[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
HEARING ON IMPLEMENTATION OF THE
UNITED STATES-OMAN FREE TRADE AGREEMENT
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
APRIL 5, 2006
__________
Serial No. 109-59
__________
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
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C O N T E N T S
__________
Page
Advisory announcing the hearing.................................. 2
WITNESSES
Office of the U.S. Trade Representative, Hon. Susan Schwab,
Deputy U.S. Trade Representative............................... 10
______
The Ballard Group LLC, Hon. Frances D. Cook...................... 34
Turner Construction--International LLC, Nicholas E. Billotti..... 39
Muscat American Business Council, and DynCorp International,
Michael P. Weitzel............................................. 42
American Federation of Labor-Congress of Industrial
Organizations, Richard L. Trumka............................... 45
Dow Chemical Company, Roger R. Schwartz.......................... 52
SUBMISSIONS FOR THE RECORD
Hamod, David, National U.S.-Arab Chamber of Commerce, statement.. 65
Keating, Frank, American Council of Life Insurers, statement..... 69
Ranchers-Cattlemen Action Legal Fund, statement.................. 70
United States Chamber of Commerce, statement..................... 72
HEARING ON IMPLEMENTATION
OF THE UNITED STATES-OMAN
FREE TRADE AGREEMENT
----------
WEDNESDAY, APRIL 5, 2006
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to call, at 10:40 a.m., in room
1100, Longworth House Office Building, Hon. William M. 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
March 29, 2006
FC-20
Thomas Announces Hearing on Implementation
of the United States-Oman Free Trade Agreement
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
the implementation of the U.S.-Oman Free Trade Agreement (FTA). The
hearing will take place on Wednesday, April 5, 2006, in the main
Committee hearing room, 1100 Longworth House Office Building, beginning
at 10:30 a.m.
Oral testimony at this hearing will be from both invited and public
witnesses. Invited witnesses will include Ambassador Susan Schwab,
Deputy U.S. Trade Representative. 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:
On March 12, 2005, formal negotiations were launched to enter into
an FTA between Oman and the United States. These negotiations concluded
on October 3, 2005, and on January 19, 2006, U.S. Trade Representative
Rob Portman signed the U.S.-Oman FTA.
Oman has been a strong ally of the United States, contributing
significantly to U.S. combat operations in Iraq and hosting thousands
of U.S. military personnel during Operation Enduring Freedom in
Afghanistan. In addition, Oman has played a leading role in the Persian
Gulf area in opening trade with Israel and does not implement any
aspect of the Arab League Boycott of Israel. Under the leadership of
Sultan Qaboos, Oman has enacted a wide range of economic and political
reforms, including promoting women to key roles such as Ministers and
as the Ambassador to the United States.
A U.S.-Oman FTA would be the fourth U.S. agreement with an Arab
country, following the U.S.-Jordan FTA signed in 2000, the U.S.-Morocco
FTA signed in 2004, and the U.S.-Bahrain FTA signed in 2006. The U.S.-
Oman FTA is an integral part of the Administration's strategy to create
a Middle East FTA by 2013. The market access commitments in the U.S.-
Oman FTA would immediately eliminate duties of all current bilateral
trade in consumer and industrial products. Under the agreement, Oman
would also provide immediate duty-free access for U.S. agricultural
products in 87 percent of its agricultural tariff lines, and both
nations would eliminate tariffs on any remaining products within 10
years. The agreement also provides strong protections for intellectual
property and one of the highest levels of access for U.S. services
industries in any FTA to date.
United States-Oman two-way goods trade was $1.1 billion in 2005.
The United States exported $593 million in goods to Oman, with major
exports including aircraft, vehicles, machinery, electrical machinery,
and optical and medical equipment.
In announcing the hearing, Chairman Thomas stated, ``This FTA
builds on our strategic efforts cited by the 9/11 Commission Report to
promote free and open economic and political systems in the Middle East
and is another key part of our goal of establishing a Middle East Free
Trade Area. Oman has been a strong partner of the United States and
through this agreement has made some of the strongest market access
commitments in any FTA to date. In addition, Oman has made significant
progress, just as Bahrain, in improving its labor standards. I look
forward to moving this agreement quickly and expanding economic
opportunity in the Middle East.''
FOCUS OF THE HEARING:
The hearing will examine the U.S.-Oman FTA and the benefits that
the agreement will bring to American businesses, farmers, workers,
consumers, and the U.S. economy, as well as to the U.S. strategic
relationship in the region.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Michael Morrow or Kevin Herms at (202) 225-1721 no later than 12:00
p.m. Friday, March 31, 2006. The telephone request should be followed
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In view of the limited time available to hear witnesses, the
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Those persons and organizations not scheduled for an oral appearance
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Chairman THOMAS. Today, the Committee will discuss the
implementation of the U.S.-Oman Free Trade Agreement (FTA).
This FTA, continues the strong precedent set by the United
States-Bahrain FTA in terms of our trade relations with the
Persian Gulf regions.
This Agreement will make 100 percent of U.S. imports and
exports in consumer industrial goods duty free on the day the
Agreement enters into force. It provides duty-free treatment to
87 percent of our agricultural products from day one,
understanding that the two-way trade between the United States
and Oman is less than $800 million in the most recent
statistical year, 2004. The International Trade Commission
(ITC) agrees that although it is small, it is positive. Like
the FTA with Bahrain, clearly, this Agreement has significance
beyond its immediate markets.
The one thing that I will not recount in particulars, as I
am going to recognize the gentleman from Florida, is the long,
strong friendship the U.S. has shared with Oman, signing their
first treaty in 1833. I also would like to make note that there
are letters that we have received from Oman that I would like
to make a part of the record, in which the Ministry of Commerce
and Industry has described specific steps the Omanis intend to
take, including specific dates for action in regard to labor
standards. That, I think, provides a measuring stick, one,
which they will live up to, but two, should give additional
comfort, looking forward, to what Oman will look like when the
agreement enters into force.
[The letters follow:]
Embassy of
The Sultanate of Oman Washington, D.C.
[GRAPHIC] [TIFF OMITTED] T0441A.001
March 3, 2006
The Honorable William M. Thomas
Chairman, House Ways and Means Committee
2208 Rayburn House Office Building
Washington, DC 20515-2105
Dear Chairman Thomas:
This will provide a reply to your request regarding Oman's ability
to adapt its labor rights regime in a manner similar to that which the
Kingdom of Bahrain had committed in seeking Congressional approval of
the U.S.-Bahrain Free Trade Agreement.
We have reviewed the correspondence between the Kingdom of Bahrain
and Ambassador Portman regarding issues and commitments of the Kingdom
with respect to its labor right. regime. I have discussed these issues
with the Minister of Industry and Commerce, H.E. Maqbool Ali Sultan,
who has also conferred with the Minister of Manpower, H.E. Juma Al
Juma. The Sultanate of Oman will:
1. Clarify its law that more than one Representative Committee may
be formed in order to represent workers in their relations with a
single enterprise.
2. Oman shall consult with the International Labor Organization and
shall clarify that Representative Committees may belong to more than
one federation.
3. The Ministry of Manpower will review remedies available to
workers for unlawful termination of a worker for participating in a
strike. In the event a legal preference for remedies is advisable and
in compliance with I.L.O. standards, Oman will consider requiring
reinstatement as the preferred remedy in such cases.
4. Oman shall continue to participate in consultations with the
International Labor Organization to address and improve Oman's evolving
labor rights regime, including further clarification of collective
bargaining rules.
5. Oman will take steps to reduce government involvement in
Representative Committee operations in order to conform to I.L.O.
Convention 87.
Our review of the Bahrain commitments indicate that other
representations made by Bahrain are not readily comparable with Oman's
laws and practices. Nevertheless, if you believe otherwise, we will be
pleased to further discuss these issues with you.
[GRAPHIC] [TIFF OMITTED] T0441A.002
CC: Angela Ellard; Majority Staff Director, Trade Subcommittee,
House Ways and Means Committee
______
Sultanate of Oman
Ministry of Commerce and Industry
Muscat
Date: 26 March 2006
The Honorable William Thomas
Chairman, Ways and Means Committee
United Stats House of Representatives
2208 Rayburn HOB
Washington, DC 20515
Dear Chairman Thomas,
I sincerely appreciate the opportunity to work with you on the
passage of the U.S.-Oman Free Trade Agreement and I welcome you
interest in our labor laws. Over the last few years Oman has made
significant progress in reforming our laws to comply with the
International Labor Organization (``ILO'') core labor standards. We are
currently consulting with the ILO to further modernize our law and
practices, taking into account the ILO standards. Therefore, Oman makes
the following commitments:
1. Oman is hosting an ILO delegation in April of this year in order
to determine how to incorporate ILO Convention 98 into our labor laws.
Oman will then seek the views of the Council of Oman, the Council of
Ministers, the Chamber of Commerce & Industry, representative
committees and other interested parties (hereinafter, ``Interested
Parties''). Thus, Oman will be able to issue a Ministerial Decision,
after consultation with Interested Parties, no later than October 31,
2006 that incorporates the standards of ILO Convention 98 into Omani
labor laws.
2. The Ministerial Decision referenced in number 1 above will
clarify that Article (106) of the Omani Labour Law allows workers, at
their option, to be reinstated for any termination that resulted from
lawful union activity.
3. After consultation with Interested Parties, Oman will issue a
Royal Decree amending Royal Decree 35/2003 (the Omani Labor Law) by no
later than October 31, 2006 that states that more than one
representative Committee may be formed in order to represent workers in
their relations with a single enterprise.
4. After consultation with Interested Parties, Oman will issue a
Royal Decree amending Royal decree 35/2003, as noted in point 3 above
to amend Articles (108-110) of the Labour Law reflect that each
representative Committee may belong to the Main Representative
Committee and that other main representative bodies may be formed. This
action will be taken no later than October 31, 2006.
5. After consultations with Interested Parties, Oman will issue a
Ministerial Decision by no later than October 31, 2006 ensuring that
penalties for anti-union discrimination are adequate to deter acts of
discrimination.
6. After consultations with the ILO and with Interested Parties,
Oman will issue a Ministerial Decision by no later than October 31,
2006 that will ensure that technical standards for strikes do not
exceed the standards of the ILO.
7. As provided by the Basic Law of Oman, Oman does seek the views
of Interested Parties, before making any changes in the legislation and
will commit to continue this practice in the future.
8. After consultations with Interested Parties, Oman will amend
Ministerial Decisions 135/2004 & 136/2004 by no later than October 31,
2006 in order to remove all government involvement in representative
Committees' activities.
Yours sincerely,
Maqbool Ali Sultan
Minister of Commerce & Industry
Chairman THOMAS. For the remainder of the time, I recognize
the gentleman from Florida, the Chairman of the Subcommittee on
Trade, Mr. Shaw.
Mr. SHAW. Thank you, Mr. Chairman. I would like to express
my pleasure that we are discussing the implementation of the
U.S.-Oman FTA. Today we move forward on a FTA that I hope, in
the end, will result in strong support similar to what we saw
with the U.S.-Bahrain FTA, which received 327 yea votes in the
House of Representatives. It is true that the size of Oman's
economy is small relative to the U.S. economy. In fact,
according to the Congressional Research Service, total U.S.-
Oman trade was $1.1 billion in 2005, accounting for only 4/
100ths of 1 percent of all U.S. trade. Despite this small level
of trade, there are some real benefits in this agreement for
American producers.
As mentioned earlier, the Agreement will provide
immediately duty-free access to 87 percent of all agricultural
tariff lines. My home State of Florida will receive duty-free
treatment of many citrus products, and I am very pleased to see
that Mr. Billotti, in his written testimony, noted that his
construction work in Oman is generating new opportunities for
Florida companies. However, beyond the benefits to American
companies and workers, the people of both countries will
benefit from the continued development and deepening of the
good relationship between us. It is certainly in our best
interest to foster strong economic growth in the economy of our
allies, and there is little question that Oman has been a solid
ally of ours for some time, as spoken by the Chairman.
Particularly, I would like to applaud Oman and its
leadership in dismantling the Arab League boycott of Israel.
Additionally, Oman has no law which establishes or enforces
primary, secondary or tertiary boycotts, and it does not apply
the boycotts in practice. On September 28th, 2005, Oman's
Minister of Commerce and Industry, Mr. Maqbul, wrote to
Ambassador Portman to reiterate that Oman does not apply any
aspect of the boycott. I would like to ask unanimous consent to
include this letter in the record.
Chairman THOMAS. Without objection.
[The information follows:]
28 September 2005
The Honorable Robert Portman,
U.S. Trade Representative
600 17th Street, NW
Washington DC 20508,
United States of America
Dear Ambassador Portman,
Please accept my congratulations on your recent appointment to
serve as the U.S. Trade Representative.
It has come to my attention that questions have arisen regarding
Oman's participation in the Arab Boycott of Israel. I would like to
assure you that Oman does not apply any aspect of the boycott, whether
primary, secondary or tertiary or have any laws to that effect. Oman
has no restriction whatsoever on U.S. companies trading with Oman or
doing business with Oman, regardless of its ownership or relations with
Israeli companies, and the government is taking steps to ensure that
all Ministries are aware of the situation and remove any boycott
language that may unintentionally remain in their contracts.
As a Member of the World Trade Organization (WTO), Oman did not
invoke the non-application provisions of the WTO Agreement toward any
other Member, and therefore has all WTO rights and obligations with
respect to all Members.
Your sincerely,
Maqbool Bin Ali Sultan
Minister of Commerce and Industry
Mr. SHAW. The incredible change that can be fostered
through trade relations can bee seen in the Qualified
Industrial Zone (QIZ), a program in Egypt, which provides trade
benefits to Egyptian companies that use Israeli content.
Skeptics said that launching QIZs in Egypt would lead to
protests against working with Israel. They were right that QIZs
led to protests, but it couldn't have been more wrong about the
reason. Egyptian workers protested because more of them wanted
the ability to work in these jobs; jobs that helped ties
between Israel and the Arab world. All over, Oman has been in
the forefront of the Persian Gulf Region in developing strong
ties with Israel.
After the signing of the Egyptian-Israeli Peace Treaty in
1979, Oman was one of the few Arab countries that did not break
off relations with Egypt. It was also one of the few countries
in the region to host an Israeli Prime Minister, when Prime
Minister Rabin visited Oman in 1994. If we are to have any
success in convincing countries to end the boycott, then we
must stand ready to build relationships with those countries
that do. With this his FTA, the U.S. can again show countries
the economic benefits that are available to them if they reject
this boycott. Mr. Chairman, I thank you for this time. I have
run over, I appreciate it and yield back.
Chairman THOMAS. Thank the gentleman. The Chair would
recognize the Ranking Member, the gentleman from New York, for
any comments he may wish to make at this time.
Mr. RANGEL. Thank you so much. Welcome to the Committee. I
will be yielding to the Ranking Member of the Subcommittee on
Trade, but I am glad to see that the Chairman raised some
questions or at least indicated that he had received some
answers as it relates to basic International Labor Standards
(ILS), and I see that you have referred constantly to labor
standards consistent with internationally recognized
principles. I assume you feel that one of the things that have
torn this Committee apart on trade has been the interpretations
of these standards. At some point I would like to know whether
you have reached out to the Members of this Committee to try to
get some agreements as to what the United States Trade
Representative (USTR) thinks these standards should be, and how
much time we have to deal with these questions. I really
believe that more of these trade agreements should be
bipartisan, and where efforts have been made to reach out, we
have had tremendous success. I would like to yield to Mr.
Cardin, who may be able to share whether or not the USTR has
been working directly with him.
Mr. CARDIN. Let me thank Mr. Rangel for yielding.
First, let me just concur with the comments made about Oman
being a longstanding friend and ally of the U.S., for all of
the reasons that have been stated, and I hope we can conclude a
FTA. However, I must raise an important concern that prevents
me from endorsing the Agreement at this time. The structure of
the Oman FTA, like those of other recent trade agreements,
provides that the country must only enforce their own laws when
it comes to basic labor standards. This is the only enforceable
provision in the chapter on labor, and there is no requirement
that the countries bring their laws into compliance with
internationally recognized standards. When ``enforce your own
laws'' is the model we use in our trade agreements, it is
important that a country's labor laws meet basic international
standards. Unfortunately, at this time, Oman's labor laws do
not meet these standards.
Last month, Oman committed to issue several ministerial and
royal decrees by October 31, 2006, to address certain areas
where its laws fall short of basic international labor
standards. Mr. Chairman, I believe Oman's commitments are an
important step in the right direction. However, there is more
work that needs to be done if we are able to get the type of
bipartisan support that the U.S.-Bahrain FTA had. As you
recall, the key to broad congressional support for the U.S.-
Bahrain FTA was a detailed agreement reached between the U.S.
Government and the government of Bahrain regarding labor laws.
This Agreement had four key parts. First, Bahrain was able to
demonstrate that its existing labor laws, as applied, were
consistent with basic international standards. Oman has not yet
satisfied this requirement, as Oman has not committed to apply
its laws immediately in an International Labor Organization
(ILO) consistent manner in the areas where its laws, as
written, do not currently meet international standards.
Second, Bahrain made a commitment to make formal changes to
all of its laws that were not fully ILO compliant. Oman is
committed to issuing ministerial decisions to address seven
areas in which the country's laws currently, do not comply with
ILO standards. However, it is unclear whether these ministerial
decrees override previously enacted contradictory provisions
and Oman's labor laws. In addition, Oman has not committed to
making changes to address three other areas in the law that are
not fully ILO compliant.
Third, Bahrain made a commitment to introduce the formal
changes to its laws immediately, committing that certain
changes would be submitted to the Parliament before the House
voted on the FTA, and certain other changes would be submitted
within 3 weeks of the House vote. Oman has not committed to
take immediate action to address these areas in which laws fall
short of basic ILO standards. Instead, Oman has committed to
issue certain ministerial and royal decrees by October 31,
2006.
Fourth, prior to the Committee on Ways and Means markup of
the U.S.-Bahrain FTA, U.S. Ambassador Portman sent a letter to
the government of Bahrain, reflecting a joint agreement between
the two countries that Bahrain's commitment to continuing
applying its laws in an ILO consistent manner, and to formally
change its laws to comply fully with ILO standards, would be
considered as, ``matters arising under the agreement,'' and
subject to consultations. No such commitment has been made with
respect to the enforcement of commitments made thus far by
Oman. Mr. Chairman, I think we are on the right path, but there
are several additional steps that must be taken before this
Agreement can gain the broad bipartisan support. Let me just
make my final comment to point that Oman currently benefits
from the U.S. Generalized System of Preferences (GSP), and of
course, as part of that, they must be moving toward ILO
standards. I think it is important that the final agreements
that are reached meet the standards of the Bahrain FTA, and we
are not there yet. I hope we can get there, and I will look
forward to working with the Committee.
Chairman THOMAS. I thank the gentleman for his comments.
Just to clarify, the letters that the Chairman requested to put
in the record, were letters to the Chairman from the Omanis,
and the Omanis responded back to the Chairman. The Chairman's
idea for a letter directly was based upon our friends on the
minority side's similar actions with Morocco and Bahrain. I
think it is a good idea. Although they were not shared with the
majority prior to having them sent, our concern was the content
of the letters, I am hopeful that the minority's reaction to
the Chairman's letter would not be based upon the manner, as I
indicated, but on the contents, and I believe the gentleman
from Maryland's comments were focused on the contents of the
letter, and I appreciate that.
Mr. CARDIN. We are not concerned about how we get the
commitment, so we are very much working--and as I said, I think
the letter exchange between you and the Omanis was a positive
step, so we look forward to----
Chairman THOMAS. As the Chair thought, the letters from the
minority to Morocco and Bahrain--I just heard some comments
about that and I wanted to clarify the record--our job was to
try to get it right, and that would be something substantive
that we could focus on.
Mr. RANGEL. Mr. Chairman, would you yield?
Chairman THOMAS. Gentleman from New York.
Mr. RANGEL. Could you share with a copy of the Chairman's
letter?
Chairman THOMAS. Yes. It is in the record and it will be
available to everyone.
Mr. RANGEL. That would help too.
Chairman THOMAS. As would the Morocco and the Bahrain
letters would have as well. Now it is my pleasure to have
before the Committee, the Honorable Susan Schwab, who is the
Deputy USTR, and thank you very much. You may address the
Committee in the time you have in any way you see fit. Any
written testimony will be made a part of the record.
STATEMENT OF THE HONORABLE SUSAN C. SCHWAB, DEPUTY UNITED
STATES TRADE REPRESENTATIVE, OFFICE OF THE UNITED STATES TRADE
REPRESENTATIVE
Ms. SCHWAB. Thank you, Mr. Chairman. I will be submitting
written testimony for the record. Mr. Chairman, Chairman Shaw,
Congressman Rangel, Members of the Committee, let me begin by
thanking you and other Members on the Committee who have worked
in such close partnership with us on our FTAs. I am also
grateful to the cochairs of the Middle East Economic
Partnership Caucus, Congressmen Ryan, Meeks, Jefferson,
English, Chandler and Issa, who have been extremely supportive
of this agreement.
I appreciate the opportunity to discuss the U.S.-Oman FTA
with you today. This and other FTAs that the Committee has
considered are important elements of U.S. policy in the Middle
East, with potential benefits that extend well beyond their
immediate trade implications.
With this Agreement, Oman has made legally binding
commitments to liberalize trade with the U.S. The FTA will
provide new market access opportunities for U.S. manufacturers,
farmers and service providers. It will also create an economic
environment conducive to additional economic opportunities for
the people of Oman.
Beyond substantial trade liberalization, the FTA will help
support ongoing economic, political and social reforms in Oman,
and promote the benefits of pursuing market opening policies in
other countries in the region. Embracing trade will benefit the
people of the Middle East as they strengthen their ties with
countries outside the region and with each other.
The Administration's trade agenda is a fundamental part,
therefore, of the President's vision of developing economic
growth and democracy in the Middle East. In May 2003, the
President announced a plan of graduated steps for Middle
Eastern countries to increase trade and investment with the
U.S. and others in the world economy, and to create a U.S.-
Middle East Free Trade Area (MEFTA), by 2013. Oman is the fifth
Middle Eastern country to have negotiated an FTA with the U.S.,
building on our existing agreements with Israel, Jordan,
Morocco and Bahrain. We are also negotiating an FTA with the
United Arab Emirates, and have Trade and Investment Frameworks
Agreements (TIFA), with most other countries in the region.
These are important steps in implementing the President's
initiative.
The 9/11 Commission urged the U.S. to expand trade in the
Middle East in order to ``encourage development, more open
societies, and opportunities for people to improve the lives of
their families and to enhance prospects for their children's
future.'' The President and USTR take this recommendation very
seriously, and the Oman FTA is an important milestone in our
progress.
On the first day the Agreement enters into force, 100
percent of bilateral trade in industrial and consumer products,
with the exception of certain textile and apparel products,
will flow duty-free, as was indicated by the Chairman and
Subcommittee Chairman Shaw. Oman will also provide immediate
duty-free access for 87 percent of the lines of U.S. exports of
agricultural products with major potential benefits to American
exporters. Services regimes will also be liberalized, including
banking and securities, insurance, telecommunications, express
delivery, distribution, health care, construction, architecture
and engineering.
We are also very pleased with the legal and regulatory
environment changes that will be going on in Oman as a result
of this Agreement that will assist foreign investors who want
to see a 21st century commercial environment in which to
invest. The labor laws, labor law reforms, intellectual
property rights reforms, all are important parts of this
Agreement, as are provisions in the FTA related to
transparency, public notification and anti-bribery provisions.
The FTA's labor and environment provisions fully meet the
negotiating objectives set out in the Trade Act of 2002
(P.L.107-210) and these provisions are included in the core
text of the Agreement. The Agreement requires that each party
not fail to effectively enforce its labor and environmental
laws. Moreover, each country commits to ensure that its
policies provide for and encourage high levels of environmental
protection, to strive to ensure that its labor laws provide for
labor standards consistent with internationally recognized
principles, and we can talk more about that later, and strive
not to weaken or reduce labor or environmental laws to attract
trade and investment.
Oman passed a new labor law in the year 2003 that allows
for the creation of worker representative Committees for the
first time. It also removed its 1973 enacted prohibition on
strikes. The Agreement enjoys widespread support from our
private sector advisory Committees. I look forward to answering
any questions you might have about this important agreement.
[The prepared statement of Susan Schwab follows:]
Statement of The Honorable Susan Schwab, Deputy U.S. Trade
Representative, Office of the U.S. Trade Representative
INTRODUCTION
Mr. Chairman, Congressman Rangel, and Members of the Committee:
I would like to thank Chairman Thomas, Congressman Rangel, and
others on the Committee who work in such close partnership with us on
our free trade agreements. I am also grateful to the co-chairs of the
Middle East Economic Partnership Caucus--Congressmen Ryan, Meeks,
Jefferson, English, Chandler and Issa--who have been extremely
supportive of this agreement.
I appreciate the opportunity to discuss the United States-Oman Free
Trade Agreement (FTA) with you. This and other recent FTAs that the
Committee has considered are important elements of U.S. policy in the
Middle East. With this agreement, Oman has made legally binding
commitments to liberalize trade with the United States. The FTA will
provide new market access opportunities for U.S. farmers,
manufacturers, and service providers. It will also be an important
force in encouraging increased direct foreign investment in Oman and in
creating an economic environment conducive to additional employment
opportunities for the people of Oman.
Beyond substantial trade liberalization, the FTA will help support
ongoing economic, political and social reforms in Oman, and promote the
benefits of pursuing market liberalizing policies in other countries in
the region. Embracing trade will benefit the people of the Middle East
as they strengthen ties with countries outside the region and with each
other. The more nations trade with one another, the better the chances
for ending political instability and economic stagnation.
The Administration's trade agenda is a fundamental part of the
President's vision of developing economic growth and democracy in the
Middle East--a region of almost 350 million people and a $70 billion
trading relationship with the United States. In May 2003, the President
announced a plan of graduated steps for Middle Eastern nations to
increase trade and investment with the United States and others in the
world economy, and to create a United States-Middle East Free Trade
Area (MEFTA) by 2013. This trade agenda is one element of a
comprehensive approach to address the economic, social and political
challenges facing the region and U.S. interests in the area.
Our strategy toward countries in the region--to engage them at
their individual levels of progress, to provide them access to the U.S.
market based on mutual benefit, and to require that they adopt high
standards for trade and investment--is working. Oman is the fifth
country in North Africa and the Middle East to have negotiated an FTA
with the United States, building on our existing agreements with
Israel, Jordan, Morocco and Bahrain. We are also negotiating an FTA
with the United Arab Emirates and have Trade and Investment Framework
Agreements (TIFA) with most of the other countries in this region,
which provide opportunities to enhance our bilateral trade and
investment relationships. These are important steps on the path to
implementing the President's MEFTA initiative.
The 9/11 Commission urged the United States to expand trade with
the Middle East in order to ``encourage development, more open
societies, and opportunities for people to improve the lives of their
families and to enhance prospects for their children's future.'' The
President and USTR take this recommendation very seriously.
Working in close partnership with Congress has been critical to our
successes to date. The Trade Act of 2002 put in place procedures that
make it possible to negotiate and implement the types of agreements
that not only address the pressing need for engagement with regions
such as the Middle East, but also bring real benefits to American
workers and the U.S. economy.
THE AGREEMENT
The United States-Oman FTA will eliminate tariffs and non-tariff
barriers and expand trade between the two countries, generating new
opportunities for U.S. workers, consumers, farmers, manufacturers and
service providers.
On the first day the agreement enters into force, 100 percent of
bilateral trade in industrial and consumer products, with the exception
of certain textile and apparel products, will flow duty-free. In
addition, Oman will provide immediate duty-free access for 87 percent
of U.S. exports of agricultural products. This will mean new
opportunities for U.S. companies that produce machinery, automobiles,
optical and medical instruments. And it will mean new opportunities for
U.S. producers of vegetable oils, sugars and sweeteners for beverages.
Under the FTA, Oman will provide substantial market access across
its entire services regime, providing new opportunities for U.S.
companies involved in banking and securities, insurance,
telecommunication, express delivery, distribution, health care,
construction, architecture and engineering.
This Agreement will also help ensure a secure and predictable legal
and regulatory environment in Oman that foreign investors want to see
in 21st century commerce. Under the Agreement, Oman will provide
effective enforcement of labor and intellectual property laws. This
will help make Oman a more attractive place for investors and create
new opportunities for the Omani people.
The Agreement's rules of origin provisions on regional cumulation
allow FTA partners in the region to combine inputs into products and
qualify for preferential tariff treatment. This feature will facilitate
connecting our bilateral agreements as we move toward a more
integrated, region-wide agreement. It will also encourage trade among
countries in the region, an important yet currently missing ingredient
for the region's development.
The Agreement also includes important transparency, public
notification, and anti-bribery provisions. Application of these
provisions will also help to improve the business and investment
environment in Oman by providing more certainty and predictability for
firms and individuals operating and investing there and promoting the
rule of law.
The FTA's labor and environment provisions fully meet the
negotiating objectives set out in the Trade Act of 2002. These
provisions are included in the core text of the agreement. The
Agreement requires that each Party not fail to effectively enforce its
labor and environmental laws. If they consistently fail to enforce
those laws in a manner that affects our trade, then they face the
prospect of monetary penalties that will be directed to solve the
problem, or potentially face the loss of preferential trade benefits.
Moreover, each country commits to ensure that its laws and policies
provide for and encourage high levels of environmental protection, to
strive to ensure that its labor laws provide for labor standards
consistent with internationally recognized labor principles, and to
strive not weaken or reduce labor and environmental laws to attract
trade and investment. Also notable are provisions calling for panel
expertise in the event of labor or environmental disputes, as well as a
mechanism that would allow for monetary assessments to be used to
assist a country in addressing a labor or environmental violation. The
Agreement also establishes processes for further cooperation on labor
and environmental issues.
Oman passed a new labor law in 2003 that allows for the creation of
worker representative committees for the first time. The law details
procedures for dispute resolution and removes a 1973 prohibition on
strikes. Oman recognizes the need to continue its efforts on labor
rights, and is working to raise awareness and educate workers about
their rights and to establish new worker representative committees.
Oman is working with the ILO on these efforts.
The Agreement enjoys widespread support from our trade advisory
committees. The most senior committee, the Advisory Committee for Trade
Policy and Negotiations (ACTPN), ``unanimously endorses the United
States-Oman Free Trade Agreement,'' and found the agreement ``is in the
best economic interest of the United States.'' In addition, the ACTPN
views the agreement as ``an additional step toward the goal of a Middle
East Free Trade Area,'' and noted that the agreement ``will improve and
strengthen overall U.S. relations with the countries in the Middle
East.'' Committees representing sectors such as consumer goods,
services, information technology, intellectual property, and
agriculture also expressed broad support for the Oman FTA.
We recognize that the Labor Advisory Committee has concerns about
all FTAs that the United States has concluded to date, and that such
concerns relate as well to the Committee's assessment of this
agreement. We are convinced that the disciplines and consultative
mechanism in the FTA will play a major role in further improving the
labor situation in Oman.
CONCLUSION
For decades, Oman and the United States have shared a desire for
peace, stability, and economic opportunity in the Middle East. This
Agreement is an important new step in our partnership that will not
only remove trade barriers, but also cement our long-standing
friendship and growing commercial ties and create new economic
opportunities for both of our countries.
This Agreement also helps the advancement of economic and political
freedom in the region and is an essential building block for the
Administration's goal of assisting the countries in the Middle East to
build more market-oriented, liberalized economic regimes.
With your guidance and support, we will continue to pursue the
President's MEFTA initiative. As the next step in implementing that
initiative, we look forward to working with you and building bipartisan
support for legislation implementing the U.S.-Oman FTA this spring.
I would be pleased to respond to questions or comments from Members
of the Committee.
Chairman THOMAS. Thank you, Ambassador. Any Member wish to
inquire of the Ambassador? The gentleman from New York.
Mr. RANGEL. Thank you, Mr. Chairman. Let me thank the
Chairman, as well as you, for referring to the labor standards
that we would find acceptable, and especially for inclusion in
a very general way in your statement before us today. You
indicate that you are striving to ensure its labor laws provide
for labor standards consistent with internationally recognized
labor principles, and then you relate that Oman is working with
the ILO on these efforts. Can we assume that the USTR office is
suggesting that the ILO standards be one in which the U.S. and
the government of Oman can agree to?
Ms. SCHWAB. Congressman Rangel, I highlighted the labor
provisions in my opening statements because it occurred to me
that that might be a topic of some discussion today at the
hearing. These labor provisions are a very important part of
these agreements, and as you know, we have approached these on
a case-by-case basis based on the state of labor laws and
reforms in any given country.
To talk specifically about ILO core labor standards, as you
know, there are four core labor standards, we address four core
standards within these agreements. If you are talking about the
specific dotting of ``i's'' and crossing ``t's'' of the ILO
treaties, it is important to note that the U.S., for example,
has ratified two of the eight treaties that correspond to the
four standards. It is uneven in terms of the countries that
have ratified others. For example, you will find that Sri Lanka
and Belarus have ratified all eight. Sudan and Bangladesh have
ratified seven.
Mr. RANGEL. I guess I didn't word my question correctly.
You know, with intellectual and so many other issues, there is
an American standard that we request, and I am pleased to see
that the Chairman has asked the government of Oman as to what
they intend to do to protect the workers. If we are going to do
this on a country-by-country basis and not have an American
standard, whether we abide by the standard or not, if the
country is saying it wants to, you don't have an objection to
these countries having a higher standard in terms of agreeing
to ILO provisions just because we don't abide by or haven't
signed? There is no objection to their unilaterally agreeing,
is there, with USTR?
Ms. SCHWAB. Well, and in fact, in part, as a result of
these FTAs, our FTA partners in many cases have really advanced
their commitment to and their changes in their labor laws to
reflect core ILO standards. For example, in the case of Oman,
the case we are talking about here, Oman passed a major labor
law reform.
Mr. RANGEL. I am not saying there hasn't been improvement.
What I am trying to do, since we--I am trying to find out
whether we can get more bipartisan support. You refer to that
in your statement. You know what the major objections have been
in each and every trade agreement that has come before this
Committee. It has been unclear to me, unless you have discussed
it with the staff of the Democrats, as to what USTR believes is
acceptable as it relates to getting countries not to enforce
their own laws--they may not have their own rules--and not just
to deal with improvement, because I am emotionally impressed
with many of the developing countries' improvement. To have a
standard that Republicans and Democrats can say ``this is what
America stands for.'' This is what we believe workers, minimum
standards for workers no matter what country it is. I just
can't break through the language in which the USTR is willing
to accept that could be a standard, so that you don't have to
deal with the partisanship that exists on the Committee because
of a serious difference of opinion as it relates to the labor
standards.
I am just saying, is there any reason why you can't go
further and say, ``These are basic standards?`` You can call
them ILO, you can call them USA. You can say, ``This is what we
expect.'' Is there any way that you can give us guidance
besides country-by-country as to what is it the U.S. of America
demands of a country as it treats its workers, as it relates to
right to assembly, to organize and to bargain?
Ms. SCHWAB. I think there are fewer differences than your
question implies.
Mr. RANGEL. Does your office have basic standards that,
instead of us having to deal with country-by-country, does your
office have standards that we can talk with and know that when
it gets to this Committee, that that is already incorporated in
an agreement, and we can then discuss other issues. Why do we
always have to get weighed down with this issue as to why there
is no basic standard that we have?
Chairman THOMAS. The gentleman's time has expired. Let me
pursue a line of questioning that might illuminate for the
gentleman from New York, some of the reasons why procedure may
be carried on the way it is. If in fact you have--and the
gentleman ran through some of the typical labor concerns,
assembly, organize, bargain--clear ILO points, and that if we
were to use the ILO standards, and that there had to be
explicit agreement with the specific ILO standards, and the
U.S. wanted to have a FTA with itself, would we meet those
standards in terms of the specificity of the International
Labor Organization's specific, explicit written requirements?
Ms. SCHWAB. The core ILO standards are broadly articulated,
as you know. Refer to free association, the right to organize--
--
Chairman THOMAS. In other words, you would have to look at
what is going on, the specifics of what a country is doing more
than a list of objective criteria, which if they say, ``Yes, I
am for eight, I am for seven, I am for six,'' and if you are
for five or more you are okay. The idea of trying to create an
absolute objective checklist is not a way to deal with--in the
Chair's opinion, and I assume in USTR's opinion, with reality.
For example, we have heard Bahrain. Bahrain is being held up as
an example of what we would like. Well, frankly, all Bahrain
promised to do was to introduce certain measures. Now, why
would introducing certain measures be a more comforting
criteria than Oman's specificity of October 31, 2006, something
will happen?
Well, the reason is you have to look at the governmental
structure. Bahrain is a monarchy, but they have a parliament.
They can't tell you on October 31st something is going to
happen. All they can do is promise to introduce it, and we hope
the process works the way we hope it will work, and that the
result will be what we want. Why in the world could Oman say,
``Hey, October 31st, it's done,'' because Oman is a sultanate
that has a consulting group, and they will be consulted with,
but the Omani Minister has the ability to write in a letter
that October 31, 2006 it will happen.
As far as I am concerned, if I get those two commitments, I
have a higher comfort level with the Omanis' commitment because
of its certainty. If we are going to get into an examination of
the governmental structure, and we are excited because Bahrain
is going to introduce something into a parliament, we all feel
comfortable because of our commitment to a more democratic
structure, although we all certainly know that a commitment to
that process means no guarantee on result. Whereas, with the
Omanis, they have guaranteed a result.
I think the reason you don't have a simple, easy, 100
percent agreed-upon checklist is that everybody deals with it
in different ways. What we are looking for is a fundamental
core commitment, because then it makes all kinds of sense, that
if you can see that they have done what we consider basic, we
can require them to match their own laws, and where they fail
to do that, those laws being minimally adequate. I think where
you really get a difference is not in all those machinations,
it is in the fact that the requirement of what it is they
should have in their law so that we can punish them if they
don't match up to it, is far beyond what anyone would consider
reasonable or appropriate. The goal would be to move in a
significant way, the world labor movement forward, but not
necessarily benefit a particular country in terms of its
attempts.
I cannot tell you how eloquent the President of Peru was,
in which he said, ``Please look at my formal labor structure.
The one the government can control--judge us on that. If you
are going to judge us on the informal labor structure, then
look at my history, one of 16 children, had to go shine shoes
at 6 years of age, try to drag themselves out of abject
poverty, and are they going to follow some international labor
standard as they are trying to scratch out an existence. Don't
judge me by that,'' he asked, and, frankly, I agree with him.
Our job is to look at where they are, where they commit to
be, and our comfort level, that in fact, is going to happen, so
that when these agreements go into effect, we will hold them to
their standards because their standards are minimally
acceptable. The gentleman from Florida.
Mr. SHAW. Thank you, Mr. Chairman. Very, very briefly, I
want to talk more about the politics of the Middle East and the
effect that this agreement, the acceptance or rejection would
have on it. One of the best ways to combat terrorism from that
part of the world is to build bridges into that part of the
world. I will use an old expression, you destroy your enemies
by making them into your friends, and there are some good
people in that part of the world, and unfortunately, the few
bad people over there are extremists and are creating terrible,
terrible problems on a worldwide basis. What effect would the
acceptance or rejection of this particular agreement have upon
those bridges that we are trying to build?
Secondly, how would it affect the Commission
recommendations of 9/11 if we had a slim majority or a large
majority passing this bill? I believe that in the end we will
come together as Democrats and Republicans and iron out the few
problems that we have, but I think we do at this point, at this
hearing, need to look into the upside and the downside of the
action of Congress.
Ms. SCHWAB. Congressman, you raise a very important point.
I mentioned the President's MEFTA initiative, and we are well
on our way. This is the fifth FTA that would be a piece of that
puzzle. One of the things that perhaps a lot of us don't
realize is the extent to which these kinds of FTAs are very
high profile in the countries involved, the countries where we
are negotiating. This is a major issue in Oman, for example.
Therefore, a dramatic embracing of this FTA by this
Committee, by the U.S. Congress, would be a very welcome
development and a strong positive signal that the U.S. would be
sending to the people of Oman about the importance that we
place--and not just the people of Oman, by the way, but also on
others in the region is implied by your question--about the
importance that we place on the region, and the implications of
the FTA are not just economic implications. Again, as you
noted, they have political implications and social implications
going forward.
The rejection of this agreement by the Congress would be an
extremely negative development, and obviously, the larger the
margin, the stronger the positive message being sent. With
economic liberalization, we see political liberalization. The
President spoke of this in the State of the Union address. We
are striving for a world that is moving away from economic
isolationism. Thank you.
Mr. SHAW. Thank you. I yield back, Mr. Chairman.
Chairman THOMAS. The gentleman from Michigan.
Mr. LEVIN. Thank you, Mr. Chairman. I was going to ask you
a question about intellectual property and pharmaceuticals, why
this agreement goes beyond the CAFTA language. I want to
respond to the Chairman. The question is not conventions. We
all have signed the declaration. The declaration commits each
country to carry out the labor standards, the five
international standards. To make that commitment real, it has
to be in their laws and practices. Raising the convention
issue, I think is really a diversion.
Likewise, the notion that Mr. Thomas has raised that if it
is spelled out in exact detail, essentially the U.S. might be
caught within it. No one is talking about writing the National
Labor Relations Act 1935 (Ch. 372, 49 Stat 449), into an
agreement. It is the basic standards in implementing them. I
remind the Chairman and everybody else, in order for it to be
actionable, it has to be a violation that would directly affect
trade relations between the countries. Putting labor standards
into trade agreements is not an open invitation to getting at
the labor laws of one country or another. The matters have to
affect trade and affect them directly.
I want to get back to this issue relating this country,
Oman, but quickly. The Chairman talks about Peru. The problem
with Peru's labor laws are not that they don't apply to the
informal sector, that is one problem, but they are woefully
inadequate in terms of ILO standards in terms of the formal
sector, and that is a major problem that we will be talking
about. In terms of Bahrain, the Chairman says look at the
difference. In this case you have a system of government where
the leader can decree by himself, and so then the question
arises, why wait until October or November? Why not make sure
that before the agreement is carried out, the trade agreement
is agreed to, that the laws are in place? If it can be done
just like this, what we say is, let them do it as is necessary
in other provisions of trade agreements.
Chairman THOMAS. If the gentleman will yield briefly on my
time on that point?
Mr. LEVIN. Yes.
Chairman THOMAS. I said the government of Oman is
different. It is a consultative government. They do have a
formal consultative process. If the gentleman is asking us for
the government of Oman to violate its formal consultative
process so that you can have in place what you want when you
want it, that would be done immediately. All I said was, they
could give you the final outcome because it is consultative.
The process does take time. It does involve actual
consultations. That is why it is not done immediately.
If the gentleman is requesting that the government of Oman
not do what it normally does when it makes changes, that is, of
course, a request we can make of them, and I will join with you
in asking them not to follow the procedure they use in their
country to make changes, if that is the request you want to
make.
Mr. LEVIN. I am glad that was on your time.
Chairman THOMAS. It is on my time.
Mr. LEVIN. It is not my request.
Chairman THOMAS. Well, okay, then. I won't----
Mr. LEVIN. I am not suggesting that they violate their laws
or their processes. They have the ability to act and to act
promptly, and not to essentially have us act on an agreement
with promises. I simply suggest--and I guess I will go back if
there is time and ask our Ambassador--I will go through the
various core labor standards, and ask if by any stretch of the
imagination, today, they are met. The answer is, in terms of
the core labor standards, they are not met. They are not met.
They are far from it. Interference in the right of workers to
associate. Employers can participate in meetings of employees.
If you are not speaking Arabic, you are not allowed to
participate in the process.
The ILO makes clear that there are violations across the
board today, and what is being suggested here is that the
government says it will do, and so, we are supposed to move
ahead on a statement as to what a government will do, and those
are vague. We don't do that, Mr. Chairman, as to any other
provision of a trade agreement. We don't do that. We don't take
a statement of intention. What we do is insist on the
embodiment of what we have agreed in the laws and actions of a
country.
I fully understand, and I finish with this; the importance
of Oman, but for our representative to say here with a straight
face that this country is abiding by its obligations under the
declaration is simply pretending something that is not true. It
is not true. Why do we not sit down, Mr. Chairman, and work on
this together? With Morocco--I finish--we were active. We
wanted--the more participation the better from the majority. I
am glad there was a letter to you. I suggest we sit down on a
bipartisan basis with the government of Oman and figure out how
they are going to comply with their obligations, and to do it
promptly within their processes, so that we have something in
place when we move on this. That is all we are asking.
Chairman THOMAS. The gentleman's time has expired.
The gentleman from California?
Mr. HERGER. I request recognition.
Chairman THOMAS. Does the gentleman yield to the Chair?
Mr. HERGER. I yield.
Chairman THOMAS. Thank the gentleman. The gentleman has
laid out his criteria on what he wants with Oman in which we
don't do what he says that we are going to be doing here with a
guaranteed date of enactment. I tell the gentleman, that is
exactly what we are doing with Bahrain, except we do not have a
conclusion in the agreement with Bahrain. We had a promise that
they would introduce legislation. the gentleman's own criteria
is not carried out with the agreement with Bahrain. Yet, that
has been held up as a model that we really, really like. One
thing I do hope we have around here is at least consistency.
I thank the gentleman, and----
Mr. HERGER. Thank you, Mr. Chairman.
Three years ago the President proposed to establish a MEFTA
area within 10 years, and in his words, to bring the Middle
East into an expanding circle of opportunity. This is the
message we are now carrying through the U.S.-Oman Free Trade
Agreement. Certainly, there is forward movement in terms of the
particular sectors we all typically watch, service, investment,
Intellectual Property, or in my case, agriculture. For example,
all the agriculture is covered by the agreement whether
immediate or over time. The Technical Advisory Committee for
Grains and Seeds fully endorsed the FTA reached with Oman,
noting that the industry will benefit from the immediate tariff
reductions, as well as by Oman's movement toward the science-
based Sanitary and Phytosanitary Measures Agreement (SPS)
guideline, more transparency, and these procedures.
Similarly, the Fruits and Vegetables Advisory Committee
noted that the FTA will provide equity and reciprocity within
the fruits and vegetable sector. Still, we are realistic about
potential market access in Oman. With $12 million in total
agriculture products exports to Oman in 2005 to a population of
3 million, there is obviously much more to this Agreement than
market access in any particular sector. In this spirit and in
the spirit of the MEFTA, Ambassador Schwab, how do you view
this agreement as contributing to our efforts against terrorism
and how does free trade between the U.S. and Oman help support
our other objectives, those of reform and political
liberalization in the Middle East?
Ms. SCHWAB. Thank you, Congressman. Thank you for that
question. As I had indicated, Oman is part of the President's
MEFTA initiative, and you spoke about his commitment to have
MEFTA by the year 2013. This is an important step leading to
that. This is the fifth FTA that we have negotiated that we
have concluded in the Middle East. Israel, Jordan, Morocco,
Bahrain, and now Oman. We are in negotiations with the United
Arab Emirates, for example. We have TIFAs with a variety of
other countries in the region, and it is absolutely the case,
and stressed by the 9/11 Commission, about the important link
between development and the openness of societies. This is an
integral part of our effort to see reform in the Middle East,
and, as the 9/11 Commission said, more opens societies and
opportunities for people to improve the lives of their
families, and to enhance prospects for their children's future.
This is a process that we take very seriously.
Obviously, the economic implications are important, and we
find when we negotiate FTAs, that those countries really are
believers in open trade, and become very important allies for
us, for example, in WTO negotiations. We are able to set
standards that are higher than the standards that we are able
to set in the WTO. Aside from the obvious trade-specific
implications, there are very important geopolitical
implications here, and I thank you for the question.
Mr. HERGER. Madam Ambassador, again, I thank you and the
Administration for this outstanding work, and I think it is so
important that we do recognize not only is this of tremendous
benefit to our economy, but it helps set the standard in our
war on terrorism and on other FTAs. Again, I thank you for your
work.
Ms. SCHWAB. Thank you, Congressman.
Mr. RYAN. [Presiding.] Mr. Cardin.
Mr. CARDIN. Thank you, Mr. Chairman.
It is a pleasure to have you before us again--it is the
first time I believe. It is nice to have you before our
Committee. Let me get back to the legal issues on ILO standards
and try to get the USTR's position on this. Do we know what the
legal effect of ministerial decisions are as it relates to
decrees that are inconsistent with the current laws in Oman? Do
they supersede the laws permanently, or is it necessary also to
change the laws? What are the legal effects of these
ministerial decrees?
Ms. SCHWAB. Our understanding--and this is, perhaps, one of
the reasons that each country has a somewhat different formula
in terms of how it conforms to its commitments. Each country
has a different way of enshrining these particular commitments
and in the case of Oman, as you noted, there is a commitment to
do by decree a variety of elements that had been requested. The
date of commitment, the date that they have agreed to have this
done by decree, is the end of October. My understanding is the
end of October--this was a question raised earlier--is in part
because the Shura, which is the legislative body with which the
extensive consultations take place is adjourned for much of the
time between June and the end of September, so that is part of
it.
In terms of what has the force of law and practice, my
understanding is, these have the force of law. We do know that
in 2003, the fundamental labor reform legislation or laws were
passed in Oman. This is the basis of these changes. In terms of
the practices----
Mr. CARDIN. Yes, I want to get to them as well, but also,
the fact that they are not going to be in session during the
summer months, it would seem to me we should be asking that
this action be done before they go on summer recess. After all,
I believe there may be some interest in Congress taking up this
Agreement for approval before we return from our August recess.
It would seem to me that we should be expecting the Omanis to
act before they go into recess, rather than October. I just
point that out.
The other point, if you would address, deals with
compliance. In Bahrain, the USTR was able to get a commitment
that we could raise issues under the labor sections of the
Agreement if they don't comply with the exchange of letters on
the changing of their laws and acting and practice in ILO
standards. My question is, are we going to seek a similar type
of ability to raise these issues under the FTA if Oman either
does not change its practice or change its laws, or is not in
compliance of ILO understandings that we have?
Ms. SCHWAB. I think, Congressman Cardin, we are pleased
with the commitments that the Omanis have made to the Chairman.
These have been----
Mr. CARDIN. If they do not comply, what would be our
options? If they don't change the laws, what would be our
options?
Ms. SCHWAB. Under our agreement, under the FTA agreement,
they are committed, they have committed to enforce their laws.
Mr. CARDIN. I understand that, but if they do not change
their laws in October, if after we were--suppose we were to
ratify this in June, and the Omanis do not change their laws,
what would be our options?
Ms. SCHWAB. Let me suggest that when we negotiate these
agreements, it is under the assumption that each side is going
to implement the agreement.
Mr. CARDIN. No, that is not correct. We have legally
binding commitments to enforce the terms of the FTA, and we
could be taken under dispute settlement if we don't comply with
our commitments to open market and remove obstacles. My
question is, if they do not change their labor laws, what
options do we have legally under the agreement?
Ms. SCHWAB. Well, as you know, labor is not the--labor law
issues are not the only issues in FTAs where there are side
agreements and side letters.
Mr. CARDIN. I know. Do we have any options for enforcement?
I mean, enforce your own laws is in the agreement. They have a
responsibility to enforce their own laws, but if they don't
change their laws by the side agreements that have been raised,
do we have the right under the Agreement to raise the issues?
Ms. SCHWAB. Congressman Cardin, let me suggest that
empirical--the former academic in me comes out here. I
apologize. The empirical evidence is that with every one of our
FTAs, the countries that have made commitments associated with
the FTA. For example, in the case of Oman, they started making
agreements and changes in their laws----
Mr. CARDIN. In Bahrain, we have that commitment to be able
to bring it up under the agreement, and from the way that you
are responding, you are not giving me any comfort that we have
the ability to enforce the letter that our chairman has
referred to and put in the record.
Ms. SCHWAB. Congressman, up to this point that dialog, that
exchange has taken place between the government of Oman, and
the Ways and Means Committee.
Mr. CARDIN. We look forward to USTR giving us the final
exchanges of understanding with Oman, because it is going to be
critically important for the support, broad support to get this
agreement passed.
Mr. RYAN. The time of the gentleman has expired. I would
like to point out to the gentleman that under the FTA, both
countries are entitled to change their own laws, even after the
agreement is made, in either direction.
Mr. LEVIN. Would the Chairman yield for 1 second?
Mr. RYAN. Yes, go ahead.
Mr. LEVIN. That is one of the problems, because under this
agreement, even if the laws were in place, they could later
weaken them, and we would have no recourse. What you point out
is----
Mr. RYAN. If you want to take that course, we are never
going to have any FTA.
Mr. LEVIN. That is not true of any other provision. It is
not true of tariff or anything else in this agreement.
Mr. RYAN. The gentleman will suspend. Mr. Doggett.
Mr. DOGGETT. Thank you very much.
Do I understand that the provisions in this agreement
concerning the environment are the same as we had in Bahrain,
and the same as the trade representative's office is seeing for
Peru and Ecuador and Colombia and so forth?
Ms. SCHWAB. Yes, Congressman.
Mr. DOGGETT. Those provisions really don't mandate that any
country comply with multilateral environmental agreements that
it might have signed, do they?
Ms. SCHWAB. The environmental provisions of these
agreements refer to the basic commitments that each side
undertakes, the fact that each side will enforce their own
laws. Iin many cases, these countries have undertaken
international commitments, and many of these agreements,
including this one, have consultative and technical assistant
components.
Mr. DOGGETT. There's no penalty for totally disregarding an
international environmental agreement that a country has agreed
to, is there?
Ms. SCHWAB. There are consultative mechanisms that exist
within the agreement, and----
Mr. DOGGETT. You can consult at any time with these
countries, can't you?
Ms. SCHWAB. Yes. Although when you are talking about
consulting under trade agreements, there are stronger
implications about what that means under trade agreements. In
addition, obviously, there is a focus on the enforcement of
laws and each country----
Mr. DOGGETT. Just centering in on that then, and knowing
that what we are doing here is not just about Oman, it is also
about the Galapagos Islands and other environmentally sensitive
areas. All that you do is require that a country strive to
ensure that it doesn't weaken its laws, and it seems to me that
striving to ensure is very different than insuring, that you
can strive not to take dollars from Jack Abramoff, but you
might still take them, or you can strive to provide adequate
armor to our troops, but you might not make it. If a country
fails to strive, the only remedy that is provided is that they
pay a fine to themselves; isn't that right?
Ms. SCHWAB. Well, the fine is used to help remedy the
problem, so a fine to themselves is in the way the fine is
used. We have some influence over where that money goes, so
that is quite different from the money going to----
Mr. DOGGETT. To the extent that it is a fine limited to $15
million, it is something you pay yourself to improve your
environmental laws?
Ms. SCHWAB. It is a fine that is used in consultation with
us in this particular case, or vice versa, that is used to
improve the environmental circumstance. Therefore, it is a
remedy that is geared specifically to solving the kinds of
problems that you have identified.
Mr. DOGGETT. That is not if they weaken their laws, but if
they fail to strive to ensure they don't weaken them.
Let me ask you about another subject that I think is also
something that what we are doing in Oman applies everywhere,
and that is the concern that the American Medical Association
has raised to Ambassador Portman about the office seeking to
reduce tariffs on tobacco and other trade restrictions on
tobacco. This Agreement requires, this agreement with Oman,
that their current duty, which is a high one on tobacco, be
phased out for U.S. tobacco, which will result in decreasing
the price of cigarettes. Decreasing the price, as even this
Administration has recognized in its signing the world's first
public health treaty, the Framework Convention on Tobacco
Control, will result in more use, addiction to smoking and more
smoking. With big tobacco having run into at least a few
barriers in addicting American children to tobacco and
resulting in many ultimate deaths, doesn't this tobacco
decrease and resulting price cut just make it easier for big
tobacco to kill children in other parts of the world?
Ms. SCHWAB. Congressman, as you know, when we negotiate
these FTAs, these are comprehensive agreements. They are
comprehensive agreements where we want to see barriers
eliminated on both sides. In this particular agreement, the
slowest phasing of the tariff reductions are applied to
alcohol, tobacco and pork, not surprisingly, given the cultural
and religious implications. As to the ability of the government
of Oman to address smoking in it society, that is up to the
government of Oman, and whether it chooses to place excise
taxes or others internally is quite a different matter than
what tariff is charged at the border.
Mr. DOGGETT. Finally, as it relates to the investor state
provisions, you do provide a mechanism in this agreement for
Oman to use international arbitration to resolve any investment
disputes that would extend to services such as any agreement
over management of ports or any other kind of service that Oman
might choose to engage in, or any future company that
incorporated in Oman might choose to engage in. They would use
international tribunals, not our courts; is that correct?
Ms. SCHWAB. If you are referring to dispute resolution
mechanisms, we have dispute resolution mechanisms articulated
within the FTA. They differ in that in some cases there are
WTO-related provisions, sometimes there are FTA-related
provisions and in some cases, commercial arbitration.
Mr. DOGGETT. If there were a dispute over a port
management, we would go to the international----
Mr. RYAN. The time of the gentleman has long expired. Mr.
Linder? No questions. Mr. Becerra? Excuse me. Ms. Tubbs Jones
is next.
Ms. TUBBS JONES. Mr. Chairman, Thank you very much. Madam
Ambassador, how are you today?
Ms. SCHWAB. Thank you, very well.
Ms. TUBBS JONES. When my colleagues have been asking you
questions, you seem to have a problem with answering yes or no,
and I am just curious about if we could get a yes or no answer
to some of the questions that have been asked. For example, if
there is an agreement with regard to a letter as we have in
this instance, where the persons or the country says they are
going to implement a labor standard and they do not implement
the labor standard, what is the recourse?
Ms. SCHWAB. Congresswoman, I apologize if my answers have
seemed long-winded. It may be attributable to the time that I
have spend in academia. I will endeavor to provide shorter
answers. Unfortunately, the questions that are being asked
don't lend themselves to yes and no answers. For example, in
the case of the labor provisions of the FTA, in some cases a
violation would result in consultations. In some cases a
violation would result in kind of the fine that we were talking
about. Really, it depends on----
Ms. TUBBS JONES. Understanding there is some violation--
some implementation of some violation, but we could not go back
and then say, ``This Agreement is over with,'' if there were a
labor standard violation that was implemented? We couldn't cut
up the agreement under the WTO, and say, ``See you later?``
Ms. SCHWAB. You have asked a question that I don't--you
know, if I can get back to you in writing on that? I can not
imagine an economic circumstance where we would toss any
agreement that has been signed by the U.S., approved by the
Congress of the U.S. through the passage of implementing
legislation, and signed into law by the President. I can not
think of a situation where it could unilaterally be tossed
overboard on economic grounds.
[The written response from Ambassador Schwab follows:]
The agreement allows either party to withdraw from the agreement 6
months after having provided written notification to the other party.
------
Ms. SCHWAB. On the other hand, if, for example, you are
talking about an issue related to national security--let's take
a national security example.
Ms. TUBBS JONES. Yes.
Ms. SCHWAB. If there were a national security problem with
the implementation of some part of the Agreement, the FTA, and
in fact, all of our WTO agreements, have an essential security
out. In that case, we could step outside of a trade agreement
for national security reasons. Any country can do that.
Unfortunately, some of our trading partners have used that--
sort of have abused that and used national security as an
excuse for protectionism. In that particular instance--that is
an example where there is a specific out.
Ms. TUBBS JONES. Okay. For example, if Oman has inadequate
protection against forced labor, inadequate protection against
the worst forms of child labor, and inadequate protection of
foreign workers from forced labor, and there is no way in which
we could destroy an agreement if they don't comply with those
situations, which they don't currently comply with, it really
doesn't make any sense that we should enter into this agreement
at all if we don't know that those three things cannot be taken
care of.
Ms. SCHWAB. I think, Congresswoman, any objective observer
of what Oman has done in the labor arena in the last several
years in anticipation of, and in connection with the FTA, would
say that they have made dramatic improvements both in the law
and in the practice of their treatment of workers. For example,
when you talk about foreign workers, they are covered by the
right to organize, the right of free association. They are
covered by the collective bargaining provisions that are in the
labor laws.
Now, recognizing that 2003 was when this new law was
enacted, clearly, Oman has a ways to go in the implementation
arena. We know that they are consulting closely with the ILO,
for example, to figure out how they could educate their
workers----
Ms. TUBBS JONES. I understand, Mr. Chairman, I am out of
time, but it is her long answers, not my long questions that
are taking up my time.
Ms. SCHWAB. Oh, I apologize. I was looking at the clock and
I thought you still----
Ms. TUBBS JONES. I didn't tap, he did.
Mr. RYAN. I tapped.
Ms. TUBBS JONES. Mr. Chairman. Will you allow her to finish
the answer, Mr. Chairman?
Mr. RYAN. Yes.
Ms. SCHWAB. Just summing up very quickly, I think Oman has
recognized that they have a ways to go in terms of the
implementation. I think there are very clear steps that have
been delineated in terms of commitments that they have made, in
terms of their ability to implement those commitments, and
absent the FTA and negotiations for the FTA, we would not have
seen these kinds of improvements.
Ms. TUBBS JONES. Therefore, even though they have a long
way to go, you still recommend we implement such an agreement?
Ms. SCHWAB. Absolutely, yes.
Ms. TUBBS JONES. Thank you.
Mr. RYAN. Thank the gentlelady.
Let me take some time. I appreciate the gentlelady. I think
what we haven't discussed in this hearing is the big picture
here, and I want to make basically three points, but first on
the big picture.
This is an area where we have had some great bipartisan
successes I think in trade agreements with the Middle East.
This is part of a broader picture, and that broader picture is,
through these trade agreements, we are able to successfully
bring together our countries. We are able to successfully bring
together the people of America with the people of the Middle
East to foster greater understanding. With these trade
agreements, we are also able to bring forward more openness and
more freedom in these other societies, these closed societies.
When we get these trade agreements, we strike a blow for
women's rights. We strike a blow for workers' rights. We strike
a blow for freedom and free enterprise, and we help put into
place the institutions that bring more democracy and freedom,
and so this is a good thing, and it is something that is a very
fairly non-controversial part of our foreign policy.
Mr. CARDIN. Would the gentleman yield on that point?
Mr. RYAN. Sure.
Mr. CARDIN. I appreciate that, because I agree with
everything you said. I just would ask the USTR to be sensitive
on the worker rights provision that you just----
Mr. RYAN. That is what I want to go to next.
Mr. CARDIN. Just a response to your question with Ms. TUBBS
Jones, the letter is not enforceable. What you negotiated in
Bahrain, we can bring up for consultation under the Agreement.
What Mr. Thomas got in exchange, there is no opportunity under
the agreement. My only point was, and I appreciate you
yielding, is, please, as you submit the final documents to us,
give us something that will give us hope that these minimum
worker rights are going to be adhered to after we have approved
the agreement, because attention is very short lived.
Mr. RYAN. Okay. Point taken. Point number two. Look where
Oman is today. Oman is a phenomenal ally to the U.S. Oman has
historic ties to our country. They have been a great ally in
the war on terror. They have been a voice of moderation in the
Arab world. One area that I think is probably most important is
in the area of women's rights. Oman has the first woman
ambassador to the U.S. She is here with us today. They have
women in elected office. They have appointed women to the
Ministry and the Judiciary. In fact, Oman is the only country
in the Gulf with women in all three branches of government.
Women constitute nearly 30 percent of the workforce in Oman.
This is important. They have already made great strides in
other areas.
Let's now talk about labor. In labor, this is where we are
all agree there is need and room for improvement. We passed, I
think, the biggest bipartisan vote of a trade bill, in this
Congress at least, or in a long time, was the Bahraini trade
agreement. The question is: does the Omani trade agreement meet
what we now kind of consider the Bahrain standard or not? I
believe it does, but we need to discuss to make sure we both
agree that it does.
Let's compare it to the Bahrain agreement for a moment.
Bahrain committed to seek accession to the ILO Conventions 98
and 138, and incorporate this into their laws. Oman's issues
are more with the Conventions 87 and 98. They are seeking
accession to these conventions, and they will incorporate them
into the laws, and they have already given us a date certain,
by October 31st, 2006. Sandy, just let me finish, if you will.
They submitted to their parliament, amendments. Bahrain
submitted to their parliament amendments to improve anti-union
discrimination and work to ensure that penalties are stiff
enough. Oman has committed to doing the same thing by
ministerial decree. Bahrain amended its laws to allow for more
than one union per employer. Oman has committed to doing the
same thing. Bahrain eliminated the requirement that all unions
belong to one federation. Oman has committed to doing the same
thing. Bahrain insured that technical requirements for a strike
do not exceed ILO standards. Oman has committed to doing the
same thing. Bahrain provided notice to labor panels and other
bodies to have them reflected in actions even before the law
was changed. Oman will seek the view of interested parties.
That comes to this timing issue. I would argue that we want
them to take a little bit of time to put these agreements in
place so that they consult interested parties, so that they can
consult ILO, the technical aspects of it, the labor unions'
interested parties. It does take some time to do this, and they
ought to be able to take some time to do it so that it is done
right in the first place.
Mr. LEVIN. Would the gentleman yield?
Mr. RYAN. Sure.
Mr. LEVIN. First of all----
Mr. CARDIN. Let me just ask unanimous consent the gentleman
be given an additional five minutes, because I think this is an
important point.
Mr. RYAN. I guess I am the Chair. This is a little new for
me up here, so, yes.
[Laughter.]
Mr. LEVIN. First of all, when you talk about the Bahrain
standard, it is not being suggested that you can take the
Bahrain standard and apply it to every other country.
Mr. RYAN. No, it is not.
Mr. LEVIN. The Chairman said case-by-case, and I hope no
one thinks that the Bahrain standard is applicable in other
cases just across the board. Bahrain, like Oman, has a power
structure that allows for very, very quick action. Let that be
clear. Number two, in the case of Bahrain, there was a
statement by the government that in practice the rights of
workers, and by the way, this isn't just a narrow issue, this
relates to globalization, the sharing of the benefits of
globalization. Globalization is in trouble in part because in
many countries the majority of people aren't receiving the
benefits of it. the Bahrainian government told us that in
practice, even if the laws did not reflect it, that these basic
opportunities for workers were in place. I don't care, frankly,
what USTR tries to say. With all due respect, it isn't true
today, it simply is untrue. They made some changes a few years
ago. If you go through the realities today, they don't meet
these basic international standards, not ours.
Number three, Congressman Ryan, we have been talking with
them since October, and let's sit down and do this on a shared
basis. We have taken on this talking to governments in part
because no one else was doing it. We didn't exclude Republicans
from these discussions. With Morocco it was left to us, and
they made changes, and they had practices in place in a
tradition of workers having freedoms. I mean the Middle East is
vital. We prefer to move with an agreement with Oman, but let's
not play let's pretend. That is what you are doing.
Mr. RYAN. I am going to have to reclaim my time on that
point. Mr. Levin, I think the important question and issue here
is, where are they now, and where are they going to be? We
received two letters in the last month from the Oman
Government, one with five commitments, another one with eight
commitments, to, by ministerial decree, making important
changes, clarifying workers have the option to reinstatement
for improper termination due to union activity; allowing more
than one worker representative Committee per enterprise;
allowing for more than one federation representing a group;
ensuring penalties for anti-union discrimination are
sufficient; ensuring technical standards for strikes do not
exceed the requirements for ILOs. Many other very, very
important worker rights are being committed to, and will be
implemented by ministerial decree. I, for one, want to make
sure that they take a little bit of time to do it correctly,
get the ILO in there to make sure that they are drafted
properly.
Mr. LEVIN. Would you yield for a simple question then?
Mr. RYAN. Sure.
Mr. LEVIN. What is lost if the Omani government says it
will do it by October? What is----
Mr. RYAN. I think they are saying October 31st.
Mr. LEVIN. Why not wait, as is true for other provisions of
a trade agreement, to see if these changes are in place? Why
not wait if we care that much about this?
Mr. RYAN. My response would be we didn't do that with
Bahrain. Why would we want to do----
Mr. LEVIN. They were in place.
Mr. RYAN. --with Oman now?
Mr. LEVIN. The practices were in place, and because there
was a qualify of discussion between the Bahrainis and
ourselves. The practices were in place. You have here the
ability of a government to meet ILO standards, and to do it
within four or 5 months. To say, go ahead on the basis of
statements, is an indication, Mr. Ryan, of a lack of certainty.
I won't say seriousness. Certainty that is true of every other
provision. We don't take promises----
Mr. RYAN. I am going to reclaim just because I want to
manage time fairly efficiently here. In my opinion, that is
another way of saying we don't trust you, and until you do it,
we are not going to act.
Mr. LEVIN. We don't say that about any other part of the
agreement.
Mr. RYAN. Let me reclaim time and yield to the gentleman
from Florida, and then I will make another point.
Mr. SHAW. I will only take 10 seconds to say, Mr. Levin,
what you stated is wrong. Those laws were not in place with
regard to Bahrain.
Mr. LEVIN. It was in practice.
Mr. SHAW. That is not all together true either, that is not
all together true either. Are we going to look and see what is
going on and then go ahead? I think the question here before
the Committee should be, is it to the best interest to the U.S.
and to Bahrain, or to Oman, to go ahead with these agreements,
or isn't it? That is the only question, I think, as far as this
Committee is concerned. I yield back. Thank you for the time.
Mr. RYAN. I will just take a minute to only we need to sit
down and talk this out together, and it seems to me we have an
extraordinarily good faith effort to improve, substantially
improve worker rights in Oman, and that, I think, is largely
because of points and concerns raised by the minority. we have
great movement on the issues that were articulated very well by
the minority side of the aisle. I think we have tremendous
movement. You, obviously, don't think it is enough movement. We
need to work that out. We need to figure this out.
Let's go back to the big issue here, and that point is,
this is a good thing for our country to pass these trade
agreements, especially these trade agreements in the Middle
East, so that we can improve not only our economic ties with
the Middle East, but we can improve our cultural, political
ties as well, and that we can put into these trade agreements
the building blocks planting the seeds of openness and freedom
so that we can improve peace and prosperity in a region that so
desperately needs it. We have made these bipartisan in the
past. I would like to think we are going to be able to continue
to do that in the future. This is a good start and a good step
in the right direction. I hope we can bring this to a
conclusion fairly quickly.
With that, I will----
Mr. RANGEL. Before the Chairman yields, especially before
you yield, where did you get this----
Mr. RYAN. I will yield to the gentleman from New York.
Mr. RANGEL. Where do you get this concept about Republicans
and Democrats talking about labor provisions?
Mr. RYAN. You and I talked on Monday.
Mr. RANGEL. I was talking to you as the acting Chairperson,
not just----
Mr. RYAN. Well, I----
[Laughter.]
Mr. RANGEL. Where is this policy----
Mr. RYAN. I will reclaim my time, but you and I had a long
talk about this very topic on Monday.
Mr. RANGEL. You were not the acting Chairman then.
Mr. RYAN. I am a Republican Member of the Committee.
Mr. RANGEL. Then what you are saying is that you have the
ability now to say it is the policy----
[Laughter.]
Mr. RYAN. Reclaiming my time, okay, nice point. Are there
any other Members who wish to seek time? Mr. Johnson, did you
have a point you wanted to make? Mr. McCrery?
Mr. BECERRA. Mr. Chairman?
Mr. RYAN. Mr. Becerra. Mr. Becerra is recognized.
Mr. BECERRA. Thank you, Mr. Chairman. I enjoyed listening
to the exchange, and I would only point out to the acting
chairman that there has been good movement, and we should
always recognize our friends and our partners when they move in
the right direction, or at least move in a direction we think
is constructive.
To the government of Oman and its people, we want to make
sure it is clear that we appreciate what they are spelling out
for us in these letters and the movement that they have
expressed toward their labor laws and their practices, and we
wish to see them continue that movement. As a President that I
think the acting chairman or Mr. Ryan would agree had it right,
when Ronald Reagan said, trust but verify, that is all we are
asking, it that we be able to verify that these things will
occur. Ambassador Schwab, thank you very much for being here.
Welcome. Let me see if I can try to ask some questions that
will require short responses. Actually, let me ask you a couple
quick questions that you should be able to respond to pretty
quickly. Do you own a home?
Ms. SCHWAB. Do I own a home? Yes, sir.
Mr. BECERRA. Do you own a car?
Ms. SCHWAB. Yes.
Mr. BECERRA. When you purchased that home, did you purchase
it just on a verbal arrangement or agreement with the person
selling you that home?
Ms. SCHWAB. No.
Mr. BECERRA. No. You got something in writing, correct?
When you purchased your car, new or used, did you purchase it
based solely on the verbal representations made by that car
salesman?
Ms. SCHWAB. Yes.
Mr. BECERRA. You did?
Ms. SCHWAB. It is a family--you don't want the details.
[Laughter.]
Mr. BECERRA. I probably don't. Have you purchased any other
cars?
Ms. SCHWAB. Yes.
Mr. BECERRA. In essence, you have purchased vehicles, you
purchased a home, and in each case you come at least home with
a document verifying the substance of that agreement that you
got when you either purchased or sold a home or purchased and
sold a car, correct?
Ms. SCHWAB. Yes.
Mr. BECERRA. I think that is what we are saying with regard
to these trade agreements. We are purchasing something here. We
are purchasing the goodwill, the partnership with these friends
in these other countries or governments, but we want to know
what we got. If we do it based simply on a verbal agreement, or
a handshake, we ain't got nothing. let me ask you another
question. Would this Administration, would the U.S. Trade
Representative accept an agreement, a trade agreement with Oman
or any other country that said, ``enforce your own laws,''
country, when it comes to pharmaceuticals?
Ms. SCHWAB. Different parts of FTAs and the WTO are treated
differently.
Mr. BECERRA. I understand, but I am just asking you
specifically. I think that you can just tell me if you think
the administration or the U.S. Trade Representative would be
accepting of this if we had a trade agreement, negotiated a
trade agreement that said simply: ``Oman, enforce your own laws
with regard to how you treat pharmaceuticals,'' would we agree
to that provision?
Ms. SCHWAB. The implication is in contrast to----
Mr. BECERRA. No, no, no. There is no need to contrast. I am
just asking isolate just that provision on pharmaceuticals.
Forget about everything else for now. If the provision on
pharmaceuticals said, ``Enforce your own laws, country, Oman,
Central America, whatever country, enforce your own laws with
regard to pharmaceuticals,'' would we support that provision?
Ms. SCHWAB. No.
Mr. BECERRA. If we had a provision with regard to
intellectual property that told a country, ``Enforce your own
laws,'' would we agree to that trade agreement?
Ms. SCHWAB. No, nor have we done so in labor if that is
where you are going, sir.
Mr. BECERRA. The trade agreement with Oman says, ``Enforce
your own laws,'' correct?
Ms. SCHWAB. There are a variety of provisions within----
Mr. BECERRA. Forcible provisions of the trade agreement
say, ``enforce your own laws.''
Ms. SCHWAB. There are a variety of dispute resolution and
consultative mechanisms with----
Mr. BECERRA. Based on enforcing your own laws.
Ms. SCHWAB. Among other things, yes.
Mr. BECERRA. What other legal requirements, mandated
requirements are there under the trade agreement under law----
Ms. SCHWAB. There are consultative requirements related
to----
Mr. BECERRA. Consultative, as you heard Mr. Doggett say,
anyone can consult at any point in time. That is not a mandated
activity that forces you to do something.
Don't try to confuse the issue. It is very simple. Just the
way you wouldn't buy a car without something that guarantees
you a right to defend yourself in court, or buy a home that you
didn't know if it had shoddy construction done to it. This
country should not enter into agreements where we can't enforce
the laws. If the only thing you tell a country is ``enforce
your own laws'' and those laws are already weak, we undermine
our own ability to protect working men and women, not just in
this country, but in those countries abroad. it is a much
simpler test than you or anyone else would like to make it
look. It is fairly simple and straightforward, that if you just
tell a country the enforce its own laws and they are deficient,
you are setting yourself up, at least your men and women in
your country who work--into a bad deal. I think I have lost the
remainder of my time.
Ms. SCHWAB. Mr. Chairman, I would hope I would have an
opportunity to respond to the question.
Chairman THOMAS. [Presiding.] Briefly.
Ms. SCHWAB. Briefly. The reason it is important for me to
respond, is that it relates to some statements that Congressman
Levin also made, and that has to do with the current state of
affairs in terms of the current law in Oman. It is important to
note that the current law in Oman, the law that would be
enforced under this FTA, made some dramatic improvements in
Oman's laws as they affect worker rights, and that includes the
right to associate, to bargain collectively, the repeal of
their right to strike. If you want empirical evidence--and
these are the provisions of law that are enforceable under this
agreement--take the right to strike. There were, as we
understand it, 33 work stoppages involving over 6,000 workers
last year. We know that there are collective worker groups. We
can give you the names of the people who head them up--and some
of them are women, by the way--in this Mid-Eastern country.
there is a lot that has been done, recognizing that there is
progress to make, but there are laws on the books that are
effective, that are enforceable under this----
Mr. BECERRA. Don't forget President Reagan's admonition,
trust but verify.
Chairman THOMAS. The gentleman's time has expired.
The gentleman from Louisiana.
Mr. MCCRERY. Yes, thank you, Mr. Chairman. I want to thank
Ambassador Schwab for her testimony today and her persistence
in trying to answer the questions factually, and I look forward
to the next panel's presentations. I think that is important.
Chairman THOMAS. Would the gentleman yield briefly?
Mr. MCCRERY. I yield.
Chairman THOMAS. For purposes of illustration, there could
easily be a series of questions and I don't expect anyone to
react to them, but they could be directed toward any one member
of this panel, or in fact, you, Ms. Schwab. It would go
somewhat along this line if you really want to get carried
away. Are you married?
Ms. SCHWAB. Yes, sir.
Chairman THOMAS. Did you get any written contract in terms
of what you were going to do in terms of obligations and
responsibilities? You still went through with the ceremony?
I am just telling you, that line of questioning may be
interesting, but anyone else wish to be recognized, and I thank
the gentleman----
Mr. MCCRERY. I yield the balance of my time----
Chairman THOMAS. I thank the gentleman for the time and
yield back.
Mr. RANGEL. Why don't you follow through on your question?
This was getting interesting.
[Laughter.]
Chairman THOMAS. I tell the gentleman that each Member
should apply it to themselves and ask themselves that question.
That, to me, would be far more interesting. Except I am
interested in the cardio. We will talk later.
[Laughter.]
Chairman THOMAS. Do you yield back?
Mr. MCCRERY. I did.
Chairman THOMAS. Any other Members? The gentleman from
Pennsylvania.
Mr. ENGLISH. Madam Ambassador, I want to thank you for your
presentation here today. Again, as the gentleman from Louisiana
put it, for endeavoring heroically to answer some of these
questions. I have to say, looking at the labor offer that Oman
has made, I take a great deal of comfort in it because I have
looked at the track record of Oman. Oman has been one of our
best strategic allies in the region. They have been with us
when it was very unpopular in the region to be with us. This
relationship is very, very important, and I certainly would
hate to think that this small FTA would create another occasion
for one of our good friends in the Middle East to become a
political punching bag, and I, for one, don't want to allow
that to happen.
The Sultan of Oman has done an extraordinary job since he
assumed his position, replacing his father, of westernizing and
modernizing his society and his culture. Obviously, by our
standards, they still have a distance to go, but what they have
done on the labor front, in my view, is very dramatic, and is
something I think deserving of applause, and I will leave it
for some of my friends, who have raised these issues, to take
all of that into account.
My question has to do with Oman's economic profile,
recognizing it is a small market, but it appears that the U.S.
is at a relative disadvantage compared to blocks of trading
partners when it comes to getting into that market,
particularly, the EU-15 and Asia. How will this FTA allow us to
penetrate with U.S. exports into the Oman market at levels
comparable to European and Asian exports, and can U.S.
producers expect to see gains in exports of a broader nature
than the current concentration of machinery, transportation
equipment and measuring instruments?
Ms. SCHWAB. Congressman, Thank you very much for your
question, and thank you for your support of this FTA and your
active engagement in the Middle East Economic Partnership
Caucus. Although U.S.-Oman trade is relatively small, I would
note first of all that the U.S. last year ran a small trade
surplus with Oman, and we do expect, as implied by your
question, for U.S. exports to Oman to go up in the context of
this Agreement in a variety of areas. 100 percent of industrial
and consumer goods go duty-free upon date of entry, and
virtually all agricultural products, 87 percent of the lines in
agriculture go duty-free. This is very significant.
It is also in services, and some of the areas that you have
mentioned, with work that we will be doing, for example, with
Oman in standards and certification. That has the potential for
opening new markets. In textiles and apparel with this
assessment's rules of origin, there is potential for increased
U.S. exports that have not been there before, in addition to
the export areas that you mentioned, which we would expect to
grow, automotive, medical, optical equipment and so on.
Mr. ENGLISH. Thank you.
Thank you, Mr. Chairman.
Chairman THOMAS. Thank the gentleman.
Thank you very much, Ambassador.
Chairman THOMAS. The Chair would request the next panel.
The Hon. Frances D. Cook, Chairman, Ballard Group and former
U.S. Ambassador to Oman; Nicholas Billotti, President and Chief
Executive Officer of Turner Construction International from New
York; Michael P. Weitzel, Program Manager, DynCorp
International, Muscat American Business Council in Muscat,
Sultanate of Oman; Richard L. Trumka, Secretary-Treasurer,
American Federation of Labor, AFL-CIO; Roger R. Schwartz,
Business Vice
President, Polyethylene, the Dow Chemical Company in Midland,
Michigan. I always thought everything was Maryland.
You all have written statements, and we will be pleased to
make it a part of the record, if you, in the time you have,
wish to address us in any manner you see fit. It just seems
appropriate the Chair would start on the far left with
Ambassador Cook, and then move down the line.
STATEMENT OF THE HONORABLE FRANCES D. COOK, CHAIRMAN AND
PRINCIPAL, THE BALLARD GROUP, LLC; AND FORMER UNITED STATES
AMBASSADOR TO OMAN
Ms. COOK. Thank you, Mr. Chairman, distinguished Members of
the House Ways and Means Committee, and friends, good
afternoon. Thank you for inviting me to appear before you in
support of the passage of the U.S.-Oman Free Trade Agreement.
My comments are in my personal capacity as an American citizen
and as former U.S. Ambassador to Oman. They are uncleared by
the Department of State.
I will summarize my remarks, and the full text you have for
the record.
I am going to try to speak to some of the issue raised in
conjunction with the passage of this FTA in the hearing this
morning, and try to explain Oman a little bit as I came to know
it.
The key to understanding Oman, I think, is the Sultan
himself. In only 35 years he has taken his nation from an
almost closed and near medieval state, to the vibrant and
welcoming country that we know today. From three small primary
schools, Oman now has 600,000 children in the classroom, and
English is required from grade one. From an American missionary
run 12-bed hospital, Oman is now recognized by UNICEF as
providing among the best primary health care in the world.
From less than 10 miles of hard-surface road, Oman now
boasts thousands of kilometers of super highways. From a few
sleepy fishing ports, Oman now boasts the 11th busiest state of
the art container terminal in the world, built during my time
in Oman by an American company, I would add. How has the Sultan
managed such a transformation, working with much smaller
hydrocarbon revenues than other Gulf states, while dealing with
a historically disputatious and tribally based population?
Therein, I think, lies the political skills of the man.
From 1970 he enunciated very big goals, they were really
dreams, for a people who were just emerging from a grinding
insurgent war in the south. The Sultan proclaimed that a modern
state living in peace with its neighbors was his goal, but he
never coerced or forced changes on his citizenry. He has
proceeded on an evolutionary, gradual, deliberate track. After
each move or new institution is announced and has been accepted
and absorbed, he moves things on up a notch. This has been as
true of reforms in education and the Omani legal system, as it
is in gender equality and in Oman's evolving political
institutions.
I was there when Oman's first constitution, called the
Basic Law or Statute, was announced. Omanis are proud of their
country, but I don't think I have ever seen them prouder than
that day. The document that he gave them actually includes
something that we would call a bill of rights that would be
recognizable as such to our Founding Fathers in Philadelphia.
The role of religion, in my own analysis, is what has
helped Sultan Qaboos in his reform program, specifically, the
predominant Ibadhi brand of Islam, which is preponderant in
Oman. Its chief characteristic is a deep tolerance of others.
When you combine that with Oman's historical seafaring
tradition and long exposure to others' cultures and religions,
it produces a people who are secure in knowing who they are and
who can therefore accommodate other people and beliefs more
easily it seems than other groups in the Middle East.
The Ibadhis, for example, worship alongside other sects of
Islam, the Sunni, the Shi'a, in their mosques, just as they are
used to seeing churches built on land granted by the Sultan,
and Hindu temples in their cities. The Sultan's unwavering
quest for peace in the region has led Oman almost uniquely to
pioneer in several other areas, some of which have been
mentioned already this morning. Alone in the Arab Gulf, Oman
has negotiated and formalized all of its land borders and had
them registered at the United Nations. Alone in the Arab Gulf,
indeed in the whole Middle East, Oman stood by Egypt after Camp
David. Alone in the Arab Gulf, Oman still hosts a Track II
Middle East Peace Process Institution, the MEDRC, with full
Israeli membership.
Water, most experts agree, will likely be the source of
future tensions in the region, so MEDRC Center works to develop
lower-cost desalinization methods for coastal states and to
rationalize water usage in the region. I still recall the day
when the Permanent Secretary of the Israeli Foreign Ministry
came into my office in Muscat to show me a one million dollar
Israeli contribution check to MEDRC. They have since added
another million to the pot, and that has been created and
continues to be overseen by Ministry of Foreign Affairs in
Oman.
It is a little hard to talk about Arab-Israeli relations
right now because they have deteriorated after the second
Intifada, but during that time there was a great flowering, and
we welcomed Israel's first trade representative to Muscat in
1996, and helped him set up an office. During that time we even
had Israeli firms participate in trade fairs in Oman, and Omani
trading houses sent management personnel to Israel to establish
commercial ties. I even welcomed some Israeli friends, who came
with their children to vacation in Oman. That was a very
hopeful time, but I think it was also an important lesson, that
small states with visionary leaders can show the way. I would
hope that these pioneering efforts by Oman will be remembered
in Washington.
Let me move quickly to the labor situation in Oman.
Mr. RYAN. [Presiding.] Ambassador, could you wrap up,
please?
Ms. COOK. Yes, please, okay. I would just say that all of
the Gulf states have had large expatriate labor forces because
they have tried to develop quickly with their oil resources
while they are getting their own population educated. I think
the recent reforms that you have been informed of today are
absolutely in the right direction, and they will be honored.
One of the things I want to demonstrate, I think, in my
comments is that Oman does honor its agreements. It has honored
its agreements with us from the beginning, and I think that
they have earned the kind of respect and friendship that this
treaty implies. Thank you very much.
[The prepared statement of Ms. Cook follows:]
Statement of The Honorable Frances D. Cook, Chairman and Principal,
The Ballard Group LLC, and former U.S. Ambassador to Oman
Mr. Chairman, distinguished members of the House Ways and Means
Committee, and friends:
Thank you for inviting me to appear before you in support of
passage of the U.S.-Oman Free Trade Agreement. In preparation for this
hearing, I reviewed earlier testimony, and asked myself what further
information I could provide, to facilitate the Congress' decision-
making in this matter? Unlike other witnesses, I have actually resided
I Oman, so I bring personal experience to the table. I am the daughter
of a union member, and have honored, throughout my lifetime, the
contributions of working men and women to our own development, as a
society, and a nation. I believe, in fact, the Congress and the AFL-CIO
rightly focus on labor commitments in all trade agreements negotiated--
by any administration--in our globalizing world. I was in Oman when the
first tentative steps were taken with Israel, so I can speak to that
issue. Finally, my specialization in the Foreign Service was in the
political-military sphere, so I'd like to review, briefly, for you, the
absolutely key role that Oman has played in our various engagements
against Middle East extremism in recent decades--and the support the
Sultanate provides to our men and women in uniform. More broadly, I'll
discuss my personal support for the notion (as stated in the 9/11
Commission's final report) that any comprehensive U.S. strategy abroad,
must include economic policies and engagements that encourage broad
economic development and provide opportunities for families to enhance
prospects for their children's future. The FTAs that USTR is now
negotiating in the region are key components of that effort.
Understanding Oman
The key to understanding Oman, which remains relatively unknown in
America, is the Sultan himself. In only 35 years, this remarkable
leader has taken his nation from an almost closed, and near-medieval
state, to the vibrant and welcoming country we know today----
--from 3 small primary schools, Oman now has 600,000 children in
the classroom, and English is required from Grade One;
--from an American missionary-run 12 bed hospital, Oman is now
recognized by UNICEF as providing among the best primary health care in
the world;
--from less than 10 miles of hard surface road, Oman now boasts
thousands of kilometers of super highways----
--and from a few sleepy fishing and dhow ports, Oman now boasts the
eleventh busiest, state of the art, container port in the world . . .
built during my time in Oman by an American company (Sealand, now owned
by Maersk) I'd add.
How has the Sultan managed such a transformation, working with much
smaller hydro-carbon revenues than other Gulf states, while dealing
with an historically disputatious, and tribally-based population?
Therein lies the genius of the man, I believe. From 1970, he enunciated
very big goals--dreams, really--for a people just emerging from a
grinding insurgent war in the country's south. The Sultan proclaimed
that a modern state, living in peace with its neighbors was his goal.
But he never coerced or forced changes on his citizenry. He has
proceeded on an evolutionary, gradual, deliberate track--after each
move, or new institution, has been accepted, and absorbed, he moves on
up a notch. This has been as true of reforms in education, and the
Omani legal system, as it is in gender equality, and in Oman's evolving
political institutions. I was there when Oman's first constitution,
called the Basic Law or Statute, was announced. Omanis are proud of
their country and their Sultan, but I don't think I've ever seen them
prouder than on that day. They understood that the Sultan had given
them a document--he wrote it himself, he told me--and a roadmap
forward, that exceeded anything else we have seen from the Arab world.
It even includes what we Americans call a Bill of Rights, that would be
recognizable, as such, to our Founding Fathers in Philadelphia.
The Role of Religion
My own analysis, for what it is worth, is that Sultan Qaboos has
been aided in his reform programs by the predominant Ibadhi brand of
Islam which is preponderant in Oman. Deep tolerance of others is a
hallmark of Ibadism--and when combined with Oman's historical seafaring
tradition (Omanis were head of the Foreign Traders Committee in the
Port of Shanghai in the 11th and 12th centuries; many of today's
government ministers grew up in East Africa, when Zanzibar and coastal
East Africa was part of Oman's empire), it produces a people who are
secure in knowing who they are, and who can therefore accommodate other
people and beliefs more easily, it seems, than other groups in the
Middle East. Ibadhis worship alongside others sects of Islam (Sunni,
Shi'a) in their mosques, just as they are used to seeing churches
(built on land grated by the Sultan) and Hindu temples in their cities.
This kind of balanced world view, combined with a longstanding and
unwavering quest for peace in the region, has led Oman, almost
uniquely, to pioneer in several areas . . .
Peace is the Goal
--alone in the Arab Gulf, Oman has negotiated and formalized all of
its land borders, and had them registered at the United Nations. (It
doesn't get much coverage here, but throughout my stay in Oman, there
were deadly confrontations, on various other borders in the oil-rich
Arabian peninsula, and that remains the case today.)
--alone in the Arab Gulf (indeed in the Middle East), Oman stood by
Egypt after Camp David (an Omani representative was among those killed
when dissident Egyptian military personnel assassinated President Anwar
Sadat in the reviewing stand in Cairo)
--alone in the Arab gulf, Oman still hosts a Track II MEPP
institution, MEDRC--with full Israeli membership. Water, most experts
agree, which is in inadequate supply throughout the Middle East, will
be the source of future tensions in the region. So, the MEDRC Center
works to develop lower cost desal methods, for coastal states; and to
rationalize water usage in the region. I still recall the day when the
then-PermSec of the Israeli Foreign Ministry came to my office in
Muscat to show me the $1 million Israeli contribution (it has since
grown to $2 million) to the functioning of MEDRC, which was created,
and continues to be overseen by one of the finest diplomats I knew in
my long career at State, the Under Secretary of the Omani Foreign
Ministry. (I'd add that that diplomat, along with his Minister of State
for Foreign Affairs, were sent by Sultan Qaboos to PM Rabin's funeral
in Jerusalem. Before taking up my post in Muscat, I had the honor of
discussing, with PM Rabin, his trip to Oman, and can describe his
attitude toward Oman later during the Q & A, if there is interest.)
Arab relations with Israel have been complicated greatly by the
lack of recent progress toward overall peace, and by second
``intifada''--and the endless televising of its brutality into Middle
Eastern homes. I was in Oman during the period between the two
``intifidas''. I welcomed Israeli's trade representative to Muscat in
1996, and help him set up an office (that was an embassy in everything
but name), reciprocating what Oman had in Tel Aviv. During that time,
we even had Israeli firms participate in a trade fair in Oman, and
Omani trading houses sent management personnel to Israel to establish
commercial ties. My Israeli colleague and I were pleased to welcome on
a visit Israeli's trade rep from Qatar (the only other state to have an
Israeli trade office in the Gulf), and during this period I also
welcomed Israeli friends who came to Oman on vacation, with their
children, and stayed with me at the official U.S. residence. What a
hopeful time that was! It is a bit painful for me now, to recall those
days (the trade office effort is was ``suspended'' in 2000), but
Americans did learn an important lesson about Oman's commitment to
Middle East peace--and that small states, with visionary leaders, can
show the way. I would hope that these pioneering efforts by Oman, based
on their own analysis of how to develop relations, across an historic
divide, are not forgotten in the current atmosphere in Washington.
Labor in Oman
Let me move quickly to the labor situation in Oman. Labor is a
complex issue in all of the GCC states in the Gulf, due to their
reliance on foreign labor--in order to develop modern economies
quickly, using new oil monies, while their own people are being
educated. Oman, which has the second largest population in the GCC, is
now in the midst of a large ``Omanization'' process, putting trained
Omanis to work in slots formerly held by expats--at the same time it is
opening up to tourism, and all of the jobs that will undoubtedly create
for locals.
When I was served in Oman 1995-1999, my labor reporting officer and
I were aware that Oman did not have in place the various protection
mechanisms required by the ILO. We asked a lot of questions, and
nudged--not because of any instruction from Washington, nor because
there was any apparent labor unrest--but because it was an appropriate
activity for representatives of a nation which values its working men
and women. I have been very pleased, through this FTA process, to learn
that the excellent Labor Minister, who was named just as I was leaving
Oman, put priority on Oman's ILO compliance, and enacted a
comprehensive labor code in 2003. This is obviously a work in
progress--with ``Omanization'' and training undoubtedly remaining the
top labor priorities in the Sultanate--but I refer you back to earlier
comments on evolution and gradualism in all of Oman's modern reforms.
Nonetheless, the right to organize and to strike is now law--and the
Minister of Commerce reports 33 strikes (involving 6000 workers) in
2004 alone. So, I think Oman is now ahead of most of its neighbors, in
implementing a modern labor code. I'd think we'd want to encourage that
move, rather than harm it, through the FTA process. I can also speak to
the conditions of the large population of foreign workers in Oman, in
the Q & A session, if that would be of interest to this Committee.
Close Security Cooperation is the Foundation of our Ties
Again, because of the Sultan's vision, our security ties with Oman
are both the longest-lived, and the most proven, in the region. A quick
glance at a map will demonstrate why they are as valuable today, as
when they were initiated in the Carter Administration.
Again, the Sultan moved in this arena far before any of his GCC
peers. (After being educated at Sandhurst, he served with the British
Army in Germany--where he came to know the U.S. military at Garmisch,
he once told me.) In fact, Kuwait offered Oman a multi-million dollar
``package'' of incentives NOT to sign an access agreement with the
United States, so leery were they of a foreign presence in the Gulf
after the British departure! Ten years later, at the time of the first
Gulf war--to expel Iraq from Kuwait--the prepo supplies and equipment
we had in Oman, valued then at over $1.5 billion, saved 4-6 months in
the build-up prior to the commencement of hostilities. Again, look at
the map and consider the attitude of our host in Oman--you then won't
be surprised also to learn that the first humanitarian food deliveries
CENTCOM made to Somalia came from the Oman prepo, just as the first
supplies to the Balkans, by EUCOM, came from the same place. Still, we
have no ``bases'' in Oman, and seek none. Our supplies--Harvest Falcon
sets, fuel, military hospital kits, emergency food rations, and
vehicles--are all co-located on Omani air bases, where Oman's highly
professional military treat our soldiers, airmen and contractors, with
great professionalism. We have run some very select operations from
Oman over the years, which would be best discussed in a classified
session. But two which have been in the media, are Oman's help in the
``Earnest Will'' reflagging operation, in the late 80s, out of Masirah
Island. And the first combat use of American B-1's, was also out of
Oman, during my time there. In all these delicate security operations,
in a very dangerous part of the world, Oman's size abets its vaunted
discretion. U.S. strategists have considered themselves lucky to deal
with a leader, over the decades, who understands both our historic
reluctance to use military power--and our commitment to our troops to
provide the best possible support once we opt to engage. As someone who
spent part of her career negotiating military access agreements, as
well as a renewal in Oman, I have never had the slightest doubt that
the reason Oman has been such a steadfast partner for the United States
of America, is that the Sultan has always viewed our security
cooperation as profoundly in Oman's best interest. In that, he is
right.
In conclusion, let me just note that the Sultan was also right to
instruct his Ministry of Commerce to engage in a series of trade
negotiations--with WTO, with India, with us. Oman will benefit not only
from the greater transparency and enhanced regulatory environment that
these agreements require, but--in spite of the now small amount of
foreign trade between our two states--America will gain, too. A level
playing field, and strict IPR enforcement, in signatory states, will be
a big boost to U.S. industries--many of which are only now looking to
invest abroad, and spread their wings to the export markets of the
world. This is a win-win proposition for both sides (the best
agreements always are), because it advances, in a significant way,
America's historic goals of peace and development in the Middle East
region. The Sultanate of Oman, as I've tried to demonstrate, has
clearly earned the right to be treated as a full-fledged partner of our
nation. And, I hope this committee, and the Congress, will so vote.
Thank you for your attention.
Mr. RYAN. Thank the Ambassador. Mr. Billotti, and I also
want to let every witness know that your written statements
will be included in the record, so if you could keep your
statements to 5 minutes, we would appreciate that.
STATEMENT OF NICHOLAS BILLOTTI, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, TURNER CONSTRUCTION INTERNATIONAL LLC, NEW YORK, NEW
YORK
Mr. BILLOTTI. Thank you, Mr. Chairman. I will spare you
from the entirety of my written text. Mr. Chairman and
distinguished Members of the Committee, thank you for the
opportunity to testify today on the proposed FTA between the
U.S. and the Sultan of Oman. My name is Nick Billotti, and I am
the President and CEO of Turner Construction International,
which is a subsidiary of the Turner Corporation, the U.S.'s
leading general building contractor. Internationally, Turner
manages projects of more than 8.2 million square meters in
building area, with a value in excess of U.S. $12.2 billion. We
are headquartered in New York City, and we provide
comprehensive, professional building services in Africa, Asia
Pacific, Europe, Latin America, the Middle East. Our area of
expertise centers on program management, project management and
construction management.
We have been working in the Middle East for over 30 years
on many landmark projects, and we have formed many strategic
relationships with companies in the region. As members of the
business community in Oman, we work hard to build strong
relationships with our local clients, architects,
subcontractors, laborers and government. Additionally, we are a
member of the American Business Council of Oman.
Today, we are active on three major programs in Oman. We
work to manage the design, the procurement and the construction
of a large resort called Al Jissah, which is a combination of
three hotels that is valued at approximately $145 million. We
are working on an enormous theme park entitled The Wave, which
is valued at approximately $800 million, and we are also
working to build support facilities for F-16 fighter planes at
Thumrait Air Base in Oman.
I can tell you from my own experience of 30 years in
dealing with the Middle East, that our business deals in Oman
have all been extremely fair, they are wholly transparent. We
have no sponsor. We have no agent. We have no barriers to
entry, and on a personal level we enjoy the relationships that
we have developed with so many of our Omani clients.
I will tell you as a construction manager, we have a great
deal of influence on the selection of architects, engineers,
and for the selection of so much of the equipment and materials
that are put into the projects. As an American based company,
we have an affinity for American based architects and engineers
because of the expertise that they bring. I will tell you, on
all three of our projects, we have American architects and
engineers working. Those architects, and particularly
engineers, have a great deal to do with the manufacturers that
are specified for the supply of major pieces of plant and
equipment, and there are numerous examples on the project's on
which we work, where Americans have been very successful in
trade with Oman.
I will tell you that if this FTA goes through, it will give
us even greater incentive to recommend to our clients for the
purchase of American manufactured goods and materials. In our
view, the FTAs that are currently being negotiated with
countries in the Middle East will help both sides economically,
increasing exports, generate jobs and developing common
business practices. Labor has been a particular hot button
today, and I will tell you, on those projects where Turner is
involved, we work extremely hard to enforce the same standards
that we employ here in the U.S. The same personnel policies
that we employ in the U.S. are mirrored for all of the staff
that work for us in Oman.
The safety standards that we employ on projects here in the
U.S. are written into our contracts for the contractors and the
subcontractors who work on our projects. as Americans
participate in the economy of Oman, we tend to take those
standards that we employ and introduce them, and I think Oman
is better for that, and I think that we are better for that.
Agreements such as the one contemplated today represent the
firm base from which U.S. interests, already present in the
country, can move ahead for the benefit of both countries. A
snapshot of our work--this is the propaganda portion--in Oman
can be found in a recent issue of the U.S.-Arab Tradeline. It
is the monthly newsletter of the National U.S.-Arab Chamber of
Commerce, and in our opinion, the newsletter provides excellent
overview of U.S. and Oman relations, and with your permission,
Mr. Chairman, I request that this special issue of the
Tradeline be included in the record of today's hearing. I thank
you for the opportunity to testify.
[The information is being retained in the Committee files.]
[The prepared statement of Mr. Billotti follows:]
Statement of Nicholas E. Billotti, President and Chief Executive
Officer, Turner Construction--International LLC, New York, NY
Mr. Chairman and distinguished members of the committee: Thank you
for the opportunity to testify today on the proposed Free Trade
Agreement (FTA) between the United States and the Sultanate of Oman.
My name is Nick Billotti, and I am President & CEO of Turner
Construction--International, a subsidiary of The Turner Corporation,
the United States' leading general builder. Internationally, Turner
manages projects of more than 8.2 million square meters in building
area, with a value of some U.S. $12.2 billion.
Headquartered in New York, Turner Construction--International
provides comprehensive professional building services in Africa, Asia-
Pacific, Europe, Latin America and The Middle East. Our area of
expertise centers on program management, project management, and
construction management.
Turner has worked in the Middle East for over 30 years on many
landmark projects and we have formed strategic relationships with many
companies in the region. As members of the business community in Oman,
we work hard to build strong relationships with local clients,
architects, subcontractors, laborers, and the government. Additionally,
Turner is a member of the American Business Council of Oman.
American firms have a reputation for quality in Oman and Turner is
doing its best to live up to that reputation. We bring high standards
to every project we work on and we insist that our clients adhere to
those standards, especially as they concern the health and safety of
our staff and the subcontractors on our jobsites.
Working with our clients and the government in Oman has been a
positive experience with transparency in all of our business dealings.
In fact, Turner has never experienced a lack of transparency in our
work in Oman. We have found that the standards on our jobsites are not
compromised and regulations are strictly adhered to by our clients and
their subcontractors. Turner works hard to enforce these standards to
ensure that our jobsites are well staffed with workers who are properly
fed, properly clothed and paid on a timely basis.
Over the past several years, Turner has fostered strong ties with
many Omani firms that work on our projects as general contractors and
laborers. We are planning to hire qualified Omani engineers and
architects to join Turner as it benefits our organization to have local
staff on our team.
Additionally, our staff at The Wave project is planning a mentoring
program for local students who are pursuing engineering degrees. This
is similar to programs that Turner runs in the U.S. and will give Omani
students an opportunity to work for an American company and gain
firsthand job experience.
Today, Turner is currently working on the three distinguished
projects in Oman which are indicative of the strong and growing ties
that exist between U.S. business and the Sultanate:
Turner served the project manager for the recently completed
Shangri-La Barr Al Jissah Resort in Muscat, a project with a
construction value of U.S. $145 million. The resort includes a total of
680 rooms and suites in three separate hotels. This luxury hotel is
scheduled to celebrate its grand opening this month.
As an extension to the successful work just completed at the Barr
Al Jissah, Turner has been assigned to work on a new program for the
construction of 125 residential units on the grounds. The residential
complex will consist of 75 apartments, 30 townhouses and 20 villas.
In both of these efforts, Turner led a global team of engineers,
contractors, and consultants including the U.S.-based design firm,
Wimberly Allison Tong & Goo, and managed the inclusion of many
suppliers from the U.S. who exported their goods to the project such as
Superior Boiler Works and Baltimore Aircoil--two leading manufacturers
of mechanical equipment.
Turner is also working as project and construction manager for
Oman's tourism and beach front residential project, The Wave, also in
Muscat, an $800 million construction project which will include a Greg
Norman signature golf course, a 300-berth marina, villas, apartments
and several themed hotels. Both the architect for the project, OBM, and
golf course designer, Greg Norman Golf Design, are based in Florida.
Finally, at the Thumrait Air Base for the Sultanate, Turner is
managing construction of facilities for twelve U.S. manufactured F-16
fighter jets. This exhibits not only Turner's commitment to the nation,
but also the U.S. aircraft manufacturing community.
In addition to these projects, Turner was also a corporate sponsor
for ``A Celebration of Omani Culture'' at the Smithsonian Castle in
Washington, D.C. in June, 2005.
In my travels to Oman, I have become acquainted with a beautiful
country where the people are open and extremely generous. I have been
particularly impressed by the Omanis' respect for the environment and
their desire to incorporate standards that respect the environment into
their construction projects. For example, our clients have made special
efforts to preserve the coral reef and the turtle breeding grounds at
the Bar Al Jissah, and we are working with the client at The Wave to
create an eco-sensitive building program.
Overall, I believe that industry and tourism, the pillars of Oman's
sustainable development, are segments in which American businesses will
continue to flourish and that there is great potential for Turner to
work on additional projects in the Sultanate.
In our view, the Free Trade Agreements that are currently being
negotiated with countries in the Middle East will help both sides
economically: increasing exports, generating jobs and developing common
business practices. With each new project and private transaction
between U.S. and Omani firms that conform to the international
marketplace, this already solid trading partnership will continue to
improve and grow in value to the citizens of Oman and the overall U.S.
services industry of the region. Agreements such as the one
contemplated today, represent a firm base from which U.S. interests
already present in the country can move ahead for the benefit of both
countries.
Specific to the construction industry, I believe the FTA will bring
practical benefits to U.S. firms. Our firm's early involvement in
construction projects often allows us to influence clients' choice of
consultants on the project, including the selection of architects,
engineers and others.
We often suggest U.S.-based firms, as we are familiar with the
high-quality of their work. In turn, these consultants usually specify
American-made materials for these large projects. It is part of
Turner's job to help clients obtain the best value for their projects.
This FTA will help us recommend U.S.-based companies to clients at more
competitive prices.
A snapshot of Turner's projects in Oman can be found in a recent
special issue of U.S.-Arab Tradeline, the bimonthly newsletter of the
National U.S.-Arab Chamber of Commerce. In our opinion, this newsletter
provides an excellent overview of U.S.-Oman relations. With your
permission, Mr. Chairman, I request that this special issue of
Tradeline be included in the record of today's hearing.
Thank you for the opportunity to testify today.
Mr. RYAN. Thank you, Mr. Billotti. Mr. Weitzel?
STATEMENT OF MICHAEL P. WEITZEL, PROGRAM MANAGER, DYNCORP
INTERNATIONAL; AND PRESIDENT, MUSCAT AMERICAN BUSINESS COUNCIL,
MUSCAT, SULTANATE OF OMAN
Mr. WEITZEL. Thank you, Mr. Chairman, distinguished
Members. I really appreciate this opportunity to come before
you today to speak. My name is Mike Weitzel, and I am the
President of the Muscat American Business Council. I am also
the Program Manager for DynCorp International's War Reserve
Materiel contract with Central Command's Air Forces. DynCorp
International, as you know, is an international company that
employs over 14,000 employees in some 35 countries, with
revenues of over $2 billion.
Both as an active duty Air Force Colonel assigned to U.S.
Central Command (CENTCOM) and U.S. Central Command Air Forces
(CENTAF), and after retiring as the War Reserve Material (WRM)
Program Manager, I have experienced firsthand the partnership
our country has long enjoyed with the Sultanate of Oman. I am
based in the Middle East and live in Muscat, its capital.
The Muscat American Business Council (MABC) was established
in October of 2004. Its goals are to increase knowledge,
strengthen business ties and stimulate the exchange of
information between the American business community and Omani
businesses and government. The MABC forms a forum for issues
that impact the business community, and offers a single voice
for communications with ministries and government
decisionmakers. Membership is open to all companies in Oman
that have an America interest, and we have over 45 companies
that are members of our organization.
Right to the point. One of our members talked--his name is
Michael Hansen. He is an Oman Marketing and Services Company
executive, and he said this is how the FTA is going to make a
difference for his company. Honda, which is one of the cars
that he sells, has a model called the Pilot here in the U.S. It
is known as the MRV back in Oman. They are looking at
increasing the number of vehicles to send to Oman. The FTA will
reduce the logistical cost of bringing that over to Oman,
increasing the sales of the Pilot, and it is manufactured in
the U.S. He also talked about the Rheem Air Conditioners that
are manufactured in the U.S. and sold in Oman. The FTA is going
to reduce the cost of those Rheem Air Conditioners, thereby
increasing American jobs.
Yaser Tobeh, a General Manager of the Dhofar Power Company,
provided the following example for the FTA's potential benefit
to the Oman economy. ``The growth of our business relies
directly on the number of customers and bulk consumers that get
connected to our system in Salalah and the Dhofar region. With
the Salalah Free Zone under construction, the FTA would
encourage U.S. investors and companies to bring businesses or
industries into the zone, which means more power connections,''
which means more investment, which means more profit, which
means more investment, and on and on and on. He felt that it
was going to make a big difference for his company.
Oman is the size of New Mexico, with a population, as
mentioned earlier, of over 3 million people, and they have made
great strides in a short period of time. Since 1970, as
Ambassador Cook mentioned, the renaissance has taken place in
Oman. It is a wonderful place to live and it is a wonderful
place to work. In act, I am kind of jealous of the Turner
Construction Company with the wonderful resorts and areas that
they are building and bringing more tourists into Oman, which
is a good thing and also a bad thing for those of us who live
there.
In December of 2005, I participated in the Regional Labor
Dialog, a 3-day event organized by the U.S. Embassy and the
Oman Ministry of Manpower as a part of the U.S. Department of
State's Middle East Partnership Initiative. Held in Muscat, the
event was well attended by government and private sector
interest from across the region, including labor ministers from
10 different nations. Issues such as work conditions, third
country workers, guest laborers and women in the workplace,
were discussed openly and energetically. It was a significant
event, and well attended, and well thought of.
We have every reason to be optimistic in the MABC. Oman's
willingness to meet high standards required of FTA partners is
a testament to the progressive spirit and determination of the
Omani people and its leader, the Sultan Qaboos bin Said. The
Muscat American Business Council supports the FTA as good
business and good policy. We look forward to doing our utmost
to support the agreement by increasing awareness locally and
enhancing opportunities for trade between these two countries.
Having more American products on the shelves in Oman will be a
sure sign of the FTA's success. Thank you, Mr. Chairman.
[The prepared statement of Mr. Weitzel follows:]
Statement of Michael P. Weitzel, Program Manager, DynCorp
International, and President, Muscat American Business Council, Muscat,
Sultanate of Oman
Mr. Chairman and distinguished members of the Committee on Ways and
Means, I thank you for this opportunity to testify on the proposed
U.S.-Oman Free Trade Agreement. My name is Michael P. Weitzel, and I
serve as president of the Muscat American Business Council--MABC.
I am employed by DynCorp International as Program Manager of the
U.S. Air Force's War Reserve Materiel (WRM) Program in the Central
Command (CENTCOM) Area of Responsibility (AOR). DynCorp International
provides support services to the U.S. and foreign governments as well
as private companies worldwide. We have over 14,000 employees in 35
countries and revenues of nearly $2 billion. Both as an active duty Air
Force Colonel assigned to CENTCOM and then CENTAF and, after retiring,
as the WRM Program Manager, I have experienced first hand the
partnership our country has long enjoyed with the Sultanate of Oman. I
am based in the Middle East and have spent the last two years in Oman's
capital city, Muscat.
The Muscat American Business Council was established in October
2004. Its goals are to increase knowledge, strengthen business ties,
and stimulate the exchange of information between the American business
community and Omani businesses and government. MABC provides a forum
for issues that impact the business community and offers a single voice
for communication with ministries and government decision makers.
Membership is open to companies in Oman with U.S. affiliation or
interest in U.S.-Oman relations. 45 companies joined MABC in its first
year.
The FTA is good for business. That, quite simply, is the bottom
line. The agreement encourages trade by eliminating tariffs; promotes
investment by creating a more transparent and therefore more inviting
business environment; it requires partners to commit to standards--
internationally recognized and agreed standards--regarding labor and
intellectual property rights. The agreement is designed for mutual
benefit, to create jobs and stimulate investment in both the U.S. and
Oman.
In a recent article, Oman's Minister of Commerce and Industry, H.E.
Maqbool Ali Sultan, identified FTA benefits to both sides as follows:
``Oman needs a larger, global market to achieve their long-term goal of
establishing a viable non-oil sector. The FTA will contribute to
economic diversification. . . . The U.S. stands to gain from increased
exports, which have grown each year since 2003. Imports from the U.S.
January--October 2005 were $432.1 million, an increase of 23.6% from
the previous year.'' It is interesting, also, to note results of the
U.S.-Jordan FTA, which was signed in 2000. Trade between Jordan and the
U.S. prior to the agreement was approximately $300 million; by 2003, it
had more than tripled to over $1 billion.
MABC member Michael Hansen of Oman Marketing and Services Company
translates statistics into tangible examples of benefit to the U.S.
economy. The Honda SUV model MRV, known as the "Pilot" in the U.S., and
the Honda Odyssey are produced in the U.S. and supplied to Oman and the
GCC region. Honda is evaluating whether to increase the supply of cars
to be produced in the U.S. for sale in Oman and the wider GCC region.
This will create jobs in America. Rheem air conditioners are
manufactured in the U.S. and sold in Oman by Oman Marketing and
Services Company. FTA implementation would mean elimination of import
duty and therefore a reduction in the high logistics costs from the
U.S. to Oman. Increased sales are the end result.
MABC member Yaser Tobeh, General Manager of the Dhofar Power
Company, provides the following example of the FTA's potential benefit
to Oman's economy. He writes, ``The growth of our business relies
directly on the number of customers and bulk consumers that get
connected to our system in Salalah and the Dhofar region. With the
Salalah Free Zone under construction, the FTA would encourage U.S.
investors and companies to bring businesses or industries into the
Zone, which means more power connections and more system expansions,
thus providing growth to our utility.'' And while the Dhofar Power
Company would benefit, U.S. investors would also benefit from the
company's increased production made possible by additional sales and
profits.
Oman, the size of New Mexico, with a population approaching three
million, has made dramatic strides in a short time. Prior to 1970 when
Sultan Qaboos bin Said assumed leadership, the country was closed to
outside influence; infrastructure and social services were negligible.
Today, Oman has a modern infrastructure, outstanding educational and
medical facilities, and women are welcomed in the workplace. The
economy is growing, there is a significant campaign underway to achieve
economic diversification, and major infrastructure development.
Work is in progress to improve ports in Salalah and Muscat, to
build a new port in Duqm, and the newly completed port of the
industrial city of Sohar has been commissioned. Also underway are plans
for a new terminal at the existing Seeb airport, plus additional
airports elsewhere. A residential resort called The Wave is being built
now and, for the first time, foreigners will be able to own property in
Oman. Cultivation of tourism, and in particular eco-tourism, is a
priority. Properties such as Shangri La's recently opened Barr Al
Jissah Resort, which includes three luxury hotels in a location of
spectacular beauty, and largely built by the Dallas-based firm Turner
Construction, will--I am both happy and sad to say--make Oman a much
sought-after destination.
Recent steps to enhance local labor conditions and comply with ILO
labor requirements demonstrate Oman's commitment to the FTA. Prior to
2003, Oman functioned under an archaic labor law that simply did not
keep pace with the Sultanate's ratification of core international labor
standards and specifically forbade strikes. Today, workers are joining
the rapidly growing number of unions and engaging in collective
bargaining and even strikes with the full protection of the Omani
government. The Omani government is not simply writing new laws--it is
putting its modern labor policies into practical effect.
In December 2005, I participated in the Regional Labor Dialogue, a
three-day event organized by the U.S. Embassy and Oman's Ministry of
Manpower as part of the U.S. Department of State's Middle East
Partnership Initiative (MEPI). Held in Muscat, the event was well
attended by government and private sector interests from across the
region, including labor ministers from ten nations. Issues such as work
conditions, third country workers, child labor laws, and women in the
workplace were discussed openly and energetically. This in itself is
significant and noteworthy progress.
DynCorp International has operations throughout the region
including Bahrain. As a result of the U.S.-Bahrain Free Trade
Agreement, our company has a workers' union. We view this as a plus,
and we work together with the DynCorp Workers Trade Union and the
General Federation of Bahrain Trade Unions (GFBTU) as they develop and
take on the responsibilities of organized labor. We intend to be
leaders in the implementation of the U.S.-Oman FTA labor provisions,
and will be supportive of the formation of workers' representative
groups in Oman.
Beyond economics, Oman is a positive presence in the region and a
valued partner in the Global War on Terror. It is a country that
rejects extremism and supports moderation and tolerance. For the last
three decades, Oman has been a trusted ally and has enabled the United
States to maintain its stabilizing military presence in the Gulf. At
last week's MABC meeting, Salem bin Nasser Al Ismaily, CEO of the Omani
Center for Investment Promotion & Export Development (OCIPED), spoke on
the subject of Economic Freedom in the Arab World. He emphasized the
integral link between trade and security. They go hand in hand, and
more trade means a better chance to end political instability as well
as economic stagnation. Unemployment is a problem in Oman; the FTA will
increase the number of jobs available for Omanis. We believe efforts to
create jobs and raise standards of living will contribute positively to
stability in the region.
We have every reason to be optimistic. Oman's willingness to meet
the high standards required of FTA partners is a testament to the
progressive spirit and determination of the Omani people and their
leader, Sultan Qaboos bin Said. The Muscat American Business Council
supports the U.S.-Oman FTA as good business and good policy. We look
forward to doing our utmost to support the agreement by increasing
awareness locally and enhancing opportunities for trade between these
two countries. Having more American products on the shelves in Oman
will be a sure sign of the FTA's success.
Mr. RYAN. Thank you, Mr. Weitzel. Mr. Trumka.
STATEMENT OF RICHARD L. TRUMKA, SECRETARY-TREASURER, AMERICAN
FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS
Mr. TRUMKA. Thank you, Mr. Chairman, Representative Rangel
and Members of the Committee. I want to thank you for the
opportunity to testify today on behalf of 9\1/2\ million plus
working men and women of the AFL-CIO. In our view, the Oman FTA
provides the wrong answers to the challenge faced in Oman and
the U.S. The Agreement is based on a failed model that neither
addresses the problems confronted by workers in Oman, nor
contributes to the creation of good jobs and decent wages at
home. The workers' rights provisions are entirely inadequate to
ensure that fundamental human rights are respected, and the
dispute settlement mechanism for workers' rights and
environmental protections is far weaker than that available for
commercial provisions.
At the same time, flawed provisions on services,
investment, government procurement and intellectual property
rights will undermine the ability of both governments to
protect public health, strong communities and the environment.
As you know, we have argued that Oman's labor laws are
egregiously out of compliance with the ILO core labor
standards, and we remain deeply concerned about the lack of
fundamental protection for Omani workers in both law and
practice. Despite some improvements made to Oman's legal
framework, Oman's labor laws today do not provide for the
exercise of the most important and fundamental workers' rights,
that is, freedom of association and the right to organize and
bargain collectively. Omani labor laws provide the government
with an entirely inappropriate level of oversight and control
over the activities, meetings, finances and selection of
representatives of the National and Industrial Worker
Representative Committees. In addition, current laws fail to
explicitly protect workers who participate in the worker
committees from anti-union discrimination, and they do not
spell out protections for workers who choose to engage in
strikes.
We understand that the Omani government sent letters to
Chairman Thomas, pledging to make certain changes in bringing
its labor laws into compliance with the ILO standard by October
31st, 2006. We applaud those efforts, and we welcome this offer
on the part of the government. However, we continue to have
serious concerns. Congress should delay further proceedings on
the Oman FTA until after these important changes have been
fully implemented. It is essential to see the precise
legislative language before it can be ascertained whether or
not the reform laws do actually meet ILO standards.
Also, while Oman might issue a new decree changing the law,
it has no history of labor movement. Employers in Oman must
have time to be educated on the role of workers representatives
in fostering positive employment relations. This will not
happen immediately, and certainly not by October 31st, the date
by which the Omani government indicates decrees will be
completed. Workers representatives must be given the tools and
opportunities and time to organize workers into trade unions
and fulfill their responsibilities to protect workers rights.
We expect that this will take time. The effectiveness of these
changes will not be seen overnight. It will also take time to
monitor and judge whether or not any new decrees have been
successful. Even more important to the AFL-CIO, the labor
provisions included in the Oman FTA do not include any
enforceable provisions preventing the weakening of or
derogation from domestic labor laws. Only one labor right
obligation, the obligation for a government to enforce its own
labor laws, is actually enforceable through dispute settlement.
All the other obligations contained in the labor chapter are
explicitly not covered by the dispute settlement system. This
directly violates the Trade Promotion Authority (TPA) which
instructs our negotiations to treat all negotiating objectives
equally.
This means that if Oman's labor laws are brought fully into
compliance with ILO standards over the coming months, the U.S.
Government would have absolutely no recourse to dispute
settlement or enforcement if a future Omani government were to
reverse those gains, or weaken, or gut Omani's labor laws after
congressional passage of the FTA. Because of this, Omani
workers do not have any voice in electing their government;
they would not be in a position to vote out of office a
government that chose to weaken the labor laws. In addition,
any vote on the Oman FTA must take into account the broader
economic reality that we are facing today.
Now, our executive council adopted a statement in March
calling for a moratorium on all FTAs, including Oman, until we
rewrite them to protect and advance workers' interest. The
labor provisions in the Oman FTA are woefully inadequate and
clearly fall short of the TPA negotiating objectives. They will
be extremely difficult to enforce, and fines may be inadequate
to actually remedy violations. Given Oman's historic failure to
respect core worker rights, and the troubling inadequacies in
the current laws, it is especially problematic to implement an
FTA with weak labor protections at this time. Thank you, Mr.
Chairman.
[The prepared statement of Mr. Trumka follows:]
Statement of Richard L. Trumka, Secretary-Treasurer, American
Federation of Labor-Congress of Industrial Organizations (AFL-CIO)
Good afternoon, Mr. Chairman, Representative Rangel, and members of
the Committee. I thank you for the opportunity to testify today on
behalf of the 9 million working men and women of the AFL-CIO on the
U.S.-Oman Free Trade Agreement (FTA). Trade policy in general, and this
agreement in particular, are of great interest and concern to our
members, to America's workers, and to workers in Oman as well.
In our view, the Oman FTA provides precisely the wrong answers to
the challenges faced in Oman and the United States. The agreement is
based on a failed model that neither addresses the problems confronted
by workers in Oman, nor contributes to the creation of good jobs and
decent wages at home. The workers' rights provisions are entirely
inadequate to ensure that workers' fundamental human rights are
respected, and the dispute settlement mechanism for workers' rights and
environmental protections is far weaker than that available for
commercial provisions. At the same time, flawed provisions on services,
investment, government procurement, and intellectual property rights
will undermine the ability of both governments to protect public
health, strong communities, and the environment.
In addition to the problems outlined above with the Oman FTA
template, which are common to all the FTAs negotiated by this
Administration, we continue to have very serious concerns about Oman's
2003 Private Sector Labor Law, and the Ministry of Manpower's decrees,
which outline the detailed implementation procedures. As you know, we
have argued that Oman's labor laws are egregiously out of compliance
with the ILO core labor standards, and we remain deeply concerned about
the lack of fundamental protections for Omani workers in both law and
practice. Despite some improvements made to Oman's legal framework,
Oman's labor laws today do not provide for the exercise of the most
important and fundamental workers' rights: freedom of association and
the right to organize and bargain collectively.
ILO standards call for workers to be able to form their own
organizations, free of interference from employers or government. Omani
labor law, in contrast, provides the government with an entirely
inappropriate level of oversight and control over the activities,
meetings, finances, and selection of representatives of the national
and industrial ``worker representative committees.'' In addition, the
laws fail to explicitly protect workers who participate in the worker
committees from anti-union discrimination, nor do they spell out
protections for workers who choose to engage in strikes. The Omani
Government claims the forthcoming Ministerial Decree outlining
procedures on the Right to Strike will be reviewed by the ILO to ensure
compliance with ILO Standards.
We understand that the Omani government has sent a letter to
Chairman Thomas (dated March 26, 2006), pledging to bring its labor
laws into compliance with ILO standards by October 31, 2006. We applaud
and welcome this offer on the part of the government.
However, we continue to have some serious concerns. Congress should
delay further proceedings on the Oman FTA until after these important
changes have been fully implemented. We have plenty of experience with
labor legislation, and we know that it is essential to see the precise
legislative language before we can ascertain whether or not the
reformed laws do actually meet ILO standards.
Second, while Oman might issue a new decree changing the law, it
has no history of a labor movement. Employers are reluctant to accept
the representative committees, let alone actual trade unions with
collective bargaining rights. Employers in Oman must have time be
educated on the role of worker representatives in fostering positive
employment relations.
This will not happen immediately and certainly not by October 31,
2006, the date by which the Omani Government indicates the decrees will
be completed. Omani worker representatives are currently at a distinct
disadvantage compared to the Government and employers. This new legal
framework will be a good start. But worker representatives must be
given the tools, opportunities and time to organize workers into trade
unions and fulfill their responsibilities to protect worker rights. We
can expect this will take more time in Oman, as their worker rights
were virtually non-existent, lagging far behind even Bahrain. The
effectiveness of these changes will not be seen overnight. It will also
take time to monitor and judge whether or not any new decrees have been
successful.
Even more important, the labor provisions included in the Oman FTA
do not include any enforceable provisions preventing the weakening of
or derogation from domestic labor laws. This means that even if Oman's
labor laws are brought fully into compliance with ILO standards over
the next couple of months, the U.S. government would have absolutely no
recourse to dispute settlement or enforcement if a future Omani
government were to reverse those gains and weaken or gut Oman's labor
laws after Congressional passage of the FTA. And because Omani workers
do not have any voice in electing their government, they would not be
in a position to vote out of office a government that chose to weaken
their labor laws.
In addition to our concerns on Oman's labor situation, any vote on
the Oman FTA must take into account the broader economic reality that
we are facing today. Our trade deficit hit a record-shattering $726
billion last year; we have lost more than three million manufacturing
jobs since 1998; and average wages have not kept pace with inflation
this year--despite healthy productivity growth. The number of people in
poverty continues to grow, and real median family income continues to
fall. Offshore outsourcing of white-collar jobs is increasingly
impacting highly educated, highly skilled workers--leading to rising
unemployment rates for engineers and college graduates. Together,
record trade and budget deficits, unsustainable levels of consumer
debt, and stagnant wages paint a picture of an economy living beyond
its means, dangerously unstable in a volatile global environment.
The AFL-CIO Executive Council adopted a statement in March calling
for a moratorium on all new free trade agreements, including with Oman,
until we can rewrite them to protect and advance workers' interests.
Labor Provisions of the Oman FTA
Unfortunately, the Oman FTA labor provisions actually constitute a
step backwards from existing labor rights provisions in the U.S.-Jordan
FTA and in our Generalized System of Preferences (GSP) program. In the
Oman agreement, only one labor rights obligation--the obligation for a
government to enforce its own labor laws--is actually enforceable
through dispute settlement. All of the other obligations contained in
the labor chapter, many of which are drawn from Congressional
negotiating objectives, are explicitly not covered by the dispute
settlement system and are thus completely unenforceable.
Labor Rights in Oman
Again, while the government has made numerous pledges, current
Omani law does not come close to meeting International Labor
Organization (ILO) criteria for compliance with core labor standards,
and the weak and inadequate labor rights protections in this agreement
will allow these severe deficiencies in Oman's labor laws to persist.
The most serious issue is Oman's systematic denial of workers'
freedom of association. The Omani government is in egregious violation
of ILO conventions and universally accepted international practice.
Again, we cannot expect these problems to be solved overnight.
The Omani Government claims, in the March 26 letter Chairman
Thomas, that ``a significant number of strikes occur every year since
the adoption of the 2003 Labour Law with no prosecution or retribution
of any form for such work stoppages which is evidence that the freedom
to strike exists under Omani law.''
This assertion has yet to be proven. No documentation has been
provided by the Omani authorities as to the dates, issues, and parties
involved in actual strikes. Such information would constitute actual
evidence that ``the freedom to strike exists under Omani law.'' If the
law is unclear, and there is little or no evidence of the practice
being different, the Omani Government cannot claim to adhere to the
requirements of 87 and 98 on the right to strike.
In Oman's legal system, it is not clear what takes precedence on
labor rights, a law developed by the parliament and approved by the
Sultan, or a Ministerial Decree? Which is considered ``Omani law''? If
the Omani Government does not amend its 2003 Labor Law to come into
conformity with the Ministerial Decrees, then how will a judge
determine which standard to apply, given the violations of 87 and 98
present both the 2003 Law and the current Ministerial Decrees governing
the internal procedures of the representative committees? The Bahraini
Government made a commitment to amend both the 1976 Labor Law, as well
as the 2002 Trade Union Law. The Omani Government should make a similar
commitment.
A review of Oman's current Labor Law, issued by decree in 2003,\1\
also reveals a pattern of exceptions to the very standards it proclaims
as law, from the exclusion of foreign domestic workers and civil
servants from protection under the law, to loopholes that allow for a
wide variety of interpretations of basic rights. This leaves workers
dependent not upon the law, but upon the discretion of powerful vested
interest groups that form the core of a semi-authoritarian regime.
---------------------------------------------------------------------------
\1\ Omani Labour Code of 26 April 2003
Ministry of Information
The New Labor Code was issued by Royal Decree No. 35 of 2003, and
abrogates the previous Labor Law issued by Royal Decree Nov. 34 of
1973.
www.omanet.om/arabic/goverment/gov20.asp?cat=gov
---------------------------------------------------------------------------
Ministry of Manpower Decrees 135 and 136, issued in 2004, outline
stringent and inappropriate government oversight parameters for both
worksite level committees and a national committee intended to serve as
a national representative body.\2\ The government reserves the right to
``be notified one month prior to each meeting of the general assembly
with a copy of the invitation letter, agenda, documents and papers
relating to the issues to be discussed,'' and to ``delegate who it
chooses to attend the meeting.'' It also requires the committees to
provide minutes of all meetings to the government and reserves the
right to review the dues structure. All of these requirements
constitute violations of ILO standards of freedom of association.
---------------------------------------------------------------------------
\2\ Sultanate of Oman, Ministry of Manpower, ``Ministerial Decision
No. (135/2004), ``On Principles of Formation and work of Representative
Committees in Establishments,'' and Ministerial Deicion No. (136/
2004)--``On Principles of Formation and Work of the Main Representative
Committee.''May 11, 2004, Translated by POLE: Ahmed Al-Sawei.
---------------------------------------------------------------------------
In its defense of the provision allowing Ministry delegates to
attend worker committee meetings, the government has said that ``the
presence of the representative from the Ministry is to help the
committee in case of their need to consult with the Ministry on any
issue.'' It certainly seems that if the worker committees need advice
from the government, they could ask for it, rather than having a
government presence at all their meetings ordained in labor law.
The government has claimed that ``eleven members [of the Main
Representative Committee] were all elected from the existing
Representative Committees and are all workers.'' This is untrue. The
government appointed at least some of the members of the Main
Representative Committee, and five of them actually serve in management
positions within their companies, either as CEOs or Personnel Managers.
Any paid representative of an enterprise with management
responsibilities should be disqualified from running for office on
either the enterprise level or Main Representative Committee. The
candidates in the next round should be allowed to campaign publicly,
and democratic elections should be held to decide the officers.
Although the workplace level committees allow for a semblance of
rank and file participation through the General Assembly, workers may
not join the assembly until they have completed one year of employment.
The Minister of Manpower is directly responsible for ratifying the
election results for both the workplace and national committees, and
may object to any nominee to the administrative bodies who does not
meet a set of stringent conditions, including fluency in written and
spoken Arabic language, a condition which would disqualify most
foreign-born worker from leadership positions (contrary to the USTR
factsheet). Non-citizens account for as much as 80% of the private-
sector workforce (according to the State Department 2004 annual human
rights report). Under ILO Standards for Leadership Positions, workers
should be able to choose their representatives free of Government or
employer interference.
The labor law also decrees that membership in the administrative
body [of the worker committee] is terminated in the case that a member
``commit[s] any act that causes material or moral harm to . . . the
public interest of the Sultanate.'' Again, this is totally
inappropriate.
The current labor law prohibits the administrative body of the
worker committees outright from ``join[ing] any organization or
authority with headquarters outside the Sultanate,'' from sending
``delegations outside the Sultanate or receiv[ing] delegations,'' and
even from holding ``public festivities or present[ing] public
lectures'' without the approval of the Minister. ILO standards
explicitly lay out that unions may affiliate to international
organizations of their choosing, and certainly the government has no
business monitoring the travel, visitors, or public festivities and
lectures of workers' organizations.
In a March 10 letter to the Committee on Ways and Means, the Omani
government indicated that Article (6) of the Oman's labor law does
provide legal consequences in the case of the employer refusing the
request of a representational committee to negotiate additional
benefits schemes.
This appears to be a misrepresentation as Article 6 reads: ``The
employer may execute projects whereby the workers obtain more generous
benefits than prescribed, or he/she may provide the workers with other
benefits, conclude agreements covering more generous conditions than
those prescribed in this law. If a provision of this law infringes with
one or more of the conditions set by the referred projects or
agreements, the most beneficial provision to the worker applies.''
While this clause gives the employer the option to execute ``projects''
it fails to mention a committee's role in negotiating such terms with
the employer. The fact that no collective bargaining agreements exist
in Oman indicates that employers do not feel compelled to allow workers
to infringe on their unilateral exercise of power.
This provision relies upon employer largesse, permitting such
``schemes'' to take place if the employer desires it, but not requiring
employers to engage in collective bargaining.
While all workers in Oman are denied basic labor rights, the large
foreign workforce, who constitute the majority of private-sector
workers in Oman, are especially vulnerable to abuse and exploitation.
Foreign workers have the right to remain in the country for the
duration of their work contracts; but employers are known to hold the
passports of guest workers, and in the worst cases of abuse, even deny
individuals the ability to extract themselves from dangerous or cruel
work conditions. Laws protecting workers from forced labor are not
enforced. According to the State Department:
The Government did not investigate or enforce the law effectively.
Foreign workers at times were placed in situations amounting to forced
labor. Employers have withheld documents that release workers from
employment contracts and allow them to change employers. Without such a
letter, a foreign worker must continue to work for his current employer
or become technically unemployed, which was sufficient grounds for
deportation.\3\
---------------------------------------------------------------------------
\3\ State Department COUNTRY REPORTS ON HUMAN RIGHTS PRACTICES 2004
http://www.state.gov/g/drl/rls/hrrpt/2004/41729.htm
---------------------------------------------------------------------------
Oman has an equally problematic record on trafficking in persons,
according to the State Department's 2004 Trafficking in Persons Report:
Oman is a destination country for women and men who migrate legally
and willingly from South Asia--primarily from India, Bangladesh,
Pakistan, Sri Lanka, and the Philippines--for work as domestic workers
and laborers but are subsequently trafficked into conditions of
involuntary servitude. Some of these workers suffer from physical and
sexual abuse or withholding of ages or travel documents . . . According
to a noted human rights activist, several dozen foreign children
trafficked for the purpose of exploitation as camel jockeys were
reportedly seen near the border with the United Arab Emirates.\4\
---------------------------------------------------------------------------
\4\ TRAFFICKING IN PERSONS REPORT--Released by the Office to
Monitor and Combat Trafficking in Persons, June 3, 2005:
http://www.state.gov/g/tip/rls/tiprpt/2005/46614.htm
---------------------------------------------------------------------------
Even should the current Omani regime alter it's existing workers'
rights restrictions, the proposed FTA would allow Oman to undermine
workers' fundamental rights in the future. Even for the one labor
obligation in the FTA that is subject to dispute resolution--the
requirement to effectively enforce domestic laws--the procedures and
remedies for addressing violations are significantly weaker than those
available for commercial disputes in the agreement. This directly
violates TPA, which instructs our negotiators to seek provisions in
trade agreements that treat all negotiating objectives equally and
provide equivalent dispute settlement procedures and equivalent
remedies for all disputes.
The labor enforcement procedures cap the maximum amount of fines
and sanctions available at an unacceptably low level, and allow
violators to pay fines that end up back in their own territory with
inadequate oversight. These provisions not only make the labor
provisions of the agreement virtually unenforceable, they also differ
dramatically from the enforcement procedures and remedies available for
commercial disputes:
In commercial disputes, the violating party can choose to
pay a monetary assessment instead of facing trade sanctions, and in
such cases the assessment will be capped at half the value of the
sanctions. In labor disputes, however, the assessment is capped at an
absolute level, no matter what the level of harm caused by the
offending measure.
Not only are the caps on fines much lower for labor
disputes, but any possibility of trade sanctions is much lower as well.
In commercial disputes, a party can suspend the full original amount of
trade benefits (equal to the harm caused by the offending measure) if a
monetary assessment (capped at half that value) is not paid. In a labor
dispute, the level of trade benefits a party can revoke if a monetary
assessment is not paid is limited to the value of the assessment
itself--capped at $15 million.
Finally, the fines are robbed of much of their punitive
or deterrent effect by the manner of their payment. In commercial
disputes under the Oman FTA, the deterrent effect of punitive remedies
is clearly recognized--it is presumed that any monetary assessment will
be paid out by the violating party to the complaining party, unless a
panel decides otherwise. Yet for labor disputes, the violating country
pays the fine to a joint commission to improve labor rights
enforcement, and the fine ends up back in its own territory. No rules
prevent a government from simply transferring an equal amount of money
out of its labor budget at the same time it pays the fine. And there is
no guarantee that the fine will actually be used to ensure effective
labor law enforcement, since trade benefits can only be withdrawn if a
fine is not paid. If the commission pays the fine back to the offending
government, but the government uses the money on unrelated or
ineffective programs so that enforcement problems continue un-
addressed, no trade action can be taken.
The labor provisions in the Oman FTA are woefully inadequate, and
clearly fall short of the TPA negotiating objectives. They will be
extremely difficult to enforce with any efficacy, and monetary
assessments that are imposed may be inadequate to actually remedy
violations. Given Oman's failure to respect core workers' rights and
the huge inadequacies in its labor laws, it is especially problematic
to implement an FTA with weak labor protections at this time.
In addition to the very serious problems with the labor provisions
of the Oman agreement outlined above, commercial provisions of the
agreement also raise serious concerns.
Trade Impacts of the Oman FTA
While the overall trade relationship with Oman is small relative to
the economy of the United States, it is possible that the agreement
will result in a deteriorating trade balance in some sectors, including
sensitive sectors such as apparel. Even where the market access
provisions of the agreement themselves may not have much of a negative
impact on our trade relationship, these provisions when combined with
rules on investment, procurement, and services could further facilitate
the shift of U.S. investment and production overseas, harming American
workers.
The dramatically lower costs of energy in Oman provide enormous
opportunities for energy-dependent industries to use the country as an
export platform. As is the case with the United Arab Emirates (UAE),
where a foreign glassware manufacturer has set up shop and may use the
UAE's natural gas--which costs less than 1/12th of what it does in the
U.S.--to flood the U.S. market with glassware, a similar opportunity
exists with Oman.
Chemical manufacturers, energy interests and others could similarly
benefit from Oman's energy pricing structure. Oman, like many other
energy-rich nations, has a built-in advantage in low energy costs. But,
beyond this initial advantage, energy costs to
Oman's manufacturing interests do not reflect market prices.
Additionally, the failure of the United States to have a comprehensive
energy policy to ensure long-term stable supplies and affordable prices
puts the U.S. at a substantial disadvantage. The failure of the Bush
Administration to aggressively address energy costs has serious
repercussions for our manufacturing sector and, indeed, for all energy
consumers. The U.S.-Oman FTA will exacerbate that disadvantage by
providing enhanced access to the U.S. market without addressing the
non-market pricing of energy.
Investment: In TPA, Congress directed USTR to ensure ``that foreign
investors in the United States are not accorded greater substantive
rights with respect to investment protections than United States
investors in the United States.'' Yet the investment provisions of the
Oman FTA contain large loopholes that allow foreign investors to claim
rights above and beyond those that our domestic investors enjoy. The
agreement's rules on expropriation, its extremely broad definition of
what constitutes property, and its definition of ``fair and equitable
treatment'' are not based directly on U.S. law, and annexes to the
agreement clarifying these provisions also fail to provide adequate
guidance to dispute panels. As a result, arbitrators could interpret
the agreement's rules to grant foreign investors greater rights than
they would enjoy under our domestic law. In addition, the agreement's
deeply flawed investor-to-state dispute resolution mechanism contains
none of the controls (such as a standing appellate mechanism,
exhaustion requirements, or a diplomatic screen) that could limit abuse
of this private right of action. Finally, the marked difference between
the dispute resolution procedures and remedies available to individual
investors and the enforcement provisions available for the violation of
workers' rights and environmental standards flouts TPA's requirement
that all negotiating objectives be treated equally, with recourse to
equivalent dispute settlement procedures and remedies.
Intellectual Property Rights: In TPA, Congress instructed our trade
negotiators to ensure that future trade agreements respect the
declaration on the Trade Related Aspects on Intellectual Property
Rights (TRIPs) agreement and public health, adopted by the WTO at its
Fourth Ministerial Conference at Doha, Qatar. The Oman FTA contains a
number of ``TRIPs-plus'' provisions on pharmaceutical patents,
including on test data and marketing approval, which could be used to
constrain the ability of a government to issue compulsory licenses as
permitted under TRIPs and the Doha Declaration.
Government Procurement: The FTA's rules on procurement restrict the
public policy aims that may be met through procurement policies at the
federal level. These rules could be used to challenge a variety of
important procurement provisions including domestic sourcing
preferences, prevailing wage laws, project-labor agreements, and
responsible contractor requirements. We believe that governments must
retain their ability to invest tax dollars in domestic job creation and
to pursue other legitimate social objectives, and that procurement
rules which restrict this authority are inappropriate.
Safeguards: Workers have extensive experience with large
international transfers of production in the wake of the negotiation of
free trade agreements and thus are acutely aware of the need for
effective safeguards. The safeguard provisions in the Oman agreement,
which offer no more protection than the limited safeguard mechanism in
NAFTA, are not acceptable. U.S. negotiators should have recognized that
much faster, stronger safeguard remedies are needed. The Oman FTA has
failed to provide the necessary import surge protections for American
workers.
Services: NAFTA and WTO rules restrict the ability of governments
to regulate services--even public services. Increased pressure to
deregulate and privatize could raise the cost and reduce the quality of
basic services. Yet the Oman agreement does not contain a broad,
explicit carve-out for important public services. Public services
provided on a commercial basis or in competition with private providers
are generally subject to the rules on trade in services in the Oman
FTA, unless specifically exempted.
Conclusion
Congress should reject the Oman FTA, and send a strong message to
USTR that future agreements must make a radical departure from the
failed NAFTA model in order to succeed.
American workers are willing to support increased trade if the
rules that govern it stimulate growth, create jobs, and protect
fundamental rights. The AFL-CIO is committed to fighting for better
trade policies that benefit U.S. workers and the U.S. economy as a
whole. For the reasons stated above, we urge the Congress to reject the
U.S.-Oman FTA and begin work on a more just economic and social
relationship with Oman.
Mr. RYAN. Thank you, Mr. Trumka. Mr. Schwartz?
STATEMENT OF ROGER SCHWARTZ, BUSINESS VICE PRESIDENT,
POLYETHYLENE, THE DOW CHEMICAL COMPANY, MIDLAND, MICHIGAN
Mr. SCHWARTZ. Mr. Chairman and distinguished Members of the
House Ways and Means Committee, thank you for the opportunity
to provide testimony on behalf of the U.S.-Oman FTA. The Dow
Chemical Company is a diversified chemical company that
harnesses the power of science and technology to improve living
daily. The company offers a broad range of innovative products
and services to customers in more than 175 countries, helping
them to provide everything from fresh water, food,
pharmaceuticals, to paints, packaging and personal care
products. Built on its commitment to principles of
sustainability, Dow has annual sales of $46 billion and employs
42,000 people worldwide.
Dow is a 109-year-old American company headquartered in
Midland, Michigan, and in 2004 we announced a joint venture
agreement with the government of the Sultanate of Oman, and the
Oman Oil Company, to design, build and operate a petrochemical
complex in the Sohar Industrial Port Area. The complex includes
feedstock production facilities, and ethylene gas-cracking
unit, and world-scale polyethylene production units based upon
the state of the art catalyst and process technology. As a
company, we are very excited about this project. Oman is one of
the key locations in the Middle East where Dow is
preferentially investing due to its proximity to the Asian
markets and access to cost-competitive hydrocarbon feedstocks
which we need to make these products.
The FTA helps in our development by gaining market access
for American products and manufacturing inputs to support the
growth of our production in Oman, and ultimately makes us more
competitive in the Asia-Pacific consumer market. The project is
a key step in Dow's strategy of having cost competitive,
geographic and product positions that will enable value growth.
The project is a true partnership, helping the Omani government
to meet its objectives of attracting foreign investment,
diversifying the economy, creating job opportunities, and
laying the foundation for future downstream industries, or
helping us to access cost competitive feedstocks for the fast-
growing markets in Asia. While we began our discussion with the
Omanis prior to the launch of the FTAs, we have been
tremendously impressed by the speed and the progress made in
the U.S.-Oman FTA negotiations. In particular, we give
significant credit to the Omani negotiating team for their very
progressive attitude toward liberalization, not just in the
reduction of tariffs, but augmenting and improving domestic
rules on intellectual property protection, investor rights, and
government procurement.
The Omanis are already signatories of the plurilateral
Chemical Harmonization Tariff Agreement, that not only helps my
company but also supports simplification and efficient trade of
chemical products worldwide. This Agreement is yet another
example of the tremendous progress on reforms within Oman, and
the Sultan's progressive agenda. The Sultan has fostered a high
degree of political stability within the country by instituting
a new constitution which has created a more democratic
infrastructure, including a deputy prime minister post,
bicameral legislature and guarantees for basic civil liberties.
Ultimately, Oman is a key growth opportunity for American
companies, particularly those like Dow that are heavily reliant
on sustained access to low-cost energy and feedstocks. With our
value park concept of bringing in manufacturing partners to co-
locate near our facilities, the FTAs will support additional
American investment, creating significant new employment and
economic opportunities in downstream plastic industries. This
is a concept that we have already successfully implemented at
Dow Chemical's Germany operations in Schkopau, a former East
German site.
Dow views Oman as yet another strategic investment that
enhances our global reach, accessing low-cost natural resources
in a geographically strategic location to ultimately
participate in the tremendous consumer growth in the Asia
markets. That pattern of growth helps us as an American company
deliver significant value back to our shareholders. The FTA is
not only a recognition for Oman's progress on economic reform
and trade liberalization, but serves as a high-quality, high-
standard benchmark for further progress on the President's
vision for MEFTA by 2013. Oman serves as a living example of
the benefits of progressive reform. We are pleased to be a
partner in Oman's development, and urge the House to recognize
Oman's progress on economic reform and trade liberalization
with an expeditious and positive vote on this agreement. Thank
you.
[The prepared statement of Mr. Schwartz follows:]
Statement of Roger R. Schwartz, Business Vice President, Polyethylene,
The Dow Chemical Company, Midland, MI
Mr. Chairman, and distinguished members of the House Ways & Means
Committee, thank you for the opportunity to provide testimony on behalf
of the U.S.-Oman Free Trade Agreement.
The Dow Chemical Company is a diversified chemical company that
harnesses the power of science and technology to improve living daily.
The Company offers a broad range of innovative products and services to
customers in more than 175 countries, helping them to provide
everything from fresh water, food and pharmaceuticals to paints,
packaging and personal care products. Built on a commitment to its
principles of sustainability, Dow has annual sales of $46 billion and
employs 42,000 people worldwide.
Dow is a 109-year-old American company, headquartered in Midland,
Michigan.
In 2004, we announced a joint venture project with the Government
of the Sultanate of Oman and Oman Oil Company (OOC) to design, build
and operate a petrochemical complex in the Sohar Industrial Port Area.
The complex will include feedstock production facilities, a gas
cracker, and world-scale polyethylene production units based on state-
of-the-art catalyst and process technology.
As a company, we are very excited about this project. Oman is one
of the key locations in the Middle East where Dow is preferentially
investing, due to proximity to Asian markets and access to cost-
competitive hydrocarbon feedstocks which we need to make many of our
products.
The FTA helps our development by gaining market access for American
products and manufacturing inputs to support growth of our production
in Oman and ultimately make us more competitive in the Asia/Pacific
consumer markets. This project is a key step in Dow's strategy of
having cost competitive geographic and product positions that will
enable value growth.
The project is a true partnership--helping the Omani government to
meet their objectives of attracting foreign investment, diversifying
the economy, creating job opportunities and laying the foundation for
future downstream industries while helping us to access cost-
competitive feedstocks to supply the fast-growing markets of Asia.
While we began our discussions with the Omanis prior to the launch
of the FTAs, we have been tremendously impressed by the speed and
progress made in the U.S.-Oman FTA negotiations. In particular, we give
significant credit to the Omani negotiating team, for their very
progressive attitude towards liberalization, not just in the reduction
of tariffs but augmenting and improving domestic rules on intellectual
property protection, investor rights and government procurement.
The Omanis are already signatories to the plurilateral Chemical
Harmonization Tariff Agreement (CHTA)--not only helpful to my company
but also to supporting simplified and efficient trade in chemical
products.
This agreement is yet another example of the tremendous progress on
reforms within Oman and the Sultan's progressive agenda. The Sultan has
fostered a high degree of political stability within the country by
instituting a new Constitution, which has created a more democratic
infrastructure--including a deputy Prime Minister post, bicameral
legislature and guarantees for basic civil liberties.
Ultimately, Oman is a key growth opportunity for American
companies--particularly those, like Dow, that are heavily reliant on
sustained access to low cost energy and feedstocks. With our value park
concept, bringing in manufacturing partners to co-locate with our
facility, the FTA will support additional American investment, creating
significant new employment and economic opportunities in down stream
plastics industries. This is a concept we have already successfully
implemented at the Dow Chemical Germany Schkopau site, in the former
East Germany.
Dow views Oman as yet another strategic investment that enhances
our global reach--accessing low-cost natural resources in a
geographically strategic location to ultimately participate in the
tremendous consumer markets of Asia.
That pattern of growth helps us, as an American company, deliver
significant value back to our shareholders.
The FTA is not only a recognition for Oman's progress on economic
reform and trade liberalization, but serves as a high-quality, high-
standard benchmark for further progress on the President's vision for a
U.S.-Mid East Free Trade Area by 2013. Oman serves as a living example
of the benefits of progressive reform.
We are pleased to be a partner in Oman's development--and urge the
House to recognize Oman's progress on economic reform and trade
liberalization with an expeditious and positive vote on this agreement.
Mr. RYAN. Thank you. Let me start with just one question to
you, Ambassador Cook. You are perhaps the best qualified to
answer this. The Sultan has made a lot of concrete commitments
in the area of labor issues, and you mentioned briefly in your
testimony that your experience with the Sultanate is that they
honor their words. I would like to see if you could elaborate
more on that point specifically. This trade agreement is
progressing based upon the agreements made by Oman in the area
of labor. What in your estimation--how should we evaluate that?
How do you believe, based on your track record with them and
your understanding of the government, we should interpret those
agreements and our faith in those taking place?
Ms. COOK. Thank you very much, Mr. Chairman. My experience
with them has been over a range of issues, not just on labor or
on trade but I could give you a couple of quick examples to
show how they do honor their word. One of them is in the
military sphere. As you know, we negotiate military access
agreements in countries where we keep troops. If that has to be
implemented, usually under very difficult circumstances, it is
trying for the host nations.
One specific example is a fatality of a local citizen,
which occasionally occurs where we have troops abroad--that was
a very sensitive issue for Oman, where a troop killed an Omani
driving accident. It was nothing more than an automobile
accident, but you can understand how such an incident can be
very sensitive, as indeed it is in Washington, D.C., when it
occurs with diplomatic vehicles. They honored that agreement to
the letter. It was obviously a very difficult issue for them
locally, abut they carried out every bit of--it was handled in
48 hours. That one is extremely sensitive, and something that
they did honor very quickly in my time there.
They have done that as well with our various agreements
with DOD for access to our facilities. those are legal
agreements that they have honored in my time there that have
been difficult for them to honor, but they honor it without
flinching. There was no attempt to negotiate or renege
something-else. They did what they said they would do in the
treaty, and that was it.
Mr. RYAN. Thank you. Mr. Rangel?
Mr. RANGEL. Mr. Chairman, I think those questions are so
unfair because it detracts from the credibility of our former
ambassador, who obviously served our country well, and has a
good working relationship with the Sultan. You know, if we did
business that way, just on trust, we don't need any agreement.
If the President said, ``You are ambassador. Work out something
with these people,'' and you came back and told the President,
``We worked it out. I trust them,'' it would not look good on
the U.S., nor on our embassy in that country.
Just because we differ doesn't mean that the we challenge
the credibility of the Sultan. He is a nice man, but when we
get out there and represent our constituents, we can't say,
``You told us trust him.'' You know that, and you know it. We
need to have something that is the U.S. policy. We have to talk
to make certain we are talking the same language, since, I
think, we basically want to reach the same goal.
Mr. Trumka, are your union officials willing to help out
some of these countries that have cultural differences that can
assist them in the language, whether it is ILO, or no matter
what it is? It is just basic decency that we are talking about,
and the ability of poor people to acquire funds so that they
can buy U.S. products. Are you willing to go and help them
since we have to assume that there is good faith involved in
this by USTR, by our embassy, and by the countries and the
Congress?
Mr. TRUMKA. Yes, very much so, sir. Not only are we willing
to, we have been doing just that for any number of years, for
decades, trying to help workers in other countries through the
ILO, through the ICFTU, the International Confederation of Free
Trade Unions, to help them get a better standard of living,
help them get more enforceable rights and to help them increase
their standard of living, of course we are. In fact, we have
actually participated in negotiations in other countries with
companies to help those workers get a better standard of
living.
Mr. RANGEL. I would guess that if the USTR would ask what
is the biggest impediment to getting bipartisan trade
agreements, they would say it is labor. Have they consulted, to
the best of your knowledge, with the leaders in your
organization to see how we could work out those language
differences?
Mr. TRUMKA. They have not.
Mr. RANGEL. Well, that is something maybe we can talk
about, Mr. Acting Chairman, because communications is so
important since there are so many people who don't want to
listen on both sides. They shouldn't be using ILO as an excuse
because we are not looking to support the ILO. We are looking
for basic standards that everyone can agree upon, and they have
to be minimum standards.
Mr. Billotti, you had indicated that the actions of your
construction company in the U.S. is reflected in part in how
you do business abroad in Oman. The Mayor of the city of New
York had to set up a special commission because of the apparent
absence of minorities in these construction jobs in New York,
and I would assume, around the country. I don't know how
familiar you are in New York City, but they don't have--well,
what do you think about the hiring practices of your
construction company in New York?
Mr. BILLOTTI. Of my construction company in New York? Well,
I am most familiar with what we do outside of the U.S. That is
my area of expertise.
Mr. RANGEL. I know, but you say that you reflect U.S.
policies.
Mr. BILLOTTI. Yes. We have taken our U.S. personnel
policies and we mirror them in places where we do business.
Mr. RANGEL. Well, if you deal with foreigners within a
foreign country, I would like to know how you deal with
Americans in New York City who are minorities.
Mr. BILLOTTI. That is a very good and fair question, and I
can't speak to the specific accomplishments or statistics, but
I do know that we go out of our way to form joint ventures with
local minority companies in Brooklyn where I am from, and
Manhattan, in the Bronx, where we will be building the new
Yankee Stadium, but to us, minority participation is a very,
very important part of our industry, and I could just----
Mr. RANGEL. Well, as you travel in New York City, you do
see then the absence of minorities working on these sites, so
much so that the unions and the Mayor and construction people
have joined a special commission to see what we can do to
change this obscene policy of the absence of minorities.
Mr. BILLOTTI. Again, I am not in a position to speak to the
specifics of the industry in New York City. I can tell you
though that Turner's policy has been, and continues to be, to
attract minority participation in our industry.
Mr. RANGEL. Would you send me something on that as soon as
possible?
Mr. BILLOTTI. Absolutely, I would be happy to.
[The written response from Mr. Billotti follows:]
May 18, 2006
Congressman Charles Rangel
163 West 125th Street, Suite #737
New York, NY 10027
Dear Congressman Rangel:
We met recently at the U.S. House of Representatives' Committee on Ways
and Means hearing regarding the implementation of the U.S.-Oman Free
Trade Agreement. At the hearing, you asked me about minority
participation in the projects Turner Construction is involved in the
U.S. and specifically in New York City, Turner's headquarters for
almost 100 years. As the leading general builder in the U.S., Turner
recently announced that it had awarded over $1 billion worth of
construction contracts to minority and women owned businesses (M/WBEs)
during 2005. This is the first time in the history of Turner that the
company has surpassed the $1 billion mark.
By establishing joint venture and association partnerships,
utilizing supplier and prime contractors, Turner was able to continue
the company's ongoing commitment to minority and women owned business
and secure more than 2900 contracts with M/WBE firms in 2005. Turner is
committed to supporting communities in areas where we do business and
has a longstanding record of this support across the U.S. The company
has received well over 100 awards for leadership in utilization of M/
WBEs. Our objective is to increase the visibility, improve the economic
viability and expand opportunities for these businesses.
In New York, we have increased the total volume of work awarded to
MWBEs from $300,275,574 in 1995 to $978,851,957 in 2005. Specifically,
within your own Congressional District, District 15, Turner has worked
on City University of New York/City College of New York, Columbia
University and Harlem Center with minority and women-owned businesses
over the last several years. I have attached a report from our New York
business unit's Community Affairs department which highlights our MWBE
work locally. I believe that companies must reflect the communities in
which we live and work. The utilization of M/WBE firms is critical to
the overall success of the construction industry and of Turner. Our
environment, culture, policies, programs and practices reflect the high
value we place on diversity and outreach to M/WBEs.
In closing, I would again like to thank you for allowing me to
speak in support of the U.S.-Oman Free Trade Agreement. Please feel
free to contact me should you or other committee members desire
additional information about the M/WBE participation
Sincerely,
Nicholas Billotti
President and CEO
Turner Construction--International
cc: U.S. House of Representatives' Committee on Ways and Means
Congressman William Thomas
Congressman E. Clay Shaw
Congresswoman Nancy Johnson
Congressman Wally Herger
Congressman Jim McCrery
Congressman Dave Camp
Congressman Jim Ramstad
Congressman Jim Nussle
Congressman Sam Johnson
Congressman Phil English
Congressman J.D. Hayworth
Congressman Jerry Weller
Congressman Kenny Hulshof
Congressman Ron Lewis
Congressman Mark Foley
Congressman Kevin Brady
Congressman Thomas Reynolds
Congressman Paul Ryan
Congressman Eric Canter
Congressman John Linder
Congressman Bob Beauprez
Congresswoman Melissa Hart
Congressman Chris Chocola
Hilton O. Smith, Turner Construction
Mr. RANGEL. What is Turner's policy in terms of hiring non-
citizens?
Mr. BILLOTTI. In terms of hiring non-citizens?
Mr. RANGEL. People who are not citizens of the U.S. of
America.
Mr. BILLOTTI. Working inside the U.S. or outside of the
U.S.?
Mr. RANGEL. Inside the U.S.
Mr. RYAN. I will have to ask you to answer briefly. Time
has expired.
Mr. RANGEL. Yes, we are over time.
Mr. BILLOTTI. We only hire people who are either U.S.
citizens or who have valid work permits in the U.S. to work in
the U.S.
Mr. RANGEL. Thank you.
Mr. RYAN. Mr. Camp.
Mr. CAMP. Thank you. Mr. Chairman, I want to thank all of
our witnesses for their testimony. Thank you very much.
My question is really to Mr. Billotti and Mr. Weitzel and
Mr. Schwartz. If you could just briefly answer. You all have
experience in the region. Based on that experience in the
region, I would like to know how closely these countries and
their citizens follow developments in the U.S. on our
relationship, and how do you believe the people of the region
would react if action on the agreement is delayed or if
Congress seeks to reopen it for negotiation? If you could just
comment. Mr. Billotti, why don't you start?
Mr. BILLOTTI. In my experience, they follow what happens in
the U.S. very closely, and if this agreement was not to go
forward, I think it would have a detrimental affect on
relations with Oman.
Mr. CAMP. Thank you. Mr. Weitzel?
Mr. WEITZEL. We have three English newspapers in Muscat,
and every one of them has an American section. We know what is
going on back home, plus television has CNN everywhere, and Fox
News, the whole bit. We are very aware of what is going on. The
FTA has been discussed and talked about in the business
community from the very beginnings of the time when
negotiations started, and there is excitement, there is
anticipation that--it is like Christmas, if you will, with a
new toy coming out the door. There will be a lot of
disappointment if it is delayed, and the business community is
ready to execute and make this happen, and make it good for
both Omani and the U.S.
Mr. CAMP. All right. Mr. Schwartz?
Mr. SCHWARTZ. My experience is the Omanis are very proud of
their relationship with the U.S., and that they are excited
about this FTA agreement going forward, and I think it would be
a very big disappointment, and very much impact our
relationships with the country.
Mr. CAMP. Thank you.
Thank you, Mr. Chairman.
Mr. RYAN. Mr. Levin?
Mr. LEVIN. Thank you.
A couple of quick comments. I think commercial benefits of
this Agreement are clear. In fact, I think all of you, except
Mr. Trumka--I don't think he is--one way or another, are
involved with the commercial benefits, right, your companies or
your consulting business? It is clear there are commercial
benefits, and there are important commercial benefits.
Secondly, I hope nobody thinks this is a question of
goodwill between our two nations, it isn't. I think Democrats
prefer to be able to vote for an FTA. I think whether it is in
October, November or September, or late July is hardly a matter
that would affect goodwill between our Nations. It seems to me
a bit of an exaggeration. It is clear there has been progress
in the country under the Sultan. No one is challenging that.
Mr. Rangel and I are not sure who is left, who is
listening, but he asked a good question. In no other provision
do we rely on promises. We don't, whether it is tariff
reductions, intellectual property, investment procedures, we
don't say it is good enough that they say they will do better.
I just want to emphasize the reason this matters, it is not a
narrow issue, but it affects the whole pattern and path of
globalization, and we are learning more and more what happens
in a country where globalization benefits are not shared. I
just want to quickly refer, while Mr. Ryan is here, I just want
to go through what appear to be some of the shortcomings, and I
have just a minute or two.
It is true, there is a labor law reform, and it was a step
forward, but this appears to be the fact today, that in these
representative Committees, that is what they are called, they
have to notify a ministry a month before a meeting, provide a
copy of the agenda. The company can send a delegate to these
meetings, but the representative Committee cannot join any
organization with headquarters outside of Oman. Those are clear
violations of ILO standards. You have to be an employee for a
year before you can belong to a representative Committee. That
is another clear violation. This appears to be the language
under the 2003 law. I read: the employer has the sole
discretion--no, the employer may establish schemes from which
his workers may get advantages which are more beneficial than
what is prescribed or provided than with other benefits or
enter into agreements with them, the terms of which are more
beneficial than the terms provided for in this law.
That is not at all a mandate to bargain collectively. It is
permissive as we read it. Then under the 2003 law relating to
Committees, it appears that employers can elect people to these
Committees. Also, the law requires a single main representative
Committee and requires that all representative Committees
belong to it. That is a clear violation of freedom of
association. it is because of this larger issue that we raise
these questions, and there is no use trying to skirt them, and
I am not sure who is here, I think I do from the Omani
government. I simply urge that there be a major effort to sit
down and to talk about these issues, and see if there cannot be
remediation meeting the basic standards before this matter
comes up for a vote. There is no reason, Mr. Acting Chairman,
why that can't happen.
Mr. RYAN. Thank you. The gentleman's time has expired. Mr.
English.
Mr. ENGLISH. Thank you, Mr. Chairman, acting or otherwise.
I want to thank this panel for really providing some thought-
provoking insights on this very important FTA. Because the
issue has been raised, and because three of you represent
organizations that have operations in Oman, can you please
comment, Mr. Schwartz, Mr. Weitzel and Mr. Billotti, how have
you found the overall business climate and working conditions
in Oman compared to other nations in the Persian Gulf Region,
and to what extent is Oman a model for other nations in the
region as a country that has dramatically modernized itself
since 1970? Mr. Schwartz.
Mr. SCHWARTZ. Currently our project in Oman is in the
design stage, so we don't have a big employment workforce there
to comment on, but I can comment, based upon my visits there,
my interactions with the Omani people, people have been very
impressed with the interaction, how progressive they are in
terms of how they operate, and how much women are involved in
the workforce. My perception is a very progressive labor
environment.
Mr. ENGLISH. Mr. Weitzel?
Mr. WEITZEL. Sir, our organization has operations in Qatar,
Bahrain and Oman, so I can tell you that the three countries
are different, but yet, Oman is unique in the fact of its
openness, in my opinion. The government is willing to speak and
talk with the companies that have questions. In preparing my
testimony, we sent an e-mail to the Minister of the Interior,
and he sent back an answer the very same day.
The companies, the Omani companies, are very interested in
finding out ways to get into the American market and bring
products over to Oman. Compared to the other countries, they
are a step ahead in the business world because they do not have
the hustle and bustle of Qatar and the construction that is
going on there. They just seem to be a little bit faster in
accepting the changes that come about, and I am very pleased
that they are doing that because it means business for
everybody.
Mr. ENGLISH. Mr. Billotti?
Mr. BILLOTTI. The Turner Company works in all of the Gulf
nations with the exception of Yemen. I have traveled the region
for 30 years now, and I have worked in Saudi, the UAE, and all
of the countries. I find that the Omanis are a little bit
different and I think that is because they don't have the same
oil, gas or petroleum wealth that so many of the other Gulf
countries carry. I think because of that, they are more open.
They certainly tend to be more appreciative of some of the
business standards and ethics that we try to bring, and our
working relationship, I have to honestly say, has probably been
as good or better in Oman than in any of the other Gulf
nations, even though we do more work in Dubai, for instance,
and Abu Dhabi and even in Saudi.
Mr. ENGLISH. Mr. Trumka, I want to congratulate you for
raising issues about labor standards in Oman, and certainly
this is something that our Committee has been very interested
in and very concerned about, and accordingly, we have been very
pleased with the statement that the Omani government has
provided us, a commitment to move toward those ILO standards as
we advance the FTA.
One thing that was missing from your testimony, I know that
we have received analysis from USTR and the Department of
Commerce about the point that the gentleman from Michigan made,
that there are clearly commercial benefits from this FTA. With
some FTAs, Mr. Trumka, you know, we have had legitimate
concerns about job loss on the U.S. Do you have any economic
analysis or study that suggests that we would experience
significant job losses in the U.S. if we were to enter into
this Omani FTA?
Mr. TRUMKA. Thank you, Representative English. First of
all, in my full testimony, I answer some of those questions. We
would be glad to provide additional amplification if you are
interested in it. There is some chance that in energy-intensive
industries that there will be job loss to Oman from the U.S.,
not nearly as significantly as NAFTA or the other FTAs that
have been entered into.
Mr. ENGLISH. I think Mr. Schwartz would probably point out
and I will conclude on this point, that although low energy
costs are obviously one of the reasons why Dow finds Oman
attractive, nevertheless, the jobs that would likely move to
Oman, as I understand it, would be jobs that would otherwise be
offshore anyway because they are so energy price sensitive. I
will examine your testimony in detail, and if you have anything
else concrete to provide the Committee about actual potential
job losses, we would certainly like to see them, because so
far, the overpowering evidence here is that although the
benefits will be modest from this FTA, clearly, there are net
benefits.
I thank the Chairman for your indulgence.
[The response from Mr. Trumka was not received at the time
of printing.]
Mr. RYAN. Thank the gentleman. Mr. Cardin?
Mr. CARDIN. Thank you, Mr. Chairman, and let me thank all
the witnesses for their testimony.
During the CAFTA debate, I was visited by a lot of
representatives from the business community in support of
CAFTA, and I went over with them some of the discussions I had
on workers' rights and the fact that we could have made greater
gains in CAFTA on workers rights, but that it was mainly our
country that was holding back the progress on workers rights.
The business representatives were surprised to hear that.
I guess my point is similar to the discussion I had with
the first panel, with our Trade Representative, in that with
Bahrain we negotiated for stronger provisions on workers'
rights, and it was like pulling teeth, not with the people from
Bahrain, with the people from our Administration.
My point is this, where is the business community on
workers' rights? What do you want to see accomplished in
international agreements? I find that when labor and business
works together, there is nothing we can't accomplish. When we
did the Trade Promotional Authority, TPA, we had a huge fight
in this Congress on workers' rights, and we got no support from
the business community to give us the opportunity to negotiate
stronger workers' rights internationally. My own observation is
that we have some of the strongest protections for workers than
any country that we trade with, although at times, I wonder
whether that is being enforced properly.
My point is this, your silence speaks volumes. You want us,
and I want to open up markets. Part of your priority to raise
standards in this regard so that American workers, American
businesses, American manufacturers can have a better
competitive environment internationally. It seems to me it
makes sense to do that. I will check my files. I don't remember
receiving a single letter urging us to be more aggressive on
workers' rights from any of the business groups that you all
represent today. I would love to have your comments.
Mr. BILLOTTI. I have to comment to that. I tell you, the
Turner Company, and particularly, those of us who work
internationally are absolutely committed to worker rights.
There are some deplorable conditions that exist outside of the
U.S., places like the Middle East, places in Latin America,
places in Asia where we have work. Our staff has worked
extremely hard in enforcing safety standards and organizing to
know that people are fed properly, that they are paid on time.
We had people go out to a labor camp to inspect it. This is not
our labor camp, but a contractor's, and we forcibly closed that
labor camp because it did not come close to any humane
standards.
The Turner Company, whether we may or may not have written
and taken issue through the U.S. Congress, but I can tell you
that as a practical matter, each and every one of us who work
out in the field in so many of these locations outside of the
U.S., work every day to enforce labor standards. It is to our
benefit, because workers who are well paid, who are well fed,
who are housed properly, are better workers, and it increases
the productivity. We do it for selfish reasons. We want people
to work for us and to work hard for us.
Mr. CARDIN. Will you support Congress' effort to give the
U.S. Trade Representative greater authority to negotiate worker
standards internationally in trade agreements?
Mr. BILLOTTI. I can't imagine how I could say no to that.
Mr. CARDIN. Thank you. I would appreciate other Members'
views on it.
Mr. WEITZEL. Sir, we have almost 800 employees in Oman, and
269 of them are Omanis, and the rest are expatriates. We are
excited about the opportunity that the Omanis are going to be
given with their representative groups. We have set up an
English language course formed down at one of our operations at
Thumrait Air Base. We want to see them mature as a workers'
representative group into a union and into taking care of their
concerns and rights. It is something, three operations have to
occur. The workers have to get knowledge and they have to
become mature in being a representative group. The government
has to do the same thing. It is foreign to them to have a
union. The courts must also do that same thing because they
have to learn how to adjudicate union cases.
The trends and the thoughts and the ideas of the courts
need to focus on what is right for the workers and what is
right for the companies.
Mr. CARDIN. I will just make this final observation. Unless
it becomes part of core trade agreements, you are not going to
get the respect from the other countries to do what they need
to do to raise international worker rights.
Mr. RYAN. Thank the gentleman. Mr. Becerra.
Mr. BECERRA. Thank you, Mr. Chairman. First, welcome and
thank you very much for being here, and Ambassador Cook,
especially. Thank you for the insights on how things operate,
what we should expect with regard to the Omani government and
the people. I think for the most part, every Member here would
agree with what you are saying. They have proven over the years
that they are really a friend, someone who really wants to
continue a partnership with us, and I think most of us would
agree that they have made progress, meaningful progress, with
regard to the labor standards. The difficulty is, we know they
still have a bit to go, and the difficulty some of us have, is
that if we don't try to make sure that our agreements get them
there. Then what we do is in essence give them a pass if they
should not get there in the future; it only hurts American
working men and women and Omani working men and women.
If you take a look, and I know all of you had a chance to
sit through the first part of the discussion with Ambassador
Schwab, and now this discussion. We have not had a discussion
about a disagreement with any other aspect of the trade deal
except this, the treatment of labor and environment, and how it
is treated differently. Why we would want to treat the
protection of working men and women in America differently than
we treat products from America, I am not sure, or why we would
want to treat industrious men and women who work in America
differently than the intellectual property that is amorphous
that we protect, I am not sure, but that is the crux of this.
Quite honestly, I think those of you who followed some of
these trade debates, probably you know this as well, that if we
could handle this issue, we would have what we used to have,
robust bipartisan agreement on trade deals that would show a
clear face of the U.S. when it comes to trading with our
partners, and it is unfortunately, because most of these trade
deals that have passed in the last few years have passed by one
vote, and that is the worst face you want to show your
competitors, even your foreign partners, because you want to
show a very united front in America when it comes to that trade
deal.
Quite honestly, I think as some of you have just indicated,
especially from the business community, we are really not that
far away. What some of us are saying is what President Reagan
said, trust but verify. We want to know that it is in the
agreement that we will continue to lift standards, and by the
way, we are willing to also give time so some of those
countries that are developing have that opportunity to get
there. We do not expect them to be there yesterday.
If all you say is enforce your own laws, how does that
work? Mr. Billotti, let me ask you this. If all the work that
you do, all of a sudden you found that the contractors in Oman
simply had to abide by a law which said Oman contractors and
subcontractors get preference when it comes to disputes, and
therefore, they are entitled to have representation in court,
but foreigners are not; would that seem right to you?
Mr. BILLOTTI. Well, it certainly wouldn't seem right. If it
doesn't take place, and we wouldn't participate.
Mr. BECERRA. See, that is the point, none of us expects
that to be the case. Where there are areas of deficiency, as we
know exists on some of the labor side, what we want to make
sure is that they continue to cleanse those, so that we do have
appropriate laws. I think some of you have just said it from
the business community. You wouldn't expect to see us wanting
to reach agreements with countries that aren't going to respect
whether it is intellectual property, financial services laws,
or certainly labor laws, because it makes it tough for you to
compete. I continue to say that the biggest losers when we
don't have good agreements on these labor provisions, are
American companies, because as you just expressed, we probably
bring higher standards into some of these countries than what
exist. It is going to be tough for American companies to
continue to want to do that if you have got other competitors
from other countries who don't care to bring up standards.
At some point you are going to have to decide, do I compete
with them at the lower standards to be able to match them, or
do I continue to just have a higher cost? Ultimately, American
companies lose. I don't think American companies go abroad
simply to take advantage of cheap labor. I think we go out
there because we see there is a good business decision being
made, and also it benefits all of us here and abroad when you
all produce more, create more jobs. You still have to hire an
American here to do the accounting if nothing else because of
the work that you have done abroad.
Rather than have a question, let me just make a plea to
you, as I think the gentleman from Maryland--to help us. We are
that close to having deals that are again bipartisan with
robust votes in favor on both sides of the aisle. We are not
far apart on the language. Some of us are simply saying, let's
have that floor so you can't see companies go below it. That is
clear and enforceable. Right now these agreements don't have
enforceable language to protect working men and women, not just
in America, but in those other countries as well. Let's, again,
respect that the Omani government has been moving forward.
I don't really have a question there. If any of you wish to
comment with the time that I have remaining, I would be more
than willing to open up the floor.
Mr. RYAN. Sorry, but the gentleman's time has expired. We
will just have to call it at that. I want to thank the
witnesses for taking the time to come here. Some traveled great
distances. I want to thank the first panel. This hearing is
adjourned.
[Whereupon, at 1:08 p.m., the Committee was adjourned.]
[Submissions for the record follow:]
Statement of David Hamod, National U.S.-Arab Chamber of Commerce
``From the first recorded contact--the arrival in Muscat of a ship
hailing from Boston named the Rambler in September 1790--until the
present day, the bonds between Oman and the United States have been
warm and enduring. Both nations share a seafaring heritage, mutual
commercial interests, a tradition of tolerance and a desire for contact
with other cultures as some of the distinguishing features of this
long-term relationship.'' U.S. Embassy, Muscat, Oman
Mr. Chairman, Mr. Ranking Member, and distinguished members of the
House Ways and Means Committee: Thank you for the opportunity to
testify today on the proposed Free Trade Agreement (FTA) between the
United States and the Sultanate of Oman. My name is David Hamod, and I
serve as President & CEO of the National U.S.-Arab Chamber of Commerce
(NUSACC). I have also been a regular visitor to Oman for most of the
past two decades.
NUSACC, established nearly 40 years ago, is widely regarded as the
voice of American business in the Arab world. We are America's longest
serving chamber of commerce dedicated to
U.S.-Arab business, with membership rolls that now include more
than 1,500 companies. With offices in New York, Houston, Los Angeles,
and our headquarters in Washington DC, NUSACC is a nexus for U.S.-Arab
business and the only chamber of its kind that covers the nation from
coast to coast.
Moreover, NUSACC is the only entity in the United States with
official recognition conferred by the League of Arab States and the
General Union of Arab Chambers of Commerce, Industry, and Agriculture.
As such, we serve as the U.S. point of contact for the national
chambers of commerce in the 22 Arab nations--including the Oman Chamber
of Commerce and Industry. We also have longstanding relationships with
the American Business Council of the Gulf Countries (ABCGC) and the
Muscat American Business Council.
NUSACC supports free trade agreements between the United States and
our trading partners around the world because we believe that such
agreements create ``win-win'' opportunities. In our view, the FTAs that
are currently being negotiated with countries in the Arab world will
help both sides to increase exports, generate jobs, develop business
practices that are well suited to the international marketplace and,
over time, improve the quality of life in the United States and the
Middle East.
We are pleased and honored that the House Ways and Means Committee
has invited us to provide this ``big picture'' assessment of U.S.-Oman
relations and why we believe that an FTA between our two nations would
be in the best interests of the United States and Oman alike.
Under the thoughtful leadership of H.M. Sultan Qaboos bin Said al
Said, Oman has been transformed from an economic backwater to one of
the most progressive and attractive nations in the region. And unlike
some of its neighbors in the Arabian Gulf area, Oman has achieved this
status without the benefit of huge energy reserves--relying instead on
the resilience, determination, and entrepreneurial spirit of its
people.
According to our chamber's forecast for 2006, U.S. merchandise
exports to Oman are on track to reach nearly $1 billion this year--
which translates into more than 15,000 direct U.S. jobs. The 2006
figures represent an increase of nearly 56 percent over 2005, when U.S.
merchandise exports totaled $593.3 million.
The U.S. has become the third largest exporter to Oman, and if our
two nations implement this FTA, market share for U.S. products in Oman
is expected to close in on that of the United Arab Emirates and Japan,
ranked first and second, respectively. The UAE is an important hub for
re-exports to Oman. If and when the U.S.-Oman FTA enters into force, it
is safe to assume that the FTA will increase profit margins for U.S.
exporters by cutting out some of the transshippers and ``middlemen''
who drive up the costs of U.S. products. And as for Japan, it is moving
aggressively to sign its own FTAs with Oman and other nations in the
region.
Under the terms of the FTA, according to the Office of the U.S.
Trade Representative, 100 percent of bilateral trade in industrial and
consumer products, and no less than 87 percent of agricultural tariff
lines, will become duty-free immediately upon entry into force of this
agreement. The United States and Oman will phase out tariffs on the
remaining products within ten years.
With this in mind, our chamber encourages the U.S. Congress to
support the Free Trade Agreement with the Sultanate of Oman for a
variety of reasons:
Successful Market for the United States--In recent years, Oman has
steadily grown its commercial relationship with the United States. As a
result, there are upwards of 100 U.S. companies with a presence in
Oman, and U.S. firms are playing an important role in Oman's strategic
planning for the 21st century.
A little over a year ago, for example, the Dow Chemical Company
entered into a partnership with the Oman Oil Company to build a
polyethylene complex at the Sohar industrial port zone. H.E. Maqbool
Ali Sultan, Oman's Minister of Commerce & Industry, hailed the new
partnership as a ``further milestone in the Omani Government's
objective to attract foreign investment, diversify the economy, create
job opportunities, and lay the foundation for future downstream
industries.''
Equally impressive was the initial public offering (IPO) last year
for shares of AES Barka, the largest operating independent power and
water project in Oman. Led by the AES Corporation of the United States,
the IPO was oversubscribed by more than 16 times, according to
BankMuscat, amounting to nearly half a billion U.S. dollars. The
company, which has an installed capacity of 427 MW and 20 million
gallons of water, started commercial production in June 2003 and,
within the first year, it reached profitability. The project was named
``Investment Project of the Year--2003'' at the Oman Awards for
Excellence.
Another high profile undertaking involving a U.S. company is the
$3.5 billion Dolphin project, in which Occidental Petroleum is a joint
venture partner. This ambitious project is linking the gas networks of
Qatar, the UAE, Oman and, eventually, the Indian subcontinent. Under a
deal reached in March 2003, Oman Gas Company (OGC) began supplying gas
to Dolphin in the fourth quarter of 2003, and deliveries will continue
for a period of up to five years. This agreement marks the first cross-
border gas delivery in the history of the GCC.
Open Economy--Oman has made significant progress over the years in
integrating its economy into the global marketplace, and an FTA with
the United States would further reinforce Oman's efforts to promote
economic liberalization. According to Economic Freedom of the World:
2005 Annual Report, published by The Fraser Institute
(www.freetheworld.com), Oman has the seventeenth freest economy in the
world. This ties Oman with Finland and places the Sultanate ahead of
such nations as Germany (#19), Taiwan (#24), Spain and Japan (tied for
#30), South Korea (#35), and Italy (#54).
Just a few years ago, some of Oman's tariffs ranged as high as 15
percent (e.g.--food products). Today, according to the National
Association of Manufacturers, Oman's applied tariff rates range from
4.5 percent to 5.7 percent. The Government's decision to lower tariffs
is helping to make U.S. products more competitive in the Omani market,
thereby serving Oman's consumers and curbing overland imports from
Dubai, the re-export capital of the Arabian Gulf.
Respect for the Rule of Law--The best objective measure of Oman's
adherence to the rule of law may be Transparency International's
Corruption Perception Index 2005, which ranked Oman 28th in the world--
tied with Israel--with a low level of perceived corruption.
(www.transparency.org) Oman ranks number one in the Arab world and
placed higher than such nations as Taiwan (#32) and Italy & South Korea
(tied for #40) among the 159 nations that were studied. TI's Corruption
Perceptions Index draws on 16 different polls from ten independent
institutions.
Oman is also making headway in its efforts to promote good
governance. For example, the Central Bank of Oman (CBO), in association
with the Arab Banking Union and the Oman Chamber of Commerce and
Industry, has been hosting seminars on the role of corporate governance
in Arab banking institutions. One such seminar recently attracted
corporate leaders from throughout the Arab world.
Political Stability and Investment Appeal--Under the leadership of
H.M. Sultan Qaboos, Oman has been one of the most stable nations in the
Arab world for more than three decades. This is not easy, given the
``tough neighborhood'' that the Middle East can sometimes be. Oman has
a well deserved reputation for diplomacy and moderation, two traits
that have enabled the Sultanate to stay on good terms with just about
everyone in the region. Because of Oman's commitment to tolerance, the
Sultanate has also been very successful at accommodating traditional
Islam while at the same time hosting a wide variety of cultures among
Oman's many expat residents and foreign visitors.
Oman remains heavily dependent on oil, which makes up approximately
40 percent of the country's GDP, more than 80 percent of the country's
exports, and some 75 percent of the government's revenues. Such
dependence is of great concern to the Government of Oman because the
life cycle of the nation's oil fields is in decline. With this in mind,
Oman is aggressively pushing for diversification and privatization,
particularly in the form of ``Omanization''--replacing expatriate
workers with Omanis.
In an effort to make Oman more attractive to prospective partners
around the world, Oman has waived requirements that foreign businesses
had to enter into exclusive agency agreements. In addition, a
ministerial decision was issued in 2000 waiving the requirement for
foreign firms to partner with a 51 percent Omani-owned company in order
to obtain an import license.
Oman has also created a series of incentives in recent years that
will encourage investments by U.S. partners and others. Some of these
incentives include tax exemptions for five years for industrial
enterprises that contribute to Oman's economy, a stable currency with
full convertibility, no personal income tax and no foreign exchange
controls, tax and import duty exemptions, and interest-free long-term
loans for industrial and tourism projects that involve foreign
investment. Oman also touts its price stability, with an inflation rate
that has not exceeded one percent since 1992.
NUSACC sees these efforts to liberalize Oman's economy as important
steps along the path to a U.S.-Oman Free Trade Agreement.
Adherence to International Agreements--Oman is a member of the
World Trade Organization (WTO) and is making steady progress in its
efforts to support intellectual property rights (IPR). The Omani
trademarks regime consists of Royal Decree 68/87, Decree Law No. 635/
1991 and Royal Decree 33/91. Oman's latest Copyright Law, No. 37/2000,
updated the earlier Royal Decree 47/96, enacted in 1996. In addition,
Oman has joined the Patent Cooperation Treaty and has asked the World
Intellectual Property Organization (WIPO) to register the Sultanate as
a signatory to the Paris and Berne Conventions on IPR.
According to the International Intellectual Property Alliance
(IIPA), Oman is enforcing its copyright laws and bringing down piracy
levels. The piracy level for business software was 87 percent in 2000
and dropped to 71 percent two years later. The piracy level for motion
pictures is even more impressive: from a high of 100 percent in 1995,
it has dropped to below 25 percent--making it one of the lowest rates
in the region. However, the IIPA reports that there is still room for
improvement when it comes to the WIPO Copyright Act and the
Performances and Phonograms Treaty.
During my visits to Oman 15 years ago, the telltale signs were
everywhere that there was relatively little enforcement of intellectual
property rights. Pirated computer software, bootleg videos, and
designer clothing knock-offs were widely available. Following its
accession to the WTO, however, Oman began cracking down in earnest on
IPR violations. Today, with support from the private sector, Omani
authorities are keeping the heat on IPR offenders, routinely conducting
sting operations on illicit video producers and busting rings of
counterfeiters.
Strategic Support--The Sultanate of Oman, with its close proximity
to the strategic Straits of Hormuz, is an important asset for the
United States military in the Middle East. Over the years, Oman has
provided invaluable support to the U.S. forces in terms of forward
deployments of U.S. servicemen and women and the pre-positioning of
U.S. materiel. Oman hosts an estimated 3,000 U.S. servicemembers,
particularly from the U.S. Air Force.
According to the U.S. Department of Defense, ``Oman has been a
coalition partner for over thirty years. Oman's active participation
during the Gulf crisis and their willingness to allow access to port
facilities and air bases make them vital to any coalition success in
the region.''
Supporting the Fight Against Terrorism--Oman has been a strong and
reliable partner in the war against terrorism. Since 2001, the
Sultanate has taken decisive steps to combat money laundering and to
shut down any financial resources that might be available to
terrorists. Oman is also hoping to become the second Arab nation to put
the U.S. Container Security Initiative in place, allowing U.S.
personnel to inspect cargo bound for the United States.
Oman has been unequivocal about its willingness to stand ``side by
side'' with the United States in America's fight against terrorism.
H.E. Yousef Bin Alawi Bin Abdullah, the Head of Oman's Delegation to
the United Nations, stated in New York not long after 9/11, ``We would
like to reaffirm again our solidarity with the United States of America
in fighting all forms of terror against humans wherever they are.'' He
went on to say, ``Stemming from my country's firm position of
condemning terrorism in all its forms, and in compliance with the goals
of the United Nations of maintaining international peace and security,
my country ensures its support toward the international efforts in
fighting terrorism. . . .''
Commitment to Human Development--When it comes to capacity building
through social policies, Oman is one of the most progressive nations in
the region, thanks to the enlightened leadership of H.M Sultan Qaboos.
The Sultan has encouraged women to play a leading role in the
development of Oman on the grounds that to ``exclude women is to
exclude 50 percent of the country's potential.'' In large part as a
result of the Sultan's encouragement over the years, there are more
female graduates these days than male graduates.
Women in Oman have the right to vote and run for office in
Consultative Council elections, held every four years. Oman has three
women in its Cabinet, and it is no coincidence that Oman has produced
the first fully accredited female ambassador to the United States from
the Arab world, H.E. Hunaina Sultan al-Mughairy.
A strong commitment to education is a key component of a nation's
ability to encourage economic development, and Oman has one of the most
respected literacy rates in the Arab world. The Omanis have made
remarkable progress since 1970, when H.M. Sultan Qaboos acceded to the
throne. Before 1970, Oman had only three schools, and only boys were
allowed to receive an education. Today, Oman boasts upwards of 1,000
schools, and boys and girls are equally represented.
There was also a time in Oman when the opportunity to learn English
was only available to small number of Omanis. Today, in recognition of
English as the lingua franca of international commerce and diplomacy,
English is being taught in the first grade, with five lessons per week.
One academic success story that connects the United States to Oman
is The American International School of Muscat (TAISM), which ``pursues
academic excellence for students in the international community through
an American-based education that develops ethical, responsible, and
globally conscious life-long learners.'' TAISM, designed to afford
expatriate children of all nationalities with an educational program in
the context of an American-based curriculum, is accredited by the New
England Association of Schools and Colleges (NEASC) and the Council of
International Schools (CIS).
Respect for Workers' Rights--Oman joined the International Labor
Organization in 1994, and the Sultanate has come a long way over the
years in its efforts to encourage labor reform and support the rights
of workers. This is still a work in progress, but NUSACC is encouraged
by steps that Oman has taken and continues to take.
In NUSACC's view, the most significant step forward came in 2003
with the passage of a new labor law (Royal Decree 35) that enables
workers--Omanis and foreigners--to join ``worker representative
committees.'' These committees represent an important step forward in
effectively granting workers the right to strike, engage in collective
bargaining, and take their employers to court. According to the Office
of the U.S. Trade Representative, ``Oman is currently working with the
ILO on additional regulations to ensure that the implementation of
collective bargaining provisions is consistent with international labor
standards.''
Environmental Protection--Under the leadership of H.M. Sultan
Qaboos, a lifelong environmentalist, Oman has been dedicated for
decades to the preservation of nature. Oman was the first country in
the Arab world to establish a full-fledged Ministry of Environment, and
Oman was one of the first nations in the region to design a strategic
plan for the environment. As part of that nation's efforts to raise
public awareness, Omani Environment Day is celebrated each year on
January 8.
In addition to establishing the Ministry of Regional Municipalities
and Environment to handle environmental issues, H.M. Sultan Qaboos
sponsors a major biennial conservation award, the first of its kind in
the Arab world. The award is presented as part of the UNESCO ``Man and
the Biosphere'' Program to highlight outstanding contributions to
environmental preservation.
In recognition of his environmental stewardship, H.M. Sultan Qaboos
has received the prestigious John C. Phillips Memorial Medal from the
World Conservation Union and the Order of the Golden Ark from the World
Wildlife Fund (WWF). In cooperation with the WWF, Oman has established
six nature preserves to protect and support the breeding of endangered
species.
When the United States and Oman inked the Free Trade Agreement on
January 19, 2006, U.S. Trade Representative Rob Portman noted, ``With
our signatures today, we cement our long-standing friendship and
growing commercial ties and create new economic opportunities for both
of our countries . . . For decades, Oman and the United States have
shared a desire for peace, stability and economic opportunity in the
Middle East. Today we take an important new step in our partnership.''
The U.S. is well aware of ``Oman's enthusiasm for open trade and free
markets,'' concluded Ambassador Portman. ``We welcome that spirit and
we are pleased to have Oman as a partner in our efforts to raise living
standards and promote peace through trade.''
In many ways, these statements echo sentiments of the House Ways
and Means Congressional delegation that visited Oman in late 2004. That
report stated, ``The delegation strongly supports the negotiation of an
FTA with Oman and is pleased to see the commitment and drive by Oman to
conclude such negotiations. . . . Oman has undertaken significant
economic and political reforms in a short time, particularly in the
banking and insurance sectors, demonstrating its capacity and
willingness to use objective, transparent standards.''
A wide range of business leaders and U.S. policymakers recognize
Oman's genuine commitment to reform and to enhancing free trade with
the United States. With this in mind, NUSACC lends its full support to
a U.S.-Oman Free Trade Agreement, and we look forward to doing our part
to help turn this vision into a reality in the months ahead.
Thank you for the opportunity to testify today, Mr. Chairman. I
would be pleased to answer any questions that you may have.
Statement of Frank A. Keating, American Council of Life Insurers
Mr. Chairman, Mr. Ranking Member and distinguished members of the
House Ways and Means Committee: Thank you for the opportunity to submit
a statement on behalf of the American Council of Life Insurers in
support of the proposed United States--Oman Free Trade Agreement. Our
industry looks forward to swift and successful passage of the
aforementioned agreement.
The American Council of Life Insurers (``ACLI'') represents three
hundred seventy-seven (377) member companies operating in the United
States that account for 91 percent of total assets, 90 percent of the
life insurance premiums, and 95 percent of annuity considerations in
the United States. Internationally, ACLI members account for over 99
percent of life insurance premiums generated in overseas markets by
U.S. based life insurance and retirement security companies.
ACLI applauds the achievement of U.S. trade negotiators in
concluding the U.S.-Oman Free Trade Agreement because we believe it
continues the high standard of commercially meaningful free trade
agreements (``FTAs'') which support our bilateral objectives in these
markets and facilitate progress in the World Trade Organization's Doha
Development Negotiations. We fully support the ongoing U.S. strategy of
bilateral and regional FTAs as a mechanism for expanding market
opportunities for U.S. insurance and retirement security exporters.
ACLI's members are proud of the positive contribution we make to
the U.S. financial services export surplus and are committed to further
expand our global market presence through trade negotiation and
facilitation to further create wealth and jobs at home in towns across
America. We are also proud that our industry's products help build
individual and national economic stability in markets where they are
freely available, and that in turn supports strong and growing global
economies throughout the world.
While Oman is a relatively small insurance market by global
standards with a population of under three million, the Omani insurance
premiums as a percentage of GDP (1. 28%) and per capita spending on
insurance (U.S.$103) are both well above the regional averages. As the
vision of a broader Middle East Free Trade Area gains support, these
positive Omani market indicators, coupled with a young and growing
regional population, make this agreement a strong foundation upon which
to build even more advanced regional objectives.
Overall insurance premiums in the region grew by 4.1% in real terms
in 2004 against the backdrop of Oman's 2004 7.5% growth rate, based
largely on an increasingly efficient, open and transparent regulatory
system. The Omani government has demonstrated an understanding of the
importance of an innovative and dynamic insurance market and it has
endeavored to build one for all companies operating in the market. In
addition to a virtually perfect set of commitments on market access and
national treatment for our industry, the U.S.-Oman FTA disciplines on
transparency and administrative procedures will lock in important pro-
competitive regulatory practices that allow U.S. companies to provide
new and innovative products. The value of these disciplines can not be
overstated in building U.S. market share.
As a highly regulated financial service, transparency and
administrative procedures commitments are regionally and globally
critical to our success and the regulatory, and by extension, market
stability of the nations in which we operate. Vague, inconsistent or
capricious regulation and supervision is in many ways worse than
outright barriers to market access and expansion. By contrast, in
signing this agreement, Oman has committed to provisions based largely
on the U.S. Administrative Procedures Act.
Put in a broader context, the transparency and other ``rule of
law'' provisions in this agreement also set a strong foundation for the
Omani regulatory and legal environment which has tangible benefits for
our companies as foreign stakeholders in the Omani economy. This in
turn allows access to competitive insurance and benefits products,
which is beneficial for Omani workers and families and represents one
of the best elements of U.S. commercial diplomacy.
Described more specifically, through this FTA, Omani citizens will
have increased access to world standard financial services products to
help them protect their families and take individual responsibility for
their economic futures. Second, Omani workers will have increased
access to world standard life insurance, retirement security and health
insurance products. Third, Omani businesses will have increased access
to world standard employee benefits and risk management technologies.
Our companies therefore look forward to advancing their stake in this
marketplace. By any yard stick, this agreement is a major step forward
for all involved.
In conclusion, we believe the U.S.-Omani FTA builds on all previous
FTAs and represents a gold standard for future bilateral and
multilateral agreements, while extending traditional American values of
transparency, economic empowerment and rule of law to the Middle East.
ACLI looks forward to Congress' approval of the proposed United States-
Oman Free Trade Agreement, and would be pleased to provide any further
information that the subcommittee may request.
Statement of Ranchers-Cattlemen Action Legal Fund
The Ranchers-Cattlemen Action Legal Fund--United Stockgrowers of
America (R-CALF USA) appreciates this opportunity to submit testimony
on the U.S.-Oman Free Trade Agreement (Oman FTA). R-CALF USA is a non-
profit association that represents over 18,000 U.S. cattle producers in
47 states across the nation. R-CALF USA's mission is to represent the
U.S. cattle industry in trade and marketing issues to ensure the
continued profitability and viability of independent U.S. cattle
producers. R-CALF USA's membership consists primarily of cow/calf
operators, cattle backgrounders, and feedlot owners. Various main
street businesses are associate members of R-CALF USA.
R-CALF USA believes that U.S. cattle producers can compete and
thrive in global markets if the rules that regulate those markets are
fair. Today, U.S. exports of cattle and beef are thwarted by high
import tariffs abroad, large subsidies to cattle and beef producers in
other countries, and a failure to harmonize health and safety standards
to allow for increased trade while protecting animal health and
consumer safety. In addition, the highly perishable nature of our
product demands the creation of special rules for cattle and beef trade
that reflect the special needs of our producers and protect them from
import surges and excess price volatility. While many of these issues
may be most comprehensively addressed at a global level, progress can
also be made through a strategic program of bilateral and regional
negotiations.
The Oman FTA is one example of how such negotiations can be pursued
to benefit the U.S. cattle and beef industries. Oman is not a
significant producer or exporter of cattle and beef. Oman has a small
domestic cattle herd of 335,000 head and produces about 4,160 metric
tons of beef and veal a year.\1\ Oman exports little beef to the world,
and none to the U.S.\2\ Though Oman is a net importer of beef, its
market has so far been largely untapped by U.S. producers. Currently,
Oman imports more than two-and-a-half times more beef and veal than it
produces.\3\ All in all, Oman imported nearly $22 million worth of
bovine meat products from the world in 2004.\4\
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\1\ FAOSTAT Agricultural Production Database, Live Animals,
Livestock Primary, and Agriculture & Food Trade, United Nations Food
and Agriculture Organization, available on-line at http://
faostat.fao.org/.
\2\ Id.
\3\ Id.
\4\ Id.
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Yet U.S. exports of beef and veal to the region make up a very
small percent of those imports. Even before Oman closed its border to
imports of U.S. beef after the discovery of a Canadian animal infected
with BSE in Washington state in late 2003, U.S. shipments of beef and
veal regularly accounted for less than 5 percent of all of Oman's beef
and veal imports.\5\ If all bovine products are included, such as beef
offal and beef preparations, the U.S. has accessed an even smaller
portion of the Omani import market, less than 1 percent on average
since 2000.\6\ Though Oman lifted its temporary BSE ban in April 2005,
significant U.S. exports have yet to resume.
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\5\ U.S. export statistics from U.S. Department of Commerce, Census
Bureau, Foreign Trade Statistics.
\6\ Id.
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Under the Oman FTA, Oman's tariffs on all imports of beef products
from the U.S. go to zero immediately. This will eliminate Oman's
current tariff of 5 percent on imports of frozen beef, beef offal, bull
semen, and prepared beef products from the United States. Under the
FTA, Omani beef exports to the U.S. are also granted immediate duty-
free access, as long as they enter under the general ``all others''
quota available to exporters of beef to the U.S. under U.S. WTO
commitments. Some out-of-quota exports from Oman will also have duty-
free access under an additional, dedicated quota of 15,000 kilograms if
the general U.S. beef quota is exhausted. This dedicated quota will
grow gradually until it allows unlimited imports from Oman in 10 years,
and tariffs on any Omani beef entering out-of-quota will phase out over
the same 10 years. Since Oman produces only a minimal amount of cattle
and beef, the majority of which is currently consumed domestically
within Oman, this additional market access is unlikely to have a
significant impact on U.S. producers. The net impact of liberalization
of cattle and beef trade under the FTA should be to allow U.S.
producers to access more of the Omani beef market and build an
important, strategic presence in the Middle Eastern region.
While R-CALF USA supports the Oman FTA, it is worth noting that the
agreement does not incorporate the rules of origin for cattle and beef
that R-CALF USA has sought in preferential trade agreements. R-CALF USA
believes that preferential trade agreements should include a ``born,
raised and slaughtered'' (BRS) rule of origin for cattle and beef to
ensure that the benefits of the agreement accrue to product of the
country, or countries, participating in the agreement. While the
failure to include a BRS rule of origin is not especially significant
in the Oman agreement, it could be critical in other ongoing FTA
negotiations. Stronger rules of origin are particularly important in
FTAs with countries where the risk of circumvention is substantial, and
where the third countries that would potentially benefit from
circumvention are themselves resisting entering into FTA negotiations
directly with the United States. In these situations, rules of origin
must be strengthened to prevent diluting the benefits of the agreement
and to ensure that third countries are not allowed to benefit from
preferential access to the U.S. market without providing reciprocal
access to U.S. products.
R-CALF USA is encouraged by the fact that, along with the Oman FTA,
an increasing number of newly proposed FTAs promise potentially
substantial benefits for U.S. cattle producers. As trade in cattle and
beef is liberalized through such agreements, it is important that,
overall, the agreements achieve a balance between the size of new
export markets opened for U.S. producers and the volume of potential
foreign production given preferential access to the United States. It
is critical that FTAs with countries that differ significantly from
Oman--that have large domestic herds, produce significant quantities of
beef, and/or are net exporters of cattle and beef--should be assessed
on their own merits and may require longer phase outs of U.S. tariffs,
backloading of expansion of tariff rate quotas (TRQs) and additional
provisions to ensure that trade in cattle in beef will work for U.S.
cattle producers.
While supporting the Oman FTA, R-CALF USA will continue to push for
improvements in overall U.S. trade policies regarding cattle and beef
and assess future trade agreements on a case-by-case basis. In
particular, R-CALF USA believes U.S. trade negotiators should pursue a
strategic program of bilateral, regional, and multilateral trade
negotiations that:
Reduce global market distortions such as high import
tariffs abroad, restrictive quotas, and large subsidies to cattle and
beef producers in other countries;
Upwardly harmonize health and safety standards to allow
for increased trade while protecting animal health and consumer safety;
Include a ``born, raised and slaughtered'' rule of origin
for beef receiving preferential market access; and
Create special rules for cattle and beef trade that
reflect the highly perishable nature of our product and the special
needs of our producers by protecting them from import surges and excess
price volatility.
Until distortions in international cattle and beef markets are
addressed comprehensively at a global level, the U.S. should pursue
FTAs strategically to move toward the goals outlined above. Because the
Oman FTA represents an important step in the right direction for U.S.
cattle and beef producers, R-CALF USA urges its support.
Statment 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 the U.S.-Oman Free
Trade Agreement (FTA). 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 FTAs. 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.
General Benefits of Free Trade Agreements
The FTAs the United States has negotiated since 2002 represent an
ambitious and comprehensive approach to opening markets one country or
region at a time. While the U.S. Chamber is strongly backing the Doha
Development Agenda negotiations for a new global trade-expansion
agreement, we believe it is entirely appropriate to leverage both the
breadth of the DDA and the depth of FTAs. In this fashion, 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 as insignificant the resulting 12%
price disadvantage that follows from these lopsided tariffs (to cite
the difference in average tariffs between the United States and Oman).
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. America's small and medium-
sized companies are leading the charge into foreign markets, accounting
for more than three-quarters of exporting firms to markets which have
recently completed FTAs or are in the process of doing so. As a
corollary, it suggests how smaller businesses stand to gain
disproportionately from the market-opening measures of a free trade
agreement:
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.
The Agreement with 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.
The FTA also addresses agriculture products. Under the agreement,
U.S. agriculture exports in 87% of the agriculture tariff lines will be
given immediate duty-free access to the Omani market. All remaining
tariffs on agricultural products between the two countries will be
phased out over the next ten years.
From a services standpoint, this agreement will allow additional
opportunities for U.S. companies in the banking, insurance and
securities sectors. The agreement will allow for U.S. financial
services companies to create subsidiaries in Oman and enter into joint
ventures with Omani companies. The agreement will also provide for a
framework which ensures transparency in these sectors and assurances to
U.S. investors.
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.
The U.S. Chamber looks forward to leveraging this agreement for our
member companies and the broader U.S. business community. The Chamber
has an accredited affiliate in Oman--the Muscat-American Business
Council--which we intend to work with as a means of fostering increased
bilateral trade and investment between the two countries--once this
agreement is entered into force. The existence of this business council
is evidence of the interest by both the Omani and American business
communities of furthering trade, investment and commercial ties.
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, and
we applaud your efforts to move forward with the U.S.-Oman FTA. We
stand ready to work with you on this agreement and other challenges in
the year ahead. Thank you.