[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
                     PRESIDENT BUSH'S TRADE AGENDA

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

                                HEARING

                               before the

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

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 15, 2006

                               __________

                           Serial No. 109-57

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania           WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona               JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois               XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri           LLOYD DOGGETT, Texas
RON LEWIS, Kentucky                  EARL POMEROY, North Dakota
MARK FOLEY, Florida                  STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas                   MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York         JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin                 RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    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

                                WITNESS

The Honorable Rob Portman, U.S. Trade Representative.............     8

                       SUBMISSIONS FOR THE RECORD

Center for Policy Analysis on Trade and Health, San Francisco, 
  CA, statement..................................................    81
Coalition for GSP, statement.....................................    89
Doctors Without Borders/Medecins Sans Frontieres, New York, NY, 
  statement......................................................    92
Jackson-Vanik Graduation Coalition, statement....................    95
Jaeger, Kathleen, Generic Pharmaceutical Association, Arlington, 
  VA, statement..................................................    99
Lanier, Robin, Consumers for World Trade, letter.................   103
Retail Industry Leaders Association, Arlington, VA, letter.......   106
U.S. Chamber of Commerce, statement..............................   107


                     PRESIDENT BUSH'S TRADE AGENDA

                              ----------                              


                      WEDNESDAY, FEBRUARY 15, 2006

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

    The Committee met, pursuant to notice, at 1:41 p.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
February 07, 2006
No. FC-19

                      Thomas Announces Hearing on

                     President Bush's Trade Agenda

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
President Bush's trade agenda. The hearing will take place on February 
15, 2006, in the main Committee hearing room, 1100 Longworth House 
Office Building, beginning at 1:30 p.m.

      

    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. The sole 
witness will be United States Trade Representative (USTR) Rob Portman. 
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:

      
    Since enactment of the Trade Promotion Authority Act (TPA) of 2002 
(P.L. 107-210), the President has used his authority to greatly expand 
trade opportunities for the benefit of American workers and businesses. 
The United States has concluded free trade agreements (FTAs) with 
important trading partners and regions such as Chile, Singapore, 
Australia, Morocco, Central America-Dominican Republic, Bahrain, Oman, 
and Peru. The Administration is continuing negotiations with Panama, 
Colombia, Ecuador, Thailand, and the Southern African Customs Union, 
and President Bush has recently notified Congress of his intent to 
negotiate an FTA with the Republic of Korea. Additionally, the 
President is continuing multilateral negotiations in the World Trade 
Organization (WTO) to expand U.S. opportunities in trade in 
agriculture, industrial goods, and services, despite strong efforts to 
diminish the ambitions of such an agreement by trading partners seeking 
to protect various sectors.

      

    At the same time, USTR is managing a host of serious bilateral 
trade disputes and concerns that require a combination of diplomacy and 
litigation. In the past several years, USTR has managed and won several 
formal WTO-based disputes, while at the same time defending U.S. 
interests and demanding compliance with commitments by our trading 
partners in all parts of the world through negotiations and 
consultations.

      

    In announcing the hearing, Chairman Thomas stated, ``TPA has 
allowed us to regain our leadership role in trade negotiations and to 
eliminate foreign trade barriers to U.S. goods and services. The 
Administration has moved an impressive and ambitious agenda in the past 
few years and clearly intends to maintain that momentum. Expanded trade 
means more business for American farmers, manufacturers, and service 
providers, better value for American consumers, higher living standards 
for American families, and good jobs for American workers. I am 
committed to ensuring the Administration's adherence to the rigorous 
consultation process and the detailed negotiating objectives 
established in TPA. This hearing will give Ambassador Portman the 
opportunity to lay out the President's trade priorities and is an 
important component of our bipartisan oversight responsibilities.''
      

FOCUS OF THE HEARING:

      
    The hearing is expected to examine current trade issues such as: 
(1) the prospect for trade expansion in agriculture, industrial goods, 
and services through multilateral negotiations in the WTO; (2) the 
recently concluded FTAs with Oman and Peru; (3) other FTAs that are 
currently being negotiated or have been notified by the President; (4) 
management of bilateral trade disputes and concerns; (5) ongoing 
negotiations with several countries seeking to accede to the WTO; (6) 
compliance with WTO dispute settlement decisions; and (7) other trade 
issues.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
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FORMATTING REQUIREMENTS:

      
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    The Committee seeks to make its facilities accessible to persons 
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noted above.

                                 

    Chairman THOMAS. If I could ask our guests to find seats, 
please. Today the Committee considers the President's trade 
agenda. We are pleased to have our former colleague, Ambassador 
Rob Portman, testifying before us for the first time in his new 
capacity to discuss efforts to expand international trade, 
which will create jobs and opportunities for American workers, 
farmers, and firms. Since the President signed the Trade 
Promotion Authority into law in 2002, Congress has approved 
agreements negotiated by the administration with Chile, 
Singapore, Morocco, Australia, Central America, and Bahrain. We 
have teed up agreements that we will soon look at with Oman and 
Peru, and it is in the process of negotiating several others. 
Many in Congress are concerned, frankly, about the larger non-
bilateral regional world of the WTO and the current status of 
the Doha Round. It seemed to some of us, and the Chairman in 
particular, that several of our trading partners spent more 
energy in Hong Kong in trying to avoid free trade rather than 
liberalizing it, and not to mention any names, the European 
Union, Japan, Brazil, and India seemed to be the frontrunners. 
If countries were unwilling to move by December on key 
modalities, as they say in the business, Mr. Ambassador, I want 
you to give me some understanding as to why they will move by 
some new deadline of April or finish by the end of 2006, for 
that matter, because Trade Promotion Authority expires in 2007. 
I am concerned about how we deal with these dynamics or whether 
we do not think about creating a new dynamic.
    In the meantime, I think we should continue to aggressive 
pursue our bilateral efforts as we have in liberalizing trade. 
While clearly the WTO negotiation is our best opportunity to 
liberalize trade, our bilateral agreements, I think, have 
spurred growth for U.S. exports at twice the rate of our 
exports to the rest of the world. To the degree we continue the 
success and we move more to industrialized nations, as 
evidenced by the potential for a U.S.-Korea Free Trade 
Agreement, I believe some of our more recalcitrant friends will 
begin to take notice of the impact our bilateral agreements are 
going to have. Last year, this Committee held hearings on our 
economic relations with Japan and China--probably one of the 
more unifying hearings we have had in some time in this 
Committee--because of our deep concerns about these countries' 
apparent lack of commitment to free trade. I would underscore 
that for Japan far more than China. For example, the Chair 
believes Japan has a long history of blocking U.S. goods, 
devising nontariff barriers that allow their farmers and firms 
to operate while keeping out imports. U.S. beef is only the tip 
of the iceberg. At the Japan hearing, I pointed out that we are 
not looking for any more apologists for Japan's behavior. There 
seemed to be a sufficient number of those. We are looking for 
results.
    As we begin to focus on China, I think we have a newer 
partner, one who has shown the ability to move and, frankly, 
one that was fairly impressive by, in baseball terms, doing the 
Babe Ruth of pointing where they were going to go and when they 
were going to get there. Part of the Chair's interest is in 
whether or not, based upon what our friends the Chinese have 
agreed to in terms of a host of improvements on intellectual 
property and other areas, how successful are they? What kind of 
a report card can we give in their ability to move? We outlined 
those factors in a bill, frankly, introduced by the gentleman 
from Pennsylvania, Mr. English, H.R. 3283. The House moved on 
this bill. The Senate has not. We would appreciate some comment 
during your testimony, Mr. Ambassador, in that regard. Then, 
finally, let me make sure that I do not forget our friends, the 
Europeans, who recently lost the biotech case in the WTO but 
are publicly stating there is no need for them to change their 
system. They are currently honing their last desperate 
opportunity to deal with issues that we have put behind us in 
both the FSC and in the Byrd cases. Ambassador Portman, welcome 
back. We look forward to your testimony, but first let me call 
on the gentleman from New York, Mr. Rangel, for any opening 
statement he may wish to make.
    Mr. RANGEL. Thank you, Mr. Chairman. Ambassador, let me 
thank you for the attempts that you have made to bring 
Republicans and Democrats closer together as it relates to 
trade policy. I think everyone on both sides of the aisle agree 
that that is the way we would like our Nation to be perceived 
with foreigners, and that is that, at least on the issue of 
trade, we have put our party labels behind us. Now, it has been 
difficult, but you have to agree that we have had some success, 
and the President has called for us to attempt at least to try 
to work more closely together. Each time we have a major 
problem where it looks like there is a partisan approach, more 
often than not it deals with some form of international labor 
standards.
    Now, we all agree that globalization presents different 
problems to different countries depending on the state of their 
laws and their economic development. You do have, in the 
communications we have, problems with the ILO standards, either 
in the declarations or the conventions and the inability that 
you have to negotiate standards and other people that we have 
not agreed to ourselves. But I hope publicly as well as 
privately that you understand that the only reason we use the 
international labor standards is because they appear to be so 
minimum. But if what they are saying is that we do not want 
forced labor, child labor, and the right of collective 
bargaining, then it would seem to me that we look forward to 
your good offices to see whether you can build a bridge between 
those that would not want any standard and those that some 
might think that the standards are too high. But based on your 
ability and your skills to have been successful with so many 
FTAs that have come before us and can seriously have been 
considered as bipartisan, I ask for you to continue to work on 
that, and if it reaches the point that the other party feels 
that it does not want to work in this area or if the 
administration believes that it cannot be flexible in this 
area, not to worry. It just saves us a lot of time. But I think 
we are proving our willingness to, whenever possible, 
especially with trade agreements to try to have it come out as 
a bipartisan agreement. I just congratulate you and hope we can 
continue to work together.
    Chairman THOMAS. I thank the gentleman. With the 
Ambassador's indulgence, given this special occasion, the Chair 
would be a bit more flexible than our usual procedure with 
other members, and without objection, the Chair plans on 
recognizing the Chairman of the Subcommittee on Trade, the 
gentleman from Florida; and then recognizing the ranking member 
on the Subcommittee on Trade, the gentleman from Maryland. 
Without objection, the Chair recognizes the gentleman from 
Florida.
    Mr. SHAW. Thank you, Mr. Chairman. I would like to add my 
welcome to Ambassador Portman, and welcome you home. I hope you 
feel that this is always a home. It is wonderful to have 
somebody in your position that recognizes all the good we can 
do when we act in a bipartisan manner with regard to matters of 
trade, understanding that there will be some areas that there 
will be partisan differences. But it is for the best of this 
country that I think every Democrat and Republican really is 
pushing forward with their trade agenda. I want to thank you 
for your leadership on behalf of the United States during 
recent World Trade Organization meetings in Hong Kong. Thank 
you for your efforts and work of your staff. We remain hopeful 
for a successful conclusion of the Doha Round, but in the next 
few weeks and months, it is critical. The United States must 
continue to push for the elimination of trade barriers across 
the globe. I look forward to hearing your impressions on where 
we are in the current negotiations.
    I want to focus my comments for just a few moments on 
Russia. Russia is moving toward joining the World Trade 
Organization and is hoping to reach this goal by the year's 
end. Chairman Thomas and I met with your Russian counterparts 
last fall, considering the Russians' lack of enforcement of 
intellectual property rights. Congress passed a resolution in 
the fall calling on the Russian government to crack down on 
piracy and continues to urge Russia to take the necessary steps 
to ensure market access without counterfeiting. In my view, the 
Putin administration has not used the necessary political 
capital to acknowledge the problem and take the proper steps to 
shut down pirates. The United States copyright industry 
estimates losses of $1.7 billion in 2004 alone as a result of 
this failure by the Russian Government. In fact, there is 
evidence that the Russian government is harboring pirates on 
government property.
    I recognize the friendly relationship between Moscow and 
Washington, which is very important; yet as Mr. Putin pushes 
for World Trade Organization membership on the eve of the G-8 
Summit, I hope that you and President Bush will remain tough 
with the Russians in ending the piracy and counterfeit 
practices that have plagued Russia. Unless Russia adopts 
domestic enforcement laws, dismantles organized crime, and 
commits itself to the rule of law, I think consideration of 
permanent normal trade relationships in Congress will be highly 
controversial. American sectors are getting a raw deal with 
Russia. I applaud you on your recent announcements launching 
the U.S.-Korea Free Trade Agreement. Free trade access to 
Korea, our Nation's seventh trading partner, in goods would be 
a tremendous opportunity for many United States industries. I 
look forward to working with you in moving a comprehensive 
Korea Free Trade Agreement in the coming months.
    Finally, Mr. Chairman, I want to touch on our role within 
the World Trade Organization. The United States is a leader 
within the organization. A successful Doha Round is in our 
National interest. At the same time, our free trade agreement 
negotiations provide the quickest route to ending barriers to 
trade, and I applaud you for the negotiations underway. In 
addition, I believe we need to be aggressive in seeking 
enforcement of the WTO obligations among our trading partners. 
I look forward to your annual report to Congress relating to 
barriers to trade, and I urge you to provide us with specifics 
on the barriers to trade in each country and what steps are 
available to the United States. Working with your team, this 
Committee will get a clearer understanding of what our 
industries face and what we may be able to do in striking down 
unfair barriers. I look forward to your testimony, and I look 
forward to members' questions. I yield back, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. The ranking member 
of the Subcommittee on Trade, the gentleman from Maryland, Mr. 
Cardin.
    Mr. CARDIN. Thank you very much, Mr. Chairman. Ambassador 
Portman, it is a pleasure to have you before the Committee. We 
ended 2005 on, I think a very positive note, with the Bahrain 
agreement being approved and the method in which we used to 
work out potential differences so that we could have a very 
strong vote without much controversy. I want to applaud your 
leadership in bringing us back together. However, we start this 
year with some rather chilling news on our trade deficits: a 
record $726 billion trade deficit in 2005, representing nearly 
6 percent of the U.S. economy. Our deficit with China continues 
to skyrocket. It hit $202 billion in 2005, 25 percent higher 
than in 2004. Let me quote from a person who I have the 
greatest respect for and agree with his opinion when he said, 
``Our bilateral trade relationship with China today lacks 
equity, durability, and balance.'' Quoting from your statement 
of yesterday, and I agree with you, Mr. Ambassador. We cannot 
sustain this current bilateral relationship with China. Action 
must be taken.
    To pay these deficits, President Bush has accumulated more 
debt to foreigners, $1.2 trillion, than all other Presidents 
before him combined. In fact, foreigners have finance 90 
percent of the Bush administration's increase in Federal debt. 
I mention that because I talked to a trade attorney this 
morning who told me that he was in Beijing on a private trade 
issue talking to a senior Chinese official, who basically said: 
We don't have to respond to your concerns about market access. 
Your country can't do anything about it. They need us to 
continue to buy your dollars. So, I worry about whether we 
really do have the freedom to respond the way we need to 
against our trading partners because we are so dependent upon 
their need to buy our bonds so that we can pay our bills. 
Earlier today, Secretary Snow was here, and I posed the 
question to Secretary Snow on the Chinese currency 
manipulation. I understand that is under the portfolio of the 
Secretary of the Treasury. But I do believe we all have to be 
concerned about the currency issue with China, the impact it is 
having on U.S. competitiveness, and I was pleased to see that 
in your review, that is acknowledged as an issue that needs to 
be dealt with.
    On the WTO negotiations, I want to compliment you for your 
leadership. I think you have provided the opportunity for us to 
have a successful Doha Round. You have shown courage and 
leadership of the United States. I am extremely disappointed by 
the lack of leadership of our traditional trading partners. 
They don't seem to want to take advantage of an opportunity to 
expand trade through the WTO. I look at the lack of progress in 
agriculture and see Europe and see how disappointed we are that 
they have not responded to the offer that you put on the table. 
We look at what is happening in the tariff issues, and there is 
no agreement to a progressive way to reduce tariffs. We look at 
the service industry and we see some progress being made, but 
certainly not a lot of progress, and certain areas of concern. 
You and I have talked about an area that gives me great 
heartburn in the WTO Doha Rounds, and that is, if the rules 
issues come up and weakening our antidumping and countervailing 
duty laws, that is going to be something that is totally 
unacceptable, I think, to the majority of Members of Congress.
    So, I want to thank you for your leadership and just 
express disappointment that that has not been matched by our 
traditional trading partners. I agree with Mr. Rangel's point 
on the free trade agreements. I understand that we may have 
Oman or Peru coming in shortly. I would urge you to continue to 
use the model we did in Bahrain in working out issues that are 
very important, I think, to the Members of Congress to deal 
with worker rights and protection. I look forward to your 
testimony, and I look forward to a successful year in 2006 on 
the trade agenda. Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Any other member 
may have a written statement. It will be placed in the record, 
without objection. Mr. Ambassador, your written statement will 
be made a part of the record, and the Chair fully understands 
that the 5-minute rule is but a fond memory. So, you will have 
the amount that your conscience will allow you to have to 
address us, and we are going to extend you a degree of House 
courtesy. But it is nice to have you with us, Mr. Ambassador, 
and the floor is yours.

      STATEMENT OF THE HONORABLE ROB PORTMAN, U.S. TRADE 
                         REPRESENTATIVE

    Ambassador PORTMAN. Thank you, Mr. Chairman. I never 
noticed that kind of generosity on the 5-minute rule when I was 
on the other side of the microphone, so this will be a new 
experience. It is great to be here, and to be here in this 
newly refurbished room but with old friends, and I thank you 
very much for your statements, Mr. Rangel, for yours. Mr. 
Rangel talked about the fact that we should try to work as 
Americans, not as Democrats or Republicans on trade. He has 
made that point to me many times. That is what we will try to 
do because it is so much in our National interest going 
forward. To Mr. Shaw and Mr. Cardin, I appreciate working with 
you on the Subcommittee, and with your staffs, and I think we 
do have an exciting agenda ahead. I will get into that in a 
second. What I thought I would do, instead of making a 
statement or even putting a statement in the record, is go 
through a PowerPoint presentation. You have this in front of 
you, and it is the 2006 trade agenda. We talked in the library 
a moment ago about some specific issues, and I told you I am 
happy to address other issues that are not addressed here, and 
I look forward to your questions and to your input.
    I want to start, if I could, by just reviewing why what we 
are doing is so important, just quickly recap where we have 
been for the past year working together. We have actually had a 
number of accomplishments. Mr. Cardin talked about the Doha 
Round, as did Mr. Shaw and Mr. Thomas. The first two points are 
we have made some bold proposals there. We have reinvigorated 
those talks, I believe. We have still got a lot of work to do. 
The second major category there would be our FTAs, the free 
trade agreements. We have closed two. We have passed two with 
your help with seven different countries. We have also engaged 
India in a new trade policy forum, deepening our relationship 
there, which will be very much front and center when the 
President visits India in early March. With China, we were able 
to work out a comprehensive textile deal after a lot of 
negotiation. We are working with many of you. It is an 
agreement that I am happy to talk about if you have further 
questions, but it has been very well received, I believe, for 
the most part on our side, and it gives predictability and 
certainty to our importers as well as our manufacturing 
industry.
    Saudi Arabia is now part of the WTO. We held their feet to 
the fire on some issues, and we were able to get that 
accomplished this last year. The Morocco Free Trade Agreement 
was implemented. We do have a number of agreements going from 
the EU enlargement agreement to the Russia meat agreement that 
we were able to close this year, some of which had been 
outstanding for several years. That is one of our objectives, 
to try to complete these agreements that have been on the table 
for a while and move forward; or if they can't be completed, 
frankly, to move forward on other higher-priority items. In the 
beef market, we have had some success. I am disappointed, of 
course, in the recent news from Japan, but if you look at what 
has happened with Korea, Hong Kong, Thailand, Taiwan, and the 
Philippines recently, we are working through this BSE issue 
successfully in those markets. We have got more to do. China 
top-to bottom review we talked about a little in our pre-
meeting, and then, of course, working with you, we actually 
extended Trade Promotion Authority, kind of a quiet vote but an 
important one to give us the time until July of 2007 
particularly to work through the Doha agreement.
    We have also had a number, on page 3, the next page, of 
successes on the enforcement side, and I have listed some 
highlights here. I have organized them along the lines of 
China, ag, and then other, which kind of indicates our focus on 
China. We have had some successes with China, persuading them 
to remove some semiconductor taxes which were discriminatory. 
As you know, we have filed the only WTO case against China, and 
it was successful in the sense we were able to work out that 
issue. We were prepared to file a second WTO case against China 
a few weeks ago, and I talked to Mr. McCrery about this 
beforehand. Some of you are very familiar with this, who come 
from one of the 14 States that export a very important paper 
product to China called Kraft linerboard. But we told China we 
were going to file the case, and after months of fruitless 
negotiations, overnight China rescinded an antidumping order 
which was unfair, in our view, and we were able to get the 
result we wanted without going through the protracted 
litigation. It was a good result for U.S. industry, and this is 
a model I think that works. I think we need to use the WTO as 
leverage to get real results for our U.S. commercial interests.
    We are still working with China on a couple other issues. 
One is an auto parts issue we have raised with them over the 
last several months. We continue to work with them on that as 
well as the various intellectual property rights challenges in 
China that were discussed a moment ago. On the ag side, we did 
win a biotech case, which the Chairman mentioned, against the 
EU at the interim stage. Very successful for us because it 
relates to a huge issue for the United States, which is 
sanitary and phytosanitary issues. Regardless of how low 
tariffs get, if we cannot get our product in because bad 
science is used in a protectionist way, it does not help much. 
So, this is a case that goes well beyond the EU and is an 
important accomplishment for us. We filed a WTO case on Turkey 
just last week with regard to rice, something we have worked 
through with them. We were not able to resolve the issue short 
of a WTO case. We feel that is the best route to take there. We 
also won a number of WTO cases including one against Mexico, 
Japan, Canada, and another one in Mexico on high fructose corn 
syrup.
    Other cases, as you know, we have what is considered to be 
the largest WTO case ever, which is the Airbus-Boeing case 
before the WTO right now. We brought that when I came to the 
conclusion that the EU was not able to negotiate in good faith 
on the issue of direct launch aid, and to the extent that was 
not--it would be taken off the table, we had no choice but to 
proceed to the WTO. We do hope we can negotiate that case. We 
think it would be a case that could be settled. But it would 
require the EU to make the necessary decisions with regard to 
direct launch aid, which we strongly believe is an illegal 
subsidy under the WTO. We also won a case on geographical 
indications with regard to our products. We also were able to 
win on several counts on a customs regime in the EU, a case 
with regard to Egypt, and a case with regard to 
telecommunications with Mexico. So, those are just some of the 
enforcement highlights of this last year. Enforcement will 
continue to be a top priority. Underlying all this work, on the 
next page just a chart that I do not have to go into with this 
group because you all follow trade closely, just why we are 
doing all this. A proactive trade agenda is in our interest, 
strongly in our interest. We are already the most open large 
economy in the world. It is going to be in our interest to 
knock down barriers to our goods and services. It is critical 
to our economy. Trade liberalization raises productivity, 
raises wages, expands consumer choice and our purchasing power.
    When you go sector by sector with regard to manufacturing, 
we are the largest exporter of manufactured products in the 
world. We can't forget that. Our exports actually have 
increased 82 percent since the end of the Uruguay round. One in 
every five jobs in manufacturing is supported by exports. With 
regard to the kinds of jobs they support, they pay an average 
of 13 to 18 percent more. So, reducing trade barriers helps 
spur the creation of higher-paying jobs in this country. 
Agriculture, one in three acres are planted for export, 27 
percent of income. Absolutely critical to our ag economy 
Services, of course, we had another great year, record 
surpluses in services. Here we have a comparative advantage. 
Our surplus this year went from $48 to $56 billion, very 
important for us to have access through our services. The trade 
agenda for 2006, we have an ambitious agenda, a proactive one. 
I divided it into three categories: one is the global trade 
talks that were talked about; second is bilateral and regional 
agreements; and third would be enforcing our trade laws and 
strengthening our agreements.
    With regard to the global trade talks, there has already 
been some discussion about this. Progress in Hong Kong may be a 
misnomer, as the Chairman says. We did not make all the 
progress that we had hoped for. On the other hand, the round 
continued and we did make incremental progress in a number of 
key areas, as I talked about a moment ago. The timing, just to 
remind us, the plan is to finish by the end of this year. That 
is the stated goal, not just for the United States but the WTO 
membership, in part because our Trade Promotion Authority, its 
expiration date is in July and the agreement would have to come 
to you in the spring of 2007. There are three negotiating 
areas, as you know, under the Doha Round: one is manufacturing; 
another is services; and third is agriculture. On 
manufacturing, we just talked a moment ago about how important 
it is for us. We are seeking--the U.S. proposal is real cuts. 
That means applied cuts, not in just what the bound or allowed 
rate is, but what the real rate is, the applied rate. We are 
also focused on key sectors. We think we can make more progress 
with a sectoral approach. We have some history to support that. 
Also nontariff barriers, extremely important to us, including 
the auto industry.
    The next chart just shows you in a visual form why it is so 
important for us to reduce these barriers overseas. Our average 
manufacturing tariff in this country is 3 percent, and you can 
see on that chart the average among all WTO members is closer 
to 30 percent with regard to manufactured goods, 40 percent for 
all goods. So, we are, again, a relatively open, low-tariff 
country. Exports are key to us, and reducing those barriers is 
critical through the Doha multilateral process. Second is 
services. Here again we have had a nice surplus in 2004 and 
2005. Our exports have increased dramatically, nearly doubled 
over the past 11 years. In Hong Kong, we were able to come up 
with a framework for services. One of the frustrations had been 
we had a framework for agriculture, a framework for 
manufactured products. But for services, because it doesn't 
relate to tariffs but, rather, to regulations and other 
nontariff barriers, it was harder to come up with that formula. 
We think we have one that can work now. It is not just a 
bilateral process but what is called a plurilateral process, 
meaning working with those countries that have a common 
interest and working on particular sectors of services, say 
financial services or express delivery or telecommunications.
    So, we think we have a model that can work to open up some 
markets for us. We are pushing very hard on that. By the end of 
this month we are looking for revised offers from our trading 
partners on services. The next chart talks about why this is 
beneficial to us. Again, we have one of the most open service 
regimes in the world. We do have some challenges here. One is 
so-called Mode 4 or temporary visits, temporary business entry, 
and we are getting some pressure on that. But the bottom line 
is services is incredibly important to our economy. There is an 
estimate out there that the median U.S. family of four annual 
income could increase by as much as $6,800 per year--$6,800 per 
year--if we had full liberalization of services because it is 
so key to our economy, and we have such a comparative advantage 
there. The third pillar is agriculture, and within agriculture 
there are three pillars. One is market access, lowering 
tariffs. The framework that we have agreed to calls for 
substantial improvement in market access. That is what we are 
looking for, as the Chairman said. We have not received offers 
that are commensurate with our offer on trade-distorting 
subsidies. We need to see that to move this round forward. 
Importantly, so do a lot of other members of the WTO, including 
many in the developing world.
    Second is eliminating export subsidies. There we did make 
some progress in Hong Kong. We came up with a date for the 
total elimination of export subsidies. You will see in a minute 
why that is so important to our farmers. Third is reducing 
trade-distorting agriculture support. There we made a 
commitment in 2004 that we would, as WTO members, reduce trade-
distorting support. The United States has stepped up to the 
plate and put on the table the most ambitious proposal out 
there on all three of these pillars, but significantly being 
willing to put our trade-distorting support on the table in 
exchange for getting the market access commitments that we need 
and also moving ahead on manufacturing tariffs and on services. 
We would not have a chance to improve this multilateral 
approach on agriculture had Hong Kong not moved forward. Now we 
have a chance to do it, as tough as it will be. The next page 
is some interesting charts on all three pillars, just to show 
you again why it is so key to us. Market access, average tariff 
in the U.S. is the red bar on the left, 12 percent. If you look 
at the global average on the far right, 62 percent. The highest 
tariffs in the world are on agricultural products, as are most 
of the trade-distorting subsidies. So, it is an area where 
there is significant room for improvement, and it will help 
with regard to our farmers who have the ability to export our 
product when they have a level playingfield.
    The second pillar is down at the bottom left, direct export 
subsidies. Again, you see there we have made a commitment now 
not just to eliminate them but come up with a date certain, 
2013, with significant progress by the midterm there; 89 
percent of those subsidies are used now by the European Union. 
Therefore, our farmers are unfairly competing with the European 
Union with regard to our exports currently. The third area is 
domestic support. Here you see two bars. One is the gold bar, 
which is what is permitted or allowed under the WTO. That would 
be the bound rate. The yellow is what is actually used, which 
is the current so-called AMS or amber box levels. If you look 
at that chart, you will see that the Europeans have the ability 
to use, as an example, four and a half times more than we do. 
They actually use about three times more than we do in terms of 
domestic support. The same with Japan, by the way, as a 
percentage of their agricultural production. It is about three 
times what the U.S. is. So, this is an issue where we need to 
see two things: one, yes, a reduction of our trade-distorting 
support, but also harmonization, where others come down more 
than we come down, to equalize this to a certain extent to four 
and a half to one. It needs to be more equalized.
    The next chart shows you why we are under pressure at the 
WTO on trade-distorting subsidies. You know, frankly what has 
happened since the end of the Uruguay round, as we have seen, 
reductions in trade-distorting support among our other 
developed country partners. The black line is the EU limit. The 
black bars is where the EU is. The red line is the Japanese 
limit. The red bars is where they are. Likewise, the yellow 
line is where we are allowed to be, and the yellow is where we 
are. You will see that the Europeans and the Japanese have 
actually reduced their trade-distorting support significantly--
not below our level yet, but significantly; whereas, we have 
gone up a little and now have sort of leveled off. So, this is 
why the U.S. has been under particular pressure with regard to 
this issue of trade-distorting support. Just so you understand 
the context within which we are negotiating in the WTO. Another 
big WTO issue is accessions. Chairman Shaw talked a little 
about Russia, some concerns he has on IPR. We have got four 
major accessions coming up that will go before you, because 
they all involved Jackson-Vanik and, therefore, a vote on PNTR, 
permanent normal trade relations.
    If you recall the PNTR vote on China, these can be tough 
votes. We have Vietnam coming up, Ukraine, Russia, and 
Kazakhstan. We are close with regard to the Ukraine. I hope we 
are close with regard to Russia, taking into account what Mr. 
Shaw said. With Vietnam and Kazakhstan, we are also making 
progress. I would love to have all four of these come before 
the Congress to move them forward even this year. That may be 
ambitious, but I think it is in our interest to get these 
countries into the rules-based WTO system. There are also 
another 26 applicants looking for membership in the WTO. We 
have worked with a number of them--I mentioned Saudi Arabia 
earlier--and we will continue to do so. GSP--I wanted to throw 
in General System of Preferences as part of our global 
discussion because it expires at the end of this year. The 
President has put a 5-year reauthorization in his budget. This 
is a program that does expand choices, as I say, of American 
industry and consumers. It was $26.7 billion last year in 
imports. Our total exports, as an example, would be about $1.2 
trillion. So, it is not a large percentage as compared to our 
imports or exports. But it is a very significant program for 
the developing world, and it is one I am really looking forward 
to working with members of this Committee on. I think we will 
have some opportunities with GSP reform to look at some new 
ways of doing business.
    With regard to our free trade agreements, I wanted to show 
you all, you know, the obvious benefits we get from our free 
trade partners in a chart form. I came up with this chart 
today. I hope it is helpful to you. It talks about the fact 
that our free trade agreement partners now account for 15 
percent of the GDP of the world. That is because we don't 
include the EU or China or Japan or India in our FTAs, which 
are the big economies, but 54 percent now of our exports. It is 
an interesting chart. It just goes to show, as many of you have 
said at the outset here, this is definitely in our interest to 
develop not just a multilateral approach, which is ultimately, 
you know, the best way to get a universal reduction of tariffs 
and reducing other trade barriers, but our FTAs are very 
effective on a bilateral and regional basis to get these 
barriers down and increase our exports which is great for our 
economy. Once CAFTA-DR, Bahrain, Oman, and Peru are 
implemented, we would have ten free trade agreements, seven of 
which were completed in the last 5 years. The next chart talks 
more specifically about our exports. A simple point here, our 
exports are rising twice as fast among our FTA partners as they 
are among the world in general.
    Where are we on our negotiations? Oman is up on the Hill. I 
believe the Committee on Ways and Means will be moving forward 
with some sort of a hearing soon. Mr. Chairman, I know you are 
working on that. Peru, we have notified you of our intent to 
sign, meaning it is up here for the 90-day period. We are more 
than halfway through that now, I believe. I think you have the 
opportunity late spring to take up the Peru agreement. We are 
working for completion of a few more in 2006. Panama--some of 
you expressed some concern to me before this meeting about 
Panama, why we have not moved more quickly. I would be happy to 
talk about that in questions, but the bottom line is we are 
very close. We still have some concerns from early in the 
agriculture area. Thailand, Colombia, and the United Arab 
Emirates. Colombia, of course, we would hope to partner with 
Peru and, for that matter, Ecuador for an Andean trade pact, 
but in any case, we are moving forward with those countries 
that are prepared to move, and Peru we have already closed on.
    New agreements. As you may know, because some of you were 
involved in it, we did launch free trade discussions with 
Korea. We are very interested in continuing to launch free 
trade agreements with countries like Korea, where we have a 
strong commercial interest and where we see the ability of that 
country to make some important reforms so that you can see a 
successful conclusion of the round. We believe that was true 
with Korea. We spent several months working with Korea even 
before we launched. We also launched up here on the Hill, 
incidentally, the first we have ever launched a trade agreement 
on the Hill, I am told, and did it in a bipartisan way with a 
lot of support from members of this Committee on both sides of 
the aisle and Senator Baucus and others present. I appreciate 
that very much. We will work closely with you as we negotiate 
this agreement so we can end up with a great agreement.
    We are continuing to work on the Southern African Customs 
Union, SACU. I am happy to talk more about that, if you would 
like. The AGOA benefits are very helpful to all these 
countries. On the other hand, they may make it less 
advantageous to move to a free trade agreement, but we are 
working on that and continue to. The same with FTAA and Ecuador 
I talked about earlier. On Korea, I will not get into a lot of 
detail here with this chart so we can keep moving, except to 
say Korea is now the tenth largest economy in the world and 
growing and our seventh largest trading partner. There is a 
huge commercial interest here on behalf of our services 
industry, agriculture and industrial goods. They are excited 
about this. I know many of you are. Again, we look forward to 
working very closely with you to be sure this is an agreement 
that you can support when it comes before you. There are other 
potential agreements we would like to complete. Even this year, 
we would like to be able to launch with Malaysia. We are not 
quite there yet because, again, we are working through some 
issues with Malaysia to be able to launch an agreement. But 
again, our tenth largest trading partner, a big economy in a 
strategic part of the world--Asia. So, I am hopeful we can make 
progress on Malaysia. I know many of you have been involved in 
encouraging me to move on Malaysia, and I agree with you there 
is a great potential there.
    Egypt is another possibility. We have some challenges right 
now with Egypt we are working through, but, again, we think it 
is in our long-term interest to have deepening trade 
relationships with the largest Arab country. A third area I 
want to touch on in enforcing trade laws and strengthening 
trade agreements. We talked about this a little at the outset 
in terms of last year, what we were able to accomplish. Let me 
just go through, if I could quickly, what some of our 
approaches are on the enforcement side. First is bilateral 
consultations. We tried to solve problems bilaterally. Often 
that achieves the best outcome. I will give you a couple of 
examples on that. We reached an agreement with the EU recently 
on compensation for tariffs that were raised when the new 
members came in, when the ten new members came in, the 
enlargement agreement. We were able to work that out 
bilaterally to our satisfaction and to the interests of our 
commercial interests among our exporters to Europe. We also 
were able to recover a lot of the beef markets, as I said, 
through bilateral and technical conversations and negotiations 
with a number of countries I mentioned earlier.
    The WTO round also gives us some opportunity. Again, it 
covers all sectors, all areas. It is universal, so it has 
certain advantages. It enables us also to negotiate new 
disciplines. We are doing that in the context of the Doha 
Round. Accessions. As we are doing now with all the accessions 
I talked about earlier, we are able to get commitments and 
concessions from these countries and gain additional tools. One 
example there could be the China safeguards. We would not have 
had the ability to reach the agreement with China or to have 
had the safeguard imposed had we not worked that out as a part 
of their WTO accession. Enforcing existing agreements, of 
course, is another area for us under the WTO where we are 
actively involved. I will give you three examples: the TRIPS 
agreement handled intellectual property; GPA, which is 
Government Procurement Agreement; and also SPS, sanitary and 
phytosanitary agreements under the WTO. We use that as leverage 
to get movement from our trading partners. The FTA 
negotiations. We have talked about the FTAs. It is a great 
place to get commitments and put new rules in place, and we did 
that aggressively with the FTAs last year.
    Antidumping and CVDs. Since President Bush has taken 
office, the United States has imposed $104 new antidumping 
orders, 28 of them against China, by the way, which is by far 
the most against any country. Also 20 new final countervailing 
duty orders. So, we continue--that is the Commerce Department, 
not USTR. Commerce administers antidumping and countervailing 
duties, but that is another place where we enforce our domestic 
trade laws and do so in a way that ensures that we have fair 
imports coming in. WTO dispute cases. Let me go over a few of 
those, if I could. We talked about Airbus earlier. We talked 
about EC biotech. The initial assessment there is very 
positive, as I said. Other recent successes, I mentioned Kraft 
linerboard. We were prepared to file a WTO case a few weeks 
ago. Literally overnight China changed its opinion with regard 
to an antidumping order they had put on our product unfairly, 
rescinded the order. We were able to get a great result for the 
U.S. industry. Mexico telecommunications, another great success 
for us. Japan apples. High fructose corn syrup, we are still 
working through that one in terms of the compliance part of it, 
but we have won at the panel stage in August of last year. It 
is now under appeal by Mexico, and we expect Mexico to 
eliminate its beverage tax.
    I talked about EU geographical indications earlier and 
Korea semiconductors. There the appellate body reversed a panel 
finding that the U.S. subsidy did not follow WTO rules, so that 
was a victory for us in a couple of ways, including upholding a 
core element of our trade remedy laws. Yesterday, as I said, in 
our pre-meeting, we announced the results of the top to bottom 
review, recognizing that our trading relationship has moved 
into a new phase with China, and we laid out plans for moving 
ahead. The China textile safeguards we worked with a number of 
you on, we signed this agreement last fall. It establishes 
quotas on imports of 34 textile and apparel categories through 
2008. That is about 46 percent of the trade that was previously 
subject to a quota before the end of last year. The broad 
product coverage and three-year term of this agreement will 
permit our producers, importers, and exporters from China to 
operate in a more stable and predictable environment. The China 
Transparency Initiative, some of you have been involved with. 
This is under the WTO TRIPS agreement. It is a way for us to 
get more information regarding IP rights. This is the so-called 
Article 63.3 invocation. I appreciate many of you working with 
us on this. What I am particularly pleased about is the fact 
that we got Japan and Switzerland to work with us in this case. 
They have filed it with us and they are sticking with us and I 
applaud them for that. It would have been nice to have had 
additional trading partners, too, but the China IP challenge is 
not one exclusively faced by the United States. It is faced by 
all of us who do trade and business in China and faced by 
Chinese entrepreneurs, innovators, and businesses, as well.
    China JCCT, this is our annual meeting with the Chinese 
where we have made progress in the past. We have another one 
coming up in April. We did make some progress last year. 
Through the JCCTR, customs officials and Chinese customs 
officials have worked together to crack down on some of the 
piracy, particularly with regard to the customs side, the 
exports of pirated items. China also did agree to delay its 
procurement regulations, but they do maintain problematic auto 
parts and direct sales rules that I mentioned earlier and we 
still believe that it would be very much in our interest and 
China's interest to have them accede to the government 
procurement agreement. We are pushing hard on that. We will 
continue to push hard in our April meeting with JCCT on a whole 
range of issues with China, many of which are mentioned in the 
top to bottom review. The next page, intellectual property, we 
have got a number of initiatives here, some of which have been 
worked out over the years with Congress. The STOP! Initiative 
is a couple of years old now. It coordinates our international 
outreach effort with key trading partners. It has now been 
extended to other international fora, including the E.U.-U.S. 
summit and the APEC summit in Asia.
    Special 301, we use aggressively, as you know, with regard 
to putting countries on an either Priority Foreign Country 
List, which would be the countries that have the worst results, 
and these can result in sanctions; the Priority Watch List, 
also very serious; and the Watch List. Example, when we put 
Ukraine on the Priority Watch List, we were able, having 
actually designated them as a Priority Foreign Country, to get 
a change in their laws regarding intellectual property. They 
enacted a law to curb illegal CD production in August of last 
year. We were able then to terminate sanctions we had imposed 
against Ukraine. So, we used this as leverage. We used it in 
Pakistan to shut down illegal CD plants after designating them 
as a Priority Watch List country. Finally, FTA implementation. 
Once an agreement is signed, USTR monitors and ensures that our 
trade partners rewrite legislation that they have committed to 
do, including on SPS, intellectual property, and so on, make 
sure it is done in the right way, and we follow through on 
agreements. For example, we have done this in Singapore, 
Morocco, Australia. The reason our CAFTA partners have not 
implemented the agreement is that we are following through on 
the commitments they made to you and I made to you and we will 
continue to do that.
    To summarize, again in 2006, we have got a lot on our 
plate, a lot of opportunities, a lot of challenges. We look 
forward to working closely with you on that. We hope to 
conclude these global trade talks this year, a once in a 
generation opportunity to reduce barriers to trade. We hope to 
continue to pursue these high-standard bilateral and regional 
agreements to provide new market access for our workers and our 
farmers, our businesses, and we will vigorously enforce trade 
laws and agreements to ensure a more level playingfield. Again, 
thank you, Mr. Chairman, for allowing me to go over my allotted 
time a little bit, but I thought it was important to walk 
through the various items on what is a very ambitious and 
proactive agenda and I look forward to questions.
    [The prepared statement of Ambassador Portman follows:]

   Statement of The Honorable Rob Portman, U.S. Trade Representative
         Testimony Before the House Committee on Ways and Means
                           February 15, 2006

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    Chairman THOMAS. I thank the gentleman. The Chairman is 
tempted to ask for written testimony at the next hearing.
    [Laughter.]
    Chairman THOMAS. Rob, back in the old days, some of us 
remember that USTR simply wasn't adequately staffed. I am 
pleased to say that I see you have brought something close to 
10 percent of your resources----
    [Laughter.]
    Chairman THOMAS. --which is stressing more of the still 
relatively small size of the USTR and I think that approach 
best serves our purposes. We want to make sure that you have 
sufficient resources, and you have outlined some changes that I 
think we agree on, especially focusing on the activity of, or 
what is growing into a significant and hopefully mutually 
prosperous relationship with China, but that is going to 
require additional resources. One of the concerns that I have 
is that in moving initiatives more than once in this direction 
will put you into what I consider to be a bureaucracy class 
that I am hoping you don't want to be in. Therefore, in looking 
over the list of opportunities you outlined in 2006, I see some 
old and familiar friends on the list. One of the things I think 
I am going to ask you to do, and as other members ask specific 
questions, they obviously will go in the directions they want 
to go, but we seem to have some difficulty in getting our 
friends to understand that we really are concerned about some 
absolutely critical fundamentals, the scientific base, 
sanitary-phytosanitary system, intellectual property rights in 
terms of a uniform and objective structure, and frankly, some 
of our friends in negotiating are more interested in the phase-
out of years or the elaborate and cumbersome intertwined 
relationship that they are interested in and that at some 
point, I am very mindful of the fact that there are some 
ambassadors from some countries that survive in Geneva for 
decades. Over my career, I have seen, and I don't mean this as 
any personal statement, USTR Ambassadors come and go, a number 
of them, unfortunately.
    I am thinking along the lines of indicating that if you 
have a decent run, you know, four to 6 years, we need to assess 
the progress that we are making on particular efforts and that 
if we don't have clear-cut effort, it seems to me that we 
simply have to come to the conclusion that it is probably not a 
productive use of USTR's time and resources and that we don't 
want to expand the resources to have that many more balls in 
the as you move forward, but that we prioritize, and that 
message delivered to some of those folks who seem to enjoy the 
leisurely pace, I think might actually move us toward the 
conclusion on some of these. Perhaps, and I hate to say this, 
the threat of being dropped or we quit wooing some of them 
might put some underscoring along the lines that there are 
certain key things we need agreement on, and if we don't get 
those, it doesn't make a whole lot of sense to continue to fool 
each other that we aren't moving in terms of a Free Trade 
Agreement. The recent example of Peru and Oman and some others, 
Bahrain, although it was through no fault of their own that 
they weren't moved a year earlier, indicate that if two willing 
partners sit down and really understand what needs to be done, 
it doesn't take all that long. So, I am going to be asking you 
to take a look at some of these folks that we have been wooing 
for some time without material progress and maybe suggest that 
at what point do you continue to fool each other that we are on 
the road to somewhere when, in fact, we are not. What is your 
reaction to that?
    Ambassador PORTMAN. Well, first, we are a lean and mean 
organization, about 212 people and about a $42 million budget, 
which is tiny by government standards.
    Chairman THOMAS. So, my 10 percent was more accurate than I 
thought.
    Ambassador PORTMAN. Yes, and maybe closer to 20 percent.
    [Laughter.]
    Ambassador PORTMAN. It is a great group of people, high 
quality and highly-motivated career people for the most part, 
but it, for the most part, was the career side of it. They are 
all highly motivated and highly skilled. But you are right. We 
probably have sometimes fallen into this trap of continuing to 
try to work through some of our negotiations when our time 
might be more productively spent prioritizing agreements where 
we can make more progress, so I will take that under 
advisement. I would appreciate it if you would give me some 
more specifics, because you have followed this over the years, 
and that goes to other Members of the Committee, as well.
    Chairman THOMAS. Well, I can give you some examples. For 
example, bills introduced in the Congress are good only for as 
long as the Congress meets, which is no more than 2 years and 
then they are all dropped and you have to start over. At some 
point, we have to create a sense of timing, if not urgency, 
among some of our friends, and, of course, that goes to ongoing 
and existing relationships, as well. I just think we need to 
assess where we are and what is helping us get to where we say 
we want to go and I am very anxious to get that prioritization 
by the United States Trade Representative, not necessarily by 
other agencies of the U.S. government who may have reasons 
other than the very narrow and important trade aspect that you 
folks are focused on, and I am going to have continuing 
discussions with you over this and I appreciate it.
    Ambassador PORTMAN. Thank you. I can provide you something 
that is a draft that we work from in this regard, but perhaps 
we could even refine it further.
    Chairman THOMAS. I think we will shorten it significantly. 
The gentleman from New York.
    Mr. RANGEL. Thanks again, Mr. Ambassador. You indicated the 
President was going to recommend a five-year extension of the 
General System of Preferences. Would that include the textiles 
and apparel?
    Ambassador PORTMAN. Mr. Rangel, I honestly don't know if 
the budget got into that level of detail. I don't think it did. 
It did not.
    Mr. RANGEL. Would that include the Andean Trade Program?
    Ambassador PORTMAN. No, it does not include ATPA. It is 
just with regard to GSP. But you are very appropriately 
mentioning another expiration that I probably should have 
mentioned, which is the Andean Trade Promotion Act.
    Mr. RANGEL. Well, I am concerned about how developing 
countries are going to be impacted by this globalization. At 
one point, we were talking about having one of your 
representatives work with the CARICOM organization. Are there 
any special considerations given to that group?
    Ambassador PORTMAN. Well, under CBI, there are, and under, 
of course, CAFTA, they sent their members, which I think they 
all are.
    Mr. RANGEL. I think only one is.
    Ambassador PORTMAN. On CARICOM?
    Mr. RANGEL. No, CAFTA, only one, D.R.
    Ambassador PORTMAN. Only D.R.?
    Mr. RANGEL. Having said that, you are having some problems, 
you point out, with CAFTA. Any of those ``I told you so'' type 
of issues?
    [Laughter.]
    Ambassador PORTMAN. I am sure if you told me, it was 
something very profound and I should have listened. No, what 
the issue is is just making good on the commitments that I made 
to you, and a big part of it, frankly, right now is SPS. 
Sanitary and phytosanitary issues have become very difficult to 
work through. It is a controversial area, what we asked for.
    Mr. RANGEL. Could you send me--I am looking at the time, 
but he is leaving so I get as much time as I want now.
    Ambassador PORTMAN. He is very generous today.
    Mr. RANGEL. Could you tell me, in the Korean agreement, how 
you take care of those restrictions they have on American motor 
vehicles?
    Ambassador PORTMAN. Well, it is a big concern of mine 
because so few cars get in, fewer than 5,000 a year now, I 
believe, and we have worked through one issue with them even 
before launching that I think you and I have talked about, 
which is the auto emissions issue, which is an indirect import 
barrier for our automobiles, we believe, and they tend to be 
more indirect, not direct. But we are going to work through the 
auto issues as part of the negotiation with Korea this year and 
to me, this is one of the critical issues. We need to be able 
to see more access for our automobiles in Korea and our auto 
parts.
    Mr. RANGEL. Is there anything that the Congress can do to 
help you with the CAFTA-DR agreement?
    Ambassador PORTMAN. Yes. I think the Chairman just did, 
perhaps inadvertently, talking about the importance of SPS. You 
know, our farmers and ranchers look at the reduction of tariffs 
and are very pleased, but they also look around the world and 
see where their products are blocked because international 
standards are not used, science-based standards, and that is 
all we are asking for. I know this is a tough issue politically 
back home in many of these countries, but we need to bring more 
focus to that. I do think, Mr. Rangel, that by the end of this 
month, by the end of February, we should have two of the six 
countries fully implemented and I am hopeful that another two 
could come on in the next month or two. The only country that 
right now is not ratified, as you know, is Costa Rica. They 
have just gone through a Presidential election and are in a 
recount. I believe that we will be able to make progress there, 
as well, once that recount is over. We are making progress, but 
I have taken the position, and not all have agreed with this, 
but I have taken the position that to the extent we have got a 
commitment, even if it was oral, an oral commitment, not in 
writing, we need to be darn sure that that commitment is kept. 
One of the concerns I heard raised as I talked to you and 
others about CAFTA was sometimes in our Free Trade Agreements, 
we finish the vote here in the House and the Senate and then 
commitments are not maintained. I want to be sure that with 
regard to the CAFTA countries that we start off on the right 
foot.
    Mr. RANGEL. As violently as we oppose CAFTA, we are still 
here ready to make it work as best that it can, so you can 
depend on our support in that process.
    Ambassador PORTMAN. Thank you, Mr. Rangel.
    Mr. RANGEL. Thank you.
    Mr. SHAW. [Presiding.] Thank you, Mr. Rangel. Mr. Portman, 
for some time, Mr. Rangel and I have expressed great concern 
about Haiti and its economy and the direction it has been 
going. They just got through with an exercise in democracy, and 
I will quote Secretary Rice when she said, ``We will continue 
to support the people of Haiti as they progress toward a 
transparent and stable democracy.'' I am concerned about the 
recent rioting in wake of the election and urge that the 
international community certify the election as quickly as 
possible. One thing I think that perhaps we can all agree on, 
that a democracy has a very difficult time, if not an 
impossible time, in surviving where there is no economy. 
Basically, there is very little economy in Haiti. What do you 
see on the horizon as to what preferences we may be able to 
give Haiti in order to stimulate some additional capital 
flowing into that country?
    Ambassador PORTMAN. I appreciate your question, Mr. Shaw, 
and your advocacy of this over the years. As you know, you and 
I worked with this when I was on the other side of this dais 
and I share your concerns. Mr. Rangel and I have talked a lot 
about it also in my new position. It is a desperate situation, 
not just the political situation today on the streets of Haiti, 
but the economic situation. There is an interest on my part in 
working with you and others to try to come up with some way to 
help Haiti. Once this election is resolved, it might be a good 
time to do that. The textile issue is a political concern here 
in the U.S. Congress. We want to be sure we come up with 
something that is balanced that we can get through the 
political process that we are not putting together legislation 
which doesn't meet the concerns of other members of this 
Committee and the Congress who are concerned about additional 
textiles coming in, perhaps from third countries, even.
    I will say one thing that I like about what we did in CAFTA 
is we have a special arrangement we agreed to within a side 
letter from August 2004--I think Mr. Rangel was involved with 
this--between the U.S. and the D.R. that regards the 
preservation of the preferential treatment for the Haitian-
Dominican Republic co-production of textiles and apparel, which 
should bring Haiti some relief. I think that's one thing we 
need to follow as we get D.R. on board, is to be sure that that 
2004 letter is one that is followed with regard to Haiti.
    Second, again, we would like to work with you in a number 
of ways, but specifically in the area of legislation, similar 
legislation that you have already introduced, Mr. Shaw and Mr. 
Rangel and others, to try to see what we can do to move forward 
with some kind of a preference program. I do think that what we 
are talking about in the WTO will directly affect Haiti. There 
is this duty-free, quota-free commitment we have made under the 
WTO Doha Round. The U.S. commitment is to provide up to 97 
percent duty-free, quota-free by tariff line for least-
developed countries. Haiti qualifies for that.
    Mr. SHAW. Let me switch your attention to Saudi Arabia. 
Back in September, we announced our favorable impression of 
bringing Saudi Arabia into the World Trade Organization. Part 
of that commitment is to abide by the provisions of the World 
Trade Organization. One is to provide Most Favored Nation 
status to other members of the World Trade Organization. In 
December, Saudi Arabia made the announcement that they would 
continue their boycott of Israel. This seems to be very 
inconsistent with membership in the World Trade Organization. 
Where do you see this thing going?
    Ambassador PORTMAN. Well, it is a big concern of the United 
States, of course, because we worked with Saudi Arabia on the 
issue of their WTO accession and part of coming into the WTO is 
MFN treatment, in other words, nondiscriminatory treatment for 
all members. Saudi Arabia did not, when they joined the WTO, 
invoke non-application with regard to Israel or anybody else. 
So, as far as we are concerned, Saudi Arabia is required under 
the WTO to provide that kind of treatment to all the members of 
the WTO that they have agreed to.
    We have been monitoring this situation on the boycott. We 
have raised this with officials there in Saudi Arabia. We have 
received assurances from Saudi Arabia that they will abide by 
their WTO commitments. In addition, Mr. Shaw, I am able to tell 
you today we are sending a team of experts from the Departments 
of Commerce and State to work with the Saudi government on 
boycott issues as they affect U.S. companies. In terms of who 
might have a legal right, Israel is a member of the WTO, rather 
than the United States would have that legal right, but again, 
we have raised it with the Saudis and they tell us they will 
follow through on their WTO obligations.
    Mr. SHAW. My time has expired. Mr. Levin?
    Mr. LEVIN. Thank you, Mr. Shaw, and welcome, Mr. 
Ambassador. Just two quick comments so that we don't lose the 
forest for the trees, which I think sometimes happens in trade 
issues. There are so many very specific issues. I hope as we 
talk about this, we don't lose sight of the impact of the trade 
deficit. It is not sustainable, and your work only relates to 
part of it. I was looking over a chart recently. There really 
are no magic bullets in trade. Some of the FTA partners of 
recent times have seen their surplus with us increase. In other 
words, our deficit has increased, not gone down.
    Secondly, Mr. Rangel raised the issue of international 
worker standards, core labor standards, and I simply want to 
say that it is really part of a larger issue of the impact of 
globalization. Trade isn't simply a commercial issue, the flow 
of goods no matter how they go, but it is part of a much larger 
issue and trade is so much a part of the impact of 
globalization. So, when we talk about workers, we are talking 
about one component of larger issues of the impact of 
globalization, and that is so compelling, for example, in Latin 
America, where I was recently, where there is a turn against 
globalization because people feel they haven't benefited from 
it. So, when we talk about trade issues, I hope we keep in mind 
it is part of a larger context of globalization, and that is 
true of worker rights. It is not a narrow focus.
    Let me ask you three quickies together so you can answer. 
On China, you issued your report yesterday. You mentioned how 
hard-fought the PNTR was. There were two aspects I want to 
refer to. One was the transitional review mechanism. We provide 
for an annual mechanism. Mr. Ambassador, we haven't done well 
with it. It hasn't worked, and the GAO said that. I would 
welcome your comment. Secondly, we put in there a general 
safeguard, the 421 safeguard. Four times out of four, the 
administration has, even though the ITC said there was a reason 
to use it, this administration has said no. Secondly, on Korea, 
I am glad you talked about the non-tariff barriers. You sent us 
a letter just a few days ago saying, ``I agree with you. It is 
critical that we include NTBs as an integral and equally 
important component of the Doha Round.'' In the opening remarks 
with Korea, there wasn't a single reference, as I read it, to 
the automotive sector. It is two-thirds of our trade imbalance.
    Last, on dumping, it was not so long ago, I guess six 
months ago, you said, at the Doha Ministerial Conference, U.S. 
negotiators insisted upon and obtained a mandate under which 
the effectiveness of our trade laws will be preserved. Now, at 
Geneva, and before that at Hong Kong, there was agreement for a 
very general negotiation of the anti-dumping rules and it is 
hard to reconcile that when we were assured way back at Doha 
that what we agreed to was not a broad negotiation. So, if you 
could touch those three things, China, our failure to use the 
annual review and the safeguard, Korea and the anti-dumping. 
Thank you.
    Ambassador PORTMAN. Thanks, Sandy. Let us start with China. 
You are right. Under the PNTR, we did set up this mechanism. 
Perhaps we could use it more effectively, and I just asked Tim 
to look into that, Tim Stratford, who you know is a new 
Assistant U.S. Trade Representative for China who has got a lot 
of good experience he brings to bear on this. In terms of the 
safeguards cases, we talked about the textiles safeguards, 
which is separate from the 421, but we did get that as part of 
the accession. We have been pretty aggressive there, both in 
invoking the safeguards and in using that as leverage to come 
up with what I think has been a good agreement and widely 
applauded by our industry on both sides, which is unusual. In 
terms of 421 cases, you are right, we have not taken a 421 case 
forward yet. We have had, I think, four and the most recent one 
was steel tubes. That is the one I got involved with more and 
worked with Phil English and you and others on that. At the end 
of the day, the analysis from the ITC was so clear that there 
were third countries that would be providing the same product 
at low cost that it would not have the benefit for the domestic 
industry that would have made the safeguard invocation 
appropriate. That is basically how the analysis came out.
    It does not mean we are not going to use 421. When the 
facts indicate that it is the appropriate channel to take 
because there is a determination of a need based on a surge for 
a safeguard, we will use 421, and I in particular will take a 
very careful look at it. On that one, we did spend a lot of 
time looking at it. With regard to Korea, you are right about 
the automotive sector, and you and I have talked about NTBs in 
relations to Doha. We are the ones who keep putting that on the 
table, by the way, and insist on it. I don't think anybody else 
among the membership has a particular interest right now, and 
so we are trying to generate more interest in that. But we are 
holding firm that it has to be part of the overall reduction of 
barriers, not just the tariffs which we talked about earlier, 
but also, as I mentioned in my remarks, the non-tariff 
barriers, particularly in the automotive sector. With Korea, it 
is one of the major items on our list to be negotiated. I don't 
know if I neglected to mention it at the launch. That is what 
you are indicating. I shouldn't have if I did, but it is very 
much on my mind and on the minds of the Korean negotiators, 
more importantly.
    Mr. SHAW. The time of the gentleman has expired.
    Ambassador PORTMAN. Let me just, if I could, just quickly 
on dumping, because this is an issue I know a lot of members 
have a concern about. The effectiveness of our trade laws be 
preserved is the general issue that we have fought hard for, 
and for a while, we were kind of in this defensive posture. You 
were there in Doha. You saw it. It was sort of the United 
States against the other WTO members. That has changed, and all 
I can tell you is you didn't see anti-dumping raised as a big 
issue in Hong Kong and there was a reason for that and that is 
the U.S. has engaged and engaged aggressively on this. We have 
put a number of proposals on the table, in fact, which we had 
not done initially. We were more in a hunkered down defensive 
posture and now we are more on the offense and we are talking 
about due process, we are talking about transparency, we are 
defending the system that we have in place. Frankly, other 
countries are beginning to look at our program more objectively 
rather than to just say, gee, the U.S. must be abusing this 
process. We are not. We have a very transparent, open process. 
We have one that follows due process. Not all countries do 
that, including some that have complained about our system. So, 
that is going to be the approach we will continue to take to 
end up with something that may change the way we must implement 
some of our laws, but will not change the effectiveness of our 
laws, and I would even argue could improve the effectiveness of 
our laws. That is our objective.
    I would be happy to give you or any other members who want 
a more detailed briefing on this. We do have someone on our 
team here that follows this very closely and also, of course, 
in Geneva, we have someone who is exclusively focused on the 
rules issues, and then the Department of Commerce, led by Frank 
Lavin, who is the new Under Secretary, have taken on this 
issue. In fact, I asked Frank to take the lead in Hong Kong, 
meeting with countries all throughout the membership, and I 
think that is one reason, again, by our focusing on it and 
pushing it and being proactive rather than sitting back, we 
were able to see that not be raised as an issue against the 
United States.
    Mr. SHAW. Mrs. Johnson?
    Mrs. JOHNSON. Thank you, Mr. Chairman, and welcome, 
Ambassador Portman. It is very good to hear these last remarks 
of yours that we are taking a far more aggressive and proactive 
stance. As the most open market in the global trading system, 
it is very important that we preserve our defensive laws 
against unfair trading practices by others. I also want to 
thank you for the very close working relationship you are 
developing with the Foreign Commercial Service and embassies, 
particularly in China. You haven't had a chance to touch on 
that, but that is extremely important. It is very important to 
me because our embassy and our Foreign Commercial Service 
officers have been extremely helpful to small manufacturers in 
my district that don't have the resources of some of the global 
manufacturers at their own personal disposal, and so they have 
had a lot of help in dealing with finding partners, trustworthy 
partners, and finding both a market for their goods and a way 
to reduce their own costs in America.
    But I do want to ask you to talk a little bit more about 
this problem we have with Airbus. I was absolutely astounded in 
2004 when some of the E.U. member states put on the table new 
subsidies for new Airbus products and they covered the 
waterfront. They were launch aid subsidies. They were grants 
and government-provided goods and services to develop, expand, 
and upgrade Airbus manufacturing sites. They were loans on 
preferential terms, forgiveness of debt from past launch aid, 
development financing, equity infusions, grants. It is sort of 
appalling when at the same time they were frustrated with our 
failure to change our law in a way that is very costly to some 
of our biggest global competitors, which we did do and which 
they now have just yesterday ruled is non-compliant. But I see 
sort of a foot-dragging here, and the idea that the interim 
report due in November may slip is very concerning to me 
because if you look at the whole history of subsidies in this 
area, it is quite astounding, the degree to which governments 
outright and publicly announce subsidies to Airbus. So, where 
is this? Is this as slowed down as it appears to be from the 
rough summary in your notes?
    Ambassador PORTMAN. Well, two things. One, I hate to tell 
you, but the Welsh government has now announced its intention 
to provide direct trade-distorting launch aid, which is one of 
the reasons that we went forward with the new filing that you 
followed, I am sure, a couple weeks ago in Geneva in the WTO. 
We also believed it was necessary to make the new filing to be 
sure that we were including all of the various claims that we 
would have on a process basis. There were some procedural 
deficiencies that we thought we needed to address. So, we have 
refiled and some have said, well, that might delay the 
decision. I hope not. I share your concern. I think we need to 
move forward and move forward aggressively.
    At the same time, Mrs. Johnson, we are always open to 
discussions and to a negotiated solution. That, to me, would 
actually be the preferred option, but it is only possible if 
the E.U. is prepared to eliminate all forms of market-
distorting launch aid that E.U. member states have given Airbus 
to help it develop and to produce new aircraft models, and that 
is not something they are willing to do at this point. So, in 
the meantime, we must move, and I think move aggressively on 
the litigation front to protect our rights. We have told the 
European Union that we are willing to put on the table the 
subsidy issue on both sides of the Atlantic. We believe 
strongly that we have a strong case and we will continue to 
pursue that case.
    Mrs. JOHNSON. Thank you.
    Mr. SHAW. Mr. Cardin?
    Mr. CARDIN. Thank you, Mr. Chairman and Ambassador Portman. 
Let me go back, if I might, first to the Doha Round. As I said 
in my opening statement, I applaud your leadership and am 
disappointed in the leadership among our trading partners. I 
want to underscore the point that Mr. Levin made on our anti-
dumping and countervailing duty laws, and I appreciate your 
statements. I think that we have got to be extremely careful 
that we don't get ourselves in a position where we have no 
friends and find that we are compromised on our laws where we 
should be strengthening them and not weakening them. I want to 
also talk a little bit about services, because I am concerned 
that with the new approach that was taken in Hong Kong, which 
is using this collective approach where countries of like minds 
are trying to come together with some proposal on services, 
could be a race to the bottom rather than to the top. I just 
wanted to get your observations as to where our expectations 
are on the services and to allow you a little bit more time if 
you would like to comment on the anti-dumping and 
countervailing duty laws and the rules agenda within Doha.
    Ambassador PORTMAN. Thank you, Mr. Cardin, and I share your 
concerns with regard to services. As I said at the outset, or 
in my prepared remarks that you have before you, services is 
extremely important to the United States. This is something 
where we have a comparative advantage. It is also very 
important to Europe and it is a place where the E.U. and the 
U.S. should be able to work together, even as we have not been 
able to work together on the agriculture areas. We also have a 
very strong working relationship with India. In fact, India and 
the United States co-chaired a services working group in Geneva 
and services is extremely important to the development aspects 
of the round because it helps modernize economies through 
things like telecommunications, financial services, express 
delivery, and so on. So, it is a very important part of the 
round. It is more difficult to get at because it doesn't relate 
to this quantitative measure of tariffs. It is more like the 
non-tariff barriers that Mr. Levin and I were talking about. 
So, it is caps, it is cross-border restrictions, it is 
regulations. What I think we achieved, I hope we achieved in 
Hong Kong--it certainly was our intent--was a more effective 
way to get at it through this what I call plurilateral, where 
you have these members, WTO members that have like interests, 
similar interests coming together----
    Mr. CARDIN. As long as those interests are to open markets 
and not restrict markets.
    Ambassador PORTMAN. I see what you are saying, but it has 
worked in the past and, you know, I would refer you to the 
telecommunications successes we have had on sectors where you 
get countries working together, importers, exporters, where you 
have an interest, and you are able to make more progress and 
almost leapfrog the overall general formula that you might come 
up with. That is the idea here. We will know at the end of this 
month because we will have the results in from the revised 
offers. The initial offers, which were bilateral, were not 
satisfactory from our point of view, nor were they from a 
number--from the E.U. or the Indian point of view. So, I am 
hopeful that this process will work better, but we are going to 
really push on that. I also think we ought to have a mini-
ministerial meeting just on services.
    Mr. CARDIN. I appreciate that.
    Ambassador PORTMAN. That is something that Peter Mandelson 
offered and I think it is a good idea.
    Mr. CARDIN. I think that would be helpful. Let me just move 
on quickly to the FTAs because I think we have a model with 
Bahrain that worked and I just really want to underscore the 
point that you and I have gone over on international labor 
standards. Our concern is when we are dealing with countries 
that we have trade preference laws currently, where we allow 
certain preferential treatment of their imports and a 
commitment to meet international labor standards, that we move 
to an FTA and we don't have in the FTA laws that are adequate 
to ILO standards, that we are actually moving backward. You and 
I have talked about what we can do and what we can't do and I 
personally believe we can adopt international labor standards 
and core agreements.
    But I would urge you on the labor front that the trading 
partners who want FTAs with us need to comply with 
international labor standards, not their definition of it, but 
objective, independent definitions, and, of course, we are 
willing to work with our staffs to make sure that there are no 
misunderstandings in that regard. The last point, I want to 
compliment you in one aspect on Peru, and that is it does not 
contain sugar. I know a lot of people are going to talk about 
sugar and I know that is an issue that comes up frequently, but 
I do believe that in the agriculture areas, we are better off 
dealing with these on our policies either on the agriculture 
bill or in the WTO. I just wanted to point that out and was 
pleased to see that that was not included in the Peruvian 
agreement. Thank you, Mr. Chairman.
    Ambassador PORTMAN. A couple of things. One, with regard to 
sugar, I don't think it is going to be an issue because there 
is so little sugar, but there is a little bit of sugar, roughly 
10,000 tons----
    Mr. CARDIN. But there are other Andean countries where that 
could become more of an issue.
    Ambassador PORTMAN. Exactly. Exactly. I happen to have 
miraculously before me here a letter from the American Sugar 
Alliance talking about the FTA with Peru consistent with what 
you are saying. It says, ``In consequence of the care shown by 
the administration in fashioning these provisions, we are 
pleased to support this agreement,'' which has not been the 
case, as you know, in other agreements, including CAFTA, where 
we have had some sugar imports that were increased. So, I do 
appreciate your comment on that, but I just wanted to make 
clear there is some increased sugar, but it is minimal.
    Just quickly on anti-dumping, let me just, in response to 
your and Mr. Levin's, if I could just for a second, Mr. 
Chairman, here are some of the proposals that we have made. I 
mentioned transparency and due process. We have also made 
proposals on strengthening subsidies disciplines, which is in 
our interest; stronger rules against circumvention, which is 
something we think we do better than a lot of other countries 
on trade remedies; and abusive new shipper reviews. So, again, 
instead of being in a defensive posture, I think we have got 
some good proposals on the table that actually make sense to 
help strengthen other disciplines around the world that affect 
our exporters. I feel better about the dynamic of that 
negotiation in Doha as a result.
    Finally, on labor, I do appreciate your comments here and 
look forward to working on that. I have got more comments that 
we talked earlier in the library about, about why we are where 
we are with TPA, but I will just say that I appreciate working 
closely with you and Mr. Rangel and others on Bahrain. I do 
think we can make progress and not move backward on each of 
these agreements. I think we have.
    Mr. SHAW. I would like to voice agreement with the 
gentleman from Maryland, the ranking member on the Subcommittee 
on Trade, that the new Commerce report that came out just 
yesterday is showing that our sugar program is actually costing 
us jobs as companies are moving out of this country into other 
areas because of the high price of sugar in this country and it 
is something that we need to come forward and take a close look 
at. Mr. Herger?
    Mr. HERGER. Thank you, Mr. Chairman. Mr. Ambassador, it is 
great to have you with us. Thank you for the outstanding job 
that you are doing in an area that is so crucially important to 
not only the economy, the entire United States, but 
particularly of importance to our agricultural communities that 
I represent. With over $27 billion in farm value and 250 
commodities, California leads the nation in agricultural 
production. According to a November 2005 report by the 
University of California Agriculture Issues Center at U.C.-
Davis, in 2004, for the first time, California had agricultural 
exports totaling over $8 billion, much of which originated in 
my home district, including almonds, dairy, rice, beef, dried 
plums, peaches, just to name a few.
    Understandably, of primary importance to our region is the 
improvement of global market access for California agriculture, 
whether through bilateral trade agreements or the continuing 
Doha Round negotiations. For example, through the recently 
announced U.S. CREA-FTA, we have a real opportunity to expand 
market access for California agriculture, 4 percent of the 
State's total in 2004, through reduced tariffs and liberalized 
import policies. Of course, there are still obstacles to 
overcome, such as the reluctance of the Koreans to discuss rice 
market access. Mr. Ambassador, could you maybe discuss this 
problem we are having with Korea concerning the rice and some 
of the other crops that face higher applied tariffs, such as 
our tree nuts?
    Ambassador PORTMAN. Thank you, Mr. Herger, and let me thank 
you for your strong support of our agriculture export 
interests. You have been a leader on that in the FTAs but also 
in Doha. I think with regard to almonds, you are looking at 
about 70 percent of the product now being exported, if I am not 
mistaken, so it is a huge interest among so many of the 
growers. Most of those products you named in your district, by 
the way, received little or no subsidy, so for them, what they 
are looking for is a level playingfield out there where they 
can compete fairly, and it is not fair now. The average tariff 
is 62 percent globally in agriculture. Our tariffs in this 
country, on average, are 12 percent. I don't think that is 
unfair for us to ask for that and I think we can do it through 
bilateral, regional, and multilateral efforts and I look 
forward to working with you continually on that.
    With regard to Korea, you are right, it is a huge 
opportunity for us. It is our seventh-biggest trading partner, 
but I believe it is now our fifth-biggest agriculture market 
and the potential is enormous because they have significant 
barriers in place. Even though it is a big market already, 
significant barriers are in place, so there is a lot of 
potential for California agriculture and agriculture around 
this country. We, as you know, in our FTAs require a 
comprehensive agreement. We have the gold standard in Free 
Trade Agreements. I know sometimes they get controversial here 
in the halls of Congress, but I will tell you, around the 
world, people look at our FTAs as being the most comprehensive, 
the most difficult, frankly, because they require the most 
market access, and with regard to Korea, we didn't launch this 
FTA without Korea acknowledging that and understanding that and 
that means it covers agriculture. We haven't gotten to the 
point of negotiating yet because we have the agreement up here 
on the Hill and we have to wait a certain number of days, 90 
days, before we can start the intense negotiations, but we are 
poised to do that, including with our agriculture negotiator.
    I want to take this opportunity, if I could, Mr. Herger, to 
introduce Dick Crowder, who you already know, but Mr. Crowder 
is our new agriculture negotiator as of a couple of months ago. 
Through the Senate process, he is confirmed. He is an 
ambassador. He negotiates for us. He got back from Europe just 
yesterday. He was the chief negotiator for the United States 
back during the Uruguay round when this function was actually 
at the Department of Agriculture. He has got a lot of 
experience in the private sector and we are delighted to have 
him on board. He is tough and he focuses on exactly what you 
are talking about and he will be very involved in this Korean 
FTA. In fact, he has made some comments about the Korean FTA 
which have been picked up by the media in Korea and here and 
the comments he has made have been basically the obvious one, 
which is we have comprehensive agreements that include 
agriculture and it is going to have to be dealt with, including 
rice.
    Mr. HERGER. Thank you. Would you mind commenting on beef 
and restoring access to beef to Korea?
    Ambassador PORTMAN. Well, as I said earlier, we have made 
some great progress just in the last couple of months on beef. 
We hope to make some more progress in the next couple of months 
with regard to a number of different countries. Japan was a 
step forward, then a step back. We are hoping to be able to 
restore that market soon after what I am sure will be a very 
comprehensive and objective report by the Department of 
Agriculture. With regard to Korea, and before we launched the 
FTA, there was a decision made on the basis of science in Korea 
to expand the U.S. beef market there for the boneless product. 
Boneless beef is our largest export and it is an important 
accomplishment for our cattlemen. It was for cattle 30 months 
and younger, which is the international standard, the OAE 
standard. We were very pleased with that.
    What we are still seeking, though, after commending our 
Korean trade partners for this opening is that the bone-in 
product, including short ribs, also be included. We believe 
that the science supports our position strongly. We believe 
that even the more recent decisions that have been made here in 
the United States with regard to certifying the bone-in product 
support our decision, and we believe that the international 
standards support the position that we have taken. So, we are 
hopeful that through the process of additional discussions and 
focus on science and focus on the international standards, we 
will be able to open the market even further in Korea. But we 
are very pleased that prior to the launch of the FTA, we were 
able to get a significant opening with regard to the boneless 
product.
    Mr. HERGER. Thank you very much.
    Mr. SHAW. The time has expired. Mr. McDermott?
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Welcome, Mr. 
Portman. It is good to have you back. We hope we can work 
together on some bipartisan issues around Africa and other 
things, but I want to ask you a kind of a philosophical 
question. Recently, our trade policy with Cuba came into focus 
when the Treasury called down to some hotel in Mexico City and 
said, you can't have American businessmen meet with Cubans in 
your hotel. Was that kind of thing cleared through you or do 
they just operate like that, sort of independent of you?
    Ambassador PORTMAN. Dr. McDermott, I am not aware of the 
meeting or the U.S. government action there, but I will say 
that, as you know, this is not something that is handled within 
USTR. It is handled within Treasury in terms of the specific 
issue that you are talking about with regard to the sanctions, 
or the State Department with regard to our policy. So, they 
didn't nor should they have cleared anything with me.
    Mr. MCDERMOTT. Did they, when they made the State of the 
Union speech, ask you anything about the oil business at all? I 
notice that the president or the vice Chairman of Chevron just 
went out to Jeddah in Saudi Arabia and said, ``I don't think 
anyone actually believes the United States can end its 
dependence on oil in the Middle East at all. Frankly, I think 
these comments reflect some misunderstanding of global energy 
supply.'' Was that cleared with you?
    Ambassador PORTMAN. That comment?
    Mr. MCDERMOTT. Well, no, not the comment----
    [Laughter.]
    Mr. MCDERMOTT. --the President's speech about we are going 
to reduce by 75 percent our dependence on Arab oil, Saudi 
Arabian oil.
    Ambassador PORTMAN. No, but I wouldn't expect it to be. I 
will say, I mean----
    Mr. MCDERMOTT. Well, how does----
    Ambassador PORTMAN. You raise an important issue because 
oil is a big part of trade, in fact. If you look at our deficit 
numbers this year, which are unacceptably high, and we can talk 
about the relationship to trade policy, which as Mr. Levin 
said, it is more complicated than that, it has to do with a lot 
of factors, but oil represents, I think, 60 percent. Sixty 
percent of the increase in our trade deficit from last year to 
this year was oil.
    Mr. MCDERMOTT. That is why I am raising this question----
    Ambassador PORTMAN. I mean, that is a significant amount of 
trade.
    Mr. MCDERMOTT. --because it seems to me that we sit here 
talking. I have been on this Committee as long as you were and 
before that, actually. I have been here 16 years and I have 
listened to guys come in from this office over and over again 
and tell us, next year, it is going to be better in the trade 
field, and every year, it is worse. We are up to $700 billion 
and who knows where it will be when you are all done. Then I 
read a little something in today's newspaper which I sort of 
wonder what this mean when it says, ``Syria Switches to the 
Euro Amid Confrontation with the United States.'' Now, if they 
switch to the Euro and then maybe the Iranians switch to the 
Euro, tell me what that means in trade terms if people that are 
trading with us start switching from the dollar to the Euro. 
How does that affect us? I mean, is it meaningless?
    Ambassador PORTMAN. Probably not. Let me just say, I will 
not be one of those people who comes before you and promises 
the trade deficit will be less next year. I won't do it.
    Mr. MCDERMOTT. You will not?
    Ambassador PORTMAN. I will not, and I will also not tell 
you that it will be more. I think there are lots of factors 
that affect it. Every economist I talk to tells me the same 
thing, which is, in varying degrees, there are factors like the 
one you just mentioned, which is currency or monetary policy or 
other macroeconomic policies. We mentioned in the pre-meeting 
the savings issue and the consumption issue and the gap between 
savings and investment. In this country, we have low savings. 
In China, very high savings, up to 50 percent. Those are very 
important factors in terms of how the trade balance ends up. 
So, as I said to you previously, it could be we do all the 
right things in trade policy and actually increase exports as a 
result, which is a more important barometer, and still the 
trade deficit might go up, or it might go down next year, which 
a lot of economists are predicting.
    Mr. MCDERMOTT. Well, then explain to me what I say to my 
constituents, because this is the dilemma many of us have. I go 
home and they say, we have got two huge deficits in this 
country. The Treasury is in the tank, borrowing money all over 
the world, and our trade deficit is out of sight. Some people 
think this is unsustainable. Actually, some people with 
economics degrees are saying things like that. How do I explain 
the fact that the Trade Office comes before us and says, there 
isn't really much I can do about the trade deficit. I am just 
here negotiating with folks back and forth about cotton or, you 
know, whatever. What do I say to my constituents to make them 
not worry about that $700 billion trade deficit?
    Ambassador PORTMAN. Well, Jim, I would tell them a few 
things, and you may not want to hear this, but this is what--
you know, only several months ago, I was in your position, and 
one is that I think it is a concern, more mid- and long-term, 
and it is a question of sustainability or durability of a large 
imbalance in the current account deficit. But I would also tell 
them two other things. One is the trade deficit is not an 
indication of our economic strength. Look what has happened in 
the last year. We have added two million jobs to this economy. 
We have grown at 3.5 percent, the envy of the developed world. 
We have gone from 5.2 to 4.7 percent unemployment. The strength 
of the U.S. economy, in fact, is a factor that is pulling 
imports here. In other words, as our economy grows in 
strength----
    Mr. MCDERMOTT. Can I just add one fact?
    Ambassador PORTMAN. --the trade deficit goes up.
    Mr. MCDERMOTT. Could I just add one fact for you?
    Ambassador PORTMAN. Yes.
    Mr. MCDERMOTT. That is that wages in this country actually 
dropped last year.
    Ambassador PORTMAN. Well, it depends on what analysis you 
look at. I----
    Mr. MCDERMOTT. So, the people that are living in my 
district are really excited about these graphs that go up----
    Ambassador PORTMAN. Yes.
    Mr. MCDERMOTT. --but when their paycheck doesn't go up, 
they think there is something wrong.
    Ambassador PORTMAN. I would just tell you, if we didn't 
have, and we talked about this at the outset, the more open 
trade philosophy that we have relative to the rest of the 
world, those wages would go down even further because wages 
have improved as a result of trade. You have been an advocate 
of trade. You understand this. But I think it is something you 
need to explain. It is not the best barometer. During the 
depression, we had a nice surplus. You know, during recessions, 
we have had nice surpluses in terms of trade. So, it is not a 
direct indicator of the economy.
    A final point is, in terms of what this guy Portman can do 
or not do per your comment, I am not telling you that it 
doesn't have an impact. It does, and it is definitely in our 
economic interest for us to encourage exports and be sure 
imports are fairly traded here. It is the right thing to do and 
it does have an impact on the deficit, but I don't want to 
mislead you or mislead your constituents by saying it is the 
silver bullet, because the macroeconomic factors, the currency 
issue you talked about--switching to the Euro might, 
incidentally--I am not an economist, so I should be careful 
here, but it might actually have a positive impact on the trade 
deficit. But would that be positive for our economy? I don't 
think so. The strength of our economy is, in part, reflected in 
the fact that people want to invest here and invest in dollars. 
But I have gone beyond time, so that is my advice to your 
constituents. Thank you.
    Mr. SHAW. The time of the gentleman has expired. Mr. 
McCrery?
    Mr. MCCRERY. Thank you, Mr. Chairman. Ambassador Portman, 
welcome, and I know this is not your bailiwick, but my 
information is that, in fact, after-tax real wages have gone up 
in this country, not down, and that is to me the best measure 
of what gets in the pockets of American workers. But now 
getting to your bailiwick, I want to compliment you for the 
work that you did to get China to revoke its anti-dumping 
duties on kraft liner board from this country. It is a very, 
very important decision for our domestic industry and you were 
very critical to that decision being made by China. I was 
wondering, in light of the controversy when we were trying to 
decide whether we should support China's accession to the WTO, 
if you might want to use this as an example, along with some 
others, maybe, to point out the value of having China as part 
of the WTO and perhaps use this as a lesson for future 
considerations of countries entering the WTO.
    Ambassador PORTMAN. Mr. McCrery, that is a great point and 
I appreciate it. I did raise it earlier and mentioned you and I 
talked about it, but this is an opportunity for us to use the 
leverage that we have obtained by China's accession to the WTO. 
I mean, it is a great example. Without having the WTO case as a 
threat, we would never have gotten this resolved, and you are 
right, it was the best result for the U.S. industry because 
they actually rescinded their order rather than a year and a 
half of litigation, probably another 6 months for appeal, and 
then the remedy being we could retaliate by increasing tariffs 
on Chinese products, which, depending on what products we 
chose, could also raise concerns and hurt our consumers and 
prices and choices.
    So, I think we need to use these international mechanisms 
we now have with China more effectively and it is our intent to 
do that, but this is a great example. If we had brought the WTO 
case, I would probably be getting more plaudits from this 
Committee and particularly from some members who have been 
critical of USTR for not being tough enough on filing WTO 
cases. I am telling you, I am so glad we didn't have to file 
the case because we got a better result for U.S. commercial 
interests and we opened up a market, a product that comes from 
14 of your States that is very important right now in our trade 
with China. By the way, our exports increased in China over 20 
percent again last year, the third year in a row, making it our 
largest big market, export market for the United States, the 
highest growth. So, I think it is a good example and I think it 
is one that shows that we do have some leverage that comes from 
that accession.
    Mr. MCCRERY. Just explain a little bit more as to why 
China's being a member of the WTO gave us leverage.
    Ambassador PORTMAN. Well, specifically in this case, we 
would not have had the ability to take them to the WTO, so they 
would have been in a situation, as other countries are now, 
Russia is an example, where we don't have the ability to go to 
the WTO and to file, in this case, an action against something 
which we believe was WTO illegal, which was an anti-dumping 
order against our products, which we believe was a 
protectionist move that was not consistent with their WTO 
commitments.
    But even more generally, Jim, as you know, there are a 
number of disciplines within the WTO that relate more generally 
to trade that are very helpful to us and these have to do with 
things like procurement. That is why we want China to get in 
the government procurement agreement in the WTO. TRIPS, we 
talked about, intellectual property. That is why we were able 
to do this Article 63.3 invocation with China on intellectual 
property and why we are able to, with regard to intellectual 
property, talk about the WTO possibilities. So, there are a 
number of different areas where we benefit, and I see it now 
more clearly than ever, being in this position, where it is in 
our interest to have them in the WTO in a rules-based system.
    Mr. MCCRERY. Do we win most cases we bring to the WTO?
    Ambassador PORTMAN. Our actual averages, in terms of 
offensive cases, we win most of them. In terms of defensive 
cases, I don't know if it is 50 percent. Jim, what is the 
number? Our track record in the WTO has been pretty good, in 
part because when we take a case to the WTO, we feel we have a 
pretty good shot at winning it, and that is one of the criteria 
that I would use going forward, as I talked about earlier. We 
have a 56 percent win-loss record when you combine offensive 
and defensive cases. On offensive cases, we have won eight and 
lost one. On defensive cases, we have won 12 and lost 15, for 
an overall 20 to 16 record, 56 percent. In the Clinton 
administration, it was similar, 54 percent.
    Mr. MCCRERY. So, bottom line, our experience in the WTO has 
been that our participating in the WTO has helped us with 
enforcing trade laws around the globe. It helps our ability to 
trade and open markets.
    Ambassador PORTMAN. Yes, it does. One thing, we can talk 
about figures, which are important and I am happy to go through 
that, but there is also a qualitative measurement here. On 
anti-dumping, for instance, some have said they are concerned 
because we have lost some WTO cases related to our trade remedy 
laws, countervailing duties or anti-dumping. When I look at 
these cases, on the core issues, we have actually won most of 
them. So, it is not just the win-loss record. I think you need 
to look behind that and see, what is the real meat of the 
matter?
    For instance, in the Canadian lumber dispute, which has 
been a very tough one and it has been litigated to death, as I 
have said on occasion, with regard to the fundamental issue of 
whether the Canadian practice with regard to stumpage, which 
Wally Herger and others have been very involved in, and you 
have been involved with, the WTO upheld the fact that it was a 
subsidy. That was a core issue.
    So, we may have lost on some extraneous issues--one example 
is we lost on one issue--I don't have the numbers here in front 
of me--and we had to reduce our tariff by something like in the 
range of 27 percent down to 24 percent. Well, that is 
important, but what was more important is in that same matter, 
we actually won on the core issue. So, you can both look at the 
win-loss record and the underlying issues, and there, I think 
an objective analysis would demonstrate that it has been to our 
benefit to have this rules-based system.
    Mr. MCCRERY. Thank you.
    Mr. SHAW. The time of the gentleman has expired. Mr. Lewis 
of Georgia?
    Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman. 
Thank you, Mr. Ambassador, for being here. It is good to see 
you back in the Committee. We miss your wonderful presence in 
the Committee, but we greatly appreciate your service as our 
Trade Representative. I think Mr. Levin raised a point a moment 
or so ago and I am not sure you responded. With the growing 
globalization of the economy and trade of the community of 
nations and this growing sense of discontent and unrest when 
there is a world-wide needing. What can you do to eradicate 
that or to diffuse it?
    Ambassador PORTMAN. That is a good question. I think Mr. 
Levin was talking about Latin America, as I recall, and being 
down there and sensing some concern.
    Mr. LEWIS OF GEORGIA. There is a feeling on the part of a 
large segment of the world population that they are being left 
out and left behind.
    Ambassador PORTMAN. I guess what I would say is two things. 
One, I know that we have not done an adequate job in 
communicating the benefits of opening markets and in giving 
people opportunity. If you look at the data on Africa, for 
instance, and you look at those countries that have been 
relatively open--I talked about the services market earlier, or 
on agriculture products, which is very sensitive, but the 
countries that have been more open are the countries that have 
grown much more rapidly, and I can get you some World Bank data 
on this, but it is very compelling.
    You look at countries that have been relatively open. They 
are the ones that have been able to raise the standard of 
living in their country, not just for the wealthy, and that is 
an issue is distribution of that gain, but to provide water and 
health care and just the basics. We need to hold that up more 
and hold up the countries that have made tough decisions to do 
that, particularly when they are democratic countries. That is 
what this MCC is about, John, is in part, this Millennium 
Challenge Corporation, the way you all now give money through 
foreign aid. Trade is one of the considerations and openness 
and, obviously, lack of corruption and democracy and so on and 
human rights. But we need to hold that up more in the countries 
that have done a good job, and in Africa, there are a number of 
examples. I think we need to do a better job of communicating 
what the benefits are of trade.
    Second is with regard to something like the Doha Round, 
where I get involved with this issue a lot because I work a lot 
with the nongovernmental organizations, I will tell you, I 
think there is a little different attitude that I am 
perceiving, and maybe I am not picking up enough on the ground, 
but a number of the so-called NGOs, nongovernmental 
organizations, that used to be very anti-trade are now looking 
at trade differently. Obviously, they are very supportive of 
our cutting our domestic support in agriculture because they 
think that is a big negative to the developing country's 
ability to export their agricultural products, so they are 
pleased with that part of our proposal right now, so maybe they 
are feeling the United States has shifted its position 
somewhat.
    But I find a number of these organizations now are not 
reflexively anti-trade. They are concerned about some of the 
distributions of the benefits of trade. They are concerned 
about some of the transition periods and so on. But they 
believe that trade is a big part of the answer. I will give you 
one example. I gave a speech recently on Africa and talked 
about the fact that Africa used to be about 6 percent of global 
trade. Now, it is about 2 percent. It has gone down. If we 
could increase that by just 1 percent, which I believe would 
happen under Doha even under a relatively unambitious Doha 
result, that would result in $70 billion of additional income 
to Africa per annum, per year. That is three times all of the 
donations to Africa from all of our aid money, assistance 
money, from the E.U., the U.S., Japan, and so on. It has a 
tremendous potential, and as a result, I see a little bit of a 
shift in terms of the attitude of some of the nongovernmental 
groups that have traditionally been anti-trade of saying trade 
is part of the answer.
    Mr. LEWIS OF GEORGIA. Thank you, Mr. Ambassador. Mr. 
Ambassador, last week, the trade deficit figures for 2005 came 
out showing that the United States has a $726 billion trade 
deficit last year. This is almost double what it was at the end 
of the year 2000. Does this concern you?
    Ambassador PORTMAN. It does concern me. I just talked for a 
moment with Dr. McDermott about it. I also made the point 
which----
    Mr. LEWIS OF GEORGIA. Are you over-concerned about it?
    Ambassador PORTMAN. Well, I don't think I am over-
concerned. I think I am concerned more in terms of the mid- and 
long-term build-up, really, in the surplus dollars coming back 
here. I think our economy is very strong. I think, in a sense, 
a trade deficit----
    Mr. LEWIS OF GEORGIA. Since my time is running out, do you 
have any plans, immediate plans, to do something about it?
    Ambassador PORTMAN. Yes. I mean, our plan is--it will sound 
pretty simplistic, but it is to expand exports and to make sure 
imports are fairly traded and we are aggressive on it. I laid 
out a 2006 agenda for you a moment ago that is very sharply 
focused on opening up markets to our products because that will 
affect the balance of trade. But as I also said to Dr. 
McDermott, I don't want to mislead you to think that that is 
going to be the biggest factor in determining what our trade 
deficit is next year. There will be other macroeconomic 
factors, including currency, and the China currency issue is 
not within my bailiwick. I appreciate you are not pushing me on 
that, but that is a factor in trade, and these macroeconomic 
factors like how much we consume versus how much other 
countries like China save. We need to see some changes in 
policy, in terms of China of consuming more, more of a 
consumption economy. We need to see our economy save more, and 
we need to see a transition so there is less of a global 
imbalance. But no, I am concerned about it, John, and I think 
our plan in terms of trade policy is the right plan to try to 
get at it. I did mention that 60 percent of that increase this 
year was due to energy imports, oil in particular, and that is 
something that I hope we also will be able to get a handle on 
over time.
    Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Ambassador. 
Thank you, Mr. Chairman.
    Mr. SHAW. The time of the gentleman has expired. Mr. Camp?
    Mr. CAMP. Thank you, Mr. Chairman, and Ambassador Portman, 
good to see you again. I certainly appreciate your eloquent 
testimony today. I really appreciate your attempts in recent 
announcements to really promote a rules-based international 
trading system. I think that is what we all would like to see. 
I certainly applaud your recent announcement of a new Chief 
Counsel for China Trade Enforcement. I think that is the exact 
right direction to go. As you may know, I have introduced 
legislation, along with Representative Levin, to create a Chief 
Trade Prosecutor that would seek to enforce all trade 
agreements, not just those with China, because we have 
problems, as you mentioned, with CAFTA and other countries that 
we need to continue to pursue, and I think we are not afraid of 
trade in this country as long as people play by the rules. What 
the problem is, we enter into agreements with countries and 
then they don't play by the rules and we have no way of 
leveraging that despite the successes you mentioned of the few 
cases that have been brought before the WTO, if someone was 
dedicated to that mission within your office, not just with 
China but with all countries. So, could you just tell the 
Committee why that logic that you are using with China should 
not extend to all countries and all trade agreements?
    Ambassador PORTMAN. Well, with regard to China, as you and 
I talked about before, it is unprecedented. We have never had a 
country-specific enforcement focus like that. I think it is 
necessary, given the challenge we have as China enters this new 
phase now that it is fully a member of the WTO, and it is both 
with regard to its WTO obligations and its more general 
obligations that come with being a mature global trading 
partner. With regard to your legislation, I think it is 
consistent with what we are doing generally at USTR. I mean, I 
would hope my General Counsel, who is behind me here somewhere, 
feels that he already has that accountability and 
responsibility because I believe he does. There is also as an 
Assistant U.S. Trade Representative, as you know, who has the 
sole functioning of monitoring and enforcement. But I will look 
at that legislation. You and I have talked about it before. Now 
that I have been at USTR going on nine or nine-and-a-half 
months, I have a better sense of how it operates. We have, I 
think, roughly 22 lawyers in the monitoring area, is that 
right?--22, and they work their hearts out. They do a very good 
job and I hope that each of them feels that accountability that 
you are trying to be sure is at USTR through your legislation. 
So, I will take a look at the legislation, but I would hope 
that we already have that at USTR through the General Counsel's 
Office and through this Monitoring Enforcement Office.
    Mr. CAMP. Do you think there is room for improvement in 
USTR's enforcement of WTO commitments and trade agreements?
    Ambassador PORTMAN. Yes. There is always room for 
improvement. However, I do think, as I said earlier, that we 
have been very targeted and focused on results, appropriately. 
Sometimes we use WTO, sometimes we can settle something without 
going through the litigation process. As I said in response to 
Mr. McCrery's question, the notion of going through a costly 
and lengthy litigation process with an end result being 
retaliation or a similar remedy is not always as satisfactory 
to the U.S. commercial interests as getting a more expedited 
response, as we did with kraft liner board. So, to the extent 
we have gone to WTO, and it is always an option and it is 
always something that the USTR needs to keep on the table as an 
option, in a sense, we have failed to deliver something more 
tangible and immediate to the business interests.
    Mr. CAMP. On another subject, I wonder if you could just 
give a brief update on how the Thailand talks are progressing, 
particularly with regard to the truck tariff issue and, 
obviously, the concern that an FTA would remove the tariff 
without reciprocal access to the Thai marketplace for U.S.-
produced vehicles, and I would just appreciate your comments on 
that subject.
    Ambassador PORTMAN. I appreciate that, and I appreciate 
your correspondence with me on that. It is a huge issue, I 
know, in your State as well as in my State of Ohio. Two things. 
One, we have not gotten to that point in the negotiations yet. 
We still have issues with intellectual property rights, with 
agriculture. We are still working through some of the financial 
services issues. We have made progress on all those issues. In 
fact, we had a good negotiation about 2 weeks ago, two and 3 
weeks ago in Thailand, and the Assistant U.S. Trade 
Representative who is conducting these negotiations for our 
office has made good progress, but we have not gotten to that 
point yet of negotiating on the access on automobiles or light 
trucks.
    Second, with regard to Thailand, a concern that you have 
raised with me before is trans-shipment, in other words, other 
countries using that as a market and a platform to come to the 
United States. I think that is a very legitimate concern and 
one I am very focused on. Then finally, of course, was, you 
said, the reciprocal benefits. We have got to be sure that with 
regard to all these markets, and Korea was mentioned earlier, 
that we have access for our exports, auto parts and automobiles 
and, for that matter, to the extent we are competitive, light 
trucks. So, that will also be very much a part of our thinking.
    Mr. CAMP. All right. Thank you. Thank you for your 
testimony. Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Becerra?
    Mr. BECERRA. Thank you, Mr. Chairman. Mr. Ambassador, good 
to see you. Always good to see you, and thank you for the work 
that you do. I want to hit on this whole issue, talk more about 
this issue of our deficits because I don't think we are doing 
enough. I think the bottom line is, when you hit three-quarters 
of a trillion dollars in deficits when it comes to trade, where 
we are selling a lot less than we are buying, you can only pull 
out the government credit card so much before you finally go 
down the tubes. So, I do want to hit on that.
    But first, I am intrigued. Give me a sense of something 
here. We are facing this $726 billion deficit, trade deficit. 
Our companies and our farmers are being shut out of key markets 
around the world. We are engaged, as you have mentioned in some 
cases, in at least seven bilateral trade negotiations in 
addition to the Doha Round. Yet, if I am correct, the 
President's budget cuts your office funding. So, my question, I 
guess, is, is this a case where the administration expects you 
to do better with less?
    Ambassador PORTMAN. You know, I sort of----
    Mr. BECERRA. Don't smile. Don't smile.
    [Laughter.]
    Ambassador PORTMAN. That would be like me asking my teenage 
son, do you think you are getting adequate allowance? I think I 
know what his answer would be, but that can't be my answer.
    [Laughter.]
    Ambassador PORTMAN. Let me say two things. One is, if you 
look at the budget over the last couple of years, Congress has, 
I think, wisely seen fit to increase funding at USTR and 
sometimes for more specific targeted areas, like enforcement, 
and we are using that funding and using it well. I will tell 
you, I truly believe that we have got our budget in good shape. 
I think we are lean and mean. I think we are spending the 
taxpayers' money well.
    Mr. BECERRA. So----
    Ambassador PORTMAN. If you look at the budget from 2005 and 
2006 and 2007, you actually will see an increase. The 
administration request for this year is more than last year.
    Mr. BECERRA. Let me tell you, Mr. Ambassador, from $44 
million to $42 million, $2 million won't probably have you lose 
those 22 attorneys you just identified, but it probably makes 
it more difficult for you. I have got to tell you, you see a 
$726 billion--billion dollar--trade deficit, I would rather 
give you a couple million more to hire the folks it takes to go 
out there and capture the $2.4 billion we know in copyright 
piracy we lost just in China alone back in 2004. Whatever it 
takes, we should do, because I know you want to do some good 
work, and I know that the folks that are with you are trying 
very hard. But the last thing we should do is strap you with 
insufficient resources to go out there and do the work to 
represent America's workers and companies well. So, I just hope 
that by the time that we have a budget in place, that you won't 
have to say what your son says with regard to an allowance.
    Now, returning to the whole issue of deficits, all-time 
high, fourth year in a row that we are saying we hit an all-
time high trade deficit. We have hit all-time high trade 
deficits with China, Japan, Europe, the OPEC nations, Canada, 
Mexico, South America, Central America. Some folks--let me read 
from an article in the Associated Press that says, ``Trade 
deficits is a major factor in the loss of nearly three million 
manufacturing jobs since mid-2000, as U.S. companies move 
production overseas to lower-waged nations. Many economists 
believe those manufacturing jobs will never come back.''
    As I look at our trade agreements, Free Trade Agreements 
that we have entered into over the last, say, 20 years--and by 
the way, my 13-and-a-half years now in Congress, I have voted 
against only one trade agreement--in every case but, let me 
see, I am looking at about eight or nine trade agreements, in 
every case but two, we have seen our trade balance grow in 
deficit rather than surplus after we have struck these trade 
deals, whether it is Israel, Canada, Mexico, Jordan, Chile. The 
only exceptions there are Singapore and, in a very modest way, 
Australia, which we reached in 2005. But all but Singapore and 
Australia, we have ended up seeing our trade deficit grow with 
these countries.
    So, I guess my point, and perhaps there is a little time 
for you to comment on this, my point is that it doesn't seem 
that this regime of striking these bilateral Free Trade 
Agreements with these countries is going to help us with these 
trade deficits, and so I hope we figure out--we declare victory 
real quickly and move on to a different way of doing things. 
Thank you.
    Ambassador PORTMAN. Just quickly, if I might, Mr. Chairman, 
and I talked about this earlier, our exports have grown 
dramatically to our FTA partners, double what they have for the 
rest of----
    Mr. BECERRA. But so have our imports.
    Ambassador PORTMAN. Yes, you are right. In some cases, they 
have. Jordan would be an example of that, as you mentioned. 
Mexico would be an example of that. But I wouldn't----
    Mr. BECERRA. Mexico, we have a 3,150 percent imbalance of 
what has happened since 1993. So, by over 3,000 percent, we are 
now buying more from Mexico than we are selling them as 
compared to 1993.
    Ambassador PORTMAN. We have about, I think, a 120 percent 
increase in our exports to Mexico, too, which created a lot of 
jobs. All I would say is, in terms of--and I don't know where 
you got the figure on the manufacturing jobs--the Council of 
Economic Advisors did a study recently on this and analyzed our 
job market. We lose and gain a lot of jobs every year in this 
country. We had about a two million job gain in the last year, 
but we lost about 15 million jobs, we gained about 17 million 
jobs, and about two or 3 percent of those jobs are related to 
trade.
    Mr. BECERRA. A very important area of manufacturing, we 
continue to lose, and as you saw from the recent news from Ford 
and General Motors, we will continue to lose it. That is where 
I think we want to work with you to see if we can turn that 
around, because those are pretty decent-paying jobs that Middle 
America has.
    Ambassador PORTMAN. Well, again, the jobs related to trade 
are better jobs, though, and remember, if my figures are right, 
two or three percent of those jobs are related to trade, the 
jobs that we lost. Of the 17 million new jobs, 15 million jobs 
lost, those two million jobs gained in the last year----
    Mr. BECERRA. Ambassador, I see a lot of ``Made in China'' 
labels on products that I am buying and everyone is buying. I 
know those used to be made by Americans.
    Ambassador PORTMAN. Well, they may be made in China, but I 
will tell you that we are creating a lot of jobs through our 
exports, again, an over 20-percent increase in exports to China 
again this year, a huge market for us, and we need to be very 
careful to focus on the fact that trade is not something, 
again, that is a barometer of our economic health. We have gone 
from 5.2 to 4.7 percent unemployment in the last year. We have 
added two million new jobs. Now, you could do a lot of----
    Mr. BECERRA. You can get a lot of things when you use a 
credit card----
    Ambassador PORTMAN. --during our times of recession and 
certainly during the depression, we had huge trade surpluses. 
That is not an indication of our economic health, and that is 
my only concern here is we confuse the two, I think, which is 
why I am not promising, as Dr. McDermott said, I am going to 
promise to come back next year and this will make a difference. 
There are bigger factors here that relate to our deficit. In 
terms of our economic health right now, we are in great shape. 
One reason we have a relatively high deficit is we are in great 
shape compared to Japan and the E.U. We are growing twice as 
fast as they are, on average, and that results in more 
consumption here.
    Mr. BECERRA. Thank you, Mr. Chairman, although I would have 
to challenge the great shape of the economy, in great shape 
when we have the largest deficits we have ever seen in this 
country's history.
    Mr. RAMSTAD. [Presiding.] The Chairman thanks the gentleman 
from California, although I am sure I will be deposed soon in 
that I let you go 3 minutes extra. Mr. Ambassador, thank you. I 
just want to say you are doing a heck of a job, and as one who 
knows you well, I know I will never have to take back those 
words As you know, Congress recently passed and the President 
signed the repeal of the Byrd amendment, principally for two 
reasons. One, it was declared an illegal trade subsidy, and 
two, it threatened our position in international trade talks. 
Nobody in this room knows that better than you, Mr. Ambassador. 
Could you explain to the Committee exactly how the Byrd 
amendment affected your negotiating position, and could you 
also explain the reaction of the international community, the 
trade ambassadors you deal with from other nations, how did 
they react to the Byrd repeal and how did that repeal change 
the dynamic, change your posture in negotiations?
    Ambassador PORTMAN. I appreciate your strong interest in 
the trade issue. I hear from you a lot--and I appreciate it--
and I expect to hear more in the future on these multilateral 
issues as well as the regional and bilateral ones. On Byrd--as 
well as step 2, by the way, which was the agriculture program 
that relates to export subsidies for cotton. It was a very 
positive development for the United States in terms of the 
international trade talks. Significantly though, also recall 
that with regard to Byrd it was a matter of stopping the 
retaliation. One of my concerns is that not all of our trading 
partners have agreed to stop the retaliation because we phase 
out the Byrd amendment over time. So, I am disappointed that we 
didn't get more plaudits from them immediately, but they are 
not going to be able to retaliate once we phase it out.
    That was significant for a lot of U.S. companies that are 
involved in exporting. So, it was the right thing to do in 
terms of our economy, it was the right thing to do in terms of 
our trade posture, and I know it was a tough decision for some 
members of this Committee. I appreciate the work you did on it, 
and initiating it, and I have specifically identified Chairman 
Thomas in this regard because it took courage to move it when 
he did and how he did, and I think it was the right thing to do 
for our economy and the right thing to do for trade policy. My 
answer would be that it was beneficial to our trade negotiating 
position.
    Mr. RAMSTAD. Thank you, Mr. Ambassador. I was pleased to 
lead the charge, and you are right, without the Chairman of the 
full Committee, we couldn't have made it happen, and we got 
good bipartisan support certainly. Implicit in my question was 
the fact that, as you pointed out, it is not actually repealed 
until October 1 of 2007. I want to switch gears now, Mr. 
Ambassador. You described in your testimony--and those of us 
who work closely with you know that you are very much 
interested in seeking additional bilateral and multilateral 
agreements. As you also know, I believe, Mr. Jefferson, on the 
other side of the aisle, and I have sponsored a resolution 
calling on the United States to enter FTA negotiations with 
Taiwan. In fact, in the last Congress we gained 69 cosponsors 
to our resolution, which I think demonstrates significant 
congressional support for such an FTA. Today, in fact, we are 
going to reintroduce that very same resolution.
    It seems, Mr. Ambassador, that Taiwan serves as an ideal 
candidate because it benefits the United States both 
economically and politically. It is the United States' eighth 
largest trading partner, and it has always been a stalwart 
supporter of United States foreign policy. I realize there are 
some problems that relate to intellectual property right 
protection. I know there are some improvements that need to be 
forthcoming on the part of the Taiwanese before an agreement is 
finalized, especially in the area of optical medical piracy. I 
would expect nothing less than a hard stance on the part of the 
United States in protecting American intellectual property. We 
all know how important that is. But it seems to me that those 
improvements could be discussed in the context of negotiations. 
My question is this, Mr. Ambassador, would you be willing to 
consider Taiwan as a potential FTA candidate?
    Ambassador PORTMAN. First of all, Mr. Ramstad, I appreciate 
your leadership on that as well as other issues like the Byrd 
amendment. You talk about the importance of the Taiwan economy 
to the U.S. economy. We have a very strong and growing 
relationship. We also have some trade issues, as you mentioned. 
I do believe that we have seen some progress recently. Taiwan 
made improvements to its copyright laws, as you know, and we 
believe that they are doing a better job enforcing their laws. 
But we have a need, I think, to move forward with our trade 
discussion at a different level than the FTA at this point.
    Typically, as many of you know, we work with these trade 
investment framework agreements first, TIFAs, and with regard 
to Taiwan, we had a TIFA discussion with them, which was 
productive, in 2004. It was the first one we had had since 
1998, and I am pleased to announce today to you, Mr. Chairman, 
that we are planning another TIFA meeting in the first half of 
2006. This is where we have this very serious and sometimes 
intense dialog on the trade issues and our concerns, and that 
will include the IPR issues I discussed as well as other 
issues. That will be the next step. We, again, have a very 
strong economic relationship. We will look at the same criteria 
we look with regard to other potential FTA partners, and we 
look forward to having a successful TIFA meeting the first half 
of this year.
    Mr. RAMSTAD. Mr. Ambassador, let me thank you and your 
hard-working staff for your activist agenda, for your activist 
approach to knocking down trade barriers, to liberalizing our 
trade policy, finding those markets, and we need to continue 
that, and I applaud the good work you are doing. Thank you for 
your testimony here today. I ask unanimous consent to submit 
additional questions that I would like answers to, to the 
record. Without objection, so ordered. The Chair now recognizes 
the gentleman from Texas, Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman. Thank you for your 
service, Ambassador, and let me touch just on three topics that 
were not covered by your expansive testimony and your 
PowerPoint presentation. The first one is the environment. We 
could increase trade by millions of dollars if we permitted the 
import of certain endangered species, but we have, through many 
administrations, recognized that it wasn't worth the damage 
that was caused to add a few million dollars to our trade 
balance. This is just one example of many of where our trade 
policy needs to be broad enough to consider more than just how 
many widgets flow back and forth across international borders. 
I am concerned particularly with the Andean agreements, with 
Peru and the other countries, that we have fully 25 percent of 
the biological diversity of entire Earth in the Andean region's 
tropical areas. There was, for example, a recent New York Times 
story about the immense danger to that region from expanding 
gold mining and other types of resource extraction that damaged 
the rain forest. We know that damage to the rain forest not 
only will damage a great source of potential future 
pharmaceuticals, but also can contribute to the near runaway 
crisis we already have with global climate change. In the FTA 
agreement to this point with Peru, am I correct in 
understanding that there is no enforceable provision to 
discourage the obliteration of the Andean rain forest?
    Ambassador PORTMAN. Thank you for your question, and it is 
a concern. As you may remember, the Tropical Forest 
Conservation Act is something I offered here, and something 
Peru has taken advantage of, so I am somewhat familiar with 
that particular issue. The agreement we sent to you for your 
review did not include the environment provision. Since that 
time we have had a number of discussions, including with 
Senator Baucus, as you know has had a strong interest in this, 
and working with the interagency process we believe we have 
come up with something that would create a public submissions 
process, and independent secretariat to allow the 
nongovernmental organizations who are in Peru and other 
countries, some of the groups that are most knowledgeable about 
the issue of tropical forests and biodiversity to have access 
that they do not have now. So, that you would have, through the 
Free Trade Agreement, an improvement in the environmental 
situation there. I can get that to you. It, frankly, took us a 
little while to work through this in our process, and I am 
happy to sit with you and go through it with you, but in the 
meantime we will get you the documentation.
    Mr. DOGGETT. I appreciate that.
    Ambassador PORTMAN. Essentially what you will see now in 
the agreement is a place mark for it, but this would be 
something that we would like to pursue.
    Mr. DOGGETT. I think the real question will be what kind of 
enforcement mechanism there is, a concern you have heard me 
voice before in this Committee. A second topic that I am 
concerned about is tobacco. Is USTR seeking to promote the sale 
or export of tobacco or tobacco products by reducing either 
tariff or nontariff barriers in Korea?
    Ambassador PORTMAN. Mr. Doggett, I think we are treating 
tobacco just as we would other products. I will check on that. 
With Korea we have not, of course, come to that point yet 
because we are not beginning the negotiation yet. But on these 
other agreements, including some of our accession agreements, I 
know tobacco has been an issue. My understanding is that, 
again, we treat tobacco as we would other products, but I will 
get back to you on that. With Korean, we have not entered that 
phase of the discussion yet.
    Mr. DOGGETT. Specifically because of the unique agreements 
that we have going back to the Reagan administration when they 
were promoting tobacco overseas in 1998, I would also 
appreciate your responding concerning whether we will continue 
to require Korea to consult with us in advance before it 
changes tobacco taxes or its restrictions on advertising and 
promotion of tobacco products. A third area, another one you 
have heard me raise here in the Committee before, is the 
investor state mechanism. As you know, there was no investor 
state mechanism included in the Australian trade agreement. Is 
it your plan to seek an investor state dispute provision that 
would perhaps accord foreigners more rights than Americans in 
your negotiations with Korea?
    Ambassador PORTMAN. Again, we are not at that stage yet, 
but I think if you look at what we have done in other FTAs, 
including in the Central American-Dominican Republic Free Trade 
Agreement, I think we ended up with an investor state approach, 
which was consistent with our own due process, but did not give 
advantages to those, in that case, Central American entities 
that you would be concerned about. So, I guess I would look 
more at the model of CAFTA, which you may or may not be 
satisfied with.
    Mr. DOGGETT. As you know, I am not, but you envision 
following the CAFTA model rather than the Australian model?
    Ambassador PORTMAN. Well, again, we haven't gotten to that 
point yet. With regard to Australia, we were dealing with a 
developed country which had also a very developed judiciary and 
a system to resolve disputes. We are still in the process with 
Korea of analyzing that.
    Mr. DOGGETT. In your comments on Korean on your Web page 
and the like, you present Korea as a very advanced democratic 
country----
    Ambassador PORTMAN. It is.
    Mr. DOGGETT. Is there less confidence in the Korean courts 
than in the Australian courts?
    Ambassador PORTMAN. Not necessarily, not necessarily. We 
just are not at that point yet. Honestly, with Korea we have a 
90-day requirement to give you the ability to consult with us, 
and this is what is going on today, and you and I will have 
this discussion on these two issues that relate to Korea going 
forward. Then I believe it is in May we are permitted to begin 
the intensive negotiations, and we want to be prepared to do 
that, so I want to have this discussion with you during this 
period of congressional consultation.
    Mr. DOGGETT. Thank you very much. Thank you, Mr. Chairman.
    Mr. RAMSTAD. Thank you. The Chair would just remind the 
members that the Ambassador now has testified for 2 hours and 
30 minutes, and would appreciate if members would stay within 
the 5-minute rule. The gentleman from Texas, Mr. Johnson.
    Mr. JOHNSON OF TEXAS. Thank you, Mr. Chairman. Good 
morning, Rob. You know, in 1991, I understand that under the 
Andean Trade Preference Act, unilateral trade benefits were 
granted to Peru under conditional circumstances, and according 
to the law, I understand it makes clear that a benefiting 
country must not have expropriated property owned by a U.S. 
citizen of company unless the country provides prompt and 
adequate compensation. We have a company, Laterno, in Texas, 
from our district in Rowlett, that has been battling in and out 
of court with the government of Peru for about 30 years. 
Laterno built a 40-mile highway in the Peruvian jungle, and was 
supposed to be compensated roughly one million acres for the 
work. In 1970 Peru expropriated the property, and to this day 
refuses to pay the company. Peru committed to President Bush 
back in 2002 that this issue would be cleared up by February of 
2003. Nothing has happened, and the Congress, you are about to 
ask the Congress to act on a free trade agreement with this 
country. I am sending you a letter on it, so I won't go into 
any more specifics. My concerns is simply this: by law, 
countries given unilateral trade benefits like Peru must not 
have expropriated property, and what amount of importance, if 
any, are you placing on cases like this before you enter into 
trade negotiations with offending countries?
    Ambassador PORTMAN. Mr. Johnson, I am glad you raised the 
issue because we do have some investment disputes still with 
Peru. We have had some concerns about Peru. As you know, thanks 
to you encouraging me to do so, I met with Mr. Laterno 
personally, and your colleague, Ralph Hall, has also been 
corresponding with me on this and encouraged me to meet with 
him. What I am hearing is that the Peruvian government has now 
made a settlement offer. It may be less than Mr. Laterno and 
his company believes is appropriate, but at least they are 
talking and we have some offers on the table. I have been 
pushing this case, just as you would imagine that I would, 
because I want to get it off the table. I want to resolve it to 
the satisfaction of the U.S. interests here. So, we will 
continue to push it. We have a couple of other issues too with 
Peru that we are working on, but this would be--in my view, the 
FTA is an opportunity for us to get more focus and attention on 
that issue, and you will certainly have that in my office.
    Mr. JOHNSON OF TEXAS. Do you intend to clear this up before 
you offer them free trade?
    Ambassador PORTMAN. I would certainly hope so. I mean it 
takes the two parties being able to agree.
    Mr. JOHNSON OF TEXAS. I am aware that Peru made that 
proposal, and it wasn't the result of a fair and impartial 
process I don't think, and I don't believe American companies 
ought to be pressured into accepting a deal that no other 
company would be expected to accept. I would just like to work 
with you on a reasonable outcome, and I know you will. Changing 
the subject, I was in Thailand just 3 weeks ago now, I guess. 
We discussed free trade with them. That was high on their list, 
and I want you to know that we told them that they needed to do 
some stuff too to make it happen. They thought--and we cleared 
it up--that the U.S. Congress could snap their fingers and it 
would happen, and, obviously, they wanted it tomorrow. But you 
know and I know that it is a long drawn out process, but I hope 
we helped you a little by telling them to get off the stick and 
do their end of the bargain as well. So, keep up the good work 
over there, and I thank you for being here today.
    Ambassador PORTMAN. Thank you, Sam. Let me just say 
briefly--and you have heard me say this before--but I really 
appreciate that. I think members of Congress are under utilized 
in our trade policy initiatives, including these FTAs. So, I 
encourage you to travel and I encourage you to check in with 
us. We try to keep track of where you are going and provide you 
the talking points, as I think we did in your meetings, but 
just to give you our point of view at least, and I hope that it 
will be your point of view in most cases. That is very helpful. 
You are right, most of these countries do not recognize the 
significant role that our legislative branch plays over here. I 
run into this all the time, and I believe it can be very, very 
helpful, so thank you for doing that.
    Mr. JOHNSON OF TEXAS. Well, you helped us out. Thank you. 
Thank you, Mr. Chairman. Yield back.
    Mr. RAMSTAD. The gentleman from North Dakota, Mr. Pomeroy.
    Mr. POMEROY. Mr. Ambassador, it is great to see you again. 
When your predecessor would testify, I would be absolutely 
amazed at the grasp of what seemed like infinite detail that he 
held in his head, and I must say that you have been studying. 
You have demonstrated a very impressive mastery, you and the 
rest of your Department here this afternoon. Anyway, it is good 
to see you again, and congratulations on what a quick study you 
have been. I want to quote to you from today's CQ Today. This 
is an article, according to Saxby Chambliss, Senate Ag. 
Committee Chairman, ``Chambliss noted he has been critical of 
Bush administration's trade policies in the past because he 
felt as though agriculture had been the sacrificial lamb in 
trade agreements such as NAFTA and CAFTA. However, he said, 
this has changed because we now have a U.S. Trade 
Representative, Rob Portman, who understands agriculture. Now 
we have got folks who are negotiating bilateral trade 
agreements who actually care about agriculture.''
    I ascribe to the remarks of my former colleague and the 
Senate Ag. Committee Chairman Chambliss. So, the expectations 
are high on your shoulders as you now seek to level the 
playingfield that U.S. agriculture finds itself in, as well 
demonstrated on these handouts. First I want to ask you about 
farm bill strategy. We have to build a farm bill in the next 
year. The WTO Round will not be over yet. It seems to me that 
if we are not very careful, we could be in a situation. We 
already stand at a disadvantageous position relative to Europe, 
and we structure our farm program shy of an agreement that 
actually amounts to unilateral disarmament before we sit down 
to the table. We are taking away ammunition that you might have 
relative to trying to negotiate some more level treatment in 
support of agriculture across the globe. Do you have counsel 
for us relative to the farm bill?
    Ambassador PORTMAN. Thank you, Mr. Pomeroy. There could be 
another scenario, which is Congress could move ahead, which may 
in a sense be more likely in this environment, and not make the 
changes in the so-called amber box, the trade distorting 
subsidies, which might put us in an even more difficult 
position trade wise for whatever number of years that farm bill 
were in place.
    Mr. POMEROY. Some of us think, Mr. Ambassador, we would be 
well served continuing our present structure until the round is 
concluded, and then we would know what target we have to shoot 
for.
    Ambassador PORTMAN. I guess it is not in my interest 
necessarily to have raised that issue, but my conclusion would 
be the same on both scenarios, which is, we need to work 
extremely closely together, and as you know, from our testimony 
and discussions in the Ag. Committee, where you said something 
which really impressed me, by the way, about the fact that you 
need to be in a position to walk away from these agreements, 
which we are, and we must be, and you are right. When we put 
our best offer on the table on not just agriculture, but on 
services, and we are the most ambitious and open trading player 
among the major players, and others do not come up with 
commensurate offers, at some point you have to be able to say, 
``Maybe this process is not one that is conducive to a good 
result.'' We will always keep that as an option. In the 
meantime, we are going to push really hard to get this resolved 
this year, so that you, when you are writing the farm bill, 
have in mind not a micro management of the legislative process 
but the parameters within which you can operate, not just to 
deal with the Doha Round, but also the potential litigation as 
we have seen with the cotton case.
    Mr. POMEROY. My time is expiring here.
    Ambassador PORTMAN. That would be the goal.
    Mr. POMEROY. Thank you. Let me just--I was a little alarmed 
to see that the White House released a report from the Commerce 
Department saying that domestic sugar prices are costing the 
United States jobs, and they talk about the demise of the candy 
manufacturing industry, which has got really a whole range of 
reasons. The report also doesn't talk about the jobs created in 
the sugar sector, our agriculture and processing sector. So, we 
don't think it is a fair report. Now, up to this point you have 
indicated, and Secretary Johanns has indicated, that sugar 
would be deemed to be a sensitive product excluded from tariff 
elimination in the even this whole concept of tariff 
elimination for the least developed countries would proceed. Is 
that still the position of the administration? Is there 
something about this commerce, what we think of as an unfair 
Commerce Committee report that indicates some administrative 
shifting on treatment of the U.S. sugar policy?
    Ambassador PORTMAN. No, I don't believe so. When you 
weren't here I talked about the American Sugar Alliance letter 
on Peru, by the way, and I appreciate the fact that they are 
working with us on these trade agreements, and I this case they 
have said that because we have shown some sensitivity they 
support the agreement, despite the fact there are some sugar 
imports as you know. With regard to the duty free/quota free 
issue, we worked closely with some of the same people who are 
involved in this letter and in other efforts, to be sure that 
they understood what we were doing. We didn't make any 
commitments, but we did leave enough flexibility there to cover 
some of the concerns that they had, and the letter doesn't 
reflect a change in our communication that we had with them 
with regard to that issue.
    Mr. JOHNSON OF TEXAS. [Presiding.] The gentleman's time has 
expired.
    Mr. POMEROY. Thank you. Mr. English.
    Mr. ENGLISH. Mr. Ambassador, I would like to congratulate 
you on what I think has been a virtuoso performance today. I 
think one of the most detailed and impressive presentations of 
American trade policy that I have ever heard, and I found it to 
be most informative. I will also offer you at least one insight 
from going back to the statement of the last questioner. I 
would like to congratulate the administration for being willing 
to take a nuanced approach to sugar issues, since I represent a 
State which is a State that uses sugar as part of the 
manufacturing process in a whole range of food products. I 
bring that out because I thought you would find it refreshing 
that I could find at least one issue where Pennsylvania doesn't 
bounce protectionist. Mr. Ambassador, reviewing your top to 
bottom review--and we are still in the process of doing it--I 
am disappointed in a small way that it doesn't point to the 
opportunity to strengthen the available trade remedy laws to 
the extent allowable under international rules, which I think 
is an obvious conclusion of the bulk of the report. There are 
opportunities to do that, I think, including adding applying 
countervailing duties to non-market economies, which as the 
Chairman noted at the beginning of the hearing, we have passed 
China-specific legislation out of this Committee, H.R. 3283, 
which would apply countervailing duties to non-market 
economies. May I ask what is the administration's position on 
this bill?
    Ambassador PORTMAN. Mr. English, I appreciate the fact that 
you have read the report, and I know you have, and you will 
have a very thorough analysis of it. You are right, we did not 
get into a specific recommendation on really any legislative 
issue. I did say in the report and in the cover letter to Mr. 
Thomas and Mr. Rangel that I welcomed that, and I thought that 
this information we provided, which was a review, a top to 
bottom review of where we have been, where we are and where we 
are going on China trade policy would be helpful to inform 
policymaking, including the way in which the English bill is 
ultimately handled in the U.S. Senate, because I think that 
legislation is currently under consideration in that body. I 
hope it is a helpful addition to the information you already 
have about China, and where we are going and where we have 
been----
    Mr. ENGLISH. Yes. I am grateful for it, and given the 
limitation of my time, let me simply press the question. Has 
the administration taken a position on this bill?
    Ambassador PORTMAN. No. To my knowledge, the administration 
has not taken a position.
    Mr. ENGLISH. Thank you. Another approach mentioned in the 
top to bottom review, in fact, first revealed when the 
President declined to implement relief under section 421 for 
the pipe and tube industry, as per our recent discussion, is 
the establishment of a bilateral high-level dialog on steel in 
the JCTT. First, can you please elaborate on what the scope, 
goals and timeframe for these discussions would be? Second, 
could you please give us your thoughts on why in your opinion 
China would be more receptive to participating in bilateral 
steel talks than it was to participate in the multilateral OECD 
Round to eliminate steel subsidies in all countries?
    Ambassador PORTMAN. That is a very good question. My view 
is that it is time to have a more serious dialog on the whole 
issue of steel, not just the tube issue, as important as it is 
to you, Mr. English, and I appreciate your meeting on that and 
your advocacy on their behalf. But as you know, there is a much 
bigger issue even than these specific imports which is what is 
the China industrial policy here? Why are they so dramatically 
expanding their steel production? What is their intent and how 
are we going to deal with it? So, I am very concerned about it, 
and that is why we identified that in the top to bottom review 
as a specific area, not telling you how to legislate, but 
telling you that we believe it is appropriate to have that 
high-level dialog. We have talked to the Chinese about this. 
They have agreed to engage in this dialog, as compared to the 
OECD dialog, so, so far, so good.
    Mr. ENGLISH. Very good.
    Ambassador PORTMAN. In terms of timeframes, we are 
beginning the process in April. We are looking, again, at the 
broad range, and once we have that initial discussion, I think 
we will have a better sense of where it is going and what the 
timeframe ought to be. We will get back to you on that.
    Mr. ENGLISH. My time is expired.
    Mr. JOHNSON OF TEXAS. The gentleman's time has expired.
    Mr. ENGLISH. I thank you for your time, and I will submit.
    Mr. JOHNSON OF TEXAS. I am going to ask everyone to use the 
5 minutes judiciously because the Ambassador has a meeting that 
he needs to make, and I recognize Ms. Tubbs Jones.
    Mrs. TUBBS JONES. I don't know why that prohibition always 
comes when it is my turn to ask questions.
    [Laughter.]
    Mr. JOHNSON OF TEXAS. You got 5 minutes.
    Mrs. TUBBS JONES. Everybody else goes over time, but 
anyway, Ambassador Portman, it is nice to see you. Always good 
to see a Buckeye doing well. I want to focus my questions 
around trade adjustment assistance. Coming from Ohio, you know 
how terrible the job situation is in the State of Ohio. We lost 
more than 200,000 of manufacturing jobs, and the jobs that they 
are being replaced with are not the same kind of jobs that 
people had. The money is not the same. They are often service 
jobs without any health care, without any real benefits. What I 
am concerned about is that in the budget in 2005, the amount 
for trade adjustment assistance was $1,057,300,000. In 2006 it 
was $966,400,000, and in this proposed budget it is 
$938,600,000. At a time when you are entering into more 
agreements and we are losing more jobs--I am going to make my 
statement, then give you the rest of the time to answer the 
question--at a time when there is this whole discussion about 2 
million new jobs, I don't know what those 2 million new jobs 
are paying.
    I don't believe the number about it being only a 4.7 
percent unemployment rate. There are areas in my congressional 
district where the unemployment rate is 12 percent. So, I don't 
know what these numbers are, but in Ohio, we are suffering. I 
would like to know how it is that you can afford to operate--
and don't give me that answer about having a little bit of, 
what was that, allowance or something like that? I don't quite 
remember what you said. The reality is we need to be planning 
for trade adjustment assistance and retraining and 
opportunities for people in Ohio and across the country to have 
jobs. Tell me what you are going to do.
    Ambassador PORTMAN. First of all, I am out of my lane here, 
as they say, because trade adjustment assistance doesn't come 
under me, as you know. It is Department of Labor. But let me 
make a couple comments quickly. I don't think the system works 
very well because----
    Mrs. TUBBS JONES. The note the guy sent you was at--you all 
know you work together on these issues. Give that note back 
there.
    [Laughter.]
    Ambassador PORTMAN. That is why I am going ahead and 
answering your question even though I shouldn't. You know, one 
of the reasons the funding is going down, I think--and I have 
some data here; I don't know if it is accurate, so I am going 
to double-check it--is that we haven't seen the uptake that we 
expected. In other words, people are not applying for it 
because they do not believe they are eligible. Maybe they are, 
maybe they aren't, because it is restricted to that causal 
connection to trade which is tough to make. I mean, my own view 
is, from a trade perspective--I need to be careful here, it is 
not an administration view, giving my personal view here--that 
the system needs to be reformed so that it works better for 
trade because I think if you look at these number, I think what 
you will find is that it is not that we are reducing funding 
when there is a demand. It is that the demand is not there 
because perhaps that link to trade is too restrictive. That is 
my view.
    Mrs. TUBBS JONES. I do have a little time left. Without 
doing it one plus one equals two, you recognize that the 
manufacturing belt across this country, the loss of those jobs 
comes as a result of trade and doing business with other 
countries. It doesn't take a rocket scientist to come to that 
conclusion. When you were--and I am not saying you are in a new 
role--but when you were sitting in that other chair up there 
and we both, as Republicans and Democrats, were complaining 
about the loss of jobs in Ohio and the impact that trade has on 
it. All I am saying to you is, Ambassador Portman, my old 
friend, Rob, from Ohio, work on it. The people in Ohio need 
your help in that role that if we are going to open up the 
trade doors, then we have to help and figure out how we keep 
the people in Ohio employed. Simple.
    Ambassador PORTMAN. I appreciate that comment.
    Mrs. TUBBS JONES. Mr. Chairman, I yield back the balance of 
my time. It is nice to see you.
    Ambassador PORTMAN. Thank you, I appreciate it.
    Mr. JOHNSON OF TEXAS. Bless your heart. Thank you. You 
know, we need those jobs in Texas too. We probably took them 
all from Ohio to Texas and Missouri. The gentleman from 
Missouri is recognized.
    Mr. HULSHOF. Thank you, Mr. Chairman. Mr. Ambassador.
    Ambassador PORTMAN. How did you get up in the top tier?
    Mr. HULSHOF. Well, I want to touch on that. First of all, 
very few are probably aware that you and I were next door 
neighbors in a nearby apartment building, and I promise not to 
talk about how loud your television set was.
    Mrs. TUBBS JONES. Mr. Chairman, can I get in on that one? 
No, I am kidding.
    [Laughter.]
    Mr. HULSHOF. If you promise not to talk about how 
frequently my kids would wake you up in the middle of the 
night. I am one of your biggest fans, Rob, and when your name 
was in consideration I know it was a tough decision for you and 
Jane. You are providing an essential service to our country, 
and the fact that I am a huge cheerleader has nothing to do 
with the fact that your vacancy allowed me to go from the 
bottom tier to the top tier. In Article I, section 8, obviously 
enumerates to this body, this legislative body, the power to 
regulate commerce among the nations, and yet we have to have a 
partner, and you are doing a great job. I have just met 
recently, stepped out, in fact, during your testimony, to meet 
with some rice growers from Missouri. They applaud the fact 
that we have been very aggressive in going after the anti-
dumping case with Mexico. They hope that that will actually 
bear fruit. I am mixing crops here, rice and fruit, but 
hopefully we will actually see some benefit from that.
    I have to go on a bit of a rant, and if you want to 
comment, you can do that, and as I have shared with you 
publicly, last week the WTO panel found the European Union has 
illegally banned our genetically enhanced crops. This is 
something I have personally shared with EU Ag. Ambassador 
Mariann Fischer Boel last year when she was here in a very 
aggressive way. To me, this replicates the history of the 
European Union, where it goes through beef hormones, when it 
goes through the bananas case that you worked on personally 
when you were sitting here. Yet now, then, we have got, at 
least to all indications, the European Union thumbing its nose 
again at the United States, at the WTO, and in the same breath 
it seems, after this legislative body has worked its will in a 
very tough way on foreign sales corporation and legislatively 
fixing the extraterritorial income issue, the European Union is 
quick to say that they are going to retaliate with sanctions, 
possible sanctions.
    To me it is unconscionable to be considered a trading 
partner of these United States, to say, well, we are going to 
quickly retaliate, but we aren't willing to change our regime. 
I recognize I am on a bit of a personal rant here, but thank 
you for your aggressive stance. I look forward to working with 
new Ambassador Dick Crowder on agriculture issues. I know he 
stepped out. I don't have enough time. I have been on the 
record as far as Japan. You covered that as far as the ban on 
U.S. beef, but any comments, I will just yield to you the 
remainder of my time, specifically regarding the European 
Union. Again, thanks for what you are doing for our country.
    Ambassador PORTMAN. Thank you, Mr. Hulshof. You have 
touched on a huge issue, not just with regard to the European 
Union, by the way, but with regard to a science-based system 
for food safety. What this WTO decision allows us to do now is 
globally to help ensure that other countries don't follow along 
the path of certain EU member states, and unfairly block the 
exports of U.S. products which are safe, and which can add to 
the prosperity particularly of the developing world because of 
some of the disease and drought resistant qualities. So, it is 
a very big decision that has big implications, and we need to 
be sure that it is properly implemented. We will be on top of 
that.
    I also share, as you know, your concern on FSC-ETI, because 
this is a piece of legislation that not only went through a 
very tough process--and they don't have to be sympathetic to 
our tough political process here--but they do have to be 
sympathetic to the fact that the transition is this year, and 
then the grandfathered amount is relatively minor. The Joint 
Tax Committee has said it is $75 million, and yet they are 
talking about retaliating it to the tune of billions of 
dollars. So, it just doesn't make any sense, and I am not sure 
that I fully appreciate what the intention is here. We will 
follow up on that as well, and if necessary, we will take 
action to ensure that there is not unfair retaliation.
    Mr. JOHNSON OF TEXAS. Mr. Foley, you are recognized.
    Mr. FOLEY. Thank you very much, Mr. Ambassador, and I want 
to commend you on the report that you provided today, because 
one of the concerns I have had--we have never had a scoring 
mechanism to determine victories. We always hear the losses we 
have in tribunals. We never hear the victories. We are finally 
starting to see us claw our way into equality in trade 
disputes. Let me ask you the question: do you believe in your 
heart that American candy manufacturers have left this country 
solely because of the price of sugar?
    Ambassador PORTMAN. I don't know. Mark, I have been told by 
members of Congress who represent some of the sugar users, 
which includes candy, chewing gum and other processors, that it 
is a factor, and it is a factor because it is a cost of 
production. I have not had a chance to review this report yet 
that was discussed by Mr. Pomeroy. I will do that now. But I 
think it is a factor.
    Mr. FOLEY. But I think it singles out one area of the 
equation unfairly, in my view. I just want to express my view 
here, because otherwise, why is Motorola building in China? Why 
is everyone else going to Mexico to construct cars? It seems 
like there are a lot of people leaving to build, based on 
salaries, liability considerations and a number of factors. It 
grieves me as a member representing the sugar communities, that 
it always seems to be deduced to one little level, because 
right now the sugar price is at 19 cents, an all-time high in 
the world market, so maybe because it will be cheaper to 
produce here we will start getting the jobs back.
    A specific question I do have for you. You sit on the 
Committee on Foreign Investments. This Committee recently has 
allowed for the purchase of United States ports, six specific 
strategic ports, to be assumed by the United Arab Emirates. 
Today the United Arab Emirates, in a conversation with Iran on 
increasing--it just crossed the wires--increasing their 
bilateral trade, at a time when we are trying to put pressure, 
along with international partners, on getting Iran to back down 
on their nuclear proliferation. Today in the Washington Times 
they said: ``We should be improving port security in an age of 
terrorism, not outsourcing decisions to the highest bidder. The 
ports are thought to be country's weakest homeland security 
link with good reason. Only a fraction of the Nation's maritime 
cargoes are inspected. The root question is this: why should 
the United States have to gamble its port security on whether a 
subsidiary of the government of the United Arab Emirates 
happens to remain an antiterrorism ally?''
    In all of my conversations with our trading partners, 
NAFTA, CAFTA, I have been down, and I have asked spy what they 
are doing to inspect cargo. Now my fear comes home to roost 
that New York and Miami and New Orleans and Philadelphia and 
Newark, we have turned over the ports to a foreign entity, a 
government, foreign government. Can you provide some 
illumination on why that is a good process, a good procedure, 
or are you assured, at least from your deliberations, that we 
are going to be able to maintain the integrity of these 
facilities based on a foreign nation's ownership?
    Ambassador PORTMAN. Mr. Foley, you raise an important issue 
I am not prepared today to be able to give you that answer, 
because I just don't know enough about it. I have taken some 
notes here, and if you could follow up with me with some more 
specific information, it would be helpful, and I will get back 
to you on it.
    Mr. FOLEY. Thank you. The other issue is, obviously, and I 
think you have illuminated it, and I understand particularly 
your sensitivity to the agricultural products which, like 
Florida, like sugar, are almost exclusively domestic, and I 
appreciate your acknowledgement of the Sugar Alliance's letter. 
I know, as you recall, I played what I hope was a constructive 
role in CAFTA. Then I get reports from Commerce about singling 
ut sugar, I get a little nervous was that effort in vain? Not 
to suggest that they are supposed to create and fabricate 
reports for one member, but I hope you will continue to display 
the sensitivity.
    I would also like to suggest that, at the behest of Ms. 
Tubbs Jones, who was mentioning about domestic loss of 
manufacturing, I think here State--and you did acknowledge--
thanks to the trade policies, we have grown exponentially in 
new starts in employment and manufacturing. Honda Motor Cars, 
Toyota, BMW, a lot of international, multinational corporations 
have in fact come domestically and created jobs. I hear one 
side of the equation we have lost jobs, and that is a concern 
to everyone, but I don't hear any amplifications. Today we 
crossed 11,000 on the Dow. We have an all-time low 
unemployment. In Florida it is below 4 percent. Nationally it 
is below 5. We have a greater capacity for homeownership than 
ever, and I think that largely goes on trade policy and tax 
policy by this administration. I commend you.
    Ambassador PORTMAN. Thank you. I appreciate those comments.
    Mr. SHAW. [Presiding.] Mr. Brady.
    Mr. BRADY. Thank you, Mr. Chairman. Rob, in addition to the 
other compliments you heard today, I really appreciate the 
effort you make in trying to find bipartisan consensus on trade 
issues. We ought to speak as one voice. America should, in our 
trade initiatives--and while Republicans and Democrats may 
differ, I know that we agree you are always sincerely trying to 
find a common ground we can base from, and I encourage you to 
continue those efforts, that they will do us all well. I also 
appreciate your honesty on the trade deficit. The fact is, you 
can't control the savings rate in America would drives so much 
of our consumption including foreign products. You can't 
control the economy of America, which thankfully is strong, 
which always mirrors trade surpluses and deficits as well. What 
you have said is what you can continue to do is recognize that 
80 percent of our trade deficit comes with countries we don't 
have pretrade agreements with. As we open these markets to 
American products and services, we have an impact of some 
measure on that trade deficit. The question I have for you, two 
issues. What progress do you see, if any, in the coming 2 years 
on the dispute with Canada on softwood lumber, and on the Free 
Trade Agreement of the Americas, recognizing the second one 
gets more difficult as decisions are made in that hemisphere, 
but knowing that you have been laying and our administration 
has been laying some careful stepping stones toward the FTAA in 
our hemisphere?
    Ambassador PORTMAN. Thank you, Mr. Brady. I appreciate that 
comment you made about the fact that 80 percent of our trade 
deficit comes from countries we don't have a free trade 
agreement with. That chart that I had during the presentation 
indicates the degree to which exports are increased to our free 
trade partners, but then it also lists where the largest 
economies are, and you are right, it is an interesting point. 
What I tried to say earlier was we need to look at the trade 
deficit. It is important, but the goal of this Committee and I 
think of USTR in terms of trade, ought to be maximizing our 
exports, and we have done that with these free trade 
agreements, and I think it has been in the interest of not just 
the U.S. economy, but specifically workers who are making 
better salaries and having better jobs as a result of it.
    With regard to Canada and the softwood lumber discussions, 
I said earlier that I think the litigation has been excessive 
in the sense that it hasn't resulted in the kind of--as I view 
it--positive results for our industry, and acknowledgement of 
the subsidy and dealing with it in a straightforward way. So, 
that has been our goal since I took this job, was to try to get 
beyond the back and forth of the filings. I think there are 24 
different ongoing litigation matters right now in this case. It 
has been going on, some would argue, since the mid 1800s, but 
it has certainly been going on, this latest round, for several 
years with a lot of legal fees, and frankly, very little 
progress.
    So, I am hopeful that with the new administration, we will 
be able to make more progress. The Harper government has 
indicated that they would like to improve relations with the 
United States. We welcome that. I have also had good 
discussions with my new colleague, David Emerson, who is the 
new Trade Minister for Canada, had a very good discussion with 
him on trade in general, and specifically on our mutual 
interest to try to resolve this issue. I believe the 
Ambassador, Frank McKenna, from Canada, who has been here under 
the previous government, has been a constructive force in 
trying to come up with a solution that makes sense for both 
sides. So, I am more hopeful than I have been that we can 
resolve this issue with Canada.
    By the way, Canada is our biggest trading partner. We have 
almost a dispute-free trade relationship with the biggest 
trading partner of the United States. We are their biggest 
trading partner. They now enjoy a considerable surplus with us. 
It has been a very positive trade relationship for Canada and 
for jobs in Canada. So, sometimes this one issue gets a little 
blown out of perspective. It is an important issue. It is one 
that we spent a lot of time on, I will focus on in trying to 
resolve, but we ought not to ignore the fact that we have in 
general a very healthy trade relationship with Canada.
    That goes to your second question, FTAA, going from Canada 
down to Tiera del Fuego. One would hope we could have a Western 
Hemisphere Compact that would result in economic prosperity, 
increase prosperity for all of us. That is not something that 
is going to happen in the short term, but I think it needs to 
continue to be our goal, and in the meantime we need to 
continue to work on a bilateral and regional basis as we did 
with Central America to achieve that goal, country or region by 
region, and that is what we are doing. If you look at our 
recent announcement of completion of our talks with Peru, and 
we have discussions with Colombia this week. President Uribe is 
here. I will be meeting with him. We are trying to, as you 
know, make further progress with Panama. We are very close to a 
final agreement there that we will be bringing to you for your 
input. So, we are making progress in the Western Hemisphere, 
but all the while understanding that ultimately it would be 
beneficial for our hemisphere to achieve this goal of a free 
trade area of the Americas.
    Mr. BRADY. Thank you, sir. Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Portman, how much more time do you have? I 
understand you have some time restraints right now.
    Ambassador PORTMAN. I do, but I think it is more important 
that I answer the questions that any of the remaining members 
have.
    Mr. SHAW. Okay. I would ask the members to be as short as 
they can, and perhaps you want to shorten your answers a little 
bit just so you can get back on schedule.
    Ambassador PORTMAN. I will.
    Mr. SHAW. Thank you. Mr. Thompson?
    Mr. THOMPSON. Thank you, Mr. Chairman. Mr. Ambassador, 
thanks very much for being here. I want to make one comment, 
and then I will ask you a couple of questions, and I will just 
let you respond in a short answer so other folks can go. I am 
one of those who believe or I am concerned about our trade 
policy driving our farm policy, and I too highlighted the Saxby 
Chambliss concerns about agriculture being a sacrificial lamb. 
We have other examples, and you are very familiar with the 
concern that some of us from the northwestern part of the 
United States have in concern to trade agreements that have 
really adversely impacted the pear industry in the three 
northwest States. I really think we need to--it is probably a 
hearing of its own just to deal with those two issues and how 
they will affect both the trade policy as well as the ag. 
policy.
    I have a couple of very specific regional issues that I 
want to present to you and ask you just to respond to those. 
One is the WTO's TRIP agreement that was designed to protect 
geographical designations such as in my home, the Napa Valley. 
So, I am interested in knowing what you are doing to provide 
that protection and protect against the misuse of geographical 
indicators. Also in regard to wine, the U.S.-EU wine agreement 
sparked some concern by some of our friends in Germany who made 
some pretty nasty remarks about our wine industry and our 
product, which hasn't done a lot to help. That is a big issue 
not only for my district but for the State of California and 
for the country. That is a major industry. So, I would be 
interested to know what you are able to do to try and help 
protect our reputation and the sales viability of our wine from 
this country.
    Then to follow up on Mr. Brady's comment about the soft 
lumber issue, I guess what I would like to get some direction 
from you as to how we can help in that regard. I don't know if 
we are precluded because of the lawsuit from doing it. Does 
that have to play out or can we get involved now? From someone 
who represents a timber area, it may be a little issue in the 
big picture, but for those of us from timber areas, this is a 
giant issue for us. So, I would like to be able to get some 
direction how we can help or some idea from you specifically 
what you are able to do to move this issue along.
    Ambassador PORTMAN. Thank you. If I can quickly tick down 
some of your questions, and then we can have a further 
discussion perhaps after this hearing, we can correspond. One. 
On ag., generally front and center on all the FTAs and in the 
Doha Round, and it will continue to be, as long as I am in this 
job. Softwood. No reason we can't have a negotiation even while 
the litigation is ongoing. Litigation will come and go. We are 
going to win some, we are going to lose some, but in the 
meantime we need to be sure that we have focused on the issue, 
which is the subsidy in Canada, and come up with a fair result.
    Mr. THOMPSON. What is the status of the lawsuit?
    Ambassador PORTMAN. Well, there are, as I said, I think 24 
different legal actions out there right now including----
    Mr. THOMPSON. The subsidy issue.
    Ambassador PORTMAN. The subsidy issue is still in 
litigation. It has been determined that there is a subsidy 
question as to how much and what the countervailing duty should 
be, and as you know, we have reduced our countervailing duties 
here recently based on a decision by the NAFTA appellate panel, 
essentially, which is the ECC. But it doesn't mean that we 
can't have a negotiation, and we should. With regard to the 
wine agreement, we have not singed that agreement yet, as you 
know. Hoping to sign it perhaps when I am in Europe in the next 
month or so. Ambassador Crowder was just over in Europe talking 
about the specific issue of Germany. I met with the Wine 
Institute, as you know, a couple weeks ago, actually had an 
opportunity to review some of the footage of some of the German 
television analysis of our wine product, which was quite 
disturbing, and this is something that we are very focused on, 
and we have raised deep concerns with the German government 
over. He indicated to me, when he returned this morning, that 
he thought he had been able to have a good dialog on that with 
the German government. We can follow up with you on that.
    With regard to Napa Valley, the European Commission actions 
there are troubling to us. They appear to directly contradict 
statements they made during the course of the WTO case, which 
we won, by the way, that I mentioned earlier. We have already 
talked to your constituents and others in the Napa Valley about 
the problem, and we will continue to raise it with the EC. If 
it is not corrected, we will consider appropriate legal action. 
Finally, on the northwest generally, you are right, we have 
some challenges. We also have some great opportunities for 
agriculture from the northwest in terms of new export markets.
    Mr. THOMPSON. Well, the pear issue has really hurt the 
whole region, so look forward to working with you on those.
    Ambassador PORTMAN. Thanks, Mike.
    Mr. SHAW. Mr. Beauprez?
    Mr. BEAUPREZ. Thank you, Mr. Chairman. Mr. Ambassador, I 
marveled at your opening statement. I don't know that in my 
limited time in Congress I have ever heard one as thorough or 
as substantive, so I was impressed by that, but I am even more 
impressed by your persistence, the breadth of knowledge that 
you obviously have, the dedication to the job, so I commend you 
for that. To your personal attention, you and I have already 
had a visit about a very personal issue for me, business back 
in my district named Goldbug, and I think they are an example 
of what I would determine or would characterize as the 
unintended consequences of the U.S.-China textile agreement.
    I completely agree with your statement about wanting to 
provide predictability and stability for our American 
businesses, but with all due respect--and this is not your 
problem you created, far from it--it is one that you kind of 
got dumped in your lap I know when you took over, but I will 
commend you again for trying to get a resolution to it. With 
Goldbug--and the issue is baby socks, and who would have 
thought? But they survive on marketing baby socks, ones that 
they have imported from China for a long, long while, and 
thought with, I think full expectation, that they were not 
going to be impacted. They found out that they were in kind of 
a last minute of revision to the agreement impacted. One could 
say that they have found a solution, that they got quota from 
the Chinese Government. They got a solution, but at the cost of 
$3 million out of their pocket from their bottom line. It is 
very difficult for a business, a small business such as this, 
to take a great degree of comfort in that kind of a solution. 
Now, I find most recently that confusion in the agreement has 
also raised the specter with regard to outdoor apparel, and so 
some additional consternation on behalf of people in my 
district. Do you care to respond to that and how we might 
really provide that predictability and stability that you have 
identified, and I know you are personally very pledged to?
    Ambassador PORTMAN. Thanks, Bob. I appreciate the fact that 
you raised this with me shortly after the agreement. As you 
know, there was some issue as to the proper classification 
which made this more complicated than it otherwise would have 
been, and these were honest mistakes that were made, and that 
has created more of a problem. But you have been a great 
advocate for Goldbug, and as a result of that, as you know, I 
have talked to them directly, worked with them. We have worked 
with the Chinese government directly. We have a situation now 
where they were able to get the adequate quota allocated for 
2006. As you say, there is an issue of price. We also now are 
working with Customs, and with the Commerce Department to 
develop a definition of this issue of babies' booties so that 
those goods can be exempted from this quota. That is, I think, 
the most pressing issue right now, is to be sure that that 
definition doesn't create additional problems for them. So, we 
will keep working with them. We have also worked with them, as 
you know, on some other sourcing opportunities.
    Mr. BEAUPREZ. Right.
    Ambassador PORTMAN. We will be very willing to be 
facilitators and to help in ways that maybe go beyond our 
immediate mission here, because we want to be sure that this 
agreement does work, not just for the U.S. manufacturers, but 
also those who import products. This is one where we will 
continue to focus on the definition and on the sourcing for 
them so they can work through it.
    Mr. BEAUPREZ. I applaud you for that, and I think it is 
important. At the moment it looks like the main beneficiary in 
this agreement, at least in this very narrow portion, has been 
the Chinese government, and I hope we can find a long-term 
solution. Last, I will just make a comment. I very much applaud 
and appreciate, look forward to your efforts relative to the 
benefit of American agriculture. I have long through that the 
American farmer would feed the world if given a free and fair 
change to do that. From materials you have provided today, it 
is clear that there is a lot of opportunity.
    Ambassador PORTMAN. A lot of opportunity.
    Mr. BEAUPREZ. I very much applaud you for that. Agriculture 
is still a huge piece of who Colorado is. We are the No. 4 
producer of beef in the entire Nation of the 50 States, and 
pretty proud of that, as well as other commodities, and look 
forward to exporting those and sharing that quality product 
with much of the world. Thank you very much, again, for your 
service, and I yield back.
    Ambassador PORTMAN. Appreciate it, thank you.
    Mr. SHAW. Mr. Emanuel?
    Mr. EMANUEL. Mr. Chairman, the Congresswoman was here 
longer, and I have no problem with her going first, and then I 
will go.
    Mr. SHAW. Okay. Ms. Hart.
    Ms. HART. Thank you. It is great to see you here, Rob, Mr. 
Ambassador, and I am going to follow along the same lines of 
Mr. English, and I believe Mr. Levin. I am very interested in 
the 421 process. I want to do as your interagency goals 
suggests, to ensure full and transparent enforcement of U.S. 
trade remedy laws and agreements, and I expect that includes 
section 421. I am still mystified about the application of 
421s. I have testified in front of the ITC several times. We 
have had some relief. We have had some relief suggested by the 
ITC or encouraged by the ITC, and then denied by the president. 
In my opinion, it is actually one of the least transparent of 
the trade remedies that are available, and I am hoping that you 
will use this opportunity, the interagency process, to do a 
couple of things. One, help make it useful for us. If you think 
it is useful now, then I would beg to differ simply because of 
the facts that are presented at those hearings, and then the 
results that certainly are not I agreement with what the actual 
commission suggests. I guess my question for you is, is there a 
specific goal provided within your interagency process to make 
the 421 more transparent, change it in some way, provide a 
little more opportunity to use it to, obviously, the assistance 
of some of our American companies?
    Ambassador PORTMAN. That is a very fair question, and this 
is one of the tools that we would like to use where the facts 
justify it. We have not been shy about using it. For instance, 
I talked about the fact that China is the number one country 
now where we have anti-dumping orders, and we were not shy with 
regard to the textile safeguards. With 421, I will do some 
additional thinking on this and get back to you with, I hope, a 
more helpful and thoughtful response as to how perhaps the 
legislation could be changed. I will tell you, under the 
authority the President has, when the ITC tells him that there 
has been material injury, he has accepted that, and in four 
cases that happened. In two cases it didn't happen. One of the 
four, of course, was the most recent pipe case, the standard 
pipe case. But he also then is required to consider how the 
import restrictions would affect the economy, and a broader set 
of U.S. interests.
    In each case, the remedies were not deemed to be effective 
in helping the domestic industry. One of the reasons, as I 
said, and under the pipe case, I said earlier there were--I 
don't know how many countries I indicated, but a number of 
countries. In the steel pipe case, the ITC documented more than 
50 other countries supplying the U.S. market, ready to step in 
and replace the curtailed Chinese imports. That is the data 
that he relied on I part to make his decision. So, just so you 
know how it operates. There may not be adequate transparency, 
and I am happy to talk to you about that, but my understanding 
is, is that in that case, the ITC material injury issue was not 
the question. The question was whether in the end the remedy 
would be effective in helping the industry in Pennsylvania and 
elsewhere. The market disruption issue was not the issue. The 
market disruption issue was accepted. I am happy to work with 
you more on this, and talk about maybe how to use the existing 
authority more effectively, or whether this authority is 
adequate to meet the concern we have with products coming in 
from China.
    Ms. HART. I am not sure what a yellow light means, but I 
think it means I am getting close to the end. I appreciate 
that, and we will follow up with you on that. Significant 
progress has been made--and I think you are aware of this--in 
many of these industries as far as their technology and their 
process, and they are now state of the art, and they are still 
in this situation where they are unable to compete. There comes 
a point where I think we really do have to re-examine what we 
are doing to determine whether we do want every particular of 
our, for example, heavy manufacturing, steel manufacturing, to 
be offshore. I just--now the red light--I just would suggest 
that the entire issue be examined on sort of a larger, with a 
larger world view, and a view about the United States and our 
security as well. Thank you. I yield back.
    Mr. SHAW. Time of the gentlelady has expired. Now the 
gracious Mr. Emanuel.
    Mr. EMANUEL. Let the record show.
    Mr. SHAW. The record is showing that.
    Mr. EMANUEL. Thank you, Mr. Chair. Mr. Ambassador, I have a 
couple of questions, mainly dealing with the issue of public 
health and health care. When we were dealing with CAFTA, I had 
offered an amendment. Obviously, it was ruled not germane, but 
nonetheless, actually, the now-Chairman said it was an 
important issue. He and I have communicated about creating an 
Office of Public Health over at USTR. As you know, part of the 
issues that dealt with CAFTA, specifically Honduras, dealt with 
their own public health needs, and so forth. You have advisory 
boards, Eli Lilly represented on it, Pharma's represented on 
it, Schering Plough is represented on it, but you don't have a 
person specifically for public health, and a lot of the issues, 
whether you are dealing with South Africa now, whether you are 
dealing with Colombia, the issue of Thailand, all deal with 
their public health concerns and our pharmaceutical companies' 
interest.
    I would hope that at some point you would take a serious 
look. I got a letter actually from your office today on this, 
and quote, unquote, it talks a fairly balanced--anyway, it was 
a very good letter, but, Rob, I would hope that you would 
really take the potential of creating an office, an ombudsman 
for public health to be on the advisory panels. They have an 
equal voice. I am not saying not Schering Plough, Eli Lilly or 
Pharma off, but they get heard. There is no doubt about it, 
they get heard. Some of us think some of these trade deals 
unfairly benefit them, and damage public health both here and 
abroad. But I encourage you to really create either an office 
for it, a person for it, or give the public health officials, 
one or two people on these advisory panels, because right now 
it impugns the character of what we actually negotiate, and you 
know this issue is coming up in all these one-on-one deals that 
we are working on, bilateral agreements.
    Ambassador PORTMAN. Rahm, two things. One, I agree with 
you, and I think when I first came in the concern was expressed 
during my confirmation process about the generic 
representation, and I agreed that we had to broaden the 
representation there. On public health, my understanding is--
and I will check on this--that we have not issued a Federal 
Register notice asking for public health nominees for the 
advisory board. I think it makes sense. So, I will follow up on 
that. I will let you know more specifically where we are in 
terms of that advertising process we have to go through. But I 
think you are right.
    I do think we have not done a very good job of explaining 
what the TRIPs agreement provides for in terms of public 
health, and specifically what TPA provided for, and I don't 
think it is inconsistent to say we ought to be helping with 
regard to where we have a comparative advantage in 
pharmaceuticals and being sure that these countries--you 
mentioned Honduras I think--but Guatemala or other counties we 
might do an agreement with in Latin America, Africa or Asia, 
that they have the ability, when they have a public health 
crisis, to access a medicine they need. I think we have worked 
that out now with this latest Doha TRIPS agreement. It would be 
consistent with the approach that we would take.
    Mr. EMANUEL. You will know more about this, but from my 
understanding, part of the implementation problems on CAFTA now 
relate to health care. Australia pushed back on us when we 
tried to get certain changes to their market as related to 
pharmaceuticals. All I am recommending--and if you need names, 
I encourage you to do this, hope you do it. The second thing on 
the issue of pharmaceutical products, you know when we passed 
the appropriations for Commerce, State and Justice, we talked 
about no-trade deals would impact the ability for re-
importation. The executive branch's view was we will take it 
under advisement. That was not the intent when Congress passed 
that. It was not to be taken under advisement. It was to be 
actually executed, implemented accordingly. I would hope that 
you wouldn't ignore Congress's intent when we passed that 
legislation. You know this is an issue I care deeply about, as 
it relates to re-importation, and hope that it would not be--it 
was not intended to pass for advisory. We intended it 
specifically to be implemented. As I understand the 
Constitution--this is just one man's reading--we have an impact 
on trade as it is related to that, Congress, and international 
trade.
    Last, I have a specific issue about a company in my 
district. I mean we always talk about China as it relates to 
intellectual property. It is the largest ladder manufacturer in 
the country, and about a knock-off that China is making. I 
would like to talk to you about that individually. We don't 
have to take everybody's time here, your time here. I will work 
with your staff accordingly, but to help them as it relates to 
their competition, and especially with retail operations here 
in this country, and they get really treated unfairly.
    Ambassador PORTMAN. I would love to talk about that. Is it 
a patent issue among others?
    Mr. EMANUEL. Yes, it is a patent issue.
    Ambassador PORTMAN. A trademark issue?
    Mr. EMANUEL. Exactly. We talk about it from intellectual 
property, but here is a manufacturer, about 400 some odd jobs. 
They have a facility here and one in Alabama, and they are 
competing against a Chinese operation that does a total knock-
off.
    Ambassador PORTMAN. We would love to work with you on that. 
I should have said earlier in my testimony when more members 
are here, we are very interested in pursuing those individual 
cases, and we will do aggressively. One reason I want somebody 
in Beijing is to be able to do it even more directly with our 
embassy in Beijing.
    Mr. EMANUEL. Thank you also for taking the time to stay 
behind.
    Ambassador PORTMAN. Thank you, Rahm.
    Mr. SHAW. Well, we thank you very much. It is wonderful to 
have you back here, and it is all too rare in this political 
climate to see the mutual respect between the members of this 
Committee and you as a member of the administration, which we 
greatly appreciate. Thank you very much. We are adjourned.
    [Whereupon, at 4:58 p.m., the hearing was adjourned.]
    [Questions submitted from Chairman Thomas, Mr. Herger, Mr. 
Ramstad, Mr. Weller, Mr. Hulshof, Mr. Brady, and Mr. Nunes to 
the Honorable Rob Portman, and his responses follow.]

       Question from Chairman Thomas to the Honorable Rob Portman

    Question: The House passed H.R. 3283 last year, and sec. 5 
contained a long list of commitments voluntarily taken on by the 
Chinese in the U.S.-China Joint Commission for Commerce and Trade 
process. For example, the Chinese committed to increase civil and 
criminal prosecutions of intellectual property violators and to ensure 
all government agencies are using legal software by the end of 2005. 
Did China meet these commitments? If not, how will the Administration 
react?
    Answer: With regard to IPR prosecutions, some U.S. companies report 
that Chinese authorities have been working harder to penalize 
violators, as China committed to do. Our law enforcement agencies have 
seen a degree of increased cooperation from China's public security 
ministry on trans-border cases, which we and China are seeking to 
expand. In general, however, copyright owners report that they have not 
seen significant numbers of prosecutions, and trademark owners report 
that their ability to bring criminal cases has only marginally 
increased. U.S. companies continue to report that Chinese authorities 
rarely take effective action, violators pay token fines, infringing 
goods end up back on the street, and almost no one is prosecuted 
criminally. This is in part because China still maintains volume and 
value thresholds that allow commercial scale violations to escape 
criminal procedures and penalties. Much more is needed, and the 
solutions need to be top-down, politically driven and consistent.
    China agreed at the U.S.-China Joint Commission on Commerce and 
Trade meetings in 2004 and 2005 to ban government use of unlicensed 
software by the central, provincial and local governments, and to 
extend this ban to large enterprises, including state-owned 
enterprises, this year. China tells us that its central government 
program has been completed. However, they have not provided us with 
specific information to confirm this and we are concerned that they do 
not have an effective audit process in place. We also have not seen 
effective steps taken to reduce use by large enterprises of unlicensed 
software. I have made it clear to my counterparts that the Chinese 
government needs to allocate the budget needed to ensure that 
governments at all levels use only licensed software, and to take 
verifiable steps to make sure this is happening.

   Questions from Representative Herger to the Honorable Rob Portman

    Question: Since U.S. fruit and vegetables do not receive amber box 
subsidies, what trade negotiation procedure can we use to assure the 
U.S. fruit and vegetable growers they will see European fruit and 
vegetable subsidies be reduced?
    Answer: In addition to the United States proposing the EU cut its 
allowed overall trade distorting domestic support by 75%, it has also 
suggested the EU cut its allowed aggregate measure of support (AMS) by 
83% and product-specific caps be set at a 1999-2001 base period. The EU 
has offered to cut its allowed AMS by 70%. Since EU fruit and vegetable 
subsidies have historically totaled roughly $10 billion and account for 
just under one-fourth of all EU AMS, we can expect these products to be 
among the first to make significant contributions in cuts to EU 
domestic support. In addition, a modest level of export subsidy support 
for EU fruits and vegetables will be fully eliminated by 2013. The 
elimination of export subsidies, along with an aggressive U.S. market 
access proposal will mean that trade for U.S. fruits and vegetables in 
all foreign markets will face fewer barriers and trade distortions.

    Question: Regarding Ecuador, I am concerned about U.S. businesses 
that have been subjected to unfair practices and corruption in the 
Ecuadorian judicial system. It appears that the system encourages 
Ecuadorian interests to exploit and blackmail U.S. companies by 
bringing unfounded actions against them in Ecuador. I would like to 
know how your office is pursuing this matter, and further, whether you 
believe it will be possible to resolve such difficulties prior to 
moving ahead with a free trade agreement?
    Answer: We share your concern about the outstanding investment 
disputes and have repeatedly reminded the government of Ecuador that 
resolving these disputes is important both for Ecuador's investment 
climate and for Congressional passage of the free trade agreement we 
are negotiating. We view our role as encouraging foreign governments to 
promote the fair and prompt resolution of disputes involving U.S. 
investors, consistent with the rule of law. Further, it is in Ecuador's 
interest to demonstrate that investors receive fair and expeditious 
treatment under its judicial and administrative systems. As we continue 
our negotiations with Ecuador, we will continue to work hard to get 
these disputes resolved as soon as possible.

   Questions from Representative Ramstad to the Honorable Rob Portman

    Question: The medical technologies healthcare sectoral initiative 
in the Doha Development Agenda (DDA) would eliminate tariffs on a range 
of healthcare related products in WTO members. The remaining tariffs--
usually in the 10-20 percent range--are almost entirely in developing 
countries, so this initiative is helpful in reducing healthcare costs 
in these countries. How do you see these ``zero-for-zero'' initiatives 
proceeding in the DDA, and the healthcare sectoral in particular?
    Answer: We were pleased to achieve a specific mention of sectoral 
initiatives as a key part of the NAMA modality in the Hong Kong 
Ministerial text. We see negotiations on sectoral initiatives that 
eliminate or harmonize tariffs as an essential element of the ongoing 
DDA negotiations on non-agricultural market access (NAMA). While we 
believe that a Swiss tariff-cutting formula will deliver increased 
overall market access, sectoral initiatives offer an avenue to go 
further than the formula and create new opportunities for U.S. 
exporters.
    On February 27, Singapore and Switzerland joined the United States 
in formally tabling at the WTO a proposal to eliminate tariffs on 
medicines and medical devices. We have worked closely with health-
focused NGO groups in creating this proposal. A recent research paper 
published by the AEI-Brookings Joint Centre finds that several 
countries' taxes and tariffs inflate the price of medicines to patients 
by around 10% and often higher.\1\ Last year a report by the World 
Health Organization confirmed that many countries, several of which are 
grappling with severe public health problems such as HIV/AIDS, TB and 
malaria, continue to impose import tariffs on medicines and medical 
devices. The WHO urged countries to remove these tariffs and argued 
that the loss of government revenue from their removal will be 
insignificant.
---------------------------------------------------------------------------
    \1\ `Still Taxed to Death' by Roger Bate, Richard Tren and Jasson 
Urbach, available at 
http://www.aei-brookings.org/publications/abstract.php?pid=930.
---------------------------------------------------------------------------
    The Hong Kong Ministerial text directs Members to determine which 
sectors are viable for inclusion in the overall tariff cutting package 
by April 30, 2006. In order to advance sectoral proposals in the WTO, 
we must increase participation, especially by developing countries. We 
are working both in Geneva and on a bilateral basis to encourage key 
countries to participate in sectors of interest. Industry groups are 
coordinating with their counterparts overseas and in the medical 
technologies sectoral, NGO groups are assisting with outreach. Yet more 
work remains. We need to see visible support from Europe, African 
countries such as Kenya, U.S. FTA partners such as Morocco, Mexico, 
Chile and Thailand, as well as other ASEAN countries. Important issues 
such as the precise products to be covered by the sectoral initiative, 
options for addressing sensitive products, and flexibility for 
developing countries, will be negotiated in each sector group.

    Question: It appears the United States is well on the way to 
completing its talks with Vietnam as part of the process for Vietnam 
joining the World Trade Organization. I have heard conflicting reports 
about these negotiations on whether the U.S. wants to include a special 
textile safeguard mechanism in an agreement with Vietnam--an action I 
would strongly advise against. With most of the world no longer subject 
to textile and apparel quotas, I fail to see an economic argument in 
favor of a mechanism that would continue to impose quotas on Vietnam, 
which accounts for only 2 to 3 percent of all imports of textiles and 
apparel into the U.S. Given the confusion on this issue, I would like 
to understand better the potential costs and benefits of tabling a 
proposal for a special textile safeguard in the negotiations with 
Vietnam. Therefore, I would appreciate hearing your position on this 
issue, and your views on the following points:

    a.  Since Vietnam considers quota free treatment for their textile 
and apparel products to be a major benefit of WTO membership, it is 
clear that getting good commitments from the Vietnamese on things like 
market access, services and intellectual property would be jeopardized 
if the U.S. were to press for inclusion of a textile safeguard in the 
agreement. Therefore, what would the U.S. gain from having a textile 
safeguard in this agreement that would be worth putting at risk 
substantial benefits to U.S. exporters?
    b.  Notwithstanding pressure from its own domestic textile 
industry, the European Union did not negotiate a textile safeguard with 
Vietnam. If the U.S. bows to similar pressure and pushes for Vietnam to 
accept a textile safeguard, why would we want to provide a benefit to 
the Europeans from a concession that we alone would have to pay?
    c.  Given that all previous legislation to continue the 
normalization of political and economic relations with Vietnam has 
passed Congress with strong bipartisan majorities, do you think that 
having a textile safeguard is necessary for Congress' approval of 
legislation to give Vietnam permanent normal trade relations status, 
and if so, why?

    Answer: The United States is continuing to negotiate a bilateral 
market access agreement with Vietnam as part of its WTO accession. The 
negotiations are conducted on two tracks: (1) bilateral negotiations to 
open Vietnam's markets to WTO Member exports, and (2) multilateral 
negotiations in the Working Party to bring Vietnam's trade regime into 
conformity with WTO rules and obligations. We have made substantial 
progress, including in the most recent visit of our negotiating team to 
Hanoi in January of this year. We will continue our discussions in 
Geneva soon.
    With respect to textiles, the Administration has not proposed a 
special safeguard. However, we have made clear to Vietnam that we will 
be looking closely at its trading regime, including areas such as 
industrial subsidies, an issue that the U.S. textile industry has 
flagged as a potential concern in the negotiations. We have made 
similar comments to U.S. stakeholders who have, as you indicate, a 
range of views on this issue.
    We want to work with the Congress and industry on a strong 
commercial agreement that helps to strengthen our bilateral trading 
relationship with Vietnam.

    Question from Representative Weller to the Honorable Rob Portman

    Question: I recently introduced a bill that would force 
transparency on the traditionally opaque decisionmaking in the 
Committee to Implement Textile Agreements, or CITA. I know it is a U.S. 
priority to encourage our trading partners to adopt transparent 
decisionmaking processes as they relate to trade policy, and page 22 of 
your power point presentation says that promoting transparency is a 
priority with China (ironically, right after the priority of China 
textile safeguards). Doesn't it hurt U.S. credibility on transparency 
to allow CITA to operate in a black box, and as USTR is a member agency 
of CITA, what is your view on introducing to CITA notice and comment 
procedures that are consistent with the Administrative Procedures Act?
    Answer: The Committee for the Implementation of Textile Agreements 
(CITA) is the interagency group vested with making sure that the 
textile provisions of our trade deals work. For instance, they 
administer the ``short supply'' processes and other aspects of our free 
trade agreements. We are aware of the concerns that you raised about 
the transparency of CITA's operations and are working to improve it, 
where appropriate.
    For example, the new short supply process for the United States-
Dominican Republic, Central American Free Trade Agreement (CAFTA-DR) is 
anticipated to involve significant public notice as well as an open 
registration for email alerts. The statutory requirement is that these 
decisions be made in 30 business days. Interim regulations were 
published in the Federal Register on February 24.
    Despite our efforts to enhance the transparency of CITA's work, we 
feel it would be inappropriate to subject all of CITA's actions to 
prior notice and comment procedures. For example, in many cases, giving 
a foreign government prior notice of CITA's intentions could harm U.S. 
interests and interfere with our conduct of foreign policy. U.S. 
Commerce Secretary Gutierrez, on behalf of CITA, has conveyed the 
Administration's position on Congressman Weller's legislative proposal 
on this matter.

   Questions from Representative Hulshof to the Honorable Rob Portman

    Question: An interim WTO panel recently ruled against the European 
Union's de facto moratorium on certain genetically modified crops. The 
EU's inertia on this issue results in the loss of up to $300 million in 
agricultural export sales annually. I am confident that you know how 
important these foreign agricultural markets are for American farmers. 
For instance, Missouri exports about 1 out of every 5 rows of corn and 
half of our soybean crop, and as more of these crops are farmed using 
biotech products, it is imperative that we continue to push the EU to 
end the ban on our Nation's biotech farm products. While the WTO's 
ruling is a strong step in the right direction, I fear the EU will 
ignore this ruling and continue their standing precedent on food safety 
policy and close their borders to our farm goods. In your opinion, what 
recourse does the U.S. have, and would you contemplate the filing of a 
WTO challenge against the EU's protectionist regulations?
    Answer: We of course share your views on the importance of foreign 
agricultural markets for American farmers, and we welcomed the results 
of the interim report of the panel in the EC-Biotech dispute. As you 
know, in the dispute the United States has argued that the EC's 
administration of its biotech approval procedures are inconsistent with 
the EC's WTO obligations. The interim report is an important step, but 
the Panel must still issue a final report, and then there will be the 
possibility for an appeal. In the event that the dispute results in a 
final finding that the EC is out of compliance with its WTO 
obligations, we would certainly hope and expect that the EC will 
proceed to comply with its WTO obligations. Although it would be 
premature at this point to speculate on what specific steps the United 
States might take should the EC fail to come into compliance with its 
WTO obligations, we can confirm that the United States would consider 
all the tools available to encourage the EC to comply.

    Question: European Trade Commissioner Peter Mandelson made a 
statement prior to the Hong Kong Ministerial that the EU is willing to 
consider a proposal by certain developing countries to amend TRIPS to 
include new mandatory patent disclosure requirements for genetic 
resources used in pharmaceutical or biotechnology products. The U.S. 
biotech industry maintains that such changes to U.S. patent laws would 
significantly frustrate the industry's research and development of new 
products for the public good. USTR has taken a position against these 
additional patent disclosure requirements. How do you plan to respond 
to the EU?
    Answer: This issue has been under discussion at the WTO over the 
past few years. USTR has submitted several position papers to the WTO 
TRIPS Council arguing against new disclosure requirements in the TRIPS 
Agreement, on the grounds that such requirements would not achieve the 
purported goals of ensuring prior informed consent upon access to 
genetic resources and equitable sharing of benefits arising from the 
use of genetic resources. Further, we are concerned that such 
requirements would undermine the innovation incentives built into the 
patent system by creating uncertainty in patent rights. We will 
continue to work in the WTO against the introduction of new disclosure 
requirements by encouraging countries to implement national contract-
based access and benefit sharing systems that promote the goals of 
prior informed consent and equitable sharing of benefits for use of 
genetic resources.

    Questions from Representative Brady to the Honorable Rob Portman

    Question: With respect to the DR-CAFTA implementation, which I 
understand will now proceed on a rolling basis, can you tell us how you 
will preserve the access that the trade is entitled to under the 
agreement for goods from the first country or countries on board? 
Specifically, how those countries, and more importantly U.S. importers, 
will have duty-free treatment upon importation when goods contain the 
inputs from another country for which the agreement is not yet in 
effect? I applaud the Administration for taking the responsible 
approach of delaying implementation with those countries not ready to 
implement their commitments, and proceeding with those that are ready. 
Nonetheless, it appears that USTR has sufficient proclamation authority 
as given by Congress in the implementing legislation to ensure there is 
a seamless transition for all parties from the CBTPA to the CAFTA and 
we encourage you to affirm that this is your intention. The 
Administration must ensure that the trade is not harmed by the rolling 
implementation.
    Answer: The rolling admission approach enables us to bring the 
CAFTA-DR into force for each country as it becomes ready to carry out 
its obligations under the agreement. This procedure, which our CAFTA-DR 
partners have encouraged, has enabled us to get the agreement underway 
in the shortest possible time. We recognize, however, that there are 
concerns that textile and apparel goods produced in a CAFTA-DR 
``party'' from materials made in a country that remains just a 
``signatory'' may become ineligible for preferential duty treatment.
    The most effective and practical way to ensure that our CAFTA-DR 
partners will be able fully to cumulate their production and receive 
tariff preferences is to bring each signatory into the agreement as 
soon as possible. We are working hard with our CAFTA-DR partners to 
accomplish that.
    The CAFTA-DR is now in force between the United States and El 
Salvador. We are making every effort to bring additional CAFTA-DR 
partners on board as soon as possible. As that occurs, it will help to 
reduce cumulation concerns.
    We have been consulting closely with representatives of our 
domestic textile and apparel industry to solicit their views on ways to 
address concerns on this subject. We are examining all avenues--
including existing Presidential authority and possible legislative 
action--that may be available to resolve these concerns. I look forward 
to working with you and your colleagues on the Ways and Means Committee 
as we seek an appropriate and timely resolution to this issue.

    Question: Continuing on this line of questioning, what happens for 
short supply designation requests if, for example, a short supply 
request is still pending when the FTA is in effect for the first 
country, which is subsequently approved? If another country then 
implements the FTA, would only the second country get to use the short 
supply designation and not the first country? We should not put the 
trade and such petitions in ``never land'' as we transition from CBTPA 
to DR-CAFTA.
    Answer: All items on the approved CBTPA short supply list as of 
March 1, 2006 were incorporated into CAFTA-DR. Going forward, CAFTA-DR 
provides a new, streamlined procedure for considering new short supply 
requests. Any potential producer or supplier, even if located in a 
country that has not yet completed CAFTA-DR implementation, may submit 
a petition under the new procedure. Once a product has been designated 
as not commercially available in the CAFTA-DR region, the benefit of 
that designation extends to all CAFTA-DR parties.
    Under this new procedure, within 30, or at most 45, business days 
from the receipt of a petition, CITA will either match the petitioner 
with a regional supplier of that input or designate the input as not 
commercially available, allowing manufacturers to obtain the input from 
any source and maintain duty-free treatment for the finished product. 
We believe that the new CAFTA-DR process will provide better and faster 
results for both producers and suppliers.

    Question: We support the long term objective of establishing a free 
trade area linking the countries of the Western Hemisphere. It now 
seems to be increasingly clear that some countries in the Hemisphere 
will continue to be holdouts. In the Committee's report on CAFTA, we 
expressed our interested in seeing broader cumulation provisions in 
future agreements. What steps is USTR taking to ensure that 
opportunities for cumulation are fully developed in our trade 
agreements and specifically, in the current Andean negotiations? 
Cumulation among our FTA partners offers an important strategic 
opportunity to put some real muscle into a free-trade oriented 
hemispheric system.
    Answer: Cumulation is an important component in promoting 
hemispheric integration. In the Andean FTA negotiations, we worked 
closely with our Andean partners to ensure that the proposed agreement 
will allow cumulation for all products and between all participating 
countries. We expect that the cumulation provisions in the FTA will 
generate new commercial opportunities that will encourage Andean 
economies to integrate with each other as well as with the United 
States.

    Questions from Representative Nunes to the Honorable Rob Portman

    Question: We are on the road to completing free trade agreements 
(FTAs) with South Korea and Thailand--both important markets for fruits 
and vegetables. As of today, we have completed about 10 FTAs, and the 
fruit and vegetable industry has supported each one in an attempt to 
gain market access. However, after agreements are signed, they find 
market access unrealized because of sanitary and phytosanitary (SPS) 
restrictions imposed by those countries. How can we learn about the SPS 
restrictions during the negotiations so that we can elect not to 
complete the South Korea FTA until all SPS barriers are disclosed?
    Answer: The fruit and vegetable industry can assist us in this 
effort prior to the negotiations by identifying market access 
priorities in the Republic of Korea. With the access priorities clear, 
USTR will be better equipped to solicit information related to Korea's 
current and anticipated sanitary and phytosanitary regulatory 
requirements for the entry of specific fruit and vegetable products 
into Korea. We therefore encourage U.S. fruit and vegetable industry 
interests to testify during the interagency Trade Policy Staff 
Committee (TPSC) public hearing concerning the proposed U.S.-Korea FTA, 
scheduled for March 14, 2006(as notified in the Federal Register on 
February 9, 2006). This hearing will assist USTR in clarifying the 
negotiating objectives for the proposed FTA before negotiations get 
underway, based on advice on as to how specific goods should be treated 
under the proposed agreement.

    Question: I believe that our Nation can compete against any other 
in terms of efficiency and quality, including in the production of 
agriculture commodities. My district is the largest agriculture 
district in the United States, with the most diverse crop base in the 
nation. Many of the crops in my district are not traditional Farm Bill 
crops and are not offered domestic support of any kind. These farmers 
are particularly susceptible to trade policy. I believe it is essential 
that meaningful and measurable market access be part of any trade pact 
Congress is asked to support. However, even when we are assured this 
market access we have found that trading partners have put up 
roadblocks. Recently, a farmer in my district has tried to access the 
Moroccan market under the new FTA and failed. This was the first effort 
my district has made in shipping to Morocco under the FTA. The message 
that has been sent back to us is not a good one. I would like to know 
what USTR is doing to make certain not only that agreements in the 
pipeline are good ones, with meaningful liberalization of trade in 
theory, but also what USTR is doing to make certain that once these 
agreements are reached we get the access we were promised? The time it 
is taking to resolve these barriers hurts my farmers and it hurts my 
ability to effectively represent the importance of FTAs in the future.
    Answer: USTR and other U.S. agencies work in a number ways to 
assure that U.S. exporters receive the market access to which they are 
entitled, including under our FTAs and other international agreements. 
We cooperate daily with other agencies in responding directly to 
complaints such as this one brought to our attention by U.S. exporters 
and companies. We hear from companies directly through numerous 
channels, including industry advisory groups and industry associations.
    A case in point is our effort to assist your constituent who has 
had a problem exporting almonds to Morocco. Working with the U.S. 
Embassy in Rabat, USDA, and U.S. Customs and Border Protection, USTR 
carefully reviewed Morocco's decision that the almonds failed to meet 
rule of origin requirements. We wrote to the Moroccan government to 
express our view that the Moroccan customs service erred in its 
decision. We requested that the almonds be given FTA treatment and that 
the Moroccan government change its policy regarding this type of case. 
We will be following up to ensure that Morocco responds to this request 
and to assure that this problem does not arise for other U.S. 
exporters.
    In addition, as with our other FTAs, the agreement with Morocco has 
provisions to allow our countries to work together to assure full 
implementation and avoid similar complaints in the future: The Customs 
Administration chapter, for example, spells out how the two sides will 
cooperate to help assure efficient customs processing. The agreement 
obligates our two countries to identify contact points to address any 
matter pertaining to the agreement. The FTA also creates a Joint 
Committee that meets annually to review the working of the agreement 
and to identify steps that might be needed to make sure that the FTA is 
fully meeting its objectives.

    [Submissions for the record follow:]

   Statement of Center for Policy Analysis on Trade and Health, San 
                         Francisco, California

EXECUTIVE SUMMARY

I. PUBLIC HEALTH ISSUES ARE CRITICAL TO TRADE POLICY
    The United States has signed and is currently negotiating 
multilateral and bilateral trade agreements with significant 
implications for public health and health care. These agreements can 
provide a basis for altering domestic U.S. laws and policies, as well 
as those of our trading partners. Vital issues in current international 
trade negotiations which are directly related to health include: 
Intellectual property, affecting access to affordable prescription 
drugs; Trade in essential human services such as health care and water; 
Standards for health professional licensing; Regulation of alcohol and 
tobacco distribution; Standards for the safety of plants and food; and 
Rules on how state and federal government entities procure goods and 
services, such as affordable medicines for veterans and seniors.

II. INTELLECTUAL PROPERTY PROVISIONS REDUCE ACCESS TO MEDICINES; 
        DMINISTRATION INTENDS TO DISREGRD CONGRESS ON REIMPORTATION
    Controversies regarding intellectual property (IP) provisions are 
delaying conclusion of agreements with Central America, Thailand, and 
South Africa. Public health officials, clinicians, and patients are 
concerned that trade policies designed to extend pharmaceuticals' 
monopoly rights will delay competition from generic medicines, propping 
up high prices for brand name drugs in the U.S., and effectively 
denying access to life-saving medicines in developing nations. These 
provisions include extended terms for patents and for data exclusivity. 
They present barriers to compulsory licensing, thus further undermining 
the ability of governments to protect public health.
    In 2005, Congress passed H.R. 2862, the ``Science, State, Justice, 
Commerce, and Related Agencies Appropriations Act, 2006,''that calls 
for the USTR to refrain from negotiating trade provisions that would 
bar the reimportation of prescription drugs into the U.S. 
Unfortunately, President Bush's signing statement asserts his intent to 
treat Congress' legislation on reimportation as ``advisory.'' 
Disregarding this important legislation would both flout the will of 
the people's representatives in Congress, and continue an unfortunate 
and unpopular policy.

III. PUBLIC HEALTH MUST BE REPRESENTED IN TRADE NEGOTIATIONS
    Following months of discussions, CPATH and a coalition of public 
health groups filed a suit to demand that corporate interests be 
balanced with public interest representation on six influential U.S. 
Industry Trade Advisory Committees (ITACs). Partners include the 
California Public Health Association-North, the Chinese Progressive 
Association, Physicians for Social Responsibility, and the American 
Nurses Association, represented by the legal firm Earthjustice. In 
response, USTR and the Department of Commerce published a request for 
nominations to two ITACs not named in our suit, which are heavily 
dominated by the pharmaceutical industry. While a positive step 
forward, USTR has given no deadline for selecting appointees even to 
these two committees, and has delayed finalizing the appointment of a 
representative from the Generics Pharmaceutical Association to ITAC 3. 
USTR must take positive and immediate steps to include public health in 
determining critical trade policies.

IV. CPATH RECOMMENDATIONS
    CPATH urges Congress to pass legislation that promotes transparency 
and democratic accountability at all levels of the trade negotiation 
process, including enabling public access to all trade advisory 
committee meetings, proceedings and submissions related to multilateral 
and bilateral trade negotiations. We recommend an assessment of the 
impact of the trade agreements on population health, and follow-up 
measures to assure, based on such assessment, that these agreements do 
not have an adverse impact on health.
                                 ______
                                 
I. PUBLIC HEALTH ISSUES ARE CRITICAL TO TRADE POLICY:
    The United States has signed and is currently negotiating 
multilateral and bilateral trade agreements with significant 
implications for public health and health care. These agreements can 
provide a basis for altering domestic U.S. laws and policies, as well 
as those of our trading partners. Vital issues in current international 
trade negotiations which are directly related to health include:

      Intellectual property, affecting access to affordable 
prescription drugs;
      Trade in essential human services such as health care and 
water,
      Standards for health professional licensing,
      Regulation of alcohol and tobacco distribution;
      Standards for the safety of plants and food; and
      Rules on how state and federal government entities 
procure goods and services, such as affordable medicines for veterans 
and seniors.

    Trade policies can undermine efforts of national, state, and local 
municipalities to enact a diverse array of public health regulations: 
they could prohibit public school systems from requiring limits on 
school soda machines, and they could even remove privacy protections 
from medical records. Trade policies could also promote privatization 
of public water supplies and other vital services.

II. INTELLECTUAL PROPERTY PROVISIONS REDUCE ACCESS TO MEDICINES; 
        ADMINISTRATION INTENDS TO DISREGARD THE WILL OF CONGRESS:
    Controversies regarding intellectual property (IP) provisions are 
delaying conclusion of agreements with Central America, Thailand, and 
South Africa. Public health officials, clinicians, and patients are 
concerned that new policies designed to extend pharmaceuticals' 
monopoly rights will hinder access to life-saving medicines. The IP 
provisions in these bilateral and regional agreements would delay 
competition from generic medicines, helping to prop up high prices for 
brand name pharmaceuticals in the U.S., and effectively deny access to 
life-saving drugs in developing nations. IP provisions that would 
discourage generic competition include extended terms for patents and 
for data exclusivity. Also, new provisions present barriers to 
compulsory licensing, thus further undermining the ability of 
governments to protect public health.
    The pharmaceutical industry argues that high prices allow them to 
recoup expenses from costly research and development, and that since 
other (developed and developing) countries charge less for medications, 
they are essentially getting a ``free ride'' from the U.S. However, 
this approach is misguided and based on inaccurate assumptions. In 
actuality, European pharmaceutical companies do invent new drugs at 
proportionately the same level as U.S. companies and they do recoup 
their research and development dollars, while charging substantially 
less for their products (see Light and Lexchin article, attached). In 
addition U.S. taxpayers pay for much of the basic research that is 
conducted in this country. The current patents system maintains high 
prices, and has resulted in producing hundreds of ``me too'' products, 
(e.g., slight variations on allergy medications,) while there are not 
enough innovative products for life-threatening, highly prevalent 
diseases such as tuberculosis, and HIV-AIDS.
    The ``free rider'' argument was used to justify the U.S. position 
on medicines in the U.S.-Australia FTA. CPATH found that the U.S.-
Australia FTA contained provisions prohibiting reimportation of drugs 
from Australia to the U.S., and that the agreement would directly 
conflict with pending Congressional legislation to authorize 
reimportation of less expensive medications. CPATH found that the 
agreement would also give drug companies the right to challenge drug 
listing, purchasing and reimbursement decisions by the U.S. Department 
of Veterans Affairs, Medicare, Medicaid and other government 
authorities, which could lead to higher drug prices for the vulnerable 
populations affected.
    CPATH submitted public testimony to the Ways and Means Committee of 
the U.S. House of Representatives, and worked closely with 
Congressional Representatives and Senators concerned with public 
health. Many drew a line in the sand, calling for an end to trade rules 
in the future that may limit access to medicines.
    In 2005, Congress passed H.R. 2862, the ``Science, State, Justice, 
Commerce, and Related Agencies Appropriations Act, 2006,that calls for 
the USTR to refrain from negotiating trade provisions that would hinder 
Congress' ability to pass legislation for reimportation of prescription 
drugs.
    Unfortunately, President Bush's signing statement asserts his 
intent to treat Congress' legislation on reimportation as ``advisory'' 
only. Disregarding this important legislation would both flout the will 
of the people's representatives in Congress, and continue an 
unfortunate and unpopular policy.

III. PUBLIC HEALTH REPRESENTATION IN TRADE NEGOTIATIONS:
    It is important for Congress, the U.S. Trade Representative (USTR) 
and the Department of Commerce to receive information and guidance from 
the public health and health care community on trade negotiations which 
affect the public's health, and to benefit from a transparent public 
debate.
Public health vastly outnumbered:
    While there is no representation on the trade advisory committees 
for public health regarding the impacts of international trade on 
public health and health care (other than a representative from nursing 
on the Tier 2 labor advisory committee), there is substantial 
representation from the pharmaceutical, tobacco, alcohol, food 
processing and health insurance industries. In fact, on six relevant 
committees (dealing with issues ranging from distribution of tobacco 
and alcohol to regulation of hospital services, to intellectual 
property), there are a total of 42 representatives from these 
industries, and absolutely zero public health representatives.
Public health request:
    The public health community has called for representation on the 
trade advisory committees, which is both legally required and a sound 
policy step. In May 2005, several organizations, including the American 
Public Health Association, American College of Preventive Medicine, 
American Nurses Association, Doctors for Global Health, National 
Association of Community Health Centers, California Conference of Local 
Health Officers, Physicians for Social Responsibility (PSR), Physicians 
for Human Rights, and CPATH formally requested representation for 
public health on 6 advisory committees affecting public health. These 
committees and the issues they address are described below:

------------------------------------------------------------------------
                                              Issues Relevant to Public
                 Committee                             Health
------------------------------------------------------------------------
Consumer Goods (ITAC 4)                     Trade in tobacco, alcohol,
                                             processed foods and other
                                             consumer goods
------------------------------------------------------------------------
Distribution Services (ITAC 5)              Distribution of food,
                                             alcohol, tobacco,
                                             pharmaceuticals, hazardous
                                             products
------------------------------------------------------------------------
Information and Communications              Information technologies and
 Technologies, Services, and Electronic      services including those
 Commerce (ITAC 8)                           used to store and transmit
                                             medical information, and to
                                             conduct telemedicine and
                                             research
------------------------------------------------------------------------
Services and Finance Industries (ITAC 10)   Health-related services
                                             including health care,
                                             water supply, sanitation,
                                             research, health
                                             professional education and
                                             other education
------------------------------------------------------------------------
Customs Matters and Trade Facilitation      Movement of goods which
 (ITAC 14)                                   affect injury control
                                             (tobacco, alcohol, and
                                             firearms) and government
                                             ability to safeguard public
                                             health
------------------------------------------------------------------------
Intellectual Property Rights (ITAC 15)      Terms of access and pricing
                                             for pharmaceuticals, and
                                             copyrighted materials for
                                             research
------------------------------------------------------------------------
Standards and Technical Trade Barriers      Standards and measures
 (ITAC 16)                                   affecting environmental
                                             health and safety,
                                             agricultural and processed
                                             food safety, and alcohol
                                             products.
------------------------------------------------------------------------

    CPATH's May 2005 letter also requested that the USTR create a new 
Tier 2 committee to address public health implications of trade, and 
that the USTR promote transparency and democratic accountability at all 
levels of the trade negotiation process, including enabling public 
access to all trade advisory committee meetings, proceedings and 
submissions related to multilateral and bilateral trade negotiations.
    Members of the tobacco control community responded to a published 
requested for nominees to the advisory committee on Agriculture 
Committee on Cotton, Peanuts & Tobacco in March, 2005. The USTR 
appointed Judy Wilkinfeld of the Campaign for Tobacco Free Kids to this 
ATAC. However, Ms. Wilkenfeld was unable to serve due to illness. 
Although the USTR stated in October, 2005 that they would appoint her 
colleague, Eric Lindblom, as a replacement, they have delayed actually 
doing so. The tobacco control groups also sent a companion letter in 
May, 2005, supporting the requests of CPATH and colleagues.
    The USTR still has not implemented the appointment announced months 
ago of Shawn Brown from the Generic Pharmaceuticals Association to ITAC 
3, which also includes significant representation by brand name 
pharmaceutical companies. We applaud this appointment and urge that Mr. 
Brown be seated immediately.
    The USTR moves at snail's pace to appoint public health 
representatives, while feverishly negotiating binding agreements 
without benefit of public health expertise:
    On December 16, 2005, in response to our imminent lawsuit, the USTR 
published a Federal Register notice calling for public health 
representatives to apply to two advisory committees: ITACs 3 
(Chemicals) and 15 (IP).
    The good news is that these are important committees for 
pharmaceutical issues. The announcement calls for representatives from 
public health organizations who do not work for industries that are 
already represented.
    The bad news, however, is that the announcement gave no timeline 
for making appointments. CPATH sent a letter to the USTR and Department 
of Commerce in December asking for the deadline for applications and 
appointments. We have received no response from either office.
    In response, CPATH and our colleagues solicited applications from 
several well-qualified applicants:
    William Von Oehsen, General Counsel to the Public Hospital Pharmacy 
Coalition (PHPC), which is a coalition of the National Association of 
Public Hospitals and Health Systems (NAPH);
    Professor Kevin Outterson of the West Virginia University School of 
Law;
    Sharon Treat, Executive Director of the National Legislative 
Association on Prescription Drug Prices (NLARx);
    Hongmai Pham, MD, Johns Hopkins University; and
    Kyle Kinner, JD, MPA, Director, Policy and Programs, Environment 
and Health,Physicians for Social Responsibility.
    CPATH has sent letters of support for these individuals and we may 
nominate others. So far USTR has acknowledged to these individuals that 
they've received their applications; but there has been no other 
progress, and no response to CPATH.
    As of this date, there are still no public health representatives 
on the USTR advisory committees. The public health community and 
policy-makers are disheartened that since we first approached the USTR, 
numerous trade agreements have been negotiated and are currently in 
process: CAFTA has been approved, the Hong Kong WTO ministerial 
occurred in December, negotiations are in process with Thailand, 
Southern Africa, and the Andean nations (and completed with Peru), all 
without our participation.
Public health sues USTR
    On December 15, 2005, CPATH and a coalition of public health groups 
including California Public Health Association-North, the Chinese 
Progressive Association and Physicians for Social Responsibility, filed 
suit against the USTR, to demand that corporate interests be balanced 
with public interest representation on the U.S. Industry Trade Advisory 
committees. We called for representation on six relevant committees, 
per our May 2 letter (ITACS 4, 5, 8, 10, 14, and 16). The USTR has 90 
days to respond, or until March 15. A magistrate has been appointed but 
there has been no response from the USTR.
    The Federal Advisory Committees Act (FACA) requires that advisory 
committees be ``fairly balanced in terms of the points of view 
represented.'' Though the U.S. General Accounting Office recently 
issued a report criticizing the USTR for not opening most of its 
committees to public interest representatives, the USTR has failed, 
despite repeated requests from CPATH and others, to appoint 
representatives of public and environmental health organizations to 
several ITACs. Thus, we have been forced to go to court, seeking to 
ensure balance on these federal advisory panels. Several plaintiffs in 
the lawsuit voiced their frustration:
    ``Currently the health advisory committees are made up exclusively 
of industry representatives,'' said Peter Abbott,MD MPH, President of 
California Public Health Association-North. ``The foxes are not just 
guarding the hen house, but they are selling the eggs in a private 
market. That's no way for international trade policy to be made.''
    ``You would think that a trade panel empowered to make public 
health decisions that will impact millions of people would seek out a 
few doctors and medical experts with no ties to industry,'' said Kyle 
Kinner, JD MPA, of Physicians for Social Responsibility. ``But 
unfortunately, that is not happening. Hopefully this legal action will 
bring some balance to the process.''

IV. CPATH'S RECOMMENDATIONS:
    We urge Congress to pass legislation that promotes transparency and 
democratic accountability at all levels of the trade negotiation 
process, including enabling public access to all trade advisory 
committee meetings, proceedings and submissions related to multilateral 
and bilateral trade negotiations. The public interest, including public 
health, must be represented on the Tier 3 Industry Trade Advisory 
Committees. In addition, we recommend that a new tier-2 public health 
advisory committee be created to provide information, reports, and 
advice to and consult with the President, to Congress, and to the U.S. 
Trade Representative (USTR), in accordance with the Trade Act of 1974, 
as amended. In addition to these changes to the negotiation process, we 
recommend:

      Congress should not extend ``Fast Track.''
      An assessment of the impact of the trade agreements on 
population health, and assure based on such assessment that these 
agreements do not have an adverse impact on health.
      Exclude vital human services such as health care and 
water, and intellectual property rules that affect affordable 
medications, from trade negotiations and challenge under free trade 
agreements.
      Support enforceable commitments to advancing population 
health, and to achieving universal access to health care, affordable 
medications, and safe, affordable water in the U.S. and 
internationally.
                                 ______
                                 

Foreign free riders and the high price of U.S. medicines
Donald W Light, Joel Lexchin
    The U.S. government, backed by the pharmaceutical industry, wants 
to convince Americans that they're paying more for drugs because 
they're contributing more than their fair share of the costs of 
research and development. Not so, argue two researchers who have looked 
at the evidence.
Department of Psychiatry, University of Medicine and Dentistry of New 
Jersey
Donald W Light, professor
School of Health Policy and Management, York University, Toronto ON, 
Canada
Joel Lexchin, associate professor
Correspondence to: DWLight, [email protected]
    BMJ 2005;331:958--60
    The United States government is engaged in a campaign to 
characterise other industrialised countries as free riding on high U.S. 
pharmaceutical prices and innovation in new drugs.\1\ This campaign is 
based on the argument that lower prices imposed by price controls in 
other affluent countries do not pay for research and development costs, 
so that Americans have to pay the research costs through higher prices 
in order to keep supplying the world with new drugs.\2\ Supporters of 
the campaign have characterised the situation as a foreign rip-off.\3\ 
We can find no evidence to support these and related claims, and we 
present evidence to the contrary. Furthermore, we explain why the 
claims themselves contradict the economic nature of the pharmaceutical 
industry.
---------------------------------------------------------------------------
    \1\ McClellan MB. Speech before first international colloquium on 
generic medicine. Washington, DC: U.S. Food and Drug Administration, 
2003. www.fda.gov/oc/speeches/2003/genericdrug0925.html (accessed 15 
Aug 2005).
    \2\ Aldonas G. International trade and pharmaceuticals. Washington, 
DC: U.S. Senate Finance Committee, Subcommittees on Health and Trade, 
2004:1-17.
    \3\ Safire W. The donut's hole. New York Times 2003 Oct 27:A21.
---------------------------------------------------------------------------
Origins of the campaign
    The campaign, strongly backed by the pharmaceutical industry, seems 
to have started in the late 1990s as a response to a grass roots 
movement started by senior citizens against the high prices of 
essential prescription drugs.\4\ This issue was the most prominent one 
for both parties in the 2000 elections and has since been fuelled by a 
series of independent reports documenting that U.S. drug prices are 
much higher than those in other affluent countries.5,6,7 The 
idea that other countries are exploiting the U.S. has led to a hearing 
of the U.S. Senate Committee on Health, Education, Labor and Pensions 
and was behind a Department of Commerce report that strongly advocated 
that other developed countries raise prices on patented medicines.\8\ 
But are higher prices really necessary?
---------------------------------------------------------------------------
    \4\ Light D, Castellblanch R, Arrendondo P, Socolar D. No exit and 
the organization of voice in biotechnology and pharmaceuticals. J 
Health Polit Policy Law 2003;28:473-507.
    \5\ National Institute for Health Care Management Research and 
Education Foundation. Prescription drug expenditures in 2001: another 
year of escalating costs. Washington, DC: NIHCM, 2002.
    \6\ Gross D, Schondelmeyer S, Raetzman S. Trends in manufacturer 
prices of brand name prescription drugs used by older Americans, 2000 
through 2003. Washington, DC: AARP Public Policy Institute, 2004.
    \7\ Families USA. Sticker shock: rising prescription drug prices 
for seniors. Washington, DC: Families USA, 2004.
    \8\ United States Department of Commerce. Pharmaceutical price 
controls in OECD countries: implications for U.S. consumers, pricing, 
research and development and innovation. Washington, DC: USDC, 2004.
---------------------------------------------------------------------------
The free rider myth
    We can find no convincing evidence to support the view that the 
lower prices in affluent countries outside the United States do not pay 
for research and development costs. The latest report from the UK 
Pharmaceutical Price Regulation Scheme documents that drug companies in 
the United Kingdom invest proportionately more of their revenues from 
domestic sales in research and development than do companies in the 
U.S. Prices in the UK are much lower than those in the U.S. yet profits 
remain robust.9,10
---------------------------------------------------------------------------
    \9\ Pharmaceutical Research and Manufacturers of America. 
Pharmaceutical industry profile 2004. Washington, DC: PhRMA, 2004.
    \10\ Department of Health. Pharmaceutical price regulation 
scheme:seventh report to parliament. London, DoH, 2003.
---------------------------------------------------------------------------
    Companies in other countries also fully recover their research and 
development costs, maintain high profits, and sell drugs at 
substantially lower prices than in the U.S. For example, in Canada the 
35 companies that are members of the brand name industry association 
report that income from domestic sales is, on average, about 10 times 
greater than research and development costs.\11\ They have profits 
higher than makers of computer equipment and telecommunications 
carriers \12\ despite prices being about 40% lower than in the U.S.\11\
---------------------------------------------------------------------------
    \11\ Patented Medicine Prices Review Board. Annual report 03. 
Ottawa: PMPRB, 2004.
    \12\ Statistics Canada. Financial performance indicators for 
Canadian business. Ottawa: Statistics Canada, 1996.
---------------------------------------------------------------------------
Lower prices do not lead to less research
    Mark McClellan, the former commissioner of the Food and Drug 
Administration, maintained that low prices are ``slowing the process of 
drug development worldwide.'' \1\ A corollary to this claim is that 
drug companies are shutting down their European operations because 
prices are too low and moving to the U.S. This assertion is 
contradicted by the industry's data. The European Federation of 
Pharmaceutical Industries and Associations reported that, between 1990 
and 2003, its members increased their research and development 
investments in Europe by 2.6-fold and in the U.S. by fourfold.\13\ The 
federation concluded that this differential was due to multiple 
factors, such as the economic and regulatory framework, the science 
base, the investment conditions, and societal attitudes towards new 
technologies.
---------------------------------------------------------------------------
    \1\ McClellan MB. Speech before first international colloquium on 
generic medicine. Washington, DC: U.S. Food and Drug Administration, 
2003. www.fda.gov/oc/speeches/2003/genericdrug0925.html (accessed 15 
Aug 2005).
    \9\ Pharmaceutical Research and Manufacturers of America. 
Pharmaceutical industry profile 2004. Washington, DC: PhRMA, 2004.
    \13\ European Federation of Pharmaceutical Industries and 
Associations. The pharmaceutical industry in figures. Brussels: EFPIA, 
2004.
---------------------------------------------------------------------------
    On several measures, other developed countries spend 
proportionately as much as the U.S. on research and development. The 
table presents the spending on research and development as a percentage 
of gross domestic product for eight developed countries.\14\ The U.S. 
is about at the median. Prices in the countries with better ratios than 
the U.S. were 31-36% less than those in the U.S.\15\ Pharmaceutical 
companies commit as large a percentage of sales to research and 
development in Europe as in the U.S., about 19% on average over the 
past seven years.9,13 This little reported fact contradicts 
the widely circulated claims that European countries deliberately 
ignore research and development costs in calculating prices.\1\
---------------------------------------------------------------------------
    \14\ Patented Medicine Prices Review Board. A comparison of 
pharmaceutical research and development spending in Canada and selected 
countries (2002). Ottawa: PMPRB, 2002.
    \15\ Patented Medicine Prices Review Board. Annua l repor t 00. 
Ottawa: PMPRB, 2001.
---------------------------------------------------------------------------
Europee no less innovative than the U.S.
    Contrary to claims of American dominance, pharmaceutical research 
and development in the U.S. has not produced more than its 
proportionate share of new molecular entities. The U.S. accounts for 
just under 48% of world sales and spent 49% of the global total on 
research and development to discover 45% of the new molecular entities 
that were launched on the world market in 2003, less than its 
proportionate share. European countries account for 28% of world sales, 
36% of total research and development spending, and 32% of new 
molecular entities, more than its proportionate share.\13\
Limited investment in breakthrough research
    Pharmaceutical research and development is traditionally divided 
into three categories: x Basic--work to discover new mechanisms and 
molecules for treating a disorder x Applied--work that develops a 
discovery into a specific practical application, including research on 
manufacturing processes and preclinical or clinical studies x Other--
work that includes drug regulation submissions, bioavailability 
studies, and post-marketing trials.
    Although all types of research are valuable, it is basic research 
that leads to important therapeutic breakthroughs. Only a fraction of 
overall industry expenditure is on basic research, and it does not 
require the high prices currently seen in the U.S. to support it.
    The Pharmaceutical Research and Manufacturers of America reports 
that companies invest on average about 18-19% of domestic sales into 
research.\9\ This figure is considerably higher than that produced by 
the U.S. National Science Foundation.\16\ Its 1999 data show that drug 
companies invest 12.4% of gross domestic sales on research and 
development (10.5% in-house and 1.9% contracted out), but only 18% of 
the amount spent in-house went on basic research. Assuming that 18% of 
contracted out research is also spent on basic research (the actual 
figure is not reported) then only 2.2% (18%.4%) of revenue goes to 
basic research. The after tax cost of $1 of research and development 
expenditures in the U.S. seems to be $0.53 to $0.61, owing to tax 
incentives to do research.\17\ Thus U.S. pharmaceutical companies 
devote a net of only about 1.3 cents (2.4%x(0.53+0.61)/2) of every 
dollar from sales to innovation.
---------------------------------------------------------------------------
    \16\ National Science Federation. Research and development in 
industry: 1999. Arlington: NSF, 2002.
    \17\ Bindra G, Sturgess J. Assessment of current competitiveness of 
Canadian R&D in the pharmaceutical industry. Ottawa: Industry Canada, 
1996.
---------------------------------------------------------------------------
    Only 10-15% of newly approved drugs provide important benefits over 
existing drugs.18,19 From a drug company's point of view, 
investing principally in research to produce new variations of existing 
drugs makes sense. Government protections from normal price competition 
do not distinguish between the lower risk, less costly derivative kind 
of research and high risk basic research needed to discover new 
molecules.
---------------------------------------------------------------------------
    \18\ Industrial interests versus public health: the gap is growing. 
Prescribe Int 2004;13:71-6.
    \19\ National Institute for Health Care Management Research and 
Education Foundation. Changing patterns of pharmaceutical innovation. 
Washington, DC: NIHCM, 2002.

 Ratio of pharmaceutical spending on research and development to gross domestic product and ratio of drug prices
                                           to U.S. prices, 2000 12,15
----------------------------------------------------------------------------------------------------------------
                                                                        Country
                                     ---------------------------------------------------------------------------
                                                                                                 United   United
                                       Canada   France  Germany   Italy    Sweden  Switzerland  Kingdom   States
----------------------------------------------------------------------------------------------------------------
Percent of GDP                           0.08     0.14     0.11     0.06     0.35       0.55       0.32     0.24
----------------------------------------------------------------------------------------------------------------
Price as a percent of U.S. price        63.6     55.2     65.3     52.9     63.6       69.2       68.6        --
----------------------------------------------------------------------------------------------------------------
\12\ StatisticsCanada.FinancialperformanceindicatorsforCanadianbusiness.Ottawa:StatisticsCanada,1996.
\15\ Patented Medicine Prices Review Board. Annual report 00. Ottawa: PMPRB, 2001.

Misusing economic theory
    The industry's principal claims, as well as being contradicted, are 
based on false premises. First, counting which country discovers the 
most new molecular entities is irrelevant in a global market. Companies 
know that where a good drug is discovered does not matter, and often a 
discovery comes from research in several countries. Whether domestic 
revenues recover a given country's research and development costs is 
also irrelevant. If this were not the case the industry would have shut 
down operations in Switzerland long ago because of its small market 
size.
    If revenues are inadequate, it would make more sense to conclude 
they do not cover all marketing costs rather than research costs. 
Research is central to the industry, and costs associated with it 
should be deducted first. Pharmaceutical companies report that they 
invest around three times more in the combination of marketing, 
advertising, and administration than in research, leaving ample room to 
cut costs.\20\
---------------------------------------------------------------------------
    \20\ Families USA. Off the charts: pay, profits and spending by 
drug companies. Washington, DC: Families USA, 2001.
---------------------------------------------------------------------------
    Secondly, every student in introductory economics learns that fixed 
costs like research do not determine prices.\21\ The market sets 
prices, implying they are open to free trading like stock prices. 
Patents, and especially patent clusters, turn the market into a 
monopoly, and only a monopoly can claim that fixed costs determine 
prices because it can make that a self fulfilling prophecy. The claim 
by companies that they have to set prices at 50-100 times production 
costs to recover research and development costs has never been 
substantiated, because they have never opened their books to 
independent public inspection to prove it. What we do know is that all 
research and development costs are fully recovered each year from 
domestic sales in the UK and Canada at prices that are far lower than 
those in the U.S.
---------------------------------------------------------------------------
    \21\ Gregson N, Sparrowhawk K, Mauskopf J, Paul J. Pricing 
medicines: theory and practice, challenges and opportunities. Nat Rev 
Drug Discov 2005;4:121-30.
---------------------------------------------------------------------------
    Thirdly, free rider is both a vivid public image of someone jumping 
on for a free ride and a highly misleading economic term. Technically 
it refers to a method for allocating fixed costs in proportion to the 
prices that different groups pay. For example, if Group A (call it 
Europe) pays $1 per pill and Group B (call it the U.S.) pays $2 a pill 
and each buys a million pills, then this accounting method would assign 
half as much of the fixed cost to Group A as to Group B. If, however, 
the fixed costs are only $300 000 (a tenth of the total revenue) for 
the two million pills, the fixed costs could be allocated by volume 
rather than by price ($150 000 for each group) and conclude that Group 
A more than pays the fixed costs and Group B pays much more than it has 
to. In short, the free riding argument economically is the artefact of 
an accounting convention and can be eliminated by Group B cutting its 
prices in half, rather than forcing Group A to double its prices.
Conclusions
    The pharmaceutical industry has provided invaluable medicines to 
cure and relieve millions of patients throughout the world. As an 
industry, it drives economic growth and employs thousands of skilled 
people. But it also uses false economics and makes up stories to 
justify higher prices. Higher prices strain budgets, causing millions 
of U.S. patients not to take the drugs their doctors think necessary. 
The pharmaceutical industry and the U.S. government want to blame other 
developed countries for these higher prices rather than make drugs more 
affordable.

                                 

                   Statement of the Coalition for GSP
I. Introduction
    This written statement is submitted by the Coalition for GSP (the 
Coalition) in response to the request of the Committee on Ways and 
Means (the Committee) for comments from the public regarding President 
Bush's trade agenda in 2006. The Coalition is a diverse group of U.S. 
companies and trade associations that use the GSP program. A list of 
our members, as of today, is attached. We care so much about GSP 
renewal because, over the years, the program has become an integral 
part of our businesses. Coalition members import a wide range of goods 
under GSP, from jewelry to plywood to batteries to spices.
    The Coalition was formed in 1992 to work with Congress on a renewal 
of the program, which was then set to expire on July 3, 1993. We have 
worked for repeated Congressional renewals of the program ever since. 
Over the years, we have learned much about how important this program 
is to American consumers, be they families or manufacturers or farmers. 
We have also learned much about how the renewal process has affected 
U.S. companies and consumers. We are pleased to have the opportunity to 
share with you some of those lessons learned, and hope they are helpful 
in guiding your consideration of how Congress can best support this 
important program.
II. Long-term Renewals Are Crucial to American Users of the Program
    We urge Congress and the Administration to work together towards 
the longest period of seamless reauthorization possible. Our ability to 
use the duty-free benefits available under the program is most 
effective when we know those benefits will be available by the time we 
need to import the product or products of interest to us. While the 
time from design to order to importation varies for each of us, for 
some companies it can be quite long. For example, some products take as 
long as one year from design to importation. For others, the products 
are advertised in catalogues with a shelf life of at least six months. 
In all cases, we need to know what we will be paying for the imported 
product at the very beginning of that process. If we can count on 
receiving duty savings under GSP, we can incorporate those important 
cost savings into our pricing. But if the program expires mid-stream in 
the order-to-delivery process, we can be caught with a serious 
financial load. We cannot always adjust our prices to our customers to 
pass on the unexpected duties, especially if those prices are 
advertised in catalogues. So we have to evaluate the risk of losing GSP 
mid-stream against the benefits of the duty savings. If the program is 
likely to expire, we often cannot incorporate it into our sourcing 
plans, and our prices to our customers need to be higher.
    With those planning constraints in mind, you can see how short-term 
renewals of GSP in the 1990s, compared to the long-term period of the 
past five years, have affected our use of the program. From July 1993 
through September 2001, Congress renewed GSP in fits and starts 
(largely due to the need to meet ``pay-go'' constraints). Planning our 
sourcing using GSP was difficult if not impossible. Over this period, 
from 1994 to 2001, U.S. imports under GSP actually declined an average 
2.2 percent annually. But in 2001 Congress renewed GSP for five years, 
and as a result, imports from GSP beneficiary countries to the United 
States have increased an average 11 percent annually.
     A long-term renewal of the program is also important in 
encouraging sourcing from countries that do not yet have the 
infrastructure or production capability to be competitive suppliers of 
GSP-eligible products. You can see from the table below how the long-
term renewal of GSP has increased interest in sourcing from poorer 
beneficiary countries. To the extent that some of our members are 
interested in investing in new overseas production relationships, we 
need time to grow these suppliers. Short-term renewals of the program 
do not encourage this, and keep us focused on more traditional GSP-
eligible countries. Taking GSP away from some of the larger users of 
the program, like India or Brazil, will not increase interest in 
sourcing from least developed countries (sourcing would shift from 
India and Brazil to China instead), but a long-term renewal of GSP 
will.

             Average Annual Increases in U.S. Imports under GSP from Selected Beneficiary Countries
----------------------------------------------------------------------------------------------------------------
                                                              1994-2001 Stop-and-Start  2001-2005 Stable Renewal
                                                                   Renewal Period                Period
----------------------------------------------------------------------------------------------------------------
Guyana                                                                         - 0.6%                    +85.1%
----------------------------------------------------------------------------------------------------------------
Lesotho                                                                        -73.2%                    +63.7%
----------------------------------------------------------------------------------------------------------------
Croatia                                                                        -10.8%                    +47.0%
----------------------------------------------------------------------------------------------------------------
Kenya                                                                          - 5.5%                    +14.3%
----------------------------------------------------------------------------------------------------------------
Source: U.S. Census Bureau

    A long-term renewal of GSP is so important to American companies--
again, many of them small businesses and manufacturers--that we 
recommend Congress extend GSP indefinitely, with a requirement that the 
Office of the U.S. Trade Representative (which administers the program) 
submit a report to Congress every three years on the operation and 
effect of the program over the previous three years. Upon receipt of 
the report, Congress would have a specific opportunity to modify, if 
necessary, the program--or terminate it altogether. But if termination 
is not approved, importers could count on the program's continued 
operation (albeit, perhaps, with some modifications).
III. GSP Matters to American Companies and Workers
    While it is traditional to view GSP as a program designed to 
benefit primarily least-developed countries, over the years it has 
become just as important to U.S. farmers, manufacturers and consumers. 
Today, consumer goods account for 30.0 percent of GSP imports; raw 
materials and components further processed in the United States account 
for another more than two thirds of GSP imports. For example, U.S. 
manufacturers incorporate raw materials like ferroalloys used in steel 
production, imported under GSP, or aluminum ingots imported under GSP 
for the aluminum they produce in the United States. Leather from 
Argentina is incorporated into furniture in North Carolina. The U.S. 
automotive industry incorporates nearly $2.5 billion worth of duty-free 
auto parts and components, imported under GSP, in into motor vehicles 
manufactured in the United States. American farmers benefit from the 
duty-free savings afforded by the program to agricultural chemicals 
used to make fertilizers in the United States.
    The duty savings afforded by GSP are significant. For example, GSP 
saves consumers from paying a 12.5 percent duty on flashlights and 
duties of up to 13.5 percent on jewelry. By importing auto parts and 
components under GSP, the U.S. auto industry saves millions of dollars 
on tariffs that range up to 25 percent.
    Numerous small businesses owe their continued competitiveness to 
the GSP program, and indeed small businesses are some of the most 
enthusiastic Coalition members. The duty savings afforded by GSP for 
many products used by these companies may appear modest, but in the 
savings can make the difference between profitability and survival in 
tough markets.
    Lapses of the GSP program place a large financial burden on U.S. 
companies who must pay thousands of dollars in duties to the Bureau of 
Customs and Border Protection for an unknown period of time. After 
Congress approves reauthorization, typically retroactively to the 
expiration date, those companies must file requests with Customs to 
have their money refunded. If we were to return to a period such as 
that, it is very likely U.S. companies would simply chose to source 
their products from other countries where the tariff situation is 
stable and predictable.
    Therefore, we strongly urge the Committee to consider heavily the 
positive impact of GSP on American companies, workers and consumers. 
Failure to renew GSP before it expires December 31, 2006 would have a 
serious adverse impact on American companies, workers and consumers.
IV. GSP Helps Achieve U.S. Trade Objectives
    For nearly 30 years, the GSP program has been an important tool of 
U.S. trade policy. The United States has used GSP to encourage 
developing countries to improve their worker rights and intellectual 
property rights protections. Within the past month, USTR reinstated GSP 
benefits for the Ukraine because that country has taken drastic steps 
to combat piracy of DVDs, CDs and other optical media. USTR also 
recently terminated investigations of Pakistan's and Brazil's 
intellectual property rights practices because both countries have made 
substantial progress in combating piracy and enforcing copyrights. In 
addition, the United States restored certain GSP benefits for Pakistan 
in 2005 because that country has made substantial progress in granting 
internationally recognized worker rights. (The United States had 
suspended those benefits in 1996.)
    Some Members of Congress have suggested that it may be best to 
allow GSP to expire so that the program does not distract beneficiary 
developing countries from participating in meaningful negotiations in 
the Doha Round. If the object of such a strategy is a GSP beneficiary 
such as Brazil, Members should remember that Brazil has been especially 
supportive of U.S. goals for agricultural trade liberalization in the 
Doha round. If the objects of such a strategy are countries in Sub-
Saharan Africa (and South Africa in particular), which have been most 
vocal about their fears of ``preference erosion'' they believe would 
result from tariff reductions through the Doha round, Members should 
note that SSA countries will be unaffected by an expiration of GSP 
because their GSP benefits (expanded with textile and apparel benefits) 
will continue through 2015 on a separate track thanks to the African 
Growth and Opportunity Act (AGOA).
V. Conclusion
    While it is certainly true that GSP was born of a desire to provide 
a temporary way to assist developing countries to become competitive 
producers and exporters, over time the program has evolved into an 
important contributor to American competitiveness. Duty-free benefits 
on a wide variety of products enable American retailers to supply their 
customers with lower-cost goods, and American companies, many of them 
small businesses, to purchase raw materials for their U.S. 
manufacturing and farming operations. Today, Americans need this 
program. We urge the Administration to support a long-term rollover of 
the existing program, and for us to pursue, together, that rollover 
before the end of the next Congressional session.
                                 ______
                                 
COALITION FOR GSP
Members

Companies
*Albaugh, Inc. (Ankeny, IA)
Binney & Smith (Easton, PA)
Cost Plus/World Markets (Oakland, CA)
*Friitala of America (Connelly Springs, NC)
The Home Depot (Atlanta, GA)
J. C. Penney Company (Plano, TX)
JVC Americas Corp. (Wayne, NJ)
Leo Schachter Diamonds (New York, NY)
*Liberty Woods (Carlsbad, CA)
McCormick and Company, Inc. (Sparks, MD)
Panasonic Corporation of North America (Secaucus, NJ)
PBI Gordon Corporation (Kansas City, MO)
*S&V Industries, Inc. (Akron, OH)
Target Corporation (Minneapolis, MN)
*Ten Strawberry Street (Denver, CO)
Timex (Middlebury, CT)
ZF Industries (Vernon Hills, IL)

Associations
American Spice Trade Association
Association of Food Industries
Consumers for World Trade
International Wood Products Association
National Customs Brokers and Forwarders Association
National Retail Federation
Retail Industry Leaders Association
U.S. Chamber of Commerce
* signifies a small business (less than 100 workers)

                                 

        Statement of Doctors Without Borders, New York, New York

Introduction
    Doctors Without Borders/Medecins Sans Frontieres (MSF) is pleased 
to submit these comments to the Committee on Ways and Means of the 
House of Representatives in response to the Committee's Hearing 
regarding President Bush's Trade Agenda held on February 15, 2006. This 
testimony focuses entirely on the potential negative consequences of 
the Administration's trade agenda on access to essential medicines. MSF 
is deeply concerned that provisions sought by the Office of the United 
States Trade Representative (USTR) will undermine the historic World 
Trade Organization (WTO) Ministerial Declaration on the Trade Related 
Aspects of Intellectual Property Rights (TRIPS) Agreement and Public 
Health (``Doha Declaration''), resulting in devastating consequences in 
terms of access to medicines for millions of people with HIV/AIDS and 
other diseases throughout the developing world.
    MSF has called repeatedly on USTR to ensure that the Doha 
Declaration remains a ceiling for trade negotiations on IP as they 
relate to health technologies. Because of the clearly stated 
negotiating objectives of the U.S., however, we have been forced to go 
one step further in recommending that IP be excluded from bilateral and 
regional free trade agreements (FTAs) altogether. The standards for IP 
protection established in the WTO TRIPS Agreement are sufficiently high 
and do not justify seeking additional norms in WTO Members by the USG.
    Specifically, MSF has raised concerns about the following IP 
provisions in various FTAs:

      Restrict the use of compulsory licenses to overcome 
barriers to access created by patents
      New obstacles related to pharmaceutical test data, which 
will delay the registration of generic medicines (``data exclusivity'') 
and render compulsory licensing ineffective;
      Rules that will confer abusive powers to regulatory 
authorities to enforce patents (``linkage''); and
      Extensions of patent terms on pharmaceuticals beyond the 
20-years required in TRIPS.

    Each of these provisions, which are elaborated upon below, appear 
in multiple FTAs and threaten to hamper generic competition--the only 
reliable mechanism for ensuring significantly lower drug prices--and 
therefore restrict access to affordable medicines.\1\
---------------------------------------------------------------------------
    \1\ It is important to note that USTR issues ``side letters'' about 
public health. These are not legally enforceable and do not supercede 
the (contradictory) language in many FTAs and cannot be seen as 
providing any assurance for countries to make use of TRIPS safeguards.
---------------------------------------------------------------------------
    We urge members of this Committee in the strongest possible terms 
to take every necessary measure to ensure that the health and lives of 
millions of people in developing countries are not jeopardized by 
future U.S. FTAs.
Background: MSF
    MSF is an independent, international medical humanitarian 
organization that delivers emergency aid to victims of armed conflict, 
epidemics, natural and man-made disasters, and to others who lack 
health care due to social or geographic marginalization. We operate 
medical relief projects in over 70 countries throughout the world. MSF 
currently has a field presence in numerous countries included in 
regional or bilateral agreements with the U.S., including Bolivia, 
Brazil, Colombia, Ecuador, Guatemala, Haiti, Honduras, Lesotho, 
Morocco, Nicaragua, Peru, South Africa, and Thailand. Teams provide 
medical care for people with HIV/AIDS, malaria, tuberculosis, Chagas' 
disease, leishmaniasis, and other diseases, as well as primary care, 
maternal/child health care, and other services for displaced and 
homeless populations and for indigenous people. The organization was 
awarded the 1999 Nobel Peace Prize. Patents, Prices & Patients: The 
Example of HIV/AIDS
Patents, Prices & Patients: The Example of HIV/AIDS
    According to UNAIDS, there are currently over 40 million people 
living with HIV/AIDS in the world; six million of whom clinically 
require antiretroviral therapy now.\2\ The AIDS epidemic is having 
major consequences for infectious diseases in the region, such as 
tuberculosis. It is estimated that 95% of the people who require 
immediate treatment for HIV/AIDS do not have access to antiretroviral 
therapy--which, in wealthy countries such as the U.S., has dramatically 
extended and improved the lives of people living with HIV/AIDS, 
reducing AIDS-related deaths by over 70% \3\--simply because they, and 
the health systems that serve them, cannot afford it.
---------------------------------------------------------------------------
    \2\ http://www.unaids.org/epi/2005/doc/EPIupdate2005 _ html _ en/
epi05 _ 02 _ en.htm--Accessed February 28, 2006
    \3\ According to the U.S. National Institute of Allergies and 
Infectious Diseases (at the National Institutes of Health) and the 
Centers for Disease Control and Prevention, the estimated annual number 
of AIDS-related deaths in the United States fell approximately 70 
percent from 1995 to 1999, from 51,117 deaths in 1995 to 15,245 deaths 
in 2000. This drop is attributed primarily to the introduction of 
highly active antiretroviral therapy (HAART). Centers for Disease 
Control and Prevention (CDC). HIV/AIDS Surveillance Report 2001; 13 
(no.1):1-41.
---------------------------------------------------------------------------
    Just five years ago, the average cost of a triple combination of 
antiretrovirals was between $10,000-$15,000 per patient per year, and 
today it is available for as little as $140 per patient per year under 
certain circumstances. These price reductions were the direct result of 
international public pressure and generic competition, particularly 
from Indian and Brazilian manufacturers. Generic competition was 
possible as a result of the lack of patent protection for 
pharmaceutical products in those countries. With the full 
implementation of the TRIPS Agreement in all but least-developed 
countries in January 2005, such competition is likely to disappear, 
unless flexible conditions for granting compulsory licenses are 
available, as per the Doha Declaration. Compulsory licensing of 
pharmaceuticals will become one of the most important policy tools for 
ensuring generic production and competition.
    The case of AIDS drug prices helps illustrate the need for routine 
use of compulsory licenses now that all new pharmaceutical products may 
be patent protected as of 2005, when most WTO Members with 
pharmaceutical capacity implemented the TRIPS Agreement.\4\ As a 
consequence, prices of new medicines will remain far beyond the means 
of patients in need in poor countries. The lever that has brought the 
price of AIDS drugs down will be lost. The U.S. regional and bilateral 
agreements are creating a system that blocks use of equivalent but 
cheaper drugs, which will be a catastrophe for our patients and for all 
people in the region, because the difference in price can be the 
difference between life and death.
---------------------------------------------------------------------------
    \4\ Note that least-developed countries (LDCs) do not have to grant 
or enforce patents on pharmaceutical products before 2016, as per 
paragraph 7 of the WTO Declaration on the TRIPS Agreement and Public 
Health, available at http://www.wto.org/english/thewto _ e/minist _ e/
min01 _ e/mindecl _ trips _ e.htm
---------------------------------------------------------------------------
MSF comments to USTR on TRIPS-Plus Provisions
    On numerous occasions, MSF has raised concerns publicly about the 
U.S. insistence on including IP provisions that far exceed requirements 
set forth in the TRIPS Agreement, and directly undermine the Doha 
Declaration, which clearly recognized concerns about the effects of 
patents on prices and stated unambiguously that TRIPS should be 
interpreted and implemented in a manner ``supportive of WTO members' 
right to protect public health and, in particular, to promote access to 
medicines for all.'' \5\ MSF has called repeatedly on USTR to ensure 
that the Doha Declaration remains a ceiling for trade negotiations on 
IP as they relate to public health technologies, and, as a logical 
consequence, to exclude IP from bilateral and regional trade agreements 
altogether.
---------------------------------------------------------------------------
    \5\ To view the full Declaration, see http://www.wto.org/english/
thewto _ e/minist _ e/min01 _ e/mindecl _ trips _ e.htm
---------------------------------------------------------------------------
    It is important to point out that the draft text of most regional 
and bilateral agreements pursued by the U.S., including DR-CAFTA, U.S.-
Morocco FTA, and U.S.-Thailand FTA, are not made available during, and 
sometimes after, negotiations. We urge USTR to make the text of U.S. 
regional and bilateral free trade agreements available to the public 
throughout negotiations in order to increase the level of transparency 
and to promote democratic debate and to engage in an informed public 
debate about crucial issues that directly affect the lives and health 
of people.

Comments on Common Intellectual Property Provisions Included in U.S. 
        Free Trade Agreements
1. Restrictions on the use of compulsory licenses
    Compulsory licenses for pharmaceuticals are one of the most 
important tools for ensuring generic competition. In other fields of 
technology they are commonly used by industrialized countries such as 
the U.S. They are especially important now that all WTO countries with 
pharmaceutical manufacturing capacity, except for least developed 
countries, may provide patents for pharmaceutical products and 
processes. Generic production of new medicines will increasingly become 
dependant upon compulsory licensing, meaning that flexible conditions 
for granting compulsory licenses must be in place in order to ensure 
the continued supply of affordable generic medicines.
    A compulsory license is a public authorization to others than the 
patent holder to produce, sell and export a particular product. 
However, it is of no use if the drug regulatory authority cannot 
register any generic drug during the life of the patent. This is what 
USTR has managed to negotiate in almost all previously signed FTAs 
(such with Australia, CAFTA, Chile, Morocco and Singapore).\6\ By 
barring drug regulatory authorities from registering generic versions 
of drugs under patent, the U.S. is blocking the ability of countries to 
make use of compulsory licenses to ensure access to medicines for their 
people.
---------------------------------------------------------------------------
    \6\ Article 15.10 CAFTA--Measures Related to Certain Regulated 
Products, paragraph 3.a; Article 16.8 U.S.-Singapore FTA--Certain 
Regulated Products, paragraph 4.(a)(b); Article 17.10 of U.S.-Chile 
FTA--Measures Related to Certain Regulated Products, paragraph 
2.(b)(c); USTR fact sheet on U.S.-Morocco FTA available at 
www.ustr.gov/new/fta/Morocco/2004-03-02-factsheet.pdf; U.S.-Australia 
FTA Chapter 17 available at www.ustr.gov/new/fta/Australia/text/
text17.pdf.
---------------------------------------------------------------------------
    We urge USTR to refrain from including provisions that will 
restrict the use of compulsory licenses in future regional and 
bilateral free trade agreements, in order to preserve the full use of 
this important safeguard for low- and middle-income countries.
2. Abusive powers to drug regulatory authorities (DRAs) to enforce 
        patents
    As explained above, provisions in numerous free trade agreements 
negotiated by the U.S. use drug regulatory authorities to help enforce 
patents and prevent generic competition. This is clearly going beyond 
the traditional role and functions of drug regulatory authorities, 
which are limited to checking the safety, efficacy and quality of 
medicines authorized for use in human beings. In a number of U.S. FTAs, 
DRAs are requested to refuse the marketing of quality generic medicines 
if the original medicine is patented in a given country.\7\ This 
effectively means that drug regulatory authorities will function as 
patent enforcement agencies and will potentially result in the 
enforcement of ``bad quality'' patents, which would be revoked if 
challenged before courts.
---------------------------------------------------------------------------
    \7\ Article 15.10 CAFTA--Measures Related to Certain Regulated 
Products, paragraph 3.a; Article 16.8 U.S.-Singapore FTA--Certain 
Regulated Products, paragraph 4.(a)(b); Article 17.10 of U.S.-Chile 
FTA- Measures Related to Certain Regulated Products, paragraph 
2.(b)(c).
---------------------------------------------------------------------------
    We urge USTR not to include a similar provision in other U.S. FTAs, 
as it can only serve to protect invalid patent claims, since valid 
claims receive adequate protection through normal judicial 
processes.\8\
---------------------------------------------------------------------------
    \8\ See also Essential Action comments in response to USTR request 
for public comment on FTAA draft text, August 22, 2001, Rob Weissman--
available at http://lists.essential.org/pipermail/pharm-policy/2001-
August/001422.html
---------------------------------------------------------------------------
3. Exclusive rights over pharmaceutical test data
    The TRIPS Agreement only requires WTO Members to protect clinical 
information that is generally required by drug regulatory authorities 
to approve/register the marketing of a new medicine (``undisclosed test 
or other data'') against ``unfair commercial use'' and ``disclosure'' 
in the framework of unfair competition law. However, many U.S. FTAs \9\ 
clearly go beyond this minimum requirement and confer exclusive rights 
on these pharmaceutical test data for a period of five years, from the 
date of approval of the original medicine in the developing country. 
Some agreements go even further by conferring data exclusivity also in 
cases where the original medicine is not registered in the developing 
country \10\. Under these conditions, market exclusivity could last for 
up to ten years.
---------------------------------------------------------------------------
    \9\ Article 15.10 CAFTA--Measures Related to Certain Regulated 
Products, paragraph 1.(a); Article 16.8 U.S.-Singapore FTA--Certain 
Regulated Products, paragraph 1; Article 17.10 of U.S.-Chile FTA-- 
Measures Related to Certain Regulated Products, paragraph 1.
    \10\ The original manufacturer is given five years, from the date 
of approval in the original country, to apply for registration in the 
developing country and get a new five-year period of data exclusivity, 
resulting in a possible total of 10 years of data exclusivity in the 
developing country. See Article 15.10 CAFTA--Measures Related to 
Certain Regulated Products, paragraph 1.(b)
---------------------------------------------------------------------------
    Such proposals are clearly aimed at preventing generic competition 
of medicines, which are not patented in some countries as a result of 
pre-TRIPS legislation, and result in a de facto market monopoly. In 
cases where the original medicine is not registered in the developing 
country, which may be the case for countries that do not constitute an 
attractive market for the original manufacturer, the prevention of 
generic competition will lead to a complete lack of access to 
medicines, at any cost, for up to ten years.
    We therefore urge USTR not to pursue these unacceptable provisions 
that contradict the letter and spirit of the Doha Declaration.
4. Extensions of patent terms beyond the 20-year minimum in TRIPS
    The TRIPS Agreement obligates WTO Members to provide patent 
protection on medicines for 20 years. However, the U.S. has been 
pushing for patent extension to ``compensate'' for delays either in 
drug registration or in patent granting. These are unjustifiable 
extensions of patent terms. Extensive literature \11\ has shown that 
twenty-year patents are more than enough--indeed they may be considered 
excessive--to allow the pharmaceutical industry to recoup investments 
made in research and development.
---------------------------------------------------------------------------
    \11\ MSF and Drugs for Neglected Diseases Working Group (now 
Neglected Diseases Working Group), Fatal Imbalance, September 2001 
available at www.accessmed-msf.org/documents/fatal_imbalance_2001.pdf 
and The Report of Commission on Intellectual Property Rights, September 
2002, available at http://www.iprcommission.org/papers/text/final _ 
report/reportwebfinal.htm
---------------------------------------------------------------------------
    Patent extensions are not required by the TRIPS Agreement and a WTO 
panel expressly stated that extensions to compensate for drug 
registration delays do not constitute a ``legitimate interest'' of 
patent owners.\12\ From a public health perspective, it is critically 
important that the terms of pharmaceutical patents not exceed what is 
required in TRIPS. Extending patent terms on pharmaceuticals beyond the 
20-years required in TRIPS would be detrimental to the health of people 
in developing countries as it would unnecessarily further delay generic 
competition. We therefore urge USTR to refrain from seeking such 
measures in upcoming regional and bilateral agreements.
---------------------------------------------------------------------------
    \12\ Canada--Patent protection of pharmaceutical products--
Complaint by the European Communities and their member states (WT/
DS114/R).
---------------------------------------------------------------------------
Conclusion
    Recently negotiated trade agreements by the U.S., including DR-
CAFTA, U.S.-Chile, and U.S.-Singapore, as well as the U.S. negotiating 
objectives for U.S.-Thailand \13\ and U.S.-SACU \14\ demonstrate its 
intent to strengthen intellectual property regulations beyond what is 
required in TRIPS, and reduce the effectiveness of TRIPS safeguards to 
the detriment of public health. If U.S. free trade agreements continue 
to create a system that undermines and contradicts the Doha 
Declaration, blocking use of affordable generic medicines, it will be a 
catastrophe for our patients and millions of others in the developing 
world with HIV/AIDS and other diseases.
---------------------------------------------------------------------------
    \13\ Available at http://www.ustr.gov/releases/2004/02/2004-02-12-
letter-thailand-house.pdf
    \14\ http://www.ustr.gov/Document _ Library/Letters _ to _ 
Congress/2002/USTR _ Notifies _ Congress _ Administration _ Intends _ 
to _ Initiate _ Free _ Trade _ Negotiations _ with _ Sub-Saharan _ 
Nations _ House _ Letter.html
---------------------------------------------------------------------------
    One hundred and forty two countries, including the U.S., negotiated 
and adopted the Doha Declaration, firmly placing public health needs 
above commercial interests and offering much needed clarifications 
about key flexibilities in the TRIPS Agreement related to public 
health. We have repeatedly stated that the Doha Declaration must remain 
a ceiling for international trade negotiations on intellectual property 
as they relate to public health technologies and called upon the U.S. 
government to ensure that regional and bilateral free trade agreements 
do not renege on the historic agreement reached in Doha.
    The TRIPS Agreement already establishes comprehensive standards for 
IP protection in WTO members, which protect sufficiently the interests 
of IP holders. The promise of Doha is that the TRIPS Agreement can and 
should be interpreted and implemented in a manner ``supportive of WTO 
members' right to protect public health and, in particular, to promote 
access to medicines for all.'' \15\ Regional and bilateral U.S. free 
trade agreements threaten to make it impossible for countries to 
exercise the rights re-confirmed in Doha.
---------------------------------------------------------------------------
    \15\ To view the full Declaration, see http://www.wto.org/english/
thewto _ e/minist _ e/min01 _ e/mindecl _ trips _ e.htm
---------------------------------------------------------------------------
    In order to ensure the protection of public health and the 
promotion of access to medicines for all, we therefore strongly 
recommend that intellectual property provisions be excluded from U.S. 
regional and bilateral free trade agreements altogether.

                                 

            Statement of Jackson-Vanik Graduation Coalition
The Need for Action Now
    The Jackson-Vanik Graduation Coalition, which currently includes 
more than 250 businesses and Ukrainian-American, Jewish-American and 
non-governmental organizations, calls on the House of Representatives 
to pass legislation in February to graduate Ukraine from the provisions 
of the Jackson-Vanik Amendment.
    The Senate passed by unanimous consent in November 2005 legislation 
to graduate Ukraine from Jackson-Vanik. Failure by the House now to 
pass similar legislation will be seen in Ukraine as a failure of the 
government's foreign policy and an indication of Western disinterest, 
at a time when the country is struggling to realize the full promise of 
the Orange Revolution. Ukraine holds critical Rada (parliament) 
elections on March 26. Congressional inaction in the run-up to those 
elections will be exploited by opponents of the government's pro-
reform, pro-West course; indeed, Rada deputies have expressed concern 
to Coalition leaders about precisely such tactics by the opposition. 
The Coalition thus seeks House passage of legislation in February to 
signal support for U.S.-Ukraine relations, and for Ukraine's efforts to 
consolidate democratic institutions and build a robust market economy, 
fully integrated into the Euro-Atlantic community.
    Passage of graduation legislation is also necessary to support a 
key element of President Bush's policy toward Ukraine. In his April 
2005 joint statement with Ukrainian President Viktor Yushchenko, 
President Bush called for ``immediately ending application of Jackson-
Vanik to Ukraine.''
Background
    The Jackson-Vanik Amendment, as contained in Title IV of the 1974 
U.S. Trade Act, was a response to the discriminatory emigration 
policies of the former Soviet Union. The communist restrictions had the 
most serious impact on religious minorities, particularly on the 
ability of Soviet Jews to emigrate. The Jackson-Vanik Amendment stated 
that non-market economies that continued to impose emigration 
restrictions on their citizens would not be granted permanent normal 
trade relations or ``most favored nation'' status by the United States 
until they had met the Amendment's freedom-of emigration requirements.
    Since regaining its independence in 1991, Ukraine has built a 
strong and impressive record of allowing open emigration. Indeed, a 
large number of Ukrainian Jews have emigrated over the past fourteen 
years. Ukraine has also created conditions for religious minorities to 
pursue their beliefs freely. Ukraine thus is a success story for 
Jackson-Vanik and now merits graduation from the Amendment's 
provisions.
    Ukraine's excellent emigration record was recognized in 1997, when 
President Clinton found Ukraine to be in full compliance with the 
Amendment's freedom-of-emigration requirements. President Bush has 
regularly endorsed this finding and has called on Congress to take the 
next step: to graduate Ukraine from Jackson-Vanik. Before the House 
International Relations Committee in July 2005, Assistant Secretary of 
State for European and Eurasian Affairs Fried said:
    ``Ukraine has complied with the provisions of the Jackson-Vanik 
Amendment to the Trade Act of 1974 for over a decade. This 
Administration strongly supports Ukraine's immediate graduation' from 
Jackson-Vanik. As the Ukrainian people look for tangible signs of our 
new relationship, they are perplexed that Ukraine remains tainted by 
the legacy of Jackson-Vanik. We urge Congressional action on this 
matter.''
    In a November 8, 2005 letter to key Congressional leaders, 
Secretary of State Rice wrote:
    ``The Administration strongly supports appropriate legislation that 
would authorize the President to terminate application of Title IV of 
the Trade Act of 1974 (the Jackson-Vanik Amendment), with respect to 
Ukraine, and to extend permanent normal trade relations treatment to 
the products of that country.''
    ``Congressional action to lift Jackson-Vanik and extend permanent 
normal trade relations would sent a strong signal of support to Ukraine 
at a critical juncture.''
    Various non-governmental groups, including the National Conference 
on Soviet Jewry and the Euro-Asian Jewish Conference, agree that 
Ukraine has demonstrated its full compliance with the Amendment's 
requirements and therefore should be graduated from the restrictions it 
imposes.
    When President Yushchenko spoke before a joint session of Congress 
on April 6, 2005, he focused on the importance to Ukraine of being 
graduated from Jackson-Vanik. He received a standing ovation when he 
declared, ``I'm calling upon you to waive the Jackson-Vanik Amendment. 
Make this step. Please make this step toward Ukraine. Please tear down 
this wall.'' There is nothing more important that Congress could do now 
for Ukraine than pass graduation legislation.
In Sum
    The House must act now to pass legislation to graduate Ukraine from 
Jackson-Vanik:

      It is the right thing to do. Ukraine has long fully met 
the freedom-of-emigration requirements of the Amendment.
      It is imperative to send Ukraine a positive political 
signal now, on the eve of the March 26 parliamentary elections. Failure 
to do so will be exploited by political forces in Ukraine that oppose 
the government's pro-reform, pro-West course.
      It is essential that Congress help President Bush carry 
out his April 2005 commitment to President Yushchenko.
      It is important for the sake of the Jackson-Vanik process 
that Congress show that, when a country meets the freedom-of-emigration 
requirements, it will be graduated. What incentive will countries have 
to meet such requirements if Congress moves the goal posts?
                                 ______
                                 
COALITION MEMBERSHIP LIST
February 2006
ABEA Ltd.
ACDI/VOCA
Adams and Reese, LLP
AES Corporation
Affiliated AppraisersAmerican Chamber of Commerce in Ukraine
American Jewish Committee
American Jewish Congress
American International Group (AIG)
American Ukrainian Medical Foundation
Americans for Human Rights in Ukraine
Andrew J. Futey & Associates
Arbor View Dental Clinic, Mt. Prospect, IL
Aspect Energy, LLC
Association for the Democratization of Ukraine
Association of American Youth of Ukrainian Descent--ODUM
Atlantic Group, Ltd.
``Awakening'' Independent Film Studio
A W and Sons Inc
Baker, Donelson, Bearman, Caldwell & Berkowitz
Berdyansk Reapers
B'nai B'rith International
Boeing
Bolshoi Agrotechnica Machina (BAM) America
Borough of Roselle Park, New Jersey
BRAMA, Inc.
Breakthrough to People Network, Inc.
Breeze Ventures Management
BSI Group
Buckner Orphan Care International
Canada-Ukraine Foundation
Cape Point Capital Inc.
Case New Holland, Inc.
Cardinal Resources PLC
Cargill Inc.
Center for U.S.-Ukrainian Relations, NYC
Chadbourne & Parke, LLC
Chicago Kyiv Sister Cities Committee
Chopivsky Family Foundation
Coca-Cola Company
Conlan & Associates
Council of Ukrainian-American Organizations of Greater Hartford
Crestway Manor Apts. LTD
Customs, Trade & Risk Management Services, Ltd.
David D. Sweere & Sons International, Ltd.
Democrats Abroad--Ukraine Chapter
Diaspora Enterprise
Dr. James Mace, Holodomor-Genocide Memorial Fund
Drake Group Holding Corporation
Draper Fisher Jurvetson NEXUS
Dutko Worldwide
ECdata, Inc.
Energy Alliance
Excelsio Communications
Exquisite Elixirs, Inc
Eye Center of Delaware
Floral Designs by Katya, Chicago
``Freedom'' Ukrainian-American Publishing House
GN Associates
Gold Coast Construction
Gold Coast Properties, Inc.
Gongadze Foundation
Gordon C. James Public Relations
Gnxpert Color Inc.
Gnxpert Netral Technologies, Inc.
GnxTach, Inc.
Hamalia South Travel
Heller & Rosenblatt Law Firm
Heritage Foundation of 1st Security Federal Savings Bank, Chicago
Hollywood Trident Foundation
Holodomor Survivors, Inc.
Inco Americas
Independent Voters for Equal Education & Opportunity
International Republican Institute
International Ukrainian Genocide-Holodomor Committee
Irondequoit-Poltava Sister Cities Committee
ISTIL (Ukraine)
ISTIL Group Inc.
Ivan Bahrianyj Foundation, Arlington Heights, IL
Jewish Institute for National Security Affairs
John A. Wood, Associates Inc.
John Deere
John Wood Ministries, Inc.
Kalik Lewin Law Firm
Kiev-Atlantic Ukraine
Kobzar Society, Ltd.
Kraft Foods, Inc.
Krislaty Realty Investments
Kvazar-Micro Corp.
Kyiv Mohyla Foundation of America
Largo Asset Management, LLC
Larry M. Walker Ministries, Inc.
L. B. Lyons & CompanyLemberg Unternehmensberatung, GmbH
Light of Crimea Foundation
Lithuanian-American Community, Inc.
LPL Financial Services, Inc.
MACOIL & Gas International
Maple Investments
Media Finance Management, LLC
Medical Relief Charity Fund
Melitopol Tractor Hydro Units Plant
Meta
Ministering to Ministers Foundation, Inc.
MJA Asset Management, LLC
Moye Handling Systems, Inc.
NAS Global Trade Ltd.
National Conference on Soviet Jewry
National Tribune
Nealon and Associates, P.C.
New Millennium Strategies
New Roots Restoration
North Winnipeg Credit Union Limited, Winnipeg, MB
Nuclear Information and Resource Service
Odza, Gindhart, Steckiw & Farion
Organization for the Defense of Four Freedoms for Ukraine, Inc.
Organization for the Rebirth of Ukraine
Paco Links International
Parents Targeting Achievement
Parents Targeting Opportunity
Perekhid Media Limited
Prerkhid Outdoor
Prerkhid Business Publishing
Piedmont Trading, Inc.
Plast Ukrainian Youth Organization
Poltava Confectionery
Pro Trade Group
Pro-W International Corporation
Raymond Linsenmayer & Associates
Rescare, Inc.
Reut Consulting
Richard W. Murphy Consulting Group
Ring Publishing
RUKH--Ukrainian Movement to aid Democracy in Ukraine, Chicago
Russian-Ukrainian Legal Group, P.A.
Russin & Vecchi LLC, Moscow
Salans Law Firm
Sevastopol Shipyard
Shevchenko Scientific Society
Sibik and Cataldo
Sigma Venture, Inc.
SigmaBleyzer Emerging Markets Private Equity Investment Group
Siguler Guff & Company, LLC
Skarabey Group LLC
Society for Fostering Jewish Ukrainian Relations
Softline
Solid Team, LLC
Squire, Sanders & Dempsey LLP
St. Andrew's Ukrainian Orthodox Church, Bloomingdale, IL
St. Nicholas' Ukrainian Catholic Cathedral--B.M.V. Sodality, Chicago
``St. Sophia'' Religious Association of Ukrainian Catholics, Inc. USA
SUM Ukrainian Youth Organization
Svitanok
Sweet Analysis Services, Inc.
Techinvest
TEREX Corporation
Town of Irondequoit, New York
The Action Ukraine Report (AUR)
The Bleyzer Foundation
The International Medical Education Foundation, Inc.
The PBN Company
The School of the Voloshky Ukrainian Dance Ensemble
The Ukrainian Museum
The Washington Group
TransNational Resource, LLC
UBCTV
UkrAgroAssets, LLC
UkrAgroSystems, LLC
Ukraine-United States Business Council
Ukrainian Academic and Professional Association
Ukrainian Academy of Arts and Sciences in the USA
Ukrainian American Bar Association
Ukrainian American Chamber of Commerce
Ukrainian American Civil Liberties Association
Ukrainian American Club of Southwest, Fl
Ukrainian American Coordinating Council
Ukrainian-American Environmental Association
Ukrainian-American Freedom Foundation
Ukrainian American Senior Citizens Association
Ukrainian American Soccer Association, Inc.
Ukrainian American Sports Center ``Tryzub``
Ukrainian Association in Austria
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Ukrainian Community Action Network, Chicago
Ukrainian Congress Committee of America, Illinois Branch
Ukrainian Cossack Brotherhood, Chicago
Ukrainian Credit Union Development Committee
Ukrainian Cultural Center, Fairfax, VA
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Ukrainian Development Company, LLC
Ukrainian Education & Cultural Center
Ukrainian Engineer's Society of America, Inc. Philadelphia Chapter
Ukrainian Federal Credit Union
Ukrainian Federation of America
Ukrainian Fraternal Organization
Ukrainian Genocide Famine Foundation, Chicago
Ukrainian Gold Cross, Inc.
Ukrainian Holodomor Exhibition Committee
Ukrainian Human Rights Committee
Ukrainian Institute of America
Ukrainian Museum-Archives, Cleveland, Ohio
Ukrainian National Credit Union Association
Ukrainian National Association
Ukrainian National Museum of Chicago
Ukrainian National Women's League of America, Inc.
Ukrainian National Women's League of America- Regional Councils:
Detroit, New York, Central New York, Northern New York, Ohio,
New Jersey, Chicago, New England, Philadelphia;
Branches at Large: Phoenix, Atlanta, Miami, Pittsburgh, Denver, North 
Port,
Washington D.C., San Jose, Los Angeles, Houston, Tucson, St. Petersburg
Ukrainian Selfreliance New England Federal Credit Union
Ukrainian Wave Radio Program, Chicago
UKRUSA International Ltd.
United Software Corporation
United Ukrainian American Organizations of Greater New York
United Ukrainian Organizations of Greater Cleveland (UZO)
Usability Matrix Corporation
U.S. Chamber of Commerce
U.S. Civilian Research & Development Foundation (CRDF)
U.S.-Ukraine Foundation
Vantage Enterprises, L.L.C.
Venable LLP
VIKO Corporation
Volia Cable
Volia Software, Inc.
Voloshky Ukrainian Dance Ensemble
Westinghouse
Wilton S. Tifft Photography
WJ Group of Agricultural Companies
WJ Hopper & Co., Limited
World Federation of Ukrainian Medical Associations
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Committee
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Zaporizhya Meat Processing
Zen Architects

                                 

   Statement of Kathleen Jaeger, Generic Pharmaceutical Association, 
                          Arlington, Virginia

    The pharmaceutical provisions in recent Free Trade Agreements 
(FTAs) negotiated by the United States Trade Representative (USTR) are 
contrary to or exceed U.S. law. Specifically, recent FTAs allow brand 
pharmaceutical companies to garner greater intellectual property rights 
than those afforded under U.S. law by removing limits on patent 
extensions and expanding provisions that protect intellectual property 
beyond the legal parameters of the U.S. patent system. At the same 
time, FTAs lack sufficient generic drug access provisions essential to 
the vitality of the U.S. generic pharmaceutical industry.
    The Generic Pharmaceutical Association (GPhA) strongly supports a 
balance between fostering innovation and ensuring access to affordable 
medicine here at home and abroad through our agreements with other 
nations. The effectiveness and sustainability of the U.S. health care 
system depend increasingly on such a balance. Accordingly, FTAs that 
fail to promote these interests equitably will result in a less 
productive global pharmaceutical industry, and will damage the U.S. 
health care system in turn.
    One important goal of President Bush's administration is to 
increase global sharing of pharmaceutical research and development 
(R&D) costs through eliminating price controls and fostering a robust 
generic pharmaceutical sector. Thus, GPhA strongly supports such 
initiatives and sufficient protection of intellectual property, and 
views the reduction of price controls and greater sharing of R&D costs 
as beneficial to the entire pharmaceutical industry--a win-win for all 
involved. Yet, recent FTAs are in direct conflict with this policy, as 
they neglect to ensure the proper balance between innovation and 
access.
    Simply put, the FTAs increase protection of innovation, but 
blatantly exclude provisions to ensure access to affordable medicine. 
Over 53% of U.S. prescriptions are filled with generic medicines, yet 
they account for only 12% of the total cost of prescriptions in the 
U.S. Without a robust generic industry to complement the brand 
industry, neither the U.S. health care system, nor that of any foreign 
nation would be sustainable. FTAs should export the U.S. balance of 
pharmaceutical innovation and access to affordable medicine in order to 
ensure the same prosperity.
    Furthermore, trends among FTAs could begin to establish an 
international standard for governing pharmaceuticals that clashes with 
U.S. law. In the near future, U.S. law makers may be pressured to 
conform to such a standard through harmonization efforts. Even now, for 
instance, the vast majority of the FTAs do not contain a ``best mode'' 
provision and the recent Patent Reform bill H.R. 2795 proposes to 
eliminate the ``best mode'' requirement under the premise of 
international harmonization. The USTR should not be promoting 
agreements with trading partners that will stifle generic competition 
or make U.S. law anomalous.

I. Free Trade Agreements Conflict with International and U.S. Law
    Numerous FTA provisions regarding IP and other measures involving 
pharmaceuticals contradict, both explicitly and in spirit, commitments 
made by the United States in the World Trade Organization in both the 
November 2001 Declaration on the TRIPS Agreement and Public Health (the 
Doha Declaration) and the September 2003 Implementation of Paragraph 6 
of the Doha Declaration on the TRIPS Agreement and Public Health (the 
Paragraph 6 Decision). Moreover, several of these provisions are 
contrary to or exceed U.S. law. GPhA is concerned that such measures 
will block generic drug exports abroad, substantially delay the timely 
access to affordable pharmaceuticals in those territories, and create 
the means to delay generic competition here at home, such as through 
international harmonization measures. USTR should make efforts to 
ensure that any FTA negotiated is fully consistent with both the letter 
and spirit of our country's WTO commitments and U.S. law.

II. Patent Extensions For Pharmaceutical Products
    The patent term extensions available in existing FTAs allow 
extensions beyond those permitted under U.S. law (Hatch/Waxman patent 
extensions, 35 U.S.C.  156). Among other things, the FTAs are not 
clear that the patent extensions apply only to ``new chemical 
entities.'' The FTAs also require Parties to adopt an overly vague 
standard for restoring patent terms for pharmaceutical products in 
instances of ``unreasonable curtailment'' of the effective patent term 
resulting from the marketing approval process. These provisions thus 
fail to take into account the limitations on extensions contained in 
current U.S. law, which include the five year cap and the fourteen year 
limit on the total length of the restoration period.
    FTA patent term extensions should be subject to the same 
limitations found in U.S. statutory and corresponding case law. Those 
limitations are as follows: (1) the product must contain a new chemical 
entity (NCE), i.e., a truly novel medicine; (2) the product must be 
subject to a regulatory review period; (3) the approval for marketing 
or use of the product upon which the patent extension application is 
based must be the first permitted commercial marketing or use of the 
product; (4) only a single patent can be extended; (5) the applicant 
must have acted with due diligence; (6) the patent restoration period 
may not exceed five years; and (7) the restored patent may never exceed 
14 years. Without these limitations, patent extensions could be 
available for almost every pharmaceutical product marketed in the 
territories of the Parties, including the United States, for periods 
far exceeding what our domestic law currently permits.

III. Market Exclusivity
    The FTAs allow marketing exclusivity for pharmaceutical products in 
excess of five years and do not make clear that the exclusivity is 
limited to ``new chemical entities.'' The FTAs prohibit marketing 
approval for third parties relying on data submitted by another for at 
least five years from approval granted to the original party in the 
territory of the Party. Moreover, where approval is based on approval 
in another country, some FTAs (e.g., Singapore, Australia) state that 
marketing may be delayed for at least five years after approval in the 
Party or approval in the other country, whichever is later. There are 
no requirements in most cases to register a product in the Party within 
a short defined period of time after receiving approvals in other 
countries (except for the FTAs with Chile and CAFTA which provide for a 
protracted 5-year registration period), further enabling delays in 
marketing approvals for generic products.
    The practical effect of these provisions is that they could permit 
brand companies, without penalty, to deny access to innovative 
pharmaceuticals for approximately seven years and block the marketing 
of affordable generics in those countries for a period of about 12 
years. Marketing approval for the brand company would take about two 
years \1\ and the company would have marketing exclusivity for another 
five years after that. If a brand company waits until the end of its 
five-year market exclusivity period in one country before filing in 
another, the introduction of generics could take 12 years.
---------------------------------------------------------------------------
    \1\ In contrast, NAFTA Art. 1711:7 provides that ``[w]here a Party 
relies on a marketing approval granted by another Party, the reasonable 
period of exclusive use of the data submitted in connection with 
obtaining the approval shall begin with the date of the first marketing 
approval relied on.''
---------------------------------------------------------------------------
    Permitting brand companies to wait up to five years after receiving 
approval in one country before filing for approval in another country, 
with no erosion of market exclusivity, would limit one of the 
flexibilities identified in the Doha Declaration for increasing access 
to medicines, and accordingly, it appears to contradict the direction 
in section 2102(b)(4)(c) of the Trade Act of 2002 (``Trade Promotion 
Authority'' or ``TPA''). Specifically, the Doha Declaration reaffirmed 
that the TRIPS Agreement provides flexibility for WTO Members to take 
measures to protect public health, including ``promot[ing] access to 
medicines for all.'' In keeping with the spirit of the Doha Declaration 
and the TPA, the FTAs should encourage signatories to take action to 
require companies to expeditiously seek approval of life-saving 
medicines for use in their countries.
    U.S. law provides for a total of five years of exclusivity for 
products containing ``new chemical entities,'' and five years appears 
to be the global standard. Anything more than that is injurious to the 
U.S. economy and will drive up already skyrocketing health care costs 
here at home and abroad. No FTA should be interpreted to suggest that 
U.S. law can, or should be changed to extend the carefully balanced 
five-year NCE exclusivity period. USTR should modify its negotiations 
template to only proffer a five-year NCE exclusivity period for 
products containing new chemical entities.
    Certain of the FTAs (e.g., Singapore, Bahrain) also prevent 
marketing of the ``same or similar product'' for a period of three 
years.\2\ This language appears to permit marketing to be delayed based 
on information not tied to the product for which marketing is sought, 
and for attributes of the product that have been previously approved. 
This overly broad protection is contrary to U.S. law in that refers to 
``same or similar product'' rather than narrowing the three-year 
protection to the new ``conditions of use.'' USTR should remove this 
expansive language from the text of any FTAs.
---------------------------------------------------------------------------
    \2\ The FTA with Australia also contains similar language ``[Party] 
will not permit marketing of the same or similar product for at least 
five years from the date of marketing approval by the Party.'' 
Art.17.10:1(c). Art.17.10:2 also requires at least 3 years of 
additional exclusivity if the Party requires submission of new clinical 
information (other than information related to bioequivalency) 
essential to the approval of the product.
---------------------------------------------------------------------------
IV. Linkage Without Exceptions (Hatch/Waxman)
    The FTAs that the United States has been negotiating require that 
our trading partners establish a generic approval process that 
``links'' generic approvals with the expiration of brand patents, an 
approval process similar to that in the U.S. However, the FTAs 
incorporate only those provisions that give protection to the patent 
owner while failing to provide for the corresponding provisions that 
ensure access to generic products. With no measures to ensure timely 
resolution of patent disputes, brand companies will enjoy de facto 
patent extensions in this country and in others. In other words, 
linkage without generic access provisions, blocks generic competition 
indefinitely.
    The FTAs require signatories to prohibit, without exceptions, the 
marketing of generic pharmaceutical products during the term of the 
patent by persons other than the person who originally submitted safety 
and efficacy data for approval of the product without the consent or 
acquiescence of the patent owner. In contrast, in the United States, 
where a generic applicant files a Paragraph IV Certification 
challenging a drug patent and is not sued by the patent owner within 45 
days of its Paragraph IV Notification, FDA approval and marketing may 
occur immediately notwithstanding the existence of an unexpired 
patent.\3\ In such cases, the failure of the patent owner to file an 
infringement action could be construed as consent. However, U.S. law 
also permits FDA approval and marketing at the expiration of the 30-
month stay (30 months after a patent infringement lawsuit is filed) 
even if the lawsuit is still pending and the patent has not expired.\4\ 
If the filing and continued prosecution of such suit were construed to 
mean that the patent holder does not consent to third-party marketing, 
this provision could nullify existing U.S. law by requiring the 
conversion of the 30-month stay into an indefinite stay of generic 
approval. Ultimately, this would discourage timely resolution of patent 
disputes and result in de factopatent extensions for the brand 
companies--a result that would have substantial financial implications 
for this nation's health care system.
---------------------------------------------------------------------------
    \3\ 21 U.S.C.  355(j)(5)(B)(iii).
    \4\ Id.
---------------------------------------------------------------------------
    The FTAs consistently fail to require the inclusion of U.S. 
counterbalancing access measures that allow challenges to questionable 
patents that stand as barriers to market entry, patents that are 
frequently found un-infringed or invalid in the United States. Access 
measures should include provisions that are identical to the U.S. 
system related to: scope of patent listability (to prevent improperly 
listed patents that block generic product approvals); the mechanism to 
delist patents that fail to meet the eligibility for listing; the 45-
day window to facilitate patent dispute resolution and corresponding 
means to permit FDA approval despite patent litigation, such as the 30-
month stay period; and measures to ensure that brand companies do not 
receive de facto patent extensions by sitting idly by, such as 
declaratory judgment actions. If USTR requires our trading partners to 
duplicate two-thirds of the U.S. Hatch/Waxman system to the benefit of 
brand pharmaceutical industry, USTR also must seek to include the 
generic access provisions. To do otherwise forces FTA countries to 
accept a lopsided system that protects innovation, yet fails to promote 
access.
    The United States recently passed measures in the Medicare 
Modernization Act of 2003 (MMA) to restore the balance between 
pharmaceutical innovation and access by closing unintended loopholes in 
the U.S. system that needlessly blocked generic competition. In so 
doing, the United States has set and maintained the gold standard in 
balancing pharmaceutical innovation and access. We should not reverse 
this accomplishment by being a party to agreements that upset that 
balance in favor of innovation to the detriment of American generic 
manufacturers and consumers. Accordingly, FTAs that require the 
implementation of a drug approval system linking generic drug approvals 
to patent protections of brand products must also expressly require 
generic access measures.

V. Omission or Weakening of Best Mode Provision
    The monopoly afforded by a patent is given in consideration of full 
disclosure of the invention so that the public can enjoy the full use 
of that invention upon expiration of the term of the patent. In the 
United States, full disclosure includes (a) disclosure of the invention 
(the ``written description''), (b) a clear, concise, and exact enabling 
description of how to practice the invention (``enablement''), and (c) 
disclosure of the best mode of practicing the invention known to the 
inventor (``best mode''). FTAs (e.g., CAFTA, Australia, Bahrain, 
Morocco, Jordan) do not require disclosure of the best mode, and thus 
patents under these FTAs can disclose less than the minimum required in 
the United States. The ``best mode'' requirement is that the inventor 
shall disclose in the patent application the most efficient method 
known to him (or her) to reduce the invention to practice. Failure to 
disclose the ``best mode'' would result, upon patent expiry, in a less 
than efficient means of producing the invention, potentially giving the 
patent owner a further monopoly. FTAs should require at least the same 
disclosure standard for each Party as that which the U.S. requires in 
exchange for granting a monopoly.

VI. Mandatory Access Provisions: ``Bolar''
    The United States should support mandatory access provisions in all 
FTAs so that access to affordable medicine cannot be circumvented 
through implementing legislation. Recently negotiated FTAs do not 
mandate a ``Bolar''-type provision, which is a critical element in the 
U.S. generic drug approval process. Such provisions allow for the 
testing, manufacture and use of the subject matter of a patent for 
purposes related to the development and submission of information to 
support generic drug marketing approval. Under U.S. law, actions 
relating to the development and submission of a generic drug 
application do not constitute an infringement of patent rights. 
Permissive adoption of this provision in FTAs, however, leaves FTA 
countries open to pressure by special interests not to adopt provisions 
that are consistent with U.S. law. Unfortunately, this situation has 
already occurred in Guatemala. To prevent special interests from 
undermining the purposes of the Doha Declaration in the future and to 
facilitate access to affordable medicine, USTR must encourage our 
trading parties to adopt mandatory Bolar and other access provisions.

VII. Conclusion
    The United States has achieved excellence in health care by 
properly balancing pharmaceutical innovation and access. USTR, 
therefore, should be holistically promoting both of these features of 
U.S. law in trade negotiations with other countries. To do otherwise is 
damaging to the U.S. generic pharmaceutical industry, and adversely 
impacts both the U.S. economy and our overtaxed health care system. 
Rather than act in a manner detrimental to affordable health care both 
home and abroad, USTR should seek to export the U.S. balance of 
innovation and access to ensure access of affordable medicine around 
the globe. This is especially critical in light of the Administration's 
stated objective to secure global research and development support by 
the elimination of price controls.

                                 

                                          Consumers for World Trade
                                                  February 14, 2006
The Hon. Bill Thomas
2208 Rayburn HOB
Washington, DC 20510

    Dear Chairman Thomas:

    I am writing on behalf of Consumers for World Trade (CWT), to 
express our views concerning the Congressional 2006 trade agenda. By 
way of background, CWT is a national, non-profit, non-partisan 
organization, established in 1978 to promote the consumer interest in 
international trade and to enhance the public's awareness of the 
benefits of an open, multilateral trading system. CWT is the only 
consumer group in America whose sole mission is to educate, advocate 
and mobilize consumers to support trade opening legislation.
    In summary CWT urges Congress to pursue two key goals as it moves 
forward with its trade policy in 2006. First, we urge Congress to 
assist lower-income Americans by removing high tariffs, dumping and 
countervailing duties, and import quotas on the necessities of life 
such as food, clothing and shelter. Second, we urge Congress to take 
immediate steps to open up the trade policy and trade remedy process so 
that consumers are no longer excluded. The current exclusion of 
consumers is unfair and should be ended as quickly as possible.
    Our detailed comments on these priorities follows.
Reduce Tariffs on Clothing, Footwear and Food
    Tariffs are simply taxes that, although technically paid at the 
customs border by importers, are ultimately passed through to consumers 
in the form of higher prices. In this way, tariffs are like the worst 
kind of sales tax--hidden from view, but definitely felt in the 
pocketbooks of the nation's lowest income families.
    Although the overall average tariff on goods entering the U.S. 
market has been reduced through numerous trade rounds to less than 4%, 
this national average masks the high tariff rates on particular goods 
consumed by the nation's poorest families. Consumers for World Trade 
recommends that Congress impress upon U.S. trade negotiators to give 
priority consideration in the Doha negotiations of the World Trade 
Organization (WTO) and in bilateral free trade agreement negotiations 
to tariff reductions on goods that have above-average tariffs in the 
United States.
    In particular, CWT urges the elimination or substantial reductions 
in tariffs on products with above-average tariffs in the food, clothing 
and footwear sectors. These products are all basic commodities that 
every American consumes or uses in his or her daily life. Yet many of 
these basic staples are subject to high tariff barriers that 
artificially increase their costs to consumers.
    Food Tariffs: The United States is a major world producer of most 
agricultural commodities and processed food products, as well as a 
major consumer of these goods. As a result of the Uruguay Round, import 
quotas no longer exist on agricultural products. However, tariff-rate 
quotas now provide substantial border protection for many of these same 
goods, through restrictive lower-tier quota levels and high upper-tier 
(over-quota) tariff rates. While the average agricultural tariff in the 
United States is about 12%, this average reflects the fact that many 
agricultural products enter the U.S. duty-free, while certain other 
products have extraordinarily high tariffs.
    For example, according to USDA's Economic Research Service, the 
following six groupings of food commodities have U.S. tariffs at or 
above the U.S. average: fresh meat (12%), oilseeds (17%), nuts (17%), 
cocoa beans and products (18%), dairy products (43%), and sweeteners 
(46%). Even these figures, however, are averages and therefore somewhat 
misleading, as an examination of the individual tariff lines reveals 
much higher tariff rates, often exceeding 100% (called megatariffs).
    Megatariffs are most prominent in the U.S. tariff schedules for 
dairy, sweeteners, and nuts--all food commodities subject to tariff-
rate quotas. About 24 tariff lines in the agricultural chapters of the 
U.S. tariff schedules identify over-quota tariff rates in excess of 
100%. The U.S. over-quota tariff rate on sweeteners exceeds 200%, and 
on peanut butter is 132%. Seven different dairy products have over-
quota tariffs exceeding 100%. Some of these food products are direct 
consumer goods and some are ingredients used to make other food 
products. Either way, such extraordinary tariff rates impose 
substantial costs on American consumers. These megatariffs and other 
above-average tariff rates must be a high priority for immediate, 
substantial reduction both in multilateral and bilateral negotiations.
    CWT notes that many of these agricultural and food products with 
high tariff rates in the U.S. are similarly protected in other major 
agricultural producing nations. The Doha negotiations therefore provide 
an ideal opportunity to dismantle these tariff walls on a global basis, 
benefiting consumers everywhere.
    Clothing and footwear: There is also a significant opportunity for 
meaningful tariff relief to be achieved in the clothing and footwear 
sectors. While the United States has removed quotas from wearing 
apparel under the terms of the terms of the Agreement on Clothing and 
Textiles, more needs to be done. The effective tariff rate for wearing 
apparel now stands at 11%, taking into account recent U.S. trade 
preference programs. The average tariff for clothing excluding 
preferences is still quite high at 15% and at 40% for footwear 
products.
    Because the United States has significantly liberalized trade in 
virtually every other industrial sector, much of the United States' 
tariff protection is now concentrated in these two industries. Fully 
half of all duties collected by the U.S. Government are collected in 
these products (Chapters 50 to 65), even though the products represent 
only about 8 percent of total U.S. imports.
    Reducing duties on these consumer products would have a significant 
impact on the prices consumers pay at retail since these markets are 
highly price sensitive. Over the past decade, while overall U.S. retail 
prices have slowly increased, U.S. apparel and footwear prices have 
actually declined. As apparel and footwear companies and retailers 
strive to take additional costs out of the supply chain in order to 
allow further price reductions for consumers, the importance of 
reducing these high tariffs cannot be overstated. Through simple market 
pressure, consumers will demand that these savings be passed on, and 
thereby would clearly benefit from a removal of these duties
    Ironically, it is unclear whether these high tariff rates have been 
effective in protecting the domestic industry. Import penetration in 
apparel and footwear--where most of these duties are assessed--now 
stands at 90 and 98 percent, respectively, begging the question just 
who in America benefits from these high tariffs.
    We hope that Congress urges the administration to aggressively 
pursue reductions in wearing apparel and footwear tariffs, not only in 
the Doha round of trade negotiations but in bilateral free trade 
agreements, as well. Efforts to limit tariff reductions in these 
sectors through complex rules of origin do not protect apparel and 
footwear jobs--they simply make these necessities of life more 
expensive than they ought to be.
    High tariffs on footwear, clothing and food hits certain Americans 
harder than others. Minority households and single parent households 
spend a greater proportion of their income on the necessities of life. 
As a consequence, these families pay a higher percentage of the hidden 
price tag for the U.S. high tariff policy. It is time to recognize that 
there is little domestic industry to protect, and to eliminate tariffs 
in this sector, thereby helping hard working American families.
The U.S. should eliminate tariffs on softwood lumber imports from 
        Canada
    CWT urges you to recommend that the Administration eliminate the 
dumping and countervailing duties imposed on imports of Canadian 
softwood lumber products. Today, the 27% duties imposed on these 
building products have inflated the price of new homes by roughly 
$1,000. In the era of high home prices, this price increase adversely 
impacts the poorest Americans struggling to make a down payment on a 
new home. Furthermore, duties imposed on Canadian building products 
disadvantage those Americans rebuilding their homes devastated by last 
summer's hurricanes. For those impacted Americans along the Gulf Coast, 
every penny counts towards their recovery efforts. The United States 
could help many Americans by reducing the cost of lumber in the United 
States.
    This is especially true, given the fact that a recent NAFTA 
Extraordinary Challenge Committee (ECC) ruled against the U.S. with 
respect to these duties on Canadian softwood lumber products. We 
believe it is improper and unwise for the United States to ignore this 
international commitment by leaving in place the antidumping and 
countervailing duties on Canadian softwood lumber ultimately paid by 
consumers.
    We also strongly urge Congress to impress upon USTR to cease its 
efforts to negotiate a Canadian-imposed export tariff on these 
products. Such a tariff would still increase the price of lumber in the 
United States, but it would also transfer U.S. Consumer dollars 
directly to provincial governments in Canada. Consumers for World Trade 
vehemently opposes such a scheme to make U.S. consumers ``pay off'' 
Canadian producers.
Renew the Generalized System of Preferences
    CWT urges Congress to quickly pass a long-term renewal of the 
Generalized System of Preferences (GSP) that is set to expire by the 
end of 2006. This program offers tariff-free entry on certain products 
from a host of least developed economies and it benefits consumers in 
the form of lower prices.
Trade Remedies Injure and Exclude Consumers
    U.S. trade remedy law, and the underlying provisions of the General 
Agreement on Tariffs and Trade, significantly impact American 
consumers. And yet consumers--both retail and industrial consumers--
have no standing in these cases and are often unable to defend 
themselves when trade cases are brought. This is quintessentially 
unfair when one considers that an increasing number of trade cases are 
being brought against consumer products, such as shrimp, furniture, and 
lumber.
    Indeed, U.S. dumping law provides more standing for foreigners than 
for American consumers. This lack of official standing means that 
consumers cannot effectively defend themselves against the imposition 
of taxes, and that is inherently unfair. The lack of standing means 
that consumers are not guaranteed time at hearings, are excluded from 
seeing the trade data upon which the cases are brought, and therefore 
cannot mount anything like an effective rebuttal to the claims of 
domestic producers. It is important to understand that retail and 
industrial consumers are also Americans, and their views should be 
balanced against those of domestic producers. Indeed some industrial 
consumers are also domestic producers so the national interest ought to 
include the consideration of their views. Nevertheless, the 
International Trade Commission and the U.S. Department of Commerce, 
under existing trade law, have no obligation to even consider the 
impact of a trade remedy on competing U.S. interests such as retail and 
wholesale consumers. In this way, the United States has made a decision 
that the interests of retail and wholesale consumers is not important. 
And that's not only wrong, it is often unwise.
    U.S. consumers matter to the economy. They vote and they have views 
on trade cases. U.S. industrial and wholesale consumers are often badly 
hurt by trade remedy cases that drive up the costs of their inputs. As 
such, trade cases often reduce jobs in one sector in the name of saving 
jobs in another. Maybe that is wise policy in some cases, but without a 
requirement to hear the views of consumers, neither the Commerce 
Department or the U.S. International Trade Commission really knows.
    For this reason, we urge Congress to pass legislation that would 
allow consumers--both end users and consuming industries--to have 
standing in trade remedy cases. In addition, we hope that Congress will 
urge USTR to pursue this change as part of Doha round of trade 
negotiations.
The U.S. Trade Policy Making and Advisory Process Excludes Consumers
    At present, the United States has no consumer representatives on 
any of its trade advisory committees. This is not for want of consumer 
groups appealing for a seat at the trade policy table. Indeed, within 
the last year, Consumers for World trade was denied advisor status as 
part of the Industry Trade Advisory Committee on Consumer Goods (ITAC 
4) because the organization was not deemed to be ``a U.S. entity that 
trades internationally and is engaged in the manufacture of a product 
or the provision of a service.''
    It is disturbing that the interests and concerns of 296 million 
American consumers should be dismissed so cavalierly. For this reason, 
we urge Congress to support making seats available to consumer groups 
on the Consumer Goods ITAC. If, in the judgment of the Administration 
that only an act of Congress would allow such participation, then we 
urge Congress to pass such legislation. It makes sense for the Congress 
and the Administration to have the broadest possible participation in 
the trade policy advisory process. There is no good reason to exclude 
American consumers from that process.
    On behalf of CWT, I thank you once again for the privilege of 
providing you written comments regarding our priorities for the 
Congressional 2006 trade agenda. If you have any questions about CWT or 
its views, please feel free to contact me at (202) 293-2944 ext. 201.
            Sincerely,
                                                       Robin Lanier
                                                 Executive Director
                                 

 Statement of Retail Industry Leaders Association, Arlington, Virginia

    The Retail Industry Leaders Association (RILA) welcomes the 
opportunity to submit written comments for the record of this hearing 
on President Bush's Trade Agenda. RILA strongly supports that agenda 
and appreciates the Committee's efforts to help move it forward.
RILA and the Retail Sector
    Retail is the second largest sector in the U.S. economy, employing 
12 percent of the nation's workforce with $3.8 trillion in annual 
sales. RILA is a trade association of the largest and fastest growing 
companies in the retail industry. Its member companies include more 
than 400 retailers, product manufacturers, and service suppliers, which 
together account for more than $1.4 trillion in annual sales. RILA 
members operate more than 100,000 stores, manufacturing facilities and 
distribution centers, have facilities in all 50 states, and provide 
millions of jobs domestically and worldwide. Our members pay billions 
of dollars in federal, state and local taxes and collect and remit 
billions more in sales taxes. They are also leading corporate citizens 
with some of the nation's most far-reaching community outreach and 
corporate social responsibility initiatives.
    The retail sector, along with the suppliers and customers that it 
serves, is an essential part of the U.S. economy. Retailers meet the 
needs of U.S. consumers, and in doing so are essential drivers of the 
U.S. economy. They also serve the global market for consumer goods and 
bring U.S. products to the foreign markets where they operate. 
Retailers provide quality jobs at all employment levels with good 
benefits. The industry also creates opportunities for entry-level 
employment, part-time work, jobs for non-skilled workers, and 
management training for front-line workers.
    Virtually all of RILA's members, both retailers and suppliers, rely 
on international trade to conduct their businesses. Our members depend 
on imports of both finished consumer products and production inputs for 
merchandise that will eventually be sold at retail stores. Many RILA 
members are also working to expand retail outlets and operations in 
countries that are open to U.S. investment and expand market access for 
American products.
WTO Negotiations
    A liberalized, rules-based trading system is essential to U.S. 
economic success and serves other important U.S. policy objectives as 
well. Multilateral trade agreements help sustain an open trading regime 
for goods and services, ensuring that the United States succeeds in the 
many areas where it has a comparative advantage. Participating in the 
WTO enables us to marry liberalization of the U.S. trade regime--
beneficial in its own right--to increased access around the world for 
U.S. producers, farmers and service suppliers. And there are many more 
benefits which participation in the WTO can yet deliver--notably 
including further opening of the retail and distribution sectors in key 
emerging markets around the world.
    RILA strongly supports the Committee's and the Administration's 
commitment to ambitious results from the current WTO negotiating round 
to advance the Doha Development Agenda. RILA's specific market access 
objectives for the round include: (1) significant reduction, on a 
worldwide basis, of tariffs, quotas, other border measures, and non-
tariff barriers to trade in agricultural and non-agricultural products 
(particularly footwear, clothing, and food products); and (2) broad and 
deep further liberalization of services trade, with a particular focus 
on distribution/transportation/delivery services and retail direct 
investment. Specifically, we want to see a further reduction in 
barriers to owning and operating retail establishments in WTO Member 
countries.
    In the trade rules area, RILA priorities include (1) conclusion of 
an ambitious trade facilitation agreement, to update the various 
existing WTO disciplines in this critical area; (2) improvement of WTO 
disciplines on the use of trade defense instruments, and (3) expansion 
of intellectual property disciplines to promote better protection of 
retail brand names in the markets of all WTO Members.
    The United States should do its utmost to achieve an ambitious Doha 
Round outcome, this year, as the surest path toward advancing efficient 
resource allocation, consumer welfare, market access for U.S. products, 
sustainable development, and general economic prosperity.
    RILA also supports rapid conclusion of accession agreements with 
major economies presently outside the WTO system, particularly Vietnam 
and Russia, and prompt enactment of U.S. legislation extending ``Normal 
Trade Relations'' status to products of these countries on a permanent 
basis. RILA strongly opposes the inclusion of safeguard provisions in 
these accession agreements, such as a textile safeguard comparable to 
what was included in China's accession agreement.
Free Trade Agreements
    RILA's members benefit from, and energetically support, the 
bilateral and regional elements of the U.S. trade negotiating agenda as 
well. We welcome the conclusion of FTA negotiations with Oman and Peru, 
and urge the most rapid possible submission and passage of implementing 
legislation. We would also like to see FTAs in the pipeline, 
particularly with larger trading partners like Korea and Thailand, 
concluded and implemented during the effective period of the current 
Trade Promotion Authority procedures. Finally, we believe the existing 
FTA template could be improved by providing greater U.S. market access, 
through less-restrictive origin rules and other techniques, in the 
textile and apparel sector.
Preference Programs_GSP
    RILA supports a timely, long-term renewal of the Generalized System 
of Preferences (GSP) program which is presently due to expire at the 
end of 2006. The GSP program promotes economic development by boosting 
the export trade of developing countries, contributing to political 
stability and thereby furthering U.S. foreign policy goals. The GSP 
program also advances sound economic policies in areas such as 
intellectual property protection and worker rights; boosts the 
competitiveness of American industries that use the program to import 
raw materials and production inputs, and benefits consumers who see 
reduced prices on imported consumer goods and on products made in the 
United States using GSP-eligible inputs. This important program should 
be renewed prior to its expiration at the end of this year. All too 
often in the past the program was allowed to lapse which led to 
increased costs and price instability. This had a significant negative 
impact on small and medium sized U.S. businesses that rely on the GSP 
program. We also urge the longest possible period of reauthorization; 
the program is most effective when importers and retailers know its 
duty-free benefits will be available when the need to import arises. 
Finally, larger beneficiaries should remain eligible to participate 
subject to the existing mechanism for graduation on a product-specific 
basis.
Compliance With WTO Dispute Settlement Decisions
    RILA congratulates the Committee for the leadership it has shown in 
revising U.S. measures that have been found, in dispute settlement 
cases, to violate WTO obligations. We were particularly pleased by the 
recent passage of legislation repealing the WTO-inconsistent Continued 
Dumping and Subsidy Offset Act. The United States benefits from being, 
and being seen as, a rule-abiding WTO Member.
Conclusion
    RILA congratulates the Committee for its attention to and oversight 
of the U.S. trade agenda. Negotiated trade liberalization and ongoing 
autonomous reform of our own trade regime are essential elements of 
America's economic success story. RILA stands ready to work with the 
Committee in pressing forward an ambitious pro-trade agenda. If you 
have any questions on this statement or require any assistance, please 
contact Lori Denham, Senior Vice President--Policy and Planning or 
Jonathan Gold, Vice President--Global Supply Chain Policy.

                                 

  Statement of the Chamber of Commerce of the United States of America

    On behalf of the Chamber of Commerce of the United States of 
America (U.S. Chamber), we are pleased to present the House Committee 
on Ways and Means with this testimony regarding President George W. 
Bush's international trade agenda for 2006. International trade plays a 
vital part in the expansion of economic opportunities for American 
workers, farmers, and businesses. As the world's largest business 
federation--representing more than three million businesses and 
organizations of every size, sector, and region--the U.S. Chamber views 
efforts to expand trade opportunities as a national priority.
    As such, the U.S. Chamber has helped lead the business community's 
effort to make the case for initiatives to expand trade, including 
global trade negotiating rounds under the purview of the World Trade 
Organization (WTO) and its predecessor, the General Agreement on 
Tariffs and Trade, as well as bilateral and regional free trade 
agreements. We do so because U.S. businesses have the expertise and 
resources to compete globally--if they are allowed to do so on equal 
terms with our competitors.
Trade, Growth, and Prosperity
    America's international trade in goods and services accounts for 
nearly a fifth of our country's GDP. As such, it is difficult to 
exaggerate the importance of the Congressional vote in 2002 to renew 
Presidential Trade Promotion Authority (TPA). As we predicted, this 
action by Congress helped reinvigorate the international trade agenda 
and has given a much-needed shot in the arm to American businesses, 
workers, and consumers. The leadership demonstrated by the many members 
of the House Committee on Ways and Means was critical to this progress.
    The evidence is overwhelming that trade is a powerful tool to 
strengthen the U.S. economy. As the Office of the U.S. Trade 
Representative has pointed out, the combined effects of the North 
American Free Trade Agreement (NAFTA) and the Uruguay Round trade 
agreement that created the WTO have increased U.S. national income by 
$40 billion to $60 billion a year. In addition, the lower prices for 
imported goods generated by these two agreements mean that the average 
American family of four has gained between $1,000 and $1,300 in 
spending power--an impressive tax cut, indeed. It is also widely 
recognized that jobs in the export sector pay a premium of 
approximately 15% on average.
    When TPA lapsed in 1994, the international trade agenda lost 
momentum. The Uruguay Round was implemented, but no new round of global 
trade negotiations was launched as the 1990s wore on. Moreover, the 
United States was compelled to sit on the sidelines while other 
countries and trade blocs negotiated numerous preferential trade 
agreements that put American companies at a competitive disadvantage. 
As we pointed out during our 2001-2002 advocacy campaign for approval 
of TPA, the United States was party to just three of the roughly 150 
free trade agreements in force between nations at that time.
    The passage of TPA allowed the United States to demonstrate once 
again the leadership in the international arena that has seen trade 
emerge as a primary engine of growth and development since 1945. Four 
years ago, the promise of TPA renewal fueled the launch of the Doha 
Development Agenda--the global trade negotiations currently being 
conducted under the aegis of the World Trade Organization.
The Doha Development Agenda
    The Doha Development Agenda (DDA) represents a unique opportunity 
to unlock the world's economic potential and inject new vibrancy in the 
global trading system by reducing barriers to trade and investment 
throughout the world. The round was launched on the premise that both 
developed and developing nations alike share in the economic gains 
resulting from global trade liberalization, particularly by addressing 
unfinished business in the agricultural sector.
    With TPA due to expire on June 30, 2007, time is short for the 
WTO's 149 member countries to secure an agreement. It is clear that the 
United States must lead--and the United States is prepared to do so. In 
this vein, the U.S. Chamber applauded the Bush Administration's October 
2005 announcement that it is willing to make a 70% cut in the level of 
``domestic support'' to farmers allowed by the WTO in return for 
commensurate gains in market access overseas.
    Ambition is the key to the DDA's success. As one of the most open 
economies in the world, the United States must be ambitious in its 
approach to liberalization of trade in manufactured goods, services, 
and agricultural products if we are to convince our more reluctant 
trading partners to share our goals. Of course, we cannot lead alone. 
The European Union and the G20, in particular, need to demonstrate that 
they, too, are committed to the success of the DDA and willing to make 
the concessions necessary for a balanced result that can win the 
support of all WTO member countries.
    The U.S. Chamber and its member companies are working with the 
Administration, Congress, and their counterparts around the world to 
ensure that the negotiations advance. On October 25, 2005, the U.S. 
Chamber, in partnership with other leading U.S. business organizations 
and a broad range of companies and agricultural groups, launched the 
American Business Coalition for Doha (ABC Doha) to ensure that the U.S. 
private sector is coordinated, mobilized, and focused on achieving 
success in the DDA. The recommendations that follow represent our 
priorities for the DDA, and we will be working actively with our 
trading partners around the world in the weeks and months ahead to 
build support for the objectives set out below.
    Trade in Agricultural Products: In 2001, the WTO member countries 
committed to making ``substantial improvements in market access; 
reductions of, with a view to phasing out, all forms of export 
subsidies; and substantial reductions in trade-distorting domestic 
support.'' We are encouraged that last fall's proposals set forth by 
the United States and the G20 seem to have re-energized negotiations 
with respect to agricultural reforms. We hope these advances will stem 
what we had perceived before the 6th WTO ministerial conference in Hong 
Kong last December to be an emerging lack of ambition on the part of 
some key parties to the negotiations.
    In a World Bank paper, Kym Anderson concludes that 92% of 
developing countries' gains in agricultural trade will come from 
reductions in market access barriers. The paper finds that such tariff 
reductions will not only improve the trade climate between developed 
and developing nations, but more importantly will yield significant 
gains in trade among and between developing countries. This outcome 
mirrors what we have witnessed in improved market access provisions in 
the areas of manufactured goods and services--the most robust gains are 
seen in trade among and between developing nations.
    In this vein, the EU agricultural market access offer issued a 
month before the Hong Kong ministerial was disappointing. As an 
example, the EU is basically offering U.S. poultry producers the 
opportunity to sell every EU citizen one additional chicken nugget a 
year. The EU is the largest trading power in the world, but European 
leaders need to recognize that with great power comes great 
responsibility.
    The United States is uniquely positioned to press for success based 
on the highest levels of ambition. Bold positions can help break what 
appears to be a stalemate between developed and developing countries 
over who should make the first move. We cannot fail to deliver steep 
reductions in both trade-distorting domestic supports and tariff rates. 
In the end, success will only be achieved through mutual recognition 
that comprehensive trade liberalization is an opportunity that will 
yield enormous benefits to farmers and consumers worldwide.
    Trade in Manufactured Goods: Manufactured goods represent 75% of 
global merchandise trade, and the manufacturing sector is a strong 
driver of U.S. economic growth and employment. In 2001, the WTO member 
countries made a commitment ``to reduce or as appropriate eliminate 
tariffs, including the reduction or elimination of tariff peaks, high 
tariffs, and tariff escalation, as well as non-tariff barriers, in 
particular on products of export interest to developing countries.'' 
While some progress has been made toward this goal, much work remains 
to be done in the non-agricultural market access (NAMA) negotiations.
    In order to deliver on its development promises, the DDA must 
provide genuine new market access by substantially reducing or 
eliminating tariffs among, at minimum, the developed and developing 
countries through a formula that focuses on making meaningful 
reductions in tariffs across all product segments, particularly peak 
and high tariffs. A final agreement must also allow for a voluntary 
sectoral approach to tariff elimination. Above all, achieving a ``level 
playing field'' requires an approach that recognizes the current 
differences among countries' tariffs, and mandates reductions in 
tariffs that will reduce and eliminate those differences, so as to 
avoid an outcome where countries with high average tariffs are only 
required to make relatively small reductions.
    While tariff elimination is a critical component of the round, non-
tariff barriers are increasingly becoming as important, if not more 
important, as tariffs in constraining global trade. The DDA should 
focus on removing these hindrances to international trade, using both 
horizontal and sectoral approaches. In addition, the WTO should 
strengthen, or create where necessary, problem-solving mechanisms 
specifically focused on addressing and removing non-tariff barriers.
    In order to ensure that the NAMA negotiations lead to substantially 
increased opportunities for trade, growth, and development for all 
countries, flexibilities should be built into the process that can 
provide some room for less developed and small economies to take part 
without shouldering the same burden as their more developed 
counterparts.
    Finally, we recognize that the NAMA negotiations are impacted by 
progress in the broader negotiating environment. It is important that 
negotiations on agriculture, services, and NAMA move forward on 
parallel tracks to ensure that success in the broader round is 
achieved.
    Trade in Services: The services sector is the backbone of the 
economy in developed and developing countries alike. In total, it 
represents about two-thirds of world GDP, or $35 trillion in 2004. 
Further liberalization of this critical sector will allow WTO member 
countries to attract greater foreign direct investment and take full 
advantage of the growth and employment that this vital sector provides.
    In 2001, the services liberalization work that had been conducted 
under the GATS (General Agreement on Trade in Services) was 
incorporated into the DDA mandate. WTO members endorsed the existing 
negotiating modalities and set a schedule for successive market access 
requests and offers. Progress has been unsatisfactory to date: few 
offers and even fewer revised offers have been tabled, despite the fact 
that the May 2005 deadline is long passed. The request/offer process is 
clearly not delivering sufficient progress, and there is an urgent need 
to realign priorities and to raise the profile of the services 
negotiations among trade ministers. While new methods that hold promise 
are being explored to revitalize the process, the objective of 
achieving substantial new liberalization commitments by the spring of 
2006 should guide U.S. efforts.
    In mode one (cross border supply of services), the U.S. should seek 
full market access and most-favored nation (MFN) treatment for all 
cross border services trade. This level of ambition should apply for 
mode two (consumption of services abroad) as well. In mode three 
(commercial presence), the U.S. should seek the abolition or, at the 
very least, substantial easing in equity limits for services 
investments and allow for the incorporation of services businesses in 
whatever legal form makes the most business sense. In mode four 
(temporary movement of professionals), countries should commit to 
screen temporary workers, ensure they will leave when their visas 
expire, and generally commit to containing illegal migration in return 
for their professionals' access to host countries.
    Trade Facilitation: The Doha Declaration recognizes the case for 
``further expediting the movement, release and clearance of goods, 
including goods in transit, and the need for enhanced technical 
assistance and capacity building in this area.'' Trade facilitation 
initiatives provide significant opportunities to achieve real, nuts-
and-bolts improvements for businesses of all sizes. Progress in such 
areas as port efficiency, customs procedures and requirements, the 
overall regulatory environment, and automation and e-business usage are 
important for all companies but are especially valuable to smaller and 
medium-sized enterprises.
    Major world regions are already embracing trade facilitation. In 
2002, the 21 member economies of the Asia-Pacific Economic Cooperation 
(APEC) forum launched a Trade Facilitation Action Plan that included a 
commitment to reduce trade-related transaction costs by five percent 
within six years. In November 2004, the APEC leaders were proud to 
announce that they had reached their goal three years ahead of 
schedule. And in the Western Hemisphere, the countries negotiating the 
Free Trade Area of the Americas committed in 1999 to implement a 
package of nine customs-related ``business facilitation'' measures that 
covered much of the same ground as the APEC action plan. In November 
2005, a group of over 100 of the Western Hemisphere's leading business 
organizations released a declaration favoring an ambitious stance in 
the trade facilitation negotiating group of the DDA.
    These efforts have served to raise the profile of trade 
facilitation as an opportunity for the DDA, but much more can be done. 
Trade facilitation can bring great benefits if adopted unilaterally, 
but a global rules-based approach also offers the advantages of 
certainty, stability, and enhanced commonality to customs measures and 
port administration. This is the promise of the DDA's trade 
facilitation negotiations.
Free Trade Agreements
    While the DDA offers the remarkably broad opportunity to lower 
barriers to trade globally, the free trade agreements the United States 
has negotiated represent a more ambitious and comprehensive way to open 
markets one country or region at a time. By leveraging both the breadth 
of the DDA and the depth of FTAs, U.S. business can attain important 
new market opportunities in the years ahead.
    As noted above, the United States is an extraordinarily open 
economy. Consider how U.S. tariffs compare with those of countries 
where FTA negotiations have recently been concluded, are underway, or 
were recently proposed. According to the World Bank, the United States 
has a weighted average tariff rate of less than 2%. By contrast, the 
weighted average tariff of Panama is 7%, Thailand 8%, Peru 9%, Colombia 
and Korea 10%, and Oman 14%.
    We made this point repeatedly in 2004-2005 during our advocacy 
campaign for Congressional approval of the U.S.-Dominican Republic-
Central America Free Trade Agreement (DR-CAFTA). The United States 
eliminated tariffs on nearly all imports from Central America and the 
Caribbean in 1983 through the Caribbean Basin Initiative. In 2003, 77% 
of Central American and Dominican industrial products (including 99% of 
non-apparel industrial products) and 99.5% of agricultural products 
entered the United States duty-free. On the other hand, U.S. consumer, 
industrial, and agricultural exports to these countries faced average 
tariffs in the 7-11% range. As we often pointed out during the DR-CAFTA 
campaign, this was like going into a basketball game 11 points down 
from the tip off.
    An academic observer may regard the resulting 5-12% price 
disadvantage that follows from these lopsided tariffs as insignificant. 
However, business men and women face narrower margins than these every 
day, very often with the success or failure of their firm on the line. 
Best of all, a free trade agreement can fix this imbalance once and for 
all.
    The way free trade agreements level the playing field for U.S. 
workers, farmers, and business is borne out in the results attained by 
America's FTAs. For example, the U.S.-Chile Free Trade Agreement was 
implemented on January 1, 2004, and immediately began to pay dividends 
for American businesses and farmers. U.S. exports to Chile surged by 
33% in 2004, and by a blistering 85% in 2005. In fact, U.S. exports to 
Chile have risen nearly two-and-a-half fold in the agreement's first 
two years of implementation, reaching $6.7 billion in 2005.
    Other recent FTAs have borne similar fruits. Trade with Jordan has 
risen four-fold since the U.S.-Jordan Free Trade Agreement was signed 
in 2000, fostering the creation of tens of thousands of jobs in a 
country that is a close ally of the United States. The U.S. trade 
surplus with Singapore nearly quadrupled over the first two years of 
implementation of the U.S.-Singapore Free Trade Agreement (2004-2005), 
reaching $5.5 billion last year. And over the 12 years since 
implementation of the North American Free Trade Agreement (NAFTA), by 
far the largest and most important of these agreements, U.S. exports to 
Canada and Mexico have surged by $189 billion (to a total of $331 
billion in 2005), sustaining literally millions of new jobs and 
businesses.
    One of the most compelling rationales for these FTAs is the benefit 
they afford America's smaller companies. The following table reveals 
how America's small and medium-sized companies are leading the charge 
into foreign markets, accounting for more than three-quarters of 
exporting firms to these three selected markets (one a market where an 
FTA was recently approved, the second where FTA negotiations were 
recently concluded, and the third where an FTA has just been proposed). 
As a corollary, it suggests how smaller businesses stand to gain 
disproportionately from the market-opening measures of a free trade 
agreement:

----------------------------------------------------------------------------------------------------------------
                                                            No. of U.S.
                                                             companies       No. of U.S. SMEs   No. of U.S. SMEs
                         Market                           exporting to the   exporting to the   as a percentage
                                                               market             market          of exporters
----------------------------------------------------------------------------------------------------------------
DR-CAFTA countries                                                  15,625             13,557                87%
----------------------------------------------------------------------------------------------------------------
Peru                                                                 5,080              4,010                79%
----------------------------------------------------------------------------------------------------------------
Korea                                                               17,330             15,233                88%
----------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Commerce, 2003 data (latest available).

    Beyond the highly successful track record of America's FTAs as 
measured in terms of new commerce, the U.S. Chamber and its members 
also support free trade agreements because they promote the rule of law 
in emerging markets around the globe. This is accomplished through the 
creation of a more transparent rules-based business environment. For 
example, FTAs include provisions to guarantee transparency in 
government procurement, with competitive bidding for contracts and 
extensive information made available on the Internet--not just to well-
connected insiders.
    FTAs also create a level playing field in the regulatory 
environment for services, including telecoms, insurance, and express 
shipments. In addition, recent FTAs have strengthened legal protections 
for intellectual property rights in the region, as well as the actual 
enforcement of these rights.
    Following are observations on three of the FTAs that have been in 
the headlines lately:
    Peru: Negotiations for the Peru Trade Promotion Agreement (PTPA) 
were concluded in December 2005. U.S. trade with Peru has doubled over 
the past three years, reaching $7.4 billion in 2005. The text of the 
PTPA reveals an agreement that is both ambitious and comprehensive. 
Eighty percent of U.S. consumer and industrial products and more than 
two-thirds of current U.S. farm exports will enter Peru duty-free 
immediately upon implementation of the agreement.
    U.S. investors in Peru also regard PTPA as a helping hand for a 
close ally in the Andes. As described above, PTPA will lend support for 
the rule of law, investor protections, internationally recognized 
workers' rights, and transparency and accountability in business and 
government. The agreement's strong intellectual property and related 
enforcement provisions against trafficking in counterfeit or pirated 
products will help combat organized crime. PTPA will clearly promote 
economic growth in Peru, lending strength to its economy and providing 
its citizens with long-term alternatives to narcotics trafficking or 
illegal migration.
    The U.S. Chamber is serving as Secretariat of the U.S.-Peru Trade 
Coalition, a broad-based group of U.S. companies, farmers, and business 
organizations advocating for PTPA's approval. Negotiations for a 
similar agreement with Colombia are being held this very week, and both 
the coalition and the Chamber are hopeful these talks will produce a 
trade agreement of similar quality.
    Korea: The U.S. Chamber also strongly supports the announcement 
earlier this month by the U.S. and Korean governments of their intent 
to launch negotiations for a U.S.-Korea FTA. Such an agreement would be 
the most commercially significant FTA the United States has entered 
into with a single country. In 2005, Korea was the seventh-largest U.S. 
trading partner, its seventh-largest export market, and its sixth-
largest agricultural market overseas. Moreover, a U.S.-Korea FTA will 
strengthen the important political relationship and alliance between 
the United States and Korea, further contributing to security and 
stability in the Asia-Pacific region.
    The Chamber-administered U.S.-Korea Business Council is serving as 
Secretariat of the U.S.-Korea FTA Business Coalition. This coalition 
already embraces over 100 leading U.S. companies and business 
associations that strongly support the conclusion and passage of a 
U.S.-Korea FTA to advance the interests of the U.S. business community 
and promote further bilateral trade and investment.
    Oman: On January 19, 2006, the United States and Oman signed a free 
trade agreement. With bilateral trade surpassing $1.1 billion in 2005, 
the FTA is of particular interest to U.S. exporters of 
telecommunications equipment, oil and gas equipment, medical equipment, 
and electrical and manufacturing equipment. As noted above, Oman has a 
weighted average tariff of 14%, presenting U.S. exporters with 
relatively high barriers to market access; the FTA will eliminate all 
tariffs on industrial and consumer products immediately upon entry into 
force.
    From a regional standpoint, the U.S.-Oman FTA is an important 
strategic step in the overall U.S. foreign policy in the Middle East. 
The Bush Administration has announced its intention to create a Middle 
East Free Trade Area by 2013. The United States already has FTAs with 
Bahrain, Israel, Jordan, and Morocco and is in negotiations with the 
United Arab Emirates. Congressional approval of this FTA is a crucial 
step in attaining the MEFTA goal. Passage of this comprehensive 
agreement will set a high standard for future FTAs with Gulf 
Cooperation Council member countries and other countries in the region.
China: Challenge and Opportunity
    Beyond the Doha Development Agenda and the various free trade 
agreements coming up for Congressional consideration or under 
negotiation, we would like to comment on U.S.-China trade. The Sino-
American commercial relationship is the subject of a number of recent 
legislative proposals in Congress.
    The U.S. Chamber and our members applaud the many recent cases in 
which Chinese authorities have worked closely with the U.S. business 
community to implement the commitments China made upon accession to the 
WTO, as well as to resolve disputes that have arisen during the 
implementation process. Partly for these reasons, China is now the 
fastest-growing trading partner of the United States. Rapidly expanding 
bilateral economic and commercial ties underscore the market 
opportunities that China offers to U.S. exporters and investors, which 
support the creation of high value-added jobs at home.
    However, as underscored by last week's trade deficit figures, China 
can and must do more to open its market and instill the rule of law. 
The U.S. business community and others that vigorously advocated 
China's WTO membership premised their support on expectations that 
China is evolving into a more open and transparent market based on the 
rule of law. China's unsuccessful efforts to consistently enforce its 
laws protecting intellectual property (IP) and to combat IP theft 
represent the most visible examples of these expectations remaining 
unfulfilled.
    Similarly, China has continued its reliance on state guidance and 
industrial policies--capitalization requirements, mandated national 
technology standards, procurement preferences and subsidies--in key 
sectors. Not only is this a breach of China's market access commitments 
and the spirit of openness China embraced when joining the WTO, but it 
also gives credibility to China's critics who doubt China's commitment 
to create a business environment that values equally the economic 
contributions of domestic and foreign companies.
    China needs to implement its WTO obligations fully and consistently 
in order to advance on the path toward a clear and transparent rule-
based regulatory environment that values equally the contributions of 
U.S. as well as Chinese businesses. Some key policy issues in the area 
of IP, industrial policy, transparency, and currency are outlined 
below:
    Intellectual Property: China needs to reduce the depth and breadth 
of IP infringement and realize a marked reduction in the export of 
pirated and counterfeit products. This can be accomplished through such 
efforts as the routine implementation of effective civil, 
administrative, and criminal penalties and increased market access for 
the purchase of foreign IP-based products to facilitate the sale of 
legitimate products.
    Industrial Policy: China must refrain from using discriminatory 
government procurement policies, national standards, competition law, 
and IP regulations to erect barriers to fair competition and unfairly 
reduce the value of foreign-held IP. China should reaffirm its 
commitment to non-discriminatory, merit-based, and technology neutral 
government procurement. China should also accelerate its efforts to 
join the Government Procurement Agreement (GPA) and, prior to accession 
to the agreement, adhere to the principle of national treatment in 
government procurement. It is also essential that China respect the 
rights of patent holders, including the right to derive reasonable 
compensation (e.g., royalties or one-time payments) from IP and refrain 
from utilizing compulsory patent licensing to resolve patent-
infringement issues, even for mandatory national standards.
    Transparency: China must do much more to ensure that it develops 
and implements laws and regulations in a manner consistent with 
international practices and WTO commitments. China has made important 
progress in improving the transparency of its rulemaking and other 
regulatory activities since its WTO accession in 2001, but transparency 
remains a key concern of U.S. Chamber member companies.
    Currency: China should move as quickly as possible to a fully 
convertible exchange rate. China's status as a large, developing 
economy that is not yet fully market-based poses special challenges to 
world trade and financial systems. The U.S. Chamber supports the 
Administration's engagement of the Chinese government in discussions on 
such matters as currency levels, trade flows, investment regimes, and 
compliance with international agreements.
    The U.S. Chamber would like to underscore that for all the examples 
of China's challenges in realizing full WTO compliance, none of these 
trumps the value of engaging the world's most populous nation in the 
rules-based trading system. While we share the concerns of many members 
of Congress over the U.S.-China trade deficit, rising competition from 
Chinese imports, and China's currency regime, it is important that we 
do all we can to resist protectionist sentiments to address trade 
challenges. We understand the motivation behind legislative proposals 
to repeal China's ``permanent normal trade relations'' status or add 
significant tariffs to Chinese imports, but such actions would retard, 
not advance, U.S. interests.
    For all those who care about the future of our economy, jobs for 
Americans, stability and peace in the world, the protection of global 
health, and the advancement of environmental quality and human rights, 
we must continue to encourage China to become an active and committed 
member of the world trading system. We are pleased with the 
Administration's efforts to take a broad-based review of the U.S.-China 
commercial relationship through the top-to-bottom review. The U.S. 
Chamber encourages efforts to hold China accountable through 
appropriate means such as the U.S.-China Joint Commission on Commerce 
and Trade and other bilateral forums. When dialogue is ineffective, the 
Chamber supports the use of U.S. trade laws and the dispute settlement 
process within the WTO. Constructive engagement with China remains the 
most promising path to progress and is vastly superior to approaches 
that seek to punish and isolate this emerging global power.
Conclusion
    Trade expansion is an essential ingredient in any recipe for 
economic success in the 21st century. If U.S. companies, workers, and 
consumers are to thrive amidst rising competition, new trade agreements 
such as the DDA and the various free trade agreements cited above will 
be critical. In the end, U.S. business is quite capable of competing 
and winning against anyone in the world when markets are open and the 
playing field is level.
    The U.S. Chamber appreciates the leadership of the House Committee 
on Ways and Means in advancing the U.S. international trade agenda. We 
stand ready to work with you on these and other challenges in the year 
ahead. Thank you.

                                  
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