification of 
patent agents. Provisions of the FTA also call for cooperation in 
developing standards and criteria for licensing and certification of 
other professional services providers.
    L  Telecommunications: The FTA contains a full range of market 
access commitments on telecommunications services, consistent with the 
regulatory regimes of the U.S. and Singapore. For example, users of the 
public telecommunications network are guaranteed reasonable and 
nondiscriminatory access to the network. This prevents local firms from 
having preferential or ``first right'' of access to telecommunications 
networks. The FTA also provides U.S. phone companies with the right to 
interconnect with networks in Singapore in a timely fashion, on terms, 
conditions, and cost-oriented rates that are transparent and 
reasonable. And the FTA grants U.S. firms seeking to build a physical 
network in Singapore nondiscriminatory access to buildings that contain 
telephone switches and submarine cable heads. U.S. firms will be able 
to lease lines on nondiscriminatory terms and to re-sell telecom 
services of Singaporean suppliers to build a customer base. 
Importantly, the FTA includes transparency requirements for the 
rulemaking procedures of Singapore's telecom regulatory authority, and 
requires publication of inter-connections agreements and service rates. 
Singapore commits that when competition emerges in a telecom sector, 
that area will be deregulated. The agreement also specifies that 
companies, not governments, will make technology choices, particularly 
for mobile wireless services, thus allowing firms to compete on the 
basis of technology and innovation, not on government-mandated 
standards.

Trade in Goods and Agriculture: Tariffs Eliminated

    U.S. tariffs on 92% of Singapore's exports of goods will be 
eliminated immediately upon entry into force of the Agreement, with 
remaining tariffs phased out over 4-10 years. Singapore guarantees zero 
tariffs immediately on all U.S. products.
    Textiles and apparel will be duty-free immediately if they meet the 
Agreement's ``yarn-forward'' rule of origin, which will promote new 
opportunities for U.S. and Singaporean fiber, yarn, fabric and apparel 
manufacturing industries. A limited yearly amount of textiles and 
apparel containing non-U.S. or non-Singaporean yarns, fibers or fabrics 
may also qualify for duty-free treatment.
    Extensive monitoring and anti-circumvention commitments--such as 
reporting, licensing, and unannounced factory checks--will ensure that 
only Singaporean textiles and apparel receive tariff preferences under 
the Agreement.

Electronic Commerce: Free Trade in the Digital Age

    No previous U.S. free trade agreement contains such cutting-edge 
provisions on digital trade as the proposed FTA with Singapore. The 
United States and Singapore agreed to provisions on electronic commerce 
that reflect the issue's importance in global trade, and the principle 
of avoiding barriers that impede the use of electronic commerce.
    For example, the Agreement establishes explicit guarantees that the 
principle of nondiscrimination applies to digital products delivered 
electronically, such as software, music, images, videos, or text. This 
will provide fair treatment and protection to U.S. firms that deliver 
such digital products via the Internet. The FTA also establishes a 
binding prohibition on customs duties charged on digital products 
delivered electronically. For digital products delivered on hard media 
(such as a DVD or a CD-ROM), customs duties will be based on the value 
of the media (e.g., the disc), not on the value of the movie, music or 
software contained on the disc.
    The FTA also affirms that any commitments made related to services 
also extend to the electronic delivery of such services, such as 
financial services delivered over the Internet. This sets a very good 
precedent for U.S. services liberalization efforts in the WTO and in 
other FTAs.

Investment: Important Protections for U.S. Investors

    The Agreement will improve the bilateral investment climate and 
provide important protections for investors, and is also consistent 
with the objectives regarding investor-state dispute settlement in the 
Trade Act. Given the large stock of U.S. investment in Singapore, the 
protections of the FTA are extremely important and provide assurances 
for the future growth of two-way investment. The FTA will provide a 
secure, predictable legal framework for U.S. investors operating in 
Singapore. All forms of investment are protected under the Agreement. 
The Agreement guarantees U.S. investors treatment no less favorable 
than Singaporean investors or any other foreign investor, except in 
certain sectors that are specifically exempted. This so-called 
``negative list'' approach is the most comprehensive way to protect the 
interests of U.S. investors in Singapore. Among the rights afforded to 
U.S. investors under the Agreement are the right to make international 
transfers related to an investment, protections related to 
expropriation and due process that are consistent with U.S. law, and 
freedom from certain performance-related restrictions and requirements. 
The investor protections are backed by an effective, impartial 
procedure for dispute settlement that is fully transparent. Submissions 
to arbitral panels and arbitral hearings will be open to the public, 
and interested parties will have the opportunity to submit their views.

Intellectual Property Rights (IPR): Setting New High Standards

    The U.S.-Singapore FTA provides for a very high level of IPR 
protection, including state-of-the-art protections for trademarks and 
digital copyrights, as well as expanded protection for patents and 
undisclosed information. These are supported by tough penalties for 
piracy and counterfeiting, including procedures for seizure and 
destruction of counterfeit products, the equipment used to produce 
counterfeit products, and the establishment of statutory and actual 
damages for violations. Singapore will accede to international Internet 
treaties, extend the term of protection for copyrighted works, and 
maintain criminal penalties for circumvention of technology protection 
measures and for trade in counterfeit goods.
    The rising global level of trade in counterfeit goods calls for 
strong provisions to combat such illegal trade. The FTA gives effect to 
the trademark law treaty and the joint recommendation on protection of 
well-known marks, ensuring that all trademarks can be registered in 
Singapore and that licensees will no longer have to register their 
trademark licenses to assert their rights in a trademark. More specific 
information on the Agreement's IPR provisions is below.

    L  Trademarks: The FTA ensures government involvement in resolving 
disputes between trademarks and Internet domain names, which is 
important to prevent ``cyber-squatting'' of trademarked domain names. 
It applies the important principle of ``first-in-time, first-in-right'' 
to trademarks and geographical indicators (place-names) applied to 
products. This means that the first to file for a trademark is granted 
the first right to use that name, phrase or geographical place-name. 
Furthermore, the FTA streamlines the trademark filing process by 
allowing applicants to use their own national patent/trademark offices 
for filing trademark applications.
    L  Copyrights: The FTA contains provisions designed to ensure that 
only authors and other copyright owners have the right the make their 
works available online. Copyright owners maintain rights to temporary 
copies of their works on computers, which is important in protecting 
music, videos, software and text from widespread unauthorized sharing 
via the Internet. The FTA provides that copyrighted works and 
phonograms are protected for extended terms, consistent with U.S. 
standards and international trends. And strong anti-circumvention 
provisions will help to limit tampering with technologies (like 
embedded codes on discs) that are designed to prevent piracy and 
unauthorized distribution over the Internet.
    L  The FTA requires that governments only use legitimate computer 
software, thus setting a positive example for private users. Singapore 
agrees to prohibit the production of optical discs (CDs, DVDs or 
software) without a source identification code, unless the copyright 
holder authorizes (in writing) such production. And the agreement 
provides for protection for encrypted program-carrying satellite 
signals as well as the programming, thus preventing piracy of satellite 
television programming. The FTA provides for limited liability for 
Internet Service Providers (ISPs), reflecting the balance struck in the 
U.S. Digital Millennium Copyright Act between legitimate ISP activity 
and the infringement of copyrights.
    L  Patents and Undisclosed Information: Under the provisions of the 
FTA, a patent term can be extended to compensate for up-front 
administrative or regulatory delays in granting the original patent, 
consistent with U.S. practice. The grounds for revoking a patent in 
Singapore are limited to the same grounds required to originally refuse 
a patent, thus protecting against arbitrary revocation. The FTA 
provides new protections for patents covering biotech plants and 
animals, and it protects against imports of pharmaceutical products 
without patent-holder's consent by allowing lawsuits when contracts are 
breached. Test data and other information submitted to a government for 
the purpose of product approval will be protected against disclosure or 
unfair commercial use for a period of 5 years for pharmaceuticals and 
10 years for agricultural chemicals. Finally, the FTA contains 
provisions designed to ensure that government marketing-approval 
agencies will not grant approval to products that infringe patents.
    L  IPR Enforcement: Singapore has agreed to establish criminal 
penalties for companies that make pirated copies from legitimate 
products, and the Singaporean government guarantees in the FTA that it 
has authority to seize, forfeit and destroy counterfeit and pirated 
goods and the equipment used to produce them. Under the FTA, IPR laws 
will be enforced against traded goods, including trans-shipments, to 
deter violators from using U.S. or Singaporean ports or free-trade 
zones to traffic in pirated products. Enforcement officials may act on 
their own authority in border and criminal IPR cases without waiting 
for the filing of a formal complaint, thus providing more effective 
enforcement.
    L  The agreement mandates both statutory and actual damages under 
Singaporean law for IPR violations. This serves as a deterrent against 
piracy, and provides that monetary damages can be awarded even if 
actual economic harm (retail value, profits made by violators) cannot 
be determined.

Competition Policy: Protection Against Anticompetitive Business 
        Conduct, Designated Monopolies and Government Enterprises

    The FTA contains provisions to protect U.S. firms against possible 
anti-competitive behavior. Singapore commits to enact laws proscribing 
anti-competitive conduct and to create a competition authority 
commission by January 2005.
    Especially important in the case of Singapore is the commitment 
that Government-Linked-Corporations (GLC's) will operate on a 
commercial and nondiscriminatory basis. As GLC's account for a 
significant percentage of Singapore's economic activity, it was 
important for the U.S. to secure this nondiscrimination commitment, and 
to back it up through dispute settlement provisions. Singapore also 
agrees to provide annual information on government enterprises with 
substantial revenues or assets.

Government Procurement: Strong Disciplines

    Both Singapore and the United States are members of the WTO 
Agreement on Government Procurement, but the U.S.-Singapore FTA goes 
beyond existing WTO obligations. For example, the FTA lowers the 
monetary thresholds for coverage under government procurement 
commitments, thereby increasing the number of contracts on which U.S. 
firms may bid in a manner that is covered by transparent procurement 
disciplines. In addition, under the FTA Singapore broadens its 
commitments to nondiscrimination in government services procurement and 
reinforces its WTO commitments to strong and transparent disciplines on 
procurement procedures.
    As in the services and investment provisions of the Agreement, the 
government procurement chapter uses a ``negative list'' approach in 
which U.S. firms gain nondiscriminatory access unless a sector is 
specifically excluded in the Agreement.

Customs Procedures and Rules of Origin: Ground-Breaking Provisions

    The U.S.-Singapore FTA is one of the first U.S. trade agreements 
with specific, concrete obligations on how customs procedures are to be 
applied. Specifically, the Agreement requires transparency and 
efficiency in customs administration, with commitments on publishing 
laws and regulations on the Internet, and ensuring procedural certainty 
and fairness. The Agreement also seeks to facilitate the clearance of 
express delivery shipments through customs.
    Under the FTA, both parties agree to share information to combat 
illegal trans-shipment of goods. In addition, the Agreement contains 
specific language designed to facilitate the clearance through customs 
of express delivery shipments. Strong but simple rules of origin will 
ensure that only U.S. and Singaporean goods benefit from the Agreement.

Temporary Entry of Personnel

    The Agreement contains provisions for the temporary entry of 
business visitors, including intra-company transferees and 
professionals. The Administration believes that the temporary entry 
provisions strike a careful balance between the needs of the U.S. 
service industry to provide competitive services while preserving the 
right of Congress to legislate on immigration policy. Under these 
provisions, a professional visa category would be established.

Environmental Provisions: Cooperation to Protect the Environment

    The FTA fully meets the environmental objectives set out by 
Congress in TPA. Significantly, environmental obligations are part of 
the core text of the trade agreement. Both parties commit to ensure 
that their domestic environmental laws provide for high levels of 
environmental protection and shall strive to continue to improve such 
laws. The Agreement's text makes clear that it is inappropriate to 
weaken or reduce domestic environmental protections to encourage trade 
or investment. A related agreement on environmental cooperation will 
enhance demand for environmental goods and services.
    Reflecting the bipartisan compromise struck in the Trade Act, the 
FTA requires that parties shall effectively enforce their own domestic 
environmental laws, and this obligation is enforceable through the 
Agreement's dispute settlement procedures.

Labor Provisions: Promotion of Worker Rights

    Significantly, labor obligations are part of the core text of the 
trade agreement. Both parties reaffirm their obligations as members of 
the International Labor Organization (ILO), and shall strive to ensure 
that their domestic laws provide for labor standards that are 
consistent with internationally recognized labor principles. The 
Agreement makes clear that it is inappropriate to weaken or reduce 
domestic labor protections to encourage trade or investment.
    Reflecting the bipartisan compromise struck in the Trade Act, the 
Agreement requires that parties shall effectively enforce their own 
domestic labor laws, and this obligation is enforceable through the 
Agreement's dispute settlement procedures.

Dispute Settlement: Innovative New Tools

    All core obligations of the Agreement, including labor and 
environmental provisions, are subject to the dispute settlement 
provisions of the Agreement. The procedures for dispute panel 
procedures set new and higher standards of openness and transparency, 
reflecting the guidance from the Congress in the Trade Act. For 
example, the Agreement envisions that dispute settlement proceedings 
will be open to the public, that legal submissions by parties to a 
dispute will be released to the public, and that interested third 
parties will have the ability to submit their views to dispute 
settlement panels.
    Dispute settlement procedures in the FTA promote compliance through 
consultation and trade-enhancing remedies, rather than relying solely 
on trade sanctions. The FTA dispute settlement procedures also provide 
for ``equivalent'' remedies for commercial and labor/environmental 
disputes. The FTA does this through an innovative new enforcement 
mechanism that involves the use of monetary assessments to enforce 
commercial, labor, and environmental obligations of the trade 
agreement. Suspension of preferential tariff benefits under the 
Agreement is also available for all disputes, but the mechanism is 
designed in all cases to seek remedies that will enhance compliance 
with the obligations of the Agreement, rather than restricting trade 
and harming ``innocent bystanders.''

SUMMARY OF THE U.S.-CHILE FTA
Market Access for Goods

    More than 87% of U.S.-Chilean bilateral trade in consumer and 
industrial products would become duty-free immediately upon entry into 
force of the Agreement, with most remaining tariffs eliminated within 4 
years. Key U.S. export sectors would gain immediate duty-free access to 
Chile, such as agricultural and construction equipment, autos and auto 
parts, computers and other information technology products, medical 
equipment, and paper products. Chile's ``luxury tax'' on automobiles 
will be phased out over 4 years. In the meantime, the number of 
vehicles to which this tax applies will be sharply reduced as soon as 
the Agreement takes effect.
    Textiles and apparel will be duty-free immediately if they meet the 
Agreement's rule of origin, promoting new opportunities for U.S. and 
Chilean fiber, yarn, fabric and apparel manufacturing industries. A 
limited yearly amount of textiles and apparel containing non-U.S. or 
non-Chilean yarns, fibers or fabrics may also qualify for duty-free 
treatment.
    Our key concern was to level the playing field to ensure that U.S. 
access to Chile would be as good as that of the EU or Canada, both of 
which have FTAs with Chile. Immediately following the ratification of 
the EU-Chile FTA, the EU saw a 27% increase in trade with Chile. 
Through the U.S.-Chile agreement we ensure that U.S. firms will not be 
left behind.

Expanded Markets for U.S. Farmers and Ranchers

    More than three-quarters of U.S. farm goods will enter Chile duty-
free within 4 years, and all duties on U.S. products will be phased out 
over 12 years. Key U.S. farm products will benefit from improved market 
access, including pork and pork products, beef and beef products, 
soybeans and soybean meal, durum wheat, feed grains, potatoes, and 
processed food products such as pasta, distilled spirits, and breakfast 
cereals. Tariffs on U.S. and Chilean wines will first be equalized at 
low U.S. rates and then eliminated.
    U.S. farmers will have access to Chile that is as good as or better 
than the European Union or Canada, both of which already have FTAs with 
Chile. Chilean price bands, under which import duties on the same 
product may vary according to price level, will be phased out. During 
the phase out, producers of these products will be treated as good as 
or better than their competitors with other countries. Elimination of 
price bands was not part of the EU or Canada FTAs with Chile. The 
Agreement eliminates the use of export subsidies on U.S.-Chilean farm 
trade, but preserves the right to respond if third countries use export 
subsidies to displace U.S. products in the Chilean market. An 
agricultural safeguard provision will help protect U.S. farmers and 
ranchers from sudden surges in imports from Chile.
    Both parties to the Agreement renew their commitment to continue 
the work on resolving important sanitary and phytosanitary issues, such 
as meat and dairy inspection and meat grading, that are inhibiting 
access to consumers in both markets.
Access to a Fast-Growing Chilean Services Market
    The commitments of the Agreement in services cover both cross-
border supply of services (such as services supplied through electronic 
means, or through the travel of nationals) as well as the right to 
invest and establish a local services presence.
    Traditional market access to services is supplemented by strong and 
detailed disciplines on regulatory transparency. Regulatory authorities 
must use open and transparent administrative procedures, consult with 
interested parties before issuing regulations, provide advance notice 
and comment periods for proposed rules, and publish all regulations.
    Chile will accord substantial market access across its entire 
services regime, subject to very few exceptions, a so-called ``negative 
list'' approach. This establishes market access commitments across a 
wide range of sectors of interest to the United States, including but 
not limited to: Computer and related services; telecommunications 
services; audiovisual services; construction and engineering; tourism; 
advertising; express delivery; professional services (architects, 
engineers, accountants, etc.); distribution services (wholesaling, 
retailing and franchising); adult education and training services; and 
environmental services. The express delivery commitment includes an 
important and expansive definition of the integrated nature of express 
services, and affirms existing competitive opportunities.
    Some of the key services commitments are spelled out in more detail 
below:

    L  Financial Services: This chapter includes core obligations of 
nondiscrimination, most-favored nation treatment, and additional market 
access obligations. U.S. insurance firms would gain full rights to 
establish subsidiaries or joint ventures for all insurance sectors 
(life, nonlife, reinsurance, brokerage) with limited exceptions. Chile 
has committed to phase in insurance branching rights. Chile further has 
committed to modify its legislation to allow cross-border supply of key 
insurance sectors such as marine, aviation and transport (MAT) 
insurance, insurance brokerage of reinsurance and MAT insurance, and 
has confirmed existing rights for reinsurance. A new principle of 
expedited availability of insurance services means that the parties 
recognize the importance of developing and maintaining regulatory 
procedures to expedite the offering of insurance services by licensed 
suppliers.
    L  U.S. banks and securities firms may establish branches and 
subsidiaries and may invest in local firms without restriction, except 
in very limited circumstances, and U.S. financial institutions may 
offer financial services to citizens participating in Chile's highly 
successful privatized voluntary savings plans. U.S. firms also gain 
some increased ability to offer such products through Chile's mandatory 
social security system. Chile also will allow U.S.-based firms to offer 
services cross-border to Chileans in areas such as financial 
information and data processing, and financial advisory services with a 
limited exception. Chilean mutual funds may use foreign-based portfolio 
managers.
    L  Telecommunications: Under the Agreement, users of the public 
telecommunications network are guaranteed reasonable and 
nondiscriminatory access to the network. This prevents local firms from 
having preferential or ``first right'' of access to telecommunications 
networks. The FTA also provides U.S. phone companies with the right to 
interconnect with networks in Chile at nondiscriminatory, cost-based 
rates. U.S. firms seeking to build a physical network in Chile are also 
granted nondiscriminatory access to facilities, such as telephone 
switches and submarine cable landing stations. And U.S. firms will be 
able to lease lines on Chilean telecom networks on nondiscriminatory 
terms, and to re-sell telecom services of Chilean suppliers to build a 
customer base.

Electronic Commerce: Free Trade in the Digital Age

    The Electronic Commerce text in the FTA identifies Chile as a 
leader in Latin America for the further development of digital trade, 
as both countries agreed to provisions on electronic commerce that 
reflect the issue's importance in global trade. In the FTA, Chile and 
the United States committed to nondiscriminatory treatment of digital 
products, agreed not to impose customs duties on such products, and 
affirmed that commitments made related to services also extend to the 
electronic delivery of such services. For digital products delivered on 
hard media (e.g., a DVD or CD), customs duties will be based on the 
value of the media (e.g., the disc), not on the value of the movie, 
music or software contained on the disc. Finally, both countries agreed 
to cooperate in numerous policy areas related to electronic commerce, 
including on the maintenance of cross-border flows of information.

Investment: Important Protections for U.S. Investors

    The Agreement will establish a secure, predictable legal framework 
for U.S. investors operating in Chile, and is consistent with the 
objectives regarding investor-state dispute settlement contained in the 
Trade Act of 2002. All forms of U.S. investment in Chile are protected 
under the Agreement, including enterprises, debt, concessions, 
contracts and intellectual property. U.S. investors enjoy in almost all 
circumstances the right to establish, acquire, and operate investments 
in Chile on an equal footing with Chilean investors, and with investors 
of other countries. The Agreement prohibits and removes certain 
restrictions on U.S. investors, such as requirements to buy Chilean 
rather than U.S. inputs.
    Pursuant to U.S. Trade Promotion Authority, the Agreement draws 
from U.S. legal principles and practices, to provide U.S. investors a 
basic set of substantive protections that Chilean investors currently 
enjoy under the U.S. legal system. Among the rights afforded to U.S. 
investors (consistent with those found in U.S. law) are due process 
protections and the right to receive a fair market value for property 
in the event of expropriation. These investor rights are backed by an 
effective, impartial procedure for dispute settlement that is fully 
transparent. Submissions to dispute panels and panel hearings will be 
open to the public, and interested parties will have the opportunity to 
submit their views.

Intellectual Property Rights (IPR): Expanded Protections and 
        Enforcement

    Protection of copyrights, patents, trademarks, and undisclosed 
trade information in the U.S.-Chile FTA is state-of-the-art, with 
protections that go beyond previous U.S. free-trade agreements. 
Enforcement of intellectual property rights is also enhanced under the 
Agreement. Some specific aspects of the Agreement's protections for IPR 
are listed below.

    L  Trademarks: The Agreement contains language to ensure that there 
is government involvement in resolving disputes between trademarks and 
Internet domain names, which is important to prevent ``cyber-
squatting'' of trademarked domain names. The trademark section of the 
Agreement also applies the principle of ``first-in-time, first-in-
right'' to trademarks and geographical indicators (place-names) applied 
to products. This means that the first to file for a trademark is 
granted the first right to use that name, phrase, or geographical 
place-name.
    L  Copyrights: The Agreement's copyright language will ensure that 
only authors and other copyright owners have the right to make their 
works available online. Copyright owners maintain all rights to even 
temporary copies of their works on computers, which is important in 
protecting music, videos, software, and text from widespread 
unauthorized sharing via the Internet. Under the Agreement, copyrighted 
works and phonograms are protected for extended terms, consistent with 
U.S. standards and international trends. Strong anti-circumvention 
provisions prohibit tampering with technologies (like embedded codes on 
discs) that are designed to prevent piracy and unauthorized 
distribution over the Internet. The FTA also provides that governments 
will only use legitimate computer software, thus setting a positive 
example for private users.
    L  Patents and Trade Information: The Agreement provides that a 
patent term can be extended to compensate for up-front administrative 
or regulatory delays in granting the original patent, consistent with 
U.S. practice. The FTA specifies that grounds for revoking a patent are 
limited to the same grounds required to originally refuse a patent, 
which helps to protect against arbitrary revocation. And test data and 
other information submitted to a government for the purpose of product 
approval will be protected against disclosure or unfair commercial use 
for a period of 5 years for pharmaceuticals and 10 years for 
agricultural chemicals. Finally, the IPR provisions ensure that 
government marketing-approval agencies will not grant approval to 
products that infringe patents.
    L  IPR Enforcement: The FTA contains commitments that party 
governments will criminalize end user piracy, thus providing a strong 
deterrence against piracy and counterfeiting. The Chilean government 
guarantees that it has authority to seize, forfeit, and destroy 
counterfeit and pirated goods and the equipment used to produce them. 
The Agreement specifies that IPR laws will be enforced against goods-
in-transit, to deter violators from using U.S. or Chilean ports or 
free-trade zones to traffic in pirated products. Enforcement officials 
may act on their own authority in border and criminal IPR cases without 
waiting for the filing of a formal complaint, thus providing more 
effective enforcement. Finally, the Agreement mandates both statutory 
and actual damages under Chilean law for IPR violations. This will 
serve as a deterrent against piracy, and provide that monetary damages 
can be awarded even if actual economic harm (retail value, profits made 
by violators) cannot be determined.

Competition Policy: Protections Against Monopolistic Behavior

    The U.S.-Chile FTA commits Chile to maintain competition laws that 
prohibit anti-competitive business conduct, and a competition agency to 
enforce those laws. The Chilean laws already promote economic 
efficiency and consumer welfare, making clear the appropriate objective 
of competition laws.
    The Agreement also requires that Chile control state enterprises 
and officially designated monopolies so that such firms do not abuse 
their official status to harm the interests of U.S. companies or 
discriminate in the sale of goods or services.

Government Procurement: Setting a Precedent for the Hemisphere

    The FTA requires that covered Chilean ministries, as well as 
regional and municipal governments, not discriminate against U.S. 
firms, or in favor of Chilean firms, when making government purchases 
in excess of agreed monetary thresholds. It furthermore imposes strong 
and transparent disciplines on government procurement procedures, such 
as requiring advance public notice of purchases, as well as timely and 
effective bid review procedures.
    The FTA covers the purchases of most Chilean central government 
agencies, and covers 13 regional governments, 10 ports and all airports 
that are property of the state or dependents of the Direccion de 
Aeronautica Civil, and more than 350 municipalities in Chile.
    Importantly, the FTA ensures that bribery in government procurement 
is specified as a criminal offense under Chilean and U.S. laws. This 
furthers the anti-corruption goals set out by hemispheric leaders at 
the Summit of the Americas in Quebec City in 2001.

Ground-Breaking Customs Procedures

    The U.S.-Chile FTA is one of the first U.S. trade agreements with 
specific, concrete obligations on how customs procedures are to be 
applied. The Agreement requires transparency and efficiency in customs 
administration, with commitments on publishing laws and regulations on 
the Internet, and ensuring procedural certainty and fairness. Both 
parties agree to share information to combat illegal trans-shipment of 
goods. In addition, the Agreement contains specific language designed 
to facilitate the clearance through customs of express delivery 
shipments.
    Strong but simple rules of origin will ensure that only U.S. and 
Chilean goods benefit from the Agreement. The rules are specific to 
individual products, but are designed to be easier to administer than 
NAFTA rules of origin.

Temporary Entry of Personnel

    The Agreement contains provisions for the temporary entry of 
business visitors, including intra-company transferees and 
professionals. The Administration believes that the temporary entry 
provisions strike a careful balance between the needs of the U.S. 
service industry to provide competitive services while preserving the 
right of Congress to legislate on immigration policy. Under these 
provisions, a professional visa category would be established.

Environmental Provisions: Cooperation to Protect the Environment

    The FTA fully meets the environmental objectives set out by 
Congress in the Trade Act of 2002. Significantly, environmental 
obligations are part of the core text of the Trade Agreement. Both 
parties commit to ensure that their domestic environmental laws provide 
for high levels of environmental protection and shall strive to 
continue to improve such laws. The Agreement's text makes clear that it 
is inappropriate to weaken or reduce domestic environmental protections 
to encourage trade or investment.
    Reflecting the bipartisan compromise struck in the Trade Act, the 
FTA requires that parties shall effectively enforce their own domestic 
environmental laws, and this obligation is enforceable through the 
Agreement's dispute settlement procedures.
    In addition, the Agreement contains an annex identifying a number 
of important cooperative projects that will promote environmental 
protection. Projects include:

     LBuilding capacity for wildlife protection and resource 
management in Latin America through collaboration with wildlife 
managers, universities, and local communities.
     LA project to develop and implement effective alternatives 
to methyl bromide, a chemical that Chile and the United States have 
committed to phase out under international environmental agreements.
     LDevelopment of a Pollutant Release and Transfer Register 
(PRTR) in Chile, similar to the successful Toxic Release Inventory in 
the United States. The PRTR is a publicly available database of 
chemicals that have been released by industrial facilities into the 
environment.

Labor Provisions: Promotion of Worker Rights

    Significantly, labor obligations are part of the core text of the 
Trade Agreement. Both parties reaffirm their obligations as members of 
the International Labor Organization (ILO), and shall strive to ensure 
that their domestic laws provide for labor standards that are 
consistent with internationally recognized labor principles. The 
Agreement makes clear that it is inappropriate to weaken or reduce 
domestic labor protections to encourage trade or investment.
    Reflecting the bipartisan compromise struck in the Trade Act, the 
Agreement requires that Parties shall effectively enforce their own 
domestic labor laws, and this obligation is enforceable through the 
Agreement's dispute settlement procedures.
    The Agreement also contains a cooperative labor mechanism to 
promote respect for the principles embodied in the ILO Declaration on 
Fundamental Principles and Rights at Work, and compliance with ILO 
Convention 182 on the Worst Forms of Child Labor. Cooperative 
activities may include:

     LDiscussions of legislation, practice, and implementation 
of the core elements of the ILO Declaration on Fundamental Principles 
and Rights at Work.
     LImproving systems for the administration and enforcement 
of labor laws.

Dispute Settlement: Innovative New Tools

    All core obligations of the Agreement, including labor and 
environmental provisions, are subject to the dispute settlement 
provisions of the Agreement. The procedures for dispute panel 
procedures set new and higher standards of openness and transparency, 
reflecting the guidance from Congress in the Trade Act. For example, 
the Agreement provides that dispute settlement proceedings will be open 
to the public, that legal submissions by parties to a dispute will be 
released to the public, and that interested third parties will have an 
opportunity to submit their views to dispute settlement panels.
    Dispute settlement procedures in the FTA promote compliance through 
consultation and trade-enhancing remedies, rather than relying solely 
on trade sanctions. The FTA dispute settlement procedures also provide 
for ``equivalent'' remedies for commercial and labor/environmental 
disputes. The FTA achieves this through an innovative new enforcement 
mechanism that involves the use of monetary assessments to enforce 
commercial, labor, and environmental obligations of the Trade 
Agreement. Suspension of preferential tariff benefits under the 
Agreement is also available for all disputes, but the mechanism is 
designed in all cases to seek remedies that will enhance compliance 
with the obligations of the Agreement, rather than restricting trade 
and harming ``innocent bystanders.''

                                 

    Chairman CRANE. No, thank you. We appreciate you being 
here, Mr. Allgeier. I have heard many complaints from 
businesses that they have been placed at an unfair disadvantage 
vis-a-vis their foreign competitors located in countries with 
which Chile already has FTAs. Will this agreement immediately 
put our exporters on a level playing field with their 
international competitors?
    Mr. ALLGEIER. Yes, sir, it will. First of all, all the 
agriculture will immediately be on a par or better--our access, 
that is, in agriculture will be on par or better with foreign 
competitors. On the industrial side, all those areas in which 
an industry or a sector has identified itself as being at a 
disadvantage will be in the immediate basket as well. Similarly 
for services. All of those new obligations will come into force 
upon entry of the agreement.
    Chairman CRANE. I am still hearing that Singapore's 
implementation of its commitment on chewing gum has not yet 
been resolved. Is the U.S. Trade Representative continuing to 
support Wrigley in its effort to conclude with Singapore an 
acceptable means of implementation that will allow some chewing 
gum to be sold in Singapore without a prescription?
    Mr. ALLGEIER. Yes, Mr. Chairman. We are continuing to work 
with Wrigley and with the Singaporean authorities to provide 
the maximum possible flexibility for Wrigley and other gum 
manufacturers to sell their product in Singapore. In that 
regard, I think you are aware that Minister Yeo of Singapore 
actually met with people from Wrigley when he was here for the 
signing ceremony, and I think that is a positive sign from 
Singapore that they are prepared to work with us on this issue 
as well.
    Chairman CRANE. Very good. Thank you so much. Mr. Levin.
    Mr. LEVIN. Welcome. You have laid out some of the clear 
advantages and advances in the agreements, and I think it is 
clear there are some. Let me, therefore, focus on some of the 
issues.
    I want to talk about ISI, but let me first discuss briefly, 
leaving time for ISI, the core labor standards and 
environmental issues. Let's say that the Chilean government saw 
a change in its majority. This is theoretical. There was a 
return to power of those who had written the labor laws some 
decades ago, and as a result there was a change so that there 
were clear restrictions on the ability of employees to organize 
and bargain collectively in violation of ILO core labor 
standards. What would be the remedy that could be pursued by 
the United States if there were that change of circumstances?
    Mr. ALLGEIER. Well, if----
    Mr. LEVIN. They were enforcing those laws as were written. 
Under this agreement, what would be our available remedy?
    Mr. ALLGEIER. Okay. We would certainly look at the totality 
of the labor provisions, which means that countries are not to 
derogate from their labor laws or waive them in order to gain 
trade or investment advantage. As you said, they are to enforce 
their laws, and the implication of your question is they change 
their laws and then they enforce lax laws.
    Mr. LEVIN. Let's say they do that. What is the available 
remedy under this agreement?
    Mr. ALLGEIER. Under this agreement I think that we would 
certainly look to argue that there had been--that they had not 
lived up to the spirit of the agreement in the sense that they 
are to strive for high levels of labor protection.
    Mr. LEVIN. What would be our remedy?
    Mr. ALLGEIER. We would go through the dispute settlement 
mechanism.
    Mr. LEVIN. What is subject to the dispute--the strive to 
achieve core labor standards isn't subject to the dispute 
settlement system, right?
    Mr. ALLGEIER. Okay. Right.
    Mr. LEVIN. So, what would be--if they were enforcing their 
own laws, and they were, in our judgment, in clear violation of 
core ILO labor standards, the five standards, what would be the 
available remedy?
    Mr. ALLGEIER. I think that one would look at what the 
expectations are at the time one signs an agreement. We have, 
in respect to any part of a trade agreement, that when one 
looks at implementing the laws of Chile, one is looking at it 
from the perspective of the laws that are in effect now. Now--
--
    Mr. LEVIN. I want to ask you about ISI. The answer is that 
the way the agreement is written, this strive to implement core 
labor standards is not subject to the dispute settlement 
system, right?
    Mr. ALLGEIER. That is correct.
    Mr. LEVIN. Therefore, if they were enforcing their own 
laws, though they--and the nonderogation provision is not 
subject to the dispute settlement system either, right?
    Mr. ALLGEIER. That is correct.
    Mr. LEVIN. All right. So, therefore, if they revert, we 
have no utilization available under the dispute settlement 
system.
    Mr. ALLGEIER. Well, in all trade agreements there is this 
notion of what are reasonable expectations.
    Mr. LEVIN. I know, but----
    Mr. ALLGEIER. So, that----
    Mr. LEVIN. It is what is written into the agreement. So, 
the answer is that there isn't an available remedy. I think you 
should say that, and I don't think--I am not saying it is 
likely that Chile would revert. I would hope not. Clearly, it 
shows that to utilize that model, that standard, that example, 
as you say, for countries that do not have the core labor 
standards in their agreement, in their laws, and don't practice 
them, it is a very unfortunate and, I think, illogical and 
contradictory utilization. That is what has been positioned in 
the CAFTA negotiation.
    So, I want to ask you about ISI. Right now, machine tool 
components are subject to--machine tools have a local content 
provision. There is a lot of worry about the ISI provision. It 
is available for any country. So, let's say that Singapore, in 
order to put together their machine tools, bring in components 
from, say, Japan or China. Right now the way the agreement is 
written, those components could count as Singapore value-added 
or Singapore content in terms of meeting the local content 
requirement, right?
    Mr. ALLGEIER. If we are talking about ISI, there is a 
specific list of information technology (IT) products.
    Mr. LEVIN. Machine tools are listed under 8466. Machine 
tools are included. So, I am asking you, let's say the 
components come from China or Japan, and the imports--those 
exports have been increasing components of machine tools. 
Singapore could count those components essentially as Singapore 
content to meet the--I think it is the 35 percent content 
requirements, right?
    Mr. ALLGEIER. Not if they are coming from Japan or some 
country other than those processing zones in Indonesia that are 
part of the ISI.
    Mr. LEVIN. Ambassador, I think that is not correct. The red 
light is on. I don't think that is correct, and what I would 
like you to do--and I am not suggesting that this is a flaw 
that necessarily militates one way or another in terms of final 
judgment, but it surely sets a dangerous precedent. Also, it is 
of concern, and we need a straight answer from you because it 
is possible in the implementation legislation to take care of 
this problem. I think I asked you this point blank. If a 
component for a machine tool under 8466 comes into Singapore 
incorporated, does that count as Singapore content in order for 
them to ship under the reduced tariffs to the United States? I 
want a straight yes or no.
    Mr. ALLGEIER. I will get you the correct answer to that, 
the accurate answer to that.
    Mr. LEVIN. Thank you.
    [The information follows:]

                                                   February 9, 2004

The Honorable Sander M. Levin
Committee on Ways and Means
1102 Longworth House Office Building
Washington, DC 20515

Dear Congressman Levin,

    No. The ISI provides that a product listed in Annex 3B of the 
Singapore FTA, already MFN duty-free, is an `originating good' for 
purposes of FTA tariff preference, but only if that product itself is 
shipped from one FTA party to the other. Thus, if such a product is 
shipped to Singapore from a non-FTA party (e.g., Japan or China) and 
used in Singapore as an input for a downstream product, that ISI good 
could not count as FTA-originating toward a required regional value 
content criterion that may be applicable to a final product assembled 
in Singapore.
    The only way that an ISI product could possibly be treated as an 
originating input for purposes of a regional value content applicable 
to a downstream product would be if the ISI product from a non-FTA 
party were first shipped to the United States, then held without 
undergoing any processing that would affect its treatment under Chapter 
3 of the FTA, then shipped to Singapore, and then manufactured in 
Singapore into a non-ISI good without undergoing any intermediate 
production steps that would affect treatment of the product under 
Chapter 3. It is difficult to conceive that this type of transaction 
would be economically rational for any of the products on the ISI list 
or any of the products to which a regional value content requirement 
may be applicable.

            Sincerely,

                                                  Peter F. Allgeier

                                 

    Chairman CRANE. The time of the gentleman has expired. Mr. 
English.
    Mr. ENGLISH. Thank you, Mr. Chairman. Ambassador Allgeier, 
I, first of all, want to thank you for everything that your 
office has done to cooperate with us, and specifically with my 
office, on some of our concerns with these two agreements. I 
would like to focus, for the most part of my questioning, on 
the Singapore agreement.
    As you know, I represent a manufacturing district. Among 
the sectors that have been particularly hard hit in my district 
are the domestic tool and die industry. I wonder, have you 
analyzed the potential impact of this agreement on the tool and 
die industry? I wonder specifically, would you anticipate that 
there would be a significant increase in competition to small 
U.S. manufacturers resulting from the Singapore FTA?
    Mr. ALLGEIER. We would not expect a significant negative 
impact. However, I want to assure you that we would work--we 
will continue to work closely with that industry. We know that 
they have some concerns about possible trans-shipment, and we 
certainly do not want other countries beyond Singapore to 
benefit from this agreement.
    Mr. ENGLISH. In other words, you would characterize the 
domestic producers in Singapore of these sorts of products as 
not particularly export-oriented. So, the principal challenge 
would be with trans-shipment?
    Mr. ALLGEIER. Our principal concern would be with trans-
shipment, and that is something that we would--we have 
highlighted in terms of the customs cooperation with Singapore, 
and particularly the emphasis on detecting and protecting 
against trans-shipment from others who are not part of this 
agreement.
    Mr. ENGLISH. Could you please describe the provisions in 
the FTA which protect U.S. manufacturers, for example, from 
products from China entering the United States at tariff rates 
set forth in the Singapore FTA?
    Mr. ALLGEIER. Well, the basic protection against that is 
the rule of origin, that there does have to be a transformation 
within Singapore itself. It cannot simply serve as a conduit 
for products from other areas. Frankly, given the region in 
which Singapore is located and the very competitive industry, 
not just in tool and die and others like that, but across the 
board, we have paid particular attention to this question of 
protecting against or avoiding trans-shipment both in things 
like tool and die, but also in areas such as textiles and 
intellectual property areas.
    Mr. ENGLISH. Also, could you please indicate if you think a 
greater level of protection against transshipped products will 
exist if an FTA with Singapore is approved as opposed to the 
current relationship and why?
    Mr. ALLGEIER. I think that it will improve, primarily 
because of this enhanced customs cooperation that will be part 
of this agreement. Also, frankly, the discussions that we had 
in the course of negotiations I think has heightened all of our 
attentiveness to this, and particularly the authorities in 
Singapore. They know that they can't afford to have this 
agreement turn out to be a conduit for goods from other 
countries, and they are very conscientious about avoiding that.
    Mr. ENGLISH. Moving beyond the trans-shipment point, what 
manufacturing sectors could anticipate competition from 
Singapore specifically as a result of this FTA?
    Mr. ALLGEIER. Well, to be perfectly honest, our duties at 
this point are so low that this agreement does not enormously 
enhance Singapore's access to our market in industrial 
products.
    Mr. ENGLISH. Well, I think that is very useful. Could you 
apply the same analysis to Chile? Do you anticipate that there 
are going to be sectors of our manufacturing economy that are 
going to face increased competition as a result of a Chilean 
FTA?
    Mr. ALLGEIER. I think in the case of Chile it is even less 
a threat, because Chile, unlike Singapore, is a beneficiary of 
the generalized system of preferences, and so, for a large 
array of products, they already get them duty free under that 
program.
    Mr. ENGLISH. Thank you, Ambassador, and thank you, Mr. 
Chairman, for giving me an opportunity to pose these questions.
    Chairman CRANE. Mr. Neal. Is Mr. Neal here?
    Mr. LEVIN. No. He will be back.
    Chairman CRANE. Mr. Herger.
    Mr. HERGER. Thank you, Mr. Chairman, and, Mr. Ambassador, I 
want to thank you again for appearing before our Subcommittee. 
I want to commend the U.S. Trade Representative for the 
outstanding job he has done in negotiating both the Singapore 
and Chile FTAs. These agreements will bring down barriers to 
trade and encourage job creation and economic growth both at 
home and abroad.
    I am especially pleased that the Chile agreement is 
sensitive to the very real concerns of many of our California 
agricultural producers, particularly those in the horticultural 
sector. I hope that these strong agreements will serve as a 
model for future trade agreements. Speaking of future trade 
agreements, Congress has consistently stressed the need for 
provisions in our trade agreements that provide for the 
protection and enforcement of American intellectual property 
rights that are up to date with the latest technological 
developments.
    The Singapore and Chile FTAs achieve this result. However, 
we have recently seen reports that Brazil is advocating weaker 
intellectual property rights standards or even none at all with 
respect to the provisions on intellectual property protection 
and enforcement as part of the FTAA. It would be very troubling 
if the Administration accepted such an outcome. I would 
appreciate your views on this important issue, including 
whether you might consider such an outcome.
    Mr. ALLGEIER. As I said in my presentation, one of the 
things that we are most proud of about these agreements is that 
they reflect the real-world situation, and particularly with 
respect to two things; one, the advancement of technology in 
our own economy, and the degree to which we are dependent on 
that, and second, the related one, which is that knowledge is 
an important factor of production and competitiveness. So, a 
prime objective of ours is to ensure that Americans exercise 
those skills and those attributes for their economic welfare. 
That specifically means very strong protection for intellectual 
property--very up to date for intellectual property. Wherever 
we are negotiating bilaterally, regionally or globally, high 
standards of protection for intellectual property is our 
primary objective, and we continue to seek that in all our 
negotiations, including the FTAA.
    Mr. HERGER. I thank you very much, Mr. Ambassador. Again, 
thank you for appearing before us.
    Mr. ALLGEIER. Thank you.
    Chairman CRANE. Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Mr. Chairman. Mr. Ambassador, I 
would like to begin by commending you and your colleagues at 
the Office of the U.S. Trade Representative for the successful 
negotiations on these important trade agreements with Chile and 
Singapore. Now that these FTAs are near completion, I would 
like to hear your thoughts on other potential negotiating 
partners.
    As you may know--and as the U.S. Trade Representative 
knows--I have long advocated negotiating trade agreements with 
Taiwan and Colombia, because I believe they would strengthen 
diplomatic ties and key U.S. interests, as well as provide 
economic benefits to all three countries. So, now that the 
Chile and Singapore agreements are nearing completion, let me 
ask you this: How do you decide where to look next? That is my 
first question. How do you decide where to look next? Do you 
see Taiwan and Colombia as negotiating partners of the future?
    Mr. ALLGEIER. Okay. Thank you. First of all, of course we 
do--we don't have an empty dance card with respect to 
negotiations at the moment just because we have completed Chile 
and Singapore. We are in the midst of negotiations with the 
five Central American countries, with Morocco, with Australia, 
and with the five Members of the South African Customs Union. 
So, on the so-called bilateral and subregional side, that is 
our next set of negotiations.
    There are a number of countries and economies that have 
approached us about free trade negotiations, including the two 
examples that you gave. What we are doing is we are working 
with those countries that are interested in free trade to 
promote free trade wherever possible, even short of doing a 
free trade negotiation at this point. For example, within the 
WTO, both Taiwan and Colombia are Members of the WTO. We work 
with them there. We also use bilateral mechanisms such as we 
have with Colombia or other Andean countries to point them in 
the direction of the kinds of policies that would be compatible 
with an FTA with the United States if we get to that point.
    In terms of criteria that we use, it is a variety of 
criteria. We look, certainly, at commercial benefit, and the 
commercial benefit can be either immediate in dollars-and-cents 
sort of balance sheet terms, or it can be a benefit in terms of 
setting a good example in a region or in a particular area that 
others can emulate. Obviously, we look at the commitment of the 
other potential partner not just by what they say they are 
interested in, but their behavior within the WTO or in regional 
negotiations such as the FTAA, to see if they really are 
advocating more open trade policies in those forums. We look, 
obviously, at how it may benefit the reform efforts in those 
countries, whether those reforms are reformed in privatization 
of state enterprise, or in social reforms, having to do with 
protection of environment or labor or transparency in 
government procurement. Countries that are making reforms, and 
in which international obligations would help to make those 
reforms irreversible, also are good candidates. So, it is a 
variety of criteria.
    Mr. RAMSTAD. So, based on your description of the criteria 
for negotiating partners, is it fair to conclude that either or 
both Taiwan and Colombia are prospective negotiating partners?
    Mr. ALLGEIER. Well, I don't want to speculate on the 
situation of specific countries here today because that will 
just generate headlines that there is another country on the 
list. Let me just say that we are working constructively with 
all countries that indicate that they want to move to freer 
trade with the United States. The two examples that you gave 
are two that we are working with in the WTO and elsewhere.
    Mr. RAMSTAD. So, they meet your criteria.
    Mr. ALLGEIER. Well, there have been no decisions made on 
either those countries or any other countries beyond the ones I 
mentioned.
    Mr. RAMSTAD. You just explained your criteria, and then you 
said and these two countries--I can't remember your exact 
words, but I think it is a fair restatement to say that these 
two countries meet those criteria that you outlined.
    Mr. ALLGEIER. Well, the criteria are looked at, frankly, by 
an interagency group, not just by the U.S. Trade 
Representative. So, I am not in a position today to speak on 
behalf of the interagency group that there has been a decision 
that these two countries or any other two have met the criteria 
at this point.
    Mr. RAMSTAD. Well, far be it for me to pin you down, but I 
just appreciate your explanation. I think it is an important 
subject matter, and I hope, Mr. Ambassador--and my time has 
just expired--but I hope that both Taiwan and Colombia are 
prospective negotiating partners as well as many other 
countries. Thank you very much for your good work.
    Mr. ALLGEIER. We would be very happy to sit with you and to 
talk in more detail about our relations with these two trading 
partners and how they stack up in terms of criteria.
    Mr. RAMSTAD. I know my colleague on the other side of the 
aisle here, Mr. Jefferson who was here just briefly--he is a 
cosponsor of H. Con. Res. 98 expressing the sense of Congress 
that the United States should launch negotiations on an FTA 
with Taiwan--I know he would like to be in that meeting as 
well. We look forward to it. Thank you very much.
    Mr. ALLGEIER. Sure.
    Chairman CRANE. Thank you. Mr. Tanner.
    Mr. TANNER. Mr. Becerra was here first, Mr. Chairman.
    Chairman CRANE. Well, I have got you in order of your 
appearance.
    Mr. TANNER. I pass.
    Chairman CRANE. Yes. All right. Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman, and thank you, Mr. 
Tanner. Ambassador, good to see you again. Thank you for being 
with us. Always appreciate your testimony. A couple of 
questions. I know that there are a lot of accolades that are 
being expressed with regard to some of the provisions that were 
reached in the two accords with Chile and Singapore. My 
understanding is that there has been some concern expressed 
that the accord with Chile differs with--compared to that one 
with Singapore--when it comes to the issue of intellectual 
property, in some degrees. I was wondering if you could tell me 
why there is a difference in the treatment between the two 
agreements with regards to intellectual property.
    Mr. ALLGEIER. I don't think that there is any fundamental 
difference in terms of the level of protection or the 
comprehensiveness of protection. In the intellectual property 
chapter, as in all the chapters, the situations of individual 
countries are different, and so for example, certain aspects of 
the issue need to be emphasized in one agreement rather than 
another.
    For example, in Chile, one of the concerns--the concern 
with patent treatment is greater than the concern with patent 
treatment in Singapore. So, therefore, there needed to be more 
detail in things like patent treatment and enforcement in the 
Chile agreement than in Singapore. What we did strive to do in 
these cases is to have the same very high level of intellectual 
property protection and comprehensiveness.
    Mr. BECERRA. Now I understand that the transitional period 
for implementation under the Chile accord is longer than it is 
under the Singapore accord. Is that because of what you have 
just indicated, the circumstances differ by country?
    Mr. ALLGEIER. You are just talking specifically with 
respect to intellectual property?
    Mr. BECERRA. Intellectual property, correct.
    Mr. ALLGEIER. Yes. You see that also in the other parts of 
the agreement, in the merchandise trade part.
    Mr. BECERRA. So, if you had to venture an estimation here, 
which accord do you think we would follow in future trade 
negotiations with other countries when it comes to intellectual 
property, the provisions that we found in the Chile accord or 
the provisions we found in the Singapore accord?
    Mr. ALLGEIER. Well, that would depend on the situation of 
the country that we were negotiating with. For example, if we 
were negotiating with a country that had a very weak protection 
or enforcement and copyright, we would emphasize that, but the 
aim is to get the protection up to the level for everybody.
    Mr. BECERRA. So, we have to take the circumstances as they 
come to us for each country.
    Mr. ALLGEIER. Exactly.
    Mr. BECERRA. Now you mentioned a little earlier when you 
were reading your written statement that you thought that the 
Chile and Singapore agreement set examples for the future 
course of our trade accords with other countries. With regard 
to the issues of labor and environment, and specifically here 
with labor, the agreements with Chile and Singapore speak only 
to the effective enforcement of domestic laws--existing 
domestic laws.
    Now, if that is to be used as a template into the future, 
then it doesn't help us take into account the circumstances of 
the particular country or countries we may be negotiating with. 
So, the question I would pose to you is Chile and Singapore--we 
understand both have much better laws in place and much better 
enforcement of those laws than do other countries. I think 
every country in Central America would agree with us right now 
that their enforcement and their existing laws that they have 
in place do not match what Chile and Singapore have. So, when 
you say you want to take the Chile and Singapore agreements as 
models, does that mean we take them as rigid models, or do we 
have to bend them toward the circumstances of the particular 
countries we are negotiating with as you did with regard to 
intellectual properties for Chile and Singapore?
    Mr. ALLGEIER. No. I think throughout these agreements, 
whether it is in access for merchandise, services, intellectual 
property, or labor and the environment, these agreements are 
models in the, shall I say, the macro sense; that they set a 
level of ambition, they set an approach, a direction----
    Mr. BECERRA. Would this approach be sufficient for the 
Central America negotiations?
    Mr. ALLGEIER. Well, specifically labor and environment. Let 
me address that. So, by that I mean these would be examples in 
the following sense. There are three elements, broad elements, 
in our approach to labor and environment here. One is, of 
course, the elements of the--whatever obligations we have in 
the trade agreement. The other is through the dialog that we 
have with countries during the negotiations.
    Mr. BECERRA. Ambassador, let me stop you on that one point. 
With regard to the provisions in the agreement, are either the 
provisions in the Singapore or Chile agreements with regard to 
labor sufficient for your negotiations with Central America, 
when you speak directly about a provision dealing with 
enforcement of existing domestic laws?
    Mr. ALLGEIER. Well, that will be part of our ongoing dialog 
with them, and it depends in part on what changes in their laws 
they make during the negotiating process.
    Mr. BECERRA. Does the U.S. Trade Representative or does the 
Administration currently believe that the existing laws and 
enforcement by Central American countries is sufficient to 
allow them to have similar language to what we have in Chile 
and Singapore on labor?
    Mr. ALLGEIER. We are not finished with our dialog with 
them, so I can't draw a conclusion until we see what they are 
prepared to do. If I just mention the last element is the 
cooperation to increase the institutional capability of these 
countries to carry out laws and to enforce the labor standards 
that are in the agreement. So, we do look to the specific 
circumstances within the broad context of the kinds of 
agreements that we have negotiated with Chile and Singapore.
    Mr. BECERRA. Ambassador, thank you. Mr. Chairman, my time 
has expired. I thank the Ambassador for being here, and I hope 
you will consider what we are saying with regard to our 
concerns about using the agreements as templates, when, in 
fact, we do have to look at the particular circumstances of the 
countries; and with regard to labor, since it is treated in a 
subordinate fashion to other areas of interest, intellectual 
property and others, that we take a very close look at how we 
will make sure that we don't subordinate the interests of our 
working men and women in this country with regard to these 
trade agreements.
    Chairman CRANE. Ms. Dunn.
    Mr. ALLGEIER. We are very happy to work with you further as 
we get a refined appreciation of what the situation is and can 
be in these countries.
    Mr. BECERRA. Thank you, Ambassador. Thank you, Mr. 
Chairman.
    Ms. DUNN. Thank you, Mr. Chairman. Welcome, Ambassador. The 
Chile and Singapore FTAs include a yarn forward rule of origin 
for apparel trade, which requires that the yarn and the fabric 
that are used to make clothing must originate in the FTA zone. 
I have heard views expressed by U.S. apparel manufacturers and 
by retailers and also by importers that this rule of origin is 
too restrictive to generate new trade and may even act to 
discourage apparel sourcing from these two countries. What is 
the Administration's position with respect to the yarn forward 
rule of origin for textile and apparels? Do you believe there 
is a better way to deal with this issue that provides greater 
flexibility to our manufacturers and our retailers?
    Mr. ALLGEIER. Our position is that we are trying to strike 
an appropriate balance among the different interests, meaning, 
obviously, our domestic industry, our retailers, our consumers, 
and also the interests of the trading partner. We think that 
the proper balance is the combination of the yarn forward rule 
of origin, with some provision for tariff preference levels 
which allow these countries to use fabric from outside either 
the United States or their countries. That is the best way to 
get the balance that this--trade practices and licensing also 
helps the flexibility that the retailers are seeking.
    Ms. DUNN. You will pursue this combination.
    Mr. ALLGEIER. This is the approach that we have taken in 
NAFTA, which, of course, has been very successful in this 
regard, and the approach that we take in the Chile and 
Singapore agreements. I would expect we would take some similar 
approach with respect to Central America.
    Ms. DUNN. Great. Thank you. I am also concerned about the 
enforcement of the intellectual property rights in these 
agreements. In the most recent special 2003 report, the U.S. 
Trade Representative listed Chile on the watch list. In fact, 
the U.S. Trade Representative reported that Chile's laws are 
not yet fully TRIPS consistent. The U.S. Trade Representative 
also expressed concerns with Chile's large backlog of pending 
patent applications.
    I have heard from people I represent regarding the lack of 
enforcement of intellectual property rights in Chile. For 
example, delays in consideration of intellectual property cases 
dealing with counterfeiting in the Chilean judicial system have 
resulted in legal expenses for the legitimate owners, while 
those who have actually violated intellectual property laws 
have not been penalized. I understand that in this agreement 
there are strong intellectual property rights provisions 
including enforcement--in fact, in both agreements. At the same 
time, if countries fail to comply or enforce TRIPS, it will be 
very, very tough for them to also comply or enforce the 
provisions in these FTAs.
    I would like to know what will happen if countries that 
enter into FTAs with the United States fail to meet their 
intellectual property rights obligations. Is there anything in 
the FTAs that will require our trading partners to make changes 
in their laws and their regulations to ensure compliance and 
enforcement? What is the U.S. Trade Representative doing to 
help developing countries improve their intellectual property 
rights standards?
    Mr. ALLGEIER. Okay. First of all, the problems that you 
cited with respect to Chile and vis-a-vis the TRIPS--and 
particularly in the patent area and the backlog of patent 
applications--is a serious problem that we have highlighted, 
and it needs to be fixed as part of their implementation of the 
FTAA. If a country does not abide by the obligations, the 
intellectual property obligations, in an FTA, we have recourse 
to dispute settlement under that agreement. If it is also a 
violation, a noncompliance with their WTO obligations, we have 
recourse to dispute settlement.
    In the case of Chile, our judgment is at the point that 
they are taking this seriously enough that we do not favor 
taking a dispute settlement case under the WTO. If we do not 
see prompt compliance with the WTO and full compliance with the 
FTA, we would then make a decision about dispute settlement in 
one of those two fora.
    With respect to developing countries generally, this is an 
area in which capacity building and institutional strengthening 
is very important. Having a well-functioning patent office and 
copyright system are base obligations, and really essential to 
attract investment--therefore, we include this as part of our 
work with these countries.
    Ms. DUNN. Thank you, Ambassador. I do have constituents 
touched by this unfortunate situation, costing them many 
hundreds and thousands of--sometimes millions of dollars, and 
so, we will be watching with great interest. Thank you. Thank 
you, Mr. Chairman.
    Chairman CRANE. Thank you. Mr. Shaw.
    Mr. SHAW. Thank you, Mr. Chairman. I wanted to follow up on 
what Ms. Dunn was talking about with regard to the yarn forward 
rule of origin for the textile and apparel industry. I have 
filed a bill along with Chairman Crane and Congressman Rangel 
which would apply provisions to Haiti with regard to the 
country of origin. Specifically, it would provide that these 
yarns would not only be eligible coming from the United States, 
but coming from other countries for which we have FTAs, 
basically. There is a percentage cap which is very low on their 
production.
    I doubt that you have had an opportunity to review that 
bill, but, if you would, I would very much appreciate your 
comments with regard to it. We have got very desperate 
situations down in Haiti. We are every day finding more and 
more people trying to escape the life of poverty and come to 
the United States illegally, and many of them are being 
returned, and it is a very sad situation. It is one that I 
think we can go a long way toward helping if we can help create 
jobs in Haiti. I think the poverty level down there is 80 
percent. The unemployment rate is 70 percent, and it is a very 
desperate situation. Hundreds of thousands of kids living on 
the streets, the HIV/AIDS (Human Immunodeficiency Virus/
Acquired Immune Deficiency Syndrome) problem is just horrible, 
and there just seems to be no hope for these people unless they 
can escape that island. If you would care to comment, I would 
welcome your comments.
    Mr. ALLGEIER. First of all, we are very aware of the 
situation in Haiti, and through the work in the FTAA. With 
respect to the specific legislative proposal that you referred 
to, I would have to get back to you with a response to that, 
and I will be happy to do that.
    [The information follows:]

                                                   January 30, 2004

The Honorable E. Clay Shaw, Jr.
Committee on Ways and Means
1102 Longworth House Office Building
Washington, DC 20515

Dear Congressman Shaw,

    Thank you, Mr. Shaw, for your question and for your interest in the 
economic and political development of Haiti. As you know, Haiti is an 
original beneficiary of the U.S. unilateral trade preference program, 
the Caribbean Basin Initiative (CBI). Under CBI, U.S. imports from 
Haiti have grown to approximately $255 million, mainly in apparel. CBI 
has clearly made a positive contribution to supporting an important 
economic sector in Haiti. Further, the economies of Haiti and the 
Dominican Republic are linked, in particular through apparel factories 
close to the border. We are currently working to bring the Dominican 
Republic into the recently concluded Central American Free Trade 
Agreement (CAFTA). Economic growth in the Dominican Republic should 
have a positive effect on Haiti. We will be working with the Congress 
to ensure that the integration of the Dominican Republic into the CAFTA 
takes into account Haiti's current situation.
    While the Administration has not yet established a position on the 
bill you've introduced, which is intended to augment the benefits Haiti 
currently receives under CBI, we understand Haitian business leaders 
believe it could spur investment in the apparel sector and create new 
jobs in the apparel sector in Haiti. You have also made the case that 
such new benefits could serve as a strong motivator for improved 
political and economic governance by the Government of Haiti in 
response to the bill's conditionality in those areas. These are 
important institutional goals that the Administration shares with you. 
USTR is always eager to work with Congress to develop strategies to 
help this troubled country.

            Sincerely,

                                                  Peter F. Allgeier

                                 

    Mr. SHAW. I appreciate that. One other thing, Mr. 
Ambassador, that I would like to call to your attention, that I 
know that you are somewhat familiar with it, is to extend to 
you my strong recommendation for the Administration to openly 
support the selection of Miami, Florida, as a permanent home of 
the FTAA Secretariat. Miami is a center of trade throughout the 
Americas, and I believe placing the Secretariat on our shores 
is tremendously important in promoting free trade throughout 
the Americas.
    Also, as anyone knows who has traveled to Miami/Dade County 
in the last 15 or 20 years, it is a bilingual city. It is one 
in which we have got great transportation in and out by air, 
and I think it is also one that I think our foreign visitors 
would be very comfortable spending time in with the permanent 
home of the Secretariat situated there. If we continue to go 
ahead with more than one city vying for that position, I think 
that would certainly make us less competitive in the market of 
having the Secretariat permanent home on our shores.
    Mr. ALLGEIER. Thank you, Mr. Shaw. Certainly we want to be 
fair to all cities in the United States. I will simply say that 
we greatly appreciate the fact that Miami volunteered to serve 
as the first phase of the administrative Secretariat of the 
FTAA when we were getting those negotiations started. We are 
looking forward to a very successful ministerial in November in 
Miami, and I know that Ambassador Zoellick felt that the 
signing of the Chile agreement last week in Miami was a very 
successful event as well. So, we are very appreciative of the 
hospitality and the effectiveness of the Miami community.
    Mr. SHAW. In closing, the Congress, the U.S. House of 
Representatives, did pass a resolution in the last Congress 
calling on the Secretary to support Miami's application for the 
Secretariat. Thank you.
    Chairman CRANE. Thank you. Mr. Camp.
    Mr. CAMP. Thank you, Mr. Chairman. First, Mr. Ambassador, 
on a related topic, I want to thank you for the Office of the 
U.S. Trade Representative's efforts and persistence in 
resolving the issue at the Mexican border involving dried 
beans. As you well know, the holdup of those dried beans is 
costing farm families tens of millions of dollars, and I want 
to thank you for your efforts there.
    I have some questions regarding the automobile industry. 
Obviously, as you know, that is a major sector in our economy, 
representing about 10 percent of U.S. exports--and that is 
whether we are talking about U.S.-Chile or U.S.-Singapore FTAs, 
or the many others that are active in discussion. I appreciate 
your dedication in keeping that industry really at the 
forefront of some of the topics; but I had a couple of 
questions.
    Does the U.S.-Chile FTAA provide the U.S. automotive 
industry with a commercially beneficial automotive rule of 
origin? It is often overlooked due to the industry's 
complexities and the capital-intensive nature of it, but it is 
one of the most important elements of any U.S. FTA. I think it 
is an effective automotive-specific rule of origin. Could you 
respond, please, sir?
    Mr. ALLGEIER. I must say, I am not an expert in each of the 
rules of origin in the Chile agreement. What I would prefer to 
do, with your permission, is to get you a detailed answer to 
that in writing and spell that out that way, if that is okay 
with you.
    [The information follows:]

                                                   January 30, 2004

The Honorable Dave Camp
Committee on Ways and Means
1102 Longworth House Office Building
Washington, DC 20515

Dear Congressman Camp,

    With respect to automotive products, we achieved the balance 
necessary whereby the FTA rule of origin ensures that benefits accrue 
to the Parties to the agreement while at the same time ensuring that 
the rule of origin is also trade facilitative.
    In general terms, automotive products are subject to a product-
specific rule of origin that presents two Regional Value Content (RVC) 
percentage criteria alternatives, combined with an applicable requisite 
change-in-tariff classification met through processing or assembling of 
parts into a final product. Under the agreement, either RVC criterion 
may be established to show applicability of FTA preferential treatment.

     LThe first alternative is requirement of 30 percent RVC in 
what is referred to as the ``build-up'' formula. The ``build-up'' 
formula is a calculation that involves the amount of originating 
material inputs used on the overall production of the good.
     LThe second alternative is a 50 percent RVC in what is 
referred to as the ``build-down'' formula. This ``build-down'' formula 
is a calculation that involves the amount of non-originating material 
inputs used in the overall production of a good.

    The availability of alternative formulas to establish application 
of the tariff preferences, as well as the simplified nature of the 
formulas and other elements of the Agreement's origin regime, will 
result in the rule of origin being commercially beneficial for U.S. 
exporters.

            Sincerely,

                                                  Peter F. Allgeier

                                 

    Mr. CAMP. It is also my understanding that Chile maintains 
an 85-percent tax on imported motor vehicles. That act is a de 
facto tariff on U.S.-built motor vehicles. Were you successful 
in negotiations to eliminate this barrier to free automotive 
trade with Chile?
    Mr. ALLGEIER. My recollection is there is a phaseout of 
that which works two ways. There is a reduction in the excise 
tax, and then there is also an increase in the threshold at 
which that auto tax kicks in so that we are phasing that out, 
but I will give you the exact details of that phaseout.
    Mr. CAMP. I apologize for coming in a little bit late, but 
I wonder if you could tell me a little bit about the provisions 
for the protection and enforcement of American intellectual 
property rights in the agreement, if they are really similar to 
the kinds of things that we have seen, particularly in the 
Trade Act of 2002. Can you discuss that a little bit?
    Mr. ALLGEIER. Yes. I think that, actually, the protection 
of intellectual property rights in both agreements is something 
that we are especially proud of because we have worked very 
closely with the whole range of intellectual property rights 
interests. For example, in the copyright area, the software 
industry, the entertainment industry--and particularly to deal 
with those issues that have arisen because of the Internet, and 
how to provide protection to copyright holders, for example, so 
that their works are not pirated and then disseminated through 
the Internet without their permission. So, we have looked very 
closely at legislation in the United States, the Digital 
Millennium Copyright Act of 1998 (DMCA) (P.L. 105-304), at the 
Internet conventions in the World Intellectual Property 
Organization (WIPO), and we have incorporated all of those in 
our agreements with Chile and with Singapore.
    Mr. CAMP. Thank you very much. Thank you, Mr. Chairman.
    Chairman CRANE. Mr. Collins.
    Mr. COLLINS. Thank you, Mr. Chairman, for allowing me to 
participate in this Subcommittee, though I am not on the 
Subcommittee itself. Mr. Ambassador, I want to begin with--you 
used the terminology ``FTA.'' I prefer what the Secretary of 
Commerce has often called a ``fair trade agreement,'' and that 
is the reason why we have a lot of the provisions within the 
agreement, within the TPA that we passed. I caution you, as you 
go through these agreements--particularly one that was recently 
published about Vietnam dealing with certain products--that we 
actually confirm that they are able to produce the number of 
products that we are given a quota for, particularly in the 
area of textiles. Since, if they cannot produce, oftentimes it 
opens the gate for trans-shipments, and we don't need a trans-
shipment problem.
    The rules of origin are very helpful. They were part of the 
TPA that was negotiated with those of us who represent textile 
territories or textile States. We appreciate that, and we very 
much want you to continue to work in that direction. It is the 
only way we can come back with some fairness to the trade 
provisions.
    My question to you is in the area of currency. In the TPA, 
we had provisions that required the discussion up front as we 
began our trade agreement negotiations about the possibility of 
devaluations of currency, or changes in values of currency that 
can often have a negative impact on our product. In your trade 
agreement, do you have any documentation of the discussion of 
currency values with these potential trade partners within 
these agreements?
    Mr. ALLGEIER. We certainly do not discuss with our trading 
partners specific values for their currency. First of all, the 
whole question of exchange rates is one that is the 
responsibility of the Department of Treasury. What we do in 
these trade agreements, however, is to try to provide the 
maximum amount of openness for investors and also the maximum 
amount of openness in financial services and transparency in 
the regulation of financial services. We feel that this is the 
contribution that the trade negotiations can make to an 
international identifiable system which is not subject to 
manipulation by countries to gain unfair advantage.
    Mr. COLLINS. We are very much aware that the negotiations 
of the currency issues is that of the Department of Treasury, 
but the TPA called for just a discussion and documentation of 
that discussion in opening negotiations to make both parties 
aware that any potential change in currency can have a negative 
effect on the other trading partner. That was all that we were 
concerned about, and we would like to have seen some type of 
documentation in that regard when Ambassador Zoellick was here 
the other day, maybe a month or so ago.
    I brought this issue up to him at that point and requested 
that you all not be timid in talking about currency values, not 
that we are going to try to set any currency values, but--no 
one is going to set our currency value but us, but it is 
important as a trading partner with another nation that we feel 
we understand up front that this is something that could be a 
problem, not an aftereffect after a lot of it happens and we 
have been hurt by the lack of that type of documentation or 
that type of discussion.
    Mr. ALLGEIER. I understand that there is a reporting 
requirement on this and that the Department of Treasury is 
actually in the process of writing that so that we will be able 
to provide that information to you.
    Mr. COLLINS. You aren't aware of any discussion from the 
U.S. Trade Representative's office about this up front? It 
should be a documentation of your comments and your 
discussions, too.
    Mr. ALLGEIER. This will be an interagency submission. It is 
to be authored by the Department of Treasury, but we will 
certainly review it, and we will review the TPA language on 
this to be sure we are exercising appropriate responsibility 
and conscientiousness about that particular provision.
    Mr. COLLINS. Well, it is important to those of us who have 
a vote when it comes to the approval of agreements in 
negotiations as to how you are following the TPA--the 
provisions that we worked very hard to make sure we end the 
Trade Act of 2002 itself.
    Mr. ALLGEIER. We want to be scrupulous in our 
implementation of the TPA. We are very aware of the effort that 
Congress put into passing that, and we are very grateful for 
it. We are working with you to use it responsibly.
    Chairman CRANE. Thank you. Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman. Mr. Ambassador, many of 
us hope that Chile and Singapore, in their agreements, would 
improve upon the minimum standards for labor and environmental 
provisions. However, these new agreements merely require that 
each country enforce its own existing standards. If this 
becomes the model for all agreements, it could have severe 
impacts for workers' rights, particularly in the upcoming CAFTA 
agreement.
    Consider that the ILO has cited Costa Rica and Honduras for 
their failure to protect against anti-union bias. The U.S. 
Department of State has criticized El Salvador, Guatemala, and 
Nicaragua for the same problem. The ILO has even expressed a 
concern that Guatemalan workers participating in a lawful 
strike may be subject to criminal penalties. Do you think that 
the CAFTA agreement should merely require that these countries, 
quote, ``enforce their existing law''?
    Mr. ALLGEIER. We certainly are aware of the importance of 
this issue in the Central American countries and, frankly, the 
different circumstances that exist in those countries and among 
those countries compared to, for example, Chile and Singapore. 
I would say also that we have made very clear to their 
negotiators and their leaders that this will be something that 
will be looked at very closely by the Congress. So, part of our 
negotiation is not simply negotiating the obligations, for 
example, that we have in Singapore and Chile, but having a very 
detailed and concrete dialog with these countries about the 
kinds of changes that they would need to make in their labor 
laws, either in association with this agreement or prior to it; 
and we have seen some effort in that regard recently on the 
part of El Salvador in increasing its budget for enforcement, 
and also some labor form proposals put forward by Guatemala. I 
am not saying that either of those is sufficient in those 
cases, but it is part of the ongoing process of negotiation. We 
need to get those labor standards and the enforcements of labor 
rights up to a certain level before we would find acceptable a 
commitment to enforce those laws.
    Mr. NEAL. Accepting that, as you have stated, that in some 
instances labor standards and environmental standards are not 
sufficient, what would you propose doing to ensure they become 
sufficient?
    Mr. ALLGEIER. We would do two things: one, continue to have 
the kinds of discussions we are having with these countries to 
move them in a direction so that they put forward changes in 
their law or they make the institutional changes they need to 
strengthen the enforcement; and related to that is the second 
element, the trade capacity building.
    In the case of Central America, as the different 
negotiating groups are working on the trade agreement, we have 
a separate working group that is identifying where there needs 
to be strengthening of their capabilities, including 
institutional strengthening to carry out the kinds of 
agreements that we anticipate; and we are working very closely 
with the U.S. Agency for International Development in that. The 
U.S. Department of Labor is very involved with respect to the 
labor issues, and our other environmental related agencies such 
as the Environmental Protection Agency, the U.S. Department of 
the Interior, and the Department of State, are involved in the 
environmental side of capacity building. So, the negotiations 
really only come to a conclusion once we are satisfied that the 
standards--whether it is in intellectual property or in labor 
or in customs procedures--are up to the level that we are 
satisfied with and then that the country makes the kind of 
commitment to implement that.
    Mr. NEAL. Thank you. Acknowledging that, while the question 
was precise, the next question is going to be very precise. 
``Enthusiasm'' for enforcement, as you know, is a very 
imprecise term; so we rely heavily upon people like you to 
ensure that enthusiasm becomes more precise.
    Mr. ALLGEIER. Effectiveness of enforcement. That is the 
standard that we will be looking at to see whether countries 
are carrying out their obligations.
    Mr. NEAL. The second precise question, Mr. Ambassador--
recently, The Economist magazine editorialized against your 
quest for complete capital account liberalization, stating 
that, quote, ``bitter experience suggests that such demands are 
a mistake,'' end of quote. Further, an International Monetary 
Fund (IMF) official wrote in the wake of the 1997 Asian 
financial crisis that, quote, ``absolute unfettered global 
capital mobility is not necessarily the best long-term 
outcome.'' I understand that this became a Department of 
Treasury priority in the Chile agreement even though no 
business I have heard from has complained about Chile's 
controls. Can you answer whether complete elimination of 
capital controls has been tabled in the CAFTA approach, and 
does the IMF support your approach?
    Mr. ALLGEIER. Our approach is--this comes up in the context 
of the investment chapter of these agreements. We think it is 
extremely important to foster investment--that investors be 
confident that they are going to be able to transfer their 
proceeds and other assets back and forth without impediment.
    In the case of Chile and in Singapore, they had some 
concerns about so-called hot money and whether there could be 
instances they didn't anticipate. There could be instances in 
which they would need some period of time to have some degree 
of control over so-called hot money. So, what was agreed upon 
was a procedure which enables them a temporary period without 
fundamentally impeding transfer rights of investors, and we 
feel that the kind of balance we struck in those agreements is 
a reasonable one. It is not an ideological one, but it also 
puts great emphasis on what all our investors say, which is, 
they want the right to transfer. I would expect that we would 
use roughly that model in other instances, but, as in the other 
areas, we have to look precisely at the circumstances.
    Mr. NEAL. That was fairly precise. Thank you, Mr. 
Ambassador. Thank you, Mr. Chairman.
    Chairman CRANE. Now we have a wrap-up question from Mr. 
Levin.
    Mr. LEVIN. On the capital control, I just hope that, as we 
look at other agreements, we will look at the experience with 
Chile and Singapore. Mr. Neal, we had to pressure the U.S. 
Trade Representative to back off of what was a rigid 
ideological position; and you backed off. It is an example that 
I hope will be looked at. Let me just say, Mr. Chairman, this 
discussion we have had today about core labor standards and how 
it applies to environmental standards and other circumstances 
and application to CAFTA--I hope we can negotiate a CAFTA 
agreement.
    Ambassador, you are not making the decisions. You are part 
of the decisionmaking process. To say that you are going to, in 
the discussions with Central American countries, make sure they 
take actions so that you are satisfied they are up to 
standards--no one believes that by the time you can negotiate a 
CAFTA agreement there would be a history of their containing in 
their laws the core labor standards, and their enforcing them. 
That is not realistic unless you are going to take 5 or 10 
years to negotiate a CAFTA.
    By the way, with other issues, whether it is subsidies or 
intellectual property, you don't simply say you are satisfied 
that at the point of negotiation they are up to standards. You 
have an enforcement procedure to make sure they are carried 
out. The tabling of enforcing your own laws in CAFTA is totally 
contradictory to the circumstances that differ from Chile and 
Singapore, and we are going to continue to pressure you to live 
up to your words that you look at circumstances, since you did 
not do that when you tabled a proposal for CAFTA.
    This is not just a matter, in quotes, of ``worker rights.'' 
It is a matter of these countries--that workers be able to 
partake, to participate and move up the ladder like they have 
in every other country where a middle class evolved. I think if 
we will take some leadership, the United States, Central 
American countries will respond.
    I want to just say a word again about the ISI and your 
response, because I think we need clarification so this does 
not get kicked around and is either underestimated or 
overstated. I referred to 8466, which is part of the 
regulations on local content that relates to machine tool 
parts. This is the question that needs to be answered--I want 
it to be very clear.
    In meeting the local content requirement, can shipments 
from other countries--it could be Japan, China, et cetera--that 
make these parts be counted as Singapore content? I know that 
it is a big, complicated question, because of tariff shift 
rules and whether one or another would make it easier for them 
to take components from other places that are not covered by an 
FTA and have them count as part of Singapore local content, but 
you need to answer this.
    By the way, part of the rules regarding local content also 
relate to auto parts. So, your answer to machine tools, 8466, 
will apply to other products, other parts that are covered by 
local content. Your response that it only applied to two 
Indonesian territories, that is not, I think, if I might say so 
respectfully, correct. I think it has been acknowledged that 
the provision in the ISI is open-ended, and so you need to help 
yourself and all of us understand the meaning of ISI.
    I think it is very clear we should not do this. It is not a 
precedent. It is not an example for other FTAs. It is also 
important to understand what its possible implications are for 
our judgment of Singapore--that agreement. Otherwise, you are 
likely to have opposition that isn't based on the reality, if 
you don't point out the reality. Don't be afraid to point them 
out.
    Mr. ALLGEIER. The general approach on the rules of origin, 
of course, is to define those products specifically so that you 
don't have abuse of content from other countries counting as 
part of the product from the free-trading partner.
    However, on the two specific issues, the one that you 
raised about machine tools and the one that Congressman Camp 
raised about auto parts, I will get you a very specific and 
concrete response, and also relate that back to the ISI so that 
we do avoid the kind of concerns that you expressed where 
people misunderstand one way or another what is involved here.
    Mr. LEVIN. We have been trying to secure this from you for 
a long time, so give it to us straight and soon.
    Mr. ALLGEIER. Will do.
    Chairman CRANE. Thank you. Thank you, Mr. Allgeier. We 
appreciate your testimony, and we look forward to working with 
you as we complete our agreements with Singapore and Chile. 
With that, we will bring our next panel before the Committee. 
Our next panel includes Leon Trammell, Founder and Chief 
Executive Officer of Tramco, Inc., Wichita, Kansas, on behalf 
of the U.S. Chamber of Commerce; Jeff Jacobs, President of 
Global Business Development, Qualcomm, San Diego, California; 
Keith Gottfried, Senior Vice President of Law and Corporate 
Affairs and General Counsel, Borland Software, Palo Alto, 
California; and Robert Haines, Manager of International 
Relations, ExxonMobil Corporation, and Co-Chairman of U.S.-
Singapore FTA Business Coalition.
    If you gentlemen will please take your seats, we will begin 
your testimony in the order in which I introduced you. Keep 
your eye on the little light in front of you. Don't cross the 
intersection when the red light is on. We will start. Folks, 
can we have order in the Committee room, and those of you who 
are here, please take seats. We will commence then with our 
first witness, Leon Trammell.

STATEMENT OF E. LEON TRAMMELL, CHIEF EXECUTIVE OFFICER, TRAMCO, 
   INC., WICHITA, KANSAS, AND CHAIRMAN, BOARD OF DIRECTORS' 
    INTERNATIONAL POLICY COMMITTEE, U.S. CHAMBER OF COMMERCE

    Mr. TRAMMELL. Mr. Chairman, thank you for inviting me to 
appear before this panel today. I am Leon Trammell, Chief 
Executive Officer of Tramco, Incorporated, in Wichita, Kansas; 
and I am also a member of the Board of Directors of the U.S. 
Chamber of Commerce as well as acting Chairman of the Board's 
International Policy Committee. It is on the U.S. Chamber of 
Commerce's behalf that I am testifying today.
    I am pleased to testify in support of the recent signing of 
the U.S. trade agreement with Chile and Singapore. The U.S. 
Chamber of Commerce represents nearly 3 million companies of 
every size, sector, and region. The U.S. Chamber of Commerce 
has aggressively represented companies like mine for nearly a 
century.
    Tramco manufactures and sells environmentally friendly 
conveyors primarily for the cereal food grain processors. Our 
annual sales are roughly $20 million. Today's exports make up 
60 percent of our total sales. All is manufactured in Wichita, 
Kansas, and shipped by truck and rail to a port to be loaded or 
shipped, to be transported to the ports of destination.
    Tramco has exported to 45 countries around the world, 
including Chile and Singapore. In Chile, we are active in the 
copper mining industry, which is state owned, and about 10 
percent of our annual sales are in Chile. In Singapore, Tramco 
is active in the oil seed industry, companies that extract oil 
from the palm and other oil seeds for cooking purposes. The 
Singapore market accounts for only 2 or 3 percent of our annual 
export sales.
    The Chile and Singapore FTAs will do much for companies 
like mine to slash barriers to our exports. They will also 
improve protection for U.S. investments in these two countries, 
and they will strengthen our position and make us more 
competitive in the global economy.
    It is the last point that deserves special mention. Most of 
the 45 countries I sell to are already committed to some 
business-friendly practices. Otherwise, I would not have sold 
my products there. The main point of a trade agreement is to 
make even better whatever situations might exist today. This 
includes lower tariffs, fewer trade restrictions, stronger 
protection of property rights, expanding trade of services and 
electronic commerce, and a greater flexibility of movement of 
professional personnel.
    The Chile and Singapore agreement includes a number of 
provisions that will benefit companies like mine. These 
benefits are summarized in my written statement. By 
implementing these agreements, Congress will send an important 
message that goes far beyond Chile and Singapore. It will say 
to the world that we are back in business and committed to 
reach fair trade agreements that benefit U.S. workers and 
businesses.
    I started my company in 1967 with next to nothing. Today, I 
have over 120 employees that hold their jobs to our ability to 
access markets here and abroad. It has been pointed out that 96 
percent of the world's customers live outside our borders. 
Conditions in many countries make it harder for companies like 
mine to sell to those consumers and therefore meet our payroll.
    The Chile and Singapore agreements are important steps in 
our continuing journey toward increased trade jobs and 
prosperity, and these serve as an important example for other 
countries and regions with which we share these goals. They 
will also enable our trade negotiators to hang tough with other 
countries as we push them to open up their markets.
    Perhaps my great, great grandparents as they traveled the 
Trail of Tears would not agree with my position today. They 
probably thought we made a mistake in letting Columbus land and 
should have stopped further intruders. I admit some days, when 
things are really, really bad, living in a teepee along some 
gentle-flowing streams seems very inviting. However, we know 
being an isolationist does not work. Remember the iron and 
bamboo curtains?
    Give the U.S. manufacturer a level playing field with zero 
tariffs, and we can compete. We must be a fair free trader. I 
urge the Congress to approve legislation to implement these 
agreements as soon as possible.
    [The prepared statement of Mr. Trammell follows:]
 Statement of E. Leon Trammell, Chief Executive Officer, Tramco, Inc., 
Wichita, Kansas, and Chairman, Board of Directors' International Policy 
                  Committee, U.S. Chamber of Commerce
    Mr. Chairman, thank you for inviting me to appear before this panel 
today. I am Leon Trammell, Chief Executive Officer of Tramco, Inc. in 
Wichita, Kansas. I am also a member of the Board of Directors of the 
United States Chamber of Commerce, as well as acting Chairman of the 
Board's International Policy Committee.
    In addition to Tramco, I am pleased to testify on the recently 
signed U.S. free trade agreements with Chile and Singapore on behalf of 
the U.S. Chamber of Commerce, which is the largest business federation 
in the world. Representing nearly three million companies of every 
size, sector, and region, the Chamber has supported the business 
community in the United States for nearly a century.
    Tramco manufactures and sells high-production conveyer product 
lines. Our annual sales are roughly $20 million. In fact, exports make 
up about 60% of our sales. Tramco exports to 45 countries around the 
world, including Chile and Singapore. In Chile, we are active in the 
copper mining industry, and about 10% of our annual sales are in Chile. 
In Singapore, Tramco is active in the oilseed industry. The Singaporean 
market accounts for between 2-3% of our annual sales.
    I personally support these two landmark agreements, and the U.S. 
Chamber of Commerce offers a strong endorsement as well. These accords 
will slash trade barriers for U.S. exports, enhance protections for 
U.S. investment in these two countries, and enhance the competitiveness 
of American companies in the global economy.
The Bracing Tonic of TPA
    America's international trade in goods and services accounts for 
nearly a quarter of our country's GDP. As such, it is difficult to 
exaggerate the importance of the victory obtained last summer when the 
Congress renewed Presidential Trade Promotion Authority (TPA). When 
President George W. Bush signed the Trade Act of 2002 into law on 
August 6, it was a watershed for international commerce. As we 
predicted, this action by the Congress has helped reinvigorate the 
international trade agenda and has given a much-needed shot in the arm 
to American businesses, workers, and consumers struggling in a 
worldwide economic slowdown.
    When TPA lapsed in 1994, the U.S. was compelled to sit on the 
sidelines while other countries negotiated numerous preferential trade 
agreements that put American companies at a competitive disadvantage. 
Last year, during our aggressive advocacy campaign for approval of TPA, 
I believe many Members of Congress grew tired of hearing that the U.S. 
is party to just three of the roughly 150 free trade agreements in 
force today.
    The passage of TPA allowed the United States finally to complete 
negotiations for bilateral free trade agreements with Chile and 
Singapore, in December and January, respectively. These are the first 
significant free trade agreements negotiated by the United States since 
the NAFTA.
    They are excellent agreements. Giving the lie to foreign critics of 
alleged U.S. protectionism, no products were excluded from the market 
access commitments included in the two agreements.
    These agreements raise the bar for rules and disciplines covering a 
host of economic sectors from services and government procurement to e-
commerce and intellectual property. They also raise the bar for future 
trade agreements, including the Free Trade Area of the Americas (FTAA) 
and discussions for trade liberalization in the context of the Asia-
Pacific Economic Cooperation (APEC) forum.
Maintaining Competitiveness
    The two agreements have much in common, but each has its particular 
advantages. One factor adding urgency to our request for quick 
Congressional action on the agreement with Chile is the heightened 
competition U.S. companies face in the Chilean marketplace. In this 
sense, Chile is an example of how the world refuses to stand still--and 
how American business will lose its competitiveness without an 
ambitious program of trade expansion.
    Let me illustrate. Many of you know that Chile's free trade 
agreement with the European Union came into force on February 1. On 
that day, tariffs on nearly 92% of Chilean imports from the EU were 
eliminated. Consequently, it is not surprising to note that Chilean 
imports from the EU expanded by 30% in the year ending in February 
2003, whereas Chilean imports from the United States grew by less than 
6%. Chilean imports from Germany grew by 47% and those from France grew 
by 41% in the same period.
    The reason is simple: While U.S. exporters wait for a free trade 
agreement, our exports to Chile continue to face tariffs that begin at 
6% and, for some products, range much higher. The upshot is that 
European companies are seeing their sales in Chile rise five times as 
quickly as those of U.S. firms.
    In a similar fashion, the free trade agreement with Singapore will 
further anchor U.S. competitiveness in the Asia-Pacific region, where 
Singapore is already actively engaged in negotiating trade agreements. 
Singapore has implemented free trade agreements with Australia, Japan, 
New Zealand, and the European Free Trade Area and is negotiating with 
Canada, Chile, and Mexico. It is also a participant in the framework 
agreement between ASEAN and China aimed at reducing tariffs and non-
tariff trade barriers.
    The comprehensive nature of the free trade agreement with Singapore 
is a testament that Singapore shares many of our country's views on 
global trade liberalization. As such, the agreement will contribute to 
our global and regional trade liberalization objectives and will serve 
as a barometer for other countries in Asia that are interested in 
completing a free trade agreement with the United States.
Gauging the Benefits
    How might these two agreements benefit the United States? There is 
a strong economic argument to be made for free trade agreements. As 
U.S. Trade Representative Robert Zoellick has pointed out, the combined 
effects of the North American Free Trade Agreement (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--an 
impressive tax cut, indeed.
    From a business perspective, the following are a few examples of 
specific market-opening measures in the two free trade agreements, 
provided here to give some insight on how U.S. companies stand to 
benefit:

    Tariff Elimination. In the case of Singapore, the free trade 
agreement will immediately eliminate all Singaporean customs duties on 
all U.S. products upon entry-into-force, unequivocally meeting one of 
the principal negotiating objectives set forth in the Trade Act of 
2002. The agreement will also remove a number of significant non-tariff 
barriers, such as Singapore's excise taxes on imported automotive 
vehicles. The agreement with Chile will eliminate tariffs on more than 
90% of all U.S. goods immediately, with the remainder to be phased out 
in a fairly rapid fashion. Today, most U.S. exports to Chile face a 
tariff of 6%, which can constitute a significant barrier indeed, but 
tariffs are substantially higher on some sectors. For instance, Chile 
continues to impose a luxury tax of 85% on vehicles imported from the 
United States valued at more than $15,000--a significant barrier to 
U.S. exports that the free trade agreement will eliminate.
    Services. Services accounts for over 80% of GDP and employment in 
the United States. The services chapters of both agreements provide 
enhanced market access for U.S. firms across different service sectors 
using a ``negative list'' approach (full market access for all service 
providers except those in sectors specifically named). U.S. service 
suppliers will also be assured fair and nondiscriminatory treatment in 
both countries. Banks, insurers, and express delivery providers are 
among the sectors that will benefit from new opportunities in both 
markets if the two agreements are approved and implemented.
    Electronic Commerce. The landmark E-Commerce chapters of the U.S.-
Chile and U.S.-Singapore agreements will help ensure the free flow of 
electronic commerce, champion the applicability of WTO rules to 
electronic commerce, and promote the development of trade in goods and 
services by electronic means. Provisions in this chapter guarantee 
nondiscrimination against products delivered electronically and 
preclude customs duties from being applied on digital products 
delivered electronically (video and software downloads). For hard media 
products (DVD and CD), custom duties will be based on the value of the 
carrier medium (e.g., the disc) rather than on the projected revenues 
from the sale of content-based products.
    Intellectual Property Rights. The agreements with Chile and 
Singapore provide important new protections for copyrights, patents, 
trademarks and trade secrets, going well beyond protections offered in 
earlier free trade agreements. Once again, the two agreements serve as 
a useful benchmark for future agreements with other countries. Both 
agreements have important new enforcement provisions. In the case of 
Chile, the agreement criminalizes end-user piracy and provides strong 
deterrence against piracy and counterfeiting. The agreement also 
mandates both statutory and actual damages under Chilean law for 
violations of established norms for the protection of intellectual 
property.
    Movement of Personnel. Under the two agreements, U.S. professionals 
will be granted special temporary entry visas into Singapore and Chile 
for a period of 90 days. The special visa would be based on proof of 
nationality, purpose of the entry and evidence of professional 
credentials. The visas would provide for multiple entries and would be 
renewable. The Chamber welcomes this provision in the free trade 
agreements, as it will make it easier for U.S. companies to deploy 
personnel for short assignments or transfers to company facilities in 
Chile and Singapore.
    Provisions on Labor and the Environment. The longstanding policy of 
the U.S. Chamber is that trade agreements should not hold out trade 
sanctions as a remedy in response to labor and environmental disputes. 
Our interpretation of the enforcement mechanism of the labor and 
environmental provisions of the Chile and Singapore free trade 
agreements is that monetary compensation is the remedy of first choice 
and that trade sanctions would be employed only as a last resort.
What the Chamber is Doing
    The U.S. Chamber is helping to lead the charge in the effort to win 
approval of these two agreements. In concert with our partners in the 
U.S.-Chile and U.S.-Singapore Free Trade Coalitions, the Chamber has 
met face-to-face with over 120 Members of Congress since January to 
make the case for approval of the two agreements. We have also met with 
Members of Congress in their districts throughout the country as part 
of our ongoing ``TradeRoots'' program to educate businesspeople and 
workers about the benefits of open trade. We have found extremely broad 
support for the agreements both in the Congress and in the business 
community.
    As part of this ``TradeRoots'' effort, the Chamber has published 
two ``Faces of Trade'' books to highlight small businesses in the 
United States that are already benefiting from trade with Chile and 
Singapore--and that stand to benefit even more from free trade with 
these two markets. I invite you to review these success stories and see 
the face of American trade today. It isn't just about multinationals, 
which can usually find a way to access foreign markets, even where 
tariffs are high. It's about hundreds of thousands of small companies 
that are accessing international markets--and that are meeting their 
payroll, generating jobs, and growing the American economy.
    We've generated a wealth of information about the potential 
benefits of these agreements and our efforts to make them a reality. In 
the interest of brevity, I would simply urge you to contact the Chamber 
if you need more information. A good place to start is our website: 
www.uschamber.com.
Conclusion
    Trade expansion is an essential ingredient in any recipe for 
economic success in the 21st century. If U.S. companies, workers, and 
consumers are to thrive amidst rising competition, new trade agreements 
such as these two will be critical. In the end, U.S. business is quite 
capable of competing and winning against anyone in the world when 
markets are open and the playing field is level. All we are asking for 
is the chance to get in the game.
    Mr. Chairman, we appreciate your leadership in reviving the U.S. 
international trade agenda, and we ask you to move expeditiously to 
bring these agreements to a vote in the Congress.
    Thank you.

                                 

    Chairman CRANE. Thank you, Mr. Trammell. Our next witness 
is Jeff Jacobs.

   STATEMENT OF JEFF JACOBS, PRESIDENT, GLOBAL DEVELOPMENT, 
         QUALCOMM, INCORPORATED, SAN DIEGO, CALIFORNIA

    Mr. JACOBS. Thank you, Mr. Chairman. I am Jeff Jacobs, 
President of Global Business Development at Qualcomm, 
Incorporated. I am responsible for developing Qualcomm's global 
business strategies and directing its international activities. 
I am honored to testify today about the importance of 
implementing the bilateral FTAs with Singapore and with Chile.
    My comments will focus on the benefits of these precedent-
setting agreements and on the implications for future trade 
negotiations. I would first like to provide a brief 
introduction of Qualcomm's international trade interests.
    Headquartered in San Diego, California, Qualcomm is a 
leader in developing innovative communications technologies. 
With more than 5,800 employees at offices in 21 countries, 
Qualcomm offers a range of technology products, wireless voice, 
and data communications.
    Qualcomm is best known as the pioneer of Code Division 
Multiple Access (CDMA), wireless communications technology, 
which is the leading standard in the United States and the 
fastest-growing wireless technology globally. Nearly 155 
million people in 52 countries use CDMA, which enables high-
quality, high-speed voice, and data services.
    Qualcomm supplies the majority of the CDMA chipsets that 
are integrated into CDMA mobile phones and devices around the 
world. With more than 2,600 U.S. patents on our core CDMA 
intellectual property, Qualcomm also licenses CDMA to handset 
and equipment manufacturers around the world.
    Based on this brief overview of our global business, it is 
no wonder that Qualcomm and the U.S. tech sector strongly 
support the U.S.-Singapore and U.S.-Chile FTAs.
    Last year, Qualcomm worked hard to generate Congressional 
support for enactment of TPA; and we thank this Committee for 
its leadership on this critical issue. Accordingly, we support 
the Singapore and Chile FTAs and look forward to the 
introduction of legislation so that we can examine it and 
intensify discussion with Members.
    Open markets and strong trade rules are critical to 
Qualcomm. More than half of our revenues are generated outside 
of North America. Singapore and Chile's implementation of the 
bilateral FTAs with the United States will help level the 
playing field and put the U.S. high-tech sector on equal 
footing with domestic and third country competitors. For 
example, Singapore and Chile already have trade agreements with 
other governments such as Canada, Japan, and the European 
Union, which give companies from these countries preferential 
access and competitive advantages over U.S. firms.
    Qualcomm also supports these FTAs because of its state-of-
the-art commitment, which established some of the most advanced 
trade rules yet to be achieved in any international trade 
agreement. My written statement elaborates on some of the most 
important provisions for the high-tech sector, which includes 
market access for technology products, electronic commerce, 
investment, and intellectual property rights. In the area of 
trade and services, both agreements use the comprehensive 
``negative list'' approach, which means that all those service 
sectors are open to American companies unless specifically 
reserved.
    On telecommunications services, both agreements enhance 
transparency and pro-competetive regulation. Both also include 
nonbinding provisions calling on governments to ensure that 
telecom operators have the flexibility to use the technology of 
their choice. The last issue of ``technology neutrality,'' or 
``operator choice of technology,'' is very important to 
Qualcomm. We commend the Administration for introducing this 
critical concept into international trade negotiations, and 
believe that the Singapore and Chile FTAs are a constructive 
start.
    However, language that is non binding does not help U.S. 
technology exporters when confronted with foreign regulations 
of services that restrict market access for technology. Since 
the Singapore and Chile FTAs were negotiated, we understand 
that the Administration is pursuing binding rules on this 
concept in the WTO, the FTAA, and the FTA negotiations with 
Australia, Morocco, and Central America. We strongly support 
this and are committed to working with the Administration and 
Congress to obtain positive results.
    Our goal is simple. United States technologies should 
receive the same treatment in foreign markets that foreign 
technology providers enjoy in the United States. For this 
reason, we want technology neutrality to become a standard U.S. 
negotiating objective.
    There are also strategic reasons to support these 
precedent-setting FTAs. They can serve as a basis for other 
agreements and provide critical momentum to other trade 
negotiations. United States engagement in international trade 
negotiations also reinforces American leadership in the global 
arena and counterbalances the commercial agendas of other 
governments. Simultaneous trade negotiations with multiple 
countries also enhance the chances of obtaining strong results. 
Should negotiations with one trade partner or group stagnate, 
then the United States can reprioritize its effort in a 
different negotiation.
    For example, we understand that the United States, in its 
FTA negotiations with Central America, has encountered some 
strong opposition to the inclusion of any commitments on 
telecom services. Given the importance of this sector, it seems 
unlikely that an agreement that did not include telecom 
services would receive necessary support within the Congress 
and business community. This is an example of how the United 
States can leverage simultaneous negotiations to obtain good 
results.
    For these reasons, Qualcomm believes that both the U.S.-
Singapore and the U.S.-Chile FTAs provide significant benefits 
to U.S. high-tech products and services suppliers. We support 
the implementation of these ground-breaking agreements. 
Qualcomm looks forward to working with the Congress to ensure a 
broad bipartisan consensus in support of these and future trade 
agreements. Thank you very much.
    [The prepared statement of Mr. Jacobs follows:]
  Statement of Jeff Jacobs, President, Global Development, QUALCOMM, 
                  Incorporated, San Diego, California
    I am honored to have the opportunity to testify today about the 
importance of implementing the recently signed bilateral free trade 
agreements (FTAs) with Singapore and with Chile.
    My comments will focus on the benefits of these precedent-setting 
agreements for QUALCOMM and other American high-tech companies, and on 
the implications for future trade negotiations. Before addressing these 
matters, I would first like to provide a brief introduction of QUALCOMM 
and our international trade interests.

Introduction to QUALCOMM

    Headquartered in San Diego, California, QUALCOMM is a leader in 
developing innovative communications technologies. With more than 5,800 
employees at offices in 21 countries, QUALCOMM offers a range of 
technology products, which enable: wireless voice and data 
communications; e-mail, wireless Internet and related applications; 
``GPS'' satellite position location; and transportation communications 
and vehicle tracking. We have also developed a digital cinema 
technology that allows studios to do away with celluloid film and 
minimize piracy by distributing first-run films in an encrypted, 
digital format.
    QUALCOMM is best known as the pioneer of Code Division Multiple 
Access (CDMA) wireless communications technology. CDMA is the leading 
standard in the United States and the fastest growing wireless 
technology globally, with some 155 million people using CDMA in 52 
countries on six continents. CDMA enables high-quality, high-speed, 
spectrally efficient voice and data services over the same device. Our 
CDMA2000 technology is the first so-called ``3G'' or third-generation 
standard to be made commercially available to wireless services 
providers and consumers.
    QUALCOMM supplies the majority of the CDMA chipsets that are 
integrated into CDMA mobile phones and devices around the world. With 
more than 2,600 U.S. patents on our core CDMA intellectual property, 
QUALCOMM also licenses CDMA to more than 120 U.S. and foreign handset 
and equipment manufacturers around the world. QUALCOMM also makes 
strategic investments in key countries to help develop new markets and 
drive demand for CDMA and other technologies.

Why High-Tech Supports These Free Trade Agreements

    Based on this brief overview of our global business, it is no 
wonder that QUALCOMM strongly supports free trade, and the results of 
the U.S.-Singapore and U.S.-Chile free trade negotiations. Open markets 
and strong trade rules are critical to QUALCOMM. More than half of 
QUALCOMM's revenues are generated outside of North America, with most 
of our growth resulting from demand in Latin America, East Asia 
(especially China, Japan and Korea) and India. These trends are not 
unique to QUALCOMM; the American high-tech sector collectively is the 
largest source of U.S. merchandise exports, as well as the largest 
cumulative source of U.S. direct investment overseas.
    During 2001-2002, QUALCOMM worked hard to generate Congressional 
support for enactment of Trade Promotion Authority (TPA) legislation, 
and we thank this Committee for its leadership on this critical issue. 
As an exporter and employer, we educated Members on the benefits of 
free trade and the need to remove foreign barriers to our products and 
services. Accordingly, we support the Singapore and Chile FTAs, and 
look forward to the introduction of implementing legislation so that we 
can examine it and give our unqualified support. Legislative approval 
and implementation of the Singapore and Chile FTAs are important to 
QUALCOMM and other high-tech companies for several reasons, some of 
which are commercial and some are strategic in nature.
Commercial Significance
    It has been noted that both Singapore and Chile are already 
relatively small and open markets, and that the respective FTAs will do 
little to spur new export or investment opportunities for U.S. 
businesses. Last year, Singapore was the United States' eleventh 
largest export market and Chile ranked thirty-fourth. While I cannot 
speak to other sectors, high-tech companies believe that both markets 
are commercially significant, notwithstanding their relatively small 
populations. In the case of Chile, for example, the United States 
enjoyed a $716 million trade surplus in technology exports last year. 
This statistic will probably grow as Chile progressively eliminates 
duties on most high-tech goods. Faced with a highly competitive global 
technology market and turbulent domestic economic trends in the United 
States, increasingly more American technology companies are forced to 
look overseas for new opportunities.
Level Playing Field
    The Singapore and Chile FTAs are also important because they will 
help to level the currently unfair playing field and let U.S. companies 
compete with domestic and third-country competitors in these countries. 
For example, Singapore and Chile already have trade agreements with 
other governments, such as Canada, Japan and the European Union (EU), 
which give companies from these countries preferential access and 
competitive advantages over U.S. firms. Singapore and Chile's 
implementation of the bilateral FTAs with the United States will help 
put the U.S. high-tech sector on an equal footing to compete fairly in 
those markets.
State-of-the-Art Trade Agreements
    QUALCOMM and the high-tech community also support these FTAs 
because of the substantive rules embodied in the agreements, which are 
considered the most modern, state-of-the-art trade accords in 
existence. Many provisions in these FTAs are superior to the norms 
created by the NAFTA and WTO, and establish some of the most advanced 
commitments yet to be achieved in any international trade initiative. 
Some of the most important provisions for the high-tech sector include 
the following:

     LMarket Access for Goods: By virtue of its WTO 
commitments, Singapore has already eliminated duties on high-tech 
products. In contrast, in implementing the FTA, Chile will eliminate 
the existing 6 percent duty on most high-tech products within 4 years 
of the agreement's entry into force;
     LElectronic Commerce: Both agreements establish new rules 
on ``digital products'' transmitted electronically, and ensure duty-
free treatment for such exports;
     LInvestment: Both agreements grant U.S. citizens and 
companies broad rights to invest and own property, and provides for 
recourse and remedies in the event of disputes;
     LIntellectual Property Rights: Both agreements build upon 
existing disciplines--namely, the WTO, NAFTA and WIPO treaties--to 
establish new, innovative rules on IPR protection and enforcement;
     LServices (generally): Both agreements utilize the 
comprehensive ``negative list'' approach to establish commitments, 
which means that all services sectors are covered and open to American 
companies unless specifically reserved; and
     LTelecommunication Services: Both agreements enhance 
transparency, nondiscrimination, and pro-competitive regulation of 
communications services. Both also include nonbinding provisions 
calling on governments to ensure that telecom operators (notably in the 
mobile sector) have the flexibility to use the technology of their 
choosing to provide services.

    This last issue of ``technology neutrality'' or ``operator choice 
of technology'' is key and warrants elaboration. This concept is well 
established in the U.S. telecommunications policy and regulatory 
vocabulary, and is evident in the practices and decisions of the 
Federal Communications Commission (FCC) and other agencies in the 
United States. We commend the Administration for introducing this 
critical concept into international trade negotiations.
    We believe that the relevant provisions of the Singapore Agreement 
(Article 9.13) and Chile Agreement (Article 13.14) are a constructive 
starting point. However, language that is nonbinding or is subject to 
broad interpretation by foreign governments does not help U.S. 
technology exporters, like QUALCOMM, when confronted with foreign 
regulations of services that restrict market access for technology 
products.
    We understand that the Administration has subsequently tabled 
binding language on this issue in the WTO, FTAA and in FTA negotiations 
with Australia, Morocco, and Central America. We appreciate this 
cooperation, and are committed to working with the Administration and 
Congress to obtain positive results in these negotiations.
    Our goal is simple: U.S. technologies should receive the same 
treatment in foreign markets that foreign technology providers enjoy in 
the United States. For this reason, we want the establishment of 
binding commitments that ensure that service providers can choose 
technologies without governmental interference to become a standard 
U.S. negotiating objective--whether for bilateral and regional FTAs, 
hemispheric or multilateral negotiations, or WTO accessions.
Strategic Implications
    Yet another reason to support these agreements is that they provide 
critical momentum to other trade negotiations, principally the WTO and 
FTAA. The precedent-setting provisions of the Singapore and Chile FTAs 
can serve as a basis for subsequent negotiations. U.S. engagement in 
international trade negotiations also reinforces American leadership in 
the global arena. Active American participation in trade initiatives 
helps to counterbalance other governments whose agendas and advocacy 
may not be consistent with U.S. commercial interests.
    Sustaining simultaneous trade negotiations in multiple fora also 
enhances the chances of obtaining maximum market-opening and high 
quality trade disciplines. Should negotiations under one forum or with 
one trading partner stagnate, then the United States can re-prioritize 
its efforts in a different negotiation that may be more promising. For 
example, we understand that the United States has encountered strong 
opposition to the inclusion of any commitments on telecommunications 
services in the proposed U.S.-Central America FTA. Given the importance 
of this sector, it seems unlikely that an agreement that did not 
include telecom services would garner necessary support within the 
Congress and U.S. business community. This is an excellent example of 
how the United States can leverage simultaneous, parallel negotiations 
with key trading partners to obtain necessary liberalization.
CONCLUSION
    For these reasons, QUALCOMM believes that both the U.S.-Singapore 
and U.S.-Chile FTAs provide significant benefits to U.S. high-tech 
products and services suppliers. We support the adoption and 
implementation of these ground-breaking agreements. We also look 
forward to working with the Congress to ensure a broad, bipartisan 
consensus in support of these and future trade agreements.

                                 

    Chairman CRANE. Thank you, Mr. Jacobs. Mr. Gottfried.

STATEMENT OF KEITH GOTTFRIED, SENIOR VICE PRESIDENT AND GENERAL 
     COUNSEL, BORLAND SOFTWARE CORPORATION, SCOTTS VALLEY, 
    CALIFORNIA, ON BEHALF OF THE BUSINESS SOFTWARE ALLIANCE

    Mr. GOTTFRIED. Mr. Chairman, Mr. Levin, and Members of the 
Subcommittee, thank you for the opportunity to appear before 
you today. My name is Keith Gottfried, Senior Vice President/
General Counsel of Borland Software Corporation. We are a 
publicly held software company located in Scotts Valley, 
California. I am pleased to testify today on behalf of Borland 
and the Business Software Alliance (BSA), an association of 
leading developers of commercial software, hardware, and e-
commerce technologies. I appreciate the opportunity to testify 
today on the significance of the Singapore and Chile FTAs.
    The IT industry is one of the leading contributors for the 
U.S. balance of trade. In 2002, we generated a trade surplus of 
$24 billion. We are a leading engine of global economic growth, 
and in 2002, we contributed to the global economy in the amount 
of a trillion dollars. In the United States alone, the IT 
industry has contributed $400 billion to the U.S. economy, 
generating 2.6 million jobs and $342 billion in tax revenues. 
We are extremely proud of that record.
    Exports account for over 50 percent of revenues for most of 
the leading commercial software makers in the United States, 
including my own company, Borland. If we are to continue these 
positive contributions, FTAs must establish open trading 
environments that promote strong intellectual property 
protection, growth of IT services and barrier-free e-commerce. 
They also must recognize the emergence of new technologies such 
as digitally developed and distributed products.
    There is also another reason to support free trade. Over 
the past 2 years we have witnessed how a lack of opportunity 
and hope can cause desperate people to do awful and evil things 
such as waging a war against freedom, democracy, and the 
inherent goodness of mankind. We strongly believe that barrier-
free trade, or free trade, can be an engine that takes people 
away from the despair of poverty and toward peace and 
prosperity; and we believe that trade, particularly as it 
affects our sector, can be a catalyst for that.
    Mr. Chairman, I am pleased to express the unequivocal 
support of Borland and the members of the BSA for the Singapore 
and Chile FTAs. We urge every Member of this Subcommittee and 
Congress to vote in favor of these Agreements.
    The BSA is also a member of the High Tech Trade Coalition, 
which also actively supports both FTAs. These agreements 
significantly advance the establishment of strong intellectual 
property protection and trade liberalization in Singapore and 
Chile. We commend the Administration, the U.S. Trade 
Representative, and Congress for these achievements. Without 
the leadership provided by the Administration and Congress' 
thoughtful guidance, these achievements would not have been 
possible. Mr. Chairman, I would like to highlight for you some 
of the key provisions in the agreements and submit my written 
statement for the record.
    Chairman CRANE. Without objection, so ordered.
    Mr. GOTTFRIED. For the software industry, strong 
intellectual property protection is key in the fight against 
piracy. Piracy cost the industry $13 billion in lost revenues 
last year. That translates into hundreds of millions of dollars 
in lost taxes to the Federal Government, and State and local 
governments--if not billions. Indeed, high rates of software 
piracy are often the biggest trade barrier we face in many 
markets. In 2002, the piracy rate in Singapore was 48 percent, 
and 51 percent in Chile, costing the industry $32 million in 
Singapore, and $45 million in Chile.
    To promote strong intellectual property protection in a 
digital world, the U.S. negotiating objective is clear: Our 
trading partners must establish a high level of intellectual 
property protection that complies with the WTO's TRIPS 
agreement and the WIPO copyright treaty. The Singapore and 
Chile agreements meet this test. We get the combined effect of 
the standards in TRIPS and the WIPO copyright treaty which is 
an important result. In addition, both agreements require 
strong civil and criminal enforcement regimes which are 
critical elements in our fight against piracy.
    Let me take a moment to discuss a few key elements of 
provisions of trade in IT services, another negotiating 
objective for the United States. During the past decade, a vast 
array of new IT services has proliferated, including data 
storage and management, web hosting, and software 
implementation services. Technology users are increasingly 
purchasing IT solutions as a combination of goods and services. 
As a result, obtaining full liberalization in the area of IT 
services is more important than ever.
    Both Singapore and Chile agreements provide full-market 
access and national treatment on IT services. Both agreements 
adopt a comprehensive approach without exception for 
technology. This will provide evolving IT services full-market 
access today and into the future. We strongly commend this 
approach and result. Over 500 million people are using the 
Internet worldwide. The promotion of barrier-free, cross-border 
e-commerce is therefore critical to the IT industry.
    By 2005, two-thirds of all software is expected to be 
distributed online. This will provide U.S. software companies 
with enhanced access to markets around the world. The e-
commerce chapters of both FTAs recognize, for the first time, 
the concept of digital products. Specifically, physical copies 
of software and electronically delivered software are both 
entitled to exactly the same benefits under these trade laws. 
This safeguard ensures that software delivered online will not 
face new barriers and will have the same ease of access as 
traditional box software.
    With the successful conclusion of these FTAs, we believe 
precedents have been set for continued progress within the FTAA 
and the WTO Doha round of negotiations. Indeed, we are 
confident that these agreements set new standards that help the 
United States achieve its objectives.
    In conclusion, the U.S. FTAs with Singapore and Chile mark 
real milestones in progress. New baselines have been set which 
should open markets for the U.S. technology industry in the 
years to come. Borland and the members of the BSA commend the 
achievements made in both agreements, and we strongly support 
their passage in Congress.
    [The prepared statement of Mr. Gottfried follows:]
    Statement of Keith Gottfried, Senior Vice President and General 
 Counsel, Borland Software Corporation, Scotts Valley, California, on 
                behalf of the Business Software Alliance
    Mr. Chairman, Mr. Levin and the Members of the Committee:
    Thank you for the opportunity to appear before you today. My name 
is Keith Gottfried, Senior Vice President and General Counsel of the 
Borland Software Corporation. I am pleased to testify today on behalf 
of Borland and the Business Software Alliance (``BSA''),\1\ an 
association of leading developers of software, hardware and e-commerce 
technologies worldwide.
---------------------------------------------------------------------------
    \1\ The Business Software Alliance (www.bsa.org) is the foremost 
organization dedicated to promoting a safe and legal digital world. The 
BSA is the voice of the world's software and Internet industry before 
governments and with consumers in the international marketplace. Its 
members represent the fastest growing industry in the world. BSA 
educates computer users on software copyrights and cyber security; 
advocates public policy that fosters innovation and expands trade 
opportunities; and fights software piracy. BSA members include Adobe, 
Apple, Autodesk, Avid, Bentley Systems, Borland, Cisco Systems, CNC 
Software/Mastercam, Entrust, HP, IBM, Intel, Intuit, Internet Security 
Systems, Macromedia, Microsoft, Network Associates, Novell, PeopleSoft, 
SeeBeyond Technology, Sybase, and Symantec.
---------------------------------------------------------------------------
    Let me begin by thanking the Members of this Subcommittee for 
holding this important hearing about the significance of fully 
implementing the Singapore and Chile Free Trade Agreements (FTA). 
Borland and BSA as well as each of its member companies commend you for 
recognizing the importance of promoting free trade among our trading 
partners.
    As one of the leading contributors to the U.S. balance of trade, 
U.S. information technology (IT) and software makers have contributed a 
trade surplus of $24.3 billion in 2002. As a leading engine of global 
economic growth, the industry contributed a trillion dollars to the 
global economy in 2002. In the U.S. alone, the IT industry contributed 
$400 billion to the U.S. economy, creating 2.6 million jobs and 
generating $342 billion in tax revenues in 2002.
    Exports account for over 50 percent of revenues for most of the 
leading commercial software makers in the U.S., including Borland and 
the majority of BSA members. If we are to continue the positive 
contributions of this industry to the U.S. economy, it is critical that 
free trade agreements (FTAs) establish the highest standards of 
intellectual property protection. It is also critical that FTAs provide 
an open trading environment that promotes barrier free e-commerce and 
growth of the information technology services sector.
    As the landscape of trade policy continues to evolve, a relatively 
new issue has emerged on the international scene that could have an 
impact on American software exports. A number of countries, especially 
in Europe, are imposing levies (or surcharges) on hardware and software 
products, which by some industry estimates could cost up to one billion 
dollars per year, hurting both exports and the profitability of the 
American technology industry. This issue should also be part of our 
Nation's trade agenda.
    Mr. Chairman, I am pleased to express the unequivocal support of 
Borland and BSA and its member companies for the Singapore and Chile 
Free Trade Agreements.
    BSA is also a member of the High Tech Trade Coalition, which also 
strongly support the adoption and implementation of the FTAs. The U.S. 
High-Tech Trade Coalition is a group of leading high-tech trade 
associations representing America's technology companies. The high-tech 
sector is the largest merchandise exporter in the United States and is 
the U.S. industry with the most cumulative investments abroad.\2\
---------------------------------------------------------------------------
    \2\ High Tech Trade Coalition Include: AeA-Association For 
Competitive Technology; Business Software Alliance; Computer & 
Communications Industry Association--Computer Systems Policy Project; 
Computing Technology Industry Association--Electronic Industries 
Alliance; Information Technology Association Of America--Information 
Technology Industry Council; National Electrical Manufacturers 
Association--Semiconductor Industry Association; Semiconductor 
Equipment & Materials International--Software & Information Industry 
Association; Telecommunications Industry Association.
---------------------------------------------------------------------------
    The Singapore and Chile FTAs significantly advance the 
establishment of strong intellectual property protection and barrier 
free e-commerce in Singapore and Chile, and we commend the 
Administration and Congress for these achievements. Without the 
leadership provided by Ambassador Zoellick and his team and Congress's 
thoughtful guidance, these achievements would not have been possible.
    The importance of the Congressional approval of the Trade Promotion 
Authority (TPA) to the American high tech industry cannot be 
underestimated. The TPA legislation set the standard of strong IP 
protection and trade liberalization among our trading partners in all 
trade contexts including FTAs and the World Trade Organization (WTO).
    With the successful conclusion of these FTAs, and continued 
progress within the WTO Doha Round of negotiations, including important 
talks on e-commerce and trade in services, we feel confident that the 
U.S. will achieve its objectives in promoting barrier free e-commerce 
and trade liberalization among our trading partners.

Intellectual Property (IP) Provisions in Singapore and Chile FTA:

    For the software industry, strong intellectual property protection 
is essential in fostering continued innovation and investment as 
copyright infringements and software piracy cost the industry $13 
billion in lost revenues in 2002. In Singapore and Chile, the IT 
industry has contributed significantly to their economic growth--$1.2 
billion in Singapore and $340 million in Chile in 2002. However, both 
countries continue to have high piracy rates--48% in Singapore and 51 
percent in Chile, costing the industry $31.9 million in Singapore and 
$44.9 million in Chile in lost revenues in 2002.
    To promote strong IP protection in a digital world, it is essential 
that our trading partners establish the level of copyright protection 
that complies with WTO Agreement on the Trade Related Aspects of 
Intellectual Property Rights (TRIPS) and the World Intellectual 
Property Organization (WIPO) Copyright Treaty (WCT). It is also 
essential that our trading partners fully comply with and enforce these 
obligations.
    The mutual obligations under the U.S.-Singapore FTA mark some of 
the highest standards of intellectual property rights protection and 
enforcement yet achieved in a bilateral or multilateral agreement. The 
U.S.-Chile FTA also makes significant progress in achieving improved 
intellectual property protection and enforcement.
    Both agreements recognize the importance of strong intellectual 
property rights protections in a digital trade environment by building 
on the obligations in the TRIPS Agreement, and ensuring that works made 
available in digital form receive commensurate protection by 
incorporating the obligations set out in the WIPO Copyright Treaty.
    Some of the highlights in both agreements include:
    The clear application of the reproduction right of a copyright 
owner to permanent as well as temporary copies, including temporary 
storage in electronic form. This treatment is critical in a networked 
world where copyrighted materials can be fully exploited without a user 
ever making a permanent copy. The Chile and the Singapore Agreements 
contain slightly different obligations. While the Singapore Agreement 
establishes the much better unqualified protection for temporary 
copies, the Chile Agreement contains certain limitations. In the 
future, the United States should in all cases follow the Singapore 
model.

     LProvisions to promote strong intellectual property rights 
protection and foster electronic commerce by maintaining the balance 
reflected in the U.S. Digital Millennium Copyright Act. Copyright law 
is clarified to permit the exploitation of works and effective 
enforcement of rights in the online environment, while remedies against 
Internet service providers are limited for infringements they do not 
control, initiate or direct.
     LRequirements to establish prohibitions against the 
circumvention of effective technological protection measures employed 
by copyright owners to protect their works against unauthorized access 
or use, coupled with the ability to fashion appropriate limitations on 
such prohibitions, again consistent with those set out in the Digital 
Millennium Copyright Act.
     LRecognition that robust substantive standards for the 
protection of intellectual property, to be meaningful, must be coupled 
with obligations providing for the effective enforcement of rights, in 
both civil and criminal contexts. In this regard, key provisions of the 
agreements provide for the establishment of statutory damages at levels 
appropriate to deter further infringement, civil ex-parte measures to 
preserve evidence of infringement, strong criminal penalties against 
the most pervasive form of software piracy--corporate and enterprise 
end user piracy; and strong border measures to combat cross-border 
trade in infringing goods.
     LObligating governments to lead by example by using only 
legitimate and licensed software.

Trade in Information Technology (IT) Services

    During the past decade, a vast array of new e-commerce and 
information technology services have been developed including data 
storage and management, web hosting, and software implementation 
services. Given the increasing trend for technology users to purchase 
information technology solutions as a combination of goods and 
services, full liberalization in this area is more important than ever.
    It is critical that our trading partners provide full market access 
and national treatment in information technology services including 
those that are delivered electronically. It is also important that no 
barriers are created for the new and evolving information technology 
services.
    In both the Singapore and Chile agreements, parties agreed to 
provide full market access and national treatment on services. Both 
agreements adopted a negative list approach, which means that new 
services will be covered under the agreement unless specific 
reservations were made in the agreement.
    We commend this approach and the achievement in both agreements 
where liberalization of information technology services was achieved 
without any commercially significant reservations, leading to the 
promotion of barrier free trade in services with our trading partners.

E-Commerce in Singapore and Chile FTA

    With over 500 million people using the Internet worldwide, the 
promotion of barrier free cross border e-commerce is critical in 
encouraging continued e-commerce growth and development. In fact, the 
trade treatment of software delivered electronically is one of the most 
important issues facing the software industry and it is essential that 
software delivered electronically receive the same treatment under the 
trade laws as software traded on a physical medium. The e-commerce 
provisions in the Singapore and Chile FTAs should be the model for what 
the United States pursues in all future trade agreements.
    We are quickly moving to a world where online distribution is the 
predominant way software is acquired and used. According to our CEOs, 
by 2005, 66 percent of all software is expected to be distributed 
online. This will have enormous efficiencies as the newest, most up-to-
date software is delivered across borders at a lower cost and more 
quickly than when delivered in a physical form, to the benefit of both 
customers and software developers.
    The E-commerce chapters in both the Singapore and Chile FTAs 
recognize, for the first time, the concept of ``digital products'' in 
terms of trade. The chapters also establish requirements that further 
promote barrier free e-commerce, essential in promoting growth and 
development of the IT industry.
    In both agreements, the trading partners agreed not to impose 
customs duties on digital products. This provision is consistent with 
the WTO Moratorium on Customs Duties on Electronic Transmissions. The 
inclusion of this provision is critical in further promoting the growth 
of cross border e-commerce.
    Both agreements also introduce the concept of ``digital products'' 
as the means to ensure broad national treatment and MFN 
nondiscriminatory treatment for products acquired online. This is 
critical as it recognizes, for the first time, the evolution and 
development of digital products during the last twenty years and 
addresses the need for predictability in how digital products are 
treated by trade law.
    With respect to the physical delivery of digital products, in both 
agreements, the parties agreed to apply customs duties on the basis of 
the value of the carrier medium. This provision is essential as 
valuation on content results in highly subjective assessments of 
projected revenues.
    The parties also agreed to cooperate in numerous policy areas 
related to e-commerce, further advancing the work on e-commerce with 
our trading partners.
Information Technology: Tariff Measures
    The Uruguay Round agreements on tariff reduction, and the 
subsequent Information Technology Agreement within the WTO, have made 
significant contributions by addressing the issue of barriers to trade 
created by high tariffs. Tariffs on information technology products are 
still very high in many countries, creating a substantial impediment to 
trade.
    In order to foster a barrier free trade environment, it is critical 
that our trading partners sign and implement the Information Technology 
Agreement (ITA) or its equivalent. It is essential that our trading 
partners eliminate or phase out existing tariffs applied to information 
technology products since tariff acts as a counterproductive burden 
that raises the cost of the very technology needed to be competitive in 
the digital economy.
    In both FTAs, Singapore and Chile have agreed to liberalize tariff 
barriers. Singapore is already a signatory to ITA. Chile, who is not a 
signatory to the ITA, has agreed to eliminate tariffs on high-
technology products within the next 4 years. The tariff reduction 
measure in the Chile agreement also sets an important precedent for the 
Free Trade Area of the Americas (FTAA), significantly increasing the 
high tech industry's ability to export its products to Brazil, one of 
the largest markets for technology products in Latin America.
    In conclusion, the U.S. free trade agreements with Singapore and 
Chile sets new benchmarks in progress toward the promotion of strong 
intellectual property rights protection, full liberalization of trade 
in information technology services and barrier free e-commerce as well 
as tariff elimination among our trading partners. In these agreements, 
new baseline have been set that should lead to significant market 
opportunities for the U.S. IT and software industries in the years 
ahead. We commend the achievements made in both agreements and we 
strongly support their passage in Congress. On behalf of Borland and 
the members of BSA, I would like to thank the Committee for the 
opportunity to testify here today.

                                 

    Chairman CRANE. Thank you, Mr. Gottfried. Let me reassure 
all of our witnesses that your printed statements will be made 
a part of the permanent record. Mr. Haines.

STATEMENT OF BOB HAINES, MANAGER, INTERNATIONAL AFFAIRS, EXXON 
MOBIL CORPORATION, IRVING, TEXAS, AND CO-CHAIR, U.S.-SINGAPORE 
            FREE TRADE AGREEMENT BUSINESS COALITION

    Mr. HAINES. Thank you, Mr. Chairman, Members of the 
Subcommittee. I am Bob Haines, Manager of International Affairs 
of Exxon Mobil Corporation, and also a Co-Chair of the U.S.-
Singapore FTA Business Coalition. On behalf of the Coalition, I 
would like to thank the Subcommittee for the opportunity to 
discuss the economic impact of this agreement, and to convey 
our enthusiastic endorsement of the U.S.-Singapore FTA.
    I would like to acknowledge today Ms. Kristin Paulson, who 
is the Chair of the U.S. Chamber of Commerce in Singapore, who 
is here today representing U.S. companies in Singapore, as well 
as Ambassador Chan and Ambassador Lavin, who worked so hard on 
the bilateral relationship between the two countries.
    The Coalition, which consists of companies and business 
organizations from across America, is actively working to 
support the passage of U.S.-Singapore FTA. The Coalition is 
chaired by the Boeing Company, the United Postal Service, and 
Exxon Mobil Corporation. Exxon Mobil is the largest single 
investor in Singapore, with over $6.5 billion invested. We have 
a large refining and petrochemical complex, as well as an 
extensive marketing complex. We have found Singapore to be an 
excellent place for U.S. companies to do business.
    The membership of the Coalition includes the U.S.-ASEAN 
Business Council, the U.S. Chamber of Commerce, the National 
Association of Manufacturers, the Business Roundtable, the 
Emergency Committee for American Trade, AmCham Singapore, and 
the Coalition of Service Industries, as well as many others. 
The Coalition represents the bulk of the more than 1,300 
American companies that have a presence in Singapore.
    The Coalition views this FTA negotiated with Singapore to 
be significant for many reasons. Economically, we believe this 
is a landmark pact, which will open new sectors in Singapore to 
U.S. companies, spur economic growth in both countries, create 
higher-paying jobs for American workers, and increase 
investments, trade volumes, and economic integration. Since it 
will be the first FTA in Asia, this agreement will have 
historic ramifications. It will send a strong message that the 
United States will remain heavily engaged in Asia, and is 
committed to binding the business and economic affairs of the 
region with those of America.
    Singapore is a stalwart friend of United States and Asia, 
and an attractive place for American business. Therefore, it is 
a worthy candidate for an FTA, and one that will serve as a 
strong model for future FTAs in the Asia-Pacific region. 
Already it has stimulated interest for other countries in the 
region to work toward their own FTAs with the United States.
    For American companies, the agreement represents new 
investment opportunities, potential increased bilateral trade 
flows, and hopefully more profitable business activities. 
Although Singaporean companies now have a relatively limited 
presence in the United States, the FTA is expected to stimulate 
interest in the United States as a potential investment 
destination. The United States currently has a $7 billion trade 
surplus with Singapore, and there are no indications that this 
trend will change in the near future.
    The top State exporters to Singapore include California, 
Texas, New York, New Jersey, and Missouri; and I think we are 
going to work on Illinois as well, Mr. Chairman. Arguably, some 
of the biggest gains made in this FTA are in the area of 
services. The agreement achieves new and expanded trading 
opportunities for specific service areas including financial 
services--such as banking, securities, and asset management--
insurance, express delivery, healthcare, telecommunications, 
IT, transportation, travel, and tourism.
    In the banking sector, the FTA will result in the 
establishment of more branch operations in Singapore, and will 
allow American banks to provide more services to a broader 
clientele base by enhancing customer service capabilities 
through access to the local Automatic Teller Machine network.
    The investment chapter of the agreement clarifies the terms 
and conditions for the free flow of capital, which we believe 
will serve to enhance investor confidence. With regard to 
intellectual property rights protection, the U.S.-Singapore FTA 
breaks new ground and shores up standards that the American 
high technology industry deems essential for marketing its 
products abroad.
    Under the agreement, American biotech, chemical, 
pharmaceutical, entertainment, and multimedia companies will 
enjoy rights and privileges, including nondiscriminatory 
treatment, government involvement in the intervention and 
prosecution of violators, as well as the active application of 
anti-circumvention rules. These protections will allow American 
manufacturers and service providers to be more competitive by 
offering superior technology and services without the threat of 
trade secrets being stolen or copyrights violated. The FTA also 
contains an e-commerce chapter that is truly pioneering. Its 
inclusion addresses the realities of the information age.
    As you can see from this brief overview, there are many 
reasons for the U.S.-Singapore FTA Business Coalition to 
support this agreement, and we urge Congress to do so as well. 
Thank you.
    [The prepared statement of Mr. Haines follows:]
 Statement of Bob Haines, Manager, International Affairs, Exxon Mobil 
  Corporation, Irving, Texas, and Co-Chair, U.S.-Singapore Free Trade 
                      Agreement Business Coalition
    I am Bob Haines, Manager of International Affairs, Exxon Mobil 
Corporation and Co-Chair of the U.S.-Singapore Free Trade Agreement 
Business Coalition. On behalf of the Coalition, I would like to thank 
the Subcommittee for the opportunity to discuss the economic impact of 
this Agreement, and to convey our enthusiastic endorsement of the U.S.-
Singapore FTA. In sum, because it is a detailed, comprehensive, and 
substantive Agreement, we believe the U.S.-Singapore FTA is clearly 
good for American workers, American business, and American consumers.
    The Coalition, which consists of companies and business 
organizations from across America, is actively working to support the 
passage of the U.S.-Singapore FTA. The Coalition is co-chaired by The 
Boeing Company, UPS and Exxon Mobil Corporation. Exxon Mobil is the 
largest single foreign investor in Singapore, with over $6.5 billion 
invested. We have a large refining and petrochemical complex, as well 
as extensive marketing operations. We have found Singapore to be an 
excellent place for a U.S. company to do business.
    The membership of the Coalition includes the U.S.-ASEAN Business 
Council, the U.S. Chamber of Commerce, the National Association of 
Manufacturers, the Business Roundtable, the Emergency Committee for 
American Trade, AmCham Singapore, and the Coalition of Service 
Industries, and many others. The most recent list of Coalition members 
accompanies this written submission. The Coalition represents the bulk 
of the more than 1,300 American companies having a presence in 
Singapore.
    The Coalition views the FTA negotiated with Singapore to be 
significant for many reasons. Economically, we believe this landmark 
pact will: (1) open new sectors in Singapore to American companies; (2) 
spur economic growth in both countries; (3) create higher paying jobs 
for American workers; and (4) increase investments, trade volumes and 
economic integration. Because it will be the first FTA in Asia, this 
agreement will have historic ramifications. It will send a strong 
message that the U.S. will remain heavily engaged in Asia and is 
committed to binding the business and economic affairs of the region 
with those of America.
    Notably, the U.S.-Singapore FTA, along with the U.S.-Chile FTA, 
will be the first Free Trade Agreements approved by Congress under the 
expedited fast track procedures. It is the Coalition's hope that these 
FTAs, symbolized by the U.S.-Singapore FTA, will continue the trend 
toward greater market liberalization. The U.S.-Singapore FTA comprises 
deep and broad commitments that break new ground in a number of 
industry sectors such as financial services, telecommunications, 
intellectual property rights and e-commerce. It maximizes 
liberalization in goods and services, and should serve as a model for 
future bilateral, regional and multilateral negotiations.
    In recent years, the United States has fallen behind the rest of 
the world, which has experienced a proliferation of free trade 
agreements and bilateral investment treaties. There are now an 
estimated 130 FTAs in force, of which the United States is only a 
signatory to four. Singapore is a stalwart friend of the U.S. in Asia 
and an attractive place for American business. Therefore, it is a 
worthy candidate for a FTA and one that will serve as a strong model 
for future FTAs in the Asia Pacific. Already, it has stimulated 
interest from other countries in the region to work toward their own 
free trade agreements with the U.S. Under the Bush Administration's 
Enterprise for ASEAN Initiative, a far reaching program designed as a 
first step toward bilateral FTAs with ASEAN countries that are 
committed to economic reforms and openness, there have been trade and 
investment framework agreements signed with Thailand, the Philippines, 
and Indonesia. These efforts will enhance competitiveness and lead to 
more and higher paying jobs, benefiting American companies and the U.S. 
economy as a whole.
    For American companies, the Agreement represents new investment 
opportunities; potential increased bilateral trade flows, and hopefully 
more profitable business activities. Although Singaporean companies now 
have a relatively limited presence in the U.S., the FTA is expected to 
stimulate interest in the U.S. as a potential investment destination. 
The United States currently has a $7 billion trade surplus with 
Singapore and there are no indications that this trend will change in 
the near term. The top State exporters to Singapore include California, 
Texas, New York, New Jersey and Missouri. Currently, the intra-MNC 
trade volume accounts for approximately 62 percent of U.S.-Singapore 
trade. With the Agreement's emphasis on bilateral customs cooperation, 
expedited customs clearances and tariff elimination, trade volume 
levels are expected to increase across the board.
    Next, I would like to focus on the benefits to specific sectors of 
the U.S. economy. Arguably, some of the biggest gains made in this FTA 
are in the area of services. The Agreement achieves new and expanded 
trading opportunities for specific service sectors, including financial 
services (such as banking, securities and asset management), insurance, 
express delivery, healthcare, telecommunications, information 
technology, transportation, travel and tourism. It also provides for 
transparency in formulating domestic regulations, including licensing 
decisions, which is an essential investment tool to the services 
industry.
    In the banking sector, the FTA will result in the establishment of 
more branch operations in Singapore, and it will allow American banks 
to provide more services to a broader clientele base by enhancing 
customer service capabilities through access to the local ATM network. 
This feature will make U.S. banks more competitive in Singapore and the 
region.
    The investment chapter of the Agreement clarifies the terms and 
conditions for the free flow of capital, which we believe, will serve 
to enhance investor confidence.
    With regard to intellectual property rights protection, the U.S.-
Singapore FTA breaks new ground and shores up standards that the 
American high technology industry deems essential for marketing its 
products abroad. Adequate and effective protection of intellectual 
property rights remains a foundation for continued U.S. leadership in 
many industry sectors. Therefore, the precedent that this Agreement 
sets for future bilateral and multilateral trade agreements in IPR 
protection warrants our staunch support for the FTA. Under the 
Agreement, American biotech, chemical, pharmaceutical, entertainment, 
and multimedia companies will enjoy rights and privileges, including 
nondiscriminatory treatment, governmental involvement in the 
intervention and prosecution of violators, as well as the active 
application of anti-circumvention rules. These protections will allow 
American manufacturers and service providers to be more competitive by 
offering superior technology and services without the threat of trade 
secrets being stolen or copyrights violated.
    The FTA also contains an e-commerce chapter that is truly 
pioneering. Its inclusion addresses the realities of the information 
age and supports an industry in which the U.S. enjoys a strong 
competitive advantage. The Agreement commits Singapore to the 
nondiscriminatory treatment of digital products and lowers the barriers 
on the use and development of e-commerce. Singapore has also committed 
to not apply fees or tariffs on the electronic transmission of digital 
products and services delivered via the Internet.
    As you can see from this brief overview, there are many reasons for 
the U.S.-Singapore FTA Business Coalition to support this Agreement. We 
urge Congress to support it as well. Thank you.

                                 

    Chairman CRANE. Thank you, Mr. Haines. Some of you 
highlighted the importance of the strong intellectual property 
protections found in both of these agreements. Could you 
explain how these agreements achieve this, and what the 
economic impact will be to the United States and among our 
trading partners--any one of you?
    Mr. GOTTFRIED. Mr. Chairman, both of these agreements 
recognize and parallel the provisions in the DMCA, which 
provides strong anti-circumvention provisions. It also provides 
strong enforcement standards including civil, ex-parte 
statutory damages, criminalization of end user piracy, and 
requires legal software use by the governments. It also 
provides Internet service provider liability which is 
consistent with what the DMCA provides. As I mentioned before, 
strong intellectual property will promote economic growth and 
tax revenues as well.
    Chairman CRANE. Anyone else have any observation beyond 
that?
    Mr. HAINES. I believe the agreement covers four areas: 
trademarks, copyrights, patents, and trade secrets; and in all 
of these areas there are additional protections for these 
intellectual property rights.
    Chairman CRANE. It was mentioned that this is the first 
time that digital products were recognized in terms of trade. 
Can you explain the significance of this to the high-tech 
industry? Yes, again, Mr. Gottfried.
    Mr. GOTTFRIED. Mr. Chairman, in our industry we are 
evolving in the way we distribute our products. Traditionally, 
we have distributed our products in diskette form, and then in 
Compact Disk (CD) Rom form, but we are now evolving with the 
Internet, and with high-speed data transmission available, to 
transmitting our products in digital format so that the 
customer is able to get the product electronically without 
having to go to a store to actually physically buy the product. 
It also makes for quicker upgrades dealing with things like 
error corrections even made in the software, and it was very 
important that these FTAs recognize that medium.
    Chairman CRANE. Finally, what unique provisions in this 
agreement do you find most beneficial, and what would you like 
to see in any new agreements that United States will sign in 
the future? Anyone have a comment?
    Mr. TRAMMELL. Low tariffs is the thing that hinders 
companies, small manufacturing, even though Chile's is rather 
low by many countries' standards. It is 6 percent. It can go as 
high as 30 percent. India, 50 percent. It is the tariffs in 
companies, small companies like Tramco, that suffer from not 
having trade agreements. We look forward to more. Thank you.
    Mr. JACOBS. I would also like to add that technology 
neutrality is extremely important, and the nonbinding 
provisions in these agreements are very good start for 
Qualcomm. However, what we are looking for is a binding rule 
that enables us to offer our products in markets and be able to 
compete without any hindrances and in fair and open 
competition. I think these agreements are an extremely good 
start in this area.
    Chairman CRANE. Anyone else? Yes, Mr. Gottfried.
    Mr. GOTTFRIED. Two things that we like that are in both of 
those agreements: one is the national treatment and 
nondiscriminatory provisions on digital products. Also, we 
support the negative list approach on services.
    Chairman CRANE. Mr. Haines.
    Mr. HAINES. Our Coalition covers a broad range of 
companies, so what we enjoy about this agreement is that it is 
comprehensive, covers many new areas, and gives very good 
protection. We think that is one of the reasons why it can 
serve as a model, because it is comprehensive and provides a 
comprehensive list of protections.
    Chairman CRANE. Thank you. Mr. English.
    Mr. ENGLISH. Thank you, Mr. Chairman. I would like to thank 
the panelists for agreeing to participate today. For each of 
the panelists, since 9/11, there has been an increased focus on 
the need to provide security for goods imported into the United 
States. Do you see these trade agreements--do you see them 
working, the balanced, facilitated trade and security concerns? 
Mr. Trammell.
    Mr. TRAMMELL. It doesn't affect my business at all. We 
don't do any import. Everything we do is export. So, it is not 
affecting us at this point. However, the stuff that we 
manufacture is not high tech. So, at this point it has not been 
a problem; and I am not sure if I am answering you, giving 
you----
    Mr. ENGLISH. Mr. Trammell, if I might, let me turn to the 
other panelists. Would anyone care to focus on this?
    Mr. JACOBS. I would just add that we are also focused on 
exports and doing very little importing ourselves, so it does 
not affect Qualcomm much.
    Mr. ENGLISH. Would anyone like to comment? Very good. Both 
provisions include provisions allowing businesses to send 
service providers, professionals, owners, and officers to the 
other country. This is potentially a controversial component in 
both trade agreements. How important is this to your respective 
businesses?
    Mr. HAINES. The agreement addresses the problems that U.S. 
service providers face in obtaining work permits and visas for 
personnel, but it is on short-term assignments. In some cases 
now, it may take months for necessary authorization. Thus, that 
seriously impairs the ability of U.S. companies to compete.
    Under this agreement, the U.S.-Singapore agreement, the 
U.S. and Singapore professionals will be granted temporary 
visas, but only for a period of 90 days. This is based on some 
criteria like proof of nationality and so forth, and it is also 
limited, I believe, to 5,400 people. We think this is a very 
good accommodation that will allow American businesses as well 
as Singaporean businesspeople what they need in certain times.
    Mr. ENGLISH. Any other comments? Then, in that case, Mr. 
Jacobs, you spoke about the importance of using trade 
negotiations to secure binding rules on technology neutrality 
to ensure that telecom services companies can use the 
technology of their choice to provide services without 
governmental interference. Where has this been a problem for 
your company?
    Mr. JACOBS. I have got a few examples, but in general, it 
happens with technology standards and in the allocation and 
licensing of radio frequencies. For example, in Europe, when 
Qualcomm tried to get CDMA deployed into Europe, we were denied 
access to the most important cellular frequency bands. As a 
result, our technology has not been allowed in, but a competing 
technology is allowed. The European Union has now taken that 
same approach in large, potential markets like China. They are 
trying to do the same thing there by requesting that specific 
technology be utilized in a certain frequency band, thus 
denying the competitive neutrality that we are searching for.
    I think the most obvious one for us lately has been in 
Korea, where there is a standard, less on the air interface 
standard like CDMA, but more on applications platform, where 
Korea got very nervous that it was getting dependent on foreign 
technology. Korea wanted to create its own homegrown industry, 
and so it developed and funded an applications platform called 
the Wireless Internet Platform for Interoperability (WIPI). 
Ultimately, they are trying to mandate that upon all the 
cellular operators, and obviously that is anticompetitive. 
There are many competing solutions out there, and when a 
government mandates something, it obviously is very difficult 
to compete against it.
    Mr. ENGLISH. Finally, and I know my time is short, Mr. 
Jacobs, we frequently hear from companies operating abroad who 
complain that the first time they learn about some new 
government regulation is when the law enforcement authorities 
are knocking on their door. How do you rate the various 
transparency provisions in these two agreements, and how will 
they make a difference for your business?
    Mr. JACOBS. I am not an expert in that subject, so I think 
I will hold off.
    Mr. ENGLISH. Very good. Thank you, Mr. Jacobs.
    Chairman CRANE. Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman. Thank you, gentlemen, 
for your testimony. Let me see if I can focus in on a question 
for perhaps Mr. Jacobs and Mr. Gottfried, but, please, anyone 
on the panel if you are interested. It relates to the employer 
visa program, or employee visa program, that we find in the two 
FTAs. The H-1B program, as you are very well aware, was a very 
delicately crafted compromise trying to ensure that the real-
time needs of most companies--especially in the high-tech 
community--were addressed, while at the same time recognizing 
our obligation to put American workers first in line for any 
jobs that are here in America. We also had a $1,000 fee that 
each company would pay to recognize that, in the future, we 
don't want to have to seek workers from abroad. We should be 
hiring them from here, especially with high-tech jobs that are 
very well paid. The FTAs both include language that provides 
for, in essence, H-1B workers to come in on top of the limits 
that we have for existing H-1B programs. It also seems to allow 
for a generation of those annual caps without regard to how 
many people leave under the existing cap for the particular 
country. So, if you have a 1,400 cap in Chile, for example, if 
1,400 people come in in 2003, next year, if none of the 1,400 
are left, you still can bring in another 1,400 from Chile, and 
so forth. In Singapore it is 5,400, so there is never a limit.
    Question for you: one, should we require companies to pay 
the $1,000 fee that is, in essence, a recognition that we have 
to do more to home-grow our own workforce? Two, should we allow 
there to be no cap to the global limits on workers that are 
coming in from the two countries, so that the 5,400 from 
Singapore and the 1,400 from Chile, 6,800 total, could annually 
come in regardless of how many of those existing 6,800 in any 
year go back to their home countries?
    Mr. JACOBS. Sir, I am not an expert on this question 
either, or the spokesman for Qualcomm on this particular issue, 
but I think it is Qualcomm's goal to hire Americans. We have 
hired 5,800 employees in the United States, so I think we are 
hiring a high amount of U.S. citizens, but in this very 
competitive world market, we certainly want to have access to 
the best and brightest people. So, the more access we can get 
to the people, the better. Whether $1,000 is the right amount 
or not is not driving whether Qualcomm will pursue aggressively 
U.S. citizens or not. We also are doing many things to help 
U.S. institutions, college institutions, to continue to put out 
very strong future employees. So, that has been our path.
    Mr. BECERRA. Thank you. I think everyone recognized that. 
San Diego obviously has benefited tremendously by what Qualcomm 
has done, and we hope you continue to do so. No one wants to 
deny a company, especially a company that has produced so much, 
or any industry that has produced so much, the opportunity to 
just continue to advance. It is our fault in our country if we 
are not producing enough of those engineers and computer 
scientists and other folks of technological bent in order to 
meet the needs of our companies. No one wants to stifle 
progress. So, I am just wondering, though, if there comes a 
point where we want to be careful, because there is another 
provision in the FTAs that seems to remove the requirement that 
an employer certifies that it has sought out American workers 
for those particular positions that are open, which to me, if 
that gets out, that could become a blemish on the FTAs even if 
it doesn't happen that way. I don't believe that the countries 
of Chile and Singapore are trying to somehow circumvent the 
process. I think there is probably some genuine role to be 
played here. It just seems that we may be going beyond what we 
need to.
    Since my time is getting short, maybe I can get to one 
other question very quickly. Please tell me, anyone on the 
panel, if you have a particular disagreement with what I say. 
Child labor should not be permitted. Slave labor should not be 
permitted. The right to associate by any employee should not be 
forbidden. The right to collectively bargain--you must allow 
people to unionize. The right to associate to collectively 
bargain should not be forbidden. Also, the right against forced 
labor--the obligations to forbid discrimination.
    Is there any problem with any of those five issues? 
Outlawing child labor, outlawing discrimination, outlawing 
slave labor, forced labor, permitting right of association, 
permitting collective bargaining; does anybody have any 
problems with those? No? Would you object to having something 
like that that says you can't allow child labor; you can't 
allow slave labor, forced labor; you can't permit 
discrimination; you can't stop someone from associating; you 
can't stop someone from at least trying to collectively 
bargain? Would that--would you be opposed to an agreement if it 
said those things?
    Mr. TRAMMELL. Well, Congressman, that is a pretty broad 
brush. What is child labor? At what age do you consider it 
child labor? You have got a lot of blocks there, too, in my 
opinion, that could very well impede agreement. I think we all 
want to do what is fair.
    Mr. BECERRA. What if you used an international standard for 
child labor; say, if the international community thought that 
it shouldn't be 18 or 17.
    Mr. TRAMMELL. Please, I am not a defender of child labor, 
but I am just saying that that is a pretty broad brush. I live 
out on a ranch, and so, 16-year-old kids can work for me under 
my supervision. I would certainly hate to think that I am 
abusing the child labor law by having my grandkids help me haul 
hay or plow or something. So, the term ``child labor,'' of 
course, is very chilling in just the term ``child labor.'' I 
think you should be more definite about what you are talking 
about.
    Mr. BECERRA. If you were--and, Mr. Chairman, I know my time 
has expired, but if I can pursue this for just a second more 
because I think Mr. Trammell brings up a good point. If we were 
to give definition to those five areas, child labor--if we used 
an international standard that made it very clear what we 
meant, and we used standards that were internationally 
recognized, versus by the United States or by some other 
country, but internationally recognized, would any of you have 
objections to seeing any of those provisions ingrained, 
embedded in an FTA?
    Okay. I thank you. I assume that that means there is no 
vocal opposition to that. I only raise that point because I 
think a lot of us are just saying we could have some great 
trade agreements, and address some of the concerns that some of 
us have, and be able to move forward with some of these trade 
agreements without a problem if we just put in some floor 
standards there that would help a lot of us have confidence 
that every agreement, regardless what the good faith of the 
country and the negotiators was--we would know that there is 
something there, and it would allow us to move forward and let 
you all aggressively market your products and do as well as you 
can for the American people and your companies. Thank you, Mr. 
Chairman, for the extra time.
    Chairman CRANE. Well, I thank you. I thank our 
distinguished witnesses here. On the child labor question, 
though, let me tell you that as a kid, when we were 12, we 
worked on the farm to help load hay and get it in the barn. We 
milked the cows at 5:30 in the morning and never thought 
anything about it. We only made 10 cents an hour. We were 
blessed, we felt, because we could work a 10-hour day and make 
a dollar.
    Mr. BECERRA. Mr. Chairman, I think you are right. Sometimes 
it seems like we have reversed it, and some of our kids don't 
feel like they need to work until they become adult age.
    Chairman CRANE. Absolutely. Sad to say.
    Mr. BECERRA. We do have requirements. We do require you to 
register, and there are some regulations that require anyone 
under 18 to work under permits, unless, of course, it is 
family, which is different. We do provide a regime so that we 
can ensure that there is no abuse of those individuals. I don't 
think anyone would challenge that or contest that, because what 
we have done is, in essence, given a child the chance to become 
educated, to become the folks who take those jobs that Qualcomm 
produces, versus have to work for 10 cents an hour on a farm; 
which farm work is dignified labor, but I think all of us want 
to make more than 10 cents an hour.
    Chairman CRANE. That was back in the forties. That would 
be, probably, $20 an hour today.
    Mr. BECERRA. Mr. Chairman, I would love to find some of 
those farms, because I know a lot of folks who are working for 
a lot less than minimum wage on our farms.
    Chairman CRANE. Well, I want to thank our panel for their 
testimony and for their involvement, and I would like to ask 
you all to please stay involved, especially in terms of 
communication, with our colleagues so that as we get closer to 
voting on this on the floor, they have the information that you 
have provided us here on the Committee. With that, this panel 
stands adjourned.
    We will invite our next panel to come testify, and that 
includes Joseph Papovich, Senior Vice President International, 
Recording Industry Association of America, on behalf of the 
Entertainment Industry Coalition for Free Trade; David Spence, 
Managing Director, FedEx Corporation; Gawain Kripke, Policy 
Director, Oxfam America; Thea Lee, Chief International 
Economist, AFL-CIO; and finally, John Audley, Senior Associate 
and Director, Project on Trade Equity and Development of the 
Carnegie Endowment for International Peace.
    If our witnesses will all please take their seats, we will 
proceed in the order in which I introduced all of you. Please 
try and keep your testimony confined to the 5 minutes, and the 
little lights in front of you there--when the red light goes 
on, don't cross the intersection. With that, we will start out 
with Mr. Papovich.

      STATEMENT OF JOSEPH PAPOVICH, SENIOR VICE PRESIDENT 
 INTERNATIONAL, RECORDING INDUSTRY ASSOCIATION OF AMERICA, ON 
 BEHALF OF THE ENTERTAINMENT INDUSTRY COALITION FOR FREE TRADE

    Mr. PAPOVICH. Thank you, Mr. Chairman. On behalf of the 
Entertainment Industry Coalition for Free Trade, I appreciate 
the opportunity to testify about the benefits of these two FTAs 
for America's entertainment industry. Our coalition represents 
Americans who create, produce, distribute, and exhibit 
theatrical motion pictures, television programming, home video 
entertainment, recorded music, and video games. Our members are 
multichannel programmers and cinema owners, producers and 
distributors, entertainment guilds and unions, trade 
associations, and individual companies.
    International markets are vital to our companies and our 
creative talent. Foreign sales account for 40 to 60 percent of 
the revenues of the record and motion picture industries. This 
strong export base sustains American jobs. However, America's 
creative industries are under attack. The impact of piracy has 
grown in recent years with the advance of digital technology. 
Market access barriers plague our industries. These two 
agreements include commitments vital to our coalition, 
including strong protection of intellectual property and market 
access for the goods and services we produce and distribute, 
whether in physical form or over digital networks.
    Mr. Chairman, you asked the last panel for some specific 
examples in the intellectual property rights area that make 
these agreements good, and I have some I am going to list off 
for you right now. First, these agreements will help us better 
protect our intellectual property in Chile and Singapore, while 
setting important precedents for future FTAs, including the 
FTAA. The agreements create clear and binding rules for the 
protection of intellectual property in the digital economy. 
They ensure that copyright owners have the exclusive right to 
make their works available online. This is very important. The 
agreements build upon and improve existing copyright 
agreements, including the WTO TRIPS agreement. The agreements 
implement the obligations of the 1996 WIPO Internet Treaties. 
This includes prohibition against the provision of goods and 
services that circumvent technological measures used to protect 
copyrighted works from unauthorized access and copying. The 
agreements expand the term of protection for copyrighted works 
in line with international trends.
    Strong enforcement is essential to intellectual property 
protection, and the new agreements contain important advances. 
They mandate statutory and actual damages against infringements 
based on the value of the legitimate goods. Enforcement 
authorities will be able to seize and destroy pirated goods and 
the equipment used to produce such goods. Singapore, a major 
trans-shipment port, will enforce these laws against goods and 
transit, making it more difficult for pirates to use Singapore 
as a conduit for pirated goods produced in other Asian 
countries. Singapore also accepted a special provision to 
control optical disk production, like CDs, CD ROMs, Digital 
Video Disks (DVDs), which is a major problem in their region.
    Second, the FTAs ensure that U.S. audiovisual services will 
enjoy the Most Favored Nation principle and national treatment 
with only limited reservations. Singapore and Chile's 
commitments are excellent where U.S. audiovisual interests are 
strongest. For example, Singapore is a regional hub for the 
uplinking and delivery of channels of television content via 
satellite to cable services and directly to consumers. 
Singapore has taken full commitments on these services, as has 
Chile. Recorded music, cinema exhibition, and television and 
cable transmission services will enjoy full market access and 
national treatment under these agreements. Home video rental 
and leasing, and the on-demand delivery of all forms of 
entertainment content are fully covered.
    Third, the agreements offer groundbreaking provisions 
regarding the treatment of digital products. Among other 
things, Singapore and Chile committed to nondiscriminatory 
treatment of digital products and agreed not to impose Customs 
duties on such products. The agreements require that the 
valuation for content-based products like films, videos and 
music CDs will be based on value of the carrier media like the 
disk, not the value of the content, which would obviously be 
much higher.
    Finally, the agreements eliminate the duties on the 
physical products created by our industry and for the inputs we 
use. Therefore, Mr. Chairman, on behalf of the industry, 
Entertainment Industry Coalition, we call for congressional 
approval of these two fine trade agreements. We praise the work 
of Ambassador Zoellick and his staff in concluding these 
agreements. Congressional approval of these agreements will 
promote one of our economy's most vital sectors. Thank you very 
much.
    [The prepared statement of Mr. Papovich follows:]
  Statement of Joseph Papovich, Senior Vice President International, 
      Recording Industry Association of America, on behalf of the 
            Entertainment Industry Coalition for Free Trade
    Mr. Chairman and Members of the Subcommittee, on behalf of the 
Entertainment Industry Coalition for Free Trade (EIC), I appreciate the 
opportunity to testify about the economic benefits that the U.S.-
Singapore and U.S.-Chile Free Trade Agreement will provide for 
America's entertainment industries, including the men and women who 
work in our industries. The Entertainment Industry Coalition represents 
the interests of those men and women who produce, distribute and 
exhibit many forms of creative expression, including theatrical motion 
pictures, television programming, home video entertainment, recorded 
music, and video games. Our members are multi-channel programmers and 
cinema owners, producers and distributors, guilds and unions, trade 
associations and individual companies.
    Our members include AFMA; AOL Time Warner; BMG Music; Directors 
Guild of America; EMI Recorded Music; Interactive Digital Software 
Association; The International Alliance of Theatrical Stage Employees, 
Moving Picture Technicians, Artists and Allied Crafts of the United 
States, Its Territories and Canada, AFL-CIO, CLC (IATSE); Metro-
Goldwyn-Mayer Studios Inc.; Motion Picture Association of America; 
National Association of Theatre Owners; New Line Cinema; the News 
Corporation Limited; Paramount Pictures; Producers Guild of America; 
Recording Industry Association of America; Sony Music Entertainment 
Inc.; Sony Pictures Entertainment Inc.; Television Association of 
Programmers (TAP) Latin America; Twentieth Century Fox Film 
Corporation; Universal Music Group; Viacom; Universal Studios; the Walt 
Disney Company; Warner Bros.; and Warner Music Group; and The Writers 
Guild of America, west (WGAw). Additional information regarding our 
Membership can be found in the attached document: ``The Entertainment 
Industry Coalition for Free Trade: WHO WE ARE.''
    The goal of the EIC is to educate policymakers about the importance 
of free trade for the U.S. economy, the positive economic impact of 
international trade on the entertainment community, and the role of 
international trade negotiations in ensuring strong intellectual 
property protections and improved market access for our products and 
services.
    International markets are vital to our companies and workers. For 
the record and motion picture industries, for example, exports account 
for forty to sixty percent of revenues. This strong export base has 
been significant for sustaining countless U.S. jobs for America's 
creative talent and workers.
    Unfortunately, America's creative industries are under attack. 
Piracy of copyrighted materials has had a devastating impact. The 
impact has grown in recent years with the advance of digital 
technology. While the digital revolution has created new ways for all 
of us to reach consumers with compelling content, and for consumers in 
turn to access it from almost anywhere, this same technology has also 
facilitated the work of those who profit from stealing the innovation 
and creativity of others. Market access barriers also plague segments 
of the entertainment industries.
    All of this increases the importance of international trade 
agreements. In addition to updating traditional copyright protections, 
our industry needs new agreements that keep pace with changes in 
technology.
    The EIC, therefore, is committed to the passage of the U.S.-
Singapore and U.S.-Chile Trade Agreements. These agreements include 
numerous commitments that are vital to the members of the Coalition 
such as: (1) providing strong protection of intellectual property in 
the digital age; (2) strengthening copyright enforcement; (3) securing 
market access for the goods and services produced and distributed by 
our members whether in physical form or over digital networks; and (4) 
demonstrating that trade agreements can incorporate commitments that 
open services markets while simultaneously addressing countries' 
specific socio-cultural concerns. The Coalition firmly believes that 
these FTAs, once implemented, will promote our economic interests and 
contribute to a strengthened U.S. economy.
             The FTAs Raise Intellectual Property Standards
    The entertainment industries, and the men and women who work in 
these industries, are dependent for their success, indeed for their 
survival, on defending their rights to the intellectual content they 
have created. Achieving enhanced global standards of copyright 
protection and enforcement, ensuring meaningful market access, and 
developing trade disciplines that keep pace with technological 
development are all central to the Coalition Members' ability to remain 
competitive and to continue to ensure good jobs for America's creative 
community.
    Growing levels of physical piracy, online piracy and inadequate 
enforcement of copyright laws internationally are challenging the 
competitiveness of our industries worldwide. These two FTAs succeed in 
addressing these challenges in ways that bode well for high levels of 
protection in Singapore and Chile and for setting critical, essential 
precedents for future Free Trade Agreements. These agreements provide 
high standards of copyright protection for the modern digital age, and 
ensure that protection is meaningful in practice through strong 
enforcement. Piracy of our works represents the single largest trade 
barrier we face in markets outside the United States. Let me quickly 
highlight a few key areas.
    These agreements create clear and binding rules for the protection 
of intellectual property to the digital economy. They ensure that 
copyright holders have the exclusive right to make their works 
available online. As you know, this has been a critical problem in the 
music industry. These agreements build upon and improve in significant 
ways the existing copyright agreements, including the provisions in the 
WTO TRIPS Agreement. The agreements implement the obligations of the 
1996 WIPO Internet Treaties, including ensuring that copyright owners, 
including record companies, have the exclusive right to make their 
works available online. The agreements include strong prohibitions 
against the provision of goods and services that circumvent 
technological measures that protect copyrighted works from unauthorized 
access and copying. In addition, the agreements expand the term of 
protection for copyrighted works in line with emerging international 
trends.
    Enforcement is essential to intellectual property protection, and 
the new Agreements contain important new enforcement provisions. They 
provide strong deterrence against piracy and counterfeiting. They also 
mandate both statutory and actual damages--based on the value of the 
legitimate goods--for IPR violations under Singaporean and Chilean law.
    The Governments of Singapore and Chile guaranteed that they have 
the authority to seize, forfeit, and destroy both pirated goods and the 
equipment used to produce such goods. Singapore--as a major trans-
shipment port in Asia--will also enforce these tough laws against 
goods-in-transit, meaning that Singapore will not serve as a conduit 
for pirated goods produced in other Asian countries.
    It is critical that these issues continue to be addressed in each 
free trade agreement negotiated by the United States.
      Creating Market Opportunities for the Entertainment Industry
    Services: The U.S. entertainment industry will also benefit from 
the provisions relating to cross-border trade in services. The FTAs 
ensure that all U.S. audiovisual services will enjoy national treatment 
and MFN status, with limited reservations. Chile and Singapore each 
took a reservation (Singapore's broader than Chile's) that limits their 
obligations for television content broadcast, but their obligations in 
all other forms of audiovisual services, where U.S. commercial 
interests are strongest, are excellent. Specifically, Singapore is a 
regional hub for the uplinking and delivery of channels of television 
content via satellite to cable services and directly to customers. 
Singapore has taken full commitments on these services, as has Chile. 
Chile also agreed to grant national treatment to U.S. providers for any 
cultural cooperation agreements it enters with third countries.
    Both agreements represent good examples of trade agreements that 
are able to accommodate cultural concerns, while providing solid market 
opening commitments. They are a model for future agreements, proving 
that cultural interests can be promoted without significant 
restrictions on international trade. Recorded music, cinema exhibition, 
even television and cable transmission services enjoy full market 
access and national treatment under these agreements. Home video rental 
and leasing, and the on-demand delivery of all forms of entertainment 
content are also fully covered. The agreements ensure continued 
openness in sectors including advertising, distribution, and computer 
related services which are all critical for both traditional and as 
well as digital commerce.
    Digital Products: The agreements offer groundbreaking provisions 
with respect to the treatment of digital products. The Entertainment 
Industry Coalition is committed to bringing compelling content to 
consumers both online and through digital downloads; we are pleased, 
therefore, with the agreements' e-commerce provisions. Singapore and 
Chile have committed to nondiscriminatory treatment of digital 
products, and have also agreed not to impose customs duties on such 
products.
    Customs Valuation: The agreements also establish very valuable 
rules for customs valuation. Specifically, they require that valuation 
for content-based products (e.g., films or videos or music CDs) be 
based on the value of the carrier media--not on an artificial 
projection of revenues. Because Singapore and Chile will eliminate 
their tariffs, the true significance of this provision will be as a 
precedent for future negotiations with other trading partners in other 
bilateral and regional negotiations.
    Goods: EIC members are interested in reduction of tariffs on the 
physical products created by this industry and on zero duties for 
inputs to our various industries, from sound and projection equipment 
and state-of-the-art seating for cinemas to promotional materials, to 
the equipment used in the production of films and music. Even before 
completion of this Agreement, EIC Members had already benefited from 
Singapore's commitment to zero duties. Singapore's zero duties, of 
course, are enshrined in this Agreement. Chile to now as part of its 
commitment will have zero duties on the products essential to our 
industry.
    Singapore and Chile are not major exporters of entertainment 
products to the United States. Moreover, the United States already has 
zero import duties on most entertainment products; elimination of the 
few remaining low U.S. tariffs on entertainment products are not 
expected to affect the volume of imports of entertainment products from 
Singapore or Chile or cause any harm to any U.S. industries.
                            Call for Support
    On behalf of the Entertainment Industry Coalition, I want to praise 
the work of Ambassador Zoellick and his staff in concluding these FTAs. 
Congressional support for these agreements will help promote one of our 
economy's most vital sectors.
    More broadly, we strongly support the Administration's continuing 
efforts to pursue simultaneous liberalization through bilateral, 
regional, and multilateral trade negotiations. Each of these avenues 
offers significant prospects.
    In addition, we urge Members to join the newly forming 
Congressional Anti-piracy caucus. Congressmen Goodlatte and Schiff co-
chair the House Caucus. Senators Biden and Smith co-chair the Senate 
Caucus. This caucus will help to reinforce the critical importance of 
IP protection globally.
    For decades, the expansion of trade and the protection of 
intellectual property have been cornerstones of a bipartisan economic 
policy. The ability of our country to lead--and the ability of our 
companies to lead--will depend upon our continued success through 
passage of the Chile and Singapore FTA's and beyond.

                               __________
         Entertainment Industry Coalition for Free Trade (EIC)
                               WHO WE ARE
AFMA

    AFMA is the worldwide trade association of the independent film and 
television industry. Our members represent all facets of the 
independent film and television industry including sales, production, 
distribution and financing. AFMA also hosts the American Film Market, 
the world's largest film market, where more than $500 million dollars 
in film license transactions are concluded annually. International 
exports of film, television and video/DVD rights are a major aspect of 
the business of AFMA members and constitute about $2.6 billion dollars 
in annual sales.

DGA

    The Directors Guild of America (DGA) represents 12,500 directors 
and members of the directorial team who work in feature film, filmed/
taped/and live television, commercials, documentaries, and news. DGA 
members include Film and Television Directors, Unit Production 
Managers, Assistant Directors, Associate Directors, Technical 
Coordinators, Stage Managers and Production Associates. DGA seeks to 
both protect and advance directors' economic and artistic rights and 
preserve their creative freedom.

IATSE

    The International Alliance of Theatrical Stage Employees, Moving 
Picture Technicians, Artists and Allied Crafts of the United States, 
Its Territories and Canada, AFL-CIO, CLC (IATSE) is an International 
Union that represents over 100,000 members employed in the stage craft, 
motion picture and television production, and trade show industries 
throughout the United States, its Territories and Canada.

IDSA

    The Interactive Digital Software Association is the U.S. 
association exclusively dedicated to serving the business and public 
affairs needs of companies that publish video and computer games for 
video game consoles, personal computers, handheld devices and the 
Internet. IDSA members collectively account for more than 90 percent of 
the $6.9 billion in entertainment software sales in the United States 
in 2002, and billions more in export sales of American-made 
entertainment software.

MPAA

    The Motion Picture Association (MPAA) is a trade association 
representing seven of the largest producers and distributors of 
theatrical motion pictures, home video entertainment and television 
programming: Walt Disney Company; Metro-Goldwyn-Mayer Studios Inc.; 
Paramount Pictures; Sony Pictures Entertainment Inc.; Twentieth Century 
Fox Corporation; Universal Studios; and Warner Bros.

NATO

    The National Association of Theatre Owners (NATO) is the largest 
trade association in the world for the owners and operators of motion 
picture theatres. NATO represents over 500 movie cinema companies 
located in the United States and in 40 countries around the world. 
These companies range from large national and international circuits 
with thousands of movie screens, to hundreds of small business 
operators with only a few movie screens. NATO maintains its main office 
in North Hollywood, California, and a second office in the Washington, 
D.C. area.

PGA

    The Producers Guild of America represents nearly 2,000 producers 
and members of the producing team in film, television and new media. 
Under the leadership of Kathleen Kennedy, the PGA strives to provide 
employment opportunities for its members, combat credit proliferation 
within film and television, and represent the interests of the entire 
producing team. The producing team consists of all those whose 
interdependency and support are necessary for the creation of motion 
pictures and television programs. The producing team includes 
Producers, Executive Producers, Co-Executive Producers, Supervising 
Producers, Co-Producers, Associate Producers, Segment Producers, 
Production Managers, Post-Production Supervisors and Production & Post-
Production Coordinators.

RIAA

    The Recording Industry Association of America is the trade group 
that represents the U.S. recording industry. Its mission is to foster a 
business and legal climate that supports and promotes our members' 
creative and financial vitality. Its members are the record companies 
that comprise the most vibrant national music industry in the world. 
RIAA members create, manufacture and/or distribute approximately 90% 
of all legitimate sound recordings produced and sold in the United 
States. In support of this mission, the RIAA works to protect 
intellectual property rights worldwide and the First Amendment rights 
of artists; conduct consumer industry and technical research; and 
monitor and review--State and Federal laws, regulations and policies. 
The RIAA also certifies Gold, Platinum, Multi-Platinum, and Diamond 
sales awards, Los Premios De Oro y Platino, and award celebrating 
Latin music sales.

TAP

    The Television Association of Programmers (TAP) Latin America is a 
trade association comprising 35 pan-regional subscription programming 
suppliers serving Latin America and the Caribbean. The Association, 
founded in 1995, provides a voice in the region for its members and 
facilitates the exchange of ideas and information on issues affecting 
the Latin American marketplace. TAP's headquarters are in Miami, and it 
maintains a network of legal counsel and industry representatives 
throughout the region.

WGAw

    The Writers Guild of America, west (WGAw) is a labor union that 
represents writers in the motion picture, broadcast, cable and new 
technologies industries. Our 8,500 members of the write for news, 
entertainment, animation, informational, documentary, interactive 
online services, CD-ROM and other new media technologies. We represent 
writers in a variety of arenas in addition to traditional bargaining. 
With representatives in Washington D.C.--as well as other countries--
the WGAw furthers the interest of writers through legislation, 
international agreements and public relations efforts.

                                 

    Chairman CRANE. Thank you. Mr. Spence.

STATEMENT OF DAVID W. SPENCE, MANAGING DIRECTOR, REGULATORY AND 
 INDUSTRY AFFAIRS, FEDERAL EXPRESS CORPORATION, AND CHAIRMAN, 
       TRADE COMMITTEE, AIR COURIER CONFERENCE OF AMERICA

    Mr. SPENCE. Thank you, Mr. Chairman. This testimony is 
submitted on behalf of Federal Express (FedEx) and the Air 
Courier Conference of America (ACCA). I give this testimony 
today as managing director in the legal department of FedEx 
responsible for trade security and customs policy and as Trade 
Committee Chairman for ACCA.
    FedEx and ACCA support the Singapore FTA and believe it 
will benefit the U.S. express industry, particularly by leading 
to an increased volume of trade between the two countries. 
Express operators expect to transport a significant portion of 
that increased trade. Due to my limited time, I am focusing on 
the Singapore FTA, but we would be happy to answer questions 
about the Chile FTA as it also brings many benefits to our 
industry.
    The express industry which ACCA represents specializes in 
fast, reliable transportation services for documents, packages, 
and freight. Members of ACCA include large firms of global 
delivery networks such as Airborne, DHL, FedEx, TNT U.S.A., and 
United Parcel Service (UPS), as well as smaller businesses with 
strong regional delivery networks. Together ACCA members employ 
more than 510,000 American workers. Worldwide, ACCA members 
have operations in over 1,200 countries, move more than 20 
million packages each day, employ more than 800,000 people, 
operate 1,200 aircraft, and earn revenues of approximately $60 
billion annually.
    FedEx and ACCA strongly support free trade. The express 
industry's success depends on its ability to transport 
documents and parcels quickly without undue delay or cost. Laws 
and regulations in a wide range of areas, such as intermodal 
transportation, distribution, warehousing, customs, insurance, 
and freight forwarding can significantly affect the ability of 
ACCA members to compete effectively in foreign markets. Such 
laws have the potential to restrict trade when they are 
discriminatory or burdensome.
    As noted above, the express industry expects that the 
Singapore FTA will open new markets for American exporters and 
therefore enhance business opportunities for providers of 
express delivery services. Singapore and the other nations of 
the ASEAN region represent an important and growing market for 
the express industry. According to the U.S.-ASEAN Business 
Council, in 1999, express shipments accounted for approximately 
20 percent or $13.6 billion of the $68 billion in trade 
transported via air between the United States and the ASEAN 
nations. The counsel estimated that express delivery in the 
ASEAN region would grow at an annual rate of approximately 20 
percent per year. With the implementation of the Singapore FTA, 
this rate of growth should increase.
    In addition, the Singapore FTA is expected to enhance 
business opportunities for the U.S. express industry by 
reducing trade barriers that have the potential to directly 
affect the express industry's operations in Singapore. Of 
particular note are the agreement's trade facilitation 
provision specific to the express industry which should allow 
express operators to provide the fast, reliable service that 
businesses and consumers in both countries need. We are pleased 
that the agreement includes trade facilitation provisions as we 
believe that trade facilitation is an absolutely essential 
ingredient of trade negotiations. Trade facilitation provisions 
should focus on the simplification and harmonization of customs 
procedures and practices and should also require parties to 
maintain appropriate measures to ensure efficient and fair 
customs facilitation of goods that are imported and/or exported 
by express suppliers. The Singapore FTA's provisions do that. 
However, we are disappointed with the agreements included and 
of a 6-hour target for release of express shipments. We believe 
that target should be substantially reduced.
    The Singapore FTA is one of the first U.S. trade agreements 
to recognize express delivery as a unique service sector and to 
clarify that commitments regarding express--the express sector 
are applicable to all suppliers of the service. This is an 
important precedent for our industry because our principal 
competition often comes from national postal administrations. 
Even though express services provided by private and public 
operators are identical, they are classified differently under 
the U.N. Central Product Classification (CPC) System, the 
classification scheme that has often served as the basis for 
prior service classifications.
    The CPC has several flaws from the perspective of the 
express industry. First, it does not provide for express 
delivery services. Instead we are covered under the 
classifications ``postal services'' and ``courier services.'' 
Furthermore, the definition of postal services and courier 
services in the CPC are distinctly counterproductive to express 
delivery service liberalization efforts. They inappropriately 
focus on the nature of the service procedure rather than the 
service itself. Under the CPC, express delivery services 
provided by a private operator are classified as courier 
services, but when the same services are provided by a public 
postal administration, they are classified as postal services. 
This creates a serious problem. Sir, I understand my time is 
up, so I would be happy to answer any questions.
    [The prepared statement of Mr. Spence follows:]
    Statement of David W. Spence, Managing Director, Regulatory and 
  Industry Affairs, Federal Express Corporation, and Chairman, Trade 
              Committee, Air Courier Conference of America
    Mr. Chairman, this testimony is submitted on behalf of Federal 
Express Corporation (FedEx) and the Air Courier Conference of America 
(ACCA). I give this testimony today as Managing Director of Regulatory 
and Industry Affairs in the Legal Department of FedEx, responsible for 
trade, security, and customs policy, and as Trade Committee Chairman 
for ACCA. FedEx and ACCA support the U.S.-Singapore FTA and believe it 
will benefit the U.S. express delivery services (EDS) industry, 
particularly by leading to an increased volume of trade between the two 
countries. EDS operators expect to transport a significant portion of 
that increased trade.
    The express delivery service industry, which ACCA represents, 
specializes in fast, reliable transportation services for documents, 
packages and freight. ACCA members include large firms with global 
delivery networks, such as Airborne Express, DHL Worldwide Express, 
FedEx, TNT U.S.A. Inc. and United Parcel Service, as well as smaller 
businesses with strong regional delivery networks. Together, ACCA 
members employ more than 510,000 American workers. Worldwide, ACCA 
members have operations in over 200 countries, move more than 20 
million packages each day, employ more than 800,000 people, operate 
1,200 aircraft and earn revenues of approximately $60 billion annually.
    FedEx and ACCA strongly support free trade. The EDS industry's 
success depends on its ability to transport documents and parcels 
quickly, without undue delay or costs. Laws and regulations in a wide 
range of areas, such as intermodal transportation, distribution, 
warehousing, customs, telecommunications, insurance and freight 
forwarding, can significantly affect the ability of ACCA members to 
compete effectively in foreign markets. Such laws have the potential to 
restrict trade when they are discriminatory or burdensome.
    As noted above, the EDS industry expects that the U.S.-Singapore 
FTA will open new markets for American exporters and therefore enhance 
business opportunities for providers of express delivery services. 
Singapore and the other nations of the ASEAN region represent an 
important and growing market for the EDS industry. According to the 
U.S.-ASEAN Business Council, in 1999 express delivery shipments 
accounted for approximately 20 percent, or $13.6 billion, of the $68 
billion in trade transported via air between the United States and the 
ASEAN nations. The Council estimated that express delivery services in 
the ASEAN region would grow at an annual rate of approximately 20 
percent per year. (``The Integrated Express Industry in the ASEAN 
Region: Delivering Business into the 21st Century'' (September 2000)). 
With the implementation of the U.S.-Singapore FTA, this rate of growth 
should increase. In addition, the U.S.-Singapore FTA is expected to 
enhance business opportunities for the U.S. express industry by 
reducing trade barriers that have the potential to directly affect the 
EDS industry's operations in Singapore. Of particular note are the 
agreement's trade facilitation provisions specific to the express 
industry, which should allow EDS operators to provide the fast, 
reliable service that businesses and consumers in both countries need. 
We are pleased that the agreement includes trade facilitation 
provisions, as we believe that trade facilitation is an absolutely 
essential ingredient of trade negotiations. Trade facilitation 
provisions should focus on the simplification and harmonization of 
Customs procedures and practices and should also require parties to 
maintain appropriate measures to ensure efficient and fair Customs 
facilitation of goods that are imported and/or exported by EDS 
suppliers. The U.S.-Singapore FTA's provisions do that. However, we are 
disappointed with the agreement's inclusion of a 6-hour target for 
release of express shipments; we believe that target should be 
substantially reduced.
    The U.S.-Singapore FTA is one of the first U.S. trade agreements to 
recognize express delivery services as a unique service sector, and to 
clarify that commitments regarding the EDS sector are applicable to all 
suppliers of the service. This is an important precedent for our 
industry because our principal competition often comes from national 
postal administrations. Even though EDS services provided by private 
and public operators are identical, they are classified differently 
under the U.N. Central Product Classification (``CPC'') system, the 
classification scheme that has often served as the basis for prior 
service classifications (such as in several sectors covered by the 
GATS). The CPC has several flaws from the perspective of the EDS 
industry. First, it does not provide for express delivery services--
instead, we are covered under the classifications ``postal services'' 
and ``courier services.'' Furthermore, the definitions of ``postal 
services'' and ``courier services'' in the CPC are distinctly 
counterproductive to express delivery service liberalization efforts--
they inappropriately focus on the nature of the service provider rather 
than the service itself. Under the CPC, express delivery services 
provided by a private operator are classified as ``courier services,'' 
but when the same services are provided by a public postal 
administration, they are classified as ``postal services.'' This 
creates a serious problem. Countries are likely to argue that because 
the provision of ``courier services'' under the CPC is a different 
service than provision of the same express services business activities 
by the postal authority. National treatment violations would be nearly 
impossible to prove, as a strong argument could be made under the CPC 
that express delivery services provided by private operators are not 
``like,'' or offered under ``like circumstances'' as those same express 
services provided by public postal administrations. Thus, without a 
specific definition for express delivery services, general FTA 
provisions on national treatment and most-favored-nation treatment 
would offer little, if any, help for express delivery service providers 
that seek competitive equality. FedEx and the EDS industry as a whole 
therefore applaud the inclusion in the U.S.-Singapore FTA of an 
appropriate definition of EDS.
    The U.S.-Singapore FTA also includes commitments limiting cross 
subsidization by Singapore Post to benefit its express letter service. 
While the EDS industry is pleased with this commitment, as it is a 
first step in addressing a longstanding competitive disadvantage faced 
by our members in many markets, we strongly believe that cross-
subsidization provisions in future trade agreements should be 
considerably more rigorous than those in the U.S.-Singapore FTA. We 
believe future trade agreements should embrace the precept that all 
entities, including postal administrations, providing express delivery 
services to their customers should be governed by the same rules and 
market economics. This would preclude postal administrations from using 
profits they derive from government-granted monopoly operations to 
cross subsidize their express delivery service operations.
    Mr. Chairman, in conclusion, FedEx thanks the Trade Subcommittee 
for the opportunity to present this statement, and would be happy to 
respond to any inquiries on the part of Members.

                                 

    Chairman CRANE. Thank you, Mr. Spence. Let me reassure all 
of you folks, too, that your printed statements will be made a 
part of the permanent record. With that, our next witness is 
Mr. Kripke.

   STATEMENT OF GAWAIN KRIPKE, SENIOR POLICY ADVISOR, OXFAM 
                            AMERICA

    Mr. KRIPKE. Thank you. Thank you, Mr. Chairman, Congressman 
Levin and Members of the Subcommittee. Thanks for giving me the 
opportunity to testify today, and thanks also for hanging out 
to listen to us stray cats here at the end. Oxfam America is an 
international development and relief agency committed to 
developing lasting solutions to poverty, hunger, and social 
justice. We are part of a confederation of 12 Oxfam 
organizations working together in more than 100 countries 
around the world, and we have an annual budget of more than 
$400 million.
    Oxfam believes that trade can be an important engine for 
development and poverty reduction, and that well managed trade 
has the potential to lift millions of people out of poverty, 
and for this reason Oxfam is focused on the global trade rules 
and trade agreements as an integral part of our work to improve 
the livelihoods of poor people and to reduce poverty in 
developing countries. Since trade agreements set the rules for 
ongoing trade relationships, they present opportunities for 
developing countries, but they also present risks, and that's 
why we think it is important to look at these trade agreements 
very carefully to understand their full implications, and 
especially so since the Administration has made it clear that 
these trade agreements will serve as models for future 
agreements that are currently being negotiated.
    Today I want to focus on two areas of great concern to 
Oxfam and our partners in developing countries: intellectual 
property and investment. Both Singapore and Chile are parties 
to the existing WTO TRIPS agreement, but both the FTAs include 
measures that strengthen patent rights and enforcement around 
pharmaceutical products. Both agreements go beyond existing WTO 
TRIPS agreement and impose new requirements on our trading 
partners, implementing so-called TRIPS-plus provisions.
    Many public health and intellectual property experts have 
warned that TRIPS-plus may undermine public health in poor 
countries. This concern has become a major issue at the WTO and 
instigated a great deal of controversy, which was resolved in 
2001 with the Doha Declaration where all parties affirmed the 
primacy of public health, and in 2002 Congress also endorsed 
this as part of the TPA by instructing the U.S. Trade 
Representative to respect the Doha Declaration.
    Unfortunately, Oxfam feels that this commitment to public 
health is not being upheld by the U.S. Trade Representative, 
and we are concerned about the TRIPS-plus provisions included 
in the Chile and Singapore FTAs. At the root of intellectual 
property rights is a balance between the interests of the 
patent holders who hold a monopoly and the public interest in 
disseminating the technologies and the pharmaceuticals. 
Provisions of these FTAs tipped the balance inappropriately in 
favor of rights holders, and as a consequence may limit the 
access to affordable medicines.
    Most of the provisions in these FTAs around the 
pharmaceuticals are aimed at delaying the introduction of 
generic competition and thereby prolonging the patent holder's 
monopoly. Generic competition is crucial in bringing down 
prices to affordable levels, and anything that delays it can 
have a great impact on access to affordable medicines. 
President Bush himself made this point in the State of the 
Union when he called for a major new commitment of funds to 
combat AIDS and other diseases. He referenced the fact that 
antiretroviral drugs to treat AIDS have dropped in price from 
$12,000 per patient per year to around $300. This dramatic 
difference makes possible treating millions of people with 
diseases that otherwise wouldn't be able to be--to find 
treatment.
    I will spare you a list of the TRIPS-plus agreements in 
both the FTAs. Suffice it to say the Singapore agreement has 
many more, but both of them move forward in that direction, and 
we find this a very troubling event, and more so looking 
forward to future trade agreements. Some of the provisions in 
Singapore and Chile are aimed toward bringing patent law in 
these countries up to American legal standards. However, some 
of them appear to go beyond U.S. law in protecting patents and 
restricting generic competition.
    On intellectual property rights, an additional concern 
comes around the restrictions on the flexibility of these 
countries to determine the scope of patentability under their 
national laws. For instance, both the Chile and Singapore 
agreements require the patenting of plants, which is very 
controversial among environmentalists and among indigenous 
communities. Under WTO Agreement, the TRIPS agreement, that is 
not required, and each country should be free to decide how 
this issue should be regulated.
    So, in summary, imposing more TRIPS-plus standards in trade 
agreements is troubling from a public health and development 
point of view, and we believe that patenting of plants should 
not be part of our trade agenda and should be resolved in the 
context of a variety of development and environmental 
considerations.
    The rest of my testimony focuses on the investment 
provisions which we have concerns with also; less so around 
Chile and Singapore, but more so how they might be applied in 
other trade agreements, particularly CAFTA, the FTAA, and the 
negotiations around the agreement with the Southern African 
Customs Union. So, I will leave that to the written testimony, 
but be happy to answer questions.
    [The prepared statement of Mr. Kripke follows:]
    Statement of Gawain Kripke, Senior Policy Advisor, Oxfam America
    Mr. Chairman, Congressman Rangel, and Members of the Subcommittee, 
thank you for the opportunity to present the views of Oxfam America at 
this hearing today. We appreciate the invitation and your interest in 
gathering a variety of perspectives on the important issue raised by 
the Chile and Singapore Free Trade Agreements.
    Oxfam America believes that trade can be an important engine for 
development and poverty reduction. Well-managed trade has the potential 
to lift millions of people out of poverty. For this reason, Oxfam has 
focused on global trade rules and trade agreements as an integral part 
of our work to improve livelihoods and reduce poverty in developing 
countries.
    Trade agreements set the rules for ongoing trade relationships. 
They present opportunities, but also risks for developing countries. 
That's why we believe that it is very important to get the rules right; 
and why Congress should look carefully at these FTAs to understand 
their implications.

Intellectual Property

    An important area of concern for Oxfam are the intellectual 
property sections of the Chile and Singapore FTAs. Both FTAs include 
measures that strengthen patent rights and enforcement around 
pharmaceutical products. Both agreements go beyond the existing TRIPs 
agreement and impose new requirements on our trading partners, 
implementing so-called ``TRIPS-plus'' provisions.
    Many public health and intellectual property experts have warned 
that ``TRIPS-plus'' may undermine public health in poor countries. This 
concern has become a major issue at the WTO, and, in 2001, the primacy 
of public health over patent rights was affirmed in the Doha 
Declaration by all WTO members, including the United States. In 2002, 
Congress endorsed this commitment as part of Trade Promotion Authority 
by instructing the USTR to respect the Declaration in trade 
negotiations.
    Unfortunately, Oxfam feels this commitment to public health is not 
being upheld by the USTR. We are concerned about several ``TRIPS-plus'' 
provisions included in the Chile and Singapore FTAs. At the root of 
intellectual property rights systems is a balance between the interests 
of patent holders and the public interest. The provisions of these FTAs 
tip this balance inappropriately in favor of rights holders and, as a 
consequence, may limit access to affordable medicines.
    Most of these are aimed at delaying the introduction of generic 
competition, thereby prolonging the patent holder's monopoly. Generic 
competition is crucial in bringing prices down to affordable levels, 
and anything that delays the entry of generic products can have a grave 
impact on access to affordable medicines.
    Both the Chile and Singapore agreements contain ``TRIPS-plus'' 
provisions. However, there are more of them, and they are more 
extensive in the Singapore agreement. The U.S.-Singapore Free Trade 
Agreement includes provisions that:

     Llimit the use of ``compulsory licensing,'' an important 
mechanism for governments to obtain affordable medicines. Compulsory 
licenses provide an important safeguard to governments to 
counterbalance the monopoly rights granted to patent holders. 
Compulsory licenses enable governments to deal with public health 
problems or instances of abuse of patent rights. The U.S.-Singapore FTA 
will make it more difficult for Singapore to issue compulsory licenses 
in the public interest. The compulsory licensing provisions of the FTA 
go beyond TRIPS, restricting the circumstances under which this 
procedure can be used and expanding the rights of patent holders at the 
expense of the government and the public interest;
     Ldelay or impede the introduction of generic competition 
by (a) linking marketing approval to patent status, thereby preventing 
the immediate introduction of generic competition upon patent expiry, 
(b) mandating the protection of test data for 5 years, again delaying 
the development of and marketing approval for bioequivalent generic 
drugs, and (c) mandating the disclosure of applicants for generic 
marketing approval;
     Lextend the term of patent protection to compensate for 
delays in regulatory approval. This would also delay the introduction 
of generic competition. Twenty years of patent protection is an 
adequate monopoly for patent holders to recover investments and 
generate profit. Extending this monopoly unfairly favors patent holders 
to the detriment of the public interest in accessing affordable 
medicines;
     Lrestrict parallel importation of medicines placed on a 
foreign market at a lower price than in the home market. ``Parallel 
importation'' is a key means of obtaining affordable drugs and is not 
limited under the WTO Agreement on intellectual property (TRIPS). This 
provision may make Singapore responsible for policing patent violations 
abroad, by requiring Singapore to restrict parallel importation of 
certain drugs based on the terms of licensing contracts in other 
countries. The WTO TRIPS agreement leaves it to countries to decide 
whether or not to provide for international exhaustion in their 
national IPR regimes, so language in the Singapore FTA which limits 
parallel importation in any way is ``TRIPS-plus.''

    In addition to the intellectual property concerns around access to 
medicines, patent provisions of the Singapore-U.S. Free Trade Agreement 
restrict the flexibility accorded to governments under TRIPS to decide 
the scope of what may be patented under their national laws. For 
instance, both the Chile and Singapore FTAs require the patenting of 
plants, which is a controversial issue among environmentalists and 
indigenous communities. Under the WTO TRIPS Agreement (Article 27.3 
(b)) each country is free to decide how this issue will be regulated in 
national laws.
    Oxfam is particularly concerned that the IPR provisions of the 
Chile and Singapore FTAs may serve as models for other trade 
agreements. The pharmaceutical industry has lauded the recent Singapore 
FTA, noting that ``it establishes key precedential provisions to be 
included in other FTAs now being negotiated, including the FTAA'' (p. 
1, IFAC report).
    Experts have concluded that stringent IPR standards (a) do not lead 
to increased innovation in developing countries, (b) may harm public 
health, and (c) are not appropriate to countries of lower levels of 
economic development. Using the Singapore and Chile FTAs as a template 
for future trade agreements is dangerous and inappropriate. The FTAA, 
for example, includes a number of poor countries facing health crises, 
all of which are already subject to IPR protections provided under the 
WTO TRIPS Agreement. Holding them to ``TRIPS-plus'' standards of IPR 
protection could undermine public health and the ability to deal with 
crises such as AIDS. In addition, requiring the patenting of plants 
should not be a priority for the USTR because it is a sensitive issue 
that should be resolved in the context of a variety of development and 
environmental considerations.

Investment

    Oxfam is concerned that the investment rules in the Chile and 
Singapore agreements serve as a poor template for future trade 
agreements, and could undermine the ability of developing country 
governments to assure that foreign investment contributes to 
development goals. While the investment provisions in the Chile and 
Singapore agreements are problematic on their own, Oxfam is primarily 
concerned about the example they set for future agreements with 
countries that desperately need investment, but also need tools to make 
that investment serve human and economic development.
    Foreign direct investment (FDI) has the potential to stimulate 
economic activity and create jobs in a manner that is consistent with 
local and regional development strategies. However, for developing 
countries, the quality of investment probably matters more than the 
overall quantity. And the investment rules in the Chile and Singapore 
agreements restrict the ability of governments to guarantee the quality 
of investment in their countries. The Chile and Singapore agreements 
restrict the use of performance requirements, an important tool to 
assure that investments promote economic and social development. 
Through foreign investment, developing countries hope to spur economic 
linkages up and down the production chain. They often hope for 
technology transfer to allow countries to develop their own production 
capacities and increase the value added in country. But restrictions on 
performance requirements--such requiring use of local materials and 
technology transfers--means that productive investments can be isolated 
from the rest of the economy, offering little indirect benefit. In 
fact, the model often used in developing countries often ensures that 
investments are confined to enclave zones, with few, if any, backward 
linkages to the domestic economy. The case of Mexico under NAFTA is 
instructive. FDI flows to Mexico between January 1994 and September 
2002 reached an astonishing $116 billion. However, nearly half of this 
has gone to manufacturing low value-added goods in maquiladoras along 
the U.S.-Mexico border.
    Oxfam is troubled by the investor-to-state mechanism by which 
foreign investors may bring complaints before international arbitral 
tribunals when their business interests have been impaired by 
government actions taken in the public interest. The potential use of 
this mechanism to challenge regulations that are designed to protect 
public health, safety, and the environment represents a serious threat 
to governments' ability to provide for the basic human rights of its 
citizens. Moreover, Oxfam and many others are concerned that this 
investor-state dispute settlement mechanism bypasses domestic judicial 
systems and does not have an appellate process.
    The experience of such mechanisms under NAFTA is not encouraging. 
Since NAFTA came into force in 1994, corporations in all three member-
countries have used the investor-state mechanism to file cases 
challenging domestic law that were designed to protect health, safety, 
and environment. One of the most noteworthy cases brought under the 
NAFTA Chapter 11 investor provisions is a 1997 complaint filed by the 
U.S.-based waste disposal company Metalclad against the Mexican 
government. Metalclad claimed that the Mexican state of San Luis Potosi 
had violated its NAFTA rights when it prevented the company from 
opening a waste disposal plant after the company had taken over a 
facility with a history of contaminating local groundwater. The local 
government denied Metalclad a permit to reopen the facility and later 
declared the site part of a 600,000-acre ecological zone. Mexico was 
ultimately forced to pay Metalclad over $15 million in compensation due 
to these decisions.
    Congress was clear when providing the authority to negotiate new 
trade agreements that the investment provisions of new trade agreements 
should not provide substantive rights to foreign investors beyond those 
provided domestic investors. However, it is our judgment that the Chile 
and Singapore agreements do not comply with this mandate. The 
provisions in the Chile and Singapore agreements go beyond the set of 
guidelines for regulatory takings and due process that have been 
established in U.S. jurisprudence by the U.S. Supreme Court. This 
failure to appropriately constrain the investment rules not only risks 
the authority of foreign governments to protect the public health and 
environment, but also the United States. For example, by failing to 
appropriately and clearly limit the way in which the rules apply to 
different types of property and by failing to include the critical 
`parcel as a whole' principle, the investment rules could limit the 
ability of developing country governments--or the U.S.--to establish 
development moratoriums on projects that are socially or 
environmentally harmful.
    We are also concerned that the Chile and Singapore agreements limit 
the use of important policy tools that developing countries need to 
reduce their financial instability in times of crisis. The Chile and 
Singapore agreements restrict any measure that would impede the free 
flow of capital, even in cases of emergency balance of payments 
problems. Economists and policy analysts from range of perspectives 
agree that this is a very poor idea. Recently, Jagdish Bhagwati and 
Daniel Tarullo have argued that the ban on capital controls constitutes 
``bad financial policy, bad trade policy, and bad foreign policy and 
constitute a bad tradeoff for increased trade and investment flows 
(Financial Times, March 17, 2003). On April 1, 2003, Bhagwati, Joseph 
Stiglitz, and Nancy Birdsall testified before the House Financial 
Services Committee on the capital control provisions of the Chile and 
Singapore agreements, noting that the restrictions on their use 
constitute a major source of concern. Even The Economist (May 3, 2003) 
has made the case for maintaining capital controls as a viable policy 
alternative to prevent financial instability.
    In summary, the investment provisions in the Chile and Singapore 
agreements are important to consider in their own right. But as a model 
for future trade agreements, particularly for less developed countries, 
they are terrible. In many of the poorest countries where Oxfam is 
active, in Latin America and Southern Africa, our partners are 
extremely concerned about ensuring that their governments will continue 
to play their legitimate role of regulating investment in order that it 
contribute to, not undermine, sustainable development.
    Finally, the investment provisions in the Chile and Singapore 
agreements also fail to provide sufficient protections for 
internationally recognized worker rights and environmental standards. 
The agreements lay out weak language that each party ``strive to ensure 
that it does not waive or otherwise derogate from'' its existing labor 
and environmental standards. However, this does not commit countries to 
harmonize upward, to ensure that their laws comply with core labor 
standards as defined by the International Labor Organization, or 
international environmental standards.

Conclusion

    Oxfam America appreciates the opportunity to testify today and to 
share our concerns about the Chile and Singapore FTAs. From our 
perspective as a development and humanitarian organization, it is hard 
to identify how these agreements will promote the goals of sustainable 
development and poverty reduction. On the other hand, neither Chile nor 
Singapore are examples of countries that suffer the extremes of poverty 
and vulnerability. In that sense, they are more truly trading partners, 
with relatively robust and diversified economies. Our primary message 
today is that the IPR and investment provisions of these FTAs would be 
unacceptable for countries that have fewer options and have populations 
at greater risk. As you know, the USTR is currently engaged in 
negotiations for trade agreements with countries where we believe a 
different standard should be set. In particular, we hope for a much 
improved outcome to the negotiations around a Central America Free 
Trade Agreement, the Free Trade Area of the Americas, and the FTA with 
the Southern African Customs Union.
    Thank you again for this chance to share Oxfam's perspective.

                                 

    Chairman CRANE. Thank you, Mr. Kripke. Ms. Lee.

   STATEMENT OF THEA M. LEE, CHIEF INTERNATIONAL ECONOMIST, 
    AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL 
                         ORGANIZATIONS

    Ms. LEE. Thank you very much, Mr. Chairman, Congressman 
Levin, Members of the Subcommittee. I appreciate the 
opportunity to come and testify today on behalf of the 13 
million working men and women of the American Federation of 
Labor/Congress of Industrial Organizations (AFL-CIO) on this 
very, very important topic. These recently signed FTAs with 
Chile and Singapore are important in their own right, lowering 
trade barriers on the movement of goods and services between 
the signatories, and also laying out far-reaching rules in many 
other areas. The significance and economic impact of these 
agreements is magnified many times because, as the 
Administration has made clear, these will serve as templates 
for future bilateral and regional trade agreements that are now 
being negotiated. I want to talk both about the agreements 
themselves and also about the danger of using them as 
templates.
    The AFL-CIO believes that increased international trade and 
investment can yield broad benefits to American working 
families and to our brothers and sisters around the world, but 
we also believe it is essential that we get the rules right, 
that it isn't enough to call an agreement free trade and to 
wash our hands of it. We need to really look at the details. 
For example, we have often said that trade agreements must 
include enforceable protections for core workers' rights, and 
must preserve our ability to use our domestic trade laws 
effectively. They must not undermine the government's ability 
to regulate in the public interest, to use procurement dollars 
to promote economic development and other legitimate social 
goals, and to provide high-quality public services.
    Unfortunately we believe the Singapore and Chile FTAs fall 
short of this standard on several important counts, and we urge 
Congress to reject these agreements and to ask the U.S. Trade 
Representative not to use them as a template for future FTAs. I 
want to focus my oral comments today on two important concerns 
that we have: workers' rights and the ISI. As you all know, the 
labor movement has for a long time placed a lot of emphasis on 
the importance of core workers' rights in all trade agreements 
that we sign, and the reason is that we don't believe any 
country or company should gain a competitive advantage in 
global trade by violating the fundamental human rights of its 
own workers. We are very disappointed by the weak and back-
sliding workers' rights provisions included in the Chile and 
Singapore agreements.
    While the labor chapter is 8 pages long, in fact there is 
only one paragraph of that chapter which is subject to dispute 
settlement. As has been discussed earlier today, that paragraph 
requires that each company enforce its domestic labor laws. It 
doesn't actually require a country to have labor laws. It just 
says that whatever laws they have on the books need to be 
enforced. That is completely inadequate. It is weaker than what 
we have today in the Generalized System of Preferences program 
with respect to Chile. It is weaker than what was negotiated in 
the Jordan FTA, which the AFL-CIO was glad to support.
    I was interested to see Ambassador Allgeier earlier today 
at this hearing answer Congressman Levin's question that he is 
going to rely on the spirit of the agreement, on continued 
discussions, and on capacity-building as opposed to any 
negotiated provisions of the agreement if, in fact, there are 
problems with a country weakening its labor laws in the very 
important areas of freedom of association, right to bargain 
collectively, child labor, forced labor, or discrimination in 
employment. This is totally inadequate. Of course, while these 
provisions are problematic in the context of Chile and 
Singapore, totally unacceptable for any agreement, they would 
be disastrous in the context of the Central American FTA or the 
Southern Africa Customs Union where they are being 
contemplated. In fact, in the case of CAFTA, these weak 
provisions have been put on the table by U.S. Trade 
Representative as the initial negotiating position.
    We are also very troubled by the ISI provision, a new 
provision that has been put into the Singapore FTA. This is an 
open-ended provision that allows certain goods made outside of 
Singapore to be treated as of Singaporean origin for the 
purposes of the agreement. We believe there is no justification 
for the inclusion of this provision in the agreement, and that 
it alone constitutes sufficient reason to reject the agreement. 
We are concerned that U.S. Trade Representative has not been 
clear about what the provision is, and I was very concerned to 
hear Ambassador Allgeier say earlier today that this relates to 
the two Indonesian islands of Bintan and Batam. There is no 
mention of the islands of Bintan and Batam in the Singapore 
FTA. In fact, this is a provision which would apply to goods 
made in any country. It could be China, could be Burma, could 
be any country with an egregiously bad workers' rights and 
human rights records.
    At the moment, the ISI provisions apply only to a specified 
list of goods which are detailed in Annex 3B. As U.S. Trade 
Representative has said, these goods already enter the United 
States duty-free under the IT agreement. However, Article 3.2, 
paragraph 2 clearly states that the product coverage of these 
provisions can be expanded within 6 months after the agreement 
enters into force after consultation between the parties. There 
is no limitation listed in the language as to whether the 
additional goods would also be duty-free goods, or what 
countries they would come from, and there is no mention 
whatsoever of consultation with Congress prior to expanding 
product coverage.
    In our view, this provision defeats the entire purpose of 
negotiating an FTA, as it extends the benefit of the agreement 
without ensuring any reciprocal market access benefits for U.S. 
products, or preserving any of the negotiated conditions of the 
FTA itself, including the worker rights provision. I look 
forward to your questions, and I thank you for your time.
    [The prepared statement of Ms. Lee follows:]
   Statement of Thea M. Lee, Chief International Economist, American 
      Federation of Labor and Congress of Industrial Organizations
    Mr. Chairman, Congressman Levin, Members of the Subcommittee, I 
thank you for the opportunity to testify today on behalf of the 
thirteen million working men and women of the AFL-CIO on the recently 
signed free trade agreements with Chile and Singapore.
    These agreements will have an important economic impact on working 
people in all three countries. The immediate impact will be the 
reduction of tariff and non-tariff barriers on the movement of goods 
and services between the signatories, but far-reaching rules in other 
areas such as investment, intellectual property rights, government 
procurement, e-commerce, and the movement of natural persons will also 
affect the regulatory scope of participating governments, binding their 
ability to legislate in certain areas for the foreseeable future.
    Perhaps even more important, however, is the precedent set by these 
agreements. As the first agreements negotiated by this Administration 
under the 2002 Trade Promotion Authority legislation, these agreements 
are likely to serve as templates for future bilateral and regional 
FTAs. Since FTA negotiations are currently under way with the five 
Central American countries, the Southern African Customs Union, 
Morocco, and Australia, in addition to a hemispheric agreement 
scheduled to reach completion in 2005 (the proposed Free Trade Area of 
the Americas or FTAA), the economic importance and policy significance 
of these agreements with Chile and Singapore is magnified many times.
Overall Assessment
    The AFL-CIO believes that increased international trade and 
investment can yield broad and substantial benefits, both to American 
working families, and to our brothers and sisters around the world--if 
done right. Trade agreements must include enforceable protections for 
core workers' rights and must preserve our ability to use our domestic 
trade laws effectively. They must protect our government's ability to 
regulate in the public interest, to use procurement dollars to promote 
economic development and other legitimate social goals, and to provide 
high quality public services. Finally, it is essential that workers, 
their unions, and other civil society organizations be able to 
participate meaningfully in our government's trade policy process, on 
an equal footing with corporate interests.
    Unfortunately, we believe the Singapore and Chile FTAs fall short 
of this standard on several important counts, and we urge Congress to 
reject these agreements and to ask the U.S. Trade Representative's 
office not to use them as a ``template'' for future FTAs.
    I have attached to my testimony the summary of a detailed report 
prepared by the Labor Advisory Committee on Trade Negotiations and 
Trade Policy (LAC). The LAC is the official labor advisory committee to 
the United States Trade Representative and the Labor Department. It 
includes national and local union representatives from nearly every 
sector of the U.S. economy, including manufacturing, high technology, 
services, and the public sector, together representing more than 13 
million American working men and women.
    The LAC report details our concerns over the agreements' inadequate 
and backsliding protections for workers' rights and the environment, as 
well as problems in the areas of investment rules, temporary 
immigration provisions, trade in services, government procurement, and 
intellectual property rights. The full report can be downloaded from 
the AFL-CIO website, at www.aflcio.org/mediacenter/prsptm/
pr02282003.cfm.
    I would also like to point out that, contrary to several recent 
Administration statements and testimonies, the LAC was not the only 
advisory committee to raise significant concerns about the Chile and 
Singapore FTAs. Ralph Ives testified on May 8th, that ``thirty of the 
thirty-one advisory committees reported that the U.S.-Singapore FTA 
advanced and achieved each of the relevant objectives, purposes, 
policies and priorities set out in the trade act.''
    In fact, several other Advisory Committees declined to explicitly 
endorse the Chile and Singapore agreements and made negative findings 
or no findings at all about the agreements' achievement of 
congressional negotiating objectives. The chemicals committee was 
unable to gauge whether the agreement had met negotiating objectives or 
whether it would serve U.S. economic interests because it felt it had 
not been adequately consulted regarding the agreement. The fruits and 
vegetables committee was ``greatly disappointed'' in the failure of the 
Chile FTA to resolve sanitary and phytosanitary issues that present 
market impediments and concluded that the agreement was ``far better 
for the Chilean specialty crop industry than it is for the U.S. fruit 
and vegetable industry.'' The Intergovernmental committee made no 
findings on the specific agreement, and only remarked on the 
committee's support for trade in general and its concerns about the 
impact of FTA rules on state and local regulatory authority. The 
footwear committee said many of its members were neutral on the 
Singapore FTA, and they would oppose it if Singapore were more 
significant economically. The footwear committee doubted that the Chile 
FTA would ``significantly promote U.S. economic interests.'' The 
apparel and textiles committee was split and said ``it is unlikely that 
U.S. producers will experience much economic gain'' from the Chile and 
Singapore FTAs, with the apparel sector ``largely express[ing] 
disappointment.'' The standards committee said it would not recommend 
the Singapore FTA as a model for future FTAs.
    Reports from those few industry committees that include non-
business representatives--ACTPN, the trade and environment committee, 
the paper committee and the lumber committee--included dissents from 
those non-business representatives criticizing the agreement.
Workers' Rights
    The workers' rights provisions in the Chile and Singapore FTAs are 
unacceptably weak. While they will be problematic in the context of 
Chile and Singapore, they will be disastrous if applied to future FTAs 
with countries and regions where labor laws are much weaker to begin 
with and where abuse of workers' rights has been egregiously bad.
    USTR has characterized the workers' rights provisions of the Chile 
and Singapore agreements as ``innovative.'' In fact, these provisions 
represent a giant step backward from provisions in current law. They 
are substantially weaker than those included in the Jordan FTA, which 
passed the U.S. Congress on a unanimous voice vote in 2001. Perhaps 
even more noteworthy, the Chile and Singapore workers' rights 
provisions also represent a step backward from current U.S. trade 
policy that applies to Chile (and most other developing countries)--the 
Generalized System of Preferences. GSP is a unilateral preference 
program offering trade benefits to developing countries that meet 
certain criteria, including adherence to internationally recognized 
workers' rights.
    Both the Jordan FTA and GSP require compliance with internationally 
recognized core workers' rights. A GSP beneficiary can lose all or some 
of its trade benefits if it is not at least ``taking steps'' to observe 
internationally recognized workers' rights. This includes enforcing its 
own laws in these areas, as well as ensuring that its labor laws 
provide internationally acceptable protections for core workers' 
rights.
    Under the Jordan FTA, both parties reiterate their ILO commitments 
to ``respect, promote, and realize'' the core workers' rights under the 
International Labor Organization (ILO)'s Declaration on Fundamental 
Principles and Rights at Work (these include freedom of association and 
the right to bargain collectively, and prohibitions on child labor, 
forced labor, and discrimination in employment). The Jordan FTA also 
commits both parties to effective enforcement of domestic labor laws 
and non-derogation from labor laws in order to increase trade. All of 
these provisions are fully covered by the same dispute settlement 
provisions as the commercial elements of the agreement.
    In contrast, the Chile and Singapore agreements contain only one 
enforceable provision on workers' rights, that is, an agreement to 
enforce domestic labor laws. While the labor chapter also contains a 
commitment to uphold the ILO core workers' rights and not to weaken 
labor laws, these provisions are explicitly excluded from coverage 
under the dispute settlement chapter, rendering them essentially 
useless from a practical standpoint.
    In other words, while the Chile and Singapore agreements commit the 
signatories to enforce their domestic labor laws, they don't actually 
commit the signatories to have labor laws in place, or to ensure that 
their labor laws meet any international standard or floor. Under these 
agreements, a country could ban unions, set the minimum age for 
employment at ten years old, and reinstate slave labor. The country's 
only enforceable commitment at that point would be to continue to 
enforce those new ``laws.''
    Of course, this is entirely unacceptable, both with respect to 
these agreements and as it might play out in future trade agreements, 
particularly in Central America, where labor laws are both weak and 
poorly enforced. These weak provisions will also be problematic in any 
trade agreement negotiated with the Southern African Customs Union 
(SACU) or Morocco.
    Employers in many of the Central American and Southern African 
countries covered by ongoing FTA negotiations intimidate, harass, fire 
and blacklist workers for attempting to exercise their right to join an 
independent union, especially in sectors and export processing zones 
producing goods for the U.S. market. Labor laws fall far short of ILO 
standards, and those labor laws that exist are violated frequently and 
freely, with few negative consequences for the violators. The AFL-CIO 
has petitioned for the removal of four of these countries--Costa Rica, 
El Salvador, Guatemala, and Swaziland--from GSP eligibility for their 
repeated failure to meet international labor standards. Unions in all 
four countries are supporting these petitions.
    Unlike the Jordan agreement, the Chile and Singapore agreements 
include a separate dispute resolution process for labor and 
environment, distinct from that available for the commercial provisions 
of the agreement. This new and separate dispute resolution process, in 
our view, does not meet a key objective of the Trade Promotion 
Authority legislation, to ensure that trade agreements shall ``treat 
United States principal negotiating objectives equally with respect to 
(i) the ability to resort to dispute settlement under the applicable 
agreement; (ii) the availability of equivalent dispute settlement 
procedures; and (iii) the availability of equivalent remedies.''
    Unlike the commercial dispute resolution process, the first binding 
step in resolving labor and environment disputes is a ``monetary 
assessment,'' a fine which is essentially paid back to the offending 
government, with the vague direction that it be used for ``appropriate 
labor or environmental initiatives.'' Also unlike the commercial 
dispute resolution process, the monetary fine for labor and environment 
disputes is capped at a fairly low level--$15 million. It is unlikely 
that these low fines, paid back to the offending government, will 
constitute a meaningful deterrent in the case of determined or 
egregious violations.
    It is crucial to bear in mind that these free trade agreements are 
being put in place, not with respect only to the current governments, 
but for all future governments and labor law regimes. Therefore, the 
adequacy of current labor laws in Chile or Singapore is not the only 
factor to consider in evaluating the adequacy of the workers' rights 
provisions included in these agreements. Failing to ensure that labor 
laws meet international standards is an enormous flaw in these 
agreements.
Integrated Sourcing Initiative
    The Singapore FTA includes an open-ended provision, called the 
Integrated Sourcing Initiative (ISI), that allows certain goods made 
outside of Singapore to be treated as of Singaporean origin for the 
purposes of the agreement. We believe there is no justification for the 
inclusion of this provision in this agreement, and that it alone 
constitutes sufficient reason to reject the agreement.
    None of the workers' rights or environmental provisions of the 
Singapore FTA will apply to products entering under the ISI provision, 
nor will there be any reciprocal market access for U.S. goods. The U.S. 
ambassador to Singapore told Inside U.S. Trade that the main point of 
this provision was to allow American companies to take advantage of 
low-wage production on two neighboring Indonesian islands and export 
the products to the U.S. duty free. However, nowhere in the agreement 
are these provisions actually limited to the Indonesian islands, so 
apparently goods from anywhere in the world will be eligible to enter 
the United States via Singapore under the ISI provision.
    At present the ISI provision applies only to a specified list of 
goods (detailed in Annex 3B) that enter the United States duty-free 
under the Information Technology Agreement, as well as a few other 
products, so the immediate economic impact of the provision will simply 
be to waive customs duties for these products.
    However, Article 3.2, paragraph 2, clearly states that the product 
coverage of these provisions can be expanded within 6 months after the 
Agreement enters into force, after consultation between the Parties. 
The ISI provision lists no limitations on the products that might be 
added to the product coverage list and makes no mention whatsoever of 
consultation with Congress prior to expanding product coverage.
    This provision defeats the entire purpose of negotiating a free 
trade agreement, as it extends the benefits of the agreement without 
ensuring any reciprocal market access benefits for U.S. products or 
preserving any of the negotiated conditions of the FTA itself. It 
undermines Congress's role, by allowing USTR to add trade-sensitive 
products, from anywhere in the world, to the list of goods eligible to 
enter the U.S. under the Singapore FTA. Without any workers' rights 
protections, the development benefits of such a provision are likely to 
be minimal, while the U.S. job costs could be quite significant. This 
provision has no place in the Singapore FTA and should certainly not be 
included in any future FTAs.
Temporary Entry
    The Chile and Singapore agreements contain far-reaching and 
troubling provisions on the ``temporary entry'' of professional 
workers. The Singapore and Chile FTAs create entire new visa categories 
for the temporary entry of professionals. These visa programs are in 
addition to our existing H-1B system, and will constitute a permanent 
new part of our immigration law if the agreements are implemented by 
Congress.
    These new professional visas will give U.S. employers substantial 
new freedom to employ temporary guest workers with little oversight 
from the Department of Labor and with few real guarantees for workers. 
This is to the detriment not only of the temporary workers themselves, 
but of the domestic labor market and American workers now facing a 
lagging economy and high unemployment in many sectors.
    Immigration policy is properly the domain of Congress, not of 
executive agencies negotiating trade agreements that will be subject to 
a ``fast tracked'' up or down vote. The Singapore and Chile FTAs 
require permanent changes to our immigration policies, and USTR has 
indicated that future free trade agreements will routinely include the 
same kinds of new visa categories created in these FTAs. This strategy 
is entirely unacceptable to the AFL-CIO.
    Congress may in the future wish to strengthen, improve, or 
otherwise change our immigration policies. It makes no sense to bind 
these policies in free trade agreements, which makes it essentially 
impossible (or very costly) to change them without actually exiting the 
entire agreements. For these reasons, we believe trade agreements 
should refrain from including immigration provisions (beyond those 
necessary to conduct the trade and investment which are the subject of 
the agreement), and we urge Congress to convey this view to the 
Administration.
Investment
    We are concerned that the Chile and Singapore FTAs contain many of 
the controversial investment provisions contained in NAFTA, including 
the right for individual investors to sue governments when they believe 
that domestic regulation has violated their rights under the agreement. 
This provision, known as ``investor-to-state'' dispute resolution, has 
proved very problematic under NAFTA, giving investors greatly enhanced 
powers to challenge legitimate government regulations on public health, 
the environment, or even ``Buy American'' rules. Workers and 
environmental advocates have no similar individual right of action 
under these agreements.
    The Chile and Singapore agreements also constrain the ability of 
governments to employ capital controls to protect their economies from 
the destabilizing impact of speculative capital flows and financial 
crises. Capital controls have been used quite effectively by many 
governments, including the Chilean government. Even the IMF has 
conceded that these tools can be legitimate and beneficial.
    It therefore does not make sense for the Chile and Singapore FTAs 
to constrain the use of capital controls. Decisions over whether, how, 
and for how long to use capital controls should be made by 
democratically elected domestic policymakers, not bound by trade 
agreements.
Conclusion
    In general, the experience of our unions and our members with past 
trade agreements has led us to question critically the extravagant 
claims often made on their behalf. While these agreements are 
inevitably touted as market-opening agreements that will significantly 
expand U.S. export opportunities (and therefore create export-related 
U.S. jobs), the impact has more often been to facilitate the shift of 
U.S. investment offshore. (As these agreements contain far-reaching 
protections for foreign investors, it is clear that facilitating the 
shift of investment is an integral goal of these ``trade'' agreements.) 
Much, although not all, of this investment has gone into production for 
export back to the United States, boosting U.S. imports and displacing 
rather than creating U.S. jobs.
    The net impact has been a negative swing in our trade balance with 
every single country with which we have negotiated a free trade 
agreement to date. While we understand that many other factors 
influence bilateral trade balances (including most notably growth 
trends and exchange rate movements), it is nonetheless striking that 
none of the FTAs we have signed to date has yielded an improved 
bilateral trade balance (including Israel, Canada, Mexico, and Jordan).
    The case of the North American Free Trade Agreement (NAFTA) is both 
the most prominent and the most striking. Advocates of NAFTA promised 
better access to 90 million consumers on our southern border and 
prosperity for Mexico, yielding a ``win-win'' outcome. Yet in 9 years 
of NAFTA, our combined trade deficit with Mexico and Canada has 
ballooned from $9 billion to $87 billion. The Labor Department has 
certified that more than half a million U.S. workers have lost their 
jobs due to NAFTA, while the Economic Policy Institute puts the trade-
related job losses at over 700,000. Meanwhile, in Mexico real wages are 
actually lower than before NAFTA was put in place, and the number of 
people in poverty has grown.
    We believe it is essential for Congress to question how these new 
FTAs will yield a different and better result for working families in 
the United States, Chile, and Singapore--especially as the new 
agreements appear to be modeled to a large extent on NAFTA. If the goal 
of these bilateral trade agreements is truly to open foreign markets to 
American exports (and not to reward and encourage companies that shift 
more jobs overseas), it is pretty clear the strategy is not working. 
Before Congress approves new bilateral free trade agreements based on 
an outdated model, it is imperative that we take some time to figure 
out how and why the current policy has failed. In the meantime, we urge 
you to reject the Chile and Singapore FTAs and send our negotiators 
back to the drawing board.
Addendum:
Labor Advisory Committee for Trade Negotiations and Trade Policy Report 
to the President, the Congress and the U.S. Trade Representative on the 
          U.S.-Chile and U.S.-Singapore Free Trade Agreements
                           February 28, 2003
                   I. Purpose of the Committee Report
    Section 2104(e) of the Trade Act of 2002 (TPA) requires that 
Advisory Committees provide the President, the U.S. Trade 
Representative (USTR), and Congress with reports required under section 
135(e)(1) of the Trade Act of 1974, as amended, not later than 30 days 
after the President notifies Congress of his intent to enter into an 
agreement.
    Under Section 135(e) of the Trade Act of 1974, as amended, the 
report of the Advisory Committee for Trade Policy and Negotiations and 
each appropriate policy advisory committee must include an advisory 
opinion as to whether and to what extent the agreement promotes the 
economic interests of the United States and achieves the applicable 
overall and principle negotiating objectives set forth in the Trade Act 
of 2002.
    The Committee report must also include an advisory opinion as to 
whether the agreement provides for equity and reciprocity within the 
relevant sectoral or functional area of the Committee.
    Pursuant to these requirements, the Labor Advisory Committee for 
Trade Negotiations and Trade Policy (LAC) hereby submits the following 
report.
             II. Executive Summary of the Committee Report
    This report reviews the mandate and priorities of the Labor 
Advisory Committee for Trade Negotiations and Trade Policy (LAC), and 
presents the advisory opinion of the Committee regarding the U.S.-Chile 
and U.S.-Singapore Free Trade Agreements (FTAs). It is the opinion of 
the LAC that the Singapore and Chile FTAs neither fully meet the 
negotiating objectives laid out by Congress in TPA, nor promote the 
economic interest of the United States. The agreements clearly fail to 
meet some Congressional negotiating objectives, barely comply with 
others, and include certain provisions that are not based on any 
Congressional negotiating objectives at all. These agreements repeat 
the same mistakes of the North American Free Trade Agreement (NAFTA), 
and are likely to lead to the same deteriorating trade balances, lost 
jobs, trampled rights, and inadequate economic development that NAFTA 
has created.
    The labor provisions of the Chile and Singapore FTAs will not 
protect the core rights of workers in any of the countries involved, 
and represent a big step backward from the Jordan FTA and our 
unilateral trade preference programs. The agreements' enforcement 
procedures completely exclude obligations for governments to meet 
international standards on workers' rights. The FTAs' provisions on the 
temporary entry of professionals erode basic protections for guest 
workers and the domestic labor market. Provisions on investment, 
procurement, and services constrain our ability to regulate in the 
public interest, pursue responsible procurement policies, and provide 
public services. Intellectual property rules reduce the flexibility 
available under WTO rules for governments to address public health 
crises. Rules of origin and safeguards provisions invite producers to 
circumvent the intended beneficiaries of the trade agreements and fail 
to protect workers from the import surges that may result.
 III. Brief Description of the Mandate of the Labor Advisory Committee
    The LAC charter lays out broad objectives and scope for the 
Committee's activity. It states that the mandate of the LAC is:

    L  To provide information and advice with respect to negotiating 
objectives and bargaining positions before the U.S. enters into a trade 
agreement with a foreign country or countries, with respect to the 
operation of any trade agreement once entered into, and with respect to 
other matters arising in connection with the development, 
implementation, and administration of the trade policy of the United 
States.

    The LAC is one of the most representative committees established by 
Congress to advise the Administration on U.S. trade policy. Only three 
of the 33 Trade Advisory Committees include any labor representatives, 
and the LAC is the only Advisory Committee with more than one labor 
representative as a member. The LAC includes unions from nearly every 
sector of the U.S. economy, including manufacturing, high technology, 
services, and the public sector. It includes representatives from 
unions at the local and national level, together representing more than 
13 million American working men and women.
    IV. Negotiating Objectives and Priorities of the Labor Advisory 
                               Committee
    As workers' representatives, the members of the LAC judge U.S. 
trade policy based on its real-life outcomes for working people in 
America.
    Our trade policy must be formulated to improve economic growth, 
create jobs, raise wages and benefits, and allow all workers to 
exercise their rights in the workplace. Too many trade agreements have 
had exactly the opposite effect. Since NAFTA went into effect, for 
example, our combined trade deficit with Canada and Mexico has grown 
from $9 billion to $87 billion, leading to the loss of hundreds of 
thousands of jobs in the United States. Under NAFTA, U.S. employers 
took advantage of their new mobility and the lack of protections for 
workers' rights in Mexico to shift production, hold down domestic wages 
and benefits, and successfully intimidate workers trying to organize 
unions in the U.S. with threats to move to Mexico.
    In order to create rather than destroy jobs, trade agreements must 
be designed to reduce our historic trade deficit by providing fair and 
transparent market access, preserving our ability to use domestic trade 
laws, and addressing the negative impacts of currency manipulation, 
non-tariff trade barriers, financial instability, and high debt burdens 
on our trade relationships. In order to protect workers' rights, trade 
agreements must include enforceable obligations to respect the 
International Labor Organization's core labor standards--freedom of 
association, the right to organize and bargain collectively, and 
prohibitions on child labor, forced labor, and discrimination--in their 
core text and on parity with other provisions in the agreement.
    The LAC is also concerned with the impact that U.S. trade policy 
has on other matters of interest to our members. Under NAFTA, private 
investors have challenged a variety of domestic laws in all three NAFTA 
countries protecting public services, the environment, public health 
and safety, consumers and workers. Trade policy must protect our 
government's ability to regulate in the public interest, to use 
procurement dollars to promote economic development and other 
legitimate social goals, and to provide high-quality public services. 
Finally, we believe that American workers must be able to participate 
meaningfully in the decisions our government makes on trade, based on a 
process that is open, democratic, and fair.

                                 

    Chairman CRANE. Thank you, Ms. Lee. Our final witness is 
Mr. Audley.

   STATEMENT OF JOHN AUDLEY, SENIOR ASSOCIATE AND DIRECTOR, 
 PROJECT ON TRADE, EQUITY, AND DEVELOPMENT, CARNEGIE ENDOWMENT 
                    FOR INTERNATIONAL PEACE

    Mr. AUDLEY. Thank you, Mr. Chairman, Members of the 
Subcommittee. My name is John Audley. I am with the Carnegie 
Endowment for International Peace, an independent research 
institution here in Washington, D.C. Among my other 
experiences, I was a longtime advocate in the environmental 
community, as well as a former member of the U.S. interagency 
process that developed and negotiated trade agreements. I am 
here today to convey my overall support for the environmental 
provisions of the U.S.-Singapore and U.S.-Chile FTAs and to 
caution against using these agreements' environmental 
provisions as a model for all trade agreements, especially when 
dealing with U.S. trading partners with little capacity to 
protect the environment or promote public health.
    Among other reasons, the Singapore and Chile FTAs are 
important because they are the first agreements to be 
considered by Congress under the Trade Act of 2002. With some 
important exceptions, Ambassador Zoellick's team followed TPA's 
environmental instructions to the letter, in many instances 
incorporating TPA language directly into the agreements 
themselves.
    The Chile FTA is an especially good example of two 
countries actively negotiating environment into the trade 
agreement, and we can thank Chile for a number of important 
innovations, including the special roster of panel members to 
hear trade-related environmental disputes and the creation of 
an environmental affairs council. Chile also argued for the use 
of fines instead of punitive trade measures, dedicating the 
fines to efforts that improve environmental protection. In my 
opinion, one of our best hopes for effective inclusion of 
environment in the FTAA negotiations is to encourage Chile to 
continue its efforts to work with other Latin American 
governments to develop their own agendas for environment and 
trade.
    There are a number of shortcomings. My colleagues have 
talked about problems with TRIPS and with capital controls, so 
I will set those issues aside. It is clear from the input 
offered by many U.S. Trade Representative advisors that the 
balance between the rights of investors and regulatory 
authority hasn't been found yet. Advisors to U.S. Trade 
Representative point out the lack of clarity regarding a number 
of legal phrases, and State and local governments continue to 
worry that trade disciplines will weaken their ability to 
govern. Negotiators have not yet created an appellate body as 
instructed by Congress. Instead, in both agreements the parties 
agree to review this question at a later date. By not 
establishing an opportunity for affected citizens to formally 
question the enforcement environmental laws to attract trade, 
the United States missed a great opportunity to deliver on its 
commitment to promote good governance. This outcome is 
particularly unfortunate because I understand the interagency 
process developed a position to propose to Chile, which was 
removed by the White House before we tabled it.
    Second, the Singapore and Chile FTAs relied upon a new 
approach to addressing environmental issues that runs parallel 
to the trade negotiations. Under the authority of the 
Department of State, the United States now negotiates memoranda 
of intention or understanding that create opportunities for 
governments and their citizens to discuss environmental issues 
of common interest. While the Singapore Memorandum of Intent 
has not yet been made public, to my knowledge, the U.S.-Chile 
side of the accord references important subjects like 
developing a pollutant release and transfer register, reducing 
mining pollution and improving agricultural practices. Congress 
should follow these parallel negotiations more closely and 
ensure that initiatives agreed to by the parties are properly 
funded. This parallel approach also creates a new opportunity 
to demystify trade negotiations by making those portions more 
transparent and available to the public.
    Third, U.S. trade negotiations have made providing 
technical assistance and capacity-building to our trading 
partner a very high priority. While recent decisions to promote 
trade-related technical assistance by the United States 
represent important steps forward in this regard, U.S. 
officials must work hard to coordinate this trade-led technical 
assistance and capacity-building efforts with technical 
assistance already under way. It is especially important to 
ensure that all technical assistance capacity-building efforts 
not be captured solely by the interests of promoting trade. 
Congress could use the environmental review of trade agreement 
process to stay more fully informed of both the parallel 
negotiations and technical assistance needs, and it could 
expand the Congressional oversight to ensure the committees 
with jurisdiction over these matters are properly represented.
    Finally, the Chile and Singapore FTA should not be used as 
a model for other negotiations particularly when governments 
lack the capacity to protect their own environment without 
proper incentives that require governments not to fail to 
effectively enforce or ensure that its laws provide for high 
levels of environmental protection. These are empty promises. 
Nowhere, as we have discussed today, is this more important 
than our negotiations with Central America. Thank you.
    [The prepared statement of Mr. Audley follows:]
  Statement of John Audley, Senior Associate and Director, Project on 
 Trade, Equity, and Development, Carnegie Endowment for International 
                                 Peace
    My name is John Audley, and I am a Senior Associate and Trade, 
Equity, and Development Project Director at the Carnegie Endowment for 
International Peace. Founded in 1910 by Andrew Carnegie, the Endowment 
is a private, nonpartisan, nonprofit organization dedicated to 
advancing cooperation between nations and promoting active 
international engagement by the United States. The Trade, Equity, and 
Development Project seeks innovative, workable solutions to the 
tensions between trade liberalization, and environment, development, 
and labor policies.
    In signing the U.S.-Singapore and the U.S.-Chile Free Trade 
Agreements, President Bush presents Congress with the first trade 
agreements subject to review under the terms of U.S. Trade Promotion 
Authority (TPA).\1\ For the first time in U.S. trade history, Congress 
will judge trade agreements in which the environment was a principal 
subject of negotiation.\2\ The way in which Congress evaluates these 
agreements and enacts implementation legislation using TPA's 
environment provisions will establish a standard for future trade 
agreements. I focus my remarks on this opportunity.
---------------------------------------------------------------------------
    \1\ The draft Consolidated Texts of the U.S.-Singapore Free Trade 
Agreement is available online at: .
    \2\ On August 6, 2002, President George W. Bush received the 
benefits of TPA when he signed into law the Trade Act of 2002, Public 
Law 107-210; the full text is available through GPO Access at: . For a comprehensive discussion of 
TPA's environmental provisions, see John Audley, ``Environment's New 
Role in U.S. Trade Policy,'' Trade, Equity, and Development Series, no. 
3 (Washington, DC: Carnegie Endowment for International Peace, Sept. 
2002). Available at: .
---------------------------------------------------------------------------
    Due to time and travel constraints, my written testimony focuses 
only on the environmental provisions of the U.S.-Singapore agreement. 
In my oral testimony, I will speak to issues common to both agreements. 
If the Committee would like a similar written analysis of Chile, I will 
submit it shortly.
Background
    Although TPA had not yet been passed when formal negotiations of 
the U.S.-Singapore FTA began in November 2000, U.S. President Bill 
Clinton and Singaporean Prime Minister Goh Chok Tong agreed to include 
labor and environment as part of the negotiating agenda. Taking this 
step was politically dangerous for both leaders. As a leader among 
developing nations, Singapore's decision to include labor and 
environment in the negotiations represented a break from developing 
countries' steadfast opposition to the trade and environment linkage. 
Similarly, President Clinton included environment over the opposition 
of leading Republican Congressional leaders as well as some members of 
the business community. His decision to do so was later upheld by U.S 
President George W. Bush, when U.S. Trade Representative Robert 
Zoellick resumed negotiations in May 2001 without changing the 
agenda.\3\ Yet opposition to environment in trade negotiations still 
compelled the Office of the U.S. Trade Representative (USTR) to 
postpone offering any language on the environment until after TPA 
provided Congressional guidance--nearly 2 years after negotiations 
began.
---------------------------------------------------------------------------
    \3\ When the Clinton Administration initiated talks with Singapore, 
both sides agreed to use the U.S.-Jordan FTA as a model, which allows 
for trade sanctions against one of the signatories if it persistently 
violates its own labor or environmental laws. After President Bush took 
office, Singapore signaled its willingness to take the new 
Administration's lead on trade-related environment and labor issues. 
Throughout bilateral negotiations, however, Singapore remained opposed 
to the inclusion of environment and labor in the multilateral arena. 
See Inside U.S. Trade, March 16, p. 11.
---------------------------------------------------------------------------
    Bilateral negotiations on the U.S.-Singapore FTA were concluded in 
December 2002. On February 27, 2003, the Trade and Environment Policy 
Advisory Committee (TEPAC), a ``tier two'' private Advisory Committee 
to the USTR, submitted its report on the FTA to the President and 
Congress. A majority of TEPAC members concluded that the FTA meets 
Congress's negotiating objectives as they relate to the environment. 
However, a sizeable TEPAC minority disagreed with that conclusion, 
focusing most of its criticism on the TPA's investment chapter and 
dispute settlement procedures.\4\ The Intergovernmental Policy Advisory 
Committee (IGPAC), which represents the views of State and local 
governments, echoed similar concerns regarding the investment 
language.\5\ The differences of opinion among Advisory Committee 
members are well documented in the TEPAC and IGPAC reports and will not 
be reproduced here.
---------------------------------------------------------------------------
    \4\ ``The U.S.-Singapore Free Trade Agreement,'' Report of the 
Trade and Environment Policy Advisory Committee (TEPAC), Feb. 27, 2003. 
Available: .
    \5\ ``The U.S.-Singapore Free Trade Agreement,'' Report of the 
Intergovernmental Policy Advisory Committee (IGPAC), Feb. 28, 2003. 
Available: .
---------------------------------------------------------------------------
    If TPA instructions regarding the environment are to have the 
impact on U.S. trade policy envisioned by its Congressional supporters, 
then it is important to evaluate the U.S.-Singapore FTA's adherence to 
these directives, especially as this is the first trade agreement to be 
considered by Congress under the new TPA rules. For example, the level 
of disagreement regarding investment rules expressed by TEPAC and IGPAC 
members should signal Congress to remain diligent in this area of trade 
policy. The FTA also raises a number of environmental issues, many of 
which the TEPAC report did not cover in any detail.\6\ This brief 
examines these issues more fully.
---------------------------------------------------------------------------
    \6\ Advisory Committee rules only allow 30 days for cleared 
advisors to review an FTA. President Bush appointed his TEPAC members 
just prior to submitting the agreement to his Advisory Committees. That 
meant that 17 of the 29 advisors had not attended the regular meetings 
with USTR held during the negotiations and could not rely on 
information obtained during those meetings for their review. In their 
report, TEPAC members complained that the limited time for review, 
combined with the document's confidential status, made it difficult for 
them to render a full opinion on time.
---------------------------------------------------------------------------
Upholding Domestic Environmental Protection Policy
    TPA Section 2102(a)(7) states that negotiators will ``ensure that 
domestic environmental protection policies are not weakened or reduced 
to encourage trade,'' which raises two important issues: rules of 
origin and ambiguous language.
Rules of Origin
    In a related Trade, Equity, and Development Issue Brief, Sandra 
Polaski identifies a serious loophole in the FTA's rules of origin's 
chapter that, if left as negotiated, enables Singapore to export 
products made in the Indonesian islands of Bintan and Batam into U.S. 
markets without adherence to the FTA's instructions regarding 
environmental protections, labor laws, and other provisions of the 
trade agreement requiring effective law enforcement.\7\ No other U.S. 
trade agreement provides similar preferential market access to a 
nonsignatory.
---------------------------------------------------------------------------
    \7\ See Sandra Polaski, ``Serious Flaw in U.S.-Singapore Trade 
Agreement Must Be Addressed,'' Issue Brief (Washington, DC: Carnegie 
Endowment for International Peace, April 2003). Available at: . The specific focus of Polaski's paper concentrates 
on the ``Integrated Sourcing Initiative'' established in the U.S.-
Singapore FTA, Chapter 3: Rules of Origin, Article 3.2: Treatment of 
Certain Products, and Annex II.
---------------------------------------------------------------------------
    While perhaps logical on trade grounds, including two Indonesian 
islands as beneficiaries of the trade agreement creates two problems in 
terms of the environment. First, the government of Indonesia is not a 
party to the FTA and is not bound by its environmental obligations.\8\ 
Second, trade-related environmental problems arising from production 
practices on the islands would most likely involve process and 
production methods (PPMs)--one of the most contentious trade and 
environment issues.
---------------------------------------------------------------------------
    \8\ Taken together, Articles 18.1, 2, and 4(1) state that a party 
to the agreement has the right to establish its own levels of domestic 
environmental protection, that it will enforce its own laws so as not 
to create trade or investment advantages, and that it will ensure that 
its laws provide for high levels of environmental protection. These 
commitments do not extend to the government of Indonesia.
---------------------------------------------------------------------------
    In theory, the FTA's Joint Committee, established in Chapter 20, 
was designed to consider implementation issues such as these. Moreover, 
at its first meeting the Joint Committee will be tasked with 
considering each party's environmental review of the FTA and then 
providing the public an opportunity to offer views on the agreement's 
environmental effects.\9\ Under the terms of the environment chapter's 
public participation provisions, it is also possible for both U.S. and 
Singaporean citizens to voice, on an ongoing basis, their concerns over 
possible environmental harm caused by manufacturing or other export-
related economic activity.\10\ However, while the Joint Committee may 
invite Indonesia to join them in a discussion or even engage Indonesia 
in consultations regarding the text, it ultimately has no authority 
over Indonesia. Furthermore, public petitions regarding production 
practices likely would not result in PPM-based trade restrictions, 
given the historically controversial nature of such measures.\11\ In 
fact, neither the United States nor Singapore is likely to use General 
Agreement on Tariffs and Trade (GATT) Article XX to restrict product 
trade on environmental grounds, even though it is referenced in Article 
21.1(1).\12\
---------------------------------------------------------------------------
    \9\ U.S.-Singapore FTA Articles 20.1(3), 18.1, and 18.2(1).
    \10\ U.S.-Singapore FTA Article 18.5 requires each party to develop 
and maintain procedures for dialog with its respective public 
concerning the environment provisions of the agreement.
    \11\ Articulating a common fear, Magda Shahin argues that 
legitimizing ``unincorporated PPMs'' would ``upset the entire 
multilateral trading system and would have devastating effects, in 
particular on developing country exports.'' See Magda Shahin, ``Trade 
and Environment: How Real Is the Debate,'' in Gary P. Sampson and W. 
Bradnee Chambers, eds., Trade, Environment and the Millennium, 2nd 
edition (New York: United Nations University Press, 2002), p. 66.
    \12\ Subject to the terms of the agreement, GATT Articles XX(b) and 
XX(g) allow countries to restrict trade to protect human, animal, or 
plant life or health, or when related to the conservation of 
exhaustible natural resources.
---------------------------------------------------------------------------
    Agreeing to allow a third party to enjoy the benefits of an FTA 
without accepting its obligations is a troublesome precedent. 
Theoretically speaking, this preferential market access could be 
awarded to any manufacturing facility in the world owned or operated by 
Singapore-based companies.\13\ If the labor and environment chapters 
are to have meaning, their obligations must extend to all the 
beneficiaries of any FTA.
---------------------------------------------------------------------------
    \13\ Article 3.2(2) indicates that the parties will regularly 
review the products listed under Annex II to consider the addition of 
goods. Singaporean Trade Minister George Yeo said that the agreement 
could be extended to other countries as well as to other sectors; see 
``Yeo Lays Out FTA Rules of Origin,'' Inside U.S. Trade, March 22, 
2002.
---------------------------------------------------------------------------
Ambiguous Language
    Article 18.10 defines the terms statutes or regulations as ``an act 
of the U.S. Congress or regulations promulgated pursuant to an act of 
the U.S. Congress that is enforceable, in the first instance, by action 
of the Federal Government (emphasis added),'' a definition borrowed 
from the U.S.-Jordan FTA.\14\ This definition was not repeated in the 
U.S.-Chile Free Trade Agreement.\15\
---------------------------------------------------------------------------
    \14\ U.S.-Jordan Free Trade Agreement, Article 18.2(b). Available 
at: .
    \15\ The U.S.-Chile Free Trade Agreement defines the term as ``an 
act of Congress or regulation promulgated pursuant to an act of 
Congress that is enforceable by action of the Federal Government'' 
(Chapter 19, definitions). The complete draft FTA is available at: 
.
---------------------------------------------------------------------------
    Although the meaning of the phrase in the first instance was not 
defined by the negotiators, based on conversations with U.S. legal 
scholars it seems to refer to tensions among Federal, State, and local 
governments over whether or not a Federal Government can insist that a 
subnational authority enforce its own laws.\16\ Tensions between trade 
disciplines and State and local regulatory authority have been debated 
in the United States for a number of years; clarifying the relationship 
between disciplines and subfederal authority in an FTA is one way to 
set the record straight regarding the effect that international trade 
rules exert on subnational regulatory authority.\17\
---------------------------------------------------------------------------
    \16\ The Tenth Amendment to the U.S. Constitution reserves the 
powers not delegated to the United States by the Constitution, nor 
prohibited by it to the States, to the States respectively, or to the 
people.
    \17\ See Mark C. Gordon, Democracy's New Challenge: Globalization, 
Governance, and the Future of American Federalism (New York: Demos, 
2001).
---------------------------------------------------------------------------
Creating a Positive Agenda for Trade and Environment
    TPA Article 2101(b)(11)(D) instructs negotiators to pursue 
``strengthening the capacity of U.S. trading partners to protect the 
environment.'' FTA Article 18.6(1) indicates that the parties ``shall, 
as appropriate, pursue cooperative environmental activities, including 
those pertinent to trade and investment and to strengthening 
environmental performance, such as information reporting, enforcement 
capacity, and environmental management systems, under a Memorandum of 
Intent on Cooperation in Environmental Matters to be entered into 
between the government of Singapore and the United States and in other 
fora.''
    In March 2003, U.S. and Singaporean negotiators began working on 
the parallel agreement to address the environment.\18\ While 
negotiations remain secret, Singapore-U.S. trade and environment 
interests are--in contrast to U.S. negotiations with Central or North 
America--likely to reflect more global interests, and Singapore's 
desire to expand its technological capacities to promote green 
production. Despite the secrecy surrounding negotiations, it is 
possible to surmise the probable subjects of negotiation from a number 
of documents, including the draft U.S. and Singapore environmental 
reviews of the proposed FTA.\19\ Such issues might include:
---------------------------------------------------------------------------
    \18\ Executive Order No. 13277, Delegation of Certain Authorities 
and Assignment of Certain Functions Under the Trade Act of 2002, and 
Department of State Delegation of Authority 250, Further Assignment of 
Functions Under the Trade Act of 2002 (Federal Register/Vol. 67, No. 
243, December 18, 2002). In accordance with this order, the President 
assigned the joint authority to establishing consultative mechanisms to 
the Department of State, the Department of Labor, and the USTR. The 
Department of State's Office of Environmental Policy (OEI) works 
jointly with USTR's Office of Environment and Natural Resources on 
environmental matters.
    \19\ Documents consulted include the draft environmental reviews 
prepared by both parties, and U.S. public submissions regarding the 
U.S. environmental review. See United States Trade Representative, 
``Draft Environmental Review of the U.S.-Singapore Free Trade 
Agreement'' (Washington, DC: USTR, 2002). Available at: .

     LTrade in endangered species
     LInvasive species
     LOrnamental fish/coral reef protection
     LBuilding Singapore's capacity to act as a regional 
``green'' technology hub.

    Addressing environmental issues arising from trade negotiations 
through parallel policy instruments has become an important part of the 
U.S. trade policy tapestry, dating back to the parallel agreements in 
the North American Free Trade Agreement (NAFTA) on U.S.-Mexico border 
infrastructure and North American environmental cooperation.\20\
---------------------------------------------------------------------------
    \20\ See NAFTA's Commission for Environmental Cooperation, Border 
Environmental Cooperation Commission, and North American Development 
Bank at: .
---------------------------------------------------------------------------
    However, there are two main problems with the negotiation approach 
on environmental cooperation being employed in the U.S.-Singapore FTA. 
First, as yet there is no discussion of the resources required to 
realize any of the collaborative commitments reached. Congress has not 
been fully informed of the content of negotiations, and there is no 
evidence that U.S. Federal agencies with jurisdiction over relevant 
policy areas are amending their own budgets to support this agenda. 
Furthermore, with the exception of the U.S.-Asia Environmental 
Partnership, there are no reliable existing funding sources to support 
collaborative trade and environment work.\21\ In its report, TEPAC 
members expressed concern over funding: ``. . . the Group has concerns 
about the future of capacity building projects and the achievement of 
the Congressional mandate in this area.'' \22\ Second, negotiations 
over such subjects do not require secrecy; there are no trade secrets 
under negotiation. The failure of both parties to include the 
interested public jeopardizes public support for the final negotiated 
agenda, perhaps even robbing the countries of important technical and 
financial support from nongovernmental organizations and the private 
sector.
---------------------------------------------------------------------------
    \21\ The U.S.-Asia Environmental Partnership (AEP) was founded in 
1994 and has projects in India, Indonesia, the Philippines, Sri Lanka, 
Thailand, and Vietnam. Singapore does not receive direct support but 
instead acts as a center for work training for the U.S.-AEP countries. 
See: .
    \22\ TEPAC Report, page 2.
---------------------------------------------------------------------------
Trade and Multilateral Environmental Agreements
    TPA Section 2102(c)(10) outlines an important goal for U.S. trade 
policy: ``Promote consideration of multilateral environmental 
agreements (MEAs), in negotiations on the relationship between MEAs and 
trade rules, especially as they relate to GATT Article XX exceptions 
for the protection of human health and natural resource conservation.'' 
FTA Article 18.8 references the World Trade Organization (WTO) 
negotiations on the relationship between WTO rules and specific trade 
obligations set out in MEAs, instructing the parties to ``consult on 
the extent to which the outcome of those negotiations applies to this 
Agreement.'' In Article 21.1(1), the United States and Singapore 
reinforce the legitimacy of GATT Articles XX(b) and XX(g) to protect 
human, animal, or plant life or health. Recognizing the role played by 
GATT Article XX in conservation efforts is important, especially given 
Singapore's longstanding reluctance to accept this interpretation. 
However, the weak reference to ongoing WTO consultations and GATT 
Article XX fails to ensure that both parties will use this opportunity 
to provide better guidance regarding the relationship between WTO rules 
and the use of trade measures in MEAs.
    Bilateral negotiations can create unique opportunities to forge 
allies at the WTO on subjects of particular importance to the United 
States. For example, the U.S.-Jordan FTA was used to strengthen the 
U.S. efforts to make WTO dispute proceedings more transparent.\23\ The 
United States could use these current negotiations to accomplish a 
similar objective with regard to the MEA/WTO relationship by signing a 
Memorandum of Understanding with Singapore stating that WTO rules and 
MEA obligations are not in conflict.\24\
---------------------------------------------------------------------------
    \23\ In the ``Memorandum of Understanding on Transparency in 
Dispute Settlement Under the Agreement Between the United States and 
Jordan on the Establishment of a Free Trade Area,'' the United States 
and Jordan agree to adhere to the same dispute settlement transparency 
goals outlined in TPA in any dispute to which they are a party. 
Available at: .
    \24\ The U.S. Declaration of Principles on Trade and the 
Environment outlines the overall U.S. position on trade and environment 
policy. Regarding the MEA/WTO relationship, it states, ``Trade measures 
in MEAs are broadly accommodated by the WTO.'' Available at: , p. 7.
---------------------------------------------------------------------------
``Court of Appeals'' in Investor-to-State Disputes
    TPA Section 2102(b)(3)(G)(iv) instructs negotiators to ``[seek] to 
improve mechanisms used to resolve disputes between an investor and a 
government through . . . [the] establishment of a single appellate body 
to review decisions in investor-to-government disputes and thereby 
provide coherence to the interpretations of investment provisions in 
trade agreements.''
    In a side letter signed by both parties, the United States and 
Singapore agree that ``within 3 years after the date of entry into 
force of this Agreement, the parties shall consider whether to 
establish a bilateral appellate body or similar mechanism to review 
awards rendered under Article 15.25 in arbitrations commenced after 
they establish the appellate body or similar mechanism.'' \25\
---------------------------------------------------------------------------
    \25\ The joint letter is attached to the end of the U.S.-Singapore 
FTA investment chapter.
---------------------------------------------------------------------------
    TPA instructions stipulate that the United States should encourage 
the establishment of a single appellate body for investor-to-state 
disputes.\26\ That said, because investor-to-state disputes are not 
part of WTO rules, the WTO would not be the appropriate place to 
establish this body. If the United States decides not to make changes 
in dispute settlement procedures in each of its bilateral and 
multilateral negotiations, then it should make a concentrated effort to 
make changes in the arbitration rules followed by the UN Commission on 
International Trade Law (UNCITRAL) and the Convention on the Settlement 
of Investment Disputes between States and Nationals of other States 
(ICSID)--the two bodies most often used to settle disputes. Without 
changing the arrangement at ICSID and UNCITRAL, agreeing to consider 
whether or not to establish an appellate body falls short of TPA 
instructions to establish an appellate body to provide coherence to the 
interpretations of trade disputes.
---------------------------------------------------------------------------
    \26\ TPA section 2102(b)(3)(G)(iv) instructs the USTR to 
``[establish] a single body to review decisions in investor-to-
government disputes.''
---------------------------------------------------------------------------
Trade-Related Intellectual Property Rights and Public Health
    TPA Section 2102(b)(4)(C) instructs negotiators to ``respect the 
Declaration on the TRIPS [trade-related aspects of intellectual 
property rights] Agreement on Public Health, adopted by the World Trade 
Organization at the Fourth Ministerial Conference at Doha, Qatar on 
November 14th, 2001.'' In its Advisory Report to the President, the 
Industry Functional Advisory Committee (IFAC) praised the intellectual 
property rights chapter because it clarifies and improves on the 
standards for patent protection contained in the WTO Agreement on 
TRIPS.\27\ Some industry representatives may view this as an important 
victory, but limiting a country's ability to issue compulsory licenses 
that would enable them to manufacture life-saving medicines for use in 
poor countries is inconsistent with the spirit of the WTO TRIPS 
declaration. In December 2002, the United States was the lone defector 
from an otherwise unanimous decision among WTO members regarding new 
rules that would allow countries to source the manufacture of generic 
copies of patented drugs abroad.\28\
---------------------------------------------------------------------------
    \27\ Document available at: .
    \28\ ``U.S. Sticks to Hard Line on TRIPS, as Supachai Tries to 
Broker Deal,'' Inside U.S. Trade, Vol. 20, No. 51, December 20, 2002.
---------------------------------------------------------------------------
Next Steps for Congress
    Most experts expect that the U.S.-Singapore FTA will meet with 
little opposition in Congress. Singapore is the eleventh largest U.S. 
export market worldwide. According to the U.S.-Association of South 
East Asian Nations (ASEAN) Business Council, two-way trade between the 
United States and Singapore last year totaled $33 billion, and 
Singapore enjoys $27 billion in U.S. direct investment, with more than 
1,300 American companies with some presence in Singapore.\29\ At the 
launch of the U.S.-Singapore FTA Congressional Caucus, Co-Chairman U.S. 
Representative Solomon Ortiz (D-TX) stressed the important role 
Singapore plays in U.S. counterterrorism efforts. And negotiating an 
FTA with Singapore marks an important improvement in U.S. trade 
negotiations in the region, since efforts to stimulate trade under the 
Asia Pacific Economic Cooperation framework have not proved concrete. 
With advisory reports that side with the Administration's final product 
but also with important TPA instructions still clearly not addressed, 
what should Congress consider as it deliberates the agreement?
---------------------------------------------------------------------------
    \29\ ``U.S. Business Says Capitol Hill Singapore Caucus Is a Good 
Idea,'' U.S.-ASEAN Business Council Press Release, Oct. 7, 2002. 
Available at: .
---------------------------------------------------------------------------
    First, Congress can address some of these issues in the 
implementation legislation and statement of administrative action. Once 
the agreement is submitted, the White House will work with the House 
Ways and Means Committee and the Congressional Oversight Group to craft 
these two documents that make the terms of the U.S.-Singapore FTA part 
of U.S. law and set out the U.S. interpretation of the agreement. In 
particular, Congress could clarify the ambiguities surrounding the 
relationship between Federal action and enforcement of State and local 
laws. It could also underscore the U.S. position regarding the 
compatibility of MEA and WTO rules and the U.S. desire to ensure that 
poor citizens worldwide have access to life-saving drugs.
    But while this approach helps clarify the U.S. understanding of the 
FTA, it has no legal impact on the government of Singapore. Therefore, 
the second thing that Congress should do is to advise the 
Administration to fix the rules of origin loophole in collaboration 
with Singapore.
    Third, Congress should fund the positive environment agenda 
outlined in the environment cooperation agreement. If the implementing 
legislation requires action by the Appropriations Committees, then 
Congress could stipulate funding at that time. Another approach would 
be to instruct the Department of State, Department of Interior, 
Environmental Protection Agency, and U.S. Agency for International 
Development to fund and staff these projects.
    Fourth, as mentioned earlier, Congress should instruct the USTR and 
the Department of State to lead an effort to negotiate changes to ISCID 
and UNCITRAL arbitration rules. It is wise to avoid creating a series 
of appellate bodies; therefore, the United States should correct the 
errors with regard to public participation in dispute settlements and 
the use of an appellate procedure to ensure legally sound outcomes.
    Fifth, during hearings to review the agreement, Congress should be 
prepared to ask the Administration to explain why it did not adhere 
more closely to some of TPA's environment instructions. Perhaps U.S. 
negotiators tried to convince Singapore to take a stronger position 
with regard to MEAs and WTO rules, or perhaps they tried to negotiate a 
stronger reference to GATT Article XX. The Administration's responses 
to questions such as these should be a matter of public record, and 
Congressional Members should use these responses to judge the overall 
merits of the agreement itself.
    More generally, Congress should reconsider the degree to which it 
allows the USTR to negotiate trade agreements in relative secrecy. 
Inconsistencies between TPA guidelines and the provisions found in a 
trade agreement can often be traced back to the secretive nature of 
these negotiations; for example, had State and local governments been 
better involved in negotiations, perhaps the ambiguities with regard to 
the definition of an environmental regulation would have been caught 
and corrected before the agreement was concluded. In addition, Congress 
should take a close look at the membership of the advisory bodies used 
by the USTR and other Federal agencies to ensure that all relevant 
views are represented on the Committees. Finally, Congress could 
improve oversight of environment and trade policies by expanding the 
Membership of the Congressional Oversight Group to include 
representatives from Committees with jurisdiction over national and 
international environmental policy.

                                 

    Chairman CRANE. Thank you, Mr. Audley. I have a question 
for you, Mr. Papovich, since in your former life you were 
Assistant U.S. Trade Representative, and you were responsible 
in the intellectual property arena--you were the chief 
negotiator, as I understand it, of intellectual property rights 
with Chile and Singapore; is that correct?
    Mr. PAPOVICH. No, actually it is not correct. I did 
supervise the people who were the chief negotiators----
    Chairman CRANE. Okay.
    Mr. PAPOVICH. To be precise.
    Chairman CRANE. Well, on protection of intellectual 
property, Singapore has been reluctant to take on much 
responsibility, relying instead on businesses to police 
themselves. How do you expect this to change with the Singapore 
FTA? Are you optimistic that Singapore authorities will use the 
many new tools to fight against piracy?
    Mr. PAPOVICH. Actually, I am. It is my understanding that--
unless I am not remembering this correctly--that Singapore 
agreed to change that provision as part of the FTAs. Whether my 
memory is accurate on that score or not, the provisions of the 
agreement require them to take on new obligations that will 
enable American right holders to get criminal prosecutions of 
those who violate the rights of our members.
    Chairman CRANE. Very good. Mr. Levin.
    Mr. LEVIN. Thank you very much. Thanks to each and every 
one of you for your testimony. I regret that we all can't be 
here, but I hope all the officers, not only on the 
Subcommittee, but elsewhere, will read the testimony of each 
and every one of you. We have touched on some of the subjects 
earlier today--the ISI subject--and we will look forward to 
receiving more information from the U.S. Trade Representative. 
As I believe was made clear, there is a shortage of information 
and understanding about what this all could mean, and we look 
forward to receiving that.
    As to core labor standards, I had to leave for a memorial 
service for a few minutes. I understand Mr. Becerra asked the 
previous panel about that as we followed up on this discussion, 
and I hope that everybody will take this discussion seriously. 
There has been less discussion about the intellectual property 
rights standards, and I do think it is important, Mr. Kripke, 
that you help us understand what is in them.
    Also, in your testimony on page 5, you say using the 
Singapore and Chile FTAs as a template for future trade 
agreements--this relates to intellectual property rights--is 
dangerous and inappropriate, and I think it is important that 
you spell that out. Mr. Papovich, there was some discussion, 
and it went on earlier, about fines versus sanctions. I am not 
sure it has been widely noted that the provisions in Singapore 
and Chile, as I understand them, allowed a country to pay a 
fine, 50 percent of the trade impact. This is across the board, 
as I understand it, with a special limitation in the case of 
environmental and labor violations. So, tell me, in terms of a 
template, are we about to embark, for example, as to 
intellectual property, on a standard that allows a country that 
violates its obligations to pay a fine of 50 percent of the 
impact on trade? I guess you supervised it. Is that where we 
are going? Is that defensible?
    Mr. PAPOVICH. You are requiring me to search back into my 
memory a little bit here. First, the agreement requires that 
countries have under their laws, penalties adequate to deter 
further piracy, and that has nothing to do with your reference 
to 50-percent fines. If a country, as you said, fails to comply 
with any of the provisions of the agreement, then the question 
is what sanctions should there be. In an FTA, the only sanction 
under normal instances, this would certainly be the case with 
NAFTA, is that the other country would be free to reimpose 
tariffs equal to the damage that has been done, but only up to 
the MFN rate, the rate that would prevail in the absence of the 
FTA. So, my ability to take you much further with this is now 
coming to an end, but it seems to me that the existing sanction 
is already somewhat modest, and so a fine equal to half the 
damage, if that is the right amount, might be comparable. Yet--
--
    Mr. LEVIN. It may not be.
    Mr. PAPOVICH. It might not be. That is right. It might not 
be. It seems to me there is an option.
    Mr. LEVIN. So, wrestling with core labor and environmental 
standards in the resistance to the use of sanctions at the end 
of the game, at the end of the process--it was never suggested 
to be at the beginning--has this led the U.S. Trade 
Representative to accept a standard across the board that is 
less than necessary to enforce our trade agreements?
    Mr. PAPOVICH. I don't know the answer to the question. I 
don't have an answer to give you on that.
    Chairman CRANE. Well, as you folks know, the bells have 
gone off, and we have recorded votes coming up on the floor. I 
want to express appreciation to you also for your testimony 
today, and if there are Members here who have further 
questions, you can submit them in writing.
    Mr. BECERRA. Mr. Chairman, the first bell only rang, so 
that means we still have more than 10 minutes. Is it possible 
to just try to get in about 2 minutes' worth of questioning, 
and I will be very brief?
    Chairman CRANE. Well, Mr. English is first.
    Mr. BECERRA. I will yield. I would hate to lose my 
opportunity--I did sit through most of the hearing. I would 
love to ask the panelists--and I understand we have to catch 
our votes.
    Chairman CRANE. Okay. As soon as the bells go off, though, 
we are going to adjourn. So, Mr. English.
    Mr. ENGLISH. Thank you, Mr. Chairman. Much of the criticism 
I have heard from this panel with these two agreements has to 
do with these agreements as templates. Yet individual trade 
agreements are crafted specifically to the countries with which 
we are engaged. Obviously, I would like to explore this 
further, but I am going to have to pass--but I would like to 
follow up with you individually. Thank you for your testimony.
    Mr. BECERRA. Mr. Chairman, I will ask just one question, if 
that is possible.
    Chairman CRANE. Go ahead.
    Mr. BECERRA. Thank you, Mr. Chairman. I appreciate the 
indulgence. I asked the question with the previous panel, and 
if you could just chime in with a yes, if you can do so. Do any 
of you oppose the right of employees to associate? Do any of 
you oppose the right of employees to collectively bargain? Do 
any of you oppose the right--or excuse me, do any of you oppose 
a prohibition against child labor? Do any of you oppose a 
prohibition against discrimination? Do any of you oppose a 
prohibition against forced labor?
    Okay. I take it by your silence that no, none of you oppose 
it, and I appreciate that. I also want to, Mr. Chairman, just 
acknowledge that both Ambassador Bianchi and Ambassador Chan 
have been very gracious sitting through this entire hearing, 
and I want to thank them for all of their efforts because they 
have been very diligent in talking to all of us about the 
importance for their country of these FTAs. I want to thank 
them for all the work that they have done on behalf of this 
trade agreement. Thank you.
    Chairman CRANE. Yes, indeed. Thank you all. I want to thank 
all of the witnesses, and we are sorry for this interruption.
    [Whereupon, at 4:00 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

                              American Association of Law Libraries
                                               Washington, DC 20001
                                                      June 19, 2003

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

Dear Chairman Crane and Ranking Member Levin,

    On behalf of the American Association of Law Libraries, the 
American Library Association, the Association of Research Libraries, 
the Medical Library Association, the Special Libraries Association and 
the Digital Future Coalition, we appreciate the opportunity to comment 
on the U.S.-Chile and U.S.-Singapore Free Trade Agreements (hereafter 
the FTAs), which soon will be considered by Congress under provisions 
of the fast track trade negotiation authority revived last year by 
passage of the Bipartisan Trade Promotion Authority Act. We ask that 
you please include these comments in the official record of the 
Subcommittee's hearing of June 10, 2003.
    The American Association of Law Libraries (AALL) is a nonprofit 
educational organization with over 5,000 members nationwide who respond 
to the legal information needs of legislators, judges, and other public 
officials, corporations and small businesses, law professors and 
students, attorneys, and members of the general public. AALL's mission 
is to promote and enhance the value of law libraries, to foster law 
librarianship and to provide leadership and advocacy in the field of 
legal information and information policy. The American Library 
Association (ALA) is a nonprofit educational organization of over 
65,000 librarians, library educators, information specialists, library 
trustees, and friends of libraries representing public, school, 
academic, State, and specialized libraries. ALA is dedicated to the 
improvement of library and information services, to the public's right 
to a free and open information society--intellectual participation--and 
to the idea of intellectual freedom. The Association of Research 
Libraries (ARL) is a not-for-profit organization representing 124 
research libraries in the United States and Canada. Its mission is to 
identify and influence forces affecting the future of research 
libraries in the process of scholarly communication. ARL programs and 
services promote equitable access to, and effective use of, recorded 
knowledge in support of teaching, research, scholarship, and community 
service. The Medical Library Association (MLA) is a nonprofit, 
educational organization of more than 900 institutions and 3,800 
individual members in the health sciences information field, committed 
to educating health information professionals, supporting health 
information research, promoting access to the world's health sciences 
information, and working to ensure that the best health information is 
available to all. The Special Libraries Association (SLA) is an 
international professional association serving more than 13,000 members 
of the information profession, including special librarians, 
information managers, brokers, and consultants. The Digital Future 
Coalition (DFC) is a unique collaboration of many of the Nation's 
leading non-profit educational, scholarly, library, and consumer 
groups, together with major commercial trade associations representing 
leaders in the consumer electronics, telecommunications, computer, and 
network access industries. Since its inception in 1995, the DFC has 
played a major role in the ongoing debate regarding the appropriate 
application of intellectual property law to the emerging digital 
network environment.
    Our organizations have worked closely with other educational, 
research, and consumer-oriented groups to oppose copyright policies 
that threaten to unduly limit access to information or to upset the 
traditional balance that has existed in copyright law between the 
rights of the content community and the rights of consumers, libraries, 
and the educational community. We believe that such a balance is 
essential to the free flow of information. With that in mind, we want 
to bring to your attention several aspects of the FTAs that are 
problematic for the library community. While this is not by any means 
an exhaustive list, the most important issues that we believe require 
serious examination by Congress are listed below.
The Copyright Provisions
    The copyright sections of these agreements contain several 
provisions that require our strong opposition. Both the Chile and 
Singapore agreements require:

     Lthat the duration of the copyright term reflect the U.S. 
rule of life plus 70 years instead of the international standard of 
life plus 50 years;
     Lthat anti-circumvention rules be adopted which reflect 
the expansive provisions of Section 1201 of the Digital Millennium 
Copyright Act, including strong device prohibitions; and
     Lthat the reproduction right expressly include temporary 
copies. Under current standards, temporary copies in RAM do not 
necessarily implicate the reproduction right.

    The inclusion of the life +70 copyright term and the detailed anti-
circumvention rules also carry the deleterious effect of locking-in 
current provisions of law that Congress may want to revisit. The 
extension of the reproduction right to temporary copies raises an even 
greater problem, as these provisions go well beyond the protections 
provided under the Copyright Act. It would have profound and far-
reaching negative implications for reading and browsing, and has 
consistently been strongly opposed by consumers and the library and 
education communities. During the negotiation of the WIPO Copyright 
Treaty, a similar provision was proposed and ultimately rejected by the 
Diplomatic Conference.
    We believe that a bilateral free trade agreement is a particularly 
poor vehicle to use to extend the scope of U.S. copyright law in such a 
drastic manner. By extending the scope of copyright protection well 
beyond what exists, even under current U.S. law, the agreements exceed 
the scope of legitimate trade policy beyond even the most liberal 
interpretation. Congress should send a clear message to the USTR that 
the traditional balance and concern for the interests of all 
stakeholders that has historically informed Congressional deliberations 
in the area of copyright policy is crucial when negotiating trade 
agreements.
Fast-Track Authority
    Although fast-track authority has been touted as essential to free 
trade agreements, the cost is very high. The many benefits of 
Congressional oversight are lost when the President and his designees 
are essentially given carte blanche to make agreements quickly to 
benefit the U.S. position among its trading partners. Because there is 
no ability to amend the trade agreements negotiated by the USTR under 
fast-track authority, Congress has a minimal role to play while the 
Executive Branch makes new law in many peripheral areas simply by 
including the provisions in an FTA.
Lack of Transparency
    In addition to the power bestowed by fast-track authority, the USTR 
negotiates the FTAs in secret; it is not an open process. Interested 
parties are discouraged from commenting because there is very little 
publicity about the provisions themselves and because the comments sent 
to USTR are not readily available to anyone outside the agency. One 
must visit the USTR Reading Room to view comments, which are available 
only on certain days by appointment. While we appreciate the 
opportunity to comment eventually on these agreements, we would have 
preferred to do so at a much earlier stage in the process. Because the 
full text of the agreements is not made publicly available until the 
end of the negotiation process, the public has been effectively 
precluded from ongoing participation in these crucial deliberations.
    Because Congress must adopt or reject the entire agreement with 
limited debate and no possibility of amendment, we must oppose 
ratification and implementation of these two FTAs. We hope that 
Congress will see the wisdom of removing intellectual property matters 
from fast track authority at the earliest possible opportunity. It is 
not appropriate or in the public interest to permit far-reaching 
intellectual property law to be made without the benefit of public 
debate and Congressional oversight.
    Finally, we submit that the provisions of the WTO-TRIPS agreement 
as well as the various treaties and conventions administered by WIPO 
provide an adequate institutional framework for the international 
harmonization of international intellectual property protection. 
Institutional duplication within bilateral trade agreements is both 
unnecessary and inappropriate. We believe that Congress should 
encourage the Office of the USTR to pursue the changes in international 
intellectual property standards within the established frameworks of 
WTO-TRIPS or WIPO.

            Respectfully submitted,

                                                   Robert L. Oakley
                                  Washington Affairs Representative
                              American Association of Law Libraries

                                                   Miriam M. Nisbet
                                                Legislative Counsel
                                       American Library Association

                                                  Prudence S. Adler
                                         Associate Executive Editor
                                  Association of Research Libraries

                                                    Mary M. Langman
                         Coordinator, Information Issues and Policy
                                        Medical Library Association

                                                    Douglas Newcomb
                                            Director, Public Policy
                                      Special Libraries Association

                                                        Peter Jaszi
                                                          President
                                           Digital Future Coalition

                                 
                    [BY PERMISSION OF THE CHAIRMAN:]
   Statement of Kristin E. Paulson, American Chamber of Commerce in 
                               Singapore
Introduction

    The American Chamber of Commerce in Singapore, hereafter referred 
to as ``AmCham'' or ``AmCham Singapore,'' represents the interests of 
the 1,500 U.S. companies operating in the country, and more than 18,000 
Americans living and working in Singapore. AmCham strongly supports the 
U.S.-Singapore Free Trade Agreement (USSFTA), and the roles which the 
current U.S. Administration and Congress will play in signing the 
Agreement and implementing related legislation. We also wish to 
congratulate the Singaporean and United States governments for 
negotiating a very comprehensive agreement that will further both 
nations' trade objectives, while contributing to their respective, 
future economic growth.
    Singapore is an important economic and strategic partner for the 
United States in Southeast Asia. As the gateway to more than 500 
million consumers, Singapore is well positioned to provide open markets 
and better opportunities for American companies and workers. Featuring 
a world-class infrastructure, well-educated workforce, and a pro-
business environment, Singapore is the United States' 12th largest 
trading partner and export market. Total commerce between the two 
nations in 2002 was close to $31 billion, with the U.S. having a trade 
surplus of $1.4 billion.
    Singapore has also been one of America's key partners in Asia, 
providing access and logistical support for the U.S. Navy and U.S. Air 
Force. The nation and its government have played a vital role in the 
war against terrorism, and have actively worked to ensure the security 
of American interests and of U.S. citizens and their families living in 
Singapore.
    The USSFTA presents an opportunity for the United States and 
Singapore to further cement the friendship and strategic partnership 
which exists between the two nations. It is an historic step, one that 
will be the first free trade agreement (FTA) that the United States has 
signed with any Asian nation. This FTA will offer American companies 
significant benefits, including: increased access to the Singapore 
market, landmark intellectual property (IP) protection, removal of 
barriers in the financial services sector, and reduced restrictions on 
professional services.
    Additionally, the Agreement will give U.S. businesses a gateway 
from which they can expand into the larger ASEAN and North Asia 
markets. The USSFTA will also serve as a model for other nations who 
are considering establishing future free trade agreements with the 
United States. In short, this opportunity will represent significant 
short- and long-term benefits for American companies, as it will enable 
them to open new markets in Asia, and to create higher consumer demand 
for U.S. products. This will translate into higher U.S. exports and 
greater employment opportunities for American workers.

USSFTA Analysis and Comments

    AmCham Singapore and our members strongly support passage of the 
U.S.-Singapore Free Trade Agreement. We would like to highlight several 
key areas of the FTA and how these will affect U.S. businesses and 
their respective sectors.

     LExports: Singapore guarantees zero tariffs immediately on 
all American products. The FTA will also eliminate or reduce certain 
significant non-tariff barriers. For example, it will result in a 
change in the way Singapore calculates excise taxes on imported 
automotive vehicles. The Agreement's rules of origin will create new 
opportunities for American exporters of fiber, yarn, and fabric. 
Additionally, regulations will be relaxed in other areas.

     LCompetition: The Agreement includes provisions (Chapter 
12) that address potential anti-competitive business practices by 
state-owned enterprises in Singapore and call for the creation of a 
competition law in Singapore by 2005. We believe that a competition law 
will best serve the interests of both nations and their respective 
business communities. AmCham believes that the Agreement will help 
ensure that U.S. companies can compete fairly for the procurement of 
government contracts (Chapter 13), and for the buying and selling of 
goods and services.

     LExpress Delivery Services: The FTA's provisions 
concerning express delivery services (EDS) provide American EDS 
companies with greater access to the Singapore marketplace. We are 
pleased that the Agreement contains a commitment precluding the cross-
subsidization of EDS operations by Singaporean postal authorities, the 
first time such a commitment has been contained in a trade agreement.

     LFinancial Services and Insurance: The FTA will level the 
playing field for U.S. financial service providers in Singapore's 
banking and securities sectors. American banks will have access to the 
Singapore Automated Teller Machine (ATM) network. Restrictions will 
also be lifted on the number of qualifying full banks permitted to 
engage in retail business. Additionally, restrictions will also be 
eased on the number of branches which U.S. banks already licensed in 
Singapore can operate. With respect to asset management, it will now be 
easier for U.S. asset managers to qualify to provide approved products 
under the Central Provident Fund (CPF), Singapore's multi-billion 
dollar retirement savings/investment program.
      L  In the area of insurance and insurance-related services, 
AmCham lauds the improved access to Singapore's insurance industry, 
which was gained through these negotiations.

     LIntellectual Property Rights (IPR): The FTA will provide 
substantial enhancements to IPR protection in four main areas: (1) 
trademarks (and stronger protection for well-established trademarks); 
(2) copyrights (new protection for digital works, measures to prevent 
circumvention of copying prevention measures, measures to monitor the 
production of optical discs); (3) patents (measures that will help 
pharmaceutical companies address the problem of parallel imports); and 
(4) trade secrets. Singapore also agreed to cooperate in preventing 
pirated and counterfeit goods from entering the United States.
      L  The IPR provisions of this Agreement are one of the most 
significant aspects of the USSFTA, and something which AmCham believes 
is an important model on which future FTAs with other nations should be 
based. The Agreement will protect the work of U.S. companies and 
individuals in Singapore, thereby fostering greater trade and 
investment opportunities in the future.

     LProfessional Services: American professional services 
firms, specifically in the areas of legal, architectural, engineering, 
and land surveying services, will have improved market access to 
Singapore. For U.S. law firms, Singapore will make it easier for them 
to enter into joint-law ventures with local companies. It will also 
recognize law degrees granted by a limited number of American law 
schools, for purposes of qualifying for the Singapore bar.
      L  With respect to U.S. architectural and engineering firms, the 
FTA has relaxed local-ownership restrictions. AmCham supports these 
provisions and believes that the additional discussions (outside of the 
FTA context) pertaining to mutual-recognition of U.S. and Singaporean 
architectural and engineering professional qualifications will only 
further serve the best interest of both nations, affording increased 
opportunities for Americans and Singaporeans to work in each other's 
countries. This could indirectly encourage more Americans to consider 
getting their professional degrees in Singapore, which would allow them 
to practice architecture and engineering in both countries.

     LTelecommunications: Chapter 9 of the FTA will ensure 
greater transparency and non-discriminatory access to the telecom 
network, leased lines, and related areas. The Agreement also contains 
important clauses which will prevent anti-competitive practices, 
thereby ensuring that American firms will be able to compete more 
effectively with local companies. AmCham Singapore welcomes the 
progress that has been made to enable U.S. telecom companies to 
interconnect with Singapore's networks and to have increased 
opportunities for doing business in the country.

Summary

    AmCham Singapore strongly supports approval of legislation to 
implement the U.S.-Singapore Free Trade Agreement by the Congress. Our 
members have benefited from a very pro-business environment, supported 
through an active partnership with the Singaporean government. As 
outlined above, we believe that this Agreement helps to further cement 
that relationship with a key strategic partner and will serve as a 
model for pending negotiations with other ASEAN member countries. This 
in turn will serve to foster increased business and employment 
opportunities for American companies and U.S. citizens both at home and 
throughout the Asia Pacific region.

                                 
 Statement of Jeffrey S. Levin, Esq., Association of Food Industries, 
                                  Inc.
    This statement is submitted on behalf of the Association of Food 
Industries, Inc. (AFI). AFI is a U.S. trade association serving the 
food import trade, with approximately 200 member-companies located in 
the United States. The member-companies trade in a vast range of 
imported food products, including processed foods, nuts and other 
agricultural products, and honey.
    At the outset, AFI notes that the U.S. food importing industry is 
composed of American companies. Its workers are employed here in the 
United States, and these companies make a vital contribution to the tax 
base of our national, state and local economies.
    AFI strongly supports the liberalization of trade through the 
reduction of tariffs and the elimination of non-tariff barriers in the 
course of bilateral, and multilateral, negotiations. AFI respectfully 
submits that this intrinsic negotiating objective must be advanced for 
products across the board, including those products which are 
considered ``import sensitive agricultural products,'' as that term is 
defined in section 2104(b) of the Trade Act of 2002.\1\
---------------------------------------------------------------------------
    \1\ Under this provision, ``import sensitive agricultural 
products'' are considered to be those products which are subject to 
tariff-rate quotas, and those products subject to tariff reductions by 
the United States as a result of the Uruguay Round Agreements, for 
which the rate of duty was reduced on January 1, 1995, to a rate which 
was not less than 97.5 percent of the rate of duty that applied to such 
article on December 31, 1994.
---------------------------------------------------------------------------
    AFI brings to this proceeding the perspective not just of U.S. food 
importers but also of U.S. consumers. These are fundamentally important 
constituencies that are too often overlooked in the course of trade 
deliberations, particularly in the area of negotiating objectives. 
Indeed, in reviewing the principle negotiating objectives of the United 
States with respect to agriculture as defined in section 2102(b)(10) of 
the Trade Act of 2002, the emphasis on enhancement of export 
opportunities and the development of overseas markets for U.S. 
producers of agricultural commodities is manifest. Yet, to a critical 
extent, the sweeping benefits gained from the import side of the trade 
equation is overlooked. This is unfortunate, because imported food 
products have played a vital role in the development of this Nation's 
economy, and will continue to do so for the foreseeable future. Food 
imports still account for a relatively small share of the total U.S. 
diet. However, that share has grown considerably in recent years. 
Economists at the USDA estimate that imports' share of the total 
quantity of food consumed domestically increased from an average of 7.5 
percent for the period 1979-1994 to 9.1 percent in the late 1990's.\2\ 
Import supplies greatly increase the variety of foods available to the 
American consumer in line with expanding market demands, temper 
increases in food prices caused by adverse weather conditions and other 
market disruptions, and stabilize year-round supplies of fruits and 
vegetables. In other words, imported foods support adequate supplies of 
both dietary staples and specialty items especially important to an 
increasingly diverse population, and do so at a counter-inflationary 
cost to consumers.
---------------------------------------------------------------------------
    \2\ Putnam and Allshouse, Imports' Share of U.S. Diet Rises In Late 
1990s, Global Food Trade (September-December 2001) at 15.
---------------------------------------------------------------------------
    Indeed, U.S. Trade Representative Robert Zoellick estimates that 
the North American Free Trade Agreement and Uruguay Round Agreements 
resulted in an annual benefit of between $1,300 and $2,000 for the 
average American family of four.\3\ Much of this benefit can be 
attributed to increasingly open trade in food products. In the absence 
of due attention to import concerns, much of this benefit could 
disappear.
---------------------------------------------------------------------------
    \3\ Zoellick, Falling Behind On Free Trade, N.Y. Times, April 14, 
2002, section 4 at 13, col. 1.
---------------------------------------------------------------------------
    Furthermore, attention to the concerns of U.S. importers of food 
products fundamentally serves the negotiating objectives enunciated in 
the Trade Act. Enhanced access to markets abroad cannot be achieved in 
the absence of reasonable market opening measures on the part of this 
country. Of course, the more our trading partners are able to sell 
their products to U.S. consumers, the better equipped they are to 
purchase U.S. products shipped abroad.
    AFI applauds the initial decision to enter into a free trade 
agreement (FTA) with Chile, which we view as a particularly 
complementary trading partner. We strongly believe that this agreement 
will have a significant beneficial impact on both the U.S. and Chilean 
economies, and on the U.S. consumer.
    However, like many other companies, associations and public 
officials in the United States, AFI has a pronounced concern regarding 
the apparent delay in the submission of implementing legislation by the 
Administration to the Congress. The U.S.-Chile FTA has been a top 
negotiating priority for an extended period, spanning at least two 
Administrations, and the successful conclusion of negotiations should 
be treated and viewed as an important milestone for U.S. trade policy. 
It must not be held hostage to temporal, and unrelated, geopolitical 
vagaries. Indeed, we agree with the notion expressed last month by a 
number of ``pro-trade'' Senators and Representatives that it would be a 
``tremendous mistake'' if the Administration delayed presentation of 
the implementing legislation to Congress. As noted by these 
legislators, ``(t)o delay signing the agreement because of other 
foreign policy disagreements, no matter how important, would send 
terribly counterproductive messages--that liberalized trade is neither 
a desirable end in itself nor a more effective means to strengthen our 
international alliances.'' We implore those policymakers in a position 
to effect movement on this issue to take those actions necessary to 
sign, submit and seal this important agreement.
    AFI submits that as the Subcommittee on Trade reviews the proposed 
U.S.-Chile FTA and as it reviews other potential bilateral and 
multilateral trade agreements, two issues must remain in the 
foreground. First, apart from the technical definitional parameters 
established by the Trade Act, relevant policymakers--including those 
officials charged with negotiation of this and other trade agreements, 
and lawmakers charged with reviewing the legislation necessary to 
implement the results of the negotiations--must determine not only 
whether a particular food product is indeed ``import sensitive,'' but 
also whether that sensitivity is an interest demanding tariff 
protection when placed in the wider context of national objectives. It 
is axiomatic that trade negotiations should not be designed to protect 
the parochial concerns of a limited set of market participants, but 
rather should serve to promote the widest possible set of interests so 
as to bring the greatest potential benefit across the board. For 
example, it is one thing if the 14.9 percent tariff on prepared or 
preserved artichokes--or the tariff rate quota established for this 
product under the terms of the U.S.-Chile FTA--serves to protect a 
significant employment base in this country or furthers some other 
compelling national interest such as the competitive viability of an 
important U.S. production sector. It is quite another thing if the 
tariff exists primarily to hinder the access of U.S. importers and 
consumers to an expanded supply base in order to salvage limited and 
economically regressive domestic concerns.
    The negotiating stature of this country should operate under the 
presumption of trade liberalization, not protectionism. The burden 
should fall upon those interests that seek to stifle further tariff 
reductions for ``import sensitive'' products to affirmatively 
demonstrate the specific bases for their claims.
    Second, the Subcommittee must evaluate the merits of a potential 
trade agreement on the basis of its potential effects on the U.S. 
economy as a whole. Further tariff reductions on ``import sensitive'' 
agricultural products should be advanced if, on balance, such action 
would bring greater economic benefit to the range of interests in this 
country--including the interests of the consuming population--than 
would the status quo.
    The rubric of ``import sensitivity'' should not constitute a 
formulaic bar to trade liberalization.
    In this context, AFI also applauds the fact that duties on all 
imported food products from Chile will be eventually eliminated under 
the terms of the agreement. In particular, AFI strongly supports the 
agreement provisions that immediately remove the duties on a range of 
food products and that retain current duty-free treatment for a range 
of food products.\4\ However, we are concerned that a significant 
number of imported food products will be subject to the lengthiest 
staging category encompassed by the duty elimination provisions (i.e., 
12 years), while a significant number of so-called ``import sensitive'' 
food products will be subject to special provisions such as tariff-rate 
quotas or ``competitive need limitation'' type provisions.\5\ In 
addition, a number of imported food products will be subject to 
``agricultural safeguard'' provisions, which are in most cases framed 
by a ``trigger price'' mechanism.\6\
---------------------------------------------------------------------------
    \4\ AFI has reviewed the tariff treatment for products encompassed 
by specific Harmonized Tariff Schedule chapters of interest to its 
member-companies. For example of the 155 tariff schedule items (at the 
8-digit level) encompassed by Chapter 7 (edible vegetables), 111 items 
will be subject to immediate duty elimination or will have current 
duty-free status retained. Of the 90 tariff schedule items encompassed 
by Chapter 16 (preparations of meat and fish), 83 items will be subject 
to immediate duty elimination or will have current duty-free status 
retained. Of the 170 tariff schedule items encompassed by Chapter 20 
(preparations of vegetables, fruits and nuts), 101 items will be 
subject to immediate duty elimination or will have current duty-free 
status retained. Of the 88 tariff schedule items encompassed by Chapter 
21 (miscellaneous edible preparations), 63 items will be subject to 
immediate duty elimination or will have current duty-free status 
retained.
    Specific products of interest to AFI member-companies that will be 
subject to the immediate elimination of duties as of the date that the 
agreement enters into force are prepared or preserved mackerel 
(subheading 1604.15.00, HTS), and boiled clams in immediate airtight 
containers (subheading 1605.90.10, HTS). Specific products of interest 
that will retain their current duty-free status on a permanent basis 
include anchovies, whole or in pieces (subheading 1604.16.10, HTS) and 
frozen blueberries (subheading 0811.90.20, HTS).
    \5\ A specific example of a product of interest to AFI member-
companies that falls within this category is frozen blackberries, 
mulberries and white or red currants (subheading 0811.20.40, HTS). 
Pursuant to Annex 1, Note 17 of the agreement, imports from Chile of 
this product, and other similarly situated food products, will be 
subject to a zero percent duty as of the date that the agreement enters 
into force, unless imports from Chile exceed 50 percent of total U.S. 
imports of the product, or if the value of imports from Chile exceeds 
$110 million. If either condition is met, the duty on the product will 
revert to the appropriate level established under Annex 3.3, Note 1(b) 
of the agreement (providing for the elimination of duties in four equal 
annual stages).
    \6\ A specific example of a product of interest to AFI member-
companies that falls within this category is prepared or preserved 
artichokes (subheading 2005.90.80, HTS). Pursuant to Annex 3.18 of the 
agreement, the trigger price for this product is established as $1.29 
per kilogram. Pursuant to Article 3.18 of the agreement, the U.S. may 
impose a safeguard measure on imports of the product if the unit price 
of such imports falls below this trigger price.
    AFI notes that pursuant to Article 3.18(2)(b) of the agreement, 
``(t)he parties may mutually agree to periodically evaluate and update 
the trigger prices.'' AFI submits that this is a particularly important 
provision considering the historical volatility in the prices of 
imported food products, and that the relevant trigger prices for 
products subject to these safeguard provisions must be vigilantly 
reviewed on a regular basis to ensure that they reflect conditions in 
the market.
---------------------------------------------------------------------------
    AFI is very much aware that the text of the U.S.-Chile FTA, and the 
tariff treatment of specific products under the provisions of the 
agreement, may well serve as a ``template'' for ongoing and future FTA 
negotiations, such as the proposed FTA with Morocco and the Central 
American Economic Integration System, and the proposed Free Trade Area 
of the Americas. For this reason, AFI has a particular concern for, and 
interest in, the basis for the duty elimination provisions regarding 
food products as set forth in the U.S.-Chile FTA. As we note above, 
duties on imported food products should be subject to immediate 
elimination, or, at the least, an expeditious staging category, unless 
those domestic interests claiming otherwise affirmatively demonstrate 
the need for more ``protectionist'' treatment. In other words, a simple 
claim of ``import sensitivity'' should not suffice; an affirmative 
demonstration of the need for more ``protectionist'' treatment, rooted 
in direct evidence regarding the marketplace and conditions of 
competition, should be required.
    The concerns of AFI in this regard are well-founded. In particular, 
AFI notes the report of the Agricultural Technical Advisory Committee 
on Trade In Fruits and Vegetables with respect to the U.S.-Chile Free 
Trade Agreement. The report states as follows:

      LOther members who represent highly sensitive products (e.g., 
canned fruit) had sought particular exemptions and were disappointed 
that a twelve-year phase-out (with safeguards in some instances) was 
the best protection provided. Since the Chilean FTA has been described 
as a template for the Free Trade Area of the Americas (FTAA), Members 
of the Committee who represent highly sensitive crops believe that 
these crops should have received a 15-year phase-out as was provided in 
the North American Free Trade Agreement (NAFTA). This more lengthy time 
period would help some of the more sensitive industries adjust to 
changing trade conditions. The Committee Members representing sensitive 
interests are seeking tariff exemptions in subsequent FTAs.\7\

    \7\ The U.S.-Chile Free Trade Agreement: Report of the Agricultural 
Technical Advisory Committee on Trade In Fruits and Vegetables 
(February 26, 2003) at 3-4 (emphasis added).
---------------------------------------------------------------------------
    This sentiment expressed in this statement is a clear signal that 
certain well-entrenched interests in the United States will mount 
intensive and continuing efforts in ongoing and future FTA negotiations 
to ensure that trade liberalization is derailed, or at least delayed. 
While these interests surely retain their right to exert such efforts, 
legislators must ensure that the claims of such interests are rooted in 
fact and need before they become a basis for this country's negotiating 
posture.
    On a related issue, AFI is pleased that the U.S.-Chile FTA contains 
a provision whereby requests for accelerated tariff elimination will be 
considered by the signatory-parties. We anticipate that member-
companies of AFI will evaluate the potential for requests under this 
provision in appropriate circumstances, and hopes that U.S. 
policymakers, and their Chilean counterparts, will view such requests 
favorably.
    In sum, AFI strongly supports the ideal of trade liberalization 
embodied by the U.S.-Chile FTA, and fervently hopes that the agreement 
will be put into effect at the soonest possible date. While AFI also 
strongly supports the fact that many imported food products will be 
accorded immediate duty elimination or will retain their current duty-
free treatment, it is concerned that a significant number of products 
of interest to AFI member-companies will not be treated in as favorable 
a manner. This is detrimental not only to the interests of those U.S. 
companies that form the U.S. food importing industry, but to the 
interests of the U.S. consumer as well. AFI respectfully submits that 
the tariff treatment of imported food products in ongoing and future 
FTA negotiations be viewed with a predisposition towards the ideal of 
trade liberalization.
    On behalf of AFI and its member-companies, we greatly appreciate 
the opportunity to submit these comments.

                                 
              Statement of Automotive Trade Policy Council
    The Automotive Trade Policy Council and its member companies--
DaimlerChrysler, Ford and General Motors--strongly support passage of 
the U.S.-Chile Free Trade Agreement and the U.S.-Singapore Free Trade 
Agreement. Passage of both agreements will signal to our other trade 
partners in the Western Hemisphere and Asia, as well as in the ongoing 
Doha Development Round of the World Trade Organization, that the U.S. 
is committed to promoting free trade around the world.
U.S.-Chile Free Trade Agreement
    Total automotive trade between the United States and Chile has 
increased significantly since 1995, surpassing $180 million in 2002. In 
fact, over 6% of all U.S. exports to Chile are automotive products 
(vehicles and parts). Today, Chile is the United States' fifth largest 
automotive-sector export market in the Western Hemisphere, with annual 
sales of just over 100,000 new vehicles. At the same time, Chile does 
not export any significant automotive-sector products to the United 
States, assembling less than 20,000 new motor vehicles annually.
    U.S. automakers will benefit from the U.S.-Chile trade agreement by 
assuring that U.S. access is equal to that which our European and 
Korean competitors already have. Both the EU and South Korea signed 
free trade agreements with Chile before the United States, and both are 
major exporters of motor vehicles and parts. Until Congress agrees on 
implementing language for the U.S.-Chile agreement, automakers from 
Europe and Korea will continue to receive significant commercial 
advantages on both tariffs and taxes, as well as from business 
facilitation measures.
    U.S. automakers will directly gain in four key areas from 
provisions in the U.S.-Chile free trade agreement. Chile's high luxury 
tax on automobiles, which disproportionately harms U.S. automakers, 
will be phased out over four years. This will remove a significant 
market access barrier for U.S. vehicles. Upon implementation of the 
agreement, motor vehicles exported from the United States will receive 
immediate elimination of tariffs--achieving instant parity with the 
Korean and European automakers. The U.S.-Chile FTA also allows Chile to 
maintain the flexibility to limit imports of used vehicles, the sale of 
which can undermine sales of new motor vehicles.
    Passage of the U.S.-Chile Agreement will also strongly promote the 
realization of two other important U.S. trade initiatives--the U.S.-
Central America FTA and the Free Trade Area of the Americas. By passing 
the U.S.-Chile agreement, our trading partners in Brazil, Argentina, 
Central America, and across the entire Western Hemisphere will see 
clear evidence that the United States strongly supports the economic 
benefits of free trade and is willing to work with those nations that 
follow the same course.
U.S.-Singapore Free Trade Agreement
    While the United States and Singapore engage in significant two-way 
trade in the automotive sector--$261 million in 2002 (in a market of 
70,000 new vehicles annually)--the more important nature of U.S.-
Singapore automotive trade is in the regional component, as Singapore 
serves as a trade hub to the entire Southeast Asian region. This makes 
Singapore an important trading partner to the U.S. automotive sector, 
as the ASEAN region is one of the fastest growing and promising new 
vehicle markets in the world.
    For the automotive sector, the U.S.-Singapore FTA addresses a 
longstanding problem with how the Singapore Customs authorities value 
imported motor vehicles. The U.S.-Singapore FTA clarifies and makes 
transparent the process by which Singapore Customs authorities value 
imported vehicles to comply with the World Trade Organization's Customs 
Valuation Agreement. As such, the agreement not only facilitates 
imports of U.S. vehicles into Singapore by reducing the transaction 
cost, but it provides a model for trade agreements with other countries 
that have similar customs valuation practices.
    Passage of the U.S.-Singapore Free Trade Agreement will also 
provide an important signal of the strong commitment by the United 
States to market liberalization and expansion of free trade across 
Asia, as well as a dedication to free and open political and economic 
systems generally.
    The Automotive Trade Policy Council, Inc. is a Washington D.C.-
based non-profit organization representing the common international 
economic, trade and investment interests of its member companies. The 
members of ATPC are DaimlerChrysler Corporation, Ford Motor Company and 
General Motors Corporation.

                                 
                    [BY PERMISSION OF THE CHAIRMAN:]
    Statement of Chilean-American Chamber of Commerce, Las Condes, 
                            Santiago, Chile
    The United States is Chile's principal trading partner (16.3% of 
foreign trade) and foreign investor (31% of 1974-2002 FDI). However, 
due to the Chilean government's successful policy of unilateral trade 
liberalization, the United States' relative position on the trade front 
has deteriorated from 25% in 1995 to 16.3% in 2002. Key factors are:

     LCompetition from countries with which Chile has signed 
trade agreements, especially Canada, Mexico and the Mercosur countries 
(Argentina, Brazil, Paraguay and Uruguay) has taken opportunities away 
from U.S. firms, who do not enjoy the same commercial advantages.
     LThe free trade agreement between Chile and the European 
Union came into effect on February 1, 2003, putting U.S. companies at 
an even greater disadvantage.
Lost Market Share:
     LIn 1995--before Chile's trade agreements with Canada, 
Mexico, and the Mercosur countries came into force--25% of all Chilean 
imports came from the United States. For 2002, this figure had fallen 
to 16.3%, while countries enjoying free trade with Chile saw their 
market share soar. Chilean imports from the U.S. reached $3.8 billion 
in 1995, but fell to $2.5 billion in 2002, decreasing by 34% over this 
period. In contrast, imports from Mercosur over the same period grew by 
80%.
     LIf the United States had maintained its 1995 market 
share, it would have received an additional $1.4 billion in earnings 
from exports to Chile in 2002 alone.
     LThe accumulated value of these ``lost exports'' since 
1995 is estimated at $4.9 billion--almost two years' worth of exports.
     LDuring February 2003, the first month in which the FTA 
with the European Union became effective, Chilean imports from the U.S. 
grew at 5.6% compared to February 2002. In contrast, total imports from 
the EU expanded by 30.4%.
Lost business opportunities:
     LA study of 13 U.S. companies shows lost business 
opportunities exceeding $300 million each year due to the lack of a 
free trade agreement. For instance, an important U.S. fast food chain 
with presence in Chile buys its potatoes from Canada, not the United 
States, to take advantage of reduced tariff levels. Other sectors which 
have lost are heavy machinery producers, financial services firms, 
engineering services, and telecommunications equipment, to name a few.
     LServices purchased from U.S. firms in Chile are subject 
to a 20% tax, and Canadian companies have capitalized on this clear 
advantage.
     LWithout an FTA, U.S. products will pay a 6% tariff in 
2003, which is significant compared with other nations' duty-free 
access.
Regional opportunities:
     LChile's influence in South American markets is larger 
than its GDP suggests.
     LIn many sectors (i.e. power generation, financial 
services, telecommunications, as well as passenger and cargo air 
transport), the Chilean market is a ``testing ground'' for regional 
operations. Projects that succeed in Chile usually do so in the rest of 
Latin America; projects that do not succeed in Chile have little future 
in the region.
     LChile is a regional mining and engineering center.
       LDetailed engineering performed by a U.S. firm in Chile 
influenced equipment acquisition for plants in Colombia (a $350 million 
expansion) and Peru (an $80 million expansion).
Consumers:
     LCompetition resulting from a bilateral trade agreement 
would force companies to continually improve their products and 
services in order to maintain market share.
     LConsumers reap these benefits through lower prices, 
products that meet their needs more effectively, and a wider selection.
     LChilean products, which are of high quality and compete 
favorably in world markets, have already attracted United States 
consumers.
     LAmerican consumers will have increased access to fresh 
fruit and vegetables which they would not have in the winter season due 
to Chile's complementary seasonality.
Jobs:
     LThe sales of Chilean fruit and seafood to the United 
States require the intensive use of American labor in its ports; a 
bilateral agreement would create more traffic, meaning new jobs.
       LThe Port of Wilmington handles more than 14 million 
boxes of Chilean fruit during the months of December through May 
representing over 60% of Wilmington's volume in the winter season.
     LChile's growing seasons are the reverse of those in the 
United States, so Chile's agricultural exports do not compete directly 
with United States farmers.
     LThe National Association of Manufacturers estimates that 
the FTA will provide an additional 12,500 jobs annually.
     LEvery State in the United States exports to Chile, and 
over a 6-year period, 14 states increased their exports by more than 
100%, producing jobs at home.
What else does Chile have to offer?
     LChile has undergone far-reaching economic transformation 
over the past two decades.
       LMoved from a heavily regulated import-substitution-
oriented economy to a development strategy based on the expansion of 
Chile's markets through exports, private investment incentives, and the 
balancing of the principal macroeconomic variables.
       LUnilaterally opened up its economy more than any other 
Latin American country, and it made its commitment to a free markets 
and free trade long before any other country in Latin America.
     LChile is also the oldest democracy in the region, and its 
economy is one of the most advanced and stable. It is internationally 
recognized as the Latin American country with the highest rankings for 
investment security.
     LChile has institutional stability and a transparent 
system.
     LAlthough Chile is a small country, the United States 
exports more to Chile than to Russia, New Zealand, or several European 
countries including Austria and Norway.
     LIn 2002, Chile was the 37th most important market for 
United States exports, and the 36th largest exporting country to the 
United States.
     LChile will play a very important role in the FTAA 
negotiations. The approval of the FTA between Chile and the United 
States will emphasize U.S. commitiment to free trade in the region and 
will serve as an example for other countries to actively pursue FTAA 
negotiations.
                                *  *  *
    AmCham Chile strongly believes that the U.S.-Chile free trade 
agreement must be approved in order for U.S. businesses, consumers and 
workers to benefit. Approval is especially urgent as U.S. goods are 
currently at a 6% disadvantage with over 90% of European goods entering 
Chile as of February 1, 2003 with no duties. In the absence of price 
differentials, Chilean companies and consumers prefer U.S. products and 
services.

                                 
 Statement of Peter H. Cressy, Distilled Spirits Council of the United 
                              States, Inc.
    The following statement is submitted on behalf of the Distilled 
Spirits Council of the United States, Inc. (Distilled Spirits Council) 
for inclusion in the printed record of the Subcommittee's hearing on 
the implementation of U.S. bilateral free trade agreements (FTAs) with 
Chile and Singapore. The Distilled Spirits Council is a national trade 
association representing U.S. producers, marketers and exporters of 
distilled spirits products. Its member companies export spirits 
products to more than 130 countries worldwide, including to Chile and 
Singapore.
I. OVERVIEW
    The Distilled Spirits Council and its member companies 
enthusiastically support Congressional approval and prompt entry-into-
force of the free trade agreements with Chile and Singapore, which will 
bring about significant and measurable benefits for U.S. spirits 
exporters. Over the past decade, the export market for U.S. distilled 
spirits products has become increasingly more important to the U.S. 
distilled spirits industry. In fact, since 1990, U.S. exports of 
distilled spirits worldwide have doubled, growing to over $550 million 
in 2002. While the Uruguay Round negotiations produced significant 
benefits for U.S. distilled spirits exporters, including substantial 
reductions in import tariffs and non-tariff barriers, numerous barriers 
still remain. The U.S. distilled spirits industry actively supports the 
U.S. government's efforts to seek the elimination or reduction of these 
remaining barriers within the context of the ongoing World Trade 
Organization negotiations, and in other multilateral and bilateral 
negotiations.
    The recently-concluded Chile and Singapore agreements eliminate 
several of the barriers that U.S. spirits exporters currently face in 
these markets. Prompt Congressional approval and implementation of the 
FTAs will permit U.S. spirits exporters to benefit from improved market 
access to Chile and Singapore, thus ensuring the continued growth of 
the U.S. distilled spirits industry.
II. BENEFITS OF THE U.S.-CHILE AGREEMENT TO U.S. DISTILLED SPIRITS 
        EXPORTERS
    The U.S.-Chile Free Trade Agreement (FTA) will provide three 
significant benefits for the U.S. distilled spirits industry. First, 
the U.S.-Chile FTA will ensure that U.S. spirits entering Chile are 
accorded the same tariff treatment as Chilean spirits entering the 
United States. As a result of the ``zero-for-zero'' initiative, which 
began in the Uruguay Round, the United States has eliminated almost all 
tariffs on imported spirits products, including pisco, Chile's most 
important spirits export. In contrast, U.S. spirits currently face a 
tariff of six percent ad valorem in Chile. Under the terms of the U.S.-
Chile FTA, Chile will eliminate its tariff on all spirits (with the 
exception of brandy and gin) imported from the United States two years 
after entry-into-force of the agreement. The tariff on brandy will be 
eliminated immediately upon the agreement's entry-into-force, and the 
tariff on gin will be reduced in twelve equal annual stages until the 
tariff is zero.
    Second, the U.S.-Chile FTA will place U.S. spirits exports on a 
level playing field with our competitors. Chile currently has free 
trade agreements with Canada, Mexico and the European Union. In both 
the Canada-Chile and Mexico-Chile agreements, Chile agreed to eliminate 
immediately its tariffs on all spirits products, including tequila and 
Canadian Whisky. In the EU-Chile agreement, Chile agreed to a ten-year 
phase-out of the tariffs on Cognac, Armagnac, Grappa, and Brandy de 
Jerez and a five-year phase-out of the tariffs on all other EU-origin 
spirits. The U.S.-Chile FTA ensures, therefore, that U.S. spirits 
ultimately will be able to compete on an equal footing with spirits 
from Mexico, Canada and the European Union.
    Finally, the U.S.-Chile FTA provides essential protections for 
Bourbon and Tennessee Whiskey, two distinctly American spirits. Under 
the U.S.-Chile FTA, Chile has agreed to provide explicit protection in 
the Chilean market for Bourbon and Tennessee Whiskey as distinctive 
products of the United States. Such recognition ensures that only 
spirits produced in the United States, in accordance with the laws and 
regulations of the United States, may be marketed in Chile as Bourbon 
and Tennessee Whiskey.
III. BENEFITS OF THE U.S.-SINGAPORE AGREEMENT TO U.S. DISTILLED SPIRITS 
        EXPORTERS
    Similarly, the U.S. spirits industry stands to gain significantly 
as a result of the U.S.-Singapore FTA. First, Singapore will eliminate 
its discriminatory excise tax policy on distilled spirits. Currently, 
Singapore assesses significantly lower excise taxes on domestically-
produced spirits (samsoo, arrack and pineapple spirits) than on other 
types of distilled spirits in violation of the General Agreement on 
Tariffs and Trade (GATT) 1999 Article III, paragraph 2. This 
discriminatory excise tax policy has placed U.S. distilled spirits at a 
competitive disadvantage vis-a-vis domestically-produced spirits. Under 
the terms of the U.S.-Singapore FTA, Singapore will eliminate this 
discriminatory practice by harmonizing its excise taxes on imported and 
domestically-produced distilled spirits.
    The U.S.-Singapore FTA also guarantees that Singapore will not be 
able, at a future date, to impose tariffs on distilled spirits imported 
from the United States. Singapore does not currently assess tariffs on 
most imported distilled spirits products. However, Singapore's WTO 
bound tariff rates are high and, consistent with its Uruguay Round 
commitments, Singapore may impose at any time tariffs ranging from S$30 
per liter to S$70 per liter of alcohol on most categories of distilled 
spirits. Under the U.S.-Singapore FTA, Singapore has committed to bind 
all tariffs at zero immediately upon entry-into-force of the agreement, 
thereby ensuring that U.S. spirits exports will continue to enter the 
Singapore market duty-free.
    Finally, provisions in both the U.S.-Singapore FTA and the U.S.-
Chile FTA include commitments that those countries will not adopt or 
maintain a merchandise processing fee for originating goods. This 
provision will ensure that U.S. spirits exporters will not be subject 
to additional administrative costs in Singapore and Chile.
IV. CONCLUSION
    In summary, the U.S.-Chile and U.S.-Singapore free trade agreements 
successfully address the principal trade barriers currently impeding 
U.S. exports of distilled spirits to Chile and Singapore. The Distilled 
Spirits Council, therefore, strongly supports these agreements, which, 
once implemented, will provide considerable benefits to U.S. spirits 
exporters. We stand ready to work closely with the Congress in seeking 
the swift approval of these agreements, so that U.S. spirits exporters 
may begin soon to enjoy improved access to the Chilean and Singapore 
markets.
    Thank you very much for your consideration.

                                 
    Statement of Electronic Industries Alliance, Arlington, Virginia
    The Electronic Industries Alliance (EIA)--a partnership of 
electronic and high-tech trade associations representing 2,500 
companies and more than 80% of the $430 billion electronics industry--
appreciates this opportunity to present its views to the Trade 
Subcommittee of the House Committee on Ways and Means on the U.S.-Chile 
and U.S. Singapore Free Trade Agreements (FTAs).

The Agreements Will Advance the Cause of Free Trade

    In concluding these important trade agreements, Ambassador Zoellick 
and his skilled team of negotiators have made great progress in 
implementing the far-sighted strategy that the Congress and the 
Administration laid out in the Trade Act of 2002.
    EIA was a leader in the fight last year to obtain Trade Promotion 
Authority (TPA)--the centerpiece of the 2002 Trade Act--and we are 
pleased to see the Administration aggressively using this authority to 
open markets and eliminate trade barriers as quickly as possible. We 
hope that the Chile and Singapore FTAs are only the first of many 
important market-opening agreements reached using this grant of trade 
negotiating authority in order to further the cause of free trade, 
which benefits EIA companies and the U.S. economy.

EIA's Stake in Chile and Singapore

    U.S. high-tech goods and services exported to Chile totaled $865 
million in 2001 but, overall, the U.S. share of Chile's import market 
declined from 24% in 1997 to 16.6% in 2002. In part, this decline may 
be the result of Chile having concluded FTAs with other countries--
notably, with the European Union (EU) and Canada. Signing the U.S.-
Chile FTA will put American manufacturers on a level playing field with 
those in Europe looking for new markets in Chile and allow us to 
rebuild and grow our market share in Chile.
    EIA's member companies also recognize the tremendous opportunities 
presented by the U.S.-Singapore FTA. This FTA will be the first the 
United States has signed with an Asian nation, and it will send a 
message that the United States will pursue trade opportunities in this 
important region. More generally, bilateral agreements such as this one 
will signal our commitment to the region to foster stable economic and 
political ties. Singapore is an especially good place to start. The 
Heritage Foundation ranked Singapore second in the world in its 
rankings on economic freedom, and Singapore has a good track record for 
pursuing open trade. Its investment laws are generally clear and fair, 
and there is a strong history of protecting private property rights.
    New and expanded trade opportunities are critical to the U.S. 
electronics industry. According to the U.S. Commerce Department's 
report, ``U.S. Jobs From Exports,'' more than a third of the jobs in 
the Computers and Electronic Products Manufacturing Sector are 
supported by exports--this amounted to 603,000 jobs in 1997. In light 
of the challenges now faced by the high-tech sector, which have 
resulted in a significant number of layoffs, securing and enhancing 
access to foreign markets is a priority for our industry. The U.S.-
Chile and U.S.-Singapore FTAs can play an important role in building 
jobs in the electronics sector.

The Agreements Will Have Positive Effects in the Affected Regions

    Both of these agreements will have benefits beyond the countries 
involved. It is especially noteworthy the Chile FTA would mark the 
first time that a major South American country has embraced the duty 
reduction commitments reflected in the 1996 Information Technology 
Agreement, although it has not signed the ITA. Broadening the pool of 
countries that are prepared to eliminate tariffs on IT products should 
be a major priority for U.S. trade negotiators. Hopefully, the Chile 
agreement will pave the way for similar commitments by other countries, 
especially in Latin America.
    Similarly, the Singapore FTA hopefully will set the stage for 
additional U.S. trade agreements involving other Asian countries. 
Ambassador Frank Lavin pointed out earlier this year in a U.S.-ASEAN 
Business Council interview that Asia is a vast and largely untapped 
market for most U.S. companies and Singapore is an important next step 
toward tapping that market. With the recent opening of the Chinese 
market through the WTO, large and small enterprises alike are working 
to enter the Asian market and the Singapore FTA will provide a foot in 
the region's door for U.S. companies.

Specific Benefits of the Chile and Singapore FTAs

    There are particular aspects of both agreements that provide 
benefit to the electronics industry that should be brought to the 
Committee's attention.

    Intellectual Property Protection. We appreciate the agreements' 
strong protection for copyrighted works that would facilitate the 
growth of digital technologies and products while still protecting the 
legitimate rights of copyright owners, reflecting the balance struck in 
the Digital Millennium Copyright Act. Moreover, strong enforcement 
provisions criminalize end-user piracy and commit Chile and Singapore 
to seize, forfeit and destroy counterfeit and pirated goods and the 
equipment used to produce them. These protections will apply to goods-
in-transit and mandate both statutory and actual damages under Chilean 
and Singaporean law for violations of intellectual property rights.

    Telecommunications. The Chile and Singapore FTAs provide for open 
markets and non-discriminatory access to telecommunications networks. 
We strongly support affirmation of the principle of technology choice 
by public telecommunications service providers. We are particularly 
pleased that specific provisions in the Singapore agreement have been 
included to ensure national treatment among service providers, 
protection against anti-competitive behavior and transparency in 
licensing procedures. These and other provisions will contribute to 
open and transparent telecommunications markets for both service 
providers and equipment providers.

    Positive Economic Effects. When the U.S. enters into these FTAs, it 
will grant Singaporean and Chilean companies better access to the U.S. 
market than their neighbors enjoy. Rather than hinder trade, however, 
we believe that this will lead other countries in both regions to seek 
similar FTAs with the United States. This will create a competition 
toward trade liberalization that will help reach our goals of zero 
tariffs, more secure trade, and increased transparency.
    The FTA with Singapore will put U.S. manufacturers back on a 
competitive playing field in Singapore and erase the disadvantage they 
currently face because Singapore already has FTAs with New Zealand, 
Japan, the European Free Trade Association and Australia. Talks aimed 
at new FTAs are also underway between Singapore and Mexico, Canada, 
ASEAN countries, China, Korea and India. It is important that the 
United States secure its place in the Singapore market.
    As mentioned earlier, other countries and regions already enjoy the 
benefits of free trade with Chile, including the EU, Central America, 
Canada and Mexico. A U.S. FTA will allow manufacturers to compete more 
effectively in the Chilean market.

    Benefits to the Electronics Industry. Tariffs are less of an issue 
for the electronics industry with regard to Singapore than is the case 
with many other countries, since Singapore does not levy tariffs except 
in four product areas unrelated to our business. And, Singapore is a 
signatory to the World Trade Organization Information Technology 
Agreement. However, for its part, the United States still retains 
duties on some electronics products. Although generally small, these 
nuisance tariffs still represent a cost to American electronics 
companies and consumers. With the FTA, electronics imported from 
Singapore will no longer be subject to duties, another opportunity for 
the United States to even up tariff treatment in comparison with 
countries that already maintain reciprocal duty-free relations with 
Singapore.
    Building upon Singapore's already liberal market, the FTA will 
raise standards even higher in some areas, such as intellectual 
property rights, e-commerce liberalization and telecom market access. 
The agreement contains commitments in the e-commerce area that are more 
advanced than any negotiated under the World Trade Organization. It 
provides non-discriminatory treatment to products delivered 
electronically, which will benefit U.S. firms that sell digital 
products over the Internet. The United States and Singapore also agreed 
to permanently prohibit customs duties charged on these electronically 
delivered products.
    Chile has been lowering its tariffs on average by 1 percent a year 
since 1999 to the current rate of 6 percent, but in the U.S.-Chile FTA, 
Chile has committed to eliminating tariffs immediately on 85 percent of 
imports in key sectors including computers and other information 
technology (IT) equipment. This development will almost certainly 
expand trade and commercial relations between our countries.

Areas in Need of Improvement

    While EIA strongly supports approval of both these agreements, 
there are two issues that should be brought to the Committee's 
attention and that need improvement, if not in these agreements then in 
future ones.

    Rules of Origin. As long as tariffs remain a global reality, rules 
of origin remain a key issue in FTAs. Unfortunately, the language on 
rules of origin in these agreements is too complex and too similar to 
that under the North America FTA. There is a general consensus among 
EIA companies that the NAFTA rules of origin are highly complicated and 
that rules of origin for future FTAs should be much simpler.
    Complex rules of origin impose unnecessary administrative burdens 
on companies and raise the cost of doing business internationally. 
Accordingly, we appreciate the efforts reflected in these agreements 
that outline specific, concrete and transparent ways that customs 
procedures will be implemented, so that companies entitled to the 
benefits will not be deterred from capitalizing on them because of 
prohibitively high administrative costs. This is an important issue for 
EIA. Restrictive rules of origin could work to counteract the benefits 
of trade liberalization achieved elsewhere in these two FTAs. With 
respect to the Singapore FTA, the integrated sourcing initiative for 
products manufactured in third countries is especially useful for 
electronics and other high tech products that often are produced in 
stages in multiple countries.
    We would welcome, however, a further simplification effort by 
moving to a simple tariff shift-only approach and encourage thinking in 
that direction for future FTAs. Under a simple tariff shift approach an 
item is deemed a product eligible for FTA benefits if it is transformed 
from one tariff category to another by manufacturing or processing in 
an FTA country. We would note that a straight tariff shift-only 
approach might include a minimum regional value content (RVC) 
requirement in some cases to ensure that the benefits of an FTA are not 
unfairly exploited by what amounts to transshipment. If this issue 
cannot be addressed in these two FTAs, EIA strongly urges the 
Administration not to follow this precedent in future FTAs.

    Duty Drawback. Another concern relates to the treatment of duty 
drawback by the Chile agreement. The duty drawback program, 
administered by the U.S. Customs Service, is one of the last remaining 
export promotion programs to help U.S. companies compete in the global 
marketplace against trading partners that have significantly lower 
costs of production. Duty drawback reduces production and operating 
costs by allowing manufacturers and exporters to recover duties that 
were paid on imported materials when the same or similar materials are 
exported as finished goods or as component parts of finished goods.
    The singular importance of duty drawback to exporters is reflected 
in the WTO Agreement on Subsidies and Countervailing Measures, which 
contains specific provisions allowing WTO members to continue to 
provide drawback and making clear that drawback does not constitute an 
impermissible export subsidy.
    In the U.S.-Chile FTA, drawback is scheduled to be phased-out over 
a 12-year period. We believe that by phasing out drawback in each FTA 
that is negotiated, the elimination of this program is being 
accelerated before it is clear when and if tariffs will be eliminated 
on a global basis.
    At the very least, the EU-Chile FTA language would be preferable as 
it has an opt-out provision allowing exporters and importers to choose 
between drawback and a duty preference. By eliminating drawback in the 
U.S.-Chile FTA, the U.S. will be placed at a competitive disadvantage 
against our EU trading partners that have more preferable drawback 
language in the EU-Chile FTA. U.S. exporters need every means at their 
disposal to help reduce production costs and allow them to compete 
against lower-priced goods from China and other countries.

Conclusion

    Thank you for the opportunity to provide our views on both the 
U.S.-Chile and U.S.-Singapore FTAs. We look forward to these important 
agreements being approved by Congress.

                               __________

Below is a summary of the major points presented in the following 
comments:

The Agreements Will Advance the Cause of Free Trade: EIA was a leader 
in the fight last year to obtain Trade Promotion Authority (TPA) and 
supports the Chile and Singapore FTAs. EIA hopes that the Chile and 
Singapore FTAs are only the first of many important market-opening 
agreements reached using this grant of trade negotiating authority in 
order to further the cause of free trade, which benefits EIA companies 
and the American economy.

EIA's Stake in Chile and Singapore: EIA member companies have 
particular interest in the U.S.-Chile and U.S.-Singapore FTAs. In light 
of the challenges now faced by the high-tech sector, which have 
resulted in a significant number of layoffs, securing and enhancing 
access to foreign markets is a priority for the electronics industry. 
More than one-third of the jobs in the high-tech manufacturing sector 
are supported by exports, and EIA believes the U.S.-Chile and U.S.-
Singapore FTAs can play an important role in building jobs in the 
electronics industry.

The Agreements Will Have Positive Effects in the Affected Regions: Both 
of these agreements will have benefits beyond the countries involved. 
It is EIA's hope that the Chile and Singapore agreements will pave the 
way for similar commitments by other countries, especially in Latin 
America and Asia.

Specific Benefits of the Chile and Singapore FTAs: EIA appreciates and 
recognizes the agreements' strong intellectual property rights 
protection provisions. EIA also supports the provisions in the 
agreement establishing open markets and non-discriminatory access to 
telecommunications networks. With the FTA, electronics imported from 
Singapore will no longer be subject to duties, another opportunity for 
the United States to even up tariff treatment in comparison with 
countries that already maintain reciprocal duty-free relations with 
Singapore. The FTA with Chile will also eliminate tariffs immediately 
on 85% of exports, including on key items such as computers and other 
high-tech equipment.

Areas in Need of Improvement: While EIA strongly supports approval of 
these agreements, EIA believes that the rules of origin for both 
agreements and the duty drawback provisions in the U.S.-Chile FTA are 
deserving of the Committee's attention and require revision, if not in 
these agreements then in future ones. There is a general consensus 
among EIA companies that the rules of origin for future FTAs should be 
much simpler than those negotiated in NAFTA, on which these are based. 
With respect to drawback, EIA strongly objects to the current U.S. 
negotiating objective of restricting or eliminating duty drawback in 
the Chile FTA and in each new free trade agreement while it is still 
unknown when and if tariffs will be eliminated on a global basis.

                                 
Statement of Alexander von Bismarck, Environmental Investigation Agency
1. SUMMARY AND RECOMMENDATIONS
    Mr. Chairman and Members of the Subcommittee, the Environmental 
Investigation Agency (EIA) is grateful for this opportunity to present 
recent findings relating to the U.S.-Singapore Free Trade Agreement. 
EIA has investigated international trade and its environmental 
consequences for 19 years, and is globally recognized for its expertise 
in the problems of illegal logging and trade in illegal timber, 
wildlife, and ozone depleting substances. EIA has conducted a number of 
recent investigations that describe Singapore's role in these matters, 
and has recently published the report ``Singapore's Illegal Timber 
Trade and The U.S.-Singapore Free Trade Agreement.''
Timber Smuggling
    EIA fears that the U.S.-Singapore FTA, as it stands, will trigger a 
significant increase in Singaporean controlled exports of illegally 
produced timber products into the U.S. The Office of the U.S. Trade 
Representative, which led the U.S. negotiations, points out that 
``international trade can play a role in stimulating, enabling or 
rewarding illegal activities in a number of Asia-Pacific countries 
where illegal logging (is) a significant cause of deforestation.'' \1\
---------------------------------------------------------------------------
    \1\ Office of the USTR. Draft Environmental Review. (p. 23).
---------------------------------------------------------------------------
    Our information suggests that this concern is currently 
dramatically underestimated. While a FTA could offer excellent 
opportunities to cooperate and address problems of illegal trade, 
particularly amidst current concerns over port security, such 
opportunities have so far remained unexploited. The FTA will reduce 
tariffs, which for some wood products are significant, and defines the 
customs policies that are currently allowing Singaporean companies to 
export a variety of illegal shipments into the U.S. in a dangerously 
efficient way.
    Undercover investigations by EIA and Telapak, our Indonesian 
partner organization, in April 2003 confirmed Singapore to be a central 
hub for laundering illegal shipments of Ramin, a highly valuable and 
endangered tree species found only in Indonesia and Malaysia. 
Singaporean companies play the key role in paying bribes and falsifying 
paperwork to allow illegal shipments of wood to enter the world market, 
including the U.S. Further analysis of trade data reveals that over US$ 
3 million of Ramin was imported illegally into the U.S.--without the 
required permits--from or through Singapore between September 2001 and 
July 2002. Fifty-two percent of all Ramin shipments into the U.S. 
during these ten months passed through or originated in Singapore.
Wildlife, Chemicals and Security Concerns
    Singapore has also maintained a well deserved reputation as a major 
center of illegal international trade in endangered wildlife, including 
poached elephant ivory, tiger bone, parrots and other species. An EIA 
report published last year documented the current resurgence in 
elephant ivory smuggling. In June 2002, a foreign tip-off led to the 
seizure of six tons of ivory in Singapore--the largest seizure since 
the international ivory trade ban went into effect in 1989.
    Singapore is also central to the regional Asian black market trade 
in chlorofluorocarbons (CFCs), with much of this material transiting 
through the city-state. EIA investigations reveal that Singapore 
shipped large amounts of CFCs to Nepal, itself a staging post for CFC 
smuggling into India. International trade in CFCs is strictly limited 
by the Montreal Protocol on Ozone Depleting Substances to which both 
the U.S. and Singapore are signatories.
    A variety of factors make Singapore a haven for smugglers and 
unscrupulous international trade. First, Singapore's loose and porous 
customs system offers unique opportunities to by-pass inspectors, 
manipulate cargo and paperwork. Secondly, Singapore systematically 
withholds trade data to shelter evidence that could quantify the scope 
of illegal activities occurring in and throughout its territory. 
Finally, Singapore's commitment to multilateral environmental 
agreements is superficial and its enforcement passive at best.
Remedies
    Singapore has been particularly hostile to recent U.S.-led 
international efforts to take action against illegal logging. President 
Bush has recognized the global security threat posed by illegal logging 
and has committed $50 million in new funding over the next five years. 
The State Department has played a key role in launching the most 
promising international framework to combat illegal logging, the Forest 
Law Enforcement and Governance initiative (FLEG). In September 2001, 
ten East Asian nations with the U.S. and the UK issued the Bali 
Ministerial Declaration, a historic agreement in which producing and 
consuming nations agreed to take far reaching actions to suppress 
illegal logging. Singapore has been noticeably absent from all FLEG 
negotiations.
    Concerns over Singapore's trade in illicit goods and the impact of 
this FTA must be addressed now. The U.S.-S FTA has been heralded as a 
template for future agreements and thus must benefit from a thorough 
and sober analysis of its implications. Singapore's role as a hub for 
Asian trade is set to expand as free trade agreements between Singapore 
and other Asian nations, including China and Japan, are under 
negotiation. Japan and China are the second and third largest timber 
importers respectively.
    The U.S.-Singapore FTA offers an opportunity to enter into serious 
bilateral discussions with Singapore to tackle the problem of illegal 
trade of timber, wildlife, and dangerous chemicals. Implementing 
legislation should be considered as a means to support regional, 
bilateral and domestic enforcement initiatives.
    Singapore's example as a gateway of illegal timber into the U.S. 
must also focus our attention on desperately needed legislation to stop 
the import of illegally sourced timber. In April the `Clean Diamond 
Trade Act' was passed to stop the conflict diamond trade. The trade in 
illegal and conflict timber is equally destructive to the global 
security and the environment and must be tackled next.
RECOMMENDATIONS
    1. LThe U.S. should enter into a bilateral agreement with Singapore 
as an annex to the Free Trade Agreement to establish a licensing system 
for legally produced timber and to eliminate trade in illegally 
produced timber and timber products.
    2. LThe U.S. should establish an enforcement task force to work in 
close cooperation with a new parallel Singapore government enforcement 
body to share information, promote coordination and proactively target 
environmental crimes involving trade in illegal timber, wildlife 
products and ozone depleting chemicals linked with import, export and 
transshipment through Singaporean territory.
    3. LThe U.S. should facilitate the establishment of a regional 
enforcement body with Singapore and other important timber producing, 
consuming and processing countries in the Asia Pacific region to target 
trade in illegally produced timber and offer to provide technical and 
training assistance to the member states of the new body.
    4. LThe U.S. should use the provisions of the U.S.-Singapore Free 
Trade Agreement to ensure that Singapore upgrades its Customs laws and 
regulations to close loopholes that allow easy movement of goods into 
Customs ports, warehouses and airports without proper scrutiny and to 
prohibit the repackaging and processing of goods in transshipment or 
under Customs control in Singapore. The U.S. should ensure that 
citizens also have the ability to bring complaints to the dispute 
resolution mechanism.
    5. LThe U.S. should encourage Singapore to:
       Lformally endorse the Bali Ministerial Declaration of 
the Forest Law Enforcement and Governance (FLEG) and an action plan to 
adhere to FLEG commitments.
       Ladopt a policy of transparency concerning its trade in 
environmentally sensitive goods and ensure transparent access to key 
data concerning trade with Indonesia, timber trade, wildlife products 
and data concerning companies authorized to trade in ozone depleting 
chemicals.
    6. LThe U.S. should ban all trade in Ramin and encourage all other 
consuming countries to suspend trade in Ramin indefinitely. The U.S. 
should actively prosecute the companies, especially the repeat 
offenders, that have been documented to be importing Ramin into the 
U.S. without proper permits.
    7. LFinally, the United States must develop new legislation to stop 
the import, export, trans-shipment, purchase, or sale of illegally 
produced timber. Ongoing initiatives, such as those in the EU, offer 
templates. The U.S. should commission a study on the implementation of 
such legislation in the U.S.
2. BACKGROUND AND EVIDENCE
The U.S. and the Global Illegal Logging Problem
    Illegal logging takes place when timber is harvested, transported, 
bought or sold in violation of national laws and is widespread in most 
of the major timber producing and exporting countries of the world. In 
some cases illegal logging represents more than half of production, and 
large quantities of illegally sourced wood find their way to the major 
markets of the U.S., Europe, Japan and China in the form of timber, 
furniture or other products.
    Illegal logging has major economic implications. It is estimated 
that illegal logging on public lands worldwide causes annual losses in 
revenues and assets in excess of $10 billion.\2\ All too often money 
which should be going to fund schools, hospitals and clean drinking 
water in developing countries is instead finding its way into the 
pockets of illegal timber barons, corrupt enforcement personnel and 
politicians. The wood furniture, blinds, or flooring made from illegal 
tropical logs can then be sold in the U.S. at a discount price, 
undercutting the U.S. timber industry.
---------------------------------------------------------------------------
    \2\ Ibid.
---------------------------------------------------------------------------
    Overall, the U.S. has demonstrated a major commitment to promoting 
international measures to counter illegal logging. Despite the variety 
of positive initiatives by the U.S. Administration to address illegal 
logging, no policies or programs have emerged that will close or even 
restrict its massive domestic market to imports of illegally produced 
timber.
    The U.S. has not concluded any bilateral or multiparty agreements 
with any of the major timber producers in Asia, while the UK and China 
have reached separate bilateral agreements with Indonesia to facilitate 
action programs against illegal logging and trade in illegally cut 
timber. Japan is also currently negotiating a similar agreement with 
Indonesia.
    The U.S. is the world's largest importer and consumer of timber and 
wood products.\3\ In 2001, the U.S. imported wood and wood products 
valued at around $25 billion a year.
---------------------------------------------------------------------------
    \3\ FAO, State of the World's Forests, 2001.
---------------------------------------------------------------------------
Case Study: Ramin
    Many tropical forests in East Asia are under threat from human 
induced causes, but certain high value species are specifically 
targeted for the international timber trade. One such species is Ramin 
(Gonystylus spp.), imported to the U.S. for picture and futon frames, 
moldings, pool cues and other products.
    In 2001, the Indonesian government identified Ramin as being so 
threatened by the illegal practices of powerful timber barons that it 
turned to the international community for help and banned all export of 
the species through the Convention on International Trade in Endangered 
Species (CITES) effective on August 6th, 2001. Selective illegal 
logging of high value export species like Ramin is often the first step 
leading to forest clearance, as the tracks and roads built to access 
and remove the timber become entryways for further illegal cutting, 
hunting and burning.
    Other than for a small amount of wood originating with a company in 
Sumatra which has been certified as sustainable, no Ramin has been 
granted an export permit by the Indonesian government since December 
31, 2001. Ramin is also found in lesser amounts in Malaysia, but all 
shipments of Ramin entering the U.S. now require CITES permits and 
Certificates of Origin.
    In January 2002, more than five months after Indonesia banned the 
export of Ramin, Singapore added Ramin to Schedule II of its Endangered 
Species (Import and Export) Act, which implements CITES commitments in 
Singapore. The extent of continued smuggling in the species shows that 
Singapore has failed to enforce its own environmental legislation, as 
required by the U.S.-Singapore Free Trade Agreement, allowing 
Singaporean companies to reap significant profits in the process.
Singapore's $3 Million of Illegal Ramin Exports to the U.S.
    EIA compared data on U.S. Ramin imports obtained from the U.S. 
Department of Commerce commercial ``Port Import Export Reporting 
Service'' (PIERS) and CITES permits for Ramin obtained under the U.S. 
Freedom of Information Act on U.S. for a ten month period between 
September 2001 and July 2002.\4\
---------------------------------------------------------------------------
    \4\ PIERS imports data and FOIAed CITES permits from USMA.
---------------------------------------------------------------------------
    The data revealed that the U.S. imported at least 324 shipments 
containing products made of Ramin between September 2001-July 2002 with 
a total declared value of approximately $11,388,746.\5\ This can be 
expected to be a fraction of total Ramin imports to the U.S. since it 
only includes shipments labeled as `Ramin,' while many are labeled only 
by their product name.
---------------------------------------------------------------------------
    \5\ Ibid.
---------------------------------------------------------------------------
    167 of these 324 shipments (51.5 percent of the total), either 
originated in Singapore, or used Singapore as a trans-shipment point. 
Of the 167 Singaporean shipments, 80 percent (or 134 shipments) valued 
at just over $3 million did not have any CITES permits or 
documentation.
    PIERS data records over 600 cubic meters of Ramin products arriving 
in U.S. ports that originated in Singapore between August 2001 to June 
2002.\6\ U.S. Customs, however, did not have a single Singaporean CITES 
permit on file for Ramin imports occurring between September 2001 and 
July 2002.\7\ PIERS data further recorded 30 Ramin shipments from 
Indonesia worth US$ 700,000, that entered the U.S. after passing 
through Singapore--all without CITES permits.
---------------------------------------------------------------------------
    \6\ Ibid.
    \7\ Ibid.
---------------------------------------------------------------------------
The Role of Singaporean Timber Companies in Illegal Trade
    EIA and Telapak have undertaken numerous investigations in 
Singapore, Malaysia and Indonesia over the past five years and have 
gathered extensive information which demonstrates the central role 
Singapore plays in the illegal timber trade throughout Southeast Asia 
and globally. The most recent investigation in April 2003 detailed some 
of the particular smuggling mechanisms.
    Timber processors, traders and agents located in Singapore act as 
the key enablers of the region's illegal timber trade. More than 150 
companies are registered on the Singapore Yellow pages as timber 
importers and/or exporters. The majority are based in Kranji and the 
industrial estate of Sungei Kadut in the north of the island.
    In April 2003, EIA undercover investigators conducted telephone 
surveys and visited import/export companies in the Sungei Kadut area. 
During a visit to one such company, two managers explained their 
smuggling methods on hidden camera. They called themselves `mafia' and 
`smugglers' and one proclaimed that `drug smuggling (is) no good, but 
timber (is) okay.' He was counting upwards of US$ 10,000 in cash at the 
time. They explained the following smuggling strategies:

     L`Illegal payments' (in their words) are made to obtain 
permits that are accepted by Singaporean Customs.
     LPermits for 100 tons are used to smuggle in up to 500 
tons of Ramin per shipment into Singapore.
     LThe Ramin is moved out of Free Trade Zones and kept in 
storage in containers.
     LHe exports three to five containers per month to China 
under a false species name, where it is processed and about one-third 
shipped to the United States.
Singapore's Porous Free Trade Zones
    EIA and Telapak have identified the most common entry points of 
smuggled Ramin to be small landing sites within Singapore's Free Trade 
Zones (FTZs). Traditional vessels, mostly from Indonesia, dock at 
certain locations amidst supertankers and industrial cargo ships, and 
unload their cargo onto trucks using mobile cranes. It is then driven 
out of the Free Trade Zone to mills or agents who then arrange to ship 
it to the world market.\8\
---------------------------------------------------------------------------
    \8\ EIA and Telapak Internal Reports. 2002, 2003.
---------------------------------------------------------------------------
    The intent of the five FTZs in Singapore is to allow for trade with 
a minimum of regulation. The rationale is that they are secure and 
distinct from Singapore proper and therefore can be excused from 
national regulations without negative consequences. Evidence, however, 
suggests otherwise.
    In October 2002, a tip-off alerted Singaporean CITES Management 
Authority that a large shipment of Ramin had been collected in a 
warehouse on the same street as the company described above. 
Authorities found 120 tons of Ramin without CITES permits, the result 
of six separate shipments, each having avoided Customs on different 
occasions. The known entry point of these shipments is in Jurong Port, 
one of Singapore's 5 Free Trade Zones. Somehow the six illegal 
shipments, each of approximately 20 tons, avoided Customs in this area 
and reached the heart of the sawmill district in the North of the 
Island. This seizure is the only Ramin seizure made to date by 
Singaporean authorities.
    EIA and Telapak visited this site in April 2003 and immediately 
encountered a shipment of approximately 20 tons of sawn Ramin timber 
being unloaded from a wooden ship flying an Indonesian flag and manned 
by Indonesian sailors. When Singaporean CITES officials present asked 
for a permit, the captain produced a document that purported to show 
the timber was from Malaysia, and the shipment was allowed to continue. 
The Indonesian flag and crew and the low quality of wood, however, are 
strong indicators that this was also an illegal shipment from 
Indonesia.
    The U.S. requires CITES listed species or products in transshipment 
to be accompanied by CITES permits. In contrast, Singapore Customs 
policy does not require any Customs permit for goods which are 
``discharged along wharves directly into a Free Trade Zones (sic).'' 
\9\ Recent EIA investigations have shown such FTZs to be porous at 
best. Lax transshipment regulations and insecure FTZs allow protected 
species like Ramin, African elephant ivory, tiger bone, and endangered 
parrots to be shipped through Singapore without regulation, control or 
enforcement by the Singaporean authorities and questions
---------------------------------------------------------------------------
    \9\ Customs PM 001.74.08. Circular No. 4/98. Issued February 28, 
1998. Available online at: www.gov.sg/customs. (See also: ``Singapore 
Customs Policy Overview'' available online at: www.gov.sg/customs.)
---------------------------------------------------------------------------
Batam and Bintan
    The Integrated Sourcing Initiative (ISI) of the U.S.-Singapore Free 
Trade Agreement allows another country to benefit from what should be a 
bilateral agreement. In the case of the U.S.-S FTA, some 100 items of 
information technology products produced on the Indonesian islands of 
Batam and Bintam will be allowed to benefit from the provisions of the 
FTA. Products produced on these Indonesian islands will be considered 
as originating in Singapore.
    Other countries have already seen the potential advantages that the 
FTA confers upon products produced on Bintam and Batam. Chairman of the 
Batam Industrial Development Authority (BIDA), Ismeth Abdullah, has 
stated that following the U.S.-S FTA signing on May 6th, companies from 
other countries like South Korea, Japan, and Taiwan had also expressed 
interest in investing in Batam and Bintam.\10\
---------------------------------------------------------------------------
    \10\ ``U.S.-Singapore Trade Pact Good News for Indonesia.'' The 
Jakarta Post. May 12, 2003.
---------------------------------------------------------------------------
    Currently the FTA leaves open the possibility of other products and 
countries being included under ISI provisions. This comes at a time 
when customs enforcement capacity is overwhelmed by smugglers 
obfuscating the origin of their products, and ships have been seized 
leaving Batam with large shipments of illegal wood (see timeline 
below).
Transparency
    Singapore distinguishes itself regionally by refusing to release 
data that may point to the questionable trading practices of 
Singaporean companies. Singapore recently drew the ire of Indonesia 
when it refused to fully release trade statistics between the two 
nations. Although Indonesia is estimated to be the sixth largest 
trading partner with Singapore, it is omitted from the list of 149 
trade partners in the Singapore Trade Statistics. The trade data that 
had previously been released point to a great discrepancy between 
Indonesian and Singaporean records. Singaporean statistics estimated 
non-oil imports from Indonesia to be $7.41 billion, while Indonesian 
numbers put the value at $4.6 billion.\11\
---------------------------------------------------------------------------
    \11\ ``Discrepancies in RI-Singapore Trade Figures Seen as a Result 
of Smuggling.'' The Jakarta Post. June 12, 2003.
---------------------------------------------------------------------------
    Analysts in the Indonesian press have said that the Singaporean 
government is purposely keeping the real trade data a secret to protect 
``certain vested interest groups'' that have continued contraband trade 
with the country, including Indonesian military figures.\12\
---------------------------------------------------------------------------
    \12\ Ibid.
---------------------------------------------------------------------------
``Conflict Timber''
    The province of Aceh, Indonesia has been beset by violent and 
bloody conflict for the last twenty some years. An Aceh independence/
separatist movement led by the Free Aceh Movement (GAM) has tangled 
with the Indonesian military (TNI) in increasingly bloody battles, the 
most recent during the military state imposed by President Megawati a 
little over a month ago. Both GAM and TNI have, in the past, funded 
their efforts against each other through illegal logging, drug running 
and prostitution.\13\
---------------------------------------------------------------------------
    \13\ ``Black Economy Threatens Aceh Peace.'' The Jakarta Post. 
March 25, 2003.
---------------------------------------------------------------------------
    Past EIA investigations have documented the damage caused by 
illegal logging in the Leuser ecosystem and National Park, in Aceh and 
parts of Northern Sumatra. Indications are that trade of illegal timber 
may be continuing despite the current battles raging in Aceh, as the 
Jakarta Post reported that ships going to and from Singapore and 
Malaysia (just over the Straits) are allowed to continue their 
lucrative trade with Aceh.\14\ Ships carrying illegal logs from the 
Leuser ecosystem have already been intercepted several times after 
leaving Acehnese ports (see timeline below).
---------------------------------------------------------------------------
    \14\ ``Sea Traffic Unaffected by Closure of Aceh Waters.'' The 
Jakarta Post. June 5, 2003.
---------------------------------------------------------------------------
    Currently, Singapore offers excellent conditions for `cleansing' 
such timber of its origins and shipping it to the U.S. A free trade 
agreement without provisions to address illegal and conflict timber 
will make these conditions even more enticing.
Recent Examples of Singaporean Involvement in Illegal Timber Trade
    The following are some recent examples of Singapore's role in the 
international smuggling of illegally cut timber. This is only a partial 
list of available information in the public domain from a vast array of 
published sources.

     LApril 2003: Singaporean company offers EIA and Telapak 
undercover investigators smuggled Ramin from Indonesia and explains how 
illegally obtained permits for small amounts of the wood are used as 
cover to smuggle in as much as five times the amount. The wood is then 
shipped to China under false names, where it is processed and a portion 
is shipped to the U.S.\15\
---------------------------------------------------------------------------
    \15\ EIA and Telapak Internal Reports. 2002, 2003.
---------------------------------------------------------------------------
     LFebruary 2003: Singapore flagged and owned vessel Qing 
Ann was detained off Aceh carrying 4,500m3 of illegal logs.\16\
---------------------------------------------------------------------------
    \16\ Ministry of Forestry official, pers.comm., 2003.
---------------------------------------------------------------------------
     LEarly 2003: Singapore flagged and owned vessel, Asean 
Premier, detained near Sorong, West Papua, with illegal merbau logs. 
Still under detention.\17\
---------------------------------------------------------------------------
    \17\ Ministry of Forestry, 2003.
---------------------------------------------------------------------------
     LDecember 2002: Indonesian navy seizes 44 containers of 
illegal wood from a barge in the waters off Belakang Padang in Batam 
island, Riau province--twenty kilometers across the water from 
Singapore.\18\
---------------------------------------------------------------------------
    \18\ Antara, 14th Dec 2002.
---------------------------------------------------------------------------
     LDecember 2002: Indonesian armed forces seize three ships 
in waters off Karimun island in Riau carrying 225 tons of illegal 
processed wood including Kempas. The ships, the KM Sinar Belaras, KM 
Fendi Indah, and KM Kayu Lestari II, had come from the Sumatran 
mainland and were carrying the wood to Singapore. A fourth ship evaded 
capture and escaped to Singapore.\19\
---------------------------------------------------------------------------
    \19\ Riau Post, 31st Dec 2002.
---------------------------------------------------------------------------
     LOctober 2002: Indonesian Navy seizes tugboats carrying 85 
containers of illegal processed bengkirai timber in Riau. The wood was 
estimated to be worth more than U.S. $9 million. The ships were on 
their way to Singapore.\20\
---------------------------------------------------------------------------
    \20\ Jakarta Post, October 2002.
---------------------------------------------------------------------------
     LOctober 2002: Singaporean authorities seize 120 tons of 
Ramin from a Singaporean timber importer which had been imported 
without CITES permits.\21\
---------------------------------------------------------------------------
    \21\ Pers.Comm.--AVA CITES Management Authority, Singapore, April, 
2003.
---------------------------------------------------------------------------
     LOctober 2002: Two Singaporean timber companies openly 
admit to smuggling Ramin from Indonesia to Singapore and re-exporting 
it to the U.S. and Europe without CITES permits.\22\
---------------------------------------------------------------------------
    \22\ EIA internal investigation.
---------------------------------------------------------------------------
     LJune 2002: Customs agents in Batam, an Indonesian island 
to be included in the FTA under the ISI, seize two more ships carrying 
illegal sawn Ramin and destined for Singapore. The two ships were 
carrying a total of 105m3 of sawn Ramin.\23\
---------------------------------------------------------------------------
    \23\ Ibid.
---------------------------------------------------------------------------
     LJune 2002: 75 tons of Ramin and 130 tons of other wood is 
seized by the Indonesian navy from three ships in waters off Batam 
island, near Singapore.\24\
---------------------------------------------------------------------------
    \24\ Ibid.
---------------------------------------------------------------------------
     LJanuary 2002: The Singapore owned vessel Ever Wise 
escaped detention off Sorong, Indonesia and was subsequently arrested 
in China. Fake documents were found for illegal shipment of Ramin.\25\
---------------------------------------------------------------------------
    \25\ Indonesian Ministry of Forestry, 2002.
---------------------------------------------------------------------------
     LJanuary 2002: The Singapore owned vessel Sukaria was 
detained off Sorong carrying a shipment of merbau. It was subsequently 
released without explanation.\26\
---------------------------------------------------------------------------
    \26\ Indonesian Ministry of Forestry, 2002.
---------------------------------------------------------------------------
     LDecember 2001: A Kompas news article quotes Djoko 
(Chairman of East Kalimantan MPI--a timber industry association) saying 
that ``the wood industry in Jakarta is importing Ramin from Singapore 
which has no Ramin forest.'' He states illegal Indonesian Ramin is 
being smuggled to Singapore, legalized and shipped back to wood product 
factories in Indonesia.\27\
---------------------------------------------------------------------------
    \27\ Kompas, December 2001.
---------------------------------------------------------------------------
     LNovember 2001: Singapore flagged and owned vessel 
Mandarin Sea was detained off Central Kalimantan, carrying 12,000m3 of 
illegal logs. Linked to Tanja Lingga, implicated in illegal logging in 
Tanjung Puting National Park.\28\
---------------------------------------------------------------------------
    \28\ ``Above the Law.'' EIA Report 2002.
---------------------------------------------------------------------------
     LMarch 2001: 100 tons of processed illegal Ramin intended 
for Singapore was seized by Riau police aboard two boats. Two boat 
captains were arrested. One of the captains states 45 boats go back and 
forth to Singapore each day carrying processed timber, which would 
suggest traffic of 100,000 cubic meters a month.\29\
---------------------------------------------------------------------------
    \29\ Gamma, May 1, 2002; Riau Pos 31st Dec 2002.
---------------------------------------------------------------------------
     LAugust 2000: A cargo ship was stopped by Indonesian 
authorities off the coast of Riau province in Indonesia, on its way to 
Singapore, with illegally sourced Meranti.\30\
---------------------------------------------------------------------------
    \30\ Jakarta Post, August 19, 2000.
---------------------------------------------------------------------------
     LAugust 2000: An NGO investigation discovered barges being 
loaded with illegal Ramin in Kuala Gaung in Riau province, where there 
were no legal concessions. The barges bear the logo of a Singaporean 
company.\31\
---------------------------------------------------------------------------
    \31\ Pers. comm. Hakiki, February 2001; KEA website.
---------------------------------------------------------------------------
     LMay 2000: Indonesian port officials forced by local 
activists to order a cargo ship bound for Singapore back to Pontianak, 
Indonesia. Only seven out of the 42 containers of timber onboard had 
proper documentation.\32\
---------------------------------------------------------------------------
    \32\ Jakarta Post, May 23, 2000.

                                 
   Statement of Dan Stein, Federation for American Immigration Reform
Summary
    The Singapore and Chile Free Trade Agreements (FTAs), if they enter 
into force, contain provisions that will preclude the adoption of 
needed legislative changes in the operation of intra-company transfers 
(L-1 visas) program. The issue at stake is the FTA's restrictions on 
correcting abuses in the L-1 visa program. At present, this visa 
category is being used to sacrifice U.S. jobs to foreign workers. The 
abuse has been growing, and it has contributed to a record level of 
unemployment for U.S. high-tech workers. FAIR considers that this 
provision of the FTAs is so harmful that Congress should reject the 
Singapore and any other FTA with similar provisions and require the 
Administration to renegotiate them to retain flexibility for Congress 
to amend the law to protect U.S. jobs from this abuse.
Background on the L-1 Visa Program
    The intra-company transfer provision of the immigration law is a 
longstanding visa category designed to allow transnational firms, 
whether U.S. or foreign, with operations both in the United States and 
abroad to exchange personnel on a temporary basis. The primary impetus 
for the program was to allow for the mobility of management personnel, 
but the program also provides for personnel with ``specialized 
knowledge'' of the company's operations. Visas issued under this 
category are valid for seven years for management and supervisory 
personnel and for five years for technical staff.
    The number of these L-1 visas issued has been steeply rising in 
recent years. During the late 1980s and early 1990s, the number of 
visas was between 60-70,000 per year. Then during the 1990s, the number 
of visas began to surge: 1992--75,315; 1994--98,189; 1996--140,457; 
1998--203,255; 2000--294,658. In 2001, the last year for which the INS 
(now DHS) has released statistics, the number of L-1 visas issued was 
328,480. This meteoric rise in L-1 visa issuance highlights the fact 
that at present there is no limit on the number of these visas that can 
be issued in a given year.
    Increasingly, according to news accounts, (see ``Special Visa's Use 
for Tech Workers is Challenged,'' New York Times, May 29, 2003) the 
intra-company transfer L-1 visa is being used to bring high-tech 
workers to do U.S. jobs similar to the temporary worker H-1B visa 
program that currently is capped at 195,000 visas per year. However, 
unlike the H-1B visa, the L-1 visa does not require that the employer 
pay the worker in the U.S. the prevailing wage for the type of work 
being performed. That means that a subsidiary of a company 
headquartered in India, for example, can transfer its employees who are 
computer programmers to a subsidiary incorporated in the United States 
and continue to pay the workers Indian wage rates while they may be 
doing subcontract work for a U.S. company, such as Intel. Thus the 
Indian subcontractor can underbid a competitor paying prevailing wages, 
and Intel can lay off higher paid U.S. computer programmers.
    Another difference between the H-1B visa program and the L-1 visa 
program is that reforms adopted in 2000 provided that companies that 
are ``H-1B dependent,'' i.e., that have a significant share of their 
total workforce composed of these foreign temporary workers, must make 
attestations that they have attempted to hire U.S. workers and that 
they had not and would not lay off any American workers in the near 
term to replace them with foreign workers. This provision was estimated 
to apply to only about 50 employers in the country. Even this minimal 
protection for U.S. workers is absent from the L-1 visa program.
    Because of the growing size of the L-1 visa program and the growing 
use of it to take the jobs of U.S. workers, who often have been 
required by their employers to train their foreign replacements, and 
because of the fraud in the program noted by the General Accounting 
Office three years ago, Rep. John Mica has introduced legislation (H.R. 
2154) to reform the L-1 visa program. Other Members, such as Rep. Peter 
DeFazio, have also publicly expressed their concern with regard to the 
operation of the visa program.
Effect of the Singapore and Chile Free Trade Agreements
    On May 6, 2003, President Bush signed the Singapore FTA as an 
Executive Agreement. As it is not a treaty, it does not require Senate 
ratification and will go into effect unless Congress initiates action 
disapproving the agreement.
    The Singapore FTA currently before this body for its consideration 
contains provisions that relate to both the H-1B temporary worker visa 
program and the L-1 intra-company transfer visa program. We have been 
told that the Chile FTA which has been negotiated and is due to be 
signed this month, includes similar provisions. Annex 11A, Section III 
(2) of the Singapore FTA (dealing with Intra-Company Transferees) 
states as follows:

    A Party shall not:

      a. Las a condition for temporary entry under paragraph 1, require 
labor certification tests or other procedures of similar effect; or
      b. Limpose or maintain any numerical restriction relating to 
temporary entry under paragraph 1.

    This section has the effect of diminishing the ability of Congress 
to abolish or significantly restrict the program, if it should decide 
to do so because the L-1 visa program creates unfair competition for 
U.S. workers. Specifically, the agreement language precludes the 
adoption of a labor market test as to whether U.S. workers with similar 
qualifications are available to fill the job, and it bans the adoption 
of any numerical limit on the program, such as the one for the H-1B 
visa program. A provision similar to the restriction on amending the L-
1 program is contained in Annex 1603 of the NAFTA agreement. It seems 
clear that unless Congress acts to oppose this restriction on its 
ability to amend these programs to protect U.S. jobs, U.S. trade 
negotiators will agree to an unending stream of similar restrictions on 
Congressional legislative action.
    Although the FTA applies only to operations between Singapore and 
the United States, the existence of this permanent freezing of the 
current harmful provisions of the L-1 visa represents a major obstacle 
to efforts to reform the visa program. Foreign companies could easily 
establish a subsidiary in Singapore--or in Chile, or in Central 
America, where current negotiations may result in similar agreements--
to make use of the provision even if Congress were to decide to change 
the visa program by, for example, establishing a numerical limit, or 
including a labor certification test to assure that the program not be 
used to replace U.S. workers.
    In contrast to the effect of the FTA in locking into place the 
current no-holds-barred provisions for the L-1 visa program, the 
Administration carefully provided for the ability of Congress to 
tighten protections for U.S. workers from the operation of the H-1B 
visa program. By an exchange of letters dated May 6, 2003, the U.S. 
notified Singapore that, ``The United States intends to require all 
business persons seeking entry as professionals to the United States 
under the terms of the Agreement to present an attestation of 
compliance with certain labor and immigration laws from an employer in 
the United States.''
FAIR's Position
    FAIR strongly believes that the L-1 visa program needs to be 
significantly amended along lines that are specifically proscribed by 
the Singapore FTA--and the Chile FTA, as we understand it. It, 
therefore, would constitute a hindrance to that reform effort for the 
Congress to accede to the Singapore FTA as it is currently written. 
Accordingly, FAIR requests that this Committee act to deny accession to 
the Singapore FTA and to instruct the Administration to renegotiate the 
portion of the agreement concerning intra-company transfers or simply 
to delete that section.

                                 
                 Statement of High-Tech Trade Coalition
    As one of the leading contributors to the U.S. balance of trade, 
U.S. information technology (IT) and software makers have contributed a 
trade surplus of $24.3 billion in 2002. As a leading engine of global 
economic growth, the industry contributed more than a trillion dollars 
to the global economy in 2002, according to a recent study conducted by 
IDC for the BSA. In fact, in the U.S. alone, the IT industry 
contributed 2.6 million jobs and more than $400 billion to the U.S. 
economy, generating $342 billion in tax revenues in 2002.
    Over 50 percent of revenues for most of the leading U.S. high 
technology companies are generated outside the U.S. If we are to 
continue the positive contributions of this industry to the U.S. 
economy, it is critical that free trade agreements (FTAs) establish the 
highest standards of intellectual property protection. It is also 
critical that FTAs provide an open trading environment that promotes 
tariff-free high-tech products, facilitates barrier-free e-commerce and 
growth of the information technology services sector.
    The Singapore and Chile FTAs significantly advance the 
establishment of strong intellectual property protection, tariff-free 
and barrier-free e-commerce in Singapore and Chile, and we commend the 
Administration and Congress for these achievements. Without the 
leadership provided by Ambassador Zoellick and his team and Congress's 
thoughtful guidance, these achievements would not have been possible.
    The importance to the American high-tech industry of Congressional 
approval of the Trade Promotion Authority (TPA) cannot be 
overestimated. The TPA legislation set the standard of strong IP 
protection and trade liberalization among our trading partners in all 
trade contexts including FTAs, FTAA and the World Trade Organization 
(WTO).
    With the successful conclusion of these FTAs, and continued 
progress within the WTO Doha Round of negotiations, including important 
talks on e-commerce and trade in services, we feel confident that the 
U.S. will achieve its objectives in promoting barrier-free e-commerce 
and trade liberalization among our trading partners.

Intellectual Property (IP) Provisions in Singapore and Chile FTA:

    For the high-tech industry, strong intellectual property protection 
is essential to foster continued innovation and investment. This is 
particularly important as copyright infringements and software piracy 
cost the industry $13 billion in lost revenues in 2002.
    In Singapore and Chile, the IT industry has contributed 
significantly to their economic growth--$1.2 billion in Singapore and 
$340 million in Chile in 2002. However, both countries continue to have 
high piracy rates--48 percent in Singapore and 51 percent in Chile, 
costing the industry $32 million in Singapore and $45 million in Chile 
in lost revenues in 2002.
    To promote strong IP protection in a digital world, it is essential 
that our trading partners establish the level of copyright protection 
that complies with WTO Agreement on the Trade Related Aspects of 
Intellectual Property Rights (TRIPS) and the World Intellectual 
Property Organization (WIPO) Copyright Treaty (WCT). It is also 
essential that our trading partners fully comply with and enforce these 
obligations.
    The mutual obligations under the U.S.-Singapore and Chile FTAs 
generally set out among the highest standards of protection and 
enforcement for copyrights and other intellectual property yet achieved 
in a bilateral or multilateral agreement, treaty or convention.
    Both agreements recognize the importance of strong intellectual 
property rights protections in a digital trade environment by building 
on the obligations in the TRIPS Agreement, and ensuring that works made 
available in digital form receive commensurate protection by 
incorporating the obligations set out in the WIPO Copyright Treaty.
    Some of the highlights in both agreements include:

     LProvisions to promote strong intellectual property rights 
protection and foster electronic commerce by maintaining the balance 
reflected in the U.S. Digital Millennium Copyright Act. Copyright law 
is clarified to permit the exploitation of works and effective 
enforcement of rights in the online environment, while remedies against 
Internet service providers are limited for infringements they do not 
control, initiate or direct.
     LRequirements to establish prohibitions against the 
circumvention of effective technological protection measures employed 
by copyright owners to protect their works against unauthorized access 
or use, coupled with the ability to fashion appropriate limitations on 
such prohibitions, again consistent with those set out in the Digital 
Millennium Copyright Act.
     LThe application of the reproduction right of a copyright 
owner to permanent as well as temporary copies.
     LRecognition that robust substantive standards for the 
protection of intellectual property, to be meaningful, must be coupled 
with obligations providing for the effective enforcement of rights, in 
both civil and criminal contexts. In this regard, key provisions of the 
agreements provide for the establishment of statutory damages at levels 
appropriate to deter further infringement, civil ex-parte measures to 
preserve evidence of infringement, strong criminal penalties against 
the most pervasive form of software piracy--corporate and enterprise 
end user piracy; and strong border measures to combat cross-border 
trade in infringing goods.
     LObligating governments to lead by example by using only 
legitimate and licensed software.

    As the landscape of international copyright policy continues to 
evolve, a relatively new issue has emerged on the international scene 
that could have an impact on American high-tech exports. A number of 
countries, especially in Europe, are imposing levies (or surcharges) on 
hardware and software products, which by some industry estimates could 
cost up to one billion dollars per year, hurting both exports and the 
profitability of the American technology industry. We hope that the use 
of levies will not be encouraged through future trade agreements.

Trade in Information Technology (IT) Services

    During the past decade, a vast array of new e-commerce and 
information technology services have been developed including data 
storage and management, web hosting, and software implementation 
services. Given the increasing trend for technology users to purchase 
information technology solutions as a combination of goods and 
services, full liberalization in this area is more important than ever.
    It is critical that our trading partners provide full market access 
and national treatment in information technology services including 
those that are delivered electronically. It is also important that no 
barriers are created for evolving information technology services.
    In both the Singapore and Chile agreements, parties agreed to 
provide full market access and national treatment on services. Both 
agreements adopted a negative list approach, which means that new 
services will be covered under the agreement unless specific 
reservations were made in the agreement.
    We commend this approach and the achievement in both agreements 
where liberalization of information technology services was achieved 
without any commercially significant reservations, leading to the 
promotion of barrier free trade in services with our trading partners.

E-Commerce in Singapore and Chile FTA

    With over 500 million people using the Internet worldwide, the 
promotion of barrier free cross-border e-commerce is critical in 
encouraging continued e-commerce growth and development. In fact, the 
trade treatment of software delivered electronically is one of the most 
important issues facing the software industry and it is essential that 
software delivered electronically receive the same treatment under the 
trade laws as software traded on a physical medium.
    We are quickly moving to a world where online distribution is the 
predominant way software is acquired and used. According to a BSA CEO 
study, by 2005, 66 percent of all software is expected to be 
distributed online. This will create enormous efficiencies as the 
newest, most up-to-date software is delivered across borders at a lower 
cost and more quickly than when delivered in a physical form, to the 
benefit of both customers and software developers.
    The E-commerce chapters in both the Singapore and Chile FTAs 
recognize, for the first time, the concept of ``digital products'' in 
terms of trade. The chapters also establish requirements that further 
promote barrier-free e-commerce, essential in promoting growth and 
development of the IT industry.

     LIn both agreements, the trading partners agreed not to 
impose customs duties on digital products. This provision is consistent 
with the WTO Moratorium on Customs Duties on Electronic Transmissions. 
The inclusion of this provision is critical in further promoting the 
growth of cross border e-commerce.
     LBoth agreements also introduce the concept of ``digital 
products'' as the means to ensure broad national treatment and MFN 
nondiscriminatory treatment for products acquired on-line. This is 
critical as it recognizes, for the first time, the evolution and 
development of digital products during the last twenty years and 
addresses the need for predictability in how digital products are 
treated by trade law.
     LWith respect to the physical delivery of digital 
products, in both agreements, the parties agreed to apply customs 
duties on the basis of the value of the carrier medium. This provision 
is essential as valuation on content results in highly subjective 
assessments of projected revenues.
     LThe parties also agreed to cooperate in numerous policy 
areas related to e-commerce, further advancing the work on e-commerce 
with our trading partners.

Information Technology: Tariff Measures

    The Uruguay Round agreements on tariff reduction, and the 
subsequent Information Technology Agreement (ITA) within the WTO, has 
made significant contributions by addressing the issue of barriers to 
trade created by high tariffs. Tariffs on information technology 
products are still very high in some countries, creating a substantial 
impediment to trade.
    In order to foster a barrier free trade environment, it is critical 
that our trading partners sign and implement the ITA or its equivalent. 
It is essential that our trading partners eliminate or phase out 
existing tariffs applied to information technology products since 
tariffs act as a counterproductive burden that raises the cost of the 
very technology needed to be competitive in the digital economy.
    In both FTAs, Singapore and Chile have agreed to liberalize tariff 
barriers. Singapore is already a signatory to the ITA. Chile, which is 
not a signatory to the ITA, has agreed to eliminate tariffs on most 
high-technology products within the next 4 years. The tariff reduction 
measure in the Chile agreement also sets an important precedent for the 
Free Trade Area of the Americas (FTAA), which would significantly 
increase the high-tech industry's ability to export its products to 
Brazil, one of the largest markets for technology products in Latin 
America.
    Finally, both agreements have made important commitments in the 
areas of customs administration, technical barriers to trade and 
transparency as well as in the area of telecommunication services. All 
of these provisions will help facilitate the cross-border flow of high-
tech products and services, making our companies more competitive.
    In conclusion, the U.S. free trade agreements with Singapore and 
Chile set new benchmarks in progress toward the promotion of strong 
intellectual property rights protection, full liberalization of trade 
in information technology services and barrier free e-commerce as well 
as tariff elimination among our trading partners. In these agreements, 
new baselines have been set that should lead to significant market 
opportunities for the U.S. high-tech industries in the years ahead. We 
commend the achievements made in both agreements and we strongly 
support their passage in Congress.

                                 
           Statement of National Association of Manufacturers
    The National Association of Manufacturers (NAM) strongly supports 
rapid approval by the House and Senate of the recently signed free 
trade agreements (FTAs) with Chile and Singapore. Both agreements 
provide concrete market-opening benefits for U.S. manufacturers, 
establish world-class precedents for promoting U.S. investment, 
intellectual property rights and other key disciplines, and boost 
momentum for further progress in other bilateral, regional and 
multilateral trade negotiations.
    The NAM represents 14,000 U.S.-based manufacturing companies, 
including 10,000 small and medium enterprises. The NAM views the 
pursuit of trade-liberalizing agreements under Trade Promotion 
Authority to be in the national interest of the United States and in 
the economic interest of its members. Given the general openness of the 
U.S. market, trade negotiations should be pursued aggressively to level 
the playing field by knocking down tariffs and other non-tariff 
barriers that help keep U.S. manufactured exports out of foreign 
markets.

The U.S.-Singapore FTA

    Singapore's applied tariffs on the vast majority of industrial 
goods are already at zero. However, Singapore's legally bound WTO 
tariff rates for some sectors are greater than zero. The FTA binds 
Singapore's bound rates at zero, a measure that the NAM views as highly 
desirable because it ensures that Singapore's tariffs on U.S. exports 
cannot be raised in the future.
    Most U.S.-Singapore trade is in high technology sectors, and almost 
two-thirds of the trade is intra-company trade. U.S. companies have 
over $24 billion invested in Singapore, and U.S. firms in Singapore 
account for 60 percent of total U.S. manufacturing investment in all of 
Southeast Asia. Furthermore, U.S. investors purchase over 40 percent of 
all U.S. exports to Singapore. The heavy presence and critical role of 
U.S. manufacturing investment in Singapore are two significant reasons 
why the U.S.-Singapore Free Trade Agreement, with its strong investment 
protections, merits approval.
    Another reason is that the Singapore agreement will be seen by all 
as a precedent for future FTAs in Asia. As Singapore is the most free-
trade-oriented country in the region, the agreement's provisions are 
excellent, and provide a robust template for future agreements in the 
region. This includes the investment chapter, which can be put forward 
as a template in future negotiations with other Asian countries that 
demonstrate much less respect for investors' rights in their laws and 
practice than does Singapore.
    The NAM also applauds the very high standards the Singapore FTA 
sets with regards to competition policy. Singapore is committed to 
enact laws regulating anti-competitive conduct and to create a 
competition commission by January 2005. Because Government-Linked-
Corporations (GLCs) carry out about half of Singapore's economic 
activities, the incorporation of an enforceable requirement ensuring 
that the GLCs will operate on a commercial, nondiscriminatory basis 
represents a tremendous advance. This is so, not because Singapore GLCs 
have abused their authority in the past, but because of the need to 
ensure openness into the future and to set a strong precedent for FTAs 
with other countries.

The U.S.-Chile FTA

    Unlike Singapore, Chile currently maintains a six-percent across-
the-board uniform tariff on imports. A principal reason the NAM 
strongly backs the Chile FTA is that it will remove that tariff on 85 
percent of U.S. industrial and consumer goods upon the first day of the 
agreement's implementation. Other tariffs on industrial goods are 
removed within four years.
    The NAM views the front-loading of industrial tariff cuts as 
critical to restoring a level playing field in the competition for the 
Chilean import market. This is because we strongly believe that U.S. 
exports are currently being displaced in Chile, as Chilean buyers 
switch away from U.S.-made products and increasingly buy goods from 
suppliers in countries with which Chile has free trade agreements. The 
proposed U.S. free trade agreement with Chile could reverse this 
troubling trend.
    The United States has lost more than seven percentage points of the 
Chilean import market since 1997--nearly one-third of America's share 
of the Chilean market. Until 1997, U.S. products were highly 
competitive in Chile and captured a growing share of Chile's import 
market. After 1997, though, the U.S. share of Chile's imports went into 
a sudden and sharp decline--dropping from 24 percent of the market to 
less than 17 percent in 2002. The United States did not suffer a 
similar loss in the rest of South America.
    This drop resulted in the loss of over one billion dollars in 
exports to Chile in 2002, at an annual rate. Countries entering into or 
implementing trade agreements with Chile in 1997 showed a sharp nine-
plus percentage point gain in market share that more than offset the 
U.S. loss. In the case of Chile, its agreements with countries such as 
Argentina, Brazil, Canada, and Mexico have diverted major purchases 
away from U.S. producers.
    Using methodology developed by the U.S. Department of Commerce for 
determining the labor content of U.S. exports, the more than one 
billion dollar decline in U.S. annual sales to Chile represents the 
loss of over 12,500 American job opportunities. With the Chile-European 
Union free trade agreement's entry into effect on Feb. 1, 2003, both 
the figures mentioned above are sure to rise dramatically--unless the 
U.S. Congress quickly approves the U.S.-Chile free trade pact.

Positive Aspects of Both Accords

    In addition to the areas highlighted above, both the Chile and 
Singapore FTAs contain cutting-edge, 21st century disciplines with 
respect to customs facilitation, government procurement, intellectual 
property, electronic commerce, transparency and dispute settlement 
procedures. The NAM endorses the way these provisions comport with the 
congressionally mandated TPA negotiating objectives.
    The message is clear: America needs to accelerate greatly its 
efforts to enter into and successfully conclude trade agreements that 
will reduce barriers to U.S. exports and level the playing field for 
American firms. The prospective gains in this win-win situation are 
huge all around, and the first step in the right direction is 
congressional approval of the U.S.-Singapore and U.S.-Chile free trade 
agreements.

                                 
 Statement of National Electrical Manufacturers Association, Rosslyn, 
                                Virginia
    The National Electrical Manufacturers Association (NEMA) is a firm 
supporter of the U.S.-Chile and U.S.-Singapore Free Trade Agreements 
(FTAs). Now that both Agreements have been signed, the U.S. electrical 
industry strongly urges the U.S. Congress to use its fast-track trade 
promotion authority procedures to quickly ratify them.
    NEMA very much welcomes FTAs such as these that serve to expand the 
benefits of trade liberalization to all parties, and we hope that these 
FTAs set the course for the completion of many more market opening 
accords, be they bilateral, regional, or multilateral.

The U.S.-Chile FTA

    Chile may not be one of NEMA members' largest export markets, but 
it is an important one nonetheless. Moreover, we have seen indications 
that opportunities for U.S. electrical manufacturers to sell there have 
been lost to other countries with whom Santiago has already concluded 
FTAs.
    This is why our industry is especially pleased with Chile's swift 
elimination of its tariffs for most items in the NEMA product scope. 
NEMA has testified before the International Trade Commission on behalf 
of the Agreement and met on numerous occasions with representatives of 
both governments. NEMA also took part in a business delegation that 
traveled to Chile to meet with government and commercial leaders.

The U.S.-Singapore FTA

    While trade between our two countries is already significant, 
having an agreement in place will make an excellent commercial 
relationship even better. In particular, while the Republic of 
Singapore was already committed to tariff elimination, NEMA welcomes 
the example the new agreement sets for immediate and guaranteed tariff 
elimination for U.S. exports. The Agreement also contains useful 
service provisions that will help our members chip away at the market 
advantages enjoyed by the Republic's semi-public corporations.
    Further, the FTA directs the U.S. and Singapore to seek to enhance 
their cooperation on technical regulations, standards, and conformity 
assessment procedures. In this respect, NEMA is also quite pleased that 
U.S. negotiators heeded our request to not include an electrical 
products mutual recognition agreement (MRA) in the larger FTA package. 
Our industry supports MRAs for regulated electrical products such as 
medical devices, but we oppose them for the majority of NEMA goods, 
which are unregulated. 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. (Ever since the 
ill-fated electrical safety MRA with the European Union was concluded a 
few years ago, the U.S. government has either excluded electrical 
products from subsequently negotiated MRAs, or refused to sign on to 
any such accords that include them.)
    This is the first FTA between the world's largest economy and an 
Asian country. With two-way trade totaling $32 billion in 2002, 
Singapore is America's 11th largest trading partner. In 2002, U.S. 
exports to Singapore of products within the NEMA scope of electrical 
and medical imaging products exceeded $600 million. With the Agreement 
scoring well on the NEMA Principles for FTAs (see above), we look 
forward to further improvement in these marks.

About NEMA

    NEMA is the largest trade association representing the interests of 
U.S. electrical industry manufacturers, whose worldwide annual sales of 
electrical products exceed $120 billion. 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. Our 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. The Association's Medical Products Division represents 
manufacturers of medical diagnostic imaging equipment including MRT, C-
T, X-ray, ultrasound and nuclear products.

                               __________
                        NEMA Principles for FTAs
     LImmediate tariff elimination
     LNo mutual recognition agreements (MRAs) for non-
federally-regulated products
     LEnergy services liberalization
     LOpenness and transparency in government procurement
     LProtection of intellectual property rights
     LReduction in technical barriers to trade (TBTs) and 
compliance with all world trade organization (WTO) TBT agreement 
requirements
     LInclusive definition of ``international standards''
     LVoluntary, market-driven standards and conformity 
assessment
     LEffective monitoring and enforcement mechanisms
     LFree trade benefits not encumbered by labor or 
environmental provisions
     LAs many other market opening measures as possible

                                 
 Statement of Joe Damond, Pharmaceutical Research and Manufacturers of 
                                America
    PhRMA applauds the historic completion of two new bilateral free 
trade agreements that break down trade barriers for competitive, 
innovative American goods and services. These are the U.S.-Singapore 
Free Trade Agreement (FTA) and the U.S.-Chile FTA. Both agreements 
represent important milestones for their respective regions, and PhRMA 
member companies are pleased to support them both.
    PhRMA is the trade association representing America's leading 
research-based pharmaceutical and biotechnology companies. Our members 
are devoted to discovering and developing innovative medicines that 
allow patients around the world to live longer, healthier and more 
productive lives.
    In the 20th century, breakthroughs in medical and pharmaceutical 
science, such as antibiotics and vaccines, contributed to major 
advances in human life expectancy, helping conquer diseases such as 
polio, pneumonia and smallpox. Today, we are on the verge of a new era 
in life sciences discovery, driven by unprecedented advances in 
biotechnology, genomics and biomedical science. These discoveries hold 
out the promise of effective new treatments for diseases, such as 
cancer, arthritis, diabetes and AIDS, and new hope for millions of 
patients around the world. The U.S. is a leader in global life sciences 
innovation. In 2001, our industry invested more than $30 billion in 
2001 in discovering and developing new medicines. As a result, PhRMA 
companies are leading the way in the search for new cures for age-old 
diseases, such as cancer, and effective treatments for new medical 
challenges such as SARS.

The U.S.-Singapore Free Trade Agreement (FTA)

    Singapore is a leader in Asian biomedical research and development; 
maintains one of the most open trade and investment regimes in the 
world; and is a strong proponent of science-based regulation of 
pharmaceutical products. As a result, U.S. research-based 
pharmaceutical companies have invested over $5 billion in Singapore. In 
the last decade, Singapore has emerged as a key Asia-Pacific 
manufacturing center for U.S. life sciences companies, the regional 
corporate headquarters for many U.S. firms and an increasingly 
important location for leading U.S. pharmaceutical companies to conduct 
advanced biomedical research and global clinical trials.
    PhRMA supports the U.S.-Singapore FTA because: (1) stronger 
commercial ties between the United States and Singapore are in the 
general interest of the private sector of both countries, (2) Singapore 
has promoted positive, market-oriented and science-based policies in 
support of this critical sector, and (3) the FTA advances further 
Singapore's recognition of innovation in our sector, as well as a 
transparent, science-based regulatory regime and strong intellectual 
property protections, and is thus not only a good agreement, but it can 
also serve as a model for other trade agreements in the Asia-Pacific 
region.

Singapore's Positive Approach to the Life Sciences Sector

    In Asia, Singapore has long been a visionary proponent of policies 
to promote life sciences research, development and manufacturing. Years 
ago, Singapore recognized the potential implications of the global 
biotechnology revolution and took targeted steps to support the 
emergence of a key knowledge-based technology. As a result, Singapore 
is a leader in the Asian life sciences innovation, and it has attracted 
substantial investments from leading U.S. and European research 
pharmaceutical companies. These policies work to the benefit of 
Singapore's economy, life sciences companies doing business in 
Singapore and, even more importantly, Singaporean patients.

Recognition of Innovation

    In contrast to some other Asian economies, Singapore has adopted a 
generally market-oriented approach to health care pricing and 
reimbursement. Indeed, Singapore has helped pioneer innovative health 
care finance methods in the Asia-Pacific, including the use of medical 
savings accounts. Singapore's policies with respect to the pricing of 
pharmaceuticals recognize the value of innovation, and the Singapore 
government has strongly supported advanced life sciences discovery as 
part of its long-term economic strategy of developing knowledge-based 
21st century technologies. Accordingly, market access barriers, such 
abusive price controls, reference pricing, monopsonistic purchasing 
practices, state-trading monopolies, unreasonable restrictions on 
listings in government-established formularies, toleration of illegal 
discounts and/or discounting practices that represent WTO-illegal 
subsidies to local manufacturers, which were identified in Section 
2108(b)(8) of the Trade Act of 2002 as key negotiating objectives, are 
not an issue in Singapore. More importantly, Singapore's policies have 
worked to ensure that Singaporean patients have access to high quality, 
effective health care.

Science-based Regulatory Processes

    PhRMA welcomes Singapore's strong commitment to biomedical 
innovation and support for advanced biotechnology research.
    Singapore's strong commitment to science-based drug regulatory 
procedures, advanced life sciences research and adherence to the rule 
of law is reflected in the HSA's policies and regulations.

    1. LDrug Regulatory Procedures. Singapore's regulatory procedures 
for the approval of new medicines are timely, transparent, non-
discriminatory, and based on generally accepted international 
scientific standards.
    2. LScience-Based Drug Regulatory Requirements. In general, the 
Singapore HSA's regulatory requirements are consistent with global 
scientific standards, such as the International Conference on 
Harmonization (ICH). Decisions regarding product approvals are based 
only on the HSA's assessment of quality, safety and efficacy.
    3. LTransparency of Drug Approval Regulations. In general, 
Singapore's pharmaceutical laws and regulations are transparent and are 
formulated through procedures that provide: (1) for notice and comment 
by interested U.S. stakeholders, (2) timely and effective opportunity 
for U.S. stakeholders to submit comments, positions and views for due 
consideration by the relevant authorities; and (3) timely and effective 
opportunity for U.S. stakeholders to consult meaningfully with the HSA 
and other relevant authorities and study groups regarding the 
formulation of health care regulations and laws.

    In short, the U.S.-Singapore FTA offers a new and enduring 
foundation for implementing our shared vision for future health care 
innovation in the Asia-Pacific. Singapore is an Asia-Pacific leader in 
supporting advanced biomedical research, science-based regulation, 
strong intellectual property rights protection and market-based 
approaches to health care.

Improvements in the FTA

    PhRMA is pleased that the FTA builds on Singapore's strong record 
of support for our sector. In particular, we would like to draw 
attention to two areas: Intellectual Property Rights (IPR) and 
regulatory policy.
Intellectual Property Rights
    At the outset, in commenting on the FTA in December 2000, PhRMA 
noted that Singapore has strong intellectual property systems and has 
implemented key obligations from the Uruguay Round Agreement on Trade-
Related Aspects of Intellectual Property Rights. We are pleased that 
Singapore has taken additional steps in the FTA to improve recognition 
of intellectual property rights, including data exclusivity and patent-
term restoration. We also welcome the new FTA provisions regarding 
parallel importation, including provisions to respect the contractual 
rights of patent holders and public health safeguards to ensure that 
such parallel imports are subject to proper handling and a secure chain 
of custody. Like many public health authorities in Asia and around the 
world, we are concerned that rampant counterfeiting could lead to the 
introduction of counterfeit drug products which pose serious public 
health risks. The Singaporean public health safeguards, which are 
modeled on those used by the FDA, would help to reduce this risk.

Life Sciences Working Group

    The Medical Products Annex to the U.S.-Singapore FTA represents an 
important breakthrough, which will formalize the already existing, 
strategic partnership between the U.S. Food and Drug Administration 
(FDA) and Singapore's Health Sciences Administration (HSA). The new 
FDA-HSA Working Group on Medical Products will seek to ensure that 
regulatory procedures for new drug approvals are: (1) expeditious, 
transparent, without conflict of interest and non-discriminatory, (2) 
based on the International Conference on Harmonization (ICH) and (3) 
based only on product quality, safety and efficacy. It also seeks to 
ensure that regulatory measures and policies continue to be developed 
through a transparent process that provides for notice and comment by 
interested parties and meaningful opportunities for consultation with 
the HSA. PhRMA is pleased the Medical Products Annex recognizes HSA's 
leadership role as the ``gold standard'' of science-based regulatory 
policies in the Asia-Pacific region. It can serve as a model for other 
Asian economies seeking to participate in the advanced life sciences 
discoveries of the 21st century. We are pleased that the FTA recognizes 
the important role of the ICH in establishing harmonized, science-based 
regulatory procedures, which will facilitate global drug development 
and accelerate the approval of new life-saving medicines around the 
world. This is the first time that the FDA's strategic relationship 
with a foreign regulatory authority has been incorporated in an U.S. 
FTA, and it offers an unprecedented opportunity to strengthen a dynamic 
FDA-HSA partnership that builds toward our shared vision of ICH and 
transparent, science-based regulation.
    The SARS epidemic underscores the importance of continuing to 
invest in advanced biomedical research and development in Asia. SARS 
also illustrates the challenges posed by new forms of life-threatening 
diseases and the capability of many well-known human and animal viruses 
to mutate suddenly into devastating threats to public health. The 
development of a new cure is a protracted and costly process, which can 
require nearly a decade of research and development, clinical testing 
and regulatory approvals, and can cost over $900 million. Singapore's 
regulatory and intellectual property regimes and longstanding support 
for biomedical innovation are a vital pillar which can help support 
innovative medical discovery in the Asia-Pacific.

The U.S.-Chile Free Trade Agreement (FTA)

    PhRMA also strongly supports passage of the recently signed U.S.-
Chile FTA. The Chile Agreement represents an important breakthrough in 
U.S. trade with our Latin American neighbors and trading partners. In 
the 1980s, Chile helped pioneer free market reforms and open trade 
policies in Latin America. Chile's performance has been impressive in 
nearly every economic and social area. Today, it represents a worthy 
partner for America's first free trade agreement in the region. It will 
be particularly valuable in ensuring that Chile, a long-time leader in 
economic reform, meets or exceeds minimum international standards for 
protection of intellectual property rights. Protection of intellectual 
property is a necessary precondition for sustainable economic 
development and growth.
    Overall, the Chile FTA is a strong agreement, providing several 
important benefits for the research-based pharmaceutical industry, 
particularly in the area of intellectual property rights. The new FTA 
obligations build on TRIPS by strengthening patent, trademark, 
copyright, test data protection and adherence to intellectual property-
related treaties.
Data Protection Provisions
    The data protection obligations strengthen existing WTO data 
protection for products that require the submission of undisclosed 
safety and efficacy information to regulatory authorities. The FTA 
builds on TRIPS Article 39.3 by clarifying that data protection bars 
unfair commercial use of test data (i.e., by refusing to grant drug 
approvals on the basis of the pioneer approval for at least five years, 
consistent with U.S. law and practice).
Patent Protections
    The intellectual property chapter also clarifies protections for 
patented pharmaceutical products, with important provisions including:

    1. LThat the parties may not approve any third party request for 
marketing approval for a pharmaceutical product that is subject to a 
patent (``linkage'').
    2. LThat the parties must make available an extension of the patent 
term to compensate the patent owner for unreasonable curtailment of the 
patent term as a result of the marketing approval process, consistent 
with the U.S. Hatch-Waxman Amendment.
    3. LThat Chile must introduce legislation to make patents available 
for plant inventions within four years of the date of implementation of 
the Agreement.
Trademark Provisions
    The Agreement includes a new provision that specifically prohibits 
a party from imposing special restrictions on the use of a trademark 
relative to the generic name of a product to which the trademark 
pertains. The language significantly strengthens the general obligation 
in TRIPS that prevents Members from adopting legislation or practices 
that interfere with the legitimate use of trademark rights.
Other Provisions
    Under the terms of the Agreement, Chile must implement the 1991 Act 
of the UPOV Convention (concerning protection of new plant varieties) 
by January 1, 2009 and the Patent Cooperation Treaty by January 1, 
2007. These accession obligations have a deadline that is distinct from 
the general two year implementation period provided for most of the new 
obligations. We welcome Chile's commitments to strengthen intellectual 
property rights for pharmaceuticals and for other American knowledge-
based products.
Conclusion
    PhRMA views both Singapore and Chile as important trading partners, 
strongly committed to open trade and investment policies, and leaders 
in multilateral and regional trade liberalization. With the completion 
of these historic agreements, we are pleased that the final U.S.-
Singapore FTA and U.S.-Chile FTA both incorporate high commercial 
standards and sets an appropriately high benchmark for future U.S. free 
trade agreements in their respective regions. We are hopeful this 
agreement can serve as a precedent for future improvements in 
recognition of biomedical innovation, transparency, protection of 
intellectual property rights and science-based regulation of medical 
products, including pharmaceuticals, in FTAs with Australia, Central 
America, Morocco and other key U.S. trading partners. The U.S.-Jordan 
FTA has already created additional growth overall and in the local 
pharmaceutical sector with growth of exports of approximately 30%, and 
it provides compelling new data for the positive development impact of 
strong intellectual property standards for developing countries (See 
Appendix 1). As in Jordan, these and future FTAs will expand trade in 
biomedical products, but even more importantly, they will improve 
access by all patients to advanced life-saving medicines, support 
worldwide advances in medical treatment and lead to the discovery and 
development of innovative new cures for age-old diseases, such as 
Alzheimers, diabetes, cancer, cardiovascular, HIV/AIDS, and for 
devastating new epidemics, such as SARS.

                                 
                        Software & Information Industry Association
                                               Washington, DC 20005
                                                      June 20, 2003

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

Dear Chairman Crane and Ranking Member Levin,

    On behalf of the members of the Software & Information Industry 
Association (SIIA), I am writing to express our strong support for the 
Singapore and Chile Free Trade Agreements.
    With over 600 member companies, SIIA is the principal trade 
association of the software code and information content industry. Our 
members are industry leaders in the development and marketing of 
software and electronic content for business, education, consumers and 
the Internet. SIIA's members--software companies, ebusinesses, and 
information service companies, as well as many electronic commerce 
companies--consists of some of the largest and oldest technology 
enterprises in the world as well as many smaller and newer companies. 
All of them--from the largest to the SMEs--depend on access to and 
confidence in global markets where they are treated in a non-
discriminatory manner and their investment in digital products and 
distribution is protected.
    SIIA is also an active member of the High-Tech Trade Coalition, a 
group of the leading high-tech trade associations representing 
America's technology companies.\1\ We applaud the Administration for 
its work in reaching these Agreements. The high-tech sector is the 
largest merchandise exporter in the United States and is the U.S. 
industry with the most cumulative investment abroad. The HTTC strongly 
supports these FTAs and urges their approval by Congress.
---------------------------------------------------------------------------
    \1\ AeA, Association for Competitive Technology, Business Software 
Alliance, Computer Systems Policy Project, Computing Technology 
Industry Association, Electronic Industries Alliance, Information 
Technology Association of America, Information Technology Industry 
Council, National Electrical Manufacturers Association, Semiconductor 
Industry Association, Semiconductor Equipment & Materials 
International, Software & Information Industry Association, and the 
Telecommunications Industry Association.
---------------------------------------------------------------------------
    As detailed below, the Singapore and Chile Agreements offer many 
potential benefits to the U.S. and chart a unique approach to 
preventing barriers in international digital trade. We urge 
implementation of these Agreements as soon as possible, and we hope 
that the results can serve as a model for WTO multilateral and other 
regional and bilateral trade negotiations.
                 eCommerce Goals for Trade Negotiations
    Global eCommerce is fundamental to the success of our industry and 
our members and more broadly to other sectors of our economy. It is an 
increasingly dominant means of delivering software and digital content 
to a wide variety of users around the world. At the same time, the 
Internet has had a profound and positive impact on trade. The Internet 
has altered the way goods and services are located, ordered, produced, 
delivered and consumed, while increasing efficiencies, reducing time to 
market, reducing costs and improving productivity. These developments 
have implications for virtually all existing and future multilateral, 
regional and bilateral obligations.
    Taking these developments into account, a number of leaders in the 
high-tech community and other key industry sectors began over a year 
ago to work closely to develop four core principles for trade 
negotiations that should guide U.S. trade negotiators in all 
negotiations:

     LPromote the development of a domestic and global 
infrastructure that is necessary to conduct eCommerce while avoiding 
barriers that would hinder such development;
     LPromote full implementation of existing commitments and 
seek increased liberalisation for all basic telecommunications, value-
added and computer and related services;
     LPromote the development of trade in goods and services 
via eCommerce; and
     LPromote strong protection for intellectual property made 
available over digital networks.

    In a trade environment in which commerce is increasingly 
characterized by rapid and often surprising technological advancements, 
as well as evolving forms of delivery, international trade law can make 
a substantial contribution to promoting these very positive 
developments by providing meaningful rules and disciplines that apply 
to digital trade; ensuring that trade barriers do not retard the 
evolution and growth of digital trade; eliminating barriers where they 
exist; and developing rules to ensure that new barriers will not be 
imposed.
    To achieve these stated goals, a number of complex, and at times, 
competing factors are in play. There are, first and foremost, the 
existing WTO agreements (GATT, GATS and TRIPs) each of which is 
relevant to digital commerce transactions. In some instances, the rules 
and obligations established by all of these agreements may be 
implicated. In particular, the level of meaningful commitments in each 
is different, with more complete commitments found in the GATT (trade 
in goods) and TRIPS (intellectual property protection) than is 
currently found in the GATS (relating to services).
    Unfortunately, much of the discussion internationally, as well as 
domestically, has focused on how to classify electronically delivered 
products that have a physical counterpart. The challenge of promoting 
confidence in digital trade, nevertheless, involves much more. Thus, 
while the classification issue is important and relevant, it is only 
one, and in some instances not the most important, of the issues that 
must be examined and addressed.
    The cross-sector industry effort, working with USTR and others in 
the Executive Branch, as well as with colleagues multilaterally, has 
sought to make sure that the classification issue, important as it is, 
does not act as a ``spoiler'' to achieving meaningful trade 
commitments. A productive step toward this end result has been to focus 
on liberalization at the highest level and equivalent trade commitments 
regardless of the mode of delivery. These efforts have made 
classification a less contentious issue and highlighted the need for a 
flexible and creative examination of these issues that rests on a key 
assumption that whether or not the product (be it a good or service) 
that is delivered electronically has a physical counterpart, the 
following basic objectives should be sought, in all negotiating groups: 
(i) transparency; (ii) predictability; (iii) ensuring that all methods 
of delivery by all technological means are available, such that the 
determination of the most efficient delivery mechanism is not dictated 
by trade rules; and (iv) ensuring that digital trade is treated in a 
manner no less liberally than conventional trade.\2\
---------------------------------------------------------------------------
    \2\ Practically speaking, each negotiating group that has 
applicability for digital trade is urged, as appropriate, to be guided 
by a number of specific objectives: full market access commitments 
across a broad range of relevant goods and services; full national 
treatment and MFN rules shall apply to all transactions; no 
quantitative restrictions should be permitted; duties on all technology 
products should be eliminated by taking WTO commitments at the broadest 
level possible, and duties on all digitized products delivered on a 
physical medium should be eliminated; no new duties shall be applied to 
digital trade, either to the transmission or its content; trade 
formalities shall be transparent, fully notified, shall not constitute 
a disguised restriction on trade, and shall not impose requirements on 
how the devices and software used to consummate the transactions are 
designed or deployed; subsidies, where applied, shall be consistent 
with existing disciplines; government procurement procedures and 
practices shall be transparent and non-discriminatory; domestic 
regulations affecting digital trade shall be transparent and non-
discriminatory; and parties shall select the least trade restrictive 
measure available to address valid public policy objectives.
---------------------------------------------------------------------------
    As described below, these FTAs are major milestones in turning 
these discussions into practical policy.
                  The Chapters on Electronic Commerce
    We are pleased that U.S. trade negotiators seized the opportunity 
in their efforts with Singapore and Chile to translate these goals and 
objectives into concrete results that recognize the importance of the 
removal of barriers to electronic commerce, the applicability of WTO 
rules to electronic commerce and the development of trade in goods and 
services via eCommerce.
    We commend USTR and the entire Administration team in working 
constructively with the private sector to achieve this result, taking 
into serious consideration the goals and objectives identified by a 
cross section of industry, including leaders in high tech.
    I also call to your attention that the Electronic Commerce Chapters 
of the Singapore and Chile FTAs are consistent with and implement a 
primary objective laid out in section 2102(b)(9) of the Trade Act of 
2002 which provides the principal negotiating objectives of the United 
States with respect to electronic commerce.
    What are the elements of this result and what are the specific 
benefits?
    Central to the Singapore and Chile Agreements is a strategic 
definition of ``digital product'' that is not inherently tied to either 
a goods or services trade law framework and does not prejudice a 
product's classification. By broadly defining ``digital product'' to 
include computer programs, text, video, images, sound recordings and 
other products that are digitally encoded, regardless of whether they 
are fixed on a carrier medium or transmitted electronically,\3\ the 
FTAs seek a flexible, but practical approach to ensuring that goods and 
services that combine elements of any of these items are not 
discriminated against. In other words, no matter how a product may be 
classified, both Agreements provide for non-discriminatory treatment 
and promote broader free trade in such products.
---------------------------------------------------------------------------
    \3\ This definition is found in the Singapore Agreement. In the 
Chile FTA, a similar definition of digital products is found and means 
computer programs, text, video, images, sound recordings, and other 
products that are digitally encoded and transmitted electronically, 
regardless of whether a Party treats such products as a good or a 
service under its domestic law. Footnote 3 of the Chile FTA provides 
that ``for greater certainty, digital products do not include digitized 
representations of financial instruments, including money. The 
definition of digital products is without prejudice to the on-going WTO 
discussions on whether trade in digital products transmitted 
electronically is a good or a service.''
---------------------------------------------------------------------------
    I want to note that this construction of the definition of 
``digital product'' is a significant step toward avoiding the pitfalls 
of the classification debate. It accommodates new technologies and 
delivery mechanisms without calling into question the applicability of 
current GATT/GATS trade law regimes to these new developments. This is 
important, as there are some proponents in international discussions 
who believe that electronic commerce should be treated differently, 
arguing for a third category that isolates electronic commerce for 
treatment. While attractive conceptually to some, this approach is 
fraught with unintended negative consequences; e.g., some countries 
could claim under this approach that existing commitments no longer 
apply leading to greater uncertainty and/or calls for new and 
potentially counterproductive new rounds of trade negotiations.
    As to substantive commitments, the Singapore and Chile Agreements 
specifically affirm that the supply of a service using electronic means 
falls within the scope of the obligations contained in current relevant 
commitments.\4\ This is a concrete step to ensure that electronic 
commerce is not discriminated against vis-a-vis traditional delivery of 
goods and services under international trade law.
---------------------------------------------------------------------------
    \4\ See, in the case of the Singapore Agreement, Chapters 8 (Cross 
Border Trade in Services), 10 (Financial Services) and 15 (Investment), 
subject to any reservations or exceptions applicable to such 
obligations.
---------------------------------------------------------------------------
    Among the other specific benefits found in the Agreements, 
Singapore and Chile commit to:

     Lnot impede electronic transmission from the U.S. by 
applying customs duties or other duties, fees, or charges on or in 
connection with the importation or exportation of digital products, and 
the U.S. commits to the same from Singapore and Chile.
     Lnot discriminate against digital products from the U.S. 
by giving them less favorable treatment than it gives to other similar 
digital products from either Singapore/Chile, as the case may be, or 
other countries just because (i) the products were created, produced, 
published, stored, transmitted, contracted for, commissioned, or first 
made available on commercial terms outside its territory or (ii) the 
author, performer, producer, developer, or distributor of such digital 
products is a foreign person; and the U.S. commits to the same from 
Singapore and Chile.
     Lpublish or otherwise make available to the public its 
laws, regulations, and measures of general application which pertain to 
electronic commerce, and the U.S. commits to the same.
     Ldetermine the customs value according to the cost or 
value of the carrier medium alone, without regard to the cost or value 
of the digital products stored on the carrier medium, consistent with 
the longstanding U.S. policy, where digital products are still 
delivered on disk or other physical medium.\5\
---------------------------------------------------------------------------
    \5\ In the case of the Chile FTA, this commitment is found in the 
provisions on market access.
---------------------------------------------------------------------------
                 The Chapters on Intellectual Property
    The Singapore and Chile FTAs recognize that our trading partners 
must adhere to the effective level of copyright protection that is 
found in the WTO Agreement on the Trade Related Aspects of Intellectual 
Property Rights (TRIPS) and the World Intellectual Property 
Organization (WIPO) Copyright Treaty (WCT). The full implementation of 
the WCT and WPPT in Singapore, Chile and on a global basis at the 
earliest possible date is a critical goal of our members and others who 
depend on effective global intellectual property protection. These 
treaties are essential for developers of software code and digital 
content in their efforts to safeguard the transmission of valuable 
copyrighted works over the Internet and by providing higher standards 
of protection for digital products generally.
    The Agreements also recognize that effective enforcement of 
national laws is essential to the implementation of strong global 
trading rules. Thus, we are pleased to see that these FTAs include key 
provisions establishing statutory damages that are important tools to 
deter further infringement; strong criminal penalties targeted toward 
corporate and enterprise end user piracy; civil ex-parte procedures to 
preserve evidence of infringement; and strong border measures to combat 
cross-border trade in infringing goods.
    The Singapore FTA, in particular, sets out a very high standard of 
protection and enforcement for copyrights and other intellectual 
property, perhaps the highest yet achieved in a bilateral or 
multilateral agreement, treaty or convention.\6\ Thus, it is an 
especially important model for future negotiations. It builds on the 
standards currently in force in the WTO TRIPs Agreement and in NAFTA. 
Moreover, the Agreement lays out the goal to update and clarify those 
standards to take into account the experiences gained since those 
agreements entered into force and the significant technological and 
legal developments that have occurred since that time. For example, 
this FTA incorporates the obligations set out in the WCT and the WPPT 
and requires that Singapore ratify and fully implement these 
obligations within one year from ``entry into force'' of the FTA.\7\ We 
are also pleased that the Singapore FTA provides two provisions 
regarding domain names, including requiring each party to implement (1) 
the Uniform Domain Name Dispute Resolution procedures for each Party's 
country-code top level domain (ccTLDs) and (2) public access to a 
``reliable and accurate'' Whois database of domain name registrants 
that is an important tool to combat the problems related to copyright 
and trademark piracy.
---------------------------------------------------------------------------
    \6\ See ``The U.S.-Singapore Free Trade Agreement (FTA), The 
Intellectual Property Provisions,'' Report of the Industry Functional 
Advisory Committee on Intellectual Property Rights for Trade Policy 
Matters (IFAC-3), February 28, 2003.
    \7\ Effectively, this means that Singapore must act within one year 
after both governments have completed their respective formal approval 
mechanisms.
---------------------------------------------------------------------------
    The Chile Agreement also represents progress in building on the 
standards already in force in TRIPS and NAFTA. Among its important 
achievements, as found in the Singapore FTA, the Chile FTA incorporates 
the obligations set out in the WCT and the WPPT and provides the 
important provisions regarding domain names. While the Chile FTA 
establishes some key precedents to be included in other FTAs now being 
negotiated, including the Central America FTA and the Free Trade 
Agreement of the Americas, there are elements of the Agreement that 
could have been stronger. For example, the transition period before 
requiring adherence to the WCT and WPPT, as well as other treaties, is 
far too long.
             The Chapters on Cross Border Trade in Services
    Consistent with the other Chapters discussed above, the Chapters on 
Cross Border Trade in Services found in the Singapore and Chile FTAs 
establish important precedents by adopting the so-called ``negative 
list'' approach where exceptions to liberalization must be specified. 
This is an approach that is strategically positive and forwarding 
looking for the future. It will be more liberalizing and promote 
greater free trade than an approach where countries must specify their 
commitments as is currently done in the WTO. The FTAs expand market 
access commitments in Computer and Related Services and ensure that 
establishment in either country is explicitly not required for the 
provision of services. The FTAs also explicitly include access to 
distribution, transport, and telecom services.\8\
---------------------------------------------------------------------------
    \8\ The Chile and Singapore FTAs' telecommunications services 
chapters include several key provisions to open those markets to U.S. 
businesses. Non-discriminatory access to and use of public telecom 
networks and services are ensured. Additional obligations are placed on 
major suppliers of public telecom services--including providing 
treatment no less favorable than they accord themselves in terms of 
availability, provisioning, rates and quality of service--ensuring that 
market entrants may truly compete. Cost-based access to leased lines, 
key to network and Internet services providers, is guaranteed. The FTAs 
also ensure high levels of transparency in telecom services, and they 
include non-binding language calling for ``technology neutrality in the 
mobile telecommunications sector, which provides a useful starting 
point, though should be strengthened in future agreements.''
---------------------------------------------------------------------------
                               Conclusion
    The Singapore and Chile FTAs represent one of those rare moments in 
trade negotiations when improvements in international trade law can 
prevent future barriers rather than merely focus on removal of existing 
impediments.
    By any measure, the Chapters on Electronic Commerce represent 
groundbreaking commitments to non-discriminatory treatment of digital 
products that promote confidence in the global digital trade of such 
products.
    We also support the results achieved by USTR in the Chapters on 
Intellectual Property that represent significant improvement in the 
level of protection provided in both countries and will serve as an 
important baseline to build on in future negotiations.
    We also support the results in the Chapters on Cross Border Trade 
in Services that establish important precedents by adopting the so-
called ``negative list'' approach where exceptions to liberalization 
must be specified. This is an approach that is strategically positive 
and forwarding looking for the future.
    As you know, we are at the beginning stages of seeking a new round 
of multilateral negotiations that are focused more broadly on services. 
We commend, in many respects, the offer put forward by USTR at the end 
of March that reflects a strong negotiation position in continuing to 
achieve the broader goals outlined at the start of my testimony. There 
is little doubt that the issues that will have to be addressed in order 
to achieve real and meaningful commitments in services will be complex 
and difficult.
    The efforts by our trade negotiators to think creatively about how 
to remove barriers to electronic commerce, however, are an important 
milestone in developing a global consensus about how to possibly 
proceed in other bilateral, regional and multilateral negotiations. For 
all of these reasons, we urge implementation of both the Singapore and 
Chile Free Trade Agreements as soon as possible.

            Sincerely,

                                                      Mark Bohannon
                               Senior Vice President, Public Policy

                                 
                                                     Timken Company
                                                 Canton, Ohio 44706
                                                      June 24, 2003

The Honorable Philip M. Crane
Chairman, Subcommittee on Trade
Of the Committee on Ways and Means
U.S. House of Representatives
1104 Longworth House Office Building
Washington, D.C. 20515

Dear Mr. Chairman,

    The Subcommittee on Trade in its advisory release of June 10, 2003, 
provided for the submission of written comments on the subject free 
trade agreements (``FTAs''). The Timken Company is providing its 
comments herein for consideration by the Subcommittee. The Timken 
Company is a leading international manufacturer of highly engineered 
bearings, alloy and specialty steels and components, and a provider of 
related products and services. With headquarters in Canton, Ohio, 
Timken employs 28,000 people in operations in 29 countries. In 2002, 
the combined Timken and Torrington companies had sales of approximately 
$3.8 billion.
    Timken has manufacturing plants in the U.S. and abroad and sells 
its products all over the world. Thus, the company has a strong 
interest in a fair and efficient international trading system. It 
supports the reduction and removal of barriers to trade along with the 
continuance and enforcement of rules that operate to prevent the trade 
distortions that are created by dumping and government subsidies.
    Based on our review of the agreements, The Timken Company has 
identified a number of topics that it would like to provide its insight 
on for consideration by the Subcommittee. The company applauds the 
efforts of U.S. negotiators. Comments are presented by topic below.
                            Rules of Origin
    Foreign producers have sold bearings into the United States at less 
than fair value for over 27 years. The Timken Company has sought and 
obtained relief under U.S. trade laws from these dumped imports. 
Antidumping duty orders were imposed on tapered roller bearings from 
Japan from 1976-1999.\1\ Antidumping duty orders have been imposed on 
ball and other types of bearings from Japan, Europe, and other 
countries, including Singapore, since 1989. In efforts to evade the 
coverage of the orders, different global bearing producers have at 
various times established facilities in third countries for the purpose 
of assembling bearing components into complete bearings for export to 
the U.S. as the products of the third countries.\2\ Because 
manufactured bearing components can be assembled into complete bearings 
with little effort, such facilities have become the means for evasion 
of the antidumping duty orders.
---------------------------------------------------------------------------
    \1\ The orders were revoked as the result of sunset reviews at the 
U.S. International Trade Commission effective December 31, 1999.
    \2\ See, e.g., Customs Classification Ruling HQ 083455 (9/6/89) 
(tapered roller bearings assembled from a cup and cone from Romania, 
rollers from the US, and a cage from either Mexico or the U.S. 
considered to be products of Romania).
---------------------------------------------------------------------------
    In response, the United States has followed a strategy of adopting 
rules of origin the purpose of which is, inter alia, the preclusion of 
such evasion. As part of the North American Free Trade Agreement 
(NAFTA), the Parties adopted a tariff-switching approach to rules of 
origin.\3\ For bearings, they adopted a special rule that does not 
allow tariff-switches from bearing components to bearings to qualify as 
such for rules of origin purposes unless the resulting product has 60% 
NAFTA content (as measured by a transaction method) or 50% (as measured 
by a net cost method).
---------------------------------------------------------------------------
    \3\ See Harmonized Tariff Schedule of the United States, GN 12(t)/
84-241 (2003) (Rev. 2).
---------------------------------------------------------------------------
    It appears that in the U.S.-Singapore FTA, the Parties agreed to an 
equivalent rule, allowing tariff-switching from bearing components to 
bearings to qualify originating products only if there is 50% regional 
content as measured by the ``builddown'' method.\4\ In the U.S.-Chile 
FTA, the same rule was adopted, except that the regional content 
requirement was lowered to 40%.\5\
---------------------------------------------------------------------------
    \4\ Singapore Free Trade Agreement, Annex 3A at 3A-219-220 
(hereinafter ``US-Singapore''). This appears to be approximately 
equivalent to the NAFTA net cost method.
    \5\ United States-Chile Free Trade Agreement, Annex 4.1 at 65 
(hereinafter ``US-Chile'').
---------------------------------------------------------------------------
    Timken is pleased that U.S. negotiators have preserved rules of 
origin that are responsive to the particular circumstances of such 
products as bearings. The company urges U.S. negotiators to continue to 
be sensitive to the particular circumstances of individual domestic 
industries.
                 Antidumping and Countervailing Duties
    It is important that in exchange for the opening of its markets to 
freer trade that the United States ensure that there are domestic 
remedies for any attempts by foreign producers to take unfair advantage 
of increased market access. As Timken has noted above, it has been 
forced to rely on, and continues to rely on, antidumping orders to 
combat unfairly-priced imports of bearings. Given the continued 
existence of significant excess capacity in bearings, it is important 
for the company that the United States continues to provide viable 
trade remedies for domestic industries harmed by unfairly-traded 
imports. Thus, Timken strongly supports the fact that neither of the 
FTAs contains any provisions that reduce or otherwise interfere with 
the ability of the U.S. to provide trade remedies that are consistent 
with its WTO obligations.
    The U.S.-Singapore FTA does not mention antidumping or 
countervailing duty trade remedies except indirectly.\6\ The U.S.-Chile 
FTA includes specific provisions in Chapter Eight (``Trade Remedies'') 
which specify that: (1) each Party retains its rights and obligations 
under the WTO Agreement with regard to the application of antidumping 
and countervailing duties, and (2) no provisions of the FTA shall be 
construed as imposing any rights or obligations on the parties with 
respect to antidumping or countervailing duty measures.
---------------------------------------------------------------------------
    \6\ The U.S.-Singapore FTA begins with a statement reaffirming the 
rights and obligations of the Parties under existing bilateral and 
multilateral agreements including the WTO Agreement. U.S.-Singapore at 
3.
---------------------------------------------------------------------------
    Timken believes that the approach taken in the Chile FTA is 
suitable for an agreement where there has been discussion of AD and CVD 
trade remedies during negotiations while the Singapore approach is 
suitable as the result of negotiations which did not focus 
significantly on the remedies.
    Also important is the fact that neither agreement establishes a 
binational panel mechanism for addressing any disputes over AD or CVD 
actions. Chapter 19 of the North American Free Trade Agreement (NAFTA) 
established such a tribunal and the results have been controversial.
                         Government Procurement
    The United States ensures that it has a domestic supply of bearings 
for military purposes. Through the Defense Acquisition Regulations 
(DFAR) it requires that the Department of Defense purchase its bearings 
from a domestic producer for certain uses and applications.\7\ It 
appears that in both FTAs, the government procurement chapter preserves 
the right of the U.S. to limit acquisitions of certain bearings to 
domestic sources.\8\
---------------------------------------------------------------------------
    \7\ 10 U.S.C. Sec. 2534(a)(5).
    \8\ See U.S.-Chile at 9-17; US-Singapore at 149.
---------------------------------------------------------------------------
    By maintaining requirements for purchasing certain products from 
domestic sources, the U.S. has recognized that it has a national 
security interest in being able to respond quickly to changing 
circumstances around the globe. We should not foreclose supply sources 
through trade negotiations. Thus, Timken is pleased to see that U.S. 
negotiators have preserved the U.S. right to limit procurements that 
are critical to military readiness to domestic producers.
                             Exchange Rates
    Article IV of the International Monetary Fund (IMF) Agreement 
specifies that members should ``avoid manipulating exchange rates . . . 
in order . . . to gain an unfair competitive advantage over other 
members.'' If a country maintains an artificially weak currency 
relative to the dollar, it obtains an advantage for its goods relative 
to U.S.-produced goods. The goal of bilateral free trade agreements is 
to expand trade between the U.S. and other countries. Timken recommends 
that U.S. negotiators and the Congress consider including a requirement 
similar to the IMF Agreement provision in all future FTAs. This would 
help to stop countries that are developing into significant trading 
partners from weakening their currency artificially relative to the 
U.S. dollar.
                              Tariff Rates
    In general, tariff reduction or elimination is likely to reduce 
sales, market share, and profits for the domestic bearing industry, 
particularly in times of an economic slowdown. Capacity utilization is 
particularly important for capital-intensive industries like the 
bearing industry. Because bearings typically represent only a small 
portion of the cost of producing manufactured goods, the maintenance of 
tariffs does not significantly affect the downstream domestic economy.
    The United States has committed to reducing tariffs on bearing 
imports from Singapore to zero within the next four years. Singapore 
has committed to reducing tariffs on all imports to zero upon entry 
into force of the FTA. U.S. Government and private bodies have long 
recognized that the bearing industry is import sensitive. In 1988 for 
example, in a study regarding the effects of bearing imports on 
national security, the Department of Commerce found that the effects of 
such imports on the domestic industry were negative.\9\ Thus, it was 
reasonable for U.S. negotiators to phase out bearing tariffs over time 
for a country that is a significant bearing producer.
---------------------------------------------------------------------------
    \9\ US Department of Commerce, The Effect of Imports of 
Antifriction Bearings on the National Security, at IV-4 (1998).
---------------------------------------------------------------------------
    Tariff rates on the trade in bearings between Chile and the United 
States are being eliminated in tandem. There have been virtually no 
bearing exports from Chile to the U.S. in the past four years. At the 
same time, there are a small amount of bearing exports from the U.S. to 
Chile. Thus, the lockstep reduction was a reasonable step to take for 
our negotiators.
    These issues highlight the need for U.S. negotiators to continue to 
pursue the goal of tariff parity so that the amount of tariff reduction 
and the schedule of reductions for all participants are equivalent. A 
zero-for-zero approach is the simplest and most immediately beneficial. 
If this goal is impractical, the negotiators should still strive to 
ensure that tariff rates for the same products are equivalent.
                               Investment
    Timken supports fair investment rules for foreign investors. Both 
the U.S.-Chile and U.S.-Singapore FTAs contain chapters on 
investment.\10\ They both contain protections for inter-country 
investors in the form of procedures for the arbitration of claims of 
violation of the investment agreements. Such provisions will enhance 
the ability and willingness of individuals and businesses to invest 
across borders.
---------------------------------------------------------------------------
    \10\ See U.S.-Chile at Chapter 10, US-Singapore at Chapter 15.
---------------------------------------------------------------------------
                         Intellectual Property
    The Timken Company has major intellectual property assets. It 
supports strong intellectual property regimes that provide efficient 
protection for such rights. The Chile and Singapore FTAs both contain 
elaborate provisions on intellectual property.\11\ The Chile IP chapter 
begins with the statement that nothing in its provisions is to derogate 
from the obligations and rights of each party with respect to the other 
as the result of the WTO TRIPS Agreement. The IP chapters in both 
agreements contain references to the TRIPS Agreement for clarification 
purposes. However, neither Agreement provides any additional 
description or explanation of the relationships between them and the 
TRIPS Agreement.
---------------------------------------------------------------------------
    \11\ See U.S.-Chile at Chapter 17, US-Singapore at Chapter 16.
---------------------------------------------------------------------------
    These provisions of the FTAs provide another instance where 
reconciliation with existing WTO provisions would have been helpful. 
The TRIPS Agreement should be incorporated by reference and there 
should be clear identification of the enhancements agreed to as part of 
the FTAs. This would reduce confusion and complexity.
                    Other Trade-Enhancing Provisions
    Both FTAs contain a number of additional provisions designed to 
enhance the ease of trade between the parties. These include chapters 
on: Customs Administration, Technical Barriers to Trade, Temporary 
Entry of Business Persons, and Transparency. Timken strongly supports 
agreement to provisions in these areas that simplify procedures, reduce 
costs, and otherwise make it easier to import into, export from, and do 
business in the Parties' countries.
                       Infrastructure Provisions
    The two FTAs contain provisions on telecommunications, financial 
services, and electronic commerce. Agreement in these areas will likely 
enhance infrastructures among the parties; this will reduce the cost of 
doing business. Timken also strongly supports liberalization in these 
areas.

            Sincerely,

                                                  Michael K. Haidet
                        Senior Government Affairs, Specialist-Trade

                                 
     Statement of Randi Parks Thomas, United States Tuna Foundation
    The U.S. Tuna Foundation (USTF) requests the following statement be 
included in the record of the hearing held June 10, 2003, on the 
implementation of the U.S. bilateral Free Trade Agreements with Chile 
and Singapore:
    The U.S. Tuna Foundation is a trade association representing the 
interests of the U.S. canned tuna industry, including all U.S. canned 
tuna processors--Bumble Bee Seafoods, LLC, StarKist Seafood Company 
(Del Monte Foods), and Chicken of the Sea International (Thai Union)--
as well as all U.S. purse seine vessels that harvest tuna for the 
canned tuna market.
    The U.S. Congress and the U.S. International Trade Commission have 
deemed canned tuna to be an ``import sensitive'' product. Within the 
ITC, Section 201 (1984) and Section 332 (1986, 1990 and 1992) 
investigations reiterated that canned tuna is import sensitive. The 
facts that made canned tuna an import sensitive product then still 
apply today. For this and several other reasons, canned tuna should not 
be included in the list of products deemed eligible for duty-free 
treatment (either phased or immediate) in any upcoming Free Trade 
Agreement.
    Furthermore, the United States and the European Union comprise the 
two largest canned tuna markets in the world. The European Union has 
long maintained a much higher duty on canned tuna products than the 
United States (24% to 12%). For this reason, duties on canned tuna 
should not be the subject of bilateral trade negotiations but should 
only be considered in the context of the World Trade Organization 
efforts to address trade concessions on a product-by-product basis.

Background on Industry:

     LCanned tuna is consumed by 96 percent of U.S households. 
(Source: A.C. Nielsen Homescan data).
     LCanned tuna represents the number three item in U.S. 
grocery stores (behind only sugar and coffee) based on dollar sales per 
linear foot of shelf space. (Source: A.C. Nielsen and industry 
analysis).
     LThe U.S. represents the largest single country market for 
canned tuna in the world. It is estimated that the U.S. canned tuna 
market represents 28 percent of global consumption. (Source: U.S. 
Department of Commerce--National Marine Fisheries Service, Eurostat, 
Foodnews, industry analysis).
     LThree U.S. brands, Bumble Bee, StarKist and Chicken of 
the Sea represent more than 85 percent of U.S. tuna consumption. 
(Source: A.C. Nielsen).
     LCanned tuna represents a tremendous value versus other 
sources of canned protein. In May of 2000, lightmeat tuna retail prices 
were $0.10/ounce while albacore tuna retail prices were $0.23/ounce. 
Competitive proteins were significantly more expensive (canned 
chicken--$0.40/ounce, canned turkey--$0.40/ounce, SPAM--$0.33/ounce, 
corned beef--$0.20/ounce). (Source: Industry market basket survey, May 
2001).
     LDomestically, canned tuna is currently processed in 
California, American Samoa, and Puerto Rico.
     LU.S. Pack of Canned Tuna:


------------------------------------------------------------------------
                                                  1,000 Pounds *
------------------------------------------------------------------------
                                                1992        608,981
                                                1993        618,743
                                                1994        609,514
                                                1995        666,581
                                                1996        675,816
                                                1997        627,032
                                                1998        680,860
                                                1999        693,816
                                                2000        671,330
                                                2001        507,417
------------------------------------------------------------------------
* Canned weight.


      LSource: Fisheries of the United States, 2001, Department of 
Commerce, National Marine Fisheries Service.
     LThe quantity of canned tuna imports between 1990 and 2000 
increased by 10.0 percent while imports of frozen tuna loins increased 
by 67.3 percent. (Source: U.S. Department of Commerce--National Marine 
Fisheries Service).
     LDuring the same ten-year period, U.S. tuna processors 
moved towards heavier utilization of imported tuna loins (which carry a 
negligible import duty) taking advantage of low cost labor in Southeast 
Asia and Andean Pact countries. This led to reduced employment in U.S. 
factories.
     LOver the last twenty years, the U.S. tuna processing 
industry has shrunk from 14 factories and employment of more than 
26,000 to four factories with employment of slightly more than 6,000.
     LDuring the ten-year period between 1990 and 2000, one of 
the two remaining tuna processing facilities in California closed and 
four of the five tuna processing facilities in Puerto Rico closed. The 
two U.S. factories in American Samoa continue to operate, as they are 
not obligated to pay the U.S. minimum wage rate.
     LWith the advent of canned tuna imports from low wage rate 
countries, retail pricing of canned tuna, when adjusted for inflation, 
has decreased by 53 percent between 1980 and 2000. (Source: Federal 
Trade Commission and industry data and analysis).

2003 Canned/Pouched Tuna Tariffs:


------------------------------------------------------------------------
                                      General            Special
------------------------------------------------------------------------
1604.14.10 (canned/pouched tuna in     35%              FREE (A+,CA,D,IL,J+)
 oil)
                                        11.6%                    (MX,R)
                                        24.5%                      (JO)
1604.14.22 (canned/pouched tuna not     6%              FREE (A+,CA,D,IL,J+)
 in oil,
  below quota*)                         2%                       (MX,R)
                                         1.5%                      (JO)
1604.14.30 (canned/pouched tuna not     12.5%           FREE (A+,CA,D,IL,J+)
 in oil,
  above quota*)                          4.1%                    (MX,R)
                                        5%                         (JO)
------------------------------------------------------------------------
* The tariff rate quota for tuna in airtight containers not in oil
  (water pack) is based on 4.8 percent of apparent U.S. consumption of
  tuna in airtight containers during the preceding year.
A+ = GSP least-developed beneficiary countries
CA = NAFTA--Canada
D = Africa Growth and Opportunity Act
IL = Israel
J+ = Andean Trade Promotion and Drug Eradication Act. Only pouched tuna
  is granted duty-free status. The tuna from which the pouched tuna is
  prepared must be caught by U.S.-flagged or ATPDEA-flagged vessels.
JO = Jordan
MX = NAFTA--Mexico
R = Caribbean Basin Trade Partnership Act


Canned/Pouched Tuna Tariff Impact:

    The current import tariff provides critical and necessary benefits 
to what is left of the U.S. tuna processing and fishing industry:

     LSupport for more than 6,000 U.S. tuna processing jobs in 
California, Puerto Rico and American Samoa, which jobs would be in 
jeopardy if the tariff were to be significantly reduced or eliminated.
     LSupport for the American Samoa economy where 88 percent 
of private sector employment is provided by the U.S. canned tuna 
industry.
     LSupport for the U.S. tuna fishing fleet of approximately 
27 vessels that operate out of American Samoa and supply the U.S. tuna 
processors located there. These vessels enable the United States to 
have a strong voice in fishery conservation and regulation activities 
in the Pacific Ocean, the largest tuna fishery in the world.
     LThe United States and the European Union comprise the two 
largest canned tuna markets in the world. The European Union has long 
maintained a much higher duty on canned tuna products than the United 
States. The EU tariff rate is 24 percent on all canned tuna.
     LThe U.S. canned tuna industry has maintained for years 
that there should be international parity regarding tariff rates. We 
understand the desire of the United States to work toward the 
elimination of tariffs in the future. However, it makes no sense to us 
to unilaterally reduce tariffs when this causes an even greater 
disparity between the major world markets for a product like canned 
tuna that has repeatedly been found by the ITC to be import sensitive.

International:

     LAn import tariff of 12.5 percent is well below import 
duties on canned tuna imposed by other major canned tuna markets. The 
European Union, the largest canned tuna market in the world, maintains 
a tariff of 24 percent on all canned tuna products and on all imports 
of tuna in any other form; Mexico, our NAFTA trading partner, imposes a 
tariff of 20 percent on canned tuna; and most other Latin American 
markets maintain tariffs on canned tuna at 20 percent or more. These 
tariffs obviously provide an unfair trade advantage against U.S. tuna 
processors.
     LThe U.S. trade deficit in fishery products has reached an 
all time high. The U.S. canned tuna market, once the most dominant 
canned tuna market in the world, has recently declined in volume.
     LAs importantly, it is estimated that there is currently a 
50 percent over-capacity in the international tuna processing sector. 
Encouraging new processing capacity without cutting the existing over-
capacity situation makes absolutely no sense.
     LDue to the intense competitive environment caused by low 
cost foreign imports, retail prices of canned tuna in the United States 
are the lowest among all developed nations of the world. Comparison 
includes Australia, Canada, France, Germany, Italy, Spain and the 
United Kingdom. (Source: Industry analysis).
     LU.S. canned tuna processors face significant wage 
disparities when compared with major tuna exporters. Average hourly 
wage rates in U.S. processing facilities in California, Puerto Rico and 
American Samoa are approximately $11.00, $6.50 and $3.75, respectively. 
The average hourly labor rate in the key exporting country of Thailand 
is approximately $0.60.
     LMost canned tuna processors in foreign nations are not 
required to abide by the same health, welfare, safety, regulatory, 
conservation or environmental standards imposed on U.S. processors. In 
addition, they often receive government and other financial subsidies 
that provide an unfair economic advantage.
     LU.S. tuna vessel owners are similarly disadvantaged as 
they are required to abide by strict regulatory, environmental and 
conservation standards that are rigorously enforced by the U.S. 
Department of Commerce--National Marine Fisheries Service and the U.S. 
Coast Guard. Many of these standards are not observed by foreign flag 
vessels and are not enforced by their respective governments.

    For all of the above reasons and several others, duties on canned 
tuna should not be the subject of bilateral trade negotiations but 
should only be considered in the context of the World Trade 
Organization efforts to address trade concessions on a product-by-
product basis.

                                 
                  Statement of Selina E. Jackson, UPS
    UPS respectfully submits this statement in response to the request 
by the Ways and Means Subcommittee on Trade for comments regarding the 
implementation of the United States bilateral Free Trade Agreements 
(``FTAs'') with Singapore and Chile. UPS expects the U.S.-Singapore and 
U.S.-Chile FTAs to contribute to the growth of the U.S. express 
delivery services (``EDS'') industry.
    UPS is the world's largest package delivery company and a leading 
global provider of specialized transportation and logistics services. 
UPS employs 320,000 workers in the United States and delivers more than 
13.3 million packages and documents each day in more than 200 countries 
and territories worldwide.
    UPS strongly supports free trade. The success of UPS depends on its 
ability to transport documents and parcels quickly, without undue delay 
or costs. Laws and regulations in a wide range of areas, such as 
intermodal transportation, air auxiliary services, distribution, 
warehousing, customs, telecommunications, insurance and freight 
forwarding, can significantly affect the ability of UPS to compete 
effectively in foreign markets. It is important to remember that UPS 
ships documents and parcels for other businesses, including U.S. 
exporters, many of which rely on just-in-time systems of inventory 
control and customer delivery. For this reason, such laws have the 
potential to restrict trade when they are discriminatory and/or 
unnecessarily burdensome. As such, UPS strongly supports the 
implementation of international agreements that alleviate restrictions 
on trade.
    Both the U.S.-Singapore and the U.S.-Chile FTAs are expected to 
contribute to the growth of our company and the EDS industry by 
increasing the volume of trade between the United States, Singapore and 
Chile and by reducing some current and potential trade barriers that 
affect providers of express delivery services. Both Singapore and Chile 
represent important and growing markets for the express delivery 
services industry.

The U.S.-Singapore Market

    According to industry data, the EDS industry has the potential 
opportunity to transport approximately $11 billion of goods between the 
United States and Singapore in 2003. This opportunity is expected to 
grow significantly over the next five years, with the EDS-related trade 
opportunity reaching at least $17 billion in 2008.
    Singapore also is a critical market for companies like UPS that 
provide express delivery services in the broader ASEAN region because 
the country serves as a commercial hub. Over 40 percent of goods 
imported into Singapore are re-exported to other nations. In 1999, 
express delivery shipments accounted for approximately 20 percent, or 
$13.6 billion, of the $68 billion in imports and exports transported 
via air between the United States and the ASEAN nations.\1\ In 2000, it 
was estimated that express delivery services in the ASEAN region would 
grow at an annual rate of approximately 20 percent per year.\2\ Given 
the liberalization of trade between the United States and Singapore 
expected as a result of the U.S.-Singapore FTA, UPS expects the growth 
of express delivery services in the region to continue.
---------------------------------------------------------------------------
    \1\ See U.S.-ASEAN Business Council, Inc., ``The Integrated Express 
Industry in the ASEAN Region: Delivering Business into the 21st 
Century'' (Sept. 2000), at 21-22.
    \2\ See id. at 22.

---------------------------------------------------------------------------
The U.S.-Chile Market

    Chile also represents an important market for UPS and the express 
delivery services industry. The United States is Chile's largest 
trading partner, and trade between the two nations has been increasing 
rapidly. In the seven years prior to 2001, trade in goods between the 
United States and Chile grew by 44 percent, and trade in services grew 
by 37 percent.\3\ In 2001, the value of goods and services traded 
between the two countries reached $8.8 billion.\4\ UPS expects that as 
the U.S.-Chile FTA is implemented, the flow of goods between the two 
nations will continue to increase. Because UPS transports many of these 
goods, UPS expects that its business opportunities will increase as a 
result of the U.S.-Chile FTA.
---------------------------------------------------------------------------
    \3\ See Office of the United States Trade Representative, ``U.S. 
and Chile Conclude Historic Free Trade Agreement,'' (visited May 5, 
2003) http://ustr.gov/releases/2002/12/02-114.htm, at 2.
    \4\ See id.

---------------------------------------------------------------------------
Reducing Trade Barriers

    In addition to expanding business opportunities for the EDS 
industry by increasing trade volumes, UPS expects that the U.S.-
Singapore and U.S.-Chile FTAs will help enhance the industry's business 
opportunities by reducing some trade barriers that could otherwise 
impede the industry's operations in both countries. For example, both 
the U.S.-Singapore and U.S.-Chile FTAs break new ground by specifically 
recognizing express delivery services as a distinct service sector and 
by establishing that commitments under the Agreements regarding the EDS 
sector should apply to all suppliers of the service. As such, many of 
the Agreements' provisions restricting practices that limit or distort 
trade apply both to private and public providers of express delivery 
services. The U.S.-Singapore and U.S.-Chile FTAs also include specific 
commitments on customs procedures, requiring both transparency and 
efficiency in customs administration. While these provisions are not 
perfect in either agreement, they are expected to facilitate the 
customs process and to enhance the ability of express delivery service 
providers to quickly and reliably meet the needs of current and future 
customers.

Improving Future Agreements

    While UPS supports the implementation of the U.S.-Singapore and 
U.S.-Chile FTAs and believes these Agreements represent important steps 
forward in promoting freer trade, it is also important to note that the 
provisions included in these Agreements regarding cross-subsidization 
warrant significant improvement in future trade agreements. Effectively 
addressing cross subsidization of express delivery services by those 
with government-granted special or exclusive rights is a fundamental 
objective of the EDS industry, as this is a crucial market access issue 
for our industry. When any entity, including a postal administration, 
chooses to provide express delivery services to their customers, they 
should be governed by the same rules and market economics as other 
providers of express delivery services. Cross-subsidization constitutes 
an unfair competitive advantage that directly limits the market access 
of otherwise competitive private express delivery service providers.

                                 
    Statement of the Honorable Henry A. Waxman, a Representative in 
                 Congress from the State of California
    I appreciate the opportunity to share with the Ways and Means 
Committee my serious concerns about including Hatch-Waxman style patent 
protections in international trade agreements.
    Let me start by saying that I am very proud of the Drug Price 
Competition and Patent Term Restoration Act of 1984 and what it has 
accomplished. When Senator Hatch and I proposed this legislation, we 
were addressing a serious health care problem in the United States. On 
one hand, we needed to bring down prescription drug prices in this 
country. Because Federal law did not permit approval of generic 
versions, competition was stifled in the pharmaceutical marketplace and 
many Americans could not afford their medication. At the same time, we 
had to be careful that our response would not discourage the 
pharmaceutical companies from investing in research to develop new 
drugs that would save a great many lives.
    Hatch-Waxman was a very good, balanced, and tailored solution to 
that dilemma. The law streamlined the approval of generic drugs, while 
protecting patent rights and creating other incentives for 
pharmaceutical manufacturers to remain innovative. The policy ushered 
in a wave of competition and scientific advances that greatly lowered 
the price that millions of Americans paid for a wide range of 
medicines, while maintaining high levels of innovation in emerging new 
drugs.
    Like most good legislation, the Hatch-Waxman compromise was 
carefully designed for a specific situation, in a specific regulatory 
system. But our success here does not mean it is appropriate for other 
countries. That is why I am greatly alarmed by its inclusion in Free 
Trade Agreements like Chile and Singapore, which are being touted as 
the cookie cutter model of U.S. demands for future trade negotiations. 
Many of our trading partners face vastly different challenges and 
circumstances than we do here in the U.S.
    As we are all painfully aware, devastating epidemics in the 
developing world, including AIDS, TB, and malaria are killing millions 
of people and crippling whole societies. Even in middle-income 
countries, leading killers like heart disease, diabetes, cancer and 
other conditions are going untreated because essential medications are 
unaffordable in these countries, costing many times the average 
citizen's annual income. While the pharmaceutical industry's approach 
is to cure this problem with a dose of Hatch-Waxman, this would have 
the lethal effect of keeping drug prices in these countries 
unaffordable for many years longer than is the case now.
    I think it goes without saying that the U.S. faced nothing like 
these kinds of problems when Hatch-Waxman was enacted here. We did not 
face a situation where only a tiny percentage of the population was 
receiving the medicines that they needed to survive. We did not face a 
situation where a very large percentage of the young people in our 
society had already contracted diseases that would swiftly and almost 
certainly kill them if they did not receive such medicines.
    If we had, the solution would certainly not have looked like Hatch-
Waxman, which delays market entry of low-cost generic drugs for years 
after a life-saving drug becomes available. That system works in this 
country because most people in the U.S. have health insurance that pays 
for essential drugs and because we have a health care safety net to 
assure that the poorest in our society are not left without medical 
care and treatment. But to impose such a system on a country without a 
safety net, depriving millions of people of life-saving drugs, is 
irresponsible and even unethical. In developing countries, we must do 
everything in our power to make affordable drugs for life-threatening 
diseases available now.
    Let me make clear that I am not talking about increasing the 
availability of Viagra or drugs for hair-loss, I am talking about 
preserving the flexibility that governments need to build and maintain 
a functioning health system. It would be reckless to impose a Hatch-
Waxman without close examination of its impact on a case-by-case basis.
    As you review these agreements, I hope you will keep in mind that 
Hatch-Waxman is not a ``one size fits all'' prescription. I believe 
that the USTR should be obligated to provide a comprehensive review of 
the potential impact on the health system of any countries where it 
plans to table Hatch-Waxman requirements. Whether in Central America, 
Latin America, Morocco, or Southern Africa, there is a long slate of 
USTR negotiations where the Hatch-Waxman could have devastating 
results.

                                
