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



 
    IMPLEMENTATION OF THE UNITED STATES-MOROCCO FREE TRADE AGREEMENT

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








                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 7, 2004

                               __________

                           Serial No. 108-47

                               __________

         Printed for the use of the Committee on Ways and Means
















                 U.S. GOVERNMENT PRINTING OFFICE

99-669                 WASHINGTON : 2005
_________________________________________________________________
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

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 announcing the hearing..................................     2

                               WITNESSES

Office of the U.S. Trade Representative, Hon. Peter F. Allgeier, 
  Deputy U.S. Trade Representative...............................    11

                                 ______

CMS Energy Corporation, Jackson, Michigan, David Mengebier.......    31
Yasmine Enterprises, Inc., Denver, Colorado, Jamal Belcaid.......    35
National U.S.-Arab Chamber of Commerce, David Hamod..............    38
Intel Corporation, Santa Clara, California, Melika Carroll.......    42
Wheat Export Trade Education Committee, the National Association 
  of Wheat Growers, and the U.S. Wheat Associates, David 
  Taliaferro.....................................................    48

                       SUBMISSION FOR THE RECORD

National Corn Growers Association, Dee Vaughn, statement.........    53
























    IMPLEMENTATION OF THE UNITED STATES-MOROCCO FREE TRADE AGREEMENT

                              ----------                              


                        WEDNESDAY, JULY 7, 2004

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

    The Committee met, pursuant to notice, at 10:06 a.m., in 
room 1100, Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 25, 2004
FC-20

                      Thomas Announces Hearing on

              Implementation of the United States-Morocco

                          Free Trade Agreement

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
Implementation of the United States-Morocco Free Trade Agreement (FTA). 
The hearing will take place on Wednesday, July 7, 2004 in the main 
Committee hearing room, 1100 Longworth House Office Building, beginning 
at 10:00 a.m.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. Invited witnesses will include Ambassador Peter F. Allgeier, 
Deputy United States Trade Representative. However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.
      

BACKGROUND:

      
    Morocco and the United States had two-way trade of approximately 
$860 million, and a U.S. trade surplus of $66.5 million in 2003. On 
October 1, 2002, the President formally notified Congress that he would 
pursue an FTA with Morocco. Negotiations for the United States-Morocco 
FTA were concluded on March 2, 2004, and the agreement was signed on 
June 15, 2004, by Ambassador Robert Zoellick and Moroccan Minister-
Delegate of Foreign Affairs and Cooperation Taib Fassi-Fihri.
      
    The agreement provides significant benefits for U.S. businesses and 
their employees as well as U.S. consumers. The agreement will 
immediately eliminate tariffs on 95 percent of bilateral trade in 
consumer and industrial products, with all remaining tariffs to be 
eliminated within 9 years. The agreement includes a negative list for 
services with very few reservations. All agricultural products are 
covered by the agreement. The agreement also contains strong 
protections for U.S. investors.
      
    In announcing the hearing, Chairman Thomas stated, ``Morocco is an 
important U.S. ally, and this agreement will enhance the economic 
component of that relationship and support Moroccan economic reforms. 
This strong and comprehensive agreement will expand trade opportunities 
for U.S. goods and services immediately, and I expect it to receive 
quick and favorable congressional consideration.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on congressional consideration of the United 
States-Morocco FTA and the benefits that the agreement will bring to 
American businesses, farmers, workers, consumers, and 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 
Michael Morrow or Kevin Herms at (202) 225-1721 no later than the close 
of business Tuesday, June 29, 2004. 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 Committee 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 
Committee staff at (202) 225-1721.
      
    In view of the limited time available to hear witnesses, the 
Committee 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 in lieu of a personal appearance. 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 300 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 full Committee office, 1102 Longworth 
House Office Building, no later than 12:00 p.m. on Friday, July 2, 
2004. The 300 copies can be delivered to the Committee staff in one of 
two ways: (1) Government agency employees can deliver their copies to 
1102 Longworth House Office Building in an open and searchable box, but 
must carry with them their respective government issued identification 
to show the U.S. Capitol Police, or (2) for non-government officials, 
the copies must be sent to the new Congressional Courier Acceptance 
Site at the location of 2nd and D Streets, N.E., at least 48 hours 
prior to the hearing date. Please ensure that you have the address of 
the Committee, 1102 Longworth House Office Building, on your package, 
and contact the staff of the Committee at (202) 225-1721 of its 
impending arrival. Due to new House mailing procedures, please avoid 
using mail couriers such as the U.S. Postal Service, UPS, and FedEx. 
When a couriered item arrives at this facility, it will be opened, 
screened, and then delivered to the Committee office, within one of the 
following two time frames: (1) expected or confirmed deliveries will be 
delivered in approximately 2 to 3 hours, and (2) unexpected items, or 
items not approved by the Committee office, will be delivered the 
morning of the next business day. The U.S. Capitol Police will refuse 
all non-governmental courier deliveries to all House Office Buildings.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``108th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=16). Select the hearing 
for which you would like to submit, and click on the link entitled, 
``Click here to provide a submission for the record.'' Once you have 
followed the online instructions, completing all informational forms 
and clicking ``submit'' on the final page, an email will be sent to the 
address which you supply confirming your interest in providing a 
submission for the record. You MUST REPLY to the email and ATTACH your 
submission as a Word or WordPerfect document, in compliance with the 
formatting requirements listed below, by close of business Monday, July 
12, 2004. Finally, please note that due to the change in House mail 
policy, the U.S. Capitol Police will refuse sealed-package deliveries 
to all House Office Buildings. Those filing written statements who wish 
to have their statements distributed to the press and interested public 
at the hearing can follow the same procedure listed above for those who 
are testifying and making an oral presentation. For questions, or if 
you encounter technical problems, please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies 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. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission 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 THOMAS. Good morning. This hearing will focus on 
the recently completed U.S.-Morocco Free Trade Agreement (FTA) 
(P.L. 108-302) and the benefits this agreement will bring to 
American workers, consumers, farmers, businesses, and the U.S. 
economy. It is remarkable that the United States and Morocco 
have had such a long and strong relationship. Morocco was the 
first country to recognize the newly sovereign United States in 
1777, and the Treaty of Peace and Friendship between the United 
States and Morocco is the longest unbroken treaty relationship 
in U.S. history. Yet the economic relationship between the 
United States and Morocco has lagged significantly behind the 
strong friendship and mutual recognition. The European Union 
(EU)--and it is of no surprise with less than 10 miles 
separating Europe from Morocco--has played a dominant role in 
much of northern Africa, including Morocco. Indeed, the two-way 
trade between Morocco and the EU is over 50 percent higher than 
the two-way trade between Morocco and the United States. 
Hopefully, this agreement will provide an opportunity to expand 
our economic relationship and change that percentage.
    The agreement will also support economic reform efforts in 
Morocco, a process that we hope to see replicated throughout 
the region. Since we began negotiations with Morocco on a FTA, 
we have seen a wave of other countries in the region express 
interest. Recently, the U.S. Trade Representative's (USTR) 
office has added Kuwait, Yemen, Qatar, and United Arab Emirates 
to the group of countries with which we have trade and 
investment framework agreements (TIFA), which also includes 
Saudi Arabia, Egypt, Tunisia, and Algeria. We have recently 
concluded a FTA with Bahrain. I hope these steps will promote 
greater U.S. economic ties and integration within the region. 
Many of the features of the Morocco Free Trade Area provide a 
positive example, particularly the fact that the agreement is 
comprehensive, i.e., all products are covered under the 
agreement. Further, the agreement includes strong protections 
for investment dispute settlements, including investment 
agreements. This is clearly a strong step forward to U.S.-
Moroccan relationship improvement. I hope Congress affords it 
the quick bipartisan support that it deserves.
    Prior to recognizing the Ranking Member on the Subcommittee 
on Trade, I will recognize the gentleman from New York, the 
Ranking Member of the Committee on Ways and Means, for any 
remarks he may wish to make.
    [The statement of Chairman Thomas follows:]
    Opening Statement of The Honorable Bill Thomas, Chairman, and a 
        Representative in Congress from the State of California
    This hearing will focus on the recently completed U.S.-Morocco free 
trade agreement and the benefits this agreement will bring to American 
workers, consumers, farmers, businesses, and the U.S. economy.
    The United States and Morocco share a strong and longstanding 
relationship. Morocco was the first country to recognize the newly 
sovereign United States in 1777, and the Treaty of Peace and Friendship 
between the United States and Morocco is the longest unbroken treaty 
relationship in U.S. history. Yet the economic relationship between the 
United States and Morocco has lagged behind. The European Union has 
traditionally played a dominant economic role in many African 
countries, including Morocco. Two-way trade between Morocco and the EU 
is over 50 percent higher than two-way trade between Morocco and the 
United States. This agreement will provide an opportunity to expand our 
economic relationship with Morocco and to enhance U.S. competitiveness 
by providing Morocco with trade opportunities other than through the 
EU.
    The agreement will also support economic reform efforts in Morocco, 
a process that we hope to see replicated throughout the region. Since 
we began negotiations with Morocco on a free trade agreement, we have 
seen a wave of other countries in the region expressing interest. 
Recently USTR has added Kuwait, Yemen, Qatar, and the United Arab 
Emirates to the group of countries with which we have Trade and 
Investment Framework Agreements, which also includes Saudi Arabia, 
Egypt, Tunisia, and Algeria. We have recently concluded a free trade 
agreement with Bahrain. I hope that these steps will promote greater 
U.S. economic ties and integration within the region. The potential of 
an FTA has provided a major impetus to comprehensive labor reform in 
Morocco.
    Many features of the Morocco FTA provide a positive example, 
particularly the fact that the agreement is comprehensive--meaning all 
products are covered under the agreement. Further, the agreement 
includes strong protections for investment dispute settlements, 
including investment agreements.
    This agreement is a strong step forward in the U.S.-Moroccan 
relationship, and I expect it to be approved quickly by the Congress 
with strong bipartisan support.
    I now recognize the Chairman of the Trade Subcommittee, Mr. Crane, 
for any comments he may have.

                                 

    Mr. RANGEL. Thank you, Mr. Chairman, and I want to thank 
USTR for the work that you have done in improving the trade 
relationship between our great country and other countries. I 
do not understand why constantly we do not find from your 
office a stronger attempt to bring Democrats and Republicans 
together on this issue. I am a firm believer in foreign policy, 
that it is very, very important to us as Americans to work 
together and to resolve our differences in our country and our 
legislative and executive branches and to look like one strong 
Nation whenever we are dealing with any foreign nation.
    What has basically been the differences in these trade 
agreements? It has been that most of us on our side have 
believed that there should be some minimum standards as it 
relates to labor, and these standards should be standards that 
foreigners and the United States should be proud of as a 
starting point in making certain that we are not saying that 
the private sector is going to be in charge of determining the 
rights of workers. We use as an example the great improvement 
in workers' benefits in the United States, not for starters but 
as a goal to say one day we hope that you will be able to be 
productive enough to reach these standards. We do not want to 
dictate to the countries as to what to do and that we know 
better for their workers than what they do. We do believe that 
when we are talking about child labor, the right to organize, 
the right to vote, we know we have never, never, never would 
have reached a point that we are today if we had to depend on 
management. We know it is a good working relationship that 
worked for us and should work for other people.
    The resistance of putting these things into agreement when 
many times the ambassadors and representatives of these 
countries have said they had no problem with it, it is our side 
that really did not want that language in the agreement, well, 
that is--you diplomats can talk in language that even 
politicians do not understand. The truth of the matter is that 
you have a wonderful opportunity to bring many, many more 
Democrats on board for bipartisan agreements if you try to work 
out these differences in getting basic International Labor 
Organization (ILO) language in these agreements.
    Fortunately, when we have countries that have workable 
laws, that enforce those laws, and you use the language that 
you do to enforce your own laws, it is hard to resist it when 
we have checked out that they are doing a pretty good job. To 
think that we are just going to buy this type of boiler-room 
language with every trade agreement means that you expect to 
have a partisan fight on every trade agreement. You do not want 
it; I do not want it. We talk about it. We respect each other. 
If you think we are wrong, I hope you can bring a fresh view to 
this this morning and explain why you do not want ILO language 
in these trade agreements. It would help me not as a Democrat 
but as a Member of Congress and as an American. So, let me 
thank you for the hard work you have done.
    Chairman THOMAS. It is now my pleasure to recognize the 
gentleman from Illinois, the Chairman of the Subcommittee on 
Trade, Mr. Crane.
    Mr. CRANE. Thank you, Mr. Chairman. I am quite pleased that 
the United States and Morocco have finally reached an agreement 
on a bilateral free trade issue. Morocco has long been a key 
ally in the Middle East. While perhaps less dramatic in scope 
than some of the other FTAs Congress has and will soon 
consider, two-way trade between the United States and Morocco 
is significant, at about $1 billion per year. Furthermore, the 
International Trade Commission (ITC) estimates that trade 
between our countries should double once this agreement is 
implemented.
    This is a strong agreement. Under its terms, over 95 
percent of U.S. exports of industrial goods to Morocco will 
become duty-free immediately. This follows the high standards 
set by our recently passed agreements with Singapore and Chile, 
as well as that of the Australia FTA, which I expect will pass 
through the House this month. This is important for U.S. 
manufacturers, whether they produce heavy equipment, high-tech 
products, chemicals, or any of a number of other products. This 
is also a strong agreement for the services sector of our 
economy, whether it be telecommunications, e-commerce for 
digital products, or new opportunities for U.S. financial 
institutions.
    Importantly, unlike some other agreements, the Morocco FTA 
is comprehensive as regards to agricultural goods. This is a 
significant step forward, and I am grateful to USTR for its 
efforts in this regard. I understand that difficult balances 
must be struck in any FTA, but I hope and trust that inclusion 
of all agricultural products will become part of standard 
operating procedure as the Administration completes future 
agreements.
    I would like to emphasize my strong support for this 
agreement and my appreciation to the Administration for its 
efforts in completing it. I applaud their efforts in 
negotiating an agreement that opens markets for U.S. exports 
while eliminating tariffs, reducing nontariff barriers, opening 
services markets, and strengthening intellectual property 
protections. In addition, this agreement provides for important 
investor protections for our companies. Taken together, this 
will provide a significant benefit to the U.S. economy.
    I would also like to welcome Ambassador Allgeier, as well 
as our second panel of invited guests here today, and I look 
forward to working with Chairman Thomas and our colleagues, Mr. 
Rangel and Mr. Levin, as well as all other interested parties, 
to ensure swift passage of this agreement. Thank you, Mr. 
Chairman.
    Chairman THOMAS. Thank you. Now the Chair will recognize 
the gentleman from Michigan, the Ranking Member on the 
Subcommittee on Trade, Mr. Levin.
    Mr. LEVIN. Thank you, Mr. Thomas. As you mentioned, there 
has been a long history of cordial relationships between the 
United States and Morocco. When I was told that Morocco was the 
first country to recognize the United States in 1777, I decided 
maybe what I learned in high school and college was much too 
oriented toward other places than Africa or Asia. Indeed, there 
has been this long history of relationship, and I think we need 
to keep that in mind, especially when we acknowledge that the 
relationship between our two countries is probably more 
important today than it ever has been.
    I think it is important to remember at the same time that 
trade agreements need to address the realities of each 
situation. Trade agreements that become simply kind of 
automatic models can miss the potential impact of those 
agreements both on other countries and the United States. Each 
situation is different. One size does not fit all, unless you 
believe that expanded trade is always mutually advantageous, no 
matter how it is shaped. I do not believe that for a moment. We 
have to take into account the realities on the ground when we 
put these trade agreements together and not automatically try 
to use one as a model for another. If so, the results can be 
the opposite in one place from another place. In that regard, I 
want to talk just for a few minutes about the provisions on 
medicines. The language here is essentially the same, for 
example, as it is in Australia. The provision regarding 
generics and test data, the 5-year provision, is the same as it 
is in Australia. The situation is very different in Morocco 
than it is in Australia. So, Ambassador, I would like you to 
address this issue, whether Morocco now provides 5 years of 
protection in terms of use of test data under its own law, and 
if Morocco wanted to do otherwise, whether this agreement would 
bind them.
    The same relates to the so-called parallel importation law. 
It did not matter perhaps in other agreements, but here it 
might, and I would like you to tell us whether this agreement 
would bind Morocco in terms of so-called parallel imports, how 
they could handle exhaustion of patent rights, if there were a 
public emergency, a health emergency in Morocco. Likewise--and 
Mr. Rangel has eloquently covered this--the provisions relating 
to core labor standards, and once again, this Administration is 
using ``Enforce your own law.'' In Australia, there is going to 
be zero impact really in terms of our economic relationship, 
our competition, because the Australian laws essentially 
incorporate the basic ILO standards. The same was true in terms 
of Chile and Singapore.
    With Morocco, it is not quite the same. They started major 
reforms of their labor laws just, I think, a year ago. When we 
had the meeting, Mr. Chairman, of the Congressional Oversight 
Group (COG), we asked USTR if they had an English translation 
of the labor reforms, and the answer was they did not at that 
time. It was somewhat startling to me that we would not have an 
English translation of reforms of labor laws if one felt it 
mattered. If you use the standard ``Enforce your own laws,'' I 
guess it does not really matter what the laws say if that is 
your idea of the basis for expanded trade.
    Anyway, we now have received an English translation of the 
reforms, and there just needs to be more attention to the 
contents of trade agreements. We did not get the actual text 
until after notification in this case. So, let me just finish 
by saying that, as I understand it, Morocco is now continuing 
its process of reform of its labor laws, and there is now 
before the government and their governmental apparatus some 
proposed additional changes relating to the freedom of workers, 
especially the right to strike under certain circumstances. I 
would appreciate if the Ambassador could address us as to 
exactly what the status of the latest reforms are, their 
nature, and our government's expectations. Thank you, Mr. 
Chairman.
    Chairman THOMAS. Thank you. Now it is the Committee's 
pleasure to hear from the Honorable Peter Allgeier, Deputy 
United States Trade Representative----
    Mr. ENGLISH. Mr. Chairman?
    Chairman THOMAS. The gentleman from Pennsylvania.
    Mr. ENGLISH. Just briefly, I was wondering if I might 
insert a statement at this point for the record.
    Chairman THOMAS. The Chair appreciates the gentleman's 
concern. Any Member who has a written statement certainly can 
place it in the record at this point. I thank the gentleman and 
recognize his long interest and support, both structurally and 
personally, in this U.S.-Morocco relationship.
    Mr. ENGLISH. Thank you, Mr. Chairman.
    [The statement of Mr. English follows:]
 Opening Statement of The Honorable Phil English, a Representative in 
                Congress from the State of Pennsylvania
    Mr. Chairman, before the Committee today is a historic agreement 
that is a win for the United States and a win for Morocco.
    Morocco is an emerging market of more than 30 million people at the 
crossroads of Europe, Africa and the Middle East. As such, this 
agreement represents an excellent export destination for U.S. goods and 
services. In addition, the agreement levels the playing field with 
Europe in terms of access to the Moroccan market where European 
companies have for far too long enjoyed a competitive advantage because 
of the Moroccan-EU trade agreement.
    The United States-Morocco FTA strengthens relations with a moderate 
Muslim ally in the volatile Middle Eastern and North African region. 
Most recently, the United States further recognized our nation's 
strategic partnership with Morocco by designating it as a ``major non-
NATO ally.'' This move elevates the military ties between the U.S. and 
Morocco, and is a testament to Morocco's status as a close and vital 
ally of the United States in the War on Terror.
    More than 95 percent of bilateral trade in consumer and industrial 
products will become duty free immediately upon entry into force of the 
agreement. The FTA also provides immediate bilateral tariff elimination 
on many agricultural products. Simply put Mr. Chairman, this agreement 
represents the best market access package for domestic employers of any 
U.S. free trade agreement with a developing country. The ITC determined 
that trade liberalization as proposed by this agreement is likely to 
increase the competitiveness of U.S. manufacturers and farmers in the 
Moroccan market not only relative to Moroccan producers, but also 
relative to other foreign suppliers such as the European Union--with 
which Morocco already has an FTA.
    In 2003, U.S. domestic merchandise exports to Morocco were valued 
at $462 million, while U.S. imports for consumption from Morocco were 
$396 million. The United States recorded a $66 million surplus with 
Morocco in 2003, as Morocco ranked as the 69th largest market for U.S. 
exports and the 82nd largest supplier of imports. In fact, the U.S. 
consistently enjoys a trade surplus with Morocco; the surplus has 
totaled over $1.5 billion from 1992-2003.
    The ITC also determined that U.S. exports to Morocco are likely to 
increase by $740 million, and U.S. imports from Morocco are likely to 
increase by $198.6 million after full implementation of the FTA. This 
agreement clearly is a win-win agreement for the U.S. economy.
    The agreement is also an important component of the plan to create 
a U.S.-Middle East Free Trade Area (MEFTA) by 2013. More than any other 
region (other than sub-Saharan Africa), the Middle East has declined 
economically over the past few decades. This occurred despite the rise 
and dissemination of new technologies and the spread of international 
trade. The economic decline of the region cannot be allowed to continue 
unchecked without the political consequences we are seeing today.
    The conclusion of the U.S.-Morocco FTA sends a powerful message to 
countries throughout the Middle East and the rest of the world. The 
message is clear: The United States seeks partners in the region 
committed to economic and political reform, and is willing to extend 
help to countries that are politically committed to undertake the 
necessary--and sometimes difficult--reforms.
    And Morocco has completed difficult reforms, in large part because 
of the negotiation of this agreement. Due to Morocco's strong desire to 
negotiate a FTA with the United States, a domestic consensus developed 
for enacting sweeping labor law reforms; reforms that had been stalled 
for 20 years. These reforms were unanimously approved by the Moroccan 
Parliament. The new labor law went into effect on June 8, 2004 and 
under the terms of the agreement all aspects of the new law are fully 
enforceable.
    Some key provisions of the new Labor Code include:

      Collective bargaining: The rights of workers to union 
representation and confirming workers' rights to be consulted over 
management decisions that affect staff. Modernizes dispute resolution 
mechanism and establishes a legal framework that embraces the right to 
strike (provided for by the Moroccan Constitution).
      Worker Safety: Modernizes workplace inspections, 
including health inspections. Reduces the number of weekly working 
hours from 48 to 44 for the private sector, with no more than ten hours 
worked in a single day.
      Compensation and benefits: Raises the minimum wage in the 
private sector by 10 percent in two steps and implements the minimum 
wage in the public sector. Extends maternity leave from 12 to 14 weeks; 
and for women experiencing difficult pregnancies, additional leave up 
to 22 weeks is granted. Provides for premium pay for overtime and paid 
public and annual holidays.
      Child labor protections: Raises the minimum age of 
employment from 12 to 15 years to comply with ILO convention 138.
      Gender discrimination: Gender discrimination is 
prohibited--equal pay for equal work is required.
      Layoff protections: Total or partial shut-downs of firms 
are allowed for technical, structural or economic reasons, but should 
first have the government's agreement. The courts have the authority to 
reinstate workers dismissed arbitrarily and can compel employers to pay 
damages and backpay. Affected employees are entitled to compensation up 
to 6 weeks' salary for each year of work. The compensations are exempt 
from taxes and Social Security contributions.

    Mr. Chairman, Morocco has also made difficult reforms in the area 
of women's rights. In October, King Mohamed VI announced a series of 
proposed reforms to the Personal Status Code aimed at improving women's 
rights. These included raising the legal age for women to marry from 15 
to 18, imposing severe restrictions on polygamy, and giving husband and 
wife equal and joint responsibility over the family.
    Aside from encouraging historic opportunities for Moroccan workers 
and women through negotiating this agreement, the U.S.-Morocco FTA sets 
a high standard in many areas of 21st century global trade. The 
intellectual property rights provisions alone are the best yet in any 
U.S. FTA with a developed or developing country and will serve as an 
important model going forward.
    The agreement establishes a secure, predictable legal framework for 
U.S. investors operating in Morocco. All forms of investment will be 
protected under the agreement and U.S. investors will enjoy in almost 
all circumstances the right to make investments in Morocco on equal 
footing with Moroccan investors. Additionally, the agreement makes 
certain that trademarks are protected by embodying the principle that 
the first person to acquire a right to a trademark is the person who 
has the right to use it.
    More than simply requiring high standards on paper, Mr. Chairman, 
this agreement includes strong circumvention provisions, protecting 
intellectual property and penalizing piracy. The agreement requires 
each government to criminalize end-user piracy, providing strong 
deterrence against piracy and counterfeiting. The agreement mandates 
both statutory and actual damages under Moroccan law for violations of 
intellectual property. Under these provisions, monetary damages can be 
awarded even if actual economic harm cannot be determined.
    All core obligations of the agreement, including labor and 
environmental provisions, are subject to the dispute settlement 
provisions of the agreement. The agreement includes strong enforcement 
mechanisms, including the ability to suspend trade concessions or 
establish monetary assessments.
    Finally, Mr. Chairman, the FTA is an historic milestone in the 
U.S.-Morocco bilateral relationship, which began well over 200 years 
ago when Morocco was the first country to recognize the newly 
independent United States. Morocco today remains one of the United 
States' closest political allies in the war against terror and a 
steadfast friend in advancing peace in the Middle East.

                                 

    [The statement of Mr. Tanner follows:]
Opening Statement of The Honorable John S. Tanner, a Representative in 
                  Congress from the State of Tennessee
    Mr. Chairman, thank you for having this hearing today. I would also 
like to acknowledge my colleague and co-chair of the Morocco Caucus--
Mr. English and thank him for all his work on moving this agreement 
forward.
    I also want to congratulate Ambassadors Zoellick and Allgeier, and 
all of the hard working members of our negotiating teams at USTR and 
other agencies for their achievements. The agreement that they have 
reached, along with their Moroccan counterparts, is a comprehensive, 
well-balanced agreement that will benefit both nations. Additionally, I 
believe that this is a bipartisan agreement that follows the procedures 
established under the Trade Promotion Authority Act.
    As many of you know, Morocco is the signatory to the oldest 
unbroken treaty in the history of U.S. foreign relations and they have 
proved their commitment to the United States many times during the past 
two centuries. The U.S.-Moroccan friendship began with its recognition 
of the American Republic on December 20, 1777 and is continuing strong 
today. While many Muslim countries want nothing to do with the United 
States, Morocco is seeking closer ties with us.
    Morocco is one of our strongest allies in the war on terrorism and 
a moderate voice in the Muslim world. Moroccan officials continue to 
aid our efforts to stop terrorism and are proving to be vital helping 
track down and arrest suspected terrorists.
    The Kingdom of Morocco suffered the horror of a terrorist attack on 
May 16, 2003, in Casablanca. 42 people died as a result of the 
terrorist attacks and more than 100 people were injured. Therefore, it 
is important that the United States continue to stand together with 
Morocco in the international fight against terrorism.
    With this agreement, Morocco could be a link between the United 
States, the Middle East, Africa and the Arab world. If we delay this 
agreement and fail to cooperate with a traditional friend like Morocco, 
which has always been a moderate and stable country, it sends a strong 
negative message to the rest of the world.
    In addition to the global security benefits that will be achieved 
through this deal, the agreement will increase U.S. agriculture exports 
to Morocco and will give U.S. farmers significant tariff advantages 
over the EU and other U.S. competitor suppliers. Commodities that will 
benefit from this FTA include U.S. soybeans and wheat.
    In short, this is a good agreement and I hope it is approved by the 
House before the August recess.

                                 

    Chairman THOMAS. Now the Honorable Peter Allgeier, if you 
have a written statement, it will be made part of the record, 
without objection, and you can address us in any way you see 
fit. If you wish to respond to questions as part of your 
opening statement, feel free to do so. Otherwise, we will call 
on Members to repeat those questions so that you can understand 
them in the context in which they were delivered. Mr. Allgeier?

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

    Mr. ALLGEIER. Thank you very much, Mr. Chairman. I would 
like to thank you and Congressman Rangel and the others on the 
Committee who work so closely with us on our FTAs. I certainly 
appreciate the opportunity today to discuss the U.S.-Morocco 
FTA with you, and I know that all of you share our interest in 
expanding our trade relationship with North Africa and the 
Middle East. I am also very grateful to Congressman English and 
Congressman Tanner for their support as co-Chairmen of the 
Morocco Congressional Caucus.
    I would like to make a point about the broad context of 
this agreement before getting into some of the commercial 
aspects, and that is that this agreement is an important 
element of U.S. policy in the Middle East and North Africa. We 
believe it will help to build the economic, political, and 
social stability in Morocco, and it signals to other reforming 
countries in the region the benefits of pursuing market 
liberalization policies and a closer economic relationship with 
the United States. We think this is very important.
    Our trade strategy toward the region is predicated on the 
idea that sustained economic growth can best be brought to the 
region through internally generated reforms and market-based, 
trade-liberalizing policies which are embodied in this 
agreement.
    Working in close partnership with Congress has been 
critical to our success. The Trade Act of 2002 has put in place 
procedures that make it possible for us to negotiate agreements 
that: one, address the pressing need for engagement with such 
regions; two, bring real benefits to U.S. workers and farmers 
and to our economy overall; and, three, bolster the economic 
and social reform in our partner countries.
    This is clear in the case of Morocco. Under the leadership 
of King Mohammed VI, Morocco has made legally binding 
commitments to liberalize its trade with the United States, and 
with this agreement, it signals its serious intention to pursue 
and to lock into place profound economic reform.
    Now, this agreement will bring significant benefits to U.S. 
exporters, workers, investors, farmers, and ranchers. There are 
two important dimensions in which it will help to level the 
playing field.
    First of all is with respect to competition with Morocco 
itself in Morocco. Currently, U.S. products entering Morocco 
face an average tariff of more than 20 percent; whereas, 
Moroccan products coming into the United States have average 
duties of only 4 percent. Under this agreement, more than 95 
percent of our two-way trade in consumer and industrial 
products will become duty-free upon entry into force.
    The second way in which this agreement levels the playing 
field is vis-a-vis other competitors into the Moroccan market, 
particularly the EU, and this agreement will level the playing 
field and even give us preferential access vis-a-vis those 
competitors.
    Just to give you some examples, in the agricultural area, 
which is so important, here we had to strike a balance between 
their development needs and our free trade objectives. Our beef 
and poultry producers will get new access to a market that 
formerly was closed to them. Tariff rate quotas (TRQs) for 
wheat, durum and common wheat, could lead to a five-fold 
increase in our exports of wheat. Other agricultural products, 
fruits and vegetables, nuts, corn, and corn products, also will 
benefit from the improved access in this agreement.
    We have also achieved significant market access 
improvements in services, important services for us--financial 
services, audiovisual, are very important, banking and finance, 
telecommunications, and computer-related services.
    The agreement also provides a high level of intellectual 
property protection, including state-of-the-art protection for 
digital products, for trademarks, and for patents. The 
government procurement and customs chapters promote 
transparency and efficiency and improved market access for us.
    We have rules of origin provisions which will allow for the 
possibility of counting the value of inputs from other free 
trade partners in the region in determining whether goods will 
receive preferential access in our market. This will facilitate 
weaving together our bilateral agreements as we move forward 
toward a more integrated, region-wide agreement as envisioned 
by President Bush in the Middle East Free Trade Area 
Initiative. This also can encourage more trade among the 
countries within the region, and that is an important missing 
ingredient in their own development.
    The labor and environment provisions meet the objectives 
set out by Congress by the Trade Act of 2002. Each chapter's 
obligations are parts of the core text of the agreement. Each 
party commits to enforcing its own law. This is enforceable 
through the dispute settlement mechanism. Each government 
commits to promote high levels of environmental protection, to 
strive to ensure that its labor laws provide for labor 
standards consistent with internationally recognized standards, 
and that they will not weaken or reduce labor and environmental 
laws to attract trade or investment. What I would particularly 
like to emphasize in this regard is that this process has 
spurred significant labor law reform in Morocco, which entered 
into force a month ago and prior to this process had been 
stymied for several years.
    Further important elements of this agreement are its 
transparency, public notification, and anti-bribery provisions. 
This agreement also establishes investment protections that 
will improve conditions for investment by U.S. companies, and 
these provisions are fully consistent with trade promotion 
authority (TPA).
    In conclusion, the U.S.-Morocco FTA is a comprehensive, 
well-structured agreement that will provide concrete benefits 
for both Americans and Moroccans, and it will bolster our 
broader policies toward the Middle East and North Africa. With 
your guidance and support, we will continue to pursue the 
Middle East Free Trade Area Initiative. Working together, we 
feel confident that we can build a trading and investment 
community with the Middle East and North Africa that will 
stimulate growth, that will generate prosperity, and that will 
promote democracy. Thank you very much, Mr. Chairman. I would 
be happy to respond to your questions and your comments and 
those of your colleagues.
    [The statement of Mr. Allgeier follows:]
  Statement of The Honorable Peter F. Allgeier, Deputy United States 
                          Trade Representative
    Mr. Chairman, Congressman Rangel, and Members of the Committee:
    I would like to thank Chairman Thomas, Congressman Rangel, and 
others on the Committee who work in such close partnership with us on 
our free trade agreements. I am also grateful to Congressmen English 
and Tanner, who have been extremely supportive of this agreement as co-
chairmen of the Morocco Congressional Caucus. I appreciate the 
opportunity to discuss the U.S.-Morocco Free Trade Agreement (FTA) with 
you now. I know that you share in our interest in expanding our trading 
relationships with countries in North Africa and the Middle East.
    The FTA with Morocco is an important element of U.S. policy in the 
Middle East and North Africa. The FTA will help build economic, 
political and social stability in Morocco, and signals to other 
reforming countries in the region the benefits of pursuing market 
liberalizing policies.
    The Administration's trade agenda is a fundamental part of the 
President's broader efforts to advance reform in North Africa and the 
Middle East. In May 2003, President Bush announced our goal of creating 
a U.S.-Middle East Free Trade Area by 2013. This trade agenda is one 
element of a comprehensive approach to address the economic, social, 
and political challenges facing the region and U.S. interests in the 
area. In particular, our trade strategy is predicated on the idea that 
sustained economic growth can best be brought to the region through 
internally generated reforms and market-based, trade liberalizing 
policies.
    Our strategy toward developing countries--to engage them at their 
levels of development, to provide them access to the U.S. market based 
on reciprocity, and to require that they adopt high standards for trade 
and investment--is working. In addition to our FTA with Morocco, we 
completed an FTA with Jordan in 2000, concluded FTA negotiations with 
Bahrain in May, and signed five additional Trade and Investment 
Framework Agreements with countries in the region in the last year. 
Important to our progress has been the strong desire among countries in 
the region to conclude FTAs with the United States to benefit from more 
certain market access for goods and services, and the high standards 
for intellectual property, transparency, and anti-corruption that only 
such agreements can provide.
    Working in close partnership with Congress has been critical to our 
successes to date. The Trade Act of 2002 has put in place procedures 
that make it possible to negotiate the types of agreements that not 
only address the pressing need for engagement with such regions as the 
Middle East and North Africa, but also bring real benefits to American 
workers and the U.S. economy and bolster economic and social reform in 
our partner countries.
    The FTA with Morocco is illustrative of these positive developments 
in our trade agenda in the region. As Ambassador Zoellick has noted, 
``our agreement with Morocco is not just a single announcement, but a 
vital step in creating a mosaic of U.S. free trade agreements across 
the Middle East and North Africa.'' Under the courageous leadership of 
King Mohammed VI, Morocco has made legally binding commitments to 
liberalize trade with the United States. With this Agreement, Morocco 
has signaled its serious intention to pursue and, lock in place 
profound economic reform.
THE AGREEMENT
    This Agreement will result in significant benefits for U.S. 
exporters, workers, investors, farmers and ranchers. Morocco is an 
emerging market at the crossroads of Europe, Africa and the Middle 
East. It imports $11.6 billion in products each year. Currently, 
however, U.S. products entering Morocco face average tariffs of more 
than 20 percent, while Moroccan products are subject to average duties 
of only 4 percent in the United States. Under this Agreement, more than 
95 percent of two-way trade in consumer and industrial products will 
become duty-free immediately upon the Agreement's entry into force, 
with all remaining tariffs on currently traded products to be 
eliminated within nine years, making this the best market access 
package of any U.S. free trade agreement signed with a developing 
country. This Agreement will also serve to level the playing field for 
U.S. companies vis-a-vis their EU competitors.
    Negotiating market access for agricultural goods was a significant 
challenge. Ultimately, negotiators from both sides were able to craft 
an agreement that balances Morocco's development needs and our free 
trade principles. U.S. access to the Moroccan market has been enhanced, 
while complementing Morocco's agriculture reform efforts, and taking 
into consideration the importance of economic and social stability in a 
sector of the economy that employs an estimated 44 percent of the 
population. Our beef and poultry producers will get new access to a 
market that was formerly closed to them. Tariff rate quotas for durum 
and common wheat could lead to five-fold increases in U.S. exports over 
recent levels.
    We also achieved significant market access in services sectors. 
This will allow U.S. services providers to compete on a level playing 
field with Moroccan companies. Under the Agreement, Morocco has made 
broad commitments to create a wide array of new opportunities in its 
services sector including banking, insurance, audio-visual, 
telecommunications and computer-related services.
    The Agreement provides for a high level of intellectual property 
protection, consistent with the standards set in U.S. law. This 
includes state-of-the-art protections for trademarks and digital 
copyrights, expanded protection for patents and product approval 
information and tough penalties for piracy and counterfeiting. Overall, 
Morocco has committed to substantially enhance protection and 
enforcement of intellectual property rights.
    The government procurement and customs chapters of this agreement 
will promote transparency and efficiency and improved access. The 
Agreement establishes important obligations between the two countries, 
such as prohibiting discrimination by government purchasers between 
U.S. and Moroccan suppliers when making covered government purchases in 
excess of agreed monetary thresholds.
    The rules of origin provisions allow for the possibility of 
counting the value of inputs from FTA partners in the region in 
determining whether goods receive preferential tariff treatment. This 
feature will facilitate the weaving together of our bilateral 
agreements as we move to a more integrated, region-wide agreement. It 
will also encourage trade among countries in the region, an important 
but missing ingredient for the region's development.
    The labor and environment provisions also meet the objectives set 
out by Congress in the Trade Act of 2002. Each chapter's obligations 
are parts of the core text of the Agreement. In both cases, each Party 
commits to enforcing their own laws. This obligation is enforceable 
through the Agreement's dispute settlement procedures. Moreover, each 
government commits to promote high levels of environmental protection, 
to strive to ensure that its labor laws provide for labor standards 
consistent with internationally recognized labor principles, and to not 
weaken or reduce labor and environmental laws to attract trade and 
investment. Also notable are provisions calling for panel expertise in 
the event of labor or environmental disputes, as well as an innovative 
mechanism that allows for monetary assessments to induce a country to 
address its labor or environmental problems. The Agreement also 
establishes processes for further cooperation on labor and 
environmental issues, building on already extensive cooperation in 
these two areas.
    Further important elements of this Agreement are its transparency, 
public notification, and anti-bribery provisions. These provisions will 
help to improve the business and investment environment in Morocco by 
providing more certainty and predictability for firms and individuals 
operating and investing there. In turn, by increasing the 
attractiveness of doing business in Morocco, such provisions will allow 
the Moroccan economy to realize the full potential for growth and 
development that an FTA provides. The agreement also establishes 
investment protections that will improve the conditions for investment 
by U.S. companies and are fully consistent with TPA objectives.
    The trade advisory committees have shown widespread support for 
this Agreement. The most senior committee, the Advisory Committee for 
Trade Policy and Negotiations, found the agreement ``to be strongly in 
the U.S. interest and to be an incentive for additional bilateral and 
regional agreements.'' Advisory committees on services, goods and 
intellectual property also expressed broad support. These committees 
highlighted the comprehensive nature of the Agreement and its rapid 
elimination of tariffs on U.S. exports. Several committees identified 
in particular the Agreements strong protection of intellectual property 
rights, with the advisory committee on Intellectual Property Rights 
saying that the Morocco FTA contains ``the most advanced IP chapter in 
any FTA negotiated so far.'' Agricultural advisory committees voiced 
broad support for the agreement as well. We recognize that the Labor 
Advisory Committee has concerns about all FTAs that relate to the 
Committee's assessment of this Agreement. The U.S.-Morocco FTA, 
however, fully meets the guidance that the Congress gave us in the 
Trade Act of 2002.
CONCLUSION
    The U.S.-Morocco FTA is a comprehensive, well-structured agreement 
that will provide concrete benefits for both Americans and Moroccans. 
The Agreement is an essential building block not only for Morocco's 
economic and structural reform effort, but also for the 
Administration's goal of building a more market-oriented, liberalized 
economic regime in the Middle East and North Africa. In addition, 
progress made bilaterally and regionally will support our global trade 
agenda and complement our efforts in the Doha round of negotiations.
    This Agreement sets a benchmark of high quality for other potential 
FTAs in the region. It demonstrates that it is possible to tackle 
successfully some of the most contentious issues facing trade with 
developing countries, such as agriculture, and that agreements 
benefiting both sides can be reached. To ensure that this Agreement 
meets the high expectations we have for it, the Administration has 
refocused its assistance program with Morocco to help ensure the 
Agreement generates the benefits both sides expect. U.S. assistance 
will focus on helping the Moroccans to meet their FTA obligations, 
stimulate business development, and promote economic reform.
    With your guidance and support, we will continue to pursue the 
Middle East Free Trade Area initiative. Working together, we feel 
confident that we can build a trading and investment community with the 
Middle East and North Africa that will stimulate growth, generate 
prosperity, and promote democracy.

                                 

    Chairman THOMAS. Thank you very much, Mr. Allgeier. 
Although there were questions in the initial statement, I will 
be recognizing Members, and they can restate their questions at 
that time. First I will recognize the gentleman from Illinois, 
Mr. Crane.
    Mr. CRANE. Thank you, Mr. Chairman. This agreement creates 
a TRQ for textile and apparel products, the first time we have 
used TRQs for anything except agricultural products. I 
understand that the quotas are large enough to cover current 
trade so they will not provide a limitation in this case, but I 
am concerned about the precedent that could be set by this 
provision. Can you describe the unique circumstances that made 
the use of TRQs appropriate here and provide assurances that 
this provision is unlikely to be used again?
    Mr. ALLGEIER. Yes, we certainly do see it as a unique 
situation here, which I will describe in a minute, and it is 
not our intention to replicate this in future agreements. The 
situation we faced is we wanted to liberalize trade in both 
directions for textile and apparel as quickly as possible. The 
Moroccans were concerned that because of commitments they have, 
most-favored-nation commitments to the EU, if they opened up 
immediately for us, it would result in a flood of imports from 
the EU. So, we devised this system of these TRQs as a way of 
opening up trade to a certain degree in various products 
immediately, and then dealing with this Moroccan problem, and 
then maintaining the TPA responsibilities of reciprocity. So, 
that was the balance we tried to achieve, and we think it is a 
unique situation here.
    Mr. CRANE. While the Chile and Singapore agreements were 
clearly used as models for this FTA, the agreement does contain 
differences. Are there any new provisions in this FTA which are 
not in the Chile and Singapore agreements that you believe are 
beneficial and should be carried over into future FTAs?
    Mr. ALLGEIER. We believe that the standards that we are 
achieving in this agreement are comparable to those in 
Singapore and Chile, which is very significant given the 
different development levels. Obviously, we have had to 
customize certain elements for the Moroccan situation, 
particularly transitions, but basically we have achieved the 
same sorts of objectives, and there are no radical new 
innovations in this agreement that we would be carrying over to 
other agreements.
    Mr. CRANE. This agreement will provide immediate duty-free 
access to 95 percent of current trade, making it the strongest 
agreement we have signed to date with a developing country. Do 
you believe expeditious action by the Congress will spark 
interest by other countries in the region to reform their 
economies as a step toward closer trade and economic relations 
with the United States?
    Mr. ALLGEIER. Absolutely. We believe that having a 
permanent preferential comprehensive trade agreement with the 
United States is a very powerful incentive for countries to 
make the sorts of reforms that we are seeking. Several 
countries in the region have already approached us. I think 
that Chairman Thomas identified those about the possibility of 
free trade agreements in the future. Obviously, they are 
looking very closely to see if we can get this agreement 
through our Congress expeditiously.
    Mr. CRANE. Thank you, Mr. Allgeier.
    Chairman THOMAS. Thank you. Does the gentleman from New 
York wish to inquire?
    Mr. RANGEL. Thank you, Mr. Chairman. Thank you again, Mr. 
Ambassador. We all are proud of our friendship with Morocco, 
and they certainly did not need us to improve the quality of 
their labor standards. We all have to feel proud as to the 
improvements that they have made as it relates to violation of 
child labor laws and moving toward ILO. Could you tell me in 
this short period of time why there is such a resistance from 
your office in advocating the adoption of ILO standards in 
these trade agreements?
    Mr. ALLGEIER. Well, looking at this particular agreement, 
we see that Moroccan law largely is consistent with ILO 
standards and is moving in that direction. So----
    Mr. RANGEL. Please, let me beg to--I hate doing this, but I 
have got a Chairman that is so strict with the time, and I do 
not want to get him annoyed. I know what you are saying is 
true, and that is why there is no resistance. They are moving 
hard toward it. My question was just simple. Why is there such 
resistance to including in the agreement incentives that we 
would help them to abide by the minimum ILO standards? Why do 
you resist that when sometimes the countries do not resist it?
    Mr. ALLGEIER. Well, certainly in the case of Morocco, I do 
not think that either we or the Moroccans are resisting it. We 
are working together to achieve a standard of treatment that 
both of us seek, and the U.S. Department of Labor has programs 
of cooperation with Morocco to help them, for example, 
implement their new labor code.
    Mr. RANGEL. I will have to find a better way to frame my 
question. Maybe I will go to U.S. Department of State school 
and learn how diplomats talk about these things. If you really 
want bipartisan agreement, you would try desperately hard to 
try to understand what we are trying to say to you in non-
diplomatic but very political language.
    Chairman THOMAS. The Chair appreciates the gentleman from 
New York not taking the full time. Does the gentleman from 
Louisiana wish to inquire?
    Mr. MCCRERY. Yes, thank you, Mr. Chairman. Just briefly. I 
am just curious. You have stated that 95 percent of all 
consumer and industrial products will be duty-free when this 
agreement goes into effect. What percentage of products now are 
duty-free? So, I can get some idea of the improvement in that 
that this agreement will make.
    Mr. ALLGEIER. Most of Morocco's products coming into the 
United States are duty-free because they benefit under the 
Generalized System of Preferences (GSP). We will have to get 
you the exact number for the percentage of U.S. products that 
are duty-free into Morocco at this time. As I mentioned, the 
average tariff we face in Morocco is 20 percent, so it is quite 
significant improvement of an access for us. We will get you 
the precise number.
    Mr. MCCRERY. Okay. Thank you. Thank you, Mr. Chairman.
    Chairman THOMAS. Thank you. The gentleman from Michigan, 
Mr. Levin.
    Mr. LEVIN. Thank you, Mr. Ambassador. So, let's start with 
medicines, and then I want to follow up on Mr. Rangel's 
question. Maybe he would yield me an extra minute or two. There 
was an article in the Wall Street Journal just yesterday, and 
it starts off this way under the headline, ``In New Trade Pacts 
U.S. Seeks to Limit Reach of Generic Drugs. As public health 
groups urge wider use of generic drugs to lower the cost of 
treating Advanced Immune Deficiency Syndrome (AIDS) and other 
diseases in developing countries, U.S. trade negotiators, 
prodded by the drug industry, are taking the opposite stance in 
new trade pacts, seeking to strengthen protections for costlier 
brand name drugs.'' So, I ask you, regarding the 5-year rule in 
terms of the use of test data, if Morocco decided not to abide 
by that--and I do not think it is in its law--does this 
agreement in any way restrict Morocco in terms of how it 
handles the sale of generic drugs in Morocco? If you can, as 
much as you can, does it or does it not? Is there some 
restriction?
    Mr. ALLGEIER. Well, first of all, you are correct that 
Moroccan law currently does not give the 5 years of data 
protection that would be required under the Free Trade Area. In 
all of these areas of intellectual property, we are trying to 
bring countries to the practice and the standards that we have 
in U.S. law, which, of course, is part of our TPA 
responsibility. We feel, however, that certainly nothing in 
this agreement restricts Morocco from dealing with genuine 
health crises, as was envisioned in the Doha agreement and 
subsequent agreements.
    Mr. LEVIN. Tell me how that works. If the agreement has a 
provision as to the use of data, doesn't that restrict Morocco?
    Mr. ALLGEIER. Well, the restriction on data is that it does 
restrict another company from relying on the originator's data.
    Mr. LEVIN. Right. So, essentially this agreement would 
restrict the flexibility of Morocco under its present law.
    Mr. ALLGEIER. Well, I think it needs to be looked at in the 
context of the other provisions in this agreement, including 
the explicit recognition that nothing in this agreement 
prevents Morocco from availing itself of the flexibilities that 
we agreed on at Doha. So, for example, they could issue a 
compulsory licensing to a producer if they needed a drug for a 
health crisis.
    Mr. LEVIN. Okay. Still, I think in terms of this provision, 
the 5-year test data provision, this agreement does restrict 
Morocco, does it not?
    Mr. ALLGEIER. It does introduce a new obligation to Morocco 
on not allowing countries to use someone else's test data for 5 
years. That is literally correct.
    Mr. LEVIN. Okay. I am not sure the compulsory license has 
anything to do with this. It is important we speak plain 
English to people. So, the answer is, forgetting--not 
forgetting, but whatever the merits, it does restrict. I simply 
suggest everybody read this Wall Street Journal article, which 
is a rather lengthy one, in terms of what is our policy. It was 
one thing to use it in Australia where it really was not going 
to have any impact, or if it did, Australians could afford the 
cost of other medicines. That is not necessarily true in 
Morocco. The same is true, I think, in terms of parallel 
importation. I do not have much time, so let me just say a word 
about the labor provisions. Are you current as to where they 
are in terms of reform of their laws?
    Mr. ALLGEIER. Yes, sir.
    Mr. LEVIN. Could you for the record give us your analysis 
as to exactly where those reforms are and when they are likely 
to be completed and the extent to which they will then comply 
with basic ILO standards? If you could do that in the next few 
days, because your answer to Mr. Rangel that you think the laws 
are basically consistent, then his question becomes all the 
more salient. Why don't you put the implementation of these 
laws into trade agreements, enforceable, like everything else? 
Here relating to intellectual property, we essentially are 
requiring Morocco to abide by a provision that is not in their 
law, to go beyond their present laws, while when it comes to 
core labor standards we have a very different approach. We are 
not even willing to put into agreements that they must carry 
out basic ILO standards and name them. There is a basic 
inconsistency here in terms of, I think, how we view economic 
development mutually beneficial for all the people. My time is 
up. If you will give us a current status of their labor reform 
efforts, and if you can do that in a timely fashion, and then 
we will engage in discussions informally, I hope on a 
bipartisan basis, as to exactly where these reforms are. Okay?
    Mr. ALLGEIER. Yes, we will provide that information, 
Congressman.
    Mr. LEVIN. Okay. Thank you.
    Chairman THOMAS. Thank you. Does the gentlewoman from 
Connecticut, Mrs. Johnson, wish to inquire?
    Mrs. JOHNSON. Thank you. Mr. Allgeier, would you please 
discuss in some detail the agreement between Europe and Morocco 
since their trade is about 50 percent more than ours and the 
preferential status--I assume that that is given Moroccan 
products, a preferential status in the European market, and 
vice versa--and how this trade agreement will or will not put 
American products on an equal footing, a better footing, or a 
less good footing?
    Mr. ALLGEIER. Yes, the arrangement between Morocco and the 
EU is a time-bound one that is renegotiated every 5 years. It 
is not as comprehensive as our agreement either in product 
coverage--it does not include all products, for example--and it 
is not as comprehensive in terms of the other disciplines that 
we have in our free trade area, including things like 
intellectual property and those sorts of investments in those 
sorts of disciplines. So, we are looking here at a much more 
comprehensive agreement than the partial preferential 
arrangements that the Europeans have.
    Mrs. JOHNSON. Thank you. I have one other question, but 
that is very important because since Europe has been so active 
in the bilateral area and through it has actually been able to 
sell a lot more to other countries, it is high time that we 
develop these agreements to put our products on an equal 
footing and to have the kind of comprehensive agreement that 
isn't just about product trade but also about intellectual 
property rights (IPR). Which product areas do you think will 
enjoy the most dramatic and immediate benefit from this trade 
agreement?
    Mr. ALLGEIER. On the industrial side, we think that 
information technology products, medical equipment, chemicals, 
civil aircraft, construction equipment will be among those that 
will benefit dramatically. In agriculture, I have already 
mentioned beef and poultry, wheat, soybean products. We think 
that fruits and vegetables, pistachios, almonds, apples, all 
will be beneficiaries of this, and, of course, a number of our 
services sectors, including audiovisual, financial, express 
delivery. Then anybody who is bidding on government procurement 
contracts in Morocco will benefit from this, to name a few.
    Mrs. JOHNSON. Thank you. Thank you, Mr. Chairman.
    Chairman THOMAS. Does the gentleman from New York wish to 
inquire?
    Mr. HOUGHTON. Thank you, Mr. Chairman. I don't know that I 
want to inquire. I just want to congratulate you on this. I 
think it is a great agreement. Here you have an economy that is 
about 1 percent of what ours is and the population about 10 
percent. We have got a trade surplus with them. We have got new 
labor reform measures which would kick in really by the FTA, 
having been stalled for 20 years. You have got enforcement of 
domestic labor and environmental laws, and also we have got a 
great dispute settlement procedure. What is wrong with this? 
What is the weak part of it? I think it is a great agreement.
    Mr. ALLGEIER. I think the weak part of it is that we do not 
have more of them with other countries.
    Mr. HOUGHTON. Do you want to break that down a little bit?
    Mr. ALLGEIER. Well, I do not mean it really in the sense of 
being weak. I think that this is actually a good example of how 
we can strike a mutually beneficial agreement with a developing 
country, one that also has great importance to us 
strategically, and that this is recognized in the region. We 
have already discussed the fact that we have an agreement with 
Bahrain, and there are a number of other countries that are 
knocking on our door that are interested. They look at this 
kind of agreement, and so they know exactly what it is that we 
expect from such an agreement. I think that is a very important 
aspect of this agreement.
    Mr. HOUGHTON. Is there any one issue that might loom in the 
future as something that you would be concerned about?
    Mr. ALLGEIER. With respect to this agreement?
    Mr. HOUGHTON. Yes.
    Mr. ALLGEIER. No, I think we feel quite good about the 
understanding that the Moroccans have of what is in the 
agreement and of their seriousness in implementing it.
    Mr. HOUGHTON. So, there isn't.
    Mr. ALLGEIER. Correct.
    Mr. HOUGHTON. Good. Thank you.
    Chairman THOMAS. Does the gentleman from New York wish to 
yield to the gentleman from New York briefly?
    Mr. RANGEL. I just want to join in with you in thanking 
USTR--I don't know whether I did that--and while I have this 
brief moment, to thank you for putting together the AGOA 
agreement with the cooperation of the Chair. Without his 
leadership we would not have been able to do it, especially to 
pass it on the suspension calendar. I wanted to take this 
opportunity to say that both to the Chair and to the USTR.
    Mr. ALLGEIER. Well, we very, very much appreciate it. That 
was an extremely important accomplishment for us and for the 
country.
    Chairman THOMAS. If the gentleman would continue to yield, 
I would like to thank the U.S. Senate for taking the House work 
product and passing it. If we can encourage more of that, we 
can move forward expeditiously. The one other thing about this 
agreement, I would tell the gentleman from New York, is that in 
this part of the world, they are not familiar with FTAs. They 
have these neomercantilist agreements with the EU, and this 
allows them to examine a far broader, more fundamental FTA. We 
hope there will be additional comparisons with the deal they 
are getting from the EU versus the deal they are getting from 
the United States and we can move forward with what we believe 
is a far more fundamental free trade working relationship. I 
thank the gentleman for yielding. Does the gentleman from 
Pennsylvania wish to inquire?
    Mr. ENGLISH. Thank you, Mr. Chairman. I do. Ambassador, in 
your testimony, you cite a statement by the Advisory Committee 
on IPR indicating that the Morocco FTA contains the most 
advanced intellectual property chapter in any FTA negotiated so 
far. Briefly, could you comment on the significance of that in 
terms of our broader trade policy?
    Mr. ALLGEIER. Yes, I would be happy to, Mr. English. This 
agreement does, in fact, have an extremely high standard for 
intellectual property protection across the range of our 
intellectual property areas. In terms of copyrighted works, 
they will join the various World Intellectual Property 
Organization (WIPO) Internet treaties. There also will be 
protection for copyrighted works for extended terms that will 
make it consistent with international standards. The government 
will use only legitimate computer software. This agreement 
requires them to adhere to standards that are basically 
equivalent to our Digital Millennium Copyright Act. This is a 
very important example for other countries of what is good 
intellectual property protection and what is achievable for a 
country that is at the status of Morocco.
    Mr. ENGLISH. Ambassador, I represent a manufacturing 
district, and many of my manufacturers are reluctant to sell 
their products in the developing world for fear that their 
patented products will eventually lead to knock-offs and unfair 
competition that they will have no control over. What does this 
do to speak to their concern?
    Mr. ALLGEIER. This agreement has very strong provisions on 
enforcement, and in most countries, the types of problems that 
your constituents are facing are a result of weak enforcement, 
not so much poor laws. So, this streamlines the rules for 
bringing copyright and trademark claims--trademark claims being 
very important for manufacturers--and effective remedies are 
also included in this agreement.
    Mr. ENGLISH. Now, many workers in my district are very 
concerned when we negotiate these FTAs that we are entering 
into a trade relationship with countries that do not have 
state-of-the-art labor laws. We have heard already that Morocco 
last month put into effect what I consider for the region to be 
revolutionary labor laws. Speaking to those, can you tell me, 
are Moroccan workers now guaranteed the fundamental right to 
associate, strike, and bargain collectively?
    Mr. ALLGEIER. Yes, they are. In fact, I should note that 
the Moroccan constitution guarantees the right to strike. So, 
the new labor law actually enhances that with appropriate 
procedures and affirming various rights. I think that this is 
certainly recognized. Previous USTR Mickey Kantor actually has 
been very complimentary of this and said that the Moroccans 
``have codified new labor rights and protections based on key 
ILO conventions. Congress can make an important contribution by 
approving the agreement this year.'' That is a quote from 
Ambassador----
    Mr. ENGLISH. From the Clinton Administration. Thank you. 
Didn't the new labor code also raise the minimum employment 
age, improve safety in the workplace, reduce the basic work 
week, and provide for premium pay for overtime hours? 
Specifically, on the minimum employment age, does this not 
bring them into conformity with international standards?
    Mr. ALLGEIER. That is my understanding. The law did raise 
the minimum employment age from 12 to 15. As you pointed out, 
it reduced the work week. It calls for a periodic review of the 
minimum wage, on top of a 10-percent increase in the minimum 
wage.
    Mr. ENGLISH. On that point, are there any plans to increase 
the minimum wage for Moroccan workers?
    Mr. ALLGEIER. Yes, there will be a periodic review, the law 
requires a periodic review of the Moroccan minimum wage to 
determine if it needs to be modified or to be increased.
    Mr. ENGLISH. Would these dramatic improvements in Moroccan 
trade law be enforceable under the FTA? If so, how?
    Mr. ALLGEIER. The FTA does require, subject to dispute 
settlement, a country to enforce its own laws, and it cannot--
if there is a pattern of failure to enforce the law in a manner 
that affects trade, that is something that is subject to the 
dispute settlement provisions of this agreement, as is any 
other violation of this agreement.
    Mr. ENGLISH. Will the United States continue to provide 
support to the Moroccan Government to further develop the 
environment for workers and tools for enforcement of those 
recently enacted changes? If so, how?
    Mr. ALLGEIER. Yes, the Department of Labor has a number of 
programs that support Morocco in this regard, and I should say 
that a number of these programs are actually implemented by the 
ILO.
    Mr. ENGLISH. Thank you very much, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Does the gentleman 
from Florida wish to inquire?
    Mr. SHAW. Yes, Mr. Chairman. I passed and indicated that I 
did not have any questions when you first called on me a few 
minutes ago. However, with the comments regarding AGOA made by 
my friend from New York, I thought it would be quite proper for 
me to report to the Committee that I just returned from 
Tanzania and looked at a factory which will be exporting to 
Wal-Mart--it is a cut-and-sew shop--and saw what was going on 
there. Tanzania is an extremely poor country. It has a very low 
minimum wage. I saw 900 workers that I was privileged to 
address, along with another Member of Congress, and saw their 
attitude and their eagerness and pride in a job. I just want to 
report back to the Committee that the only way that we are 
going to even take part in raising the standards of living in 
countries such as Tanzania is through trade. The comments were 
made over and over: ``We want trade, not aid.'' This is the way 
to fight poverty on a global scale, and I just wanted to tell 
the Members of the Committee who supported this most important 
legislation, which was, incidentally, just extended before the 
July 4th break, that it is working and it is having the exact 
results that all of us had hoped for. I yield back, Mr. 
Chairman.
    Chairman THOMAS. I thank the gentleman. Does the gentleman 
from Washington, Mr. McDermott, wish to inquire?
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Deputy, there 
has been disputed territory between Morocco and some of their 
neighbors. Does this agreement cover the territory that is 
disputed?
    Mr. ALLGEIER. This agreement, like all trade agreements, 
deals with the customs territory of the other country, and so 
however that is defined that they exercise responsibility over, 
that is the territory that would be covered by this agreement.
    Mr. MCDERMOTT. So, if products come from the territory that 
is disputed, as long as it is coming through the Moroccan 
customs system, you do not make any distinction?
    Mr. ALLGEIER. Well, this agreement does not change our 
policy with respect to the Western Sahara.
    Mr. MCDERMOTT. That is?
    Mr. ALLGEIER. That is that that is not part of Morocco. It 
is not part of the customs area of Morocco.
    Mr. MCDERMOTT. So, you are on the side of Morocco--or on 
the side of the Western Sahara in that dispute?
    Mr. ALLGEIER. No. We are simply saying that the current 
customs territory of Morocco, which does not include the 
Western Sahara, is what is covered by this agreement, and 
products would have to originate within that customs area, 
within that customs territory.
    Mr. MCDERMOTT. Does it say that in the agreement anywhere?
    Mr. ALLGEIER. There is not a specific definition of the 
territory within the Moroccan agreement and, therefore, it does 
not change the current recognition that our Customs Service 
gives to the territory of Morocco. So, the existing territory, 
not the disputed territory, is what is current practice and 
remains the practice within this agreement, as far as----
    Mr. MCDERMOTT. You are saying that the definition is 
grandfathered in from other agreements previously made.
    Mr. ALLGEIER. From our current practice and our current 
policy of recognition, yes.
    Mr. MCDERMOTT. Okay. How specific is this agreement around 
the issue of currency control? Can the Moroccan Government do 
anything to prevent the outflow of currency?
    Mr. ALLGEIER. There are not restrictions on transfers. This 
is a carryover from our bilateral investment treaty with 
Morocco. This is carried forward into the chapter on investment 
in the Free Trade Area because the chapter on investment in the 
Free Trade Area will supersede, with the proper transition, the 
bilateral investment treaty. So, there are not provisions for 
capital controls and restrictions on transfers.
    Mr. MCDERMOTT. In this agreement?
    Mr. ALLGEIER. Correct.
    Mr. MCDERMOTT. Now, are there restrictions in other 
agreements with them?
    Mr. ALLGEIER. Not that I am aware. We will double-check 
that, but I am not aware that there are other restrictions.
    Mr. MCDERMOTT. Because it was an issue, it has been an 
issue in a lot of these trade agreements recently, Singapore 
and others, and I wondered how you dealt with that issue here. 
Or do you have a general policy to try and remove restrictions 
or allow the free flow of capital wherever it goes?
    Mr. ALLGEIER. It has been a longstanding policy of ours in 
the bilateral investment treaties that we negotiate that there 
should be free transfers for U.S. investors. So, we seek both 
in our bilateral investment treaties and in the investment 
chapters of Free Trade Areas to maintain that policy as much as 
possible, and I think we have a good track record for doing 
that.
    Mr. MCDERMOTT. Because it seems to me that one of the 
things that we ought to be worried about, or at least I 
consider, is the whole question of what happened in the East 
Asia crisis, where you had the value of the rupiah in Indonesia 
just went from where it was to nowhere and crushed that 
economy, and it happened in Thailand and it happened in several 
of those countries, in part because they had absolutely no 
ability to stop the outflow. I wondered if that was something--
and you are saying it is something that we put into our 
agreements that we do not want anything to stand in the way of 
Americans to be able to pull their money out of these countries 
if there is any kind of problem that develops.
    Mr. ALLGEIER. Yes, we are trying to protect the investments 
of U.S. citizens in these countries. Obviously, questions of 
what macroeconomic policies these countries follow have a 
greater impact on what the value of their currency is or what 
their capital flow situation is than the transfer provisions of 
our investment chapters. At least that is our feeling.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Chairman THOMAS. Does the gentleman from California, Mr. 
Herger, wish to inquire?
    Mr. HERGER. Yes, thank you very much, Mr. Chairman, and 
thank you, Mr. Ambassador, for the work you have done on this 
very important trade agreement. I represent a very rich 
agricultural area with a number of specialty crops in Northern 
California in the Sacramento Valley, and I want to thank you 
for the strong rules of origin on Moroccan olives included in 
this agreement. Early on, some California olive growers were 
concerned about subsidized Spanish olives being packaged in 
Morocco and resold in the United States duty-free. My 
understanding is that the rules of origin in the agreement 
require Moroccan olives covered under this agreement to be 
grown in Morocco. So, I appreciate your commitment to fair 
trade on this particular issue. I also appreciate the strong 
IPR protection included in this agreement. They are very 
important to the California high-tech economy, so I thank you 
on both these fronts. A question I have is one that was alluded 
to, I believe, just a little earlier, but does the fact that 
our FTA with Morocco covers agricultural products while the 
Moroccan Association Agreement with the EU does not give our 
producers a competitive advantage in the Moroccan market?
    Mr. ALLGEIER. Yes, first of all, let me confirm that you 
accurately described the rule of origin that we are using for 
olives and for a number of other agricultural products to 
ensure that there is not transshipment of products from outside 
of Morocco. In terms of where we have, we think, particular 
benefits vis-a-vis European competition in Morocco--in the area 
of beef and poultry, for example--they are restricted to 
selling to the military market there, and we now have openings 
to the domestic market for those products. Also soybeans is 
another area where we have those sorts of advantages. So, there 
would be a number of products where we have an advantage over 
the Europeans in the agricultural area.
    Mr. HERGER. Again, thank you very much, Mr. Ambassador. 
Fair and free trade as we are experiencing in this agreement is 
so crucially important. The fact that I believe we have such 
overwhelming support, bipartisan support from the Congress 
indicates what a great job the Administration has done in this 
area. I want to encourage you to continue this work with other 
countries that we need the same agreements with. Thank you very 
much.
    Mr. ALLGEIER. Thank you, Mr. Congressman.
    Chairman THOMAS. Does the gentlewoman from Washington wish 
to inquire?
    Ms. DUNN. Thank you very much, Mr. Chairman. Thank you for 
being with us today, Mr. Allgeier. I want to congratulate the 
USTR for doing a great job on this agreement. It is one that we 
are all excited about, and I have, along with Mr. English, been 
a couple of times in Morocco, most recently a few weeks ago. I 
think we are all eager to begin to do increasing business with 
that nation. I am a particular advocate for compliance with 
intellectual property rights, and I would like to ask you--and 
excuse me if this question has been asked. I had to leave the 
room in order to meet with some constituents. Can you please 
expand for us on how the United States-Morocco FTA better 
protects IPR, both in compliance but also in enforcement?
    Mr. ALLGEIER. Yes, I would be happy to. Really, it is a 
very comprehensive chapter on intellectual property in that it 
covers patents, trademarks, copyright issues, and basically 
brings the Moroccan practice and law up to the sort of 
standards that we have here in the United States. You mentioned 
enforcement. Here there are streamlined procedural rules for 
people bringing copyright and trademark claims. There are 
effective remedies, which include statutory damages, and 
enforcement officials may act on their own authority in border 
cases and criminal IPR cases. So, they do not even have to wait 
for a particular petition to be brought to them. They do not 
have to have a formal complaint. So, we believe that both at 
the level of the law and at the level of enforcement, this 
agreement moves Morocco forward on intellectual property and 
obviously then protection for our intellectual property works, 
which are so important for us. If there are particular parts of 
intellectual property that you would like more details, we 
would be happy to provide those to you.
    Ms. DUNN. Thank you very much. I think in general, but 
particularly in the area of software. Thanks, Mr. Chairman.
    Chairman THOMAS. Thank you. Does the gentleman from 
California, Mr. Becerra, wish to inquire?
    Mr. BECERRA. Thank you, Mr. Chairman. Ambassador, thank you 
for coming and good to see you again. Let me follow up on some 
of the questions that were asked by my colleague from 
Washington regarding intellectual property. Give me a sense of 
what the laws are currently for Morocco and what we have done, 
because my understanding is that this agreement is very similar 
to the agreements that we have with Chile, Singapore, and now 
hopefully in the future with Australia. Give me a sense of 
where Morocco is today with regard to intellectual property in 
terms of its laws, its norms, and how it differs from what the 
trade agreement would provide.
    Mr. ALLGEIER. Yes, I would be happy to. Well, there are a 
number of areas in which Morocco has not acceded yet to 
important intellectual property treaties, and they will do so 
as a result of this agreement. For example, in the area of 
copyrights, there are the WIPO Internet treaties. This 
obviously is a very, very important area for our industry. This 
will extend the term of protection for copyrighted works in 
Morocco. On the trademark side, they will accede to the 
trademark law treaty, and this agreement also ensures that they 
will have an appropriate procedure for the settlement of domain 
name disputes, again, dealing with the Internet. These elements 
have been established in the uniform domain name dispute 
resolution policy. On copyrights, the copyright owner will 
maintain the rights to temporary copies of their works on 
computers. This is an important area in dealing with piracy in 
digital works. The terms of protection for copyrighted works 
and for phonograms will be extended, and the government can use 
only legitimate software. Also, there will be protection for 
encrypted programs that are brought through satellite signals. 
So, all of these new technologies are areas that have not been 
protected to date and will be protected under this agreement.
    Mr. BECERRA. Ambassador, do we have any sense of how they 
are going to implement these changes? Are they providing 
additional resources to their relevant agencies to try to now 
enforce these heightened standards under intellectual property 
norms?
    Mr. ALLGEIER. Well, obviously they will have to allocate 
additional resources, but also we are working with them----
    Mr. BECERRA. Have they made a commitment to do so?
    Mr. ALLGEIER. Yes, they have. Also, we are working with 
them through technical assistance, because some of these things 
are rather sophisticated----
    Mr. BECERRA. Our Patent Office will be working, in fact, 
has been working with them in the past.
    Mr. ALLGEIER. Well, it would be patent and copyright, and 
also we expect that the private sector will also be helping 
them.
    Mr. BECERRA. Now, let me turn to the labor area. I know 
that Morocco has recently amended its laws, domestic laws, to 
try to bring it closer to the ILO standards, the more 
internationally accepted standards for acceptable labor 
practices. They did not include all of the different ILO 
standards. We pushed very hard--and I know this has been asked 
by some of my colleagues previously, but we pushed very hard to 
make sure that our intellectual property was protected, and 
rightfully so. Morocco, as any other country, should abide by 
the international standards through the treaties that we have 
in place and so forth.
    Why would we not also push Morocco--if it is already making 
strides to try to improve its labor practices, why would we not 
want to do what you said just a minute ago in reference to a 
question posed by the gentlelady from Washington, Ms. Dunn, 
where you mentioned that the agreement brings Morocco's 
standards and laws to the standards that we have here in the 
U.S. with regard to intellectual property. Why would we not 
want to try to push Morocco, not perhaps to have our standards 
when it comes to labor, because we have higher wages, a higher 
standard of living and so forth, but at least push them to at 
least meet the minimum standards that are recognized 
internationally and not allow them to meet some but not others?
    Mr. ALLGEIER. First of all, I think that we certainly did 
use the influence of this FTA to encourage the passage of this 
labor reform law in Morocco, which is a very significant----
    Mr. BECERRA. It seems that we are able to succeed in 
getting real significant changes in their domestic law to IPR, 
which is important and good, but we did not really push them to 
do what they could have done with regard to basic labor 
standards, not our standards but basic labor standards.
    Mr. ALLGEIER. Well, we think that actually the new labor 
law does include the ILO standards. Substantively, it includes 
those ILO standards.
    Mr. BECERRA. The right to strike?
    Mr. ALLGEIER. Yes. Well, they have had a right to strike 
within their constitution. What they are working on now are 
some of the extra, additional procedural elements in the right 
to strike, but they do have the right of strike and they do 
exercise it.
    Mr. BECERRA. I appreciate your time. Thank you, Mr. 
Chairman.
    Mr. ALLGEIER. Thank you.
    Chairman THOMAS. Thank you. Does the gentleman from 
Illinois, Mr. Weller, wish to inquire?
    Mr. WELLER. Thank you, Mr. Chairman. Good morning, 
Ambassador. I appreciate you being before the Committee, and 
like my colleagues, I want to congratulate you, President Bush, 
Ambassador Zoellick, and all of you on the progress you are 
making on expanding opportunities for expanded trade for 
Illinois manufacturers and Illinois farmers with the agreements 
you are moving forward. I look back when I served in the 1990s, 
we sat on the sidelines when it came to expanding trade 
opportunities, and in the last 4 years, under President Bush 
and Ambassador Zoellick, we have been very aggressively working 
to open up new opportunities. This Moroccan agreement, like the 
Dominican and Central American agreement, the Australia 
agreement, continue to break down barriers and open up markets 
for Illinois farmers and Illinois manufacturers, and for that I 
want to commend you and particularly Ambassador Zoellick for 
the work that the Office of the USTR is doing.
    Morocco is a good friend of ours. They have been a partner 
and ally in so many areas, and right now we do about $475 
million in exports to Morocco from the United States. There is 
tremendous opportunity for more of this agreement. I believe 
with your good work it is going to give us that opportunity.
    I would note, because we are playing catch-up with our 
European competition, that they do twice as much business with 
Morocco as we do. My hope is this agreement will expand our 
opportunities. From the standpoint of agriculture and the 
standpoint particularly of small manufacturing, which are major 
components of the economy that I represent, my district is 
heavily dependent on export. I was wondering, can you just walk 
us through the impact, particularly on corn, soybeans, and 
beef, of this Moroccan trade agreement?
    Mr. ALLGEIER. Yes, I would be happy to do that. On beef, as 
I said previously, we really did not have access to that market 
before. Now there will be basically two segments of the market 
that we will have access to: first of all, high-quality beef, 
and there is a TRQ that will expand, that will allow us to sell 
this beef in restaurants and hotels and so forth; but then also 
there is a similar provision for standard-quality beef. So, 
this will open up that market there, and it is a growing TRQ, 
and the tariff within the quota will be eliminated. You also 
asked about, I believe, soybeans and on soybeans and soy 
products, that also will be--it will eliminate immediately 
their tariff on soybeans, and they will also be eliminating the 
tariff, very high tariff--72 percent, 75 percent--on high-value 
soybean meal used in human feed. So, the soybean area and other 
oilseeds and products also will be opened up by this agreement.
    Mr. WELLER. How about corn?
    Mr. ALLGEIER. Corn, yes, corn also will be opened up, corn 
and corn products. There is a high tariff on corn. Their tariff 
on corn now is 35 percent, and its tariffs on corn products 
such as flour, meal, and flakes, is as high as 60 percent. So, 
these tariffs will be reduced by 50 percent in the first year, 
and then they will be eliminated over the next 5 years in equal 
annual reductions.
    Mr. WELLER. So, it appears that if you are an Illinois corn 
farmer or raise soybeans or beef, you are a big winner under 
this agreement compared to the status quo.
    Mr. ALLGEIER. We expect that. Yes, sir.
    Mr. WELLER. You know, Illinois is, of course, a major 
manufacturing State. We often think of heavy construction 
equipment and other major manufacturers, but also there are a 
lot of small manufacturers. When it comes to market access for 
particularly our smaller manufacturers and smaller businesses, 
what kind of opportunities do you see resulting from this 
agreement for them?
    Mr. ALLGEIER. Well, certainly there will be the elimination 
of the tariffs, but I think particularly for smaller exporters, 
what is very important are the customs procedures that the 
country has, and whether these customs procedures are 
transparent, whether they are simple, whether they are reliable 
and that there is not any sort of under-the-table payments that 
have to be made to get your products through, this is a very 
difficult situation for small exporters. They cannot cope with 
that if they do not have these sorts of protections, and that 
is a very important element here in this agreement.
    Mr. WELLER. Thank you, Ambassador. Again, congratulations. 
I look forward to working with you toward ratification.
    Mr. ALLGEIER. Thank you.
    Mr. WELLER. Thank you.
    Chairman THOMAS. Does the gentleman from Wisconsin, Mr. 
Ryan, wish to inquire?
    Mr. RYAN. I do. Thank you, Chairman. I just wanted to get 
through a couple of things. First of all, since my home State 
of Wisconsin is one of the leading exporters to Morocco, I 
think this is a big win for Wisconsin, especially what the 
gentleman from Illinois said, corn, soybeans, manufacturing 
products. Those are the big exports that we have, and the fact 
that these tariffs are coming down such a great level so 
quickly is very good. There is an untold story here that I 
worry is not getting told, and that is the labor reforms that 
have occurred as a result of this trade agreement.
    Now, is it not true that Morocco was dealing with trying to 
pass labor reforms for about 20 years and just could not get 
off the ground? Is that not the case?
    Mr. ALLGEIER. That is accurate.
    Mr. RYAN. So, when this trade agreement came about, did it 
not bring forward a whole new labor reform law that, if I am 
correct, dealt with combating child labor, reduced the work 
week from 48 to 44 hours, with overtime rates payable for 
additional hours? Did it not call for periodic reviews of the 
minimum wage, which is increasing by 10 percent in July, just a 
few days ago? Does it deal with worker safety and health laws, 
gender equity in the workplace? Does it promote employment for 
the disabled? Does it guarantee rights of association and 
guarantee collective bargaining? Does it prohibit employers 
from taking actions against workers because they are union 
members? Does it also guarantee the right to strike?
    Mr. ALLGEIER. Yes, all of those elements that you 
identified are part of the labor code reform that is now in 
effect.
    Mr. RYAN. That is a new reform code that came largely 
because of this new free trade agreement with Morocco?
    Mr. ALLGEIER. Yes. They were stuck for nearly 20 years, and 
they do this through a tripartite arrangement of government, 
business, and labor, and they succeeded, frankly, we think, 
with the help and incentive of this agreement to pass and put 
into place the labor reform that you just described.
    Chairman THOMAS. Would the gentleman yield briefly?
    Mr. RYAN. Yes.
    Chairman THOMAS. To make sure the record is completely 
accurate, my understanding is that the recent codification does 
not include the right to strike. That is a guarantee in the 
constitution, but it is not included in the recent 
codification. Is that correct or not?
    Mr. ALLGEIER. It is correct that it is in the constitution, 
but what the new labor code did was strengthen the right to 
strike, for example, by prohibiting the hiring of substitute 
workers, prohibiting other practices.
    Chairman THOMAS. Excellent. Thank you.
    Mr. RYAN. What I think is important to note here is that as 
we go to fulfilling the vision of AMEFTA for North Africa and 
for the Middle East, what we are accomplishing is bringing 
these developing countries into the First World, bringing up 
their labor and environmental standards, bringing up their 
transparency, bringing up the protection of intellectual 
property. This is not only good for America and for American 
jobs and consumers and for our exporters, but this is good for 
our relationships that are so important with this part of the 
world. So, I just want to commend you for that, and I just hope 
that this story of how this agreement was a catalyst to rising 
labor standards, to improving trade, and opening up new markets 
for our products is a story that does not go on untold. With 
that, I just want to yield. Thank you.
    Chairman THOMAS. Does the gentleman from North Dakota wish 
to inquire or perhaps get a piece of the Moroccan market?
    Mr. POMEROY. We are very interested in the Moroccan market, 
Mr. Chairman, and I would have a quick question in that regard. 
Although there are many commodities potentially affected by the 
trade agreement, the one that I would specifically direct my 
questions to Mr. Ambassador involve sugar, specifically the net 
exporter provision relative to future sugar that might come to 
our country under preferential status from Morocco. We have 
worked very closely with the U.S. Trade Representative's office 
in other agreements as well to make certain that we suddenly 
just don't have a passthrough that they send all their sugar 
out and pull in sugar at a global dump price. So, is the 
language very clear that, to the extent that there is any 
special treatment for sugar under this agreement, it is only to 
the extent that Morocco achieves a net exporter status?
    Mr. ALLGEIER. Yes, sir, that is a precondition that they 
would have to achieve net exporter status before they could 
increase any sugar shipments to the United States.
    Mr. POMEROY. Is that part of the 18-year transition period 
or is that permanent, that is just how it goes?
    Mr. ALLGEIER. I believe that it is permanent, that that is 
a permanent requirement, a permanent precondition. It is not 
just a transitional element.
    Mr. POMEROY. I believe it is, too. How certain can we be on 
this point, which is an important one, permanent versus 18-
year?
    Mr. ALLGEIER. It is permanent.
    Mr. POMEROY. Permanent is good. I yield back, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Do any other 
Members wish to inquire of the Ambassador? I believe the 
gentleman from Michigan had a parting----
    Mr. LEVIN. Just quickly. You raised a point regarding the 
labor provisions, and before I talk about that briefly, on the 
capital controls provision, we should all look at that. I think 
you know there is some basic concern among a number of us about 
this provision. It was modified in the Chile agreement at the 
insistence of Chile. I think we should be very careful before 
we believe that this is something that on a cookie-cutter basis 
should be placed into other agreements. Mr. McDermott has 
raised some legitimate questions about it.
    Secondly, on the labor standard issue, you are going to 
send us material about the new reforms that are being 
discussed, and hopefully implemented, because in answer to Mr. 
English and then to Mr. Ryan, you said the right to strike is 
protected. It is in the U.S. Constitution. In reality, it has 
faced a number of problems, I think not only from the point of 
view of workers but from the point of view of management. So, 
let's not suggest that there is not further work that is being 
done and that should be done to make the right to strike a 
reality and consistent with ILO standards. The more some of my 
colleagues talk about how much progress Morocco has made, the 
more it raises the question: Why not have a provision in the 
agreement requiring that the parties abide by basic ILO 
standards? In a sense, the more progress Morocco has made, the 
more it contrasts with other places where we have negotiated 
trade agreements.
    I want to finish--Mr. Weller is not here anymore, but we 
have tried to put trade or continue it on a bipartisan basis. 
It does not help, in fact, it hurts to talk about the 1990s as 
this government sitting on the sidelines. It just is not true. 
In the 1990s, CBI, AGOA, China PNTR, Cambodia, Jordan, Chile, 
and Singapore were started. The World Trade Office agreement 
was finalized in this institution. I am sorry Mr. Weller is not 
here, but to try to talk about the 1990s as a period of sitting 
on the sidelines is factually erroneous, and I think it is 
harmful to any efforts to once again have a bipartisan 
coalition on trade issues. Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Mr. Ambassador, we 
want to thank you on behalf not only of this Committee and the 
Congress but the United States in continuing to move forward 
under the new agreement that we have in place after many long 
years of not having an agreement through the 1980s and the 
early 1990s and are now being able to make agreements around 
the world. It was very difficult for all of us watching rather 
than moving forward. This is on the whole an excellent 
agreement, and we thank you for your efforts. It is this 
Chairman's intention and goal to move this to the floor and off 
of the floor prior to the Democratic National Convention. With 
that, and thanking you, the Chair will call the next panel.
    Chairman THOMAS. If David Mengebier, Senior Vice President 
at CMS Energy Corporation, Jackson, Michigan, would come 
forward; Jamal Belcaid, President of Yasmine Enterprises, 
Denver, Colorado; David Hamod, President and Chief Executive 
Officer, National U.S.-Arab Chamber of Commerce; Melika 
Carroll, Trade Policy Director, Intel Corporation, Santa Clara, 
California; and David Taliaferro, a farmer from Laneview, 
Virginia, on behalf of the Wheat Export Trade Education 
Committee, the National Association of Wheat Growers, and the 
U.S. Wheat Associates.
    It is the Chair's understanding that Mr. Taliaferro has 
been in the South long enough to prefer ``Talifer'' to the 
apparent pronunciation. We are going to have Mr. ``Talifer'' in 
front of us, I would tell the gentleman from Illinois. If you 
will turn your name tags around, you have been able to 
determine where you sit by virtue of seeing your names, and now 
the Committee would prefer to see them. I would ask, Mr. 
Mengebier, if you will simply begin to address the Committee. 
All of you have written statements which will be made a part of 
the record. You have 5 minutes. You have a button that you need 
to light up, and the Committee will then, if there are any 
questions, inquire after each of you, beginning with Mr. 
Mengebier and then moving across the panel, make your 
statements. With that, welcome to the Committee.

STATEMENT OF DAVID MENGEBIER, SENIOR VICE PRESIDENT, CMS ENERGY 
                 CORPORATION, JACKSON, MICHIGAN

    Mr. MENGEBIER. Thank you, Mr. Chairman and Members of the 
Committee, for the opportunity to testify today in support of 
the U.S.-Morocco FTA. CMS Energy is an integrated energy 
company headquartered in Jackson, Michigan. In Morocco, we 
operate and are a 50-percent owner of the Jorf Lasfar power 
plant, located in the province of El Jadida on the Atlantic 
Coast. This 1,356-megawatt, $1.3 billion facility supplies 
approximately 60 percent of daily demand for electricity and 
represents the largest American investment in Morocco.
    CMS is proud to serve as the corporate co-chair of the 
U.S.-Morocco FTA Business Coalition. This coalition of nearly 
100 companies and associations believes the FTA is a 
comprehensive, high-standard agreement, and we urge its 
approval by the Congress this summer. With your permission, Mr. 
Chairman, I would like to insert into the record a short 
background paper prepared by the FTA Coalition, along with its 
membership list.
    Mr. CRANE. [Presiding.] Without objection.
    Mr. MENGEBIER. Thank you.
    [The information was not received at the time of printing.]
    The CMS has had experience building and operating energy 
facilities in more than 20 countries. Our experience has taught 
us that to succeed, these investments must be based on 
partnerships with the host country that entail collaboration, 
trust, and common vision. By these standards, our experience in 
Morocco has been outstanding. Our working relationship with the 
government and the Moroccan national utility has been one of 
openness, transparency, and cooperation.
    We have tried to reciprocate by working with our Moroccan 
partners to strengthen the Moroccan economy and society. While 
Morocco is not among the largest economies, its strategic 
location, its commitment to economic reform, and its longtime 
friendship with the United States are all factors that argue in 
favor of an enhanced economic partnership.
    The U.S. International Trade Commission (USITC) reported 
last week that U.S. exports to Morocco are likely to increase 
by $750 million and imports from Morocco by nearly $200 million 
through the implementation of the FTA. Other benefits will 
emerge that are not as easily quantified. United States 
companies will bring new technology, best practices, and 
vigorous corporate citizenship programs to their work in 
Morocco. These contributions will highlight to Morocco the 
benefits of doing business with U.S. firms and over time will 
enable the United States to compete better with Europe, which 
historically has played a disproportionate role in Morocco's 
economy.
    On the labor front, we employ more than 500 Moroccan 
citizens to operate our power plant. These jobs include 
management-level positions, pay fair wages and benefits, and 
involved rigorous training and education programs. Morocco 
still has major remaining infrastructure requirements, and the 
FTA will enhance opportunities for U.S. companies to respond. 
As they do, we fully expect they will bring a similar approach 
to labor practices.
    The labor situation took a significant step forward with 
the adoption last year of a new labor code--a development that 
many of us believe was driven in part by the FTA negotiations 
with the United States. Implementation of the new code promises 
to improve labor conditions further still and will bring 
greater predictability and stability for employers and 
investors.
    Because electricity must be produced in proximity to its 
market, I emphasize that we did not export a single job when we 
made this investment. Instead, we created and are now 
sustaining jobs in Michigan to deal with technical, financial, 
legal, and other requirements. On top of that, some of our 
current suppliers and lenders include companies from New York, 
Virginia, Tennessee, California, Connecticut, the State of 
Washington, Washington, D.C., New Jersey, and elsewhere. This 
multiplier effect will be repeated as other U.S. companies come 
to Morocco under the FTA.
    Our experience likewise shows that investment and economic 
growth can be managed in a way that advances the cause of 
environmental protection. CMS has worked closely with the 
Moroccan authorities and others to establish world-class 
standards on water quality and emissions and to deploy state-
of-the-art pollution control technology and practices.
    The FTA will have a positive and immediate impact on the 
importation of U.S. goods and services we use at the plant. Our 
facility is already operating, so the FTA will not affect 
prices on the big ticket items imported during construction. On 
an ongoing basis, we import about $10 million in goods and 
services annually to operate and maintain our facility. About 
80 percent of that currently comes from Europe since U.S. goods 
and services are subject to as much as a 42-percent customs 
duty. Once the FTA comes into effect, however, we anticipate we 
could nearly triple the amount of goods and services we procure 
from the United States. This is especially true with regard to 
services, as the FTA includes specific coverage of energy 
services and Morocco's trade agreement with the EU does not.
    In closing, both CMS Energy and the U.S.-Morocco FTA 
Coalition recognize that it will be a challenge for the 
Congress to approve this agreement prior to the August recess. 
We, nonetheless, believe it can and should be done. It is an 
outstanding agreement, it is good for the United States, it 
will advance the cause of economic progress, and it will help 
an important friend in a key part of the world. Thank you.
    [The statement of Mr. Mengebier follows:]
    Statement of David Mengebier, Senior Vice President, CMS Energy 
                     Corporation, Jackson, Michigan
    Mr. Chairman, Members of the Committee, I thank you for the 
opportunity to testify regarding the United States-Morocco Free Trade 
Agreement (FTA).
    By way of background, CMS Energy is an integrated energy company 
headquartered in Jackson, Michigan. Most of our assets and operations 
are located in Michigan, but we also have investments elsewhere in the 
United States and in international markets. In Morocco, we operate and 
are a 50% owner of the Jorf Lasfar power plant, located in the province 
of El Jadida on the Atlantic Coast. This 1,356-megawatt, $1.3 billion 
facility is the largest independent power project on the continent of 
Africa and supplies approximately 60% of Morocco's daily demand for 
electricity.
    CMS Energy is an active member and honored to serve as the 
corporate co-chair of the U.S.-Morocco Free Trade Agreement Coalition. 
The Coalition is comprised of nearly 100 companies and associations, 
all of whom support Congressional approval of the FTA. The coalition's 
leadership also includes the other corporate co-chair, Time Warner, and 
two outstanding Washington-based associations, the National Foreign 
Trade Council and the Business Council for International Understanding.
    The U.S.-Morocco FTA Coalition strongly supports the FTA and urges 
its timely passage by the Congress this summer. The FTA is a high-
standard, comprehensive agreement that will eliminate tariff and non-
tariff barriers to trade for our manufacturing and agricultural 
sectors, boost bilateral trade for our services sector, help to finance 
new investment flows, and stimulate economic growth and opportunity in 
the United States and Morocco. It will serve as an important building 
block in the proposed Middle East Free Trade Area. It will deepen U.S. 
ties with a country that recently was designated a major non-NATO ally 
and is a steadfast partner in the war against terror. The FTA is a new 
milestone in America's historic relationship with Morocco--the first 
country to recognize the newly independent United States and a partner 
in the longest unbroken treaty relationship in U.S. history.
    With your permission, Mr. Chairman, I would like to insert into the 
record a short background paper prepared by the Morocco FTA Coalition 
and its membership list.

CMS Energy in Morocco

    Over time, CMS has had investments or operations in as many as 22 
countries. To succeed, these investments must be based on partnerships 
that entail collaboration, trust and common vision. By these standards, 
our experience in Morocco--where we are the largest American investor--
has been outstanding. When changes have been required in the legal, 
regulatory or policy regime that governs our project, the needed 
adjustments have been developed in a cooperative and transparent 
fashion.
    We have tried to reciprocate by establishing ourselves as good 
corporate citizens and partners in Morocco's growth and development. In 
practical terms, we have gone beyond the requirements of our contracts 
in order to help strengthen the Moroccan economy and society. We have 
assisted in the planning of a nearby industrial park and support local 
efforts to establish the area as a regional hub for manufacturing, 
training and exports. We provide charitable contributions, support 
educational, social and health related causes, including adopting and 
refurbishing several local schools and undertaking a substantial multi-
year commitment to the Moroccan Fulbright program. As a Michigan based 
company, we are working to establish and expand links between Morocco 
and the United States in the automotive sector, which we think holds 
particular promise under the FTA.

Impact of the FTA

    While Morocco is not among the world's largest economies, its 
strategic location at the crossroads of Europe, Africa and the Middle 
East, its fundamental commitment to economic liberalization, and its 
longtime friendship with the United States are all factors that argue 
in favor of an enhanced economic partnership. The proposed Free Trade 
Agreement will increase levels of trade and investment from the United 
States and will create jobs, promote exports, and increase revenues for 
U.S. firms. It similarly will stimulate economic growth and development 
in Morocco.
    As you no doubt are aware, the U.S. International Trade Commission 
reported last week that U.S. exports to Morocco are likely to increase 
by $740 million and imports from Morocco by nearly $200 million through 
implementation of the FTA. Other benefits will emerge that are not as 
easily quantified. For instance, as U.S. companies establish themselves 
in Morocco under the FTA, they, like CMS Energy, will bring new 
technology, best practices, and vigorous corporate citizenship efforts. 
This will improve further the investment climate, strengthen business 
practices and standards, and highlight the benefits of establishing 
business relationships with U.S. firms. As a result, America in time 
will be better able to compete with Europe, which historically has 
played a disproportionate role in Morocco's trade and investment 
picture. In sum, the FTA promises to strengthen the U.S. and Moroccan 
economies, improve U.S. competitiveness, and cement the bonds between 
our governments, private sectors and peoples.

CMS Views of the FTA

    We employ more than 500 Moroccan citizens to operate our facility. 
Because electricity must be produced in proximity to its market, let me 
underscore that we did not ``export'' one job when we made this 
investment. Instead, the project created and now helps to sustain a 
variety of jobs in the United States in order to deal with ongoing 
management, technical, financial, legal and other business issues. On 
top of that, some of our current suppliers and lenders are based in the 
United States, so there is a multiplier effect that brings jobs not 
only to Michigan, but also places such as New York, Virginia, 
Tennessee, California, Connecticut, the State of Washington, 
Washington, D.C., New Jersey, and elsewhere. This is a phenomenon that 
will be replicated as other U.S. companies establish trade ties or make 
investments pursuant to the FTA.
    We have taken steps to ensure that the types of jobs that we have 
created in Morocco include management level positions, pay fair wages 
and benefits, and involve rigorous training and education programs. We 
are more than pleased with the quality and sustainability of the work 
force we have established in Morocco. Morocco still has major remaining 
infrastructure requirements, including in the energy sector, and the 
FTA will accelerate opportunities for U.S. companies to meet those 
requirements. As they do, we fully expect that they will bring a 
similar approach to employment and labor practices.
    The labor situation took a significant step forward with the 
adoption of a new labor code last year--a development that many believe 
was driven in part by the FTA negotiations with the United States. 
Implementation of the new code will improve labor conditions further 
still, creating stability and predictability for employers and union 
employees alike.
    Our experience likewise shows that investment and economic growth 
can be managed in a way that advances the cause of environmental 
protection. CMS has worked closely with Moroccan authorities and other 
parties to establish world-class standards on water quality and 
emissions and to deploy state-of-the-art pollution control technology 
and practices. We have developed major recycling programs, including an 
innovative effort to recycle 85% of fly ash from the plant for use in 
concrete production--with the remaining 15% deposited in a state-of-
the-art storage facility to be recycled at a later date. In addition, 
we collaborate with local officials to implement strict environmental 
training, education, compliance, monitoring, and reporting programs.
    Our facility has operated for several years, so the FTA will not 
affect prices on the major components and equipment that were brought 
in for construction. That said, we import about $8 million in goods and 
services from Europe and about $2 million from the United States 
annually to operate and maintain the plant. Since goods and services 
purchased from the U.S. are subject to as much as a 42% customs duty, 
we anticipate that many of these will be procured more cheaply from the 
United States once the FTA comes into effect. This is especially true 
with regard to services, as the FTA includes specific coverage of 
energy services and Morocco's trade agreement with the EU does not--
which gives an important advantage to U.S. energy and technical 
services companies.
    To conclude, on behalf of both CMS Energy and the U.S.-Morocco FTA 
Coalition, I would like to urge swift Congressional approval of this 
important agreement. We recognize that it will be a challenge for the 
Congress to approve this agreement prior to the August recess. We 
nonetheless believe it can and should be done and urge you in the 
strongest possible terms to try to meet that challenge. It is an 
excellent agreement, it is good for the United States, it will advance 
the cause of economic progress, and it will help an important friend 
and ally in a key part of the world.
    Thank you.

                                 

    Mr. CRANE. Thank you. Mr. Belcaid?

STATEMENT OF JAMAL BELCAID, YASMINE ENTERPRISES, INC., DENVER, 
                            COLORADO

    Mr. BELCAID. Chairman Thomas, Members of the Committee, 
thank you for allowing me to testify on behalf of the passage 
of the U.S.-Morocco FTA.
    I am a small businessman, based in Colorado. My company, 
Yasmine Enterprises, has supported the concept of a FTA between 
the United States and Morocco from the beginning. We are a 
member of the U.S.-Morocco FTA Coalition and strongly support 
prompt passage of the U.S.-Morocco FTA this summer. The FTA 
will create greater trade and investment opportunities for 
businesses in both countries. It will also provide greater 
opportunity for American small businesses to participate in a 
marketplace that has long been dominated by European companies, 
as well as providing greater protection to investors.
    The benefit of this FTA is illustrated by my current 
project in Morocco, a food can manufacturing plant in Agadir. 
The project will create 500 jobs in the United States and 200 
jobs in Morocco. Indirectly, it will create 2,500 jobs in 
Morocco, which is in great need of finding employment 
opportunities for its population. The project is very strategic 
in that it will enable Morocco to be more competitive on an 
international level, particularly in the European marketplace, 
while utilizing U.S. technology and raw materials.
    By far, the largest sector of the Moroccan economy is 
agriculture and fish, accounting for over 40 percent of the 
jobs in the country and 20 percent of Morocco's national 
income. Growth and prosperity for this sector have suffered 
from a shortage of high-quality food containers that are 
reasonably priced. Agribusiness is Morocco's largest and most 
important industry. In order for Morocco to expand its rate of 
economic growth and create jobs for low-skilled workers, it 
needs to increase the local processing of fruit, vegetable, and 
seafood products to expand its share of European and world 
markets for canned food, rather than exporting these products 
in raw form. The Moroccan processors of fish and vegetables 
need access to higher-quality and lower-priced canning.
    Currently, Morocco imports approximately 400 million tin 
cans from Europe per year, the majority of which come from 
Spain. The presence of these imports and the willingness of 
local food processors to pay premium prices to obtain them 
reflects the poor quality, limited product range, and 
unresponsive and monopolistic nature of the existing can 
producers in Morocco. Moroccan food processors have already 
expressed a strong interest in the introduction of a new can 
plant that will eliminate the expense and delays of importing 
cans from Europe and create a domestic alternative to the 
obsolete and non-competitive existing can producers in Morocco.
    To succeed, the plant does not need to take sales away from 
Morocco's existing domestic can producers. Instead, the plant 
only needs to replace imported cans from Europe and become the 
preferred source of high-quality cans. Local processing will 
increase, not only because of the new EU agreements, but also 
because the new can plant will make Moroccan food processors 
more competitive in international markets and thereby increase 
their demand for cans.
    The project has very strong potential for steel exportation 
from the United States. It will also help other developing 
African countries and demonstrate the effectiveness of closer 
economic and trade ties with the United States. These countries 
have the potential to better exploit their own food production 
to the degree that, with high-quality canning, they can 
actually improve their exports and compete on the European 
market. This project is a transnational project that directly 
benefits a specific country. As you know, many multinationals 
are headquartered and produce in Europe. Their intention is to 
sell their products to developing countries. Our project will 
develop production within a country, allowing it to grow and 
develop its own strength to effectively compete with the world 
market.
    I would like to stress one thing. Beyond the short-term 
benefits of the FTA, the long-term benefits will be extremely 
important to both countries, because economic stability will 
grow in Morocco, developing greater employment opportunities 
and creating overall social stability.
    In conclusion, Mr. Chairman, this agreement is very 
beneficial to the United States, to the canning industry, to 
the steel industry, and to the small business. Yasmine 
Enterprises strongly supports and urges quick passage of the 
Morocco FTA, and I would be pleased to respond to any questions 
you or other Members of the Committee may have. Thanks.
    [The statement of Mr. Belcaid follows:]
   Statement of Jamal Belcaid, President, Yasmine Enterprises, Inc., 
                            Denver, Colorado
    Chairman Thomas, Members of the Committee, thank you for allowing 
me to testify on behalf of the passage of the U.S.-Morocco Free Trade 
Agreement.
    I am a small businessman, based in Denver, Colorado. My company, 
Yasmine Enterprises, has supported the concept of a Free Trade 
Agreement between the United States and Morocco from the beginning. We 
are a member of the U.S.-Morocco FTA Coalition and strongly support 
prompt passage of the U.S.-Morocco FTA this summer. The FTA will create 
greater trade and investment opportunities for business in both 
countries. It will also provide greater opportunity for American small 
businesses to participate in a marketplace that has long been dominated 
by European companies, as well as providing greater protection to 
investors.
    The benefit of this Free Trade Agreement is illustrated by my 
current project in Morocco, a food can manufacturing plant in Agadir, 
Morocco. The project will create 500 jobs in the U.S. and 200 jobs in 
Morocco, directly. Indirectly, it will create 2,500 jobs in Morocco, 
which is in great need of finding employment opportunities for its 
population. The project is very strategic, in that it will enable 
Morocco to be more competitive on an international level, particularly 
in the European marketplace, while utilizing U.S. technology and raw 
materials.
    By far, the largest sector of the Moroccan economy is agriculture 
and fish, accounting for over 40% of the jobs in the country and 20% of 
Morocco's national income. Growth and prosperity of this sector have 
suffered from a shortage of high quality food containers that are 
reasonably priced. Agribusiness is Morocco's largest and most important 
industry. In order for Morocco to expand its rate of economic growth 
and create jobs for low-skilled workers, it needs to increase the local 
processing of fruit, vegetable and seafood products to expand its share 
of European and world markets for canned food, rather than exporting 
these products in raw form. The Moroccan processors of fish and 
vegetables need access to higher quality and lower priced canning.
    Currently, Morocco imports approximately 400 million tin cans from 
Europe per year, the majority of which come from Spain. The presence of 
these imports and the willingness of local food processors to pay 
premium prices to obtain them reflects the poor quality, limited 
product range, and unresponsive and monopolistic nature of the existing 
can producers in Morocco, many of whom are closely tied to European 
companies and financing. Moroccan food processors have already 
expressed a strong interest in the introduction of a new can-making 
plant that will eliminate the expense and delays of importing cans from 
Europe and create a domestic alternative to the obsolete and non-
competitive existing can producers in Morocco.
    The plant in Agadir will supply some 600 million cans per year, at 
peak production. Up to 50% of the output will go to the local off-
takers who sponsor the project and hold an equity stake, while the 
remainder will be sold to other domestic food processors and exported 
to other North African countries, the Middle East and European Union.
    To succeed, the plant does not need to take sales away from 
Morocco's existing domestic can producers. Instead, the plant only 
needs to replace imported cans from Europe, and become the preferred 
source of high quality cans. Local processing will increase, not only 
because of the new EU agreements, but also because the new can plant 
will make Moroccan food processors more competitive in international 
markets and thereby increase their demand for cans.
    The project has very strong potential for steel exportation from 
the U.S. It will also help other developing African countries, and 
demonstrate the effectiveness of closer economic and trade ties with 
the U.S. These countries have the potential to better exploit their own 
food production to the degree, that with high quality canning, they can 
actually improve their exports and compete on the European market. This 
project is a trans-national project that directly benefits a specific 
country. As you know, many multinationals are headquartered and produce 
in Europe. Their intention is to sell their products to developing 
countries. Our project will develop production within a country, 
allowing it to grow and develop its own strength to effectively compete 
with the world market.
    The plant will benefit from a U.S.-Morocco Free Trade Agreement 
because it will encourage the participation of high quality and highly 
competitive U.S. suppliers of equipment, raw materials, technology and 
services, as well as potential equity participation by U.S. venture 
capitalists. If the plant is constructed with U.S. involvement, total 
export potential for U.S. suppliers of goods and services could exceed 
$34 million to build and equip the plant. In addition, U.S. exports of 
tin plate and other raw materials and intermediate and replacement 
products consumed by the plant could easily exceed $25 million 
annually, meaning cumulative exports of over $150 million over a five 
year period, and $750 million over the useful life of the plant.
    Goods and services coming into Morocco from the United States will 
be more competitive because of reduced tariff rates under the FTA. The 
agreement will also result in improved customs procedures and will 
establish a secure, predictable legal framework for U.S. investors.
    All forms of investment will be protected under the FTA, and U.S. 
investors will enjoy in almost all cases the right to establish, 
acquire and operate investments in Morocco on an equal footing with 
Moroccan investors, and with investors of others countries. Basically, 
it assures that U.S. investors in Morocco receive all of the rights and 
protections that Moroccan or other foreign investors already receive in 
the United States.
    I would like to stress one thing. Beyond the short-term benefits of 
the FTA, the long term benefits will be extremely important to both 
countries, because economic stability will grow in Morocco, developing 
greater employment opportunities and creating overall social stability. 
Obviously, the benefit to the U.S. is the growth in U.S. exports in a 
region that has not been engaged in active trade with the U.S. Arab 
countries receive only 1.2% of the world's direct investment. The U.S. 
should be aggressively involved to promote stability and prosperity in 
these countries.
    In conclusion, Mr. Chairman, this agreement is very beneficial to 
the United States, the canning industry, the steel industry and small 
business. Yasmine Enterprises strongly supports and urges quick passage 
of the Morocco FTA. I would be pleased to respond to any questions you 
or other Members of the Committee may have.

                                 

    Mr. CRANE. Thank you. Mr. Hamod?

    STATEMENT OF DAVID HAMOD, PRESIDENT AND CHIEF EXECUTIVE 
        OFFICER, NATIONAL U.S.-ARAB CHAMBER OF COMMERCE

    Mr. HAMOD. Mr. Chairman and Members of this distinguished 
Committee, thank you for the opportunity to testify this 
morning. My name is David Hamod, and I serve as President and 
CEO of the National U.S.-Arab Chamber of Commerce.
    Since its inception more than 35 years ago, our chamber has 
been the preeminent organization for fostering trade and 
investment between the United States and the Arab world. Our 
special relationship with American Chambers of Commerce and the 
national chambers of commerce in the 22 Arab nations places us 
in a unique position as a nexus between East and West. This 
morning, I will outline why our chamber believes that the U.S.-
Morocco FTA is good for America and good for Morocco. I will 
also look at this agreement in the broader context of what it 
may mean for the Arab world as a whole.
    First, creating jobs for Americans. From our perspective, 
this FTA will help to create a level playing field for U.S. 
businesses and workers that have traditionally been excluded 
from markets in Morocco and the region by America's European 
trade competitors.
    Second, supporting reform in Morocco. Morocco is undergoing 
major economic reform, and the FTA is the centerpiece of this 
reform effort. For Moroccans, the FTA translates into 
opportunities for job creation in a nation whose 30 million 
citizens face double-digit unemployment, particularly among the 
youth. If it is true that ``hope begins with a paycheck,'' then 
the U.S.-Morocco FTA promises to provide a way out of the 
hopelessness that can fuel extremism and breed terrorism.
    Third, enhancing market access. In our view, the U.S.-
Morocco FTA agreement ``raises the bar'' for trade and 
investment rules that enhance market access. This agreement is 
the best FTA market access package on industrial goods 
negotiated thus far with a developing nation.
    Fourth, complying with labor laws. Morocco used the 
negotiation of the FTA to bring about a comprehensive new labor 
law that went into effect last month. Morocco's labor laws are 
based on ILO conventions, and they are consistent with TPA 
provisions on labor and the environment.
    Mr. Chairman, I would like to use the balance of my time to 
look at how Congressional action on this FTA may be perceived 
elsewhere in the region. Simply put, if Congress supports the 
FTA, this will send a very positive signal about economic 
reform to the entire Arab world, thereby encouraging Arab 
nations to take the tough steps necessary to integrate their 
economies further into the global marketplace. If Congress 
fails to support this FTA, in our opinion, this will send 
precisely the opposite message, thereby emboldening those in 
the Arab world who would seek to diminish economic ties with 
the United States. At a time when America's political relations 
with the Arab world are experiencing considerable turbulence, 
U.S. economic relations with the Arab nations are enjoying 
remarkably smooth sailing.
    There are a lot of reasons for this. One of the most 
important is that a new generation of business and government 
leaders in the Arab world is helping to drive the TIFAs and the 
FTAs forward using the FTA process as a catalyst to bring about 
long overdue economic reforms in their own nations.
    Many of these leaders received their college educations in 
the United States. As a result of their early exposure to the 
United States, these former students from the Arab world have 
an affinity for our country, respect for American institutions, 
and an appreciation for the way we do business here in the 
United States. Today, through the FTA process, these very same 
individuals--ministers, leading businessmen and businesswomen, 
and advisors to heads of state--are now playing an instrumental 
role in helping to open markets in the Arab world. This will 
enhance bilateral investment with the United States, but at the 
same time encourage regional trade and investment throughout 
the Middle East.
    United States policymakers question whether the ``stick'' 
or the ``carrot'' is the most effective way to bring about 
reform in the Arab world. In our chamber's experience, the 
``carrot'' of open markets, greater transparency, job creation, 
and a higher quality of life is clearly winning the debate 
hands down. With this in mind, Mr. Chairman, the National U.S.-
Arab Chamber of Commerce urges Congress to seize this historic 
opportunity and to move this agreement forward as soon as 
possible. Passage of this FTA is good for America, it is good 
for Morocco, and it will send the right signal about America's 
resolve to support economic reform throughout the Arab world. 
Thank you.
    [The statement of Mr. Hamod follows:]
Statement of David Hamod, President and CEO, National U.S.-Arab Chamber 
                              of Commerce
    Mr. Chairman and distinguished Members of the House Ways and Means 
Committee, thank you for the opportunity to testify this morning. My 
name is David Hamod, and I serve as President of the National U.S.-Arab 
Chamber of Commerce. I am here to provide testimony on behalf of our 
Chamber, a member of the U.S.-Morocco Free Trade Agreement Coalition.
    Since its inception more than 35 years ago, the National U.S.-Arab 
Chamber of Commerce (NUSACC) has been the preeminent organization for 
fostering trade and investment between the USA and the Arab world. Most 
of our members are small and medium-sized U.S. companies that are 
exporting to the Middle East, and we have a special relationship with 
the American Chambers of Commerce (AmChams) in the region for purposes 
of promoting U.S. business interests.
    At the same time, our Chamber serves as the U.S. point of contact 
for the national chambers of commerce in the 22 Arab nations, providing 
us with valuable insights into the opportunities and challenges facing 
the Arab business community. This unique position, as a nexus between 
East and West, enables our Chamber to closely monitor the pulse of 
business between the United States and the Arab world like no one else.
    This morning, I will outline why our Chamber believes that the 
U.S.-Morocco Free Trade Agreement (FTA) is good for America and good 
for Morocco. But I will also look at this agreement in the broader 
context of what it may mean for the Arab world as a whole and why, in 
our opinion, Congress should move this agreement forward as soon as 
possible this summer.

Creating Jobs For Americans

    From our perspective, the U.S.-Morocco FTA will help to create a 
level playing field for U.S. businesses that have traditionally been 
excluded from markets in Morocco and the region. For years, America's 
trade competitors in Europe have been successful in erecting tariffs 
and non-tariff barriers in North Africa that discriminate against U.S. 
products and services, which currently account for only six percent of 
Morocco's total imports.
    With this Committee's support for the FTA, the United States can 
beat back America's European competitors and the odds will no longer be 
stacked against U.S. companies and American workers when doing business 
with Morocco.
    The recent report of the U.S. International Trade Commission (U.S. 
ITC) put it this way: ``Trade liberalization is likely to increase the 
competitiveness of U.S. manufacturers and farmers in the Moroccan 
market not only relative to Moroccan producers, but also relative to 
other foreign suppliers such as the European Union--with which Morocco 
already has an FTA.''
    U.S. exports to Morocco are likely to increase by $740 million 
annually, according to the U.S. ITC, and tariff liberalization should 
provide benefits to U.S. consumers in the range of $110.5 to $131.6 
million per year. (``U.S.-Morocco Free Trade Agreement: Potential 
Economywide and Selected Sectoral Effects,'' U.S. International Trade 
Commission, June 2004).

Supporting Reform In Morocco

    Morocco has undertaken a process of reform that has affected every 
aspect of Moroccan life. The centerpiece of this reform effort is the 
FTA.
    For Moroccans, the FTA translates into opportunities for job 
creation in a nation whose 30 million citizens face double digit 
unemployment, particularly among the youth. If it is true that ``hope 
begins with a paycheck,'' then the U.S.-Morocco FTA promises to provide 
a way out of the hopelessness that can fuel extremism and breed 
terrorism.
    In the words of H.E. Taib Fassi Fihri, Morocco's Minister Delegate 
for Foreign Affairs and Cooperation, ``With this agreement, Morocco 
will gain a renewed incentive to complete the task of reform. The 
process of economic reform is never easy, but Morocco knows where the 
future is headed. Whatever the cost today, we know the longer-term 
payoff will be worth it.''

Enhancing Market Access

    In our view, the U.S.-Morocco FTA agreement ``raises the bar'' for 
trade and investment rules that benefit business and enhance market 
access. This agreement is the best FTA market access package on 
industrial goods negotiated to date with a developing nation. Passage 
of the FTA means that more than 95 percent of two-way trade in consumer 
and industrial goods will become duty-free immediately.
    According to the Office of the U.S. Trade Representative (USTR), 
U.S. products entering Morocco face an average tariff of over 20 
percent, while Moroccan products are subject to an average tariff of 
only 4 percent as they enter the United States. This disparity will 
change drastically with passage of the FTA.
    With regard to market access, the U.S. ITC says that commitments 
made through the FTA and the World Trade Organization (WTO) will 
``commit the two parties to progressively eliminate duties on 
originating goods and to implement a wide array of customs procedures 
that would enhance trade. . . . The FTA would make the treatment of 
U.S. exports clear and simple.''

Complying With Labor Laws

    Important labor safeguards have been incorporated into this FTA. 
Morocco used the negotiation of the FTA, for example, to bring about a 
comprehensive new labor law that went into effect on June 8 of this 
year. This law raises the minimum employment age, reduces hours in the 
work week, increases the minimum wage by ten percent, guarantees rights 
of association and collective bargaining, and prohibits employers from 
taking actions against workers because they are union members.
    Morocco's Constitution guarantees the right to strike, a right that 
Moroccans do not hesitate to exercise when the need arises, and that 
nation's labor laws are based on International Labor Organization (ILO) 
conventions. In this regard, the U.S.-Morocco FTA picks up where the 
U.S.-Jordan FTA leaves off, in the opinion of our Chamber, and Trade 
Promotional Authority (TPA) provisions on labor and the environment are 
an integral part of the U.S.-Morocco FTA.

Beyond Morocco: Implications For The Arab World

    When it comes to free trade agreements with the United States, the 
Kingdom of Jordan may have been the trendsetter, but the Kingdom of 
Morocco is now the pacesetter. Nations throughout the Arab world are 
watching closely to see how the United States treats this North African 
ally and trading partner.
    If Congress supports the FTA, as we believe it should, this will 
send a very positive signal about economic reform to the entire Arab 
world, thereby encouraging Arab nations to take the tough steps 
necessary to integrate their economies further into the global 
marketplace. If Congress fails to support the U.S.-Morocco FTA, in our 
opinion, this will send precisely the opposite signal, thereby 
emboldening those in the Arab world who seek to diminish economic ties 
with the United States.
    At a time when America's political relations with the Arab world 
are experiencing considerable turbulence, U.S. economic relations with 
the Arab nations are enjoying remarkably smooth sailing. Nowhere has 
this been more obvious than in the case of negotiations over Trade and 
Investment Framework Agreements (TIFAs) and Free Trade Agreements 
(FTAs), and our Chamber wishes to recognize the outstanding work being 
done by Ambassador Robert Zoellick, Assistant USTR Catherine Novelli, 
and their team at the Office of the U.S. Trade Representative.
    In the United States, the debate continues about whether the 
``stick'' or the ``carrot'' is the most effective way to bring about 
reform in the Arab world. In our Chamber's experience, as the FTA 
process suggests, the ``carrot'' of open markets, greater transparency, 
job creation and a higher quality of life is clearly winning the debate 
hands down.
    There are a lot of reasons why the FTA process has been so 
successful. One of the most important reasons is that a new generation 
of business and government leaders in the Arab world is helping to 
drive these Free Trade Agreements forward, using the FTA process as a 
catalyst to bring about long-overdue economic reforms in their own 
nations.
    Many of these leaders received their college educations in the 
United States, so if U.S. policymakers ever wonder about why it is 
important to have Arab students live in the USA and attend U.S. 
universities, these policymakers should wonder no more. As a result of 
their early exposure to the United States, these former students from 
the Arab world have an affinity for the USA, respect for American 
institutions, and an appreciation for the way we do business here in 
the United States.
    Today, through the FTA process, these very same individuals--
ministers, leading businessmen and businesswomen, and advisors to heads 
of state--are now playing an instrumental role in helping to open 
markets in the Arab world. This will enhance bilateral trade and 
investment with the United States, to be sure, but over time, it will 
also encourage regional trade and investment throughout the Middle 
East.
                            *      *      *
    Two hundred and seventeen years ago this month, in 1787, a young 
United States ratified a Treaty of Peace and Friendship with Morocco--
now the oldest unbroken treaty in the history of America's foreign 
relations. In signing this agreement, our fledgling democracy sought 
``most favored Nation'' status with Morocco, a regional ``superpower'' 
of its day, so that the United States could pursue unfettered trade and 
commercial opportunities.
    Today, more than two centuries later, the United States has an 
opportunity to sign another groundbreaking agreement with Morocco that 
will enhance commercial relations between our two nations. The National 
U.S.-Arab Chamber of Commerce urges Congress to seize this historic 
opportunity and to move this agreement forward as soon as possible. 
Passage of this FTA is good for America, it's good for Morocco, and it 
will send the right signal about America's resolve to support economic 
reform in the rest of the Arab world.

                                 

    Mr. CRANE. Thank you, Mr. Hamod. Ms. Carroll?

   STATEMENT OF MELIKA CARROLL, TRADE POLICY DIRECTOR, INTEL 
              CORPORATION, SANTA CLARA, CALIFORNIA

    Ms. CARROLL. Thank you, Mr. Chairman, Members of the 
Committee. My name is Melika Carroll, and I am Trade Policy 
Director for Intel Corporation, headquartered in California. I 
am very pleased to be here with you today on behalf of the U.S. 
High-Tech Trade Coalition and the U.S.-Morocco Business 
Coalition.
    Intel is the world's largest manufacturer of 
semiconductors. Our products serve as the electronic brains of 
personal computers, servers, mobile phones, network equipment, 
and many other products. Intel is an active member of the U.S. 
High-Tech Trade Coalition, which is comprised of the major tech 
industry associations and the thousands of companies they 
represent. The industry as a whole is a strong supporter of 
trade liberalization and is united in its support of the U.S.-
Morocco FTA.
    On average, 60 percent of the U.S. high-tech industry's 
revenues come from outside the U.S. market. Therefore, the 
completion of multilateral, regional, and bilateral agreements 
like the U.S.-Morocco FTA increases our access to foreign 
markets which are critical to our growth. High-tech deployment 
in Morocco is ahead of the curve compared to other countries in 
North Africa. The U.S. tech sector has enjoyed an ongoing trade 
surplus with Morocco over the last 3 years. In 2003, we 
exported nearly $100 million worth of goods to Morocco, an 
important market when compared to others in the region.
    This FTA bolsters opportunities for U.S. technology in 
Morocco as well as in the region as a whole. This is critical, 
as the Middle East tech market is expected to be worth 
approximately $14 billion by 2006. The U.S.-Morocco FTA sets 
high-standard commitments in six policy areas that are 
particularly important to the tech industry's continued 
success.
    First, Morocco joined the Information Technology Agreement 
as part of these negotiations. Consequently, most tariffs on 
U.S. high-tech goods were eliminated just this past April.
    Second, it is essential that our trading partners establish 
the level of intellectual property protection that meets the 
challenges that are particular to a digital world. The U.S.-
Morocco FTA adheres to the high standards of protection and 
enforcement of IPR set out in earlier multilateral and 
bilateral agreements. These commitments will also support the 
positive 10-year trend of decreasing piracy rates in Morocco.
    Third, commitments on information technology services are 
critical as a vast array of new e-commerce and information 
services has been developed. This agreement has no reservations 
in the area of computer-related services, thereby ensuring full 
market access and national treatment for this important sector 
of our industry. The negative list approach also adopted here 
will ensure that rapidly evolving new computer services will be 
covered by these commitments contained in this agreement.
    Fourth, the e-commerce commitments are also important. As 
software becomes increasingly distributed online, 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 chapter in the U.S.-Morocco FTA 
maintains and clarifies the standard for trade in electronic 
commerce established under previous agreements, which should 
also help us continue to advance discussions on this issue in 
the WTO in the long term.
    Fifth, the telecommunications services commitments also 
contain key provisions for our sector. In addition to the 
negative list approach for telecommunications services, the 
agreement also established the principle of technology 
neutrality to help ensure that foreign governments do not 
disadvantage American technologies to the benefits of others. 
This last principle is really critical to our industry.
    Finally, our industry is concerned that as tariffs are 
eliminated, many countries may increase their use of technical 
regulations for high-tech products to protect their market or 
their industry. This FTA has built on the WTO's commitments on 
technical barriers to trade and establishes new requirements 
that can help ensure better justification for regulatory 
decisions as a result of increased transparency, opportunity 
for industry input, and accountability.
    In conclusion, our industry believes that the positive role 
that trade liberalization has played in the development of 
markets for U.S. high-tech products should be maintained and 
expanded. The U.S.-Morocco FTA is an important step in reaching 
this objective. We commend the Administration and Congress for 
achieving such a high-standard agreement and strongly support 
congressional approval this summer. Thank you, Mr. Chairman.
    [The statement of Ms. Carroll follows:]
Statement of Melika Carroll, Trade Policy Director, Intel Corporation, 
                        Santa Clara, California
    My name is Melika Carroll and I am Trade Policy Director for Intel 
Corporation, headquartered in Santa Clara, California. I'm very pleased 
to be here with you today on behalf of the U.S. High-Tech Trade 
Coalition.
    Intel is the world's largest manufacturer of semiconductors, with 
sales in 2003 of $30 billion. We employ approximately 79,000 people 
worldwide. About 60% of our employees are based in the United States, 
while over 70% of our revenues are generated outside North America. Our 
products serve as the electronic brains of personal computers, servers, 
mobile phones, network equipment and many other products.
    Intel is an active member of the U.S. High-Tech Trade Coalition 
(HTTC), which is comprised of the major tech industry trade 
associations, and the thousands of companies they represent. The 
industry as a whole is a strong supporter of trade liberalization and 
is united in its support of the U.S.-Morocco Free Trade Agreement 
(FTA).
    Members of the HTTC 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 and 
Telecommunications Industry Association.

Expanding High-Tech Trade and the U.S.-Morocco FTA

    As one of the leading contributors to the U.S. balance of trade, 
U.S. high-tech 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 study conducted by IDC for the Business Software Alliance (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.
    On average, over 60% of the U.S. high-tech industry's revenues come 
from outside the U.S. market. Our industry's success clearly relies 
heavily on access to global and in particular emerging markets. The 
completion of bi-lateral, regional and multilateral agreements to 
increase our access to foreign markets is vital to our future.
    To maintain the positive contributions of this industry to the U.S. 
economy, it is critical that FTAs: establish the highest standards of 
intellectual property protection; provide an open trading environment 
that promotes tariff-free high-tech products; facilitate barrier-free 
e-commerce and that promote the growth of computer and 
telecommunications services.
    Past trade liberalization in the information and communications 
technology industries have benefited consumers and the U.S. economy 
alike. The acceleration since 1995 in quality improvements and price 
declines in many high-tech products coincides with three major WTO 
Agreements of direct relevance to the high-tech industry: the 1995 
Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), 
the 1997 Information Technology Agreement and the 1997 Basic 
Telecommunications Agreement.
    High-tech deployment in Morocco is ahead of the curve compared to 
other countries in North Africa. After the deregulation of 
telecommunication licenses we have seen significant improvements in 
high-tech deployment. There are millions of mobile users and broadband 
deployment is slowly improving. This growth in high-tech was also given 
a boost from Maroc Telecom's home computing initiative; a program which 
Intel has been part of, aimed at encouraging home PC adoption. Also, 
the Ministry of Commerce and Industry is working with our industry to 
develop programs to increase the deployment of technology in small and 
medium businesses.
    The U.S.-Morocco FTA bolsters these opportunities for U.S. high-
tech manufacturers and service providers. The U.S. high-tech sector has 
enjoyed a trade surplus with Morocco in each of the last three years. 
In 2003 the U.S. high-tech sector exported nearly $100 million in goods 
to Morocco, an important market when compared to another country in the 
region like Tunisia where U.S. technology exports reached $10 million 
in 2003.
    With a population of approximately 300 million, the Middle East 
region is one of the fastest growing emerging markets and has become a 
key focus area for Intel. According to IDC data, the high-tech market 
is estimated to be worth approximately $14 billion by 2006.\1\
---------------------------------------------------------------------------
    \1\ http://www.idc.com/.
---------------------------------------------------------------------------
    As the importance of the Middle East market grows, the U.S.-Morocco 
FTA sets strong precedents that will buttress our industries' growth. 
We commend the Administration and Congress for this achievement and for 
realizing the important objectives outlined in the Trade Promotion 
Authority legislation. Without the leadership provided by Ambassador 
Zoellick and his team and Congress' thoughtful guidance, these 
achievements would not have been possible.

Tariff Measures in the U.S.-Morocco FTA

    The Uruguay Round agreements on tariff reduction, and the 
subsequent Information Technology Agreement (ITA) within the WTO, have 
made significant contributions to the elimination of most tariffs in 
our sector. However, tariffs on high-tech products are still very high 
in countries that have not joined the ITA, creating a substantial 
impediment to trade.
    Fortunately, Morocco agreed to join the ITA as part of these 
negotiations. Most tariffs on U.S. high-tech manufactured goods 
included in the ITA were therefore eliminated in April 2004.\2\ Tariffs 
on most computer components and products in Morocco previously ranged 
between 2.5% and 10%, which can have a significant negative impact on 
product sale costs. Due to the highly competitive nature of our 
industry, combined with very short product life cycles, margins can be 
severely impacted by any additional costs such as these duties. Also, 
when duties are imposed on separate components, as they were in 
Morocco, the multiplier effect of the duty on each component could have 
had an even greater impact on the overall cost of the final product.
---------------------------------------------------------------------------
    \2\ Morocco has requested staging on 5 products; however those 
tariffs will be eliminated by 2010.
---------------------------------------------------------------------------
    In order to foster a barrier free trade environment, it is critical 
that our trading partners sign and implement the ITA or its equivalent. 
Morocco's agreement to join the ITA improves our industry's access to 
this growing market and sets an important example for emerging markets 
that still have not joined this agreement.

Intellectual Property (IP) Provisions in the U.S.-Morocco 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 high-tech industry $13 billion in lost revenues in 2002.
    Morocco had a 58% piracy rate in 2002 according to the Business 
Software Alliance. We are encouraged by the reduction in this rate over 
the last decade, with Morocco's piracy rate falling from 82% in 1994. 
We also are encouraged by the significant progress made in the Middle 
East/Africa region to reduce software piracy. This region's piracy rate 
improved more than any other in the world, with the regional piracy 
rate falling from 80% in 1994 to 49% in 2002. The intellectual property 
protections afforded by this FTA will continue this positive trend of 
decreasing piracy in Morocco, and they will serve as important 
precedents to continue to cut piracy throughout the region.
    To promote the development of a strong IT sector, it is essential 
that our trading partners establish the level of copyright protection 
that meets the challenges of a digital world. They must not merely 
comply with the WTO Agreement on the Trade Related Aspects of 
Intellectual Property Rights (TRIPS), but also comply with the World 
Intellectual Property Organization (WIPO) Copyright Treaty (WCT). 
Moreover, it is essential that our trading partners fully implement and 
enforce these obligations.
    The Administration has set the pattern for such levels of 
protection in the U.S.-Singapore and U.S.-Australia FTAs, and the U.S.-
Morocco FTA follows in that pattern. The U.S.-Morocco FTA adheres to 
the high standards of protection and enforcement for copyrights and 
other intellectual property set out in those earlier agreements.
    The agreement recognizes the importance of strong intellectual 
property rights protections in a digital trade environment by building 
on the obligations in the TRIPS Agreement, and ensures 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 of the agreement include:

      Provisions 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.
      Requirements 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.
      Provides for the application of the reproduction right of 
a copyright owner to temporary as well as permanent copies.
      Recognizes that robust substantive standards for the 
protection of intellectual property must be coupled with obligations 
providing for the effective enforcement of rights, in both civil and 
criminal contexts in order to be meaningful. In this regard, key 
provisions of the agreement provides for the establishment of statutory 
damages at levels appropriate to deter further 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. The authority to 
increase damages up to treble the amount of the injury assessed in a 
patent infringement case is particularly useful given the greater 
difficulty of proving infringement in these complicated cases and 
potential significant negative impact on the patent owner's ability to 
recuperate developmental costs.
      Obliges governments to lead by example by using only 
legitimate and licensed software.

Information Technology Services in the U.S.-Morocco FTA

    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.
    In this agreement, both parties agreed to provide full market 
access and national treatment on services. The agreement adopted a 
negative list approach, which means that new services will be covered 
under the agreement unless specific reservations were made in the 
agreement. Specifically, this agreement has no reservations in the area 
of computer and related services, thereby ensuring full market access 
and national treatment for this important sector in the U.S. high-tech 
industry. Between the services chapter and the investment chapter, the 
agreement covers all modes of delivery, including electronic delivery, 
such as via the Internet. The negative list approach also ensures that 
rapidly evolving new computer services, driven by continual advances in 
technology, will be covered by commitments contained in the agreement. 
Without such an approach, computer and related services definitions and 
commitments quickly could become obsolete as new services are 
introduced.
    We commend this approach and the fact that liberalization of high-
tech services was agreed to without any commercially significant 
reservations. This will lead to the promotion of barrier free-trade in 
services with Morocco.

E-Commerce in the U.S.-Morocco FTA

    With millions of 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% 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 benefiting of 
both customers and software developers.
    The e-commerce chapter in the U.S.-Morocco FTA maintains and 
slightly expands the standards for trade in electronic commerce 
established under previous agreements. As with previous agreements, the 
U.S.-Morocco FTA includes the concept of ``digital products''; prevents 
the application of customs duties on electronically delivered digital 
products; assures the non-discriminatory treatment of digital products 
delivered physically or electronically; addresses the valuation of 
physically delivered digital products; and provides commitments to 
cooperate on electronic commerce policy. The agreement includes broad 
national treatment and most favored nation (MFN) provisions which are 
further expanded in a footnote clarifying coverage in additional 
instances. In short, the FTA contains important long-standing 
electronic commerce principles identified by U.S. industry. There are 
no reservations taken specifically in the area of e-commerce.
    This sets important positive precedents for future negotiations on 
e-commerce in the context of the Doha Development Agenda negotiations. 
Through this and other recent agreements, the U.S. has developed a 
method for addressing trade in digital products which should advance 
discussions in the WTO in the long term.

Telecommunication Services in the U.S.-Morocco FTA

    Chapter 13 of the agreement contains a number of provisions that 
will benefit the telecommunications industry. The FTA ensures access to 
and use of public telecommunications networks and services on a non-
discriminatory basis. The non-discriminatory treatment is important, 
and it is a concept that we wholeheartedly support.
    Also notable is the fact that the FTA uses a negative list approach 
for telecommunications services. As with information technology 
services, the principles of market access, transparency and non-
discrimination for telecom will be reinforced as a result of this 
negative list approach.
    The provisions ensuring that each party's telecommunications 
regulatory body is separate from, not accountable to, and does not hold 
a financial interest in or maintain a separate operating role in any 
supplier of public telecommunications services are also very important. 
We believe that the affirmation of this concept is absolutely critical 
to ensuring fairness, impartiality and regulatory integrity in each 
participating country's telecommunications sector, and we encourage the 
Moroccan regulatory authority to eliminate all financial and/or other 
ownership interests in its major supplier of public telecom services as 
soon as possible.
    Furthermore, we support the inclusion of a binding commitment in 
the FTA establishing the principle of flexibility in the choice of 
technologies in the communications sector. The goal of this provision 
is to ensure that foreign governments do not disadvantage American 
companies by mandating the use of certain technologies while excluding 
others. However, the language regarding technical specifications and 
national frequency tables is different from similar technology-choice 
language in other already-negotiated FTAs and could create regulatory 
uncertainty for our sector.
    The principle of technology neutrality is critical in fostering 
competition among technologies, which has become a standard negotiating 
objective in all recent FTAs, and industry strongly supports this. 
Industry believes the technology choice provision in the CAFTA is a 
better formulation, and looks forward to working with USTR to improve 
upon the CAFTA model in negotiating future FTAs, such as with Thailand 
and the Andean countries.

Technical Barriers to Trade in the U.S.-Morocco FTA

    Finally, the agreement contains important commitments in the areas 
of technical barriers to trade and transparency.
    Since the early-1990s, many foreign governments have increased 
their use of technical regulations, including standards implemented 
through regulations, which can significantly impact the cost and design 
of high-tech products. Certain countries and/or regions have been 
particularly aggressive in this respect, focusing on product regulation 
in areas of environment, health, and safety (EHS). However, in some 
cases, these product regulations also have also been expanded to a 
variety of new areas (e.g.: privacy, security, and low-frequency 
emissions requirements). Apart from general concerns about the 
promulgation of these regulations, our major concern is that as tariff 
barriers diminish, an increasing number of countries may replicate this 
``regulatory'' approach to high-tech products to protect their markets 
or industry. Such regulations have a significant impact on the high-
tech industry because (a) they are costly and limit innovation, and (b) 
regulations generally are unable to keep the pace with the rapid 
technology advances, which may hamper product time to market and (c) 
most importantly, they may ultimately result in market access barriers.
    The FTA has built on the existing World Trade Organization 
Agreement on Technical Barriers to Trade commitments (WTO TBT 
Agreement) that will help ensure greater transparency in the regulatory 
process. In particular, new and more detailed provisions (such as a 60 
day comment period for all interested parties) ensure meaningful public 
participation in the development of standards, technical regulations 
and conformity assessment procedures. There are also new requirements 
for transparency that require government responses to significant 
comments by interested parties be made available to the public, thereby 
ensuring better justification for regulatory decisions as a result of 
increased accountability.

Conclusion

    In conclusion, the U.S.-Morocco FTA 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 increased regulatory transparency 
and tariff elimination among our trading partners. In this agreement, 
new baselines have been set that should lead to significant market 
opportunities for the U.S. high-tech industry in the years ahead. We 
commend the achievements made in the agreement and we strongly support 
Congressional approval of this agreement.
    The positive role that trade liberalization has played in the 
development and growth of markets for U.S. high-tech products should be 
maintained and expanded and the FTA is an important step in achieving 
this objective. We commend the achievements made in the agreement and 
strongly support Congressional approval.
    Thank you for the opportunity to appear before you today.

                                 

    Mr. CRANE. Thank you, Ms. Carroll. Mr. Taliaferro?

 STATEMENT OF DAVID TALIAFERRO, FARMER, LANEVIEW, VIRGINIA, ON 
   BEHALF OF THE WHEAT EXPORT TRADE EDUCATION COMMITTEE, THE 
   NATIONAL ASSOCIATION OF WHEAT GROWERS, AND THE U.S. WHEAT 
                           ASSOCIATES

    Mr. TALIAFERRO. Thank you, Mr. Chairman and Members of the 
Committee. Thomas Jefferson once wrote, ``Those who labor in 
the earth are the chosen people of God, if He ever had a chosen 
people, whose breasts He has made his peculiar deposit for 
substantial and genuine virtue.'' I stand before you today as 
one of God's chosen people, humble yet full of virtue.
    My name is David Taliaferro. My brothers and I farm in 
eastern Virginia along the Rappahanock River. Our operation is 
just 100 miles south of Washington. We raise corn, wheat, 
soybeans, and barley on approximately 4,000 acres. We also 
export food-grade soybeans to Japan and Korea.
    I am speaking on behalf of the Wheat Farmers of America who 
are ably represented in Washington by the Wheat Export Trade 
Education Committee, the National Association of Wheat Growers, 
and U.S. Wheat Associates. I am here to support the 
implementation of the United States-Morocco FTA. Strong exports 
of wheat and other grains are vital to our farm economy.
    First, 96 percent of the world's consumers live beyond our 
borders. Second, we export consistently nearly 50 percent of 
our wheat production. All opportunities for expanding our 
exports need to be vigorously pursued. This is why I am here 
today. Bilateral agreements are important interim measures as 
we pursue the objective of free and fair world trade of wheat 
in the FTAA and the WTO negotiations.
    Let me compliment the USTRs office and the United States 
Department of Agriculture for keeping wheat on the negotiating 
table. I understand that this was no easy task. We believe that 
no commodity should be exempted, and this would make future 
negotiations with other countries much more difficult. Our most 
serious competitor in the Moroccan market is the EU. With 
France's colonial ties, the EU's export subsidies, and the 
Moroccan import duty structure, we are clearly disadvantaged. 
Morocco has a GATT-bound tariff rate of well over 100 percent 
for durum and other wheat classes which could be imposed at any 
time. It is designed to favor the importation of higher-quality 
wheat but is flawed by reference prices obscured by the lack of 
pricing transparency.
    The negotiated agreement addresses the increasingly 
sophisticated and diverse wheat sector in Morocco, and we 
understand the effect that a modified tariff rate structure 
would have on the domestic wheat industry there, and we are 
sensitive to the possible need for a fair and effective farmer 
compensation program. Now, when this agreement is implemented, 
the in-quota tariffs for durum will go to zero over 10 years. 
Initially, the level is set at 250,000 metric tons, rising by 
10,000 tons each year. Unfortunately, the out-of-quota tariff 
will remain under most favored nation treatment and will not go 
to zero.
    We are disappointed that for other wheat classes the 
tariffs will continue. There is a favorable provision for 
eventual reduction which comes into play January 1st of the 
first year of the signed agreement. The in-tariff quotas are 
well within the current import levels. Growth in this volume is 
dependent on Moroccan domestic production, and we do sense that 
there is some potential for us here as well. The Moroccans have 
insisted upon protecting their industry through a seasonal 
provision that the negotiated quota would not apply during 
their wheat harvest in June and July. I do not expect this to 
be a problem.
    Regarding the issue of state trading enterprises, Morocco 
has agreed to work with the United States in the WTO 
negotiations to eliminate restrictions on the right to export, 
to eliminate the special financing granted to STEs that export 
for sale a significant share of their agriculture products, and 
to ensure greater transparency regarding the operation and 
maintenance of export state trading enterprises. Hopefully the 
Administration will secure these provisions in all future 
agreements. Finally, a most important element of the agreement 
is the clause guaranteeing preferential treatment. If Morocco 
provides any other trading partner better treatment for a 
product, then that same treatment shall be applied to the like 
U.S. product. In this way, we can compete fairly with our 
competitors.
    I would like to restate the appreciation that our wheat 
farmers have for the job done by our negotiators. I might add 
as well that the United States needs to project a positive 
image in that part of the world, and trade is the best way to 
do it. I urge the Congress to implement this agreement as soon 
as possible, and thank you for letting me come today.
    [The statement of Mr. Taliaferro follows:]
Statement of David Taliaferro, Farmer, Laneview, Virginia, on behalf of 
the Wheat Export Trade Education Committee, the National Association of 
              Wheat Growers, and the U.S. Wheat Associates
    Good morning Chairman Thomas and Members of the Committee. My name 
is David Taliaferro and I farm in eastern Virginia, approximately 100 
miles south of Washington, D.C. I raise wheat, corn, soybeans and 
barley. My brothers and I also export food quality soybeans to Japan.
    I appreciate this opportunity to speak to you on behalf of the 
Wheat Export Trade Education Committee, representing the wheat industry 
on trade policy issues; the National Association of Wheat Growers, the 
organization responsible for domestic policy and farm programs; and for 
U.S. Wheat Associates, the industry's foreign market development and 
promotion organization.
    Let me begin by highlighting two points that wheat producers in the 
United States take into account when looking at export trade 
opportunities. First, 96 percent of the world's consumers live beyond 
our border. The four percent within the United States do not consume 
enough wheat to sustain a viable wheat industry.
    Second, we consistently export nearly 50 percent of our total 
production. As you can imagine, our success or failure hinges on the 
ability of U.S. wheat to be exported around the world. Trade is a vital 
component for ensuring the financial viability of U.S. wheat farmers. 
All trade agreements, bilaterals such as the Moroccan Free Trade 
Agreement (FTA), and negotiations for the Free Trade Area of the 
Americas (FTAA) and in the World Trade Organization (WTO), must offer 
unique potential for expanding market opportunities for American wheat 
growers.
    The U.S. wheat industry strongly supports moving forward 
aggressively in Free Trade Agreements and in the World Trade 
Organization and Free Trade Area of the Americas negotiations. The WTO 
process is important for liberalizing world wheat trade, and the U.S. 
wheat industry is clearly focused on achieving our goals in this round 
of negotiations. However, the FTAA negotiations have the potential to 
extend beyond the level of liberalization achieved in the WTO and the 
U.S. must be prepared to take full advantage of this opportunity. As 
these two negotiations have not moved forward as smoothly or as quickly 
as we would have liked, the wheat industry views the Administration's 
efforts to open markets bilaterally, through FTAs, as the logical 
alternative. The FTAs should be seen as critical stepping-stones to 
free and fair trade on a worldwide scale. As part of this process the 
U.S. wheat industry strongly supports the U.S.-Morocco Free Trade 
Agreement (FTA) and urges its prompt passage by Congress before the 
summer recess.
    Before going into the details of the agreement, let me highlight 
the importance of the agreement achieved for wheat. First, without the 
strong determination of our U.S. negotiators from both the U.S. Trade 
Representative's Office and the Department of Agriculture, Morocco 
would have taken wheat off of the negotiating table. We firmly believe 
that no commodity should be exempted from any FTA negotiations. We all 
know that once a commodity is allowed to be taken off the table other 
countries will demand the same right for what they would define as 
sensitive products. Not only was keeping wheat in the negotiations a 
win for the U.S. negotiators, but I also believe that wheat posed the 
most difficult set of hurdles to overcome in this negotiation. We 
applaud the negotiators for the long hard battle they successfully 
fought on behalf of the U.S. wheat industry. Keeping wheat on the table 
and achieving a very positive outcome for our growers was not an easy 
task.
    In the Moroccan wheat market, the United States has been 
handicapped by close proximity to and old colonial ties with Europe--
especially France. The European Union's export subsidies and the 
Moroccan import duty structure also put U.S. wheat at a disadvantage 
vis-a-vis other origins. Morocco has a GATT bound tariff rate of well 
over 100 percent for durum and other wheat that they could impose at 
any time.
    The current import duty is designed to promote the importation of 
the higher quality wheat necessary to meet Morocco's evolving industry 
needs, but it is flawed because it is based on a series of reference 
prices which are further handicapped by a worldwide lack of pricing 
transparency.
    The FTA addressed the need to reflect the demands of an 
increasingly sophisticated and diverse wheat sector in Morocco. First 
of all, we acknowledged that any modification of the current duty 
structure could create major political, strategic and social problems. 
We also acknowledged the overwhelming challenge to implement a fair and 
effective farmer compensation program, particularly given the highly 
fragmented nature of land tenure and use in Morocco.
    Once the FTA is in place we will have very positive changes for 
U.S. wheat. The in-quota tariffs on durum wheat will go to zero. 
Unfortunately, these will take 10 years to phase out. U.S. durum does 
not, as a rule, compete with Moroccan produced durum. However, it is 
beneficial that the initial in-quota tariff for durum has been set at a 
level (250,000 metric tons) that is compatible with current market 
levels, and is set to grow by 10,000 metric tons a year thereafter. 
Unfortunately, the out of quota tariff on durum will remain under Most 
Favored Nation (MFN) treatment and is not scheduled to go to zero.
    We are disappointed that for all wheat other than durum, tariffs 
will continue under this agreement. However, there is a favorable 
provision to lower the tariffs. If the prevailing MFN rate is equal to 
the base rate, the reduction will be 62 percent of the base rate, and 
the reduction of an additional .275 percent of the MFN rate for every 
percentage point difference between the base and the MFN rate. These 
reductions enter into force on January 1 of the first year of the 
signed agreement.
    In-tariff quotas for common (non durum) wheat under the agreement 
are well within the current import levels. Growth in the in-quota 
volume is contingent upon domestic Moroccan production. Thus, Moroccan 
producers are protected at two levels, one at 3 million metric tons of 
production and at domestic production being less than 2.1 million 
metric tons. However, there is a generous growth potential for common 
wheat regardless of domestic production.
    The Moroccans also insisted on greater protections for their 
industry through what are known as seasonality provisions. During the 
months of June and July with the possibility to be extended through 
August, the Moroccan harvest season, the negotiated quota would not 
apply.
    For durum wheat there is a clause that would suspend the quota 
according to market conditions and the preference clause would apply.
    The wheat agreement also involves a complicated auction system on 
TRQs that is somewhat equivalent to the one Morocco structured with the 
EU. In the fourth year of the agreement, the U.S. and Morocco will 
review the auction system to decide whether to continue it or offer 
wheat quota access on a first come, first served basis.
    Tariff rate quotas (TRQs) were also established for all durum and 
common wheat products. While the TRQs may serve as a protection for 
Moroccan millers and bakers, they also serve to provide quantified 
levels of imports for these products.
    We are also extremely pleased that the negotiators secured a 
commitment on State Trading Enterprises. Morocco has committed to work 
with the U.S. in the WTO negotiations to:

    1.  Eliminate restrictions on the right to export;
    2.  Eliminate the special financing granted to state trading 
enterprises that export for sale, directly or indirectly, a significant 
share of their country's exports of an agricultural export; and
    3.  Ensure greater transparency regarding the operation and 
maintenance of export state trading enterprises.

    We have asked the Administration to secure this commitment in all 
future FTAs, both those currently under negotiation and ones yet to be 
initiated.
    The final and maybe the most important element of the agreement, 
especially since we will not go to zero tariffs on non-durum wheat, is 
the clause guaranteeing preferential treatment. A preference provision 
that is beneficial to U.S. suppliers for all products is included in 
the agreement. It guarantees that if Morocco provides any other trading 
partner better treatment for any product, Morocco must immediately 
provide the same treatment to the like U.S. product. (Thus Canada can 
not negotiate an agreement that would put our growers at a disadvantage 
in this market.)
    The U.S. wheat industry applauds our negotiators for their hard 
work and tenacity to reach this agreement for wheat. We strongly 
support the agreement and urge Congress to pass it before the summer 
recess.
    Thank you for the opportunity to present the views of the U.S. 
wheat industry on this important agreement.

                                 

    Mr. CRANE. Thank you, Mr. Taliaferro. Mr. Levin?
    Mr. LEVIN. Thank you, Mr. Crane. I do not have any 
questions, but if I might just say a special hello to David 
Mengebier--we have known each other for some years--and to 
thank you, Mr. Hamod, for your communication of last week, and 
to thank all of you for your testimony. I think it is 
interesting testimony that covers not all of the issues in this 
FTA but a lot of them. So, thank you for coming, and we will 
make sure that your testimony is well distributed. Thank you.
    Mr. CRANE. Thank you. Mr. English?
    Mr. ENGLISH. Thank you, Mr. Chairman.
    Ms. Carroll, the U.S.-Morocco FTA clearly sets a high 
standard in many areas of 21st century global trade. Some, for 
example, have said that the intellectual property rights 
provisions alone are the best that have ever been negotiated 
for a U.S. FTA with a developed or developing country. Do you 
agree with that assessment? Do you feel that the provisions in 
this agreement have the potential to be a model for future FTAs 
in the area of intellectual property?
    Ms. CARROLL. Thank you. Yes, the tech industry does believe 
that the intellectual property commitments in this FTA are very 
good indeed, although we do think that this should be an 
important model for future FTAs. There are particular entities 
in every country that we negotiate with, or region, but, in 
general, the provisions for this agreement from our industry's 
perspective are excellent.
    Mr. ENGLISH. Thank you. Mr. Hamod, in your testimony you 
state that Moroccans do not hesitate to exercise their 
constitutional right to strike. You have heard here some 
questions raised about the extent of that right to strike. Can 
you please give us an example of an occasion when Moroccans 
have been able to strike?
    Mr. HAMOD. Mr. English, I do not profess to be an expert on 
ILO and the labor laws in Morocco, but I have had the pleasure 
and the opportunity to hear from numerous delegations of 
Moroccans in recent weeks who have come through Washington and 
told us how important it is to them to have that opportunity to 
strike when necessary. They feel that it is free and fair when 
the opportunity presents itself and that this agreement will 
support their efforts.
    Mr. ENGLISH. How does this agreement embrace reforms that 
have already been made in Morocco and further encourage 
additional and ongoing reforms in the future?
    Mr. HAMOD. My own sense is that this helps to consolidate 
some of the reforms that have taken place to date, and the 
United States is in a unique position to support Morocco in 
such areas as transparency to promote better business 
practices. Frankly, given a choice between learning those from 
the United States and, say, learning corporate governance from 
the French, I would rather that they learn it from us.
    Mr. ENGLISH. That is well said. Mr. Belcaid, it is a 
privilege to see you again, and as co-Chairman of the Morocco 
Caucus and Chairman of the Congressional Steel Caucus, I have a 
particular interest in your testimony. Aside from the 
possibility of increasing steel exports from the United States 
to Morocco and creating hundreds of new jobs in both countries, 
your testimony illustrates the dynamic and complementary nature 
of our two countries' economies. Given the preferential trade 
agreement in place between Morocco and the EU, I wonder if you 
could elaborate on why this agreement is critical to your 
efforts to involve U.S. producers to make this initiative work.
    Mr. BELCAID. I was in Morocco in April, and I met with the 
industry, the canning industry, the people that buy cans and 
process food. They import a lot of cans from Europe, and right 
now with the euro high, they are struggling and they want the 
project to go through and to have a plant near them to supply 
them. I think with this FTA, we will provide greater benefit 
for the project to this industry.
    Mr. ENGLISH. Mr. Chairman, I would like to thank the 
panelists. They have provided a very broad perspective on the 
benefits of a Moroccan FTA, and with that, I yield back the 
balance of my time.
    Mr. CRANE. Thank you, Mr. English. I, too, want to express 
appreciation to all of the panelists for your participation, 
but ask you if you will be so kind as to stay in constant 
communication with us. With that, the hearing stands adjourned.
    [Whereupon, at 11:58 a.m., the hearing was adjourned.]
    [Submission for the record follows:]
      Statement of Dee Vaughan, National Corn Growers Association
    Chairman Thomas, Ranking Member Rangel and Members of the 
Committee. We would like to thank the Committee for giving us the 
opportunity to submit a statement regarding the U.S.-Morocco and U.S.-
Australia Free Trade Agreements.
    The National Corn Growers Association (NCGA) was founded in 1957 
and represents more than 33,000 dues-paying corn growers from 48 
states. The Association also represents the interests of more than 
350,000 farmers who contribute to corn checkoff programs in 19 states.
    NCGA's mission is to create and increase opportunities for corn 
growers in a changing world and to enhance corn's profitability and 
use. Trade is vital to the future of corn growers as we search for new 
markets and provide grain that is more abundant and of better quality.
    The National Corn Growers Association and sister organization, the 
U.S. Grains Council, support the Morocco Free Trade Agreement (FTA). 
Along with the Central America Free Trade Agreement (CAFTA), the 
Morocco FTA will provide new opportunities and an expanding market for 
U.S. feed grains. More so than any time in the past, corn producers 
operate in a competitive international marketplace. For this reason, 
free trade agreements have never been more essential to the future 
success of our industry.
    The feed grains industry has been active in building markets in 
Morocco and the sector is already benefiting from strong economic ties 
between the two countries. Morocco is primarily a bulk commodity market 
with corn being the largest component of that trade.
    In 2002, Morocco imported 1.1 million metric tons of corn, 63 
percent originating from the United States. However in 2003, U.S. 
market share declined to about ten percent due to increased competition 
from Argentina, Brazil and Eastern Europe. This decline was only a 
temporary phenomenon due to abundant world grain stocks in 2002. The 
world grain situation in 2002 saw abnormally high feed wheat and corn 
stocks being exported from Eastern Europe and ongoing economic turmoil 
in Argentina.
    Fortunately, U.S. market share is returning to normal in 2003 and 
2004 as feed grain stocks have returned to their normal levels. In 
2003, Morocco imported 330,819 metric tons of U.S. corn, making it the 
17th largest market for U.S. corn exports. The U.S. Grains Council 
projects this market will continue to grow over the next ten years, 
with additional demand for feed grains of 1.2 million metric tons by 
the year 2011.
    Driving Morocco's feed grain demand is poultry production, the 
fastest growing meat production sector in Morocco. In 2003, total 
broiler production was 245,000 metric tons (plus 12,000 metric tons 
from spent laying hens and breeders and 50,000 from backyard chicken 
production) and total egg production was 2.35 billion (plus 800 million 
eggs from backyard production). Per capita consumption of eggs is 105 
per year and poultry meat is 10.2 kilograms. During 2003, the poultry 
sector consumed approximately 825,000 metric tons of corn. There is 
further room for growth in the poultry sector, as the cost of producing 
chicken meat in Morocco is one of the highest when compared to other 
middle-income countries. In addition, corn is no longer seen as a 
viable crop for production in Morocco due to the large amounts of water 
it consumes and the fact that domestically produced corn is extremely 
expensive compared to international prices.
    Morocco's beef sector has remained stagnant over the past twelve 
years, with an annual production level of 150,000 metric tons of beef. 
Production levels of red meat would have to increase to 512,000 metric 
tons by the year 2020 to keep up with population growth, given the per 
capita consumption of 4.3 kilos per year. This level of production can 
only take place through intensive feeding of a larger number of animals 
with access to low cost feed grains.
    Although Morocco represents a valuable market to U.S. corn growers, 
high tariffs remain a significant barrier to U.S. exports. The current 
tariff system in place operates much like a variable levy--when the 
world price goes up, the overall percentage charged on the value of the 
corn shipment goes down; and when the world price goes down, the 
percentage goes up. For example, if a shipment of U.S. corn is valued 
at $150 CIF, the first $80 is assessed an ad valorem tariff of 35 
percent, while the other $70 for the amount above $80 is assessed a 
duty of 2.5 percent. This gives little incentive for importers to seek 
the best world price or the most optimal combination of feed 
ingredients.
    The Morocco FTA cuts the tariff on U.S. corn initially in half (to 
17.5 percent for lower value per ton shipments based on its reference 
price system), and then proceeds to zero by year six based on linear 
reductions. This provides a significant advantage to U.S. exporters and 
could potentially allow them to capture near 100 percent of the 
Moroccan market. The duty-free corn would save the Moroccan poultry and 
livestock industries approximately $30 million per year based on 
current imports and applied duties.
    The reduction and elimination of tariffs on U.S. feed grains will 
benefit corn growers upon implementation and in the future. The 
reduction in tariffs will provide lower feed costs to the Moroccan 
poultry and livestock industries which will allow further overall 
expansion of the Moroccan market for feed grains. In addition, the 
lower tariffs applied to U.S. feed grains versus the most favored 
nation (MFN) rates that competitor countries will continue to face will 
allow the United States to capture a larger portion of that important 
growth market.
    The future strength of the agricultural economy in the United 
States will depend on expanding trade opportunities like those in 
Morocco. At the same time we need to continue educating farmers across 
the country on the benefits of trade. Sometimes it is hard to 
articulate the importance when most farmers never see their grain again 
once it leaves the elevator and is transported by barge or train. We 
must do a better job communicating with our grassroots, but we need the 
Congress and Administration to negotiate and enforce trade agreements 
that allow farmers to participate on a level playing field in the 
international marketplace.
    The National Corn Growers Association remains committed to an 
aggressive trade agenda and bilateral free trade negotiations. We urge 
the Committee to approve the Morocco FTA as soon as possible and we 
look forward working with you on this and other issues of importance. 
Mr. Chairman, we appreciate the opportunity to comment and please do 
not hesitate to contact us if we can be of assistance in any way.