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




 
                IMPLEMENTATION OF THE UNITED STATES-PERU
                       TRADE PROMOTION AGREEMENT

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

                                HEARING

                               before the

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

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 12, 2006

                               __________

                           Serial No. 109-86

                               __________

         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           JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER, Illinois               LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  STEPHANIE TUBBS JONES, Ohio
MARK FOLEY, Florida                  MIKE THOMPSON, California
KEVIN BRADY, Texas                   JOHN B. LARSON, Connecticut
THOMAS M. REYNOLDS, New York         RAHM EMANUEL, Illinois
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

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


                            C O N T E N T S

                               __________

                                                                   Page

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

                               WITNESSES

U.S. Trade Representative, Everett Eissenstat, Assistant U.S. 
  Trade Representative for the Americas..........................    20

                                 ______

American Chamber of Commerce in Peru, Francisco X. Santeiro......    66
American Federation of Labor and Congress of Industrial 
  Organizations, Brett Gibson....................................    76
Association of American Chambers of Commerce in Latin America, 
  Francisco X. Santeiro..........................................    66
Coats North America, Richard Norman..............................    50
FedEx Express, Francisco X. Santeiro.............................    66
Forkan, Patricia, Humane Society International...................    63
Gibson, Brett, American Federation of Labor and Congress of 
  Industrial Organizations.......................................    76
Hispanic Alliance for Free Trade, Daniel H. Jara.................    60
Humane Society International, Patricia Forkan....................    63
Jara, Daniel H., statewide Hispanic Chamber of Commerce of New 
  Jersey, and Hispanic Alliance for Free Trade...................    60
Lilygren, Sara, National Chicken Council and Tyson Foods, Inc....    71
Mel-Delin Dairy, Ray Souza.......................................    57
National Chicken Council, Sara Lilygren..........................    71
Norman, Richard, Coats North America, and U.S. Chamber of 
  Commerce.......................................................    50
Santeiro, Francisco X., American Chamber of Commerce in Peru, the 
  Association of American Chambers of Commerce in Latin America..    66
statewide Hispanic Chamber of Commerce of New Jersey, Daniel H. 
  Jara...........................................................    60
Souza, Ray, Mel-Delin Dairy, and Western United Dairymen.........    57
Tyson Foods, Inc., Sara Lilygren.................................    71
Western United Dairymen, Ray Souza...............................    57
U.S. Chamber of Commerce, Richard Norman.........................    50

                       SUBMISSIONS FOR THE RECORD

American Apparel & Footwear Association, Arlington, VA, Kevin 
  Burke, statement...............................................   102
American Chamber of Commerce of Peru, statement..................   104
Amorrortu, Bacilio, Houston, TX, statement and attachment........   109
Association of Food Industries, Inc., Neptune, NJ, Jeffrey Levin 
  statement......................................................   111
Bayer MaterialScience, Pittsburgh, PA, Tim Chappell, letter......   114
Burke, Kevin, American Apparel & Footwear Association, Arlington, 
  VA, statement..................................................   102
California Table Grape Commission, Fresno, CA, Kathleen Nave, 
  letter.........................................................   115
Chappell, Tim, Bayer MaterialScience, Pittsburgh, PA, letter.....   114
Council of the Americas, Eric Farnsworth, statement..............   115
Emergency Committee for American Trade, statement................   117
Exporamerica, statement..........................................   119
Farnsworth, Eric, Council of the Americas, statement.............   115
Gavalis, Albert, New York, NY, statement.........................   126
Greater Miami Chamber of Commerce, Miami, FL, Barry Johnson, 
  statement......................................................   127
Grocery Manufacturers of America, statement......................   127
Johnson, Barry, Greater Miami Chamber of Commerce, Miami, FL, 
  statement......................................................   127
Levin, Jeffrey, Association of Food Industries, Inc., Neptune, 
  NJ, statement..................................................   111
National Pork Producers Council, statement.......................   129
Nave, Kathleen, California Table Grape Commission, Fresno, CA, 
  letter.........................................................   115
Peruvian Asparagus Importer's Association, Drexel Hill, PA, 
  statement......................................................   135
Retail Industry Leaders Association, Arlington, VA, statement....   139


                           IMPLEMENTATION OF
                         THE UNITED STATES-PERU
                       TRADE PROMOTION AGREEMENT

                              ----------                              


                        WEDNESDAY, JULY 12, 2006

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

    The Committee met, pursuant to notice, at 10:38 a.m., in 
room 1100, Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee) presiding.
    [The advisory and revised advisory announcing the hearing 
follow:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 27, 2006
FC-24

                      Thomas Announces Hearing on

                Implementation of the United States-Peru

                       Trade Promotion 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.-Peru Trade Promotion Agreement. The 
hearing will take place on Wednesday, July 12, 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 Everett Eissenstat, Assistant 
U.S. Trade Representative for the Americas. 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:

      
    The Administration announced plans to negotiate an Andean free 
trade agreement with Colombia, Peru, Ecuador, and Bolivia in November 
2003. Negotiations began in May 2004 with Colombia, Peru, and Ecuador. 
Negotiations with Peru concluded on December 7, 2005, and on April 12, 
2006, then-U.S. Trade Representative Rob Portman and Peruvian Minister 
of Foreign Trade and Tourism Alfredo Ferrero Diez Canseco signed the 
U.S.-Peru Trade Promotion Agreement (PTPA). Peruvian President 
Alejandro Toledo witnessed the signing. Peru held democratic elections 
on April 9 and June 4, and former President Alan Garcia won the 
election based on a platform of economic engagement and market reform.
      
    Upon implementation of the PTPA, eighty percent of consumer and 
industrial products and more than two-thirds of current U.S. farm 
exports to Peru will become duty-free immediately. Over the coming 
years, Peru will continue to provide substantial market access to U.S. 
goods, services, and agricultural products by gradually eliminating all 
tariffs on U.S. exports to Peru. As a result of this agreement, the 
United States will have greater access to the Peruvian market for 
products such as machinery, mineral fuel, electrical machinery, and 
plastics, along with meats and poultry, grains, oilseeds, dairy 
products, horticulture, processed products, and other agricultural 
products. The agreement will also provide a secure, predictable legal 
framework for U.S. investors operating in Peru, provide for enforcement 
of quality labor and environmental standards, protect intellectual 
property rights, and install an effective dispute settlement process.
      
    In 2005, U.S. goods exports to Peru totaled nearly $2.3 billion. 
Two way trade between the United States and Peru during 2005 amounted 
to $7.4 billion. Many products from Peru already enter the U.S. market 
duty-free under the Andean Trade Promotion and Drug Eradication Act 
(ATPDEA) P.L. 107-210, which expires in December 2006.
      
    In announcing the hearing, Chairman Thomas stated, ``The trade 
promotion agreement with Peru builds on our past efforts of granting 
trade benefits to alleviate poverty and eradicate drugs in the region. 
The agreement will now make our bilateral trading relationship a 
permanent two way street to benefit producers, service suppliers, 
workers, and consumers in both countries. Together with other free 
trade agreements in the region, the PTPA will help to establish an 
integrated free trading system with our neighbors in the hemisphere. 
Peru's President-elect Garcia is standing up to Cuban President Castro 
and Venezuelan President Chavez in supporting the agreement, and we owe 
it to the people of Peru to pass this agreement quickly with a strong 
bipartisan vote.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine the U.S.-Peru Trade Promotion Agreement 
and the benefits that the agreement will bring to American businesses, 
farmers, workers, consumers, and the U.S. economy, as well as to U.S. 
trade relations with our neighbors in the hemisphere.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Matt Turkstra or Cooper Smith at (202) 225-1721 no later than 12:00 
p.m. on Wednesday, July 5, 2006. The telephone request should be 
followed by a formal written request faxed to Allison Giles, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Committee will notify by telephone those 
scheduled to appear as soon as possible after the filing deadline. Any 
questions concerning a scheduled appearance should be directed to the 
Committee staff at (202) 225-1721.
      
    In view of the limited time available to hear witnesses, the 
Committee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing in lieu of a personal appearance. All persons requesting to be 
heard, whether they are scheduled for oral testimony or not, will be 
notified as soon as possible after the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Committee are required to submit 300 copies, along with an 
IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, of 
their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the full Committee office, 1102 Longworth 
House Office Building, no later than noon on Monday, July 10, 2006. The 
300 copies can be delivered to the Committee staff in one of two ways: 
(1) Government agency employees can deliver their copies to 1102 
Longworth House Office Building in an open and searchable box, but must 
carry with them their respective government issued identification to 
show the U.S. Capitol Police, or (2) for non-government officials, the 
copies must be sent to the new Congressional Courier Acceptance Site at 
the location of 2nd and D Streets, N.E., at least 48 hours prior to the 
hearing date. Please ensure that you have the address of the Committee, 
1102 Longworth House Office Building, on your package, and contact the 
staff of the Committee at (202) 225-1721 of its impending arrival. Due 
to new House mailing procedures, please avoid using mail couriers such 
as the U.S. Postal Service, UPS, and FedEx. When a couriered item 
arrives at this facility, it will be opened, screened, and then 
delivered to the Committee office, within one of the following two time 
frames: (1) expected or confirmed deliveries will be delivered in 
approximately 2 to 3 hours, and (2) unexpected items, or items not 
approved by the Committee office, will be delivered the morning of the 
next business day. The U.S. Capitol Police will refuse all non-
governmental courier deliveries to all House Office Buildings.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``109th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing 
for which you would like to submit, and click on the link entitled, 
``Click here to provide a submission for the record.'' Once you have 
followed the online instructions, completing all informational forms 
and clicking ``submit'' on the final page, an email will be sent to the 
address which you supply confirming your interest in providing a 
submission for the record. You MUST REPLY to the email and ATTACH your 
submission as a Word or WordPerfect document, in compliance with the 
formatting requirements listed below, by close of business Wednesday, 
July 26, 2006. Finally, please note that due to the change in House 
mail policy, the U.S. Capitol Police will refuse sealed-package 
deliveries to all House Office Buildings. Those filing written 
statements who wish to have their statements distributed to the press 
and interested public at the hearing can follow the same procedure 
listed above for those who are testifying and making an oral 
presentation. For questions, or if you encounter technical problems, 
please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

               * * * CHANGE IN RECORD CLOSING DATE * * *

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
July 10, 2006
FC-24 Revised

              Change in Record Closing Date for Hearing on

                Implementation of the United States-Peru

                       Trade Promotion Agreement

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the deadline for receiving written 
statements in lieu of personal appearance for the Committee hearing on 
Implementation of the United States-Peru Trade Promotion Agreement, 
previously scheduled for the close of business, Wednesday, July 26, 
2006, has been changed to close of business, Tuesday, July 18, 2006.
      
    All other details for the hearing remain the same. (See Full 
Committee Advisory No. FC-24, dated June 27, 2006).

                                 

    Chairman THOMAS. Thank you for finding your seats. Good 
morning. Our hearing this morning will exam the United States-
Peru Trade Promotion Agreement, which would liberalize trade 
barriers and mutually benefit Americans, improving businesses, 
farmers, workers and consumers. This is a significant step 
forward in promoting democracy and stability in the Andean 
region. It will cement our relationship. As you know, we have 
had an agreement with the Andean countries, but it is due to 
expire.
    Working with President Toledo who has been a champion for 
this FTA, he is hoping a timely implementation can be moved, 
significantly smooth the process so that he could offer this as 
a gesture, or, if you will, a parting gift to his people.
    Because after all, no one in Peru, better than President 
Toledo, knows first hand how much hope and opportunity can 
change a person's life for the better. He is no stranger to the 
devastating effects of poverty. His story is one that, frankly, 
does and should inspire us all; born into a family of 16 
children, and, typical in that kind of a poverty family 
structure, seven died in infancy. When he was 6 years old he 
worked as a shoe shine boy. One of the difficulties in terms of 
the economic unit of the family in that environment, is that 
virtually everyone has to be a contributor to that family.
    Through opportunities, in part, in terms of people that he 
met shining shoes, opportunities created by the Peace Corps, 
and, frankly, hard work, President Toledo was able to attend 
college in the United States--envious colleges in terms of 
Stanford, Harvard--he got his Ph.D. from Stanford. He then went 
back and served his people in a leadership position.
    Most importantly, being an indigenous person elevating to 
the presidency, the first and only in the history, not only of 
Peru, but in South America, he continues to work regardless of 
the ``political consequences'' to do what he firmly believes is 
right for the people of Peru.
    His education and his life experience has helped him 
understand that trade and free markets, coupled with education, 
can be a very significant help in eliminating the scourge of 
poverty.
    As I said we already have trade agreements with Peru, but, 
frankly, the trade preferences expire. This is an opportunity 
to lock into place a mutually beneficial FTA. We have another 
agreement with Chile. Based upon the pressure by other 
countries in South America on the democratically elected 
process in other countries--Peru recently went through an 
election with those pressures applied to them. Yet in the 
Chair's opinion, it was an absolutely outstanding job in 
signaling to the rest of the world that Peru stands with us and 
what democracy and free markets mean.
    They have also stood with us in the world arena, most 
recently, over the question of North Korea.
    The Peruvian Congress has moved forward, the President-
elect has made strong statements. They have approved this 
agreement 79-14.
    This agreement deserves broad bipartisan support, and my 
hope is that it gets the kind of support it deserves.
    With that, the Chair will recognize the gentleman from New 
York for any statement he would make. The Chair then intends to 
recognize the Chairman of the Subcommittee on Trade, and then 
the Ranking Member of the Subcommittee on Trade.
    Mr. RANGEL. Thank you, Mr. Chairman. I am almost lost for 
words because I heard you mention bipartisanship, and that is 
so shocking. I really thought that it would be your preference 
that Democrats didn't participate in this at all since, to my 
knowledge, this is the first meeting we have had as Democrats 
and Republicans in which this subject has come up.
    As a matter of fact, now that we have the United States 
Trade Representative (USTR) before us, maybe before we get 
started in questioning, he should be prepared to answer whether 
or not you think your job is to deal with Republicans or to 
deal with Democrats, or to deal with the Congress; whether you 
think it is proper for Members of Congress, whether they are 
Democrats or Republicans, to be negotiating with trade 
representatives, with foreigners, whether or not foreigners 
should hear you have to talk with the Democrats as though we 
are two different countries.
    It would seem to me that if we had differences among us as 
Members of Congress on this Committee, that we take those 
differences to you and not to foreigners, since, when the flag 
is up, we are we all are supposed to salute it.
    I don't like the idea that foreign ministers and Presidents 
have been told that the Democrats are holding up this bill.
    It doesn't bother me, because, that is the hand that is 
dealt, but this Committee has never met as Republicans and 
Democrats to study anything that would imply that we want a 
Democratic bill.
    Oh, from time to time we might talk with one or two 
Democrats, most of whom lack seniority, and pick up a vote or 
two, but having one or two Democratic votes hardly seems to be 
bipartisan unless that concept has been a partisan political 
decision.
    I would like to know, when it is time to question, that if 
a government, through its foreign minister, especially in this 
case, through the President, says that he would want to include 
all of the minimum International Labor Organization (ILO) 
standards into an agreement, whether or not the majority party 
can say, I don't want it in there, or whether or not the USTR 
decides what is in there.
    If you represent the United States of America, is the USTR 
supposed to recognize the majority party or supposed to 
recognize the Congress? I don't ever recall you or anyone else 
saying, I would like to get together with the leadership of the 
Republicans and Democrats and see what I can do.
    Whether we are talking about Oman, whether we are talking 
about Peru, whether we are talking about Vietnam, I really 
think that the one area that we ought to try our darnedest, 
whether we win or lose, to get partisanship out of the debate, 
is when you are dealing with foreigners and when you are 
dealing with trade.
    No foreigner wants a Democratic bill or a Republican bill, 
they want a bill with the United States.
    When you are appointed and they called you USTR, that means 
to me, the United States' Trade Representative.
    Not the Republican trade representative.
    So, Mr. Chairman, it is so good to discuss this issue of 
Peru with you at this point in time. It makes me feel good as 
an old man to hear you talk in terms of an appeal for 
bipartisanship. I hope the stenographer would make certain that 
it is recorded so that I can make certain to have a statement 
of this. That is going to be very helpful as a matter of 
history that we have discussed the subject and I thank you for 
your kind generosity and time.
    Chairman THOMAS. Thank the gentleman, especially for his 
comments. The Chair would note that under the Trade Promotion 
Authority, we have a congressional structure in which Ways and 
Means is a permanent member. Peru has been discussed six times 
at the COG between 2004 and 2006, between that same period, 
2004 to 2006, there have been 28 staff briefings. The gentleman 
from New York is correct, the elected officials from Peru have 
taken an interest in this and they have come; they have talked 
to the Committee on Ways and Means jointly in a bipartisan way, 
several times, and they have talked to individuals in an 
attempt to discover why this excellent piece of legislation 
isn't moving any more rapidly than it is.
    The Chair now recognizes the Chairman of the Subcommittee 
on Trade, the gentleman from Florida, Mr. Shaw.
    Mr. SHAW. Thank you, Mr. Chairman and I thank you for 
holding this hearing and welcoming this first step toward the 
approval of the Peru trade promotion agreement. Today, I 
believe we have a tremendous opportunity to demonstrate to Peru 
and other Latin American countries that the United States 
stands ready to offer a positive economic partnership as an 
alternative to that of Venezuela's President Hugo Chavez.
    Economically, this is a good deal for both countries. With 
this agreement, Peru is able to expand and make permanent the 
benefits provided under the Andean Trade Promotion and Drug 
Eradication Act, currently set to expire in December.
    First, our point of view, American companies will gain 
immediate duty-free access for much of our exports and the 
agreement will lead to an eventual elimination of all tariffs 
on U.S. exports to Peru. While the economics of this agreement 
alone will justify our approval, there is much more at stake.
    Every Member of this Committee should be well aware of 
Chavez's action. He actively seeks to restrict free markets, 
bring more economic activity under government control, and 
spread his anti-American ideology throughout the region.
    Recent actions in Bolivia and Ecuador show the damaging 
effect that Chavez can have on his neighboring countries.
    Peru's policies stand in stark contrast. Under President 
Toledo, Peru has pursued market-oriented policies, making it 
one of the fastest growing economics in the region.
    Peru's voters rejected Chavez's recent attempt to tamper 
with their Presidential elections opting last month to elect 
moderate Alan Garcia. Just a few weeks later, the Peruvian 
Congress overwhelmingly approved the agreement by a vote of 79-
14 with the full support of Garcia's political party.
    Today, it is our turn. We have an agreement before us that 
is beneficial to both nations and will buildupon relationships 
started under the performance of our preference program. The 
agreement is supported by American companies, investors, and 
farmers eager to begin and continue to expand their businesses 
in both the United States and Peru. This agreement is supported 
by both the incoming and outgoing governments of Peru.
    Most importantly, the agreement is a symbol of what other 
Latin American countries can achieve if they reject the 
demagogic policies of Mr. Chavez.
    I hope that one day, this agreement will be expanded to 
other Andean countries, such as Colombia and Ecuador.
    What message would we send to those countries if after all 
positive actions taken by Peru, Members pull the rug out from 
beneath them by rejecting this agreement?
    There is a fork in the road for many Latin American 
nations. They can choose a road that leads to government 
seizure of business, State-run enterprises, and stifled 
investment, or they can choose a path of free and open markets, 
one that allows its citizens to work and achieve the rewards 
that accompany their labors.
    Mr. Chairman, the Committee is also at an important fork in 
the road. Members can choose to send mixed signals to those in 
Peru who have worked hard to extend their hand in economic 
cooperation or we can choose to recognize what this agreement 
will mean not only to the U.S. business and workers but also to 
the people of Peru and potentially those citizens of our 
neighboring nations.
    Mr. Chairman, I would like to add here, this is more than 
just about trade. This is about the politics of our own 
hemisphere. This is about forging friendships and forging 
partnerships with those to the south of us.
    The United States has, for so many years, turned its back 
on Latin America.
    With the Central America Free Trade Agreement (CAFTA) (P.L. 
109-53) agreement, we have opened this up, with Chile, we have 
opened this up. Now we have a chance to do this with Peru.
    What better country could we possibly try to build on this 
partnership than with Peru and the wonderful leadership that it 
has had under President Toledo?
    To vote otherwise, and I would say to Mr. Rangel, this is 
an American issue. There is no question about this.
    This isn't a Republican issue. It is not a Democrat issue. 
It is an American issue. It is how we are going to stand up in 
our own hemisphere. How we are going to lead in our own 
hemisphere and what is the future of American politics in this 
hemisphere.
    It would be tragic for us to turn our backs on Peru. I 
would hope that all the Members will continue to work hard on 
both sides of the aisle and not be puppets for anybody, but to 
move forward in doing the best we possibly can to bring a FTA 
between the United States and Peru. I yield back.
    Chairman THOMAS. Thank the gentleman. The Chair would now 
recognize the Ranking Member on the Subcommittee on Trade, the 
gentleman from Maryland, Mr. Cardin.
    Mr. CARDIN. Mr. Chairman, thank you very much, and let me 
just join in the observation that there are many good reasons 
why we should move forward with the FTA between the United 
States and Peru.
    Peru is a good friend of the United States a trusted ally.
    During the past 5 years, President Toledo has demonstrated 
his commitment to improve the lives of the people of Peru by 
reform within his own country.
    So, I am hopeful that at the end of the day we will be able 
to have an agreement that can receive strong bipartisan support 
and strong support in both the House and the Senate.
    As the Ranking Member of the Subcommittee on Trade, let me 
make it clear that the Democratic party is very much in support 
of opening up markets so that American manufacturers, producers 
and farmers can export more product.
    So, we do want to remove trade barriers. We also want to 
expand trade benefits to other countries. We all benefit from 
expanded trade.
    We want to enforce our trade rules. I mention that 
particularly today, Mr. Chairman, as you know, the May report 
on the trade imbalance is very disturbing: $63.8 billion trade 
imbalance for May of this year, which puts us on pace to exceed 
last year's record trade deficit of $716 billion. So, it is 
important that we enforce our trade rules.
    It is also important that the United States advance basic 
worker rights and labor in our trade agreements. We have the 
best opportunity to do that in bilateral Free Trade Agreements 
(FTAs). I must tell you, I was very optimistic last year when 
President Toledo was here, and before the FTA was finally 
negotiated, where President Toledo offered to put in the core 
agreement, compliance with international labor standards in the 
agreement with the United States.
    To me, that was a signal that we could advance in a free 
trade agreement, with a significant trading partner, core labor 
standards, which would make it easier for us to advance worker 
rights internationally in other agreements.
    Rather than seizing on that opportunity, the negotiated 
agreement moved backward and used the standard of enforcing 
your own laws, which in Peru's case, is not acceptable.
    So, yes, we want to move quickly on an agreement. The best 
way to do it is to take Mr. Toledo's offer and put it in the 
agreement, and then we could move forward quickly.
    I point out, as the Chairman has, that we do have the 
Andean Trade Preference Act, and we have generalized systems of 
preferences today with Peru.
    As a condition to receiving those unilateral benefits on 
their imported products, they have to acknowledge a commitment 
to move toward international labor standards.
    We give that up by the negotiated agreement if we don't 
include a reference to ILO standards.
    So, where are the problems? We are now back to enforce 
their own rules, and we look at Peru and its trading practices, 
and we find in many cases, Peru does not today meet 
international labor standards. They allow employers the use of 
subcontractors and temporary workers to undermine the rights of 
workers. They fail to effectively sanction employers who 
interfere in union activities. They impose burdensome costs of 
arbitration on workers. They fail to effectively sanction 
employer interference in union activities. They permit 
employers to change unilaterally collective bargaining 
agreements.
    I mention just these five examples, and there are others 
that we will point out during the discussion on these issues, 
because I understand the Ambassador of Peru has sent us a 
letter, Mr. Chairman, indicating that, for at least the last 
two of those issues, the government is prepared to take action 
on interpretation.
    Now, I mention that because one of the problems we have had 
with other FTAs, are the exchange of letters, because we are 
enforcing our own law standard, rather than moving forward to a 
direct reference to ILO standards.
    I will admit, it is difficult in interpretation to know 
what is going on, on the ground. So, yes, it is important that 
we move forward with Peru, and we can do it quickly on the 
issue of labor standards if we just accept President Toledo's 
offer. Then we don't have to deal with interpretation of 
letters or other procedures which are not as acceptable as a 
direct reference in the trade agreement itself.
    Mr. Chairman, I do look forward to working with you. I do 
point out that, as the mechanism in Congress to deal with this, 
our Committee has not taken up the Peru labor issue, and maybe 
it would be a good forum for us to meet in an effort to try to 
resolve that difference. I thank you very much for this 
hearing.
    Chairman THOMAS. The Chair thanks the gentleman. Prior to 
introducing the assistant U.S. trade representative for the 
Americas, Edward Eissenstat as per prior agreement, the Chair 
would recognize the gentleman from Michigan for more than the 
ordinary time. I would say to the assistant trade 
representative, the questions that so far have come from the 
dais have not been rhetorical, and that at an appropriate time, 
the gentleman can and should respond and perhaps some of it, 
given its detail, could be done in writing, but all Members of 
the Committee would be interested in seeing the responses if 
that were the case. The Chair recognizes the gentleman from 
Michigan.
    Mr. LEVIN. Thank you Mr. Chairman. I ask that a statement 
of mine be placed in the record.
    Chairman THOMAS. Without objection.
    [The prepared statement of Mr. Levin follows.]

    Globalization is under siege in many places. Expanded international 
trade is hitting more and more roadblocks, both in multilateral trade 
and bilateral negotiations.
    There are many reasons this is happening.
    One reason is that we no longer in this Congress and with this 
Administration have the broad bi-partisan cooperation around 
international trade necessary to tackle difficult issues. The 
Republican Majority has rejected a broadly bi-partisan approach in 
favor of very narrow victories on small trade agreements. This either 
reflects the Majority's partisanship, or blind devotion to a belief 
that more trade is always better no matter its terms, its contents or 
it consequences. Whichever it is, this course is a mistake for 
international trade policy.
    Another key reason is that the benefits of expanded trade are not 
being widely shared. Too many people in too many places feel they are 
being left out or left behind.
    It is within this broad context and in hopes that we might seize 
the opportunity presented by the Peru FTA to restore a balanced and bi-
partisan approach to U.S. trade policy that I would like to describe my 
experience on the ground in Peru regarding the rights of workers, the 
accessibility of citizens to medicines basic for good health, and the 
impact of trade agreements on agriculture.
    The reason for the increasing attention to the basic international 
rights of workers is that large numbers of workers feel that they are 
on the outside when they do not share the benefits of expanded trade. 
Large numbers of workers become opposed to expansion of international 
trade when they feel they are competing with nations that try to gain 
economic advantage from the suppression of their own workers. This is 
not a provincial matter or simply a clash of domestic interest groups.
    It takes on added meaning when the U.S. negotiates free trade 
agreements with nations with immense poverty and vast differences in 
distribution of income. In Peru, there has been substantial economic 
growth, with some reduction in poverty. At the same time, about 50 
percent of the population of 28million live in poverty under that 
nation's own poverty standard of $58 a month, and about 20 percent are 
living in extreme poverty under $32 a month. In Peru the wealthiest 10 
percent receive 37 percent of the income, while the bottom 10 percent 
receives only 0.7 percent.
    During the years of the Fujimori regime, both in law and practice, 
workers were deprived of their basic international rights, especially 
the basic right to associate together and bargain regarding wages and 
conditions in the workplace. New laws stimulated a structure of 
relationships whereby workers began laboring under individual contracts 
or through subcontracts instead of a direct employment relationship. So 
employment was subject to arbitrary change or termination by the 
company. Large proportions of workers in the formal sector no longer 
belonged to labor organizations representing workers but they were left 
on their own at the mercy of their company, in both industrial and 
service sectors.
    President Toledo succeeded the Fujimori regime with the promise of 
addressing poverty, including the rights of workers. He has 
passionately emphasized his commitment to battle poverty in his 
meetings here in D.C. and in our cordial personal discussions that he 
generously accommodated when I was in Peru in January.
    Some changes were made in the labor law reforms of 2002.
    However, they have not reversed the denial of basic international 
standards of worker rights rampant under the Fujimori regime. Basic 
structures instituted under Fujimori remain to this day.
    This is evidenced in the 2005 State Department Report on Human 
Rights on Peru. It was detailed when I was in Peru in January in the 25 
meetings I had with a broad range of government officials and private 
sector groups.
    Problem areas in Peru's laws, as identified in reports by the ILO 
and State Department, include a failure to provide for a neutral 
arbiter to determine strike legality and inadequate judicial procedures 
for handling cases of anti-union discrimination and other labor law 
violations. Recently, we received a letter from the Embassy of Peru 
responding to these as well as other concerns that Ways and Means 
Democrats raised over 6 months ago. Some of the violations may be being 
addressed, but others, including these, are not. The letter addresses 
the concern about the failure of Peruvian law to provide sanctions 
against interference by employers in the ability of workers to 
associate by reference to a law now under consideration in the Peruvian 
Congress; it addresses the concern that Peruvian law has allowed 
unilateral changes in a collective bargaining agreement by the employer 
with a reference to a ``Supreme Decree'' issued just last week.
    While these deficiencies are problems in and of themselves, what 
has most eroded the ability of workers to exercise their basic rights, 
including to associate and bargain, persists from the Fujimori years. 
It is the replacement of regular permanent direct-hire employment with 
short-term individual contracts and subcontracting.
    The rights violations that workers in Peru face on a daily basis 
are facilitated by that country's complex and inadequate labor law 
regime. Unlike most countries with civil law systems, Peru does not 
have a central labor code. Instead, workers' rights protections are set 
out in myriad, individual labor laws. The result is a confusing web of 
regulations that impedes workers from understanding their rights.
    In this ad-hoc approach, there are separate laws for specific 
sectors and specific forms of labor contracts. There are also 
exemptions that carve out from coverage key segments of the Peruvian 
workforce. One such segment is the subcontracted sector.
    In 2002, Peru passed law number 27626, a labor law regulating and 
limiting the use of subcontractors. The law was touted as a step toward 
protecting subcontracted workers' rights. Instead, by Supreme Decree 
number 003-2002-TR, Peru severely limited the scope of this new law, 
leaving virtually unregulated the most common form of subcontracting B 
hiring subcontracted workers to perform normal, everyday company 
operations.
    These subcontracted workers are exempted from the controls 
established for other forms of subcontracting by the 2002 law. Instead, 
they are covered by law number 728, rules for individual contracts. 
Therefore, if these workers' rights are violated, each individual 
worker must bring a separate legal case to try to seek justice, leaving 
these vulnerable workers with little to no possibility of enforcing 
their rights. In the wake of the 2002 reforms, subcontracting core 
company operations has exploded, and a large marginalized workforce has 
been created.
    Likewise, employers are increasingly using the nine permissible 
forms of temporary contracts permitted by Peru's labor law number 728 
to further destabilize their workforces. Employers characterize 
permanent, everyday activities as temporary in order to enjoy this 
flexibility.
    If subcontracted workers or temporary directly employed workers try 
to unionize or complain about substandard working conditions, their 
contracts can simply not be renewed or they are asked never to return.
    In addition, if employers do not wish to wait until the contracts 
expire to expel them from their workplaces, employers may fire persons 
without cause. Employers do so knowing that the fired workers only have 
a right to reinstatement if they can overcome the often insurmountable 
obstacles to demonstrating in court that they were fired for an 
impermissible reason, such as union organizing. Workers rarely succeed.
    If Peru's labor laws are going to come close to complying with 
international standards, these serious shortcomings must be addressed 
to ensure that the rights of all workers.
    The effect of this use of the temporary/individual contract/
subcontracting process has been a dramatic reduction in workers 
belonging to labor organizations. When I was in Peru, I heard that the 
reduction was 62 percent among mining workers, and 75 percent among 
communication workers since this practice began. These trends are 
reflected in the 2005 State Department report on Peru, which notes that 
Approximately 5 percent of the formal sector workforce of 8.5 million 
belonged to organized labor unions.
    One of the engines of Peru's recent economic growth has been in 
agro-businesses, especially in asparagus and artichokes. The U.S. Peru 
FTA should enhance these exports. Agro-business has increased 
employment in areas in Peru needing that increase. The challenge is for 
that employment to substantially decrease poverty. If workers do not 
have their basic international rights, it is far less likely that this 
challenge will be met.
    While it is not easy to obtain complete information, the following 
conditions seem prevalent: agricultural laborers, the majority of which 
are women, often work 10-14 hour days, 6 days a week, with no vacation, 
no health benefits and for very low wages (approximately $5.30 a day) 
that drop if demand for the crop falls. There is also reported to exist 
pervasive subcontracting, the use of individual contracts, the firing 
of union organizers, and the lack of labor inspections.
    There are also reports of gender-specific rights violations in this 
industry, given the high percentage of women workers. Although the FTA 
requires Peru to effectively enforce its labor laws, anti-
discrimination laws are exempted.
    A recent article in Peru's La Republica notes that in the Ica and 
Trujillo regions of Peru, both of which experienced substantial 
increases in agro-industry exports B asparagus in particular B after 
the implementation of Andean trade preferences, there exists extreme 
levels of inequality as to the distribution of benefits from expanded 
trade. The article notes that between 2000 and 2004 the average wage 
for executives grew 51 percent in the Ica region and 65 percent in the 
Trujillo region. This stands in stark contrast to the average wage 
increase for workers, which was 1 percent and 0.5 percent in the Ica 
and Trujillo regions, respectively, for the same period.
    These circumstances underline the problem with the insistence of 
the Administration in negotiating a standard for worker rights that it 
would never dream of using for any other subject of the FTA: i.e. that 
a nation must simply enforce its own present laws. And the laws can be 
made worse with impunity consistent with the FTA.
    In his meetings in D.C. with Members of both parties of the Ways 
and Means Committee, President Toledo expressed the view that if 
globalization was going to work there must be a broader sharing of the 
benefits of expanded trade. He further stated that workers must be 
included and for this to happen the basic international labor standards 
should be incorporated into the agreement.
    The Bush Administration failed completely to seize the opportunity 
to accomplish this result.
    For large numbers of impoverished people within Peru and other 
nations in Latin American and elsewhere, the Bush Administration's 
position places us on the wrong side.
    For large numbers of people in our nation who worry about competing 
with nations that suppress the rights of their workers as a method of 
competition, it places us on the wrong side.
    At a time when there is increasing understanding of the need to 
combine policies of growth directly with key elements of equity, it 
places us on the wrong side.
    In a recent report of the World Bank on Latin America entitled 
``Poverty Reduction and Growth: Virtuous and Vicious Circles,'' there 
is this passage reflecting a broadened tenor regarding trade policy: 
``. . . a sensible development strategy should focus on the quantity of 
growth (that is, on the achievement of a high growth rate) and the 
quality of growth (that is, on the benefits from that growth).''
    The U.S. Peru FTA has advantageous provisions relating to the 
quantity of growth. Exports will increase both for Peru and the U.S. 
History of development in our Nation and others demonstrates vividly 
that enhancement of the rights and role of workers is an important 
ingredient in the quality of growth. The approach put forth by the Bush 
Administration on worker rights (simply requiring the status quo or 
worse) flunks the quality test.
Agriculture/Subsistence Farming
    The FTA will lead to still further growth in both Peruvian and 
American agricultural exports.
    Peruvian agricultural exports have blossomed in recent years. Under 
Andean trade preference programs, the major growth has occurred in 
asparagus and artichokes, where there is some competition with the 
U.S., and also in fruits.
    Lower Peruvian tariffs will clearly help Peruvian consumers in 
areas where there is no major source within Peru.
    A study issued 6 months ago by the Carnegie Endowment on U.S. 
negotiations for a free trade agreement with Andean nations, stated, 
based on its interview with leaders and analysts, that expanded trade 
would have an ``unambiguous positive impact'' on some of the economy 
and population, and that ``. . . [t]he brunt of the adjustment costs 
are likely to fall on farmers and the rural population in the Andean 
countries.'' A more recent Carnegie study reinforced this conclusion.
    Before passing the FTA on June 27, the Peruvian legislature 
approved a ``compensation fund'' in relation to the impact of the FTA 
on small subsistence farmers in Peru.
    When in Peru, I received very different estimates of the likely 
impact of the FTA on the millions of small Peruvian farmers. Some said 
it would be minimal. Representatives of an organization of small 
farmers called Conveagro argued that it would be dramatic. They now 
urge that the amount of the compensation fund covers only three crops B 
wheat, corn and cotton B and is grossly inadequate for the 5 year 
period.
    Clearly, the people of Peru have most at stake from the impact of 
this issue. There is also an American interest. For globalization to 
work, for the middle class to blossom, the benefits need to be broadly 
shared. Further, there is an interest particular to the Andean region, 
i.e. to be certain that the displacement of subsistence crops does not 
lead to their replacement with the growing of coca already representing 
a major issue for our Nation, including our security interests.
    It would be wise for us to spend enough time to understand this 
aspect of the FTA.
Intellectual Property and Medicines
    The issue of availability of basic medicines in negotiation of an 
FTA came up when there was consideration of the U.S.-Morocco FTA. 
During the hearing on this FTA, I asked whether the language in the 
section on intellectual property was consistent with the agreement 
worked out in the WTO at Doha assuring access to generic medicines to 
meet basic health needs in developing nations including Morocco. The 
long and short was that a side letter was negotiated in an effort to 
address this issue.
    I discussed this issue in relation to the language in the U.S.-Peru 
FTA when I was in Peru with both Health NGOs, the Health Minister and 
at a meeting of representatives of major pharmaceutical companies.
    Access to affordable medicines is extremely important for public 
health in Peru, where over half of the population lives in poverty and 
around 20 percent lack access to health care. Only half of all 
Peruvians have health insurance; people living in poverty are for the 
most part not insured and must either pay out of pocket or receive no 
treatment at all. Medicines account for one quarter of public health 
expenditure and 44 percent of household spending on health.
    This issue has been covered by side letters between the two 
governments. It is important to understand whether its contents are 
subject to dispute settlement and therefore legally binding.
    An additional side letter that is included in the Peru FTA, which 
states that the references to the intellectual property chapter in the 
Understanding include Article 10 on measures related to certain 
regulated products, may not provide additional assurances in this 
regard. It is stated in the report by the Industry Trade Advisory 
Committee on Intellectual Property, ``ITAC-15 believes that the letter 
serves only to clarify the Understanding and does not impose any 
additional obligations beyond those already found in the 
Understanding.''
    Peru should be held to global standards of intellectual property 
rights and should enforce those rights. However, we need to analyze 
specific provisions for pharmaceuticals that exceed those general 
standards and assess whether the provisions would cause hardship on 
Peruvians, particularly the large number of people living in poverty.
Conclusion
    The U.S. Peru FTA is an important agreement. It involves our two 
nations with some historically close and significant relationships. 
There is significant goodwill between our Nations, which has been 
increased in the years of the Toledo presidency.
    The FTA is also a test case of whether and how to shape the 
elements of globalization and international trade. Those who give blind 
support to expanded trade give ammunition to those who adopt blind 
opposition.
    We can do better. Indeed, we must. The terms for expanding trade 
between the U.S. and Peru provided us an opportunity to do so. It is 
indeed late, but still not too late to accomplish it.

                                 

    Mr. LEVIN. I have prepared--at first I asked that I might 
testify before this Committee. I did so, because I think that 
it is essential that there be more dialog. I was hopeful that, 
really for the first time on this issue, that we might have 
some meaningful back and forth, especially as it relates to 
Peru.
    The bipartisanship is so critical, especially with 
globalization in real trouble--expanded trade is now meeting a 
number of roadblocks, both in the multilateral sector, as well 
as in bilateral agreements.
    So, it is really important that we try to recreate a 
bipartisan foundation for trade in the United States.
    Secondly, I think it is important to ask why globalization 
is in such trouble.
    Why is expanded trade meeting so many roadblocks? There are 
a number of reasons for it.
    One of them, and it has been raised here by Mr. Shaw and 
others, is that so many people in so many countries are not 
benefiting from the expansion of trade.
    They are being left out. To mention Mr. Chavez, I think you 
need to look why he is there. It is in part, because, as 
Venezuela grew in prosperity, the vast majority of people did 
not benefit.
    So, our failure to try to shape our agreements, so that 
there is a wider sharing of benefits, our failure needs to be 
rectified so that there doesn't arise leadership that I think 
is agnostic to basic principles of expanded trade and 
globalization that will really work.
    That is the context, Mr. Shaw. It is a discussion about 
globalization, the failure for its spread to have the benefits 
spread, and the consequences of it.
    It isn't because anybody is a puppet. A number of us, most 
of us have been working hard for expanded trade. We want it in 
terms that will work.
    So, let's talk about Peru. When President Toledo came here, 
he talked about worker rights. He said to all of us, who were 
sitting there, Republicans and Democrats, in order for 
globalization to work, workers have to participate. In order 
for workers to participate, the basic international core 
standards should be in the agreement and enforceable. That is 
what he said.
    That has been the position of Democrats not for any narrow 
reasons, but because of its importance for the unfolding of 
globalization.
    Everybody has to understand that. We have taken some tough 
decisions, Democrats on this side, not always popular on our 
side, because we believe with expanded trade, it has to be 
shaped so that benefits are shared, to say it very simply and 
clearly.
    President Toledo inherited from Fujimori a structure that 
undid the rights of workers in Peru; undid them.
    It set up a structure of subcontracting and private 
contracts; short-term contracts. The result was that labor 
organizations were decimated. When I was in Peru, that was told 
to me in the mining industries; dramatic reduction in the 
ability of workers to be in organized structures.
    The same was true in communications. Also in the Fujimori 
years, there were failures to give workers the right to 
associate, even when they had direct contracts. There was 
discrimination rampant against any effort for them to organize 
and to have collective bargaining.
    In 1982, some of those aspects were changed. The reforms 
made some progress, but the basic structures today remain from 
the Fujimori regime.
    You can see the impact of that in the agribusinesses that 
are now blossoming on the west coast of Peru.
    There is more work, but there isn't the ability of workers 
to gain a wage that----
    Chairman THOMAS. Gentleman yield briefly. If the timer 
would renew the time, please, for the gentleman.
    Mr. LEVIN. I appreciate that. So, look, this is what the 
issue is here today. We would like to support an agreement with 
Peru. It is our strong preference. We admire the President of 
Peru, President Toledo. There is no question about his desire 
to come into office and to try to address issues of poverty.
    If those issues are going to be addressed and assisted 
through a U.S.-Peru Trade Promotion Agreement (TPA), there has 
to be put into place, as he himself suggested, in the 
agreement, with enforceability, the basic ILO standards, not 
American standards, but ILO standards.
    Mr. Eissenstat, you are not making the decisions, but the 
question we have always asked is, if the President of Peru said 
yes, why did we say no?
    Why we tabled a proposition that did not meet what he was 
willing to incorporate? There was some reference to what is in 
the TPA, it doesn't prohibit us for 1 minute to take the step, 
to put the core labor standards in, so that workers can be part 
of the mix of progress.
    In my statement, I also cover other issues--and I hope we 
will here--about medicines, and also about the impact on 
subsistence farmers.
    Mr. Chairman, and Mr. Shaw and our colleagues on the 
Republican side, I hope there is still time for us to do this 
right. Our failure to do so is, I think, inexcusable.
    I worry about what is happening in Latin America and the 
rest of the world. I worry about the path of globalization. Mr. 
Chairman, if globalization is going to work, we have to take 
steps in our agreements that there be broad participation. We 
simply say to a country, enforce its own laws with regard to 
its workers. It is a step backward.
    Mr. Eissenstat, in your testimony I would like you to 
indicate whether that standard is used in any other arena, 
except as to worker rights and the environment and why this 
Administration refuses to move in the direction of 
incorporating basic worker rights within the body of an 
agreement, so that as this agreement unfolds--and there will be 
benefits, there will be more expanded trade--there will be 
provisions therein that will help ensure that the benefits of 
expanded trade reach the vast majority of the people of Peru.
    Thank you, Mr. Chairman.
    Chairman THOMAS. The Chair thanks the gentleman, and for 
those of you who might not be familiar with the fact, gentleman 
from Michigan went to Peru, and spent some time in Peru 
familiarizing himself with those activities that occurred.
    The Chair would now recognize gentleman from Illinois who 
has spent considerable time in Latin and South America, also 
familiarizing himself with conditions in Peru. Gentleman from 
Illinois, Mr. Weller, and if the gentleman would yield briefly.
    Mr. WELLER. Happy to yield, Mr. Chairman.
    Chairman THOMAS. Thank the gentleman. I will tell gentleman 
from Michigan that in the number of meetings that we attended 
in a bipartisan way, and the gentleman represented a portion of 
what President Toledo said, but I think it is also important to 
note that the President also made a rather impassioned plea not 
to be locked into a straightjacket in terms of the labor 
structure that was being forcibly offered to him; citing his 
own history and the continued poverty in which, in organized 
labor relationships, there has been progress, and was 
supportive of that, but that needed to recognize the conditions 
in which boot strapping from poverty may involve more of the 
extended family in a positive economic model.
    It is always best to try to take what someone says in the 
full context of what they say, rather than accepting portions 
and assuming then if you didn't hear him, that that was the 
plea that he made.
    He made a far broader, more complex plea on the question of 
labor. In this mutually negotiated agreement, the President is 
solidly 100 percent in support. I thank the gentleman.
    Mr. WELLER. Thank you, Mr. Chairman for giving me the 
opportunity to express my strong support for the Peru trade 
promotion agreement. Mr. Chairman, this is a good agreement for 
both Peru and the United States. Here at home, we will see 
vibrant new export opportunities to help our manufacturers and 
farmers to compete with Asia and Europe and Peru or neighbors 
and friends will see increasing economic opportunity and 
continued poverty reduction. These are tangible, achievable 
goals, and we can attain them by choosing to say yes to the 
agreement.
    From the United States, on day one of this agreement going 
into effect, 80 percent of our U.S. exports in consumer and 
industrial products to Peru will become duty free immediately. 
This means real export opportunities for American 
manufacturers. I am proud to represent thousands of Caterpillar 
workers who will see tremendous benefits in this agreement, Mr. 
Chairman; a million dollar off-highway truck used in mining, 
like the one I have here in front of me today, suffers today at 
a 12 percent tariff when imported to Peru. That amounts to a 
tax representing $120,000 added to the price of this million-
dollar truck, immediately making it less competitive with their 
Asian competition. On day one of this agreement, that 12 
percent tax on this million dollar piece of equipment goes 
away.
    This agreement is good for farmers. Again, on day one of 
this agreement, 2/3 of current U.S. farm exports become duty 
free immediately. Pork tariffs are as high as 25 percent going 
into Peru, but Chilean pork is currently duty free going into 
Peru. Pork taxes are reduced immediately and gone in 10 years, 
helping us to compete. Soybeans, soybean meal and crude soy 
bean oil become duty free immediately. For corn, Argentina 
accounts for 2/3 of Peru's corn imports, and is priced 
approximately 9 to 10 percent less than U.S. corn.
    Argentine corn currently only has a 3.4 percent tariff, but 
U.S. corn is dutiable at 17 percent.
    Again, this agreement creates benefits for U.S. farmers by 
reducing and eliminating all tariffs on corn. United States 
agriculture stands to see over $700 million increased annually 
when fully implemented, only if we choose today to implement 
this agreement.
    Let's not forget under current law, most imports from Peru 
enter in this country with no duty. Ninety-eight percent of all 
imports from Peru enter duty free, and the average U.S. duty on 
imports from Peru is less than 1/10 of 1 percent, but the 
average applied duty on U.S. exports to Peru is 8 percent. It 
is a good deal for Peru, but not for U.S. workers or farmers. 
This agreement makes our partnership equal, and means the 
benefits that Peru has received unilaterally for nearly 15 
years will now be shared equally. The International Trade 
Commission (ITC) estimates an additional $2.1 billion in 
economic growth from this agreement alone for the United 
States, and increasing U.S. exports to 1.1 billion.
    This agreement is not only important for our U.S. 
exporters, but also for continued economic growth in Peru and 
stability in their own hemisphere. I have traveled twice to 
Peru and spent significant time learning about the conditions 
there.
    Let me begin by saluting President Toledo for his 
leadership which allowed this agreement to be negotiated, and 
for his and the people of Peru's unwavering friendship with the 
United States.
    We cannot forget where President Toledo brought the 
Republic of Peru from and the path he has put Peru on. 
Following the difficult Fujimori years, President Toledo 
restored democratic institutions, built the economy on exports 
and reduced poverty all the while working side by side with the 
United States to fight narcotrafficking and supporting the 
global war on terror.
    I have traveled to export facilities, met and spoke with 
workers and seen the hope and opportunity exports give to 
workers in Peru.
    President Toledo has argued passionately as one who knows 
poverty firsthand in favor of this agreement, not only as a 
solution to poverty, but as a tool.
    The Peruvian people have spoken as well, and they spoke 
loudly in favor of building the Peru-U.S. partnership. Voters 
silently rejected the message of the chosen candidate of 
Venezuela, Hugo Chavez, when Ollanta Humala advocated ending 
Peru's partnership with the United States for a thin veneer of 
populist sentiment, masking the greater hemispheric ambitions 
of Chavez, the people of Peru saw through it and they said no. 
Peru's congress took a definitive stand in favor of the Peru 
TPA, voting 79-14 to ratify this agreement. Peru is now 
counting on the United States to complete our work on this 
agreement.
    It is more important than ever that the United States not 
turn its back on Peru and continue its partnership with this 
key neighbor.
    My colleagues, I hope you will give serious consideration 
not only to the important work that Peru has done in a short 
time, but also the positive course Peru has set on particularly 
in the areas of labor.
    Some of my colleagues argue that Peru has not done enough 
on labor, but let's look at the facts. The Fujimori era 
dismantled labor rights in Peru. President Toledo had to start 
from the beginning to build and strengthen labor rights and has 
made significant strides in 5 short years.
    Major labor reform law was passed in 2003. That included 
reducing the number of workers needed to establish a union, 
eliminating prohibitions that kept workers from joining unions 
during their probationary period, and limited the power of the 
labor authority to cancel union's registration.
    In 2004 Peru published regulations to strengthen labor 
inspections and broadened labor inspector's powers. In all, 
more than 30 labor reforms have been achieved in the Toledo 
administration. The Peru trade promotion agreement includes 
labor obligations as part of its core text and contains even 
stronger language on labor standards than the U.S.-Chile FTA.
    Finally, with regard to ILO issues, Peru has ratified 71 
ILO conventions, including all eight of the core conventions. 
The ILO has noted with satisfaction Peru's work on labor issues 
having made changes to Peruvian law to address the vast 
majority of ILO observations. Peru has received ILO praise as a 
leading example in the Americas of efforts to bring national 
laws into compliance with international ILO standards.
    Four issues of concern related to Peru's labor laws were 
raised by some Members of this Committee in a letter, and I 
would just like to note for the record that each of these 
points have been specifically addressed in a letter from 
Peruvian Prime Minister Kuczynski. Briefly, he reaffirms that 
the Peruvian constitution recognizes the right of workers to 
unionize, to bargain collectively, to strike, and that 
employers cannot interfere with unions.
    Peru's law in collective work relations prohibits employers 
from interfering with workers' right to form unions. Workers 
dismissed for union activity have the right to file an amparo, 
a petition for reinstatement to their jobs, and Peru's Congress 
just this last week approved a new labor inspection law that 
defines violation of fundamental labor rights as a severe 
violation for enforcement purposes.
    Finally, let me highlight two supreme decrees just 
approved: one will amplify current law that employers cannot 
unilaterally change contents or conditions established in 
collective bargaining agreements, and another clarified that 
unions, not government, make the determination of how many 
workers constitute a strike granting majority.
    Several other points were raised in this letter, but two 
are worth pointing out here. First, there is no provision in 
Peruvian law that prohibits temporary workers from affiliating 
with the same union as permanent workers. If an employer fired 
a temporary employee for trying to exercise his rights to 
affiliate, he would have a cause of action for reinstatement 
and specific constitutional protections.
    Secondly, with regard to child labor protections, the 
government has strengthened child labor laws and developed a 
national plan of action. Peru passed laws in the year 2000, 
2001 and 2004 to help fight child labor, and Peru has 
participated in the ILO international program for elimination 
of child labor for over a decade.
    This is a good place to talk about what growing Peruvian 
exports will mean for Peruvians. Export jobs pay higher wages 
and bring people into the formal sector where rights are more 
easily protected. That is what we are talking about today, more 
economic opportunities, more job security.
    Again, this agreement will not be the sole answer to 
eliminating poverty, but it is a key tool.
    Today we are faced with a choice, Peru's chosen decisively 
to say yes to opportunity and to strengthening our partnership.
    The question remains, if we, too, will make that positive 
choice. I urge my colleagues to say yes to the U.S.-Peru Trade 
Promotion Agreement (PTPA). Thank you, Mr. Chairman, and I 
yield back.
    Chairman THOMAS. I thank the gentleman, and now I will 
recognize for his comments the assistant U.S. Trade 
Representative, Mr. Eissenstat. Your written testimony will be 
made a part of the record, and you may address us in any way 
you see fit.
    Prior to recognizing you, the Chair would ask unanimous 
consent to submit to the USTR a written question by the 
gentleman from New York, the gist of it is concern about rules 
of origin, particularly dairy products, and we anticipate a 
written response and the Chair would indicate that he would 
like to see the answer as well.
    Without objection, Mr. Eissenstat, the microphone is yours.

     STATEMENT OF EVERETT EISSENSTAT, ASSISTANT U.S. TRADE 
   REPRESENTATIVE FOR THE AMERICAS, OFFICE OF THE U.S. TRADE 
                         REPRESENTATIVE

    Mr. EISSENSTAT. Thank you, Mr. Chairman, Ranking Member 
Rangel, Members of this distinguished Committee, it is really 
an honor for me to be here today and have an opportunity to 
discuss our free trade agreement with Peru. We greatly 
appreciate the guidance of this Committee throughout the 
negotiating process, and we look forward to continuing to work 
with you as we move this agreement through the legislative 
process.
    The United States-Peru Trade Promotion Agreement marks the 
beginning of a new chapter in our trade relations with Peru. 
This agreement will enable us to turn our unilateral preference 
program into a two-way commercial partnership. It eliminates 
unfair trade barriers and provides new opportunities for 
American manufacturers, farmers and ranchers.
    The agreement levels the playingfield for U.S. exports with 
respect to our competitors, improves market access, and 
enhances protection for workers and the environment.
    Please allow me to put this agreement in context. In 1991, 
the U.S. Congress voted to authorize trade preferences to Peru 
through the Andean Trade Preference Act. Bipartisan approval of 
this preference program helped combat illegal drug cultivation 
by providing new export opportunities for the Peruvian people. 
In 2002, two things occurred which helped lay the foundation 
for our current agreement.
    First, U.S. Congress significantly enhanced trade 
preferences under ATPA through the Andean Trade Promotion and 
Drug Eradication Act. Second, Alejandro Toledo instituted a 
series of political and economic reforms which have solidified 
Peru's democratic institutions and reinvigorated its economy.
    The results have been impressive. Since 2003, Peru's real 
gross domestic product (GDP) has grown at an annual average 
rate of 5 percent. More than 1.3 million Peruvians have been 
lifted from extreme poverty. In 2005, imports from Peru to the 
United States reached $5.1 billion.
    The United States has much to gain from this agreement as 
well. Today, 98 percent of imports from Peru enter the United 
States duty free. Meanwhile less than 2 percent of U.S. 
agricultural exports and 4 percent of U.S. industrial exports 
enter Peru duty fee.
    Our free trade agreement will put an end to this disparity. 
On day one, 80 percent of our industrial products will become 
duty free into Peru. These items will include technology 
products, agricultural and construction equipment, auto parts 
and chemicals.
    At the same time, almost 90 percent of our current 
agricultural trade with Peru will become duty free, including 
products such as high quality beef, cotton, wheat, soybeans and 
many fruits and vegetables. Peru also eliminated its price ban 
system on trade with the United States.
    The agreement provides new opportunities for U.S. service 
providers across a wide range of sectors such as 
telecommunications, insurance and express delivery. It also 
provides strong protection for U.S. intellectual property 
interests, including copyright protection for the digital age 
as well as patents and trademarks.
    The agreement establishes a secure, predictable legal 
framework for U.S. investors in Peru.
    Let me briefly address two issues that we know are of 
particular importance to the Members of this Committee, labor 
and the environment.
    Peru has under taken significant labor reforms in the past 
several years and is committed to undertaking additional 
reforms in efforts to address concerns raised by the United 
States.
    Peru has ratified all eight ILOs core conventions, and 
Peru's constitution guarantees freedom of association, 
collective bargaining and the right the strike.
    In 2003, Peru enacted a major labor reform law 
strengthening labor rights and responding to ILO observations 
on their labor regime. The agreement includes a variety of 
tools that will help ensure that workers in Peru benefit from 
these reforms.
    First, the agreement will require Peru to effectively 
enforce its labor laws. The agreement also calls for Peru to 
provide fair, equitable and transparent domestic legal 
procedures through which persons can seek enforcement of Peru's 
labor laws.
    The agreement creates a labor cooperation and capacity 
building mechanism and a labor affairs council to oversee 
progress under the labor chapter.
    The environment chapter includes specific obligations in 
the core text of the agreement. Each party must effectively 
enforce its domestic environmental laws and this obligation is 
subject to dispute settlement provisions. The agreement also 
mandates the establishment of an independent secretariat to 
review and consider public submissions on environment 
enforcement matters. There is also a parallel environmental 
cooperation agreement promoting joint cooperative efforts to 
protect the environment including protection of endangered 
species.
    Mr. Chairman and Members of the Committee, Peru is a 
country heading in the right direction. Just last month the 
people of Peru elected a new President committed to promoting 
free market principles and democracy. On June 28th the Peruvian 
Congress approved our free trade agreement by a wide margin of 
support, 79 to 14. Meanwhile ATPA preferences will expire at 
the end of this year.
    We need to seize this opportunity to advance our 
partnership with Peru and help promote economic growth and 
political stability in Peru and throughout the Andean region.
    I hope that after examining the agreement, the Members of 
this Committee and the U.S. Congress will agree that it is a 
good agreement that is solidly in our National interests.
    Thank you, Mr. Chairman, Members of the Committee, I am 
happy to answer any questions you may have.

    [The prepared statement of Mr. Eissenstat follows:]

 Statement of Everett Eissenstat, Assistant U.S. Trade Representative 
       for the Americas, Office of the U.S. Trade Representative

    Chairman Thomas, Chairman Shaw, Ranking Member Rangel, Members of 
this distinguished committee, thank you for the opportunity today to 
discuss the economic and political benefits of our free trade agreement 
with Peru.
    I appreciate the views and guidance received from members of this 
Committee on the U.S.-Peru Trade Promotion Agreement over the last two 
years. I look forward to working with you and your colleagues as we 
seek congressional approval of this historic agreement.
    The United States-Peru Trade Promotion Agreement marks the 
beginning of a new chapter in our commercial partnership with Peru. The 
agreement sets out fair and reciprocal trade rules which will promote 
economic growth and prosperity in both countries. It eliminates unfair 
barriers to U.S. exporters, opening a market of 28 million consumers to 
U.S. manufacturers, farmers, ranchers, and service providers. In 2005, 
exports of U.S. goods to Peru reached $2.3 billion and through the 
implementation of this Agreement we expect our exports to rise 
significantly. While the benefits of this Agreement will accrue for a 
broad range of U.S. exporters across the country, states with the 
largest volume of exports to Peru--Texas, Florida, California, 
Louisiana, and Illinois--will gain even more export opportunities 
through the implementation of the Agreement. In fact, according to the 
International Trade Commission, our industrial and agricultural exports 
to Peru are expected to increase annually by as much as $1.1 billion 
once the Agreement is fully implemented. To date, it is the best 
agricultural deal we have ever negotiated in terms of access for U.S. 
farmers and ranchers to other markets.
    In exchange, the Agreement makes permanent the trade benefits 
Congress first authorized for Peru in 1991 under the Andean Trade 
Preference Act and enhanced significantly in 2002. By helping to create 
favorable conditions and incentives, the U.S.-Peru TPA will aid in 
sustaining real growth, creating more jobs, and attracting investment 
in Peru. This agreement will also support and enhance the democratic 
and economic reforms undertaken by Peru's leaders in recent years.
An Emerging Partnership
    I would like to put this Agreement in context. In 1991, the U.S. 
Congress with strong bipartisan support voted to authorize duty-free 
benefits to Peru through the Andean Trade Preference Act, or ATPA. ATPA 
was designed to help expand economic opportunities in the Andean region 
and encourage our Andean neighbors to move away from the production, 
processing and shipment of illegal drugs and to move toward legitimate 
products. Peru has benefited significantly from the program, steadily 
increasing its exports to the United States since 1993. Imports from 
Peru to the United States totaled $5.1 billion in 2005, of which $2.3 
billion benefited from ATPA preferences.
    In 2002, two events occurred which helped lay the economic and 
political foundation for this Agreement. First, Congress enacted the 
Andean Trade Promotion and Drug Eradication Act (ATPDEA), which renewed 
and enhanced trade preferences under the ATPA. Second, Peru's 
President, Alejandro Toledo instituted a series of political and 
economic reforms which have helped lift many Peruvians out of poverty 
and have solidified Peru's democratic institutions. These reforms have 
included: (1) restoring democratic practices, best illustrated through 
the free and fair presidential elections held this year; (2) increasing 
expenditures for health and social infrastructure programs; (3) 
undertaking initiatives in the area of labor rights, particularly to 
protect the rights of labor unions and children; (4) enhancing respect 
for the freedom of the press; and (5) improving Peru's investment 
climate. The entire region took note when the people of Peru reaffirmed 
their support for these positive reforms in June 2006, by electing a 
president in June of 2006 committed to continuing to pursue democratic 
and free-market principles.
    The results have been impressive. Since 2003, Peru's real GDP has 
grown at an annual average rate of five percent. In 2005, Peru's GDP at 
market exchange rates totaled $78 billion. Two-way trade between Peru 
and the United States increased from $3.4 billion in 2001 to $7.4 
billion in 2005, a growth of 118 percent over four years. This economic 
expansion has reached all levels of society. Even as Peru's population 
expanded by 1.6 million between 2001 and 2005, the number of people 
living in poverty declined. According to Peru's National Institute of 
Statistics and Information (INEI) and the Ministry of Economy and 
Finance during those four years, nearly 500,000 people were lifted out 
of poverty, and more than 1.3 million escaped extreme poverty.
    On June 28, the Peruvian Congress approved the United States-Peru 
Trade Promotion Agreement by a wide margin of support with 79 votes in 
favor and 14 against. The Agreement received full support from members 
of President-elect Alan Garcia's APRA party. Meanwhile, our trade 
preference program with Peru (ATPA) will expire at the end of this 
year. To ensure that these positive trends I have outlined continue, 
the time for Congress to act on this Agreement is now.
    The political and economic benefits of the United States-Peru Trade 
Promotion Agreement for the United States are significant 
(notwithstanding the small size of Peru's economy). This agreement 
makes trade between us a two-way street. Today, ninety-eight percent of 
imports from Peru enter the United States duty-free as a result of our 
unilateral preference programs or our most favored nation (MFN) duty-
free rates. Meanwhile, less than two percent of U.S. agricultural 
exports and four percent of U.S. industrial exports can enter Peru 
duty-free. This is attributed to the fact that Peru applies duty-free 
treatment to very few products on a MFN basis.
    The Agreement makes our trade relationship more reciprocal and more 
equitable. On the day the Agreement takes effect, 80 percent of our 
industrial products will be able to enter Peru duty-free. Within five 
years, an additional six percent of our industrial products will become 
duty-free and another four percent within seven years. Duties on the 
remaining 10 percent of industrial products will be phased-out over ten 
years. This will mean significant new opportunities for American 
manufacturers of technology products, mining, agricultural and 
construction equipment, medical and scientific equipment, auto parts, 
paper products and chemicals. Peru also agreed to join the WTO 
Information Technology Agreement, considered the ``gold standard'' of 
liberalization in high tech products.
    In agriculture we see a similar story. While Peruvian agricultural 
exports face few if any duties when they enter the United States, U.S. 
agricultural exports face Peruvian tariffs as high as 25 percent on 
most products and much higher tariffs for some others such as rice. 
Under Peru's current WTO commitments, these tariffs can legally be set 
as high as 30 to 68 percent ad valorem. Additionally, Peru applies 
variable tariffs based on price bands on more than 40 products, 
including corn, rice, dairy, and sugar.
    The United States-Peru Trade Promotion Agreement eliminates the 
tariff disparity that currently exists between the United States and 
Peru. It lowers tariffs, turning our one-way preference program into a 
trade partnership, and assures that our exporters will not face higher 
tariffs in the future. On the day the Agreement takes effect, almost 90 
percent of our current agricultural trade with Peru will enter the 
Peruvian market duty-free, providing opportunities to expand our 
current 20 percent share of Peru's agricultural market. In addition, 
Peru will immediately eliminate its price band system on trade with the 
United States. Tariffs on other agriculture products will be eliminated 
gradually, most within five to fifteen years. Within 17 years, all of 
our agriculture exports will be duty-free.
    In addition, the agreement will afford U.S. exporters preferential 
treatment that will position them favorably vis-`-vis exporters in 
third countries competing for the Peruvian market. These include strong 
agricultural producers, including Brazil, Argentina, and Chile, with 
which Peru has entered into preferential trade agreements over the past 
several years. The United States-Peru Trade Promotion Agreement also 
will give U.S. agriculture exporters a competitive edge over countries 
such as China, which are gaining market presence in Peru, but do not 
enjoy preferential access.
    Here are a few examples of how the Agreement will help boost our 
agricultural exports to Peru.
    U.S. beef and beef products currently face applied tariffs ranging 
from 0 to 25 percent in Peru, with ``bound'' (i.e. WTO ceiling) rates 
set at 30 percent. Under the Agreement, the tariffs on top priority 
products for the U.S. beef industry--high quality beef--will drop to 
zero immediately upon entry into force of the Agreement. This will 
enable our beef industry to compete on equal or better terms with beef 
products from Argentina and Brazil that currently enjoy preferential 
access to Peru's market.
    Tariffs on most U.S. pork products, currently set as high as 25 
percent, will be eliminated immediately or within five years after the 
Agreement enters into force. The U.S. pork industry will then be in a 
position to compete on an equal or more favorable basis with pork 
products from Chile that currently enjoy preferential access to Peru.
     The U.S. poultry industry is another clear winner. The Agreement 
provides immediate duty-free treatment for a 12,000-ton tariff rate 
quota for chicken leg quarters, and the quota will grow at an annual 
compound rate of eight percent.
    Other U.S. agricultural exports such as wheat, cotton, fruits, tree 
nuts, vegetables and vegetables products, are all expected to increase 
significantly as the Agreement will immediately eliminate Peru's 
tariffs on these products, which range from 0 up to 25 percent. Even 
for sensitive products for which tariffs are phased-out over longer 
time periods (e.g. rice and dairy), Peru will establish tariff rate 
quotas that will provide immediate duty-free access for certain 
quantities that grow as the tariffs are phased-out.
    In sum, this Agreement will substantially benefit U.S. agriculture.
    The Agreement benefits U.S. exports by going beyond tariff 
reductions. It eliminates non-tariff barriers that currently limit U.S. 
products and services from competing in Peru's market. Under the 
Agreement, Peru will become the first Andean country to lift its import 
restriction on remanufactured goods. This is a significant achievement, 
creating a new export market for U.S. remanufactured products such as 
computers, cell phones, construction and medical equipment, heavy 
machinery, and auto parts. The Agreement also establishes state-of-the-
art customs procedures to expedite the movement of goods between our 
markets.
    The Agreement will also provide important new opportunities for 
U.S. companies in Peru across a wide range of services sectors: 
telecommunications, banking, insurance, audio-visual services, 
transportation, engineering, computer and related services and express 
delivery, just to name a few. This agreement also provides 
comprehensive and strong protection for U.S. intellectual property 
interests, including copyright protection for the digital age, as well 
as patents, trademarks and proprietary data protections. Additionally, 
the Agreement provides for stronger enforcement against infringement of 
intellectual property. The United States-Peru Trade Promotion Agreement 
also includes strong anti-corruption procedures and provisions on 
transparency in government contracting and in other areas of trade that 
will help address this issue. The agreement also establishes a secure, 
predictable legal framework for U.S. investors in Peru.
    Let me briefly address two issues that we know are of particular 
importance to many members of this Committee--labor and the 
environment. Peru has undertaken significant labor reforms in the past 
several years, and is committed to undertaking additional reforms in an 
effort to address concerns the United States has raised. Peru has 
ratified all eight core conventions of the International Labor 
Organization (ILO) and Peru's Constitution guarantees freedom of 
association, collective bargaining, and the right to strike. In 2003, 
Peru enacted a major labor reform law, strengthening labor rights and 
responding to ILO observations on Peru's labor law. Among the changes 
it made, Peru's labor reform law reduced the number of workers needed 
to form a union, limited the power of the labor authority to cancel the 
registration of a union, and eliminated provisions that prohibited 
unions from engaging in political activity.
    The United States-Peru Trade Promotion Agreement includes a variety 
of tools that will help ensure that workers in Peru benefit from these 
reforms. First, the Agreement will require Peru to enforce its labor 
laws effectively. Should Peru fail to do so, the United States can 
invoke the Agreement's consultation and dispute settlement procedures, 
which could ultimately lead to the imposition of an annual monetary 
assessment of up to $15 million. The Agreement also calls for Peru to 
provide fair, equitable and transparent domestic legal procedures 
through which persons can seek enforcement of Peru's labor laws. The 
Agreement also creates a labor cooperation and capacity building 
mechanism to advance cooperation on labor matters. It establishes a 
Labor Affairs Council, comprised of senior government officials, to 
oversee implementation of and review progress under the labor chapter.
    The environment chapter, like the labor chapter, includes specific 
obligations in the core text of the Agreement. Specifically, each Party 
must effectively enforce its domestic environmental laws, and this 
obligation is subject to the Agreement's dispute settlement provisions. 
The environment chapter not only includes the obligation to effectively 
enforce domestic environmental laws, but also includes obligations on 
transparency, rule of law, procedural guarantees and access to the 
judicial, quasi-judicial and administrative proceedings and 
requirements for public participation in policy decisions in the area 
of trade and environment. The Agreement calls on the Parties to 
establish an independent secretariat to review and consider public 
submissions on environmental enforcement matters in Peru. An 
Environmental Affairs Council, comprised senior-level officials with 
environmental responsibilities, will review how the Agreement's 
environmental provisions are implemented. We have also included, for 
the first time in a U.S. free trade agreement, an article affirming 
both countries' commitment to protect and conserve biological 
diversity. Finally, in parallel with the free trade agreement, the 
United States and Peru concluded an Environmental Cooperation Agreement 
(ECA) that will promote joint cooperative efforts to protect the 
environment, including protection of endangered species and fragile 
ecosystems.
    We strongly believe that the obligations set out in the environment 
chapter and the cooperative activities we have agreed to undertake 
under the ECA will help make trade and environmental protection 
mutually supportive for both Peru and the United States.
    Mr. Chairman and Members of the Committee, the United States-Peru 
Trade Promotion Agreement enables us to turn our unilateral trade 
preference program into a trade partnership, level the playing field 
for U.S. exporters with respect to our competitors in Peru's market, 
encourage domestic political and economic reforms in Peru, and enhance 
protection for workers and the environment in that country. I hope that 
after examining the Agreement, the Members of this Committee and the 
U.S. Congress will agree that this is a solid agreement that is 
strongly in our national interest.
    Let me conclude where we began. Peru is a country heading in the 
right direction. Peru's leaders and its people are making the right 
choices. Just last month, faced with the choice to continue the 
economic and political reforms instituted by President Toledo or to 
follow an alternative, anti-market and anti-democratic model promoted 
by others in the region, the people of Peru elected a new president 
with a strong mandate to promote free market principles and a stronger 
democracy. Today, it is our turn to choose. We can turn our back on 
Peru by rejecting this Agreement or we can seize this opportunity to 
strengthen our partnership with Peru and help promote economic growth, 
prosperity and political stability in Peru and throughout the Andean 
region. I look forward to working with you Mr. Chairman, Ranking Member 
Rangel, and the other Members of this Committee to achieve strong 
bipartisan support for this Agreement.
    Again, thank you for the opportunity to testify today.

                                 

    Chairman THOMAS. Thank you very much. The Chair would 
recognize the gentleman from Florida, the Chairman of the 
Subcommittee on Trade, with the understanding that the Chair 
intends to enforce the normal rules of the Committee in terms 
of 5 minutes for questioning of the witness. Gentleman from 
Florida.
    Mr. SHAW. Thank you, Mr. Chairman. I doubt I will take my 5 
minutes. Mr. Eissenstat, your comments were very inclusive, and 
I think covered most of the things that were brought out and 
discussed and questioned on the opening statements.
    Looking at the Andean Free Trade Agreement and comparing it 
with the agreement that we have today, other than--that we have 
before us today, what advantages, other than the fact that the 
Andean Free Trade Agreement terminates at the end of this year, 
what advantages or what difference are Peruvian exports to the 
United States going to differ under this agreement?
    Mr. EISSENSTAT. Thank you, Congressman Shaw, that is a very 
good point. As you know, what we currently have with our trade 
regime with Peru is a unilateral preference program whereby 
their imports come into our country virtually duty free. We 
don't have that same reciprocity with Peru. Under the terms of 
this agreement, the preference program will turn into a two-way 
street. Many of our goods and services exports will be duty 
free. The agreement also opens up opportunities for services, 
provides manufacturers, as well as agricultural producers.
    So, it is a very solid agreement on the trade front.
    In addition, this agreement provides tools that we do not 
currently have to address labor and environment concerns that 
the United States may have or that may arise under the 
agreement. So, it is a very solid comprehensive agreement that 
addresses many concerns and reaches far beyond the current 
trade regime that we have with Peru today.
    Mr. SHAW. So, is it correct to say that this imposes 
certain restrictions and requirements on Peru that are not now 
required under the Andean free trade agreement?
    Mr. EISSENSTAT. Yes, Congressman Shaw, that is correct. 
There are provisions in here to not only enforce your own laws 
but there are cooperative provisions, labor capacity 
provisions, and a number of cooperative activities that need to 
be undertaken in the labor environment regimes that aren't part 
of our current preference program.
    This is in addition to on the trade front elimination of 
the price band for agricultural products, and duty free 
treatment for virtually 90 percent of our current trade for 
agriculture. So, there is really a broad panorama of benefits 
that we receive under the trade promotion agreement that we 
simply don't have under the preference program today.
    Mr. SHAW. Under the Andean free trade agreement, we got no 
consideration for our exports; is that correct?
    Mr. EISSENSTAT. That is right. It is a one way program. 
This agreement will turn that one way program into a two-way 
trade relationship.
    Mr. SHAW. The Gentleman from Illinois spoke about the 
tariffs that were placed on Caterpillar equipment going into 
Peru. I would say that, and I would certainly guess that 
Caterpillar and other American manufacturers, automobile 
manufacturers, are going to be much more competitive and will 
enjoy a much larger export into Peru because of this agreement. 
Is this a logical assumption?
    Mr. EISSENSTAT. Absolutely, Congressman, that is exactly 
right. As you know, under the agreement 80 percent of consumer 
and industrial goods will become duty free immediately. All 
other industrial goods and consumer exports will be phased out 
over 10 years, which is a very significant achievement; but I 
would like to point out, in addition to just duty reductions, 
this agreement provides for the elimination of non tariff 
barriers.
    For example, there are customs cooperation provisions, 
transparency, anti corruption provisions, as well as enhanced 
investment protection and elimination of a number of services 
barriers. So, the agreement really provides new opportunities 
and not just for big manufacturers. Today 80 percent of the 
exporters to Peru are small businesses, which amounts to a 
little over 4,000. For small businesses, elimination of these 
nontariff barriers are very significant. This agreement creates 
opportunities across the board for workers, farmers and 
exporters in the United States.
    Mr. SHAW. Finally, this agreement then would help us on our 
end balance of trade, cut down on our trade deficit and promote 
American jobs. Is that a correct assumption?
    Mr. EISSENSTAT. Exactly right. This agreement, as the ITC 
study demonstrates, would reduce our trade deficit with Peru by 
25 percent.
    Mr. SHAW. Thank you. I yield back, Mr. Chairman.
    Chairman THOMAS. Thank the gentleman. Gentleman from New 
York wish to inquire.
    Mr. RANGEL. Thank you, Mr. Chairman, and congratulations 
for assuming your new responsibilities.
    Mr. EISSENSTAT. Thank you.
    Mr. RANGEL. I am particularly impressed with the fact that 
you worked for Chairman Jim Kolbe and Senator Grassley and 
might able to be of some assistance to us to get over the 
legislative problems that we have in presenting our views to 
you.
    I assume it makes your job easier when you are dealing with 
the House and Senate in a bipartisan way.
    Mr. EISSENSTAT. Ranking Member Rangel, it does. I have 
enjoyed working in the House. I have enjoyed my work in the 
Senate, and in fact, it is an honor to be here today. I hope 
that the experience I have gained will enable me to work with 
you on a bipartisan way to advance our common agenda through 
the trade agreements.
    Mr. RANGEL. How long have you been with the USTR?
    Mr. EISSENSTAT. I started there in January of this year.
    Mr. RANGEL. During that period of time, have you ever 
hurried up the USTR meeting with Members of this Committee on 
trade issues, Republicans and Democrats, together?
    Mr. EISSENSTAT. Well, I have actually been focused on my 
current portfolio----
    Mr. RANGEL. Just have you ever heard of it? Anybody?
    Mr. EISSENSTAT. I have certainly heard of meetings with 
Members of Congress----
    Mr. RANGEL. I know, Republican Members and Democratic 
Members, the magic word is ``together.''
    Mr. EISSENSTAT. I am confident those meetings have taken 
place. I am confident they have.
    Mr. RANGEL. You are? Based on what rumor?
    Mr. EISSENSTAT. Congressman----
    Mr. RANGEL. I am going leave that alone because we want to 
start this thing off right.
    Having said that, do you think that it is right for 
Democratic Members of Congress to have to deal with foreigners 
as it relates to their trade interests? Do you believe that the 
proper people for us to basically deal with is your office? If 
we have an interest in what you are negotiating with a foreign 
country?
    Mr. EISSENSTAT. Congressman, I know that during my work in 
the Congress, we frequently consulted not only with foreign 
governments, but also with the USTR. I think that is part of 
the process.
    Mr. RANGEL. Let's put it the other way around. Should we 
not deal with the USTR and then also consult with foreign 
governments?
    Mr. EISSENSTAT. I certainly think that the consultation 
process is very important on both fronts.
    Mr. RANGEL. Well, if you really believe that, you can help 
us to get closer together.
    Do you think that the basic difference between Democrats 
and Republicans on this Committee, and perhaps on the floor, 
being the question of labor standards and environment, do you 
think that is basically the issue?
    Mr. EISSENSTAT. I think there is a lot to support in this 
agreement. I think that when we have an opportunity to review 
it, Members will find----
    Mr. RANGEL. I said, do you think that basically the 
difference that we have is in the area of labor standards?
    Mr. EISSENSTAT. I think there is a lot of interest in labor 
on both sides of the aisle----
    Mr. RANGEL. Let me try it again. Do you think that the 
basic difference between the Democrats and Republicans as 
relates to this and any other trade bill is the inability to 
get the language which we think is just basic and protecting 
laborers, do you think that is the basic difference? Have you 
known, read or experience where language has come into those 
bills that protect basically the ILO standards, that Democrats 
have voted for those for those bills? Isn't that a part of your 
legislative memory?
    Mr. EISSENSTAT. We have worked, and I worked, to find ways 
to----
    Mr. RANGEL. I asked a question. When language has been put 
into those bills, albeit with a lot of resistance, have you not 
seen an increase dramatically in Democrat support for those 
bills that included this type of language?
    Mr. EISSENSTAT. Well, we have seen different variations. 
For example, in the Chile agreement there was strong bipartisan 
support. There has been----
    Mr. RANGEL. Hasn't it been based on labor standards that 
you have seen the difference in the bipartisanship?
    Mr. EISSENSTAT. Well----
    Mr. RANGEL. Don't let me give up on you, Mr. Ambassador. I 
am going to assume that what I am saying is correct unless you 
can challenge it so that I can move on. Is it true that 
President Toledo gave a public statement, certainly gave it to 
us, he said it publicly, that he was willing to accept the 
standards as outlined by the ILO, you know which area that I am 
dealing with, and somehow that did not find itself into, the 
agreement, is that a fact?
    Mr. EISSENSTAT. My time has expired but with the permission 
of the Committee, I am happy to answer. I think, we try to 
address a lot of concerns raised by many different Members on 
both sides of the aisle. President Toledo did not make an offer 
to include ILO standards----
    Mr. RANGEL. He did or did not?
    Mr. EISSENSTAT. He did not.
    Mr. RANGEL. It was reported that he did by Democratic 
Members and by the press and by--gee, the assistant is more 
difficult than I thought.
    He made remarks in front of U.S. Chamber of Commerce in 
early September, 16, I hope you have time to meet with us 
privately, we haven't made much progress here today. Thank you.
    Mr. EISSENSTAT. Thank you.
    Chairman THOMAS. The Chair would now recognize the 
gentleman from Connecticut. Prior to that would the gentleman 
yield briefly?
    Mrs. JOHNSON OF CONNECTICUT. The gentlewoman would yield.
    Chairman THOMAS. In the short time that you have been with 
USTR, are you familiar with the organized letter writing 
campaign by the minority staff to every government official 
that we have attempted to negotiate in an official and formal 
way and the pen pal structure of continuing to bash foreign 
officials if they don't write the letters exactly the way the 
minority staff wants them written? Are you familiar with that 
in your recent experience?
    Mr. EISSENSTAT. Chairman Thomas, we have seen some letters 
from Members of the Committee to foreign government officials 
on specific issues, yes.
    Chairman THOMAS. Thank you.
    I thank the gentlewoman.
    Mrs. JOHNSON OF CONNECTICUT. Mr. Eissenstat, in the 
materials provided by your office to us, it makes clear that 
eight of the ILO core conventions have been ratified. Is that 
not so?
    Mr. EISSENSTAT. That is right.
    Mrs. JOHNSON OF CONNECTICUT. Those are the same eight that 
were ratified by Chile?
    Mr. EISSENSTAT. That is correct.
    Mrs. JOHNSON OF CONNECTICUT. When those standards are 
ratified, they become part of the Peruvian law, and therefore, 
the provisions in the trade agreement to enforce our laws is 
the equivalent of the requirement to enforce the ILO core 
standards, is that correct?
    Mr. EISSENSTAT. Yes, Congresswoman, that is correct.
    Mrs. JOHNSON OF CONNECTICUT. It is difficult to really 
understand what some of my colleagues on the other side of the 
aisle are concerned about when it is very clear what progress 
Peru has made on labor standards, has there been the same 
effort in this agreement that there was in the CAFTA agreement 
to address the issue of institutional capability to enforce?
    Mr. EISSENSTAT. Congresswoman, that is an excellent point. 
We have built into the agreement provisions for capacity 
building and cooperation that mirror some of the CAFTA 
provisions. We are committed to working with the Peruvian 
government to increase their institutional capacity to enforce 
their own laws. As you point out, they have a very strong labor 
regime, having ratified all eight of the ILO core provisions as 
well as taking additional steps to strengthen their labor laws.
    Mrs. JOHNSON OF CONNECTICUT. Could you give us a little 
flavor of what institutional building means? What is it that 
the agreement requires of Peru that would give us confidence 
that they will improve their ability to enforce their labor 
laws? At the same time, so I can get my questions in and you 
can manage the answer in the time remaining, my friend from 
Michigan cites the compensation fund established by Peru.
    Now, we have a parallel approach in American law through 
the Trade Adjustment Assistance Act to help those areas of 
industry or agriculture that are specifically disadvantaged by 
the competition of foreign guides. We do that routinely. We 
help those employees get retrained, we help that industry 
strengthen itself to be able to compete and so on and so forth. 
This compensation fund that the government of Peru has 
established, according to my colleague from Michigan's 
statement, which I didn't get a chance to read all of, but he 
says that the small farmers see it as completely inadequate.
    What is the discussion going on in Peru? What is the 
commitment of the Peruvian government to a trade adjustment 
approach so that those affected by trade negatively, as there 
always will be as we open markets, will get the support they 
need to assure that they can support their families and be 
strong economic partners in their communities?
    Mr. EISSENSTAT. Thank you. Excellent questions. First, let 
me address the issue of what in the agreement will actually 
enable us to move forward on labor issues with Peru.
    First, as you know, any violations of a labor commitment--
their failure to enforce their own laws, which are quite 
strong, will allow us to go to consultation under the dispute 
settlement provisions if it is necessary and ultimately to 
impose a fine, which we have some control over how that fine is 
to be utilized. It actually goes to the root of the problem, to 
remedy the underlying problem, which is a better result than 
simply leaving the practice in place with sanctions, but there 
are also are other constructive ways to solve labor problems in 
the Agreement. For example, we have the formal consultation 
mechanism, capacity building, a senior level labor affairs 
council where we can consult on a number of issues to advance 
labor rights in Peru. These mechanisms are going to be created 
as a result of the Agreement.
    Addressing quickly your point on what the Peruvian 
government has done and what they intend to do to ensure that 
the benefits of this agreement go to the broadest range of 
people. First, let me point out if we do not pass this 
agreement, they are going to lose many good export jobs that 
will put a lot of people in very dire straits. So, I think they 
are counting on our passage of this agreement to ensure that 
they can keep those jobs.
    In addition, the Peruvian government has passed a $160 
million compensation program to help aid small farmers. 
President-elect Garcia has undertaken a number of initiatives. 
It is not just about being able to produce, but how you produce 
and can you get financing and can you get your products to 
market. These are the kinds of things we are going to be able 
to work with the Peruvian government on.
    President-elect Garcia has talked about building highways 
from the highlands to the ports so they can actually get their 
products from the poor areas of the country down to the 
waterfront and to the export markets to be able to compete more 
effectively. In addition President Garcia has talked about a 
titling program that will enable a small farmer to be able to 
get financing that they simply can't get today.
    So, there are a number of ways we can work with them 
through this agreement.
    Mrs. JOHNSON OF CONNECTICUT. Thank you. My time has 
expired. Thank you, Mr. Chairman.
    Mr. SHAW. [Presiding.] Mr. Levin.
    Mr. LEVIN. Thank you, Mr. Shaw.
    Just quickly for you, Mr. Eissenstat, and I hope everybody 
else, why this core labor standard issue matters to the United 
States, in four respects: It matters to the workers in a 
country if they have their rights; it matters to that Nation; 
it matters to our businesses that need middle-classes to sell 
to; and it matters to our workers who don't want to compete 
with entities in nations where the workers don't have their 
rights. So, that is why the emphasis on core labor standards 
and how it affects the path of globalization.
    It is not a narrow issue, it is not a special interest 
issue, it is not pushing any buttons. It is a basic issue 
relating to trying to make globalization work better.
    Let me just say about what you said about this agreement 
and the Generalized System of Preferences (GSP). Mr. 
Eissenstat, we have dealt with each other, and I welcome you 
and I congratulate you.
    Look, under GSP, it is true that if they are not taking 
steps to implement the core labor standards, under GSP, we have 
the unilateral power to withdraw GSP, right?
    Mr. EISSENSTAT. That is correct. Withdraw, suspend or 
limit.
    Mr. LEVIN. Okay. So, for you to say that enforce your own 
laws is a stronger standard than is presently in GSP, is not 
correct. You say ``effectively'' in your testimony, it is 
effectively enforced. The agreement will require Peru to 
enforce its laws effectively. They could make their laws worse 
and they would be meeting the requirement of the FTA, right?
    Mr. EISSENSTAT. Congressman, that is not the case with 
Peru.
    Mr. LEVIN. No, no, no, I am not saying Peru would do that. 
Just answer the question. If a country under the standard 
enforce your own laws makes them worse, we have no remedy, 
right?
    Mr. EISSENSTAT. First let me say that----
    Mr. LEVIN. How about yes or no?
    Mr. EISSENSTAT. We have multiple mechanisms, including the 
consultation mechanism.
    Mr. LEVIN. You can't do anything if the laws are made 
worse, right? Except to consult?
    Mr. EISSENSTAT. There are provisions and obligations in the 
Agreement that strive to improve upon their labor regime.
    Mr. LEVIN. That is not enforceable, right?
    Mr. EISSENSTAT. It is subject to consultation.
    Mr. LEVIN. But not enforceable. Here is my point. Look. We 
have made some progress talking about this issue, but let's 
have straight talk. There is nothing we can do if the laws are 
made worse.
    I want to read to you a quote from Toledo that the Chairman 
talked about when he came before the Committee, he asked us not 
to straitjacket. We are talking about last basic ILO standards, 
the right to negotiate, the right to bargain, child labor, 
forced labor and anti-discrimination. The basic standards. By 
the way, the conventions themselves are not enforceable laws. 
Those conventions have been signed in Peru when Fujimori 
strangled the rights of workers in Peru. I want to read 
Toledo's statement, the president, whom I had the privilege of 
meeting with whom I admire. We failed to take him seriously on 
this and create a bipartisan foundation for trade. This is an 
exact quote from a Chamber of Commerce document of what the 
President said.
    ``We can incorporate into the Andean free trade agreement a 
page or a paragraph that includes meeting the international 
standard of labor requirements. We are members of the ILO and 
we have to comply with it so we can incorporate it.''
    Let me just ask you quickly, to change the subject for a 
moment, on the medicine issue and the provisions there, there 
are a couple of side letters. We raised this issue with 
Morocco, the ability of a county and its people--by the way, do 
you know the rate of poverty today in Peru?
    Mr. EISSENSTAT. It is around 50 percent.
    Mr. LEVIN. Right. Extreme poverty?
    Mr. EISSENSTAT. I believe if my memory is correct, it is 
about 30 percent.
    Mr. LEVIN. I believe actually it is not quite that high. 
That is why this matters.
    Including about medicines, there are two side letters. We 
raised this issue when Morocco came up. Are those side letters 
enforceable the same as other provisions in the agreement?
    Mr. EISSENSTAT. I am sorry, could you identify which side 
letters exactly?
    Mr. LEVIN. It is on prescription medicine. It is on the 
access to generics.
    Mr. EISSENSTAT. The understanding is a bilateral 
commitment, and it is a clarification of the agreement.
    Mr. LEVIN. Is the language in those----
    Mr. SHAW. The time of the gentleman has expired. The 
Chairman said he is going to enforce the 5-minute rule.
    Mr. Herger.
    Mr. HERGER. Thank you, Mr. Chairman. Mr. Eissenstat, thank 
you for joining us. As a result of the PTPA, U.S. exports stand 
to grow by $1.1 billion with a corresponding growth in our GDP 
of $2.1 billion. This is significant for business and growers 
alike in my home State of California, which ranked fourth in 
terms of highest exporting States to Peru in 2004 and third in 
2005.
    I am especially pleased to see that more than two-thirds of 
U.S. agriculture exports to Peru will become duty free 
immediately according to the business roundtable crop export 
from California it could increase by 61.5 percent after 
implementation of the agreement. This is critical to the 
almond, wheat and other growers in my heavily agricultural, 
rich, Northern California Congressional District. For other 
agriculture, such as rice, which is similarly a key commodity 
in my district, we will still see faceouts only stretched out 
over a longer time. However, the end result will be the same: 
Increased market access for U.S. growers.
    I am also pleased that we have such a willing friend in 
Peru, noting that the Peruvian congress overwhelmingly approved 
the trade agreement on June 28th. There is no question that for 
Peru, the impact of this agreement will extend beyond greater 
access to less expensive goods from the United States.
    Speaking generally, what, in your view, what is your view 
on how this agreement will help foster greater economic and 
political stability, both for Peru and the region?
    Mr. EISSENSTAT. Thank you, Congressman. This agreement, as 
you know, provides for significant benefits to the agriculture 
community. Not only does it provide for immediate duty free 
access for a lot of our products, but also, as you point out 
for rice, preferential access under a pretty significant TRQ.
    So, it is quite an impressive agreement on agriculture. As 
far as stability in the region, I think there is no question 
that passage of this agreement is critical to providing a 
stable economic environment in Peru.
    When you look at the alternative, which is the uncertainty 
of a preference program versus the certainty of an agreement, 
investors will know what the future is going to look like so 
they can make business decisions, based upon open markets and 
opportunities that they don't have today. It is going to create 
new opportunities for Peruvians, it is going to help, as you 
note, a lot of people that have been lifted out of poverty 
because of the preference programs, and I believe that this 
will help bring even more people out of poverty and create more 
opportunities.
    The institutional reforms that have been undertaken by 
President Toledo are profound. The labor reforms are very 
significant. He has worked to enhance the democratic 
institutions. We believe President-elect Garcia is committed to 
that as well.
    Clearly, a cooperative arrangement through a trade 
agreement provides us with a much better ability to continue to 
work with the Peruvian government than were we to reject this 
agreement, which President Toledo himself has strongly endorsed 
and noted is very important to the future of his country. So, I 
think it is quite significant in many different ways just 
beyond trade. For stability in the region, it sends a strong 
message to others in the region that if they make the right 
choices, if they seek to engage with the United States, there 
is opportunity and there is a benefit, which is a very 
important factor today.
    Mr. HERGER. Thank you. Let me ask another question. Some of 
the concern that we hear from Members on the other side of the 
aisle has to do with labor. Isn't it correct that as we look in 
past decades, that agreements, as our trade has improved with 
countries like Japan, looking to post-World War II, to China, 
to a number of countries that were under developed at that 
time, that we have seen by the natural process labor wages 
increase just through competition in these countries?
    Mr. EISSENSTAT. It has a very significant effect. I think a 
profound example is countries like North Korea and South Korea. 
If we look at the border between North and South Korea, the 
difference is clear between the ability of the people to 
participate in the economy and provide a working salary for 
their family. Then you take a look in Latin America, a country 
like Chile, that has embraced open market and democracy, it has 
been able to bring many of its people out of poverty. We expect 
that trend to continue.
    Mr. SHAW. The time of the gentleman has expired. Mr. 
McCrery.
    Mr. MCCRERY. Mr. Eissenstat, you have already talked a 
little bit about the prospect for increased job creation here 
in the United States as a result of the Peruvian trade 
agreement. Doesn't Peru already receive duty free access to the 
United States market for most of its goods?
    Mr. EISSENSTAT. That is correct.
    Mr. MCCRERY. Does the United States currently enjoy duty 
free access for most of its goods to Peru?
    Mr. EISSENSTAT. No, we do not.
    Mr. MCCRERY. As you stated, this agreement would provide 
that duty free access to a wide range of goods and services 
provided by the United States, is that correct?
    Mr. EISSENSTAT. That is absolutely correct.
    Mr. MCCRERY. Therefore, the logical could conclusion is 
increased exports to Peru.
    Mr. EISSENSTAT. Absolutely. In the ITC report, it 
solidifies that conclusion.
    Mr. MCCRERY. Generally, if we have increased exports, that 
means increased jobs here in the United States, right?
    Mr. EISSENSTAT. That is right.
    Mr. MCCRERY. Isn't it true that those jobs associated with 
trade exports are generally higher paying jobs than the average 
jobs in our economy?
    Mr. EISSENSTAT. That is correct, 13 to 18 percent higher.
    Mr. MCCRERY. So, this is a good agreement for job creation 
of high paying jobs in this country, right?
    Mr. EISSENSTAT. That is correct, Congressman.
    Mr. MCCRERY. Thank you. I want to talk just a minute about 
the GSP and the Andean agreement and the labor question. Isn't 
Peru already a member of the Andean agreement and the GSP?
    Mr. EISSENSTAT. That is right. They receive benefits under 
both preference programs.
    Mr. MCCRERY. How long have they been members?
    Mr. EISSENSTAT. The Andean preference program has been in 
effect since 1991. It was enhanced in 2002. I am not clear how 
long GSP has been in place, but I would suspect a similar 
timeframe.
    Mr. MCCRERY. Has Peru been eligible for those for quite 
some time?
    Mr. EISSENSTAT. Yes, Congressman, that is correct.
    Mr. MCCRERY. As was pointed out by a Member of the 
minority, under GSP, the administration here in the United 
States can suspend or take other actions if they think a 
country under the GSP, or the Andean trade agreement, has gone 
backward in its labor rights, is that right?
    Mr. EISSENSTAT. We can withdraw, suspend or limit benefits 
under the preference programs.
    Mr. MCCRERY. Has either Democratic or Republican 
administrations taken such action with regard to Peru the 
entire time they have been under GSP?
    Mr. EISSENSTAT. They have not.
    Mr. MCCRERY. So, why would one believe that the last 15 
years experience would be any different going forward, 
particularly when they agree under this agreement to enforce 
their own laws and to have binding dispute settlement with this 
country under this agreement?
    Mr. EISSENSTAT. Well, we believe the better approach is 
passage of this agreement and the right thing to do to ensure a 
strong labor regime is to see the opportunities that have been 
provided by the Toledo regime. They do have very strong labor 
laws, and we are able to lock those in with the enforce your 
own law standard and assure they will continue to do so as the 
agreement continues.
    Mr. MCCRERY. Thank you, Mr. Eissenstat.
    Mr. SHAW. Mr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I am sure my 
colleague from Louisiana doesn't mean to imply that if 
something hasn't happened, we should give it up and forget it. 
If something is a good thing to do, maybe you should push a 
little harder. There is oversight and questions that might be 
raised about that, but let me move to something else, to 
something that Mr. McCrery alluded to.
    Presently, the Majority Leader in the Senate, Mr. Frist, 
said we are going to be done in September and the Majority 
Leader in the House of Representatives, Mr. Boehner, has said 
we are going to be done in September. Being a little bit 
practical and having hung around these halls for a while, I 
sort of doubt this is going to get done by then. So, the 
question is what happens to the Andean agreement and GSP? Both 
of those are either set to expire, one on the 1st of October, 
and the other the end of the year, and it is my question, do 
you have a fallback plan or are you just going to let those 
things hang or fall on the basis of this agreement?
    What is the strategy of the Trade Representative? Usually, 
and I will tell you that GSP has been here since 1971, usually 
quite a bit in advance the administration puts forward an 
extension bill. We see nothing coming out of you, nothing 
coming out of the Committee. So, it looks like you are just 
trying to get rid of GSP and force the Peruvians and some 
others into these individual national agreements.
    Mr. EISSENSTAT. Thank you, Congressman. We are trying to 
take advantage of the opportunity the Trade Promotion Authority 
provides to expand opportunities for workers, to advance labor, 
intellectual property rights, and investment.
    Mr. MCDERMOTT. I understand your talking points. I am 
asking you what if you fail in this advancing and all the stuff 
you are talking about? Just suppose the Congress doesn't act on 
the Peruvian agreement. What happens then to the exporters and 
importers from Peru, for instance, or Bolivia, or from Ecuador 
or anywhere else?
    Mr. EISSENSTAT. Congressman, as you know, both programs are 
created by Congress. Congress is the final arbiter of what 
happens with those programs. We have heard some Members of 
Congress, both from the House and Senate, express skepticism 
over the utility of these programs and their continued 
viability.
    What we hope to achieve through both the Doha round and 
these agreements are opportunities that provide certainty to 
investors and certainty to workers. On the expiration of the 
programs, we certainly want to continue to consult with you and 
other Members of Congress as to whether it is appropriate to 
continue them, and, if so, in what form.
    Mr. MCDERMOTT. So, what you are saying to me is that this 
is a deliberate strategy to get rid of GSP as a structure that 
the trading world can count on by forcing people either to go 
with these individual things or to go for the Doha round, is 
that right?
    Mr. EISSENSTAT. The strategy is to provide opportunities 
through these trade agreements that simply don't exist today.
    Mr. MCDERMOTT. What is there in GSP--what additional to GSP 
is there in this trade agreement?
    Mr. EISSENSTAT. There are opportunities for our workers to 
export to other markets here. This is a big part of what we are 
seeking to do through these trade agreements. It also opens up 
markets for service providers.
    Mr. MCDERMOTT. You mean like jet engines and computers and 
those kinds of things we will be exporting to Peru?
    Mr. EISSENSTAT. There is a broad panorama----
    Mr. MCDERMOTT. Textiles? We will start exporting textiles 
to Peru?
    Mr. EISSENSTAT. We expect to enhance a number of our 
exports. Today we have exports of machines--somebody pointed 
out Caterpillar mining equipment. Obviously Peru imports a lot 
of those. Other exports that are likely to benefit beyond the 
agricultural goods, include things such as plastic, cotton, 
cord, grains, computer, high-tech equipment. There is quite a 
bit.
    Mr. MCDERMOTT. My time is almost up. I would like a yes or 
no. Does the administration support the extension of GSP and 
the ATPA?
    Mr. EISSENSTAT. We are working with Congress to----
    Mr. MCDERMOTT. Do you support it?
    Mr. EISSENSTAT. Congressman, GSP is not in my portfolio, 
and we are in a consultation process with the Congress 
regarding the viability of the program.
    Mr. MCDERMOTT. Well, I wonder why they didn't send up 
somebody to talk about GSP, since is seems so integrally 
related to this issue. Why would you dodge that question? Shaw 
the time of the gentleman has expired.
    Mr. Camp.
    Mr. CAMP. Thank you, Mr. Chairman. Mr. Eissenstat, I am 
going to sort of add to some of the comments that Mr. McCrery 
made about the fact that Peru has unilateral trade preferences 
into the United States and we have tariffs on our goods going 
back to Peru. I understand that the agreement would eliminate 
many of those tariffs, particularly on products in the Michigan 
economy like machinery, computer and electronic products, 
equipment, furniture, chemicals. Michigan's economy had last 
year in 2005, an 11.4 million in exports to Peru and today 
Peruvian tariffs add between 5 and 12 percent to the price of 
our Michigan products that we are trying to export.
    As has been pointed out, the United States has no tariffs 
on equivalent product from Peru into the United States. 
According to the U.S. Department of Commerce and the U.S. ITC, 
a U.S.-Peru TPA would increase exports by the key industries I 
mentioned earlier to Peru. Those would increase by between 41 
and 71 percent, which is a stunning amount. Obviously, in a 
State as hard hit as ours, looking for new markets is 
absolutely critical.
    I understand that 74 percent of Michigan's transportation 
equipment exports would receive immediate duty free treatment, 
about 84 percent of Michigan's machinery exports would get 
immediate duty free treatment, and for chemical products, 76 
percent of our exports would have immediate duty free treatment 
into Peru. Obviously, the comment is not just on those numbers, 
but the jobs that are supported by those exports.
    Do you have some idea of how the job creation in the United 
States might be improved as a result of this agreement?
    Mr. EISSENSTAT. Well, thank you, Congressman, that is a 
great question. The ITC has done an analysis of this agreement 
that shows that we expect exports to grow by as much as $1.1 
billion annually once the agreement is implemented. Those 
numbers, of course, don't take into account service exports, 
the elimination of non-tariff barriers, and the investment 
protections that will be accorded to our innovative industries. 
So, there are great opportunities for exports, both from 
Michigan and other areas of the country as well.
    Mr. CAMP. I think particularly we have had a great deal of 
support for unilateral trade preferences to the Andean 
countries. To have reciprocal benefits in this agreement would 
seem to me to follow the logic of that very easily. Thank you 
very much for your testimony and for being here today. I 
appreciate it.
    Mr. EISSENSTAT. Thank you, Congressman.
    Mr. CAMP. I yield back.
    Mr. SHAW. The gentleman yields back the balance of his 
time. Mr. Lewis.
    Mr. LEWIS OF GEORGIA. Welcome, Ambassador Eissenstat. 
Welcome. It is good to see you. I wish you well.
    I am a little troubled. I don't quite understand what type 
of message do we send when you will fight tooth and nail to 
protect pharmaceuticals, software, what type of message are you 
sending to the community of nations, to workers around the 
world, that you won't stand up and fight for poor, hard-working 
human beings?
    Mr. EISSENSTAT. Congressman Lewis, I think that the record 
on our engagement through our trade policy with countries 
around the world has shown that we send a message that if you 
want to engage with us, we have certain expectations. We have 
expectations on labor rights and we expect those rights to be 
consistent with ILO standards. If you look at Peru's labor 
regime, they have taken steps that are quite significant.
    I just want to cite a couple of points that the ILO itself 
has said about Peru's labor regime. They have been cited as a 
``case in progress.'' The ILO noted with satisfaction the 
adoption of their labor reforms in 2005. This year, the ILO 
noted that this was a significant achievement during a regional 
meeting of the Americas. They also cited Peru, and I would like 
to quote this, ``is a country which has succeeded in rebuilding 
a culture of dialog between workers, employees and the 
government.''
    When we engage with countries in the region, we do address 
labor. We expect them to have stronger labor rights. We have 
indicated to Panama and Ecuador that any country that wants to 
engage with us in a trade agreement needs to have certain 
standards. These countries recognize that, and they have moved 
significantly to try to address our concerns.
    Peru just recently made a number of very significant steps 
on its labor reforms. In fact, just this month, Peru passed a 
new labor inspections law that is quite promising, the law 
creates separate office for fines and inspections. This will 
obviously free up inspectors to go out and make sure the laws 
are enforced. The law creates a national office of inspections 
to harmonize the inspection processes throughout Peru and 
professionalizes the labor inspection regime. This is in 
addition to all of the reforms they undertook in 2003 and 2005. 
Somebody had mentioned the Supreme Decrees that have been 
recently adopted to address some of the ILO concerns that have 
been raised. I think that is a broad sweep forward. Our 
engagement on the trade front has had a lot to do with that, 
and I think when the agreement becomes part of our dialog, we 
will have further opportunities to advance labor issues.
    Mr. LEVIN. Will the gentleman yield?
    Mr. LEWIS OF GEORGIA. I yield to my friend.
    Mr. LEVIN. Mr. Eissenstat, if you listen to your language, 
they need to have certain standards, ILO standards. You expect 
them to. You don't negotiate that they shall have them with 
reasonable transition as part of the agreement. In fact, you 
tabled the opposite, enforce your own laws, as the standard, 
not what you say you expect or they need to have.
    Could I ask Mr. Lewis to give me 30 seconds to ask you, 
enforce your own laws, is that standard used in any other 
section of our FTA, other than labor and the environment?
    Mr. EISSENSTAT. Well, two points. First, we follow the 
guidance----
    Mr. LEVIN. I know, but answer my question, is that standard 
used in any other part of the FTA?
    Mr. EISSENSTAT. It is used in the environment and labor----
    Mr. LEVIN. Other than the environment and labor. Is it used 
in the FTA in any other provision?
    Mr. EISSENSTAT. We follow the guidance. I don't believe the 
guidance directs us to do that in other areas.
    Mr. LEVIN. So, the answer is no?
    Mr. EISSENSTAT. If you look at trade agreements around the 
world and the labor and environment provisions, you will note 
that the United States is one of the leaders in this area.
    Mr. LEVIN. We have known each other a long time. Answer yes 
or no: Is enforce your own laws used in any other section or 
provision of the U.S.-Peru FTA? Yes or no?
    Mr. EISSENSTAT. It is not to my knowledge. We follow the 
guidance of Congress.
    Mr. LEVIN. The answer is no?
    Mr. EISSENSTAT. That is my understanding.
    Mr. LEVIN. Thank you for yielding.
    Mr. SHAW. The time of the gentleman has expired.
    Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Mr. Chairman. Mr. Eissenstat, it is 
nice to see you again. Congratulations on your new position.
    In my judgment, the United States has no better ally in 
South or Central America than Peru. There is no better champion 
in the region of democracy, economic growth and stability than 
President Toledo, and there is no better Ambassador to the 
United States than Ambassador Ferrero. I know a lot of us who 
worked closely with Ambassador Ferrero are going to be sorry to 
see him leave in 2\1/2\ weeks when the new administration takes 
over.
    Over the last 5 years, I have seen firsthand President 
Toledo's commitment to improving the lives of the people of 
Peru and to substantially reducing poverty. My family and I 
have traveled to Peru over the last dozen years at least three 
times. Twenty other families in our community in Minnesota have 
adopted Peru for our mission work, did adopt Peru for our 
mission work many years ago.
    I traveled at my own expense, I might add, because I 
believe I have been able to get to know many of the people of 
Peru a lot better than on any congressional delegation trip 
where sometimes it becomes a dog and pony show and you see what 
they want to show you.
    I have been to Flores de Vios many, many times, the 
shantytown on the outskirts of Lima where the poorest of the 
poor live; dirt floors, cardboard shacks, average income, $400 
a year for a family of four. I have been to Sima many times, 
the orphanage for abandoned street children, where we have 
established relationships with many of the children and Father 
Louis and the staff there. So, I think I know Peru as well as 
anybody on this Committee, the people of Peru.
    I myself know and have seen that the living standards have 
improved under President Toledo. I know that Peru's economy has 
dramatically improved. Peru is much more stable than it was, 
certainly than in the pre-Toledo years. I think there is no 
question that the Peru FTA, trade promotion agreement, will 
help achieve President Toledo's vision of a strong democracy, 
strong economic growth and stability in the region. No question 
in my mind. It is a win-win. Win for the United States and a 
win for the people of Peru. It will increase the living 
standards and decrease poverty in that country.
    I want to ask you, Mr. Eissenstat, if seems to me that the 
300 pound gorilla in the region is also relevant in this 
discussion today in terms of the stability of that region, 
certainly it is very relevant to this discussion today, and of 
course, I am alluding to the president of Venezuela. No 
question that we need a counterbalance to the Venezuelan 
President's power in that region, his attempt to move South 
American countries away from the democratic west and toward his 
autocratic regime and his dictatorial practices.
    Let me ask you this question: As President Chavez continues 
to put intense political pressure on his South American 
neighbors, as he continues to exert through sheer unabashed 
bribery and other tactics such pressures, do you believe this 
agreement will provide that counterbalance to Chavez's pressure 
to move South American countries away from democracy and toward 
more autocratic governments?
    Mr. EISSENSTAT. Congressman Ramstad, that is an excellent 
point. I think you have hit on a fundamental issue that I hope 
doesn't get lost in this debate. There truly is a battle of 
ideas in the region today. Countries are choosing how to engage 
in the world economy and the kind of democracy that they want 
to see. I am confident the agreement will help solidify the 
institutional reforms that President Toledo has taken. I am 
even more confident the rejection of this agreement will send a 
signal to this region that are thinking about which way to go, 
that if you undertake labor reforms, if you institutionalize 
democracy, if you embrace your relationship with the United 
States, it doesn't matter. This is not the message we need to 
send to the region.
    This is a very important time. There is a lot of 
transition. We need to stand with our allies like President 
Toledo that are ready to stand up and make the right decisions 
and lead their economies and people toward stronger democracy 
and more open markets and a better relationship with us as 
well.
    Mr. RAMSTAD. I appreciate your recognition of that 
important factor in this discussion, and certainly President-
elect Garcia, his administration is counting on us as well. I 
thank you for the good work you are doing, Mr. Eissenstat, and 
look forward to working with you on this.
    Chairman THOMAS. [Presiding.] The gentleman's time has 
expired.
    Mr. Neal.
    Mr. NEAL. Mr. Eissenstat, in January, several Ways and 
Means Democrats sent a letter to the prime minister of Peru 
outlining concerns about aspects of the labor elements of this 
agreement that appear to violate core ILO standards. The 
Peruvian government responded with a document addressing these 
concerns dated July 7th. The Peruvian government dismissed 
several of these concerns by saying that they had been 
addressed by ``Supreme Decree.'' The document also references 
several laws the Peruvian constitution, constitutional court 
decisions, constitutional tribunal cases, the criminal code, 
and Peru's ratification of several ILO conventions.
    Since we are relying on the sturdy necessary and steadiness 
of the applicability and enforcement of these assurances and 
knowing that Peru has a very strong executive, could you please 
tell me more about these Supreme Decrees? First, how are they 
passed and by whom?
    Mr. EISSENSTAT. The Supreme Decrees are part of the 
executive branch process to clarify provisions of the law and 
to implement legislation.
    Mr. NEAL. That wouldn't be similar to presidential 
signings, would it?
    Mr. EISSENSTAT. Honestly, Congressman, I would have to get 
back to you on this particular point of procedure.
    Mr. NEAL. Perhaps most importantly, what are the legal 
effects?
    Mr. EISSENSTAT. These become the law of the land and they 
are directives and guidance to be followed in carrying out the 
legislation.
    Mr. NEAL. Are they subject to any sort of legislative 
oversight or review?
    Mr. EISSENSTAT. Congressman, if it is okay, I would really 
need to analyze this a little bit. I would like to get back to 
you in writing, if that is all right.
    Mr. NEAL. Sure. A couple of others that are more yes or no 
answers. How can they be amended?
    Mr. EISSENSTAT. A Supreme Decree, again, I would prefer to 
respond in writing.
    Mr. NEAL. Is there a process for rescinding them?
    Mr. EISSENSTAT. Again, I would prefer to get back in 
writing.
    Mr. NEAL. That is fair to get back to me on that. These are 
very important considerations given the fact it seems the 
executive is granted considerable authority in each instance 
and whether or not he is subject to legislative review is an 
argument that is across the whole hemisphere. So, you will get 
back?
    Mr. EISSENSTAT. Absolutely, Congressman.
    Mr. NEAL. Thanks. Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman again. In the 
written response, other Members of the Committee would be 
interested in the answer as well.
    Mr. EISSENSTAT. Thank you.
    Chairman THOMAS. Does the gentleman from Texas wish to 
inquire, and would he yield to the Chairman briefly?
    Mr. JOHNSON OF TEXAS. Certainly.
    Chairman THOMAS. I apologize for not being here the entire 
time, but I did hear the tail-end of a discussion between the 
gentleman from Michigan, I believe on the gentleman from 
Georgia's time, in terms of the argument made quite often in 
terms of enforce your own law regarding labor, and the 
statement was made is there any other area like this.
    I hope, Mr. Eissenstat, you will recall your time with the 
Chairman of the Committee on Finance, since he is a gentleman 
from Iowa is very concerned about agriculture products and 
sanitary and phytosanitary problems.
    I think there is a very close analogy, since we utilize the 
scientific standards of the World Trade Organization (WTO), but 
in no way could we appeal to a higher standard in terms of 
trying to enforce upon Peru the acceptance of beef older than 
30 months based upon the WTO standards, since you simply can't 
deal with that kind of specificity, which is very similar to 
the concerns in terms of labor. That is why those of us from 
agricultural areas are very aggressive in making sure prior to 
the agreement that the country with which we are entering into 
agreement has adopted the scientific standards and gone to 
specific details.
    Oftentimes it requires a compromise. The Peru agreement is 
a good example. Currently beef over 30 months is not part of 
the agreement. We will work to change that.
    So, there are many areas where, notwithstanding the fact 
that----
    Mr. POMEROY. Will the gentleman yield?
    Chairman THOMAS. In a minute, but it is the gentleman from 
Texas's time. We profess to want to have certain things in an 
agreement and statements are made to that effect. The agreement 
has to be carefully negotiated, and in front of us is an 
agreement carefully negotiated in a number of areas. Our goal 
is to get Peru to enforce its own laws in the area of sanitary/
FITO-sanitary, as well as other areas.
    I thank the gentleman from Texas for yielding.
    Mr. POMEROY. Would the gentleman from Texas allow me to ask 
just a pointed question on beef imports?
    Mr. JOHNSON OF TEXAS. I will not, unless I have extra time.
    Mr. POMEROY. Mr. Chairman, will you give extra time to the 
gentleman?
    Chairman THOMAS. The gentleman will have time on his own 
very shortly.
    Mr. POMEROY. It is just my understanding that no beef is 
coming in under the side letter. You mentioned beef 
specifically. I thought this would be an opportune moment to 
clarify that fact question.
    Chairman THOMAS. I think there will be others, and the 
Chair will make sure you have time to clarify that, because it 
is of mutual concern, especially when we are looking at other 
countries that, frankly, have been able to get away with a 
whole lot more without us being very aggressive toward them in 
responding to those factual issues.
    The gentleman from Texas.
    Mr. JOHNSON OF TEXAS. Thank you. I appreciate your presence 
here. I know you are aware about the LeTourneau situation. As 
you recall, for about 30 years, the company which, is from 
Rowlett, Texas, has been battling in and out of court with the 
government of Peru over work it performed without compensation. 
They built a 40-mile highway in the Peruvian jungle and was to 
be compensated 1 million acres. In 1970, Peru expropriated the 
property and refused to pay the company what it was owed.
    I spoke with Ambassador Portman many times, most recently 
in February, and was told you were working on a resolution.
    Well, the resolution came this past March. Seeing no chance 
of full payment once this trade agreement becomes law, 
LeTourneau was forced to settle out of court for one-third of 
the amount it was owed. Not surprisingly, they haven't received 
a dime yet, although it was promised payment by May. With the 
upcoming change in administration in Peru, I suspect the check 
will get lost in the shuffle.
    By law, countries given unilateral trade benefits like Peru 
must not have expropriated property owned by a U.S. citizen or 
company unless they provide prompt and adequate compensation. 
Clearly, it doesn't appear that any importance has been placed 
on cases like this before entering into your trade 
negotiations, and I would like to know why and how do you 
explain going forward with trade agreements with countries that 
are blatantly thumbing their noses at honest American 
businesses?
    Mr. EISSENSTAT. Thank you, Congressman. You are right, this 
is a long-standing dispute. We have engaged with the government 
of Peru for quite some time on this dispute as well as a few 
others. We have made a lot of progress. I suspect we will 
certainly work with you to ensure that LeTourneau does receive 
satisfactory resolution. We raised this at very senior levels, 
even as high as the President himself, and we will continue to 
push and work and make sure the company is treated fairly.
    One of the things that the agreement will enable us to do 
is create an investor State arbitration panel that will provide 
a remedy if there is unfair treatment. I think it is a good 
path forward. We don't anticipate situations like this. We want 
to work with you to see that all investment disputes are 
resolved. We appreciate your interest in this very much, and 
would like to continue to work with you and the other Members 
to ensure that the LeTourneau case is resolved in an 
expeditious and fair manner.
    Mr. JOHNSON OF TEXAS. Thank you.
    Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman for the time.
    The gentleman from California, Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman. Mr. Eissenstat, 
thanks for being with us. I hope at some point we do have an 
opportunity to vote for a trade agreement with Peru. I know the 
Peruvian government and its representatives have worked 
diligently to try to get us to that point. A number of us still 
hope at some point that President Toledo's pledge to 
incorporate protections for workers would be in the agreement 
and be enforceable so we can make sure that not just for 
American workers, but for Peruvian workers, this deal is a good 
deal for them as well.
    I want to pose a question, if I may, and put it in context. 
Today we just got the numbers on the size of the trade deficit 
for this country, and once again, it has gone up. It is 
approaching $64 billion for this past month of May. That is the 
third highest monthly deficit we have ever experienced in this 
Nation's history.
    We are on a path to have a trade deficit this year that 
will show more than $800 billion difference in what we collect 
from our exports versus what we pay for the imports that we are 
taking. So, a deficit of over $800 billion. That is about 14 
percent higher than it was last year.
    Our deficit with China is growing again. It will probably 
surpass easily $200 billion for the year. That is again up from 
last year. We are importing about $2 billion worth more of 
goods than we are exporting on a daily basis. My understanding 
is that for every six ships that China sends laden with goods 
that we are buying, of those six ships that go back to China, 
only one of those six ships has any American products that 
China will buy. Then when you finally put on top of all of that 
the fact that this administration in its so far more than 5 
years has initiated only 13 cases in the WTO for unfair labor 
practices--excuse me, trade practices, by our trading partners, 
in comparison to, say, the Clinton administration, which 
averaged about 11 cases per year, not total, but per year.
    How do we move forward with an agreement that even the 
Peruvians will admit does not satisfy basic worker rights 
standards and protections for workers in America or in Peru and 
given these trade deficits and the fact that these trade 
agreements haven't offset these massive trade deficits, why 
should we now move forward with a trade agreement which even 
the Peru vans agree does not meet the basic ILO standards for 
workers rights?
    Mr. EISSENSTAT. Thank you for the question. There are a 
couple of questions there. I will try to address them all. If I 
can on the trade deficit, it is significant. However, it is not 
necessarily a measure of our economic health. It is something 
that we watch closely. Over the past 12 months, our real GDP 
has increased by 3.5 percent. Between 2004 and 2005----
    Mr. BECERRA. Mr. Ambassador, I didn't pose a question on 
the trade deficit. I just stated a fact. We could talk about 
the trade deficit. It is larger than it has ever been, and 
while it may mask some realities out there economically, I 
think no one will deny it is the largest trade deficit we have 
ever had.
    More to the point, why with our trade deficits growing in 
the face of all these trade agreements we recently signed, why 
would we want to move forward with a trade deal where even our 
trading partner who would be a signatory to this acknowledges 
that its labor protections for its workers are not up to the 
standards that some of us on this Committee have been asking?
    Mr. EISSENSTAT. First on the trade deficit and its effect 
on our FTAs, there has been quite a significant increase in 
exports to all of our FTAs that have been entered into.
    Mr. BECERRA. Wait a minute. If you are going to say there 
has been a significant increase in exports, there has been a 
greater increase in imports.
    Mr. EISSENSTAT. That is correct in two cases and not 
correct in two cases. I will get to the situation with Peru at 
the end, but I think that with Jordan, we have had a slight 
increase in our deficit. The same is true with Chile. However, 
with Singapore, our trade surplus grew by $4.1 billion.
    If you compare those two agreements in a period of time in 
which the trade deficit is growing, you will see that in the 
countries that we have FTAs with, we have a positive balance on 
those four agreements.
    Mr. BECERRA. My understanding is that most of these trade 
agreements, take, for example, Mexico, which is an agreement 
that has been in force for quite some time, our trade deficit, 
in fact, it was a trade surplus with Mexico before we passed 
the North America Free Trade Agreement (NAFTA) (P.L. 103-182). 
Today we have a trade deficit that is larger than it ever has 
been with Mexico.
    Mr. EISSENSTAT. As you know, the trade deficit is due to 
macroeconomic factors. If I could address Peru quickly, the ITC 
report points that this will lead to a decrease in our deficit 
with Peru by 25 percent. Obviously, that number does not take 
into account, as I say, services, the elimination of non-tariff 
barriers and enhanced intellectual property rights protection.
    Mr. BECERRA. Workers rights?
    Mr. EISSENSTAT. On worker rights, I believe they have many 
times noted that their laobr regime is consistent and very 
strong.
    Mr. BECERRA. So, then why did we just get this letter from 
the Peruvian government saying that they are going to make some 
changes to their existing laws? If they are okay, why would 
they need to send us a letter saying they are going to change 
their laws?
    Mr. EISSENSTAT. I think it goes to a point that was made 
earlier today that countries recognize these are high priority 
issues, and they are willing to make clarifications even if 
they are not necessary. If you look at this letter carefully 
and see some of the commitments or clarifications they have 
made, they haven't necessarily made changes in each case.
    Mr. BECERRA. So, is it your opinion this letter is 
unnecessary?
    Chairman THOMAS. The gentleman's time is now 1 minute over. 
I am just trying to focus you, because we are going to have a 
vote here shortly and all Members wish to inquire.
    Mr. BECERRA. Mr. Chairman, I will conclude just asking if 
Mr. Eissenstat believes that this letter that the Peruvian 
government send us to address some of their labor issues is 
unnecessary?
    Mr. EISSENSTAT. Congressman, it was sent in response to 
inquiries from a number of Members, and I think it demonstrates 
their commitment to see this agreement become law, and their 
willingness to put in writing efforts to address concerns 
raised by the Members. I think that is a valuable thing to do, 
and I hope that we will have an opportunity to talk about that 
and other aspects of this agreement as we go forward.
    Chairman THOMAS. The gentleman's time has expired.
    The Chair will indicate that we are going to have a series 
of votes on the floor, and I believe a number of Members, 
including the gentleman from North Dakota, wish to inquire.
    Does the gentleman from Pennsylvania wish to inquire?
    Mr. ENGLISH. Yes, Mr. Chairman, briefly. I won't ask for 
equal time.
    Mr. Eissenstat, your presentation has been very 
illuminating. Perhaps you could help me clarify some of my 
confusion with regard to aspects of the labor rights and 
enforcement embedded in this agreement.
    It strikes me that from what I have been able to determine 
so far, that Peru actually has stronger labor protections and 
stronger labor laws on the books than in some instances Chile 
did, and our agreement with Chile was seemingly substantially 
less controversial.
    Is it fair to say that Peru has a more comprehensive right 
to strike provision than Chile in that it extends those 
protections to public workers, for example?
    Mr. EISSENSTAT. That is right.
    Mr. ENGLISH. Also, as you know, I have been concerned with 
the issue of child labor. Can you describe for us the programs 
that Peru employs with regard to enforcing child labor laws and 
their use of designated child labor inspectors?
    Mr. EISSENSTAT. That is a very good point. As you know, 
President Toledo himself rose from poverty and worked his way 
to become president of peru, which is quite significant.
    They have undertaken a number of initiatives on worker 
rights and especially relating to children, including increased 
inspections, and new legislation to enhance penalties for the 
exploitation of children should that occur. They have had more 
numerous raids and they have undertaken more institutional 
reforms to ensure that the rights of children are respected.
    Mr. ENGLISH. These things suggest that maybe the way Peru 
is being represented here is, well, perhaps a little unfair. 
Much of the benefit of the agreement that you have presented in 
your testimony, Mr. Eissenstat, is directed to agricultural 
producers. I have I know we have a number of agricultural 
districts represented here.
    I wonder if you can describe how this agreement is going to 
benefit a manufacturing district like mine in northwestern 
Pennsylvania?
    Mr. EISSENSTAT. Congressman, that is an excellent point. It 
is not just about the agricultural exports, but for 
manufacturers, as I noted, 80 percent will become duty free 
immediately. The phaseout for the remaining exports is over 10 
years, which is a rapid phaseout period. That will immediately 
reduce costs to exporters to Peru, particularly from 
Pennsylvania. I will give you an example. This is from a 
business association that has done some analysis of the benefit 
of the agreement. It noted that for manufacturing, particularly 
machinery, they expect an increase in exports of 55.1 percent 
under this agreement. It is very significant. That means a lot 
of jobs in Pennsylvania and that is just exemplary of the types 
of benefits that will accrue to workers in Pennsylvania and 
throughout the country.
    Mr. ENGLISH. Well, I appreciate your analysis. Of course, 
my district isn't exclusively manufacturing. We do have a 
significant agriculture component. Getting back to some of the 
issues that have been raised here previously, I notice that 
Peru currently has a price band system on trade with the United 
States. Could you explore in a little more detail what that 
means to agricultural exports into Peru and how will this 
agreement effect the price band system?
    Mr. EISSENSTAT. It is an excellent point. It is one of the 
most significant aspects of the agreement, is that it does 
eliminate application of the price band to our exports. Peru is 
the first country to make that commitment.
    The price band is a variable tariff that depends on the 
price of a commodity worldwide. So, an exporter that is looking 
for a market opportunity, if they tried to export to Peru under 
the present regime, they would have a variable tariff. They 
wouldn't have certainty as to what the profit margin would be, 
whether it would be in their interest to do the export.
    What the agreement does is eliminate that uncertainty and 
lets the exporter know what the market is going to look like. 
The tariff eventually gets to zero, and that provides 
opportunities that are not only better than what we have today, 
but better than a lot of our competitors in the region. So, it 
is a very significant aspect of this agreement, and I 
appreciate your raising it today.
    Mr. ENGLISH. Mr. Chairman, you have been generous yielding 
me time, even as Mr. Eissenstat has been very generous with his 
observations. We are very grateful for the presentation. I 
yield back the balance of my time.
    Chairman THOMAS. Does the gentleman from Illinois wish to 
inquire?
    Mr. WELLER. Yes. Thank you, Mr. Chairman. I appreciate the 
opportunity, considering you were very generous with time 
earlier.
    Mr. Eissenstat, welcome. I think this is your first time 
before this Committee so we are pleased that you are with us 
today.
    Some have advocated just abandoning and walking away from 
this agreement that was put forth by President Toledo, his 
negotiators, as well as our negotiators, and just extending the 
current Andean trade preferences that Congress created in 
preparation for negotiating these bilaterals. We now have a 
signed agreement with Peru, we have a signed agreement with 
Colombia. Ecuador, we have had negotiations with on a bilateral 
basis, but with the issue of $1 billion in U.S. assets having 
been seized by the government, that has been stalled. Bolivia, 
its new government has chosen to listen to the siren song of 
the Marxist rhetoric of the current president of Venezuela and 
to place its economic future on a medieval-style barter system 
between Cuba and Venezuela and Bolivia.
    So, let me ask this question: Compare when it comes to 
labor. You know, we have talked about the fact that when it 
comes to the core conventions of the ILO that Peru has ratified 
all eight of them; that they have enacted 30 reforms; just in 
the last few years, they have ratified 71 ILO conventions; and, 
of course, they have made tremendous progress considering what 
occurred before in the Fujimori years. President Toledo has 
made that a real priority.
    My understanding is, just looking at the facts, that the 
Andean Trade Preference Act, which gives special preferences to 
Peruvian products, for example, 98 percent of their products 
enter the United States duty free, whereas the vast majority of 
our manufactured and farm products enter their market with an 
average of 8 percent tariff. So, U.S. workers suffer, while 
Peruvian workers have an opportunity.
    As a result of that, it has created a deficit because they 
have had these advantages while we have not. So, should we fail 
to ratify this agreement, U.S. workers would be shorted.
    Again, those who advocate just extending the current 
situation, the current Andean Trade Preference Act, also 
advocate that we put in provisions regarding labor.
    Tell me again, under the Andean Trade Preference Act, are 
there any requirements that countries enforce labor laws or 
live up to the ILO standards under the Andean Trade Preference 
Act? Should it be extended, rather than ratifying this 
agreement?
    Mr. EISSENSTAT. No, it is, I believe, a strive-to standard. 
They are to make progress toward those, but there is no 
guaranty that they will meet them or that that will occur.
    Mr. WELLER. So, there is no so-called enforcement 
mechanism.
    Mr. EISSENSTAT. There is an ability to withdraw or suspend 
preferences, but, as has been noted, that has not occurred and, 
frankly, would result in harming many of the workers who were 
trying to see their livelihoods improved. So, it is not a very 
effective tool in our view.
    Mr. WELLER. Could you explain under the Peruvian Trade 
Preference Act how the Chapter 21 in the agreements dispute 
settlement procedures regarding labor--how they would work and 
when it comes to enforcing enforcement of laws----
    Chairman THOMAS. The Chair would request that that 
information be provided in writing. The Chair has at least two 
additional Members who wish to inquire, and the Chair is 
planning on recessing following this panel and reconvening at 
1:30. I am interested in those specifics as well, but perhaps 
they could be transmitted in writing.
    Mr. EISSENSTAT. Thank you. I would be happy to.
    [The information was not received at time of printing.]
    Chairman THOMAS. Then would ask the gentlewoman from Ohio 
if she has a desire to inquire.
    Ms. TUBBS JONES. Mr. Chairman, I do; and I thank you very 
much.
    We are kind of leaning trying to see each other, Mr. 
Ambassador.
    Exports from Ohio to Peru have increased substantially over 
the last 5 years. In 2001, the exports from Ohio to Peru 
totaled $17.9 million. In 2005, they totaled $32.8 million, a 
substantial increase that I hope will continue, which is good 
for Ohio because we need to employ thousands of workers who 
have lost their manufacturing jobs over the past several years.
    From the USTR's perspective, what sectors do you see 
benefiting the move from the Peru FTA?
    Mr. EISSENSTAT. Many of our industrial and consumer exports 
will gain a competitive advantage under this agreement. For 
Ohio in particular their production of machinery, 
transportation equipment, chemicals, and plastics products all 
stand to benefit; and we expect to see increases in the export 
of those products to Peru as well as the agricultural 
commodities produced in your State.
    Ms. TUBBS JONES. Free trade agreements should benefit all 
groups, particularly medium-sized businesses owned by--smaller 
medium-sized businesses owned by Latinos and African Americans. 
How do you foresee these agreements helping those minority 
groups?
    Mr. EISSENSTAT. Congresswoman, that is an excellent 
question. I think whenever we establish a cooperative and 
growing relationship with a country in Latin America it 
enhances opportunities for people with cultural affinity in 
those countries to engage in ways that wouldn't have been 
possible without this agreement. It reduces non tariff 
barriers, it enhances digital commerce, it enables a small 
business exporter to seize opportunities and enhances certainty 
that they don't have today. I think for minority workers it is 
a good opportunity and a good market and one that they will 
find quite attractive once the agreement is implemented.
    Ms. TUBBS JONES. With thanks to the Committee, I had an 
opportunity to visit Peru, Ecuador and Colombia last year and 
had a great opportunity to meet President Toledo. All of that 
being said and all the benefit that inures to Ohio businesses, 
I still have concerns with regard to labor standards, but 
because my colleagues have done such a good job on that issue, 
Mr. Chairman, I am going to forgo any further questioning on 
the issue. I just want to put those in on the record; and, Mr. 
Chairman, I yield back the balance of my time.
    Chairman THOMAS. The Chair thanks the gentlewoman from 
Ohio.
    Gentleman from Colorado wish to inquire.
    Mr. BEAUPREZ. Thank you, Mr. Chairman. Mr. Eissenstat, 
thanks for your patience and for your consideration here today.
    My subject is beef, and I am interested in the side letter 
dated January 5, 2006, to Ambassador Portman from his 
counterparts in Peru wherein it appears to me that Peru has 
acknowledged that the United States has complied both in beef 
and in poultry with World Organization for Animal Health (OIE) 
guidelines. I would assume that that means that they are going 
to accept unrestricted, appropriately certified beef from the 
United States.
    Is that the condition, though, that the circumstances that 
are actually in the trade agreement, or are we talking about a 
different target?
    Mr. EISSENSTAT. Congressman Beauprez, that is a good 
question. As it was pointed out earlier today, the SPS 
agreement is a bilateral commitment between us and the 
government of Peru. We expect them to meet that commitment. 
They have made substantial progress. They are now consulting 
with the OIE and we are consulting with the OIE to make sure 
that the regulatory regime is consistent with those standards.
    I would note that on a number of SPS issues we have made 
some progress, including on beef where they have agreed to not 
only boneless beef under 30 months but recently bone-in beef 
under 30 months. We have also had the avian influenza ban 
lifted on poultry, we have had the nontariff barrier to rice 
removed through these negotiations, and we are going to 
continue to work to ensure that equivalence is recognized, 
which it is under the current regime, as well as to make sure 
that the beef standards apply to their beef imports are OIE 
consistent. We would be very happy to work with you and Members 
of the Congress that are interested in those issues to ensure 
that those commitments are----
    Mr. BEAUPREZ. By the time this comes back for final 
ratification I hope progress is made. You know full well the 
frustration we have had with many other countries around the 
world on what I believe has been a political discussion as 
opposed to one based on sound science. While we in Congress get 
frustrated by that, it is the producers in places like I live 
in, in Colorado, Nebraska, Kansas, Texas, that are producing 
this beef that are suffering the penalty of which I think is 
unfounded.
    I would encourage you again to continue your work before 
this agreement comes back for final ratification because we 
very much would like to have ratification. I would be remiss if 
I didn't say our beef producers are very encouraged, as is all 
of agriculture, by this agreement, but we very much would like 
to see progress continue to be made.
    Mr. EISSENSTAT. Thank you. I appreciate those comments and 
look forward to working with you.
    Chairman THOMAS. Gentleman yield?
    Prior to recessing, the Chair would like to underscore the 
gentleman from Colorado's comments could be decidedly more 
pointed.
    This Committee and this Congress has had it with Japan. An 
excuse to go back to the former relationship in terms of 
refusing to accept beef is now the position that Japan holds, 
with all kinds of promises that something will happen.
    I want to assure the gentleman from Colorado that, as we 
see Peru with great difficulty able to move to a minimally 
reasonable position and show interest in moving forward, that 
Japan should do so likewise immediately. Her failure to do so 
will be reckoned with by this Committee and this Congress, and 
I want to underscore that point.
    Thank the gentleman for yielding.
    Mr. BEAUPREZ. Absolutely. Yield back all my time.
    Chairman THOMAS. The Chair thanks the Members for the 
second panel.
    We will recess now until 1:30 and reconvene at 1:30.
    [Recess.]
    Chairman THOMAS. The Committee will reconvene; guests will 
find seats. The Chair wants to thank panel members. I hope no 
one has been unduly inconvenienced by virtue of the time 
factor. It is just that sometimes business intervenes.
    The panel: Mr. Richard Norman, Human Resources, Coats North 
America, Charlotte North Carolina; Ray Souza, owner and 
operator, Mel-Delin Dairy, Turlock, California, just north of 
my district; Daniel H. Jara, President and Chief Executive 
Officer, statewide Hispanic Chamber of Commerce of New Jersey; 
Patricia Forkan, President, Humane Society International; Frank 
Santeiro, Managing Director For Global Trade Services; Sarah 
Lilygren, Vice President for Federal Government Relations, 
Tyson Foods, otherwise known as poultry hindquarters; and Brett 
Gibson, Legislative Representative of American Federation of 
Labor, AFL-CIO.
    You have all submitted written testimony. It will be made a 
part of the record. You can address the Committee in any way 
you see fit in the time that is made available to you. I will 
just start my left, your right; and we will go across the 
panel. Mr. Norman.
    You have to turn the microphone on. They are a little more 
unidirectional than they used to be.

     STATEMENT OF RICHARD NORMAN, VICE PRESIDENT FOR HUMAN 
 RESOURCES, COATS NORTH AMERICA, CHARLOTTE, NORTH CAROLINA, ON 
    BEHALF OF U.S. CHAMBER OF COMMERCE AND U.S.-PERU TRADE 
                           COALITION

    Mr. NORMAN. Chairman Thomas, Ranking Member Rangel, Members 
of the Committee, thank you for the opportunity to testify 
before you about the PTPA. I am Richard Norman, Vice President 
For Human Resources of Coats North America. Our company has 
been doing business in the United States since 1864 and in Peru 
since 1957. I am looking forward to sharing our thoughts on the 
impact of this important agreement for our business and others 
like us.
    I appear today on behalf of my company, the U.S. Chamber of 
Commerce and the U.S.-Peru Trade Coalition. This is a broad-
based group of companies representing all sectors of our 
economy. This includes U.S. companies, farmers and business 
organizations.
    My company, Coats, employs 25,000 employees worldwide and 
has manufacturing locations in more than 60 countries. Coats is 
the largest supplier of sewing thread in the world. Here in the 
United States, we employ over 1,800 workers in the Carolinas, 
Georgia, Nevada, and New Hampshire. While some may think that 
the textile business is not high tech, I am proud to say that 
our R&D facility in North Carolina creates threads that hold 
together everything from space suits used by NASA, to the 
fiberoptic cables to even the airbag that cushioned the landing 
of the Mars Rover.
    We have a business in Lima, Peru, that employs 260 people, 
producing thread for the local market, half of which is 
exported back to the United States through ATPDEA in the form 
of apparel. We export specialty thread to Peru from our 
factories in the Carolinas for use in industrial applications.
    Our thread is also used in a host of other manufactured 
products, from electronics to airplanes, that are also sold 
throughout the world. So, when industry tariffs go down, our 
business benefits.
    On behalf of my company and also the business organizations 
I represent today, I would like to voice strong support for 
PTPA. Free trade agreements like PTPA will do much for 
companies like mine to slash barriers to our exports. They will 
also improve protection for U.S. investments in South American 
countries, and they will strengthen our position and make us 
more competitive in a global economy.
    Currently, 90 percent of all U.S. exports to Peru are 
manufactured goods like Coats' thread. Many of these goods face 
an average tariff range of 12 to 25 percent. The PTPA will 
eliminate 80 percent of all tariffs on manufactured goods as 
soon as it enters into force, and then the rest of the products 
will become duty free within 10 years.
    Peruvian apparel exports reached almost $1 billion in 2005; 
and exports of U.S. thread, fabric and cotton have grown hand 
in hand.
    Having a source for apparel manufacturing in South America 
allows for replenishment of styles during the same fashion 
season, something you can't get from China due to its distance 
from our market. This is extremely important for U.S. clothing 
retailers who can replenish more of their hottest sellers 
before the season ends and fashions roll over.
    Development of the Peruvian market allows for 
diversification of sources of supply for U.S. retailers, 
ensuring that neither one country nor one region can dominate 
any market segment exporting into the United States.
    Our farm products face tariffs ranging from 12 to 52 
percent, while nearly all Peruvian agriculture sales to the 
United States enjoy duty-free, quota-free treatment under the 
existing Andean Trade Preferences and Drug Eradication Act.
    Today, 97 percent of all U.S. imports from Peru enter this 
country duty free because of preferential market access 
programs; and that is why Peru has increased its exports here 
by 157 percent in the last 3 years. American products and 
services still face tariffs and other restrictions in Peru; 
and, as a result, our exports to Peru within the same timeframe 
increased by only 38 percent. In other words, we have a trade 
deficit with Peru.
    According to the U.S. ITC, after PTPA enters force, our 
exports to Peru are expected to increase by $1.1 billion 
anually, while our imports are only expected to rise by $439 
million. Leveling the playingfield through PTPA not only helps 
us sell more but it helps reduce our trade deficit.
    The U.S. ITC predicts that PTPA will add $2.1 billion per 
year to U.S. GDP. Mr. Chairman, we can't afford to leave $2.1 
billion on the table. Trade agreements work. Just look at Chile 
as an example. U.S. exports to Chile have risen 91 percent 
since 2004. Caterpillar, for example, has doubled its sales to 
Chile since 2004 and added some 5,000 new jobs in Illinois. 
Now, that is the kind of success we would like to achieve.
    Coats itself, with operations in the United States, saw a 
30 percent increase from 2004 to 2005 with our Chile shipments.
    The PTPA will not only open markets to U.S. businesses, but 
it will send a strong message that we are in business and the 
United States stands by its friends, particularly in a region 
where we have leaders like Hugo Chavez and Evo Morales who are 
vying for influence. I would just like to say, give U.S. 
manufacturers and farmers a level playingfield with zero 
tariffs and we can compete anywhere in the world. I urge 
Congress to approve this legislation as soon as possible.
    Thank you.
    [The prepared statement of Mr. Norman follows:]

Statement of Richard Norman, Vice President for Human Resources, Coats 
North America, Charlotte, North Carolina, on behalf of U.S. Chamber of 
                 Commerce and U.S.-Peru Trade Coalition

    On behalf of the U.S. Chamber of Commerce (Chamber) and the U.S.-
Peru Trade Coalition, I would like to voice strong support for the 
U.S.-Peru Trade Promotion Agreement (PTPA). My name is Dick Norman, and 
I am Vice President of Human Resources for Coats North America, based 
in Charlotte, North Carolina. Our company employs over 1,800 workers in 
the Carolinas, Georgia, Nevada and Maine and has been engaged in the 
textile business with Peru for many years.
    First a word about our organizations:

      The U.S. Chamber of Commerce is the world's largest 
business federation, representing three million businesses of every 
size, sector, and region.
      The U.S.-Peru Trade Coalition is a broad-based group of 
U.S. companies, farmers, business organizations and other groups 
representing the largest and most dynamic sectors of our economy. With 
over 100 companies and associations taking part, this new coalition is 
growing very rapidly.

    With more than 60,000 employees worldwide, and manufacturing 
locations in more than 60 countries, Coats is the largest global 
supplier of sewing thread. Our business is divided into two parts: 
industrial and consumer. The industrial group, Coats American, was 
incorporated in 1898 in New Jersey under the name of American Thread 
Company. Coats American manufactures several different types of thread 
for use in apparel sewing, embroidery, and specialty products. The 
consumer business creates sewing and quilting products, hand knitting 
and crochet yarns, crochet thread, hand embroidery and needlepoint 
threads and implements. Coats home sewing products, used for mending 
and sewing projects, can be found in millions of households worldwide.
    My company and the business organizations I represent today believe 
that international trade plays a vital part in the expansion of 
economic opportunities for American workers, farmers and businesses. 
PTPA is a critical step in U.S. efforts to promote sustainable economic 
growth in the Western Hemisphere through trade rather than aid, and it 
follows in the footsteps of the successful U.S.-Chile Free Trade 
Agreement (FTA). Indeed, PTPA is a front-loaded, ambitious and 
comprehensive agreement that promises considerable benefits to both the 
United States and Peru.
    The agreement will substantially improve market access for American 
farm products, industrial and other non-agricultural goods, and 
services in Peru. The opportunities created by lowering tariff and non-
tariff barriers to U.S.-Peru trade and investment promise to expand 
two-way trade opportunities and lift living standards in both 
countries.
    Beyond its purely commercial benefits, the agreement offers 
critical support and stronger ties to a close ally in the Andes, a 
region where political and economic instability poses a real threat to 
U.S. and regional security. The election on June 4 of Alan Garcia to 
succeed Alejandro Toledo as President of Peru marks a clear victory by 
a candidate endorsing closer ties to the United States at a time when 
some countries in the region are taking a different course. At this 
writing, two key committees in Peru's legislature have overwhelmingly 
approved the agreement, and the national Congress is likely to do so 
this week--with President-elect Garcia's party lending its full 
support.
    In addition, PTPA will bolster the rule of law, investor 
protections, internationally recognized workers' rights, and 
transparency and accountability in business and government. The 
agreement's strong intellectual property and related enforcement 
provisions not only protect U.S. innovation-based industries but 
contribute to the fight against counterfeit and pirated products, 
denying an important source of funds for groups engaged in narco-
trafficking and terrorism.
    Looking forward, the agreement with Peru is an important step in 
the U.S. strategy to promote trade liberalization and economic 
integration with the Andean region. U.S. trade with Peru and its Andean 
neighbors reached nearly $30 billion in 2005. This region represents a 
significant potential market, with a population approaching 100 million 
and a collective GDP near $500 billion when measured on a purchasing 
power parity basis. We welcome the conclusion of negotiations for a 
similar trade agreement with Colombia as the next step in this 
important strategy.
Opening Markets
    Above all else, PTPA further opens Peru's market to products and 
services made by American workers, farmers, and companies. Equally 
important, the agreement makes it easier for U.S. consumers to buy 
products made by Peru's workers, farmers and companies. Total two-way 
trade between U.S. and Peru has doubled over the past three years, 
reaching $7.4 billion in 2005. However, due to U.S. trade preference 
programs, growth in U.S. exports to Peru reached 38% from 2000-2005, 
while Peruvian exports to the U.S. grew 157% during the same time 
period.
    The United States unilaterally opened its market to Peru and its 
neighbors through the Andean Trade Preference Act (ATPA) in 1990 and 
its successor ATPDEA. According to the U.S. International Trade 
Commission (USITC), fully 97% of all imports from Peru already enter 
the U.S. market duty-free; the report continues: ``While most of Peru's 
average tariff rates range from 12% to 25%, most of the U.S. average 
tariff rates are zero, with only one (sugar, 46.3%) exceeding 3%.'' In 
other words, Peru enjoys nearly free access to our marketplace while 
Peru taxes the products that U.S. companies and farmers ship there.
    PTPA will cut Peru's taxes on U.S. products and as a result make 
this trade relationship a more mutually beneficial, reciprocal 
partnership. The day the agreement enters into force, eighty percent of 
U.S. consumer and industrial products and more than two-thirds of 
current U.S. farm exports will enter Peru duty-free. Consider the 
following examples of the current imbalance in tariff treatment and the 
impact of PTPA on this discrepancy:

------------------------------------------------------------------------
             Without PTPA                                     With PTPA
---------------------------------------                    -------------
                                 They        Products         We    They
            We Pay                Pay                        Pay    Pay
------------------------------------------------------------------------
12-20%                           0-6%    Processed Foods     0%     0%
------------------------------------------------------------------------
12%                              2.5%    Automobiles         0%     0%
------------------------------------------------------------------------
12%                              0%      Furniture           0%     0%
------------------------------------------------------------------------
12%                              0%      Audiovisual         0%     0%
                                         products (film
                                         and DVDs)
------------------------------------------------------------------------
12%                              0%      Chemicals,          0%     0%
                                         Plastics, Mineral
                                         Fuels and Coal
------------------------------------------------------------------------
12%                              5%      Cotton              0%     0%
------------------------------------------------------------------------
12%                              0%      Metal Products      0%     0%
                                         (copper, zinc,
                                         gold, silver)
------------------------------------------------------------------------
20%,12% and 4%                   0%      Cereals (oats,      0%     0%
                                         corn, soybeans)
------------------------------------------------------------------------
4%                               0%      Other               0%     0%
                                         transportation
                                         equipment
------------------------------------------------------------------------
4%                               0%      Computers and       0%     0%
                                         related products
------------------------------------------------------------------------

    Manufacturing: PTPA offers immediate opportunities for the U.S. 
manufacturing sector. Manufactured goods represented 90% of U.S. 
merchandise exports to Peru in 2005. The fastest-growing categories 
among U.S. manufactured exports to Peru have been petroleum and coal 
products; other furniture-related products; and boilers, tanks, and 
shipping containers. PTPA promises to not only accelerate this growth 
by reducing the landed cost of U.S. goods to Peru considerably but open 
up opportunities in new product categories. The benefits of the 
agreement are significantly front-loaded. When the agreement goes into 
effect, 80% of U.S. exports of consumer and industrial goods will 
become totally duty-free. The remainder will be duty-free within ten 
years.
    As a result of the agreement, Peru will become a full member of the 
World Trade Organization's Information Technology Agreement, 
eliminating tariffs on information technology products and providing 
substantial new opportunities for U.S. high-tech exporters.
    Agriculture: U.S. ranchers and farmers should reap substantial 
benefits from PTPA. According to the Agriculture Coalition for U.S.-
Peru Trade, the United States exported an annual average of $227 
million in agricultural products to Peru in 2000-2004. U.S. 
agricultural exports to Peru include wheat ($78 million), feed grains 
($20 million), cotton ($38 million), oilseeds and products ($13 
million), rice ($9 million), and dairy products ($6 million).
    As noted, more than two-thirds of U.S. agricultural exports to Peru 
will be duty free upon implementation of the agreement, and tariffs on 
remaining U.S. farm exports will be phased out over 15-17 years. As a 
result, the Agriculture Coalition estimates the agreement will bring an 
increase in U.S. agricultural exports to Peru of more than $700 million 
by the end of the implementation period. The agreement is comprehensive 
in its coverage, providing commercially meaningful access for U.S. 
agricultural priorities while taking into account both U.S. and 
Peruvian agricultural sensitivities. The agreement also creates a 
mechanism for sanitary and phytosanitary cooperation and should ease 
related non-tariff barriers to U.S. agricultural exports to Peru.
    Services: Service providers will also benefit significantly from 
the agreement. PTPA's services commitments cover both the cross-border 
supply of services and the right to invest and establish a local 
service presence and are strengthened by a set of detailed disciplines 
on regulatory transparency--which is fundamental to meaningful market 
access to services. In fact, as a result of PTPA, Peru has agreed to a 
series of new commitments that extend beyond Peru's existing 
commitments under the General Agreement on Trade in Services (GATS). 
Specifically, PTPA extends trade disciplines to services such as 
computer and related services, real estate, construction, 
environmental, and pipeline transport services.
    While the agreement clearly levels the playing field for U.S. 
business and agriculture, it is a balanced one with significant 
benefits for Peru as well. While Peru has enjoyed virtually duty-free 
access to our market to their products under unilateral preference 
programs set-up to encourage alternatives to the drug trade, these 
preferences have always been subject to re-authorization by Congress 
with no guarantees. For example, both the ATPDEA and GSP benefits are 
set to expire in December 2006. Together, they represent half of all 
Peruvian exports that enter the United States duty-free, i.e. almost 
$2.45 billion, with the ATPDEA accounting for most of that sum. Without 
the extension of these preferential programs, Peru stands the risk of 
immediately losing a significant part of its exports. Moreover, most of 
the goods that have been exported under the ATPA/ATPDEA represent 
sectors that have previously not existed (e.g., fresh asparagus) and 
have flourished only because of these trade preferences.
    Losing access to the U.S. market would mean losing millions of 
dollars in revenue and thousands of Peruvian jobs that depend on it. 
Without these jobs, many Peruvian workers will be forced to find other 
employment opportunities in a country that still has a very high 
unemployment rate and where nearly half of the population lives in 
poverty. However, the PTPA makes Peru's favorable access to our markets 
permanent and provides additional benefits in the form of improved 
market functioning and enhanced economic growth. In other words, PTPA 
will provide continuity in a long-term U.S. policy with regard to 
Peru--one that calls for economic development and democratic 
consolidation.
The Rule of Law
    The agreement will strengthen protection and enforcement of U.S. 
trademarks, patents and copyrights, creating new opportunities for U.S. 
innovation-based and creative industries in Peru. In specific terms, 
PTPA includes strong intellectual property enforcement mechanisms and 
penalties provisions, including the criminalization of end-user piracy 
and counterfeiting and the authority to seize and destroy not only 
counterfeit goods but also the equipment used to produce them. The 
agreement also provides necessary mechanisms to fight the problem of 
trans-shipment of counterfeit goods with specific provisions that are 
aimed at goods-in-transit.
    In addition, U.S. direct investors in Peru will benefit from the 
strong investment chapter in the agreement, particularly the sections 
dealing with investment protections and dispute settlement. As noted by 
the Advisory Committee for Trade Policy and Negotiations in its report 
to President Bush, PTPA goes beyond earlier agreements in this regard 
and sets the gold standard for future free trade agreements. Indeed, 
the agreement enables binding third party arbitration for investor-
state disputes not only for investments concluded after the agreement 
goes into effect, but also for many types of investments that pre-date 
the agreement.
    The agreement provides for rights that are consistent with U.S. law 
and also contains fully transparent dispute settlement procedures that 
are open to the public and allow interested parties to provide their 
input. As such, these trade agreements provide an opportunity for the 
partner countries to improve their investment climate by undertaking 
legal and judicial reforms and resolving investment disputes (e.g., the 
criminalization of commercial disputes).
Growth, Income, and Jobs
    PTPA is a great step forward in the evolution of our trading 
relationship with Peru from one based on unilateral trade preferences 
to reciprocal market access. As such, the economic, employment, and 
pocketbook impact of the agreement are quite positive. Indeed, PTPA is 
expected make modest but nonetheless valuable contributions to economic 
growth, incomes, and employment opportunities in cities and towns 
across the country.
    According to the U.S. Department of Commerce, Peru was the 43rd 
largest market for U.S. goods in 2005, out of a total of 228 markets. 
Texas and Florida were the top state exporters, with California, 
Louisiana, Illinois, South Carolina, New York, Georgia, Pennsylvania, 
Tennessee, Washington, and New Jersey also posting significant export 
totals to Peru in 2005.
    According to the USITC's June 2006 report on economy-wide effects 
of PTPA, the agreement is likely to result in a much larger increase in 
U.S. exports than in U.S. imports given the substantially greater 
tariffs faced by U.S. exporters to Peru than Peruvian exporters to the 
United States. The USITC estimates U.S. exports to Peru will increase 
by $1.1 billion, while imports will only increase by $439 million. 
Furthermore, the USITC predicts that PTPA will add $2.1 billion per 
year to U.S. gross domestic product.
    The Chamber has begun preparing state-specific economic impact 
studies in order to gauge the impact of the agreement. Our initial 
findings for Texas and Florida provide an idea of how the agreement 
will impact local economies. The studies show moderate but real gains 
for industrial output, household earnings, and employment for both 
states. In the first year, our model shows a potential increase in 
output across all industries of $155 million in Texas and $143 million 
in Florida; increased earnings for employees in all industries of $35 
million in both states; and the creation of 1,055 and 931 new jobs in 
Texas and Florida, respectively.
    Of course, the real impact of the agreement becomes clearer as we 
look further into the future. In nine years, our model \1\ shows a 
potential increase in output across all industries of $829 million in 
Texas and $768 million in Florida; increased earnings of employees in 
all industries of $188 million in Texas and $186 million in Florida; 
and the creation of 4,141 and 4,970 jobs, respectively.
---------------------------------------------------------------------------
    \1\ This study uses the U.S. Department of Commerce's Bureau of 
Economic Analysis Regional Input-Output Modeling System (RIMS II) to 
offer a vision of the potential impact of the Peru TPA.
---------------------------------------------------------------------------
Additional Benefits
    In addition to contributing strongly to the expansion of trade and 
economic relations between the United States and Peru, PTPA will lend a 
helping hand for a close ally in the Andes and will enhance U.S. 
efforts to strengthen democracy in the region. The embrace of 
democratic norms throughout the hemisphere over the past 25 years has 
been remarkable. But in some countries, poor economic policy and weak 
political parties, among other factors, have recently endangered this 
progress. The recent surge in populist victories, especially in South 
America, underscores the fact that democratic elections do not by 
themselves guarantee the rule of law.
    While questions of the rule of law in the region may legitimately 
be addressed in a number of ways, we believe that the promulgation of 
ambitious and comprehensive free trade agreements would do more to 
enhance the rule of law and transparent governance in the region than 
any other possible step the United States could take. While the 
commercial benefits are substantial, they go beyond just opening 
overseas markets for America's workers, farmers and companies. These 
agreements assist in the creation of a transparent, rules-based 
economic environment, which is a critical element in the success of 
democratic institutions and market-based economic policies.
    Like much of Latin America, the Andean region is struggling against 
corruption, which undermines growth, security, and stability. PTPA 
contains critical provisions to enhance transparency and accountability 
in governance, providing the countries with important tools to fight 
the scourge of corruption. As an example, the agreement provides for 
the criminalization of bribery in government procurement, providing for 
more efficient procurement and a more competitive marketplace.
    PTPA also promotes U.S. security interests by forging a deeper 
partnership with Peru through a framework for government-to-government 
relationships that is grounded in the tangible national interests of 
all parties. Such a framework is vital to enhancing cooperation in the 
fight against terrorism and narcotics trafficking; it also sets an 
example for other countries around the world as we pursue our global 
security goals. By promoting economic growth in Peru, PTPA will help 
stabilize its economy and provide its citizens with long-term 
alternatives to narcotics trafficking or illegal immigration.
Conclusion
    In sum, it is worth noting that the commercial benefits of recent 
free trade agreements have surpassed all expectation. Consider the 
U.S.-Chile FTA, which 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. While the USITC had forecast total export growth of 18-52% for 
the first 12 years of the agreement's implementation, U.S. exports to 
Chile nearly doubled in just two years--a combined 91% increase over 
just 24 months. Given the similarities between PTPA and the U.S.-Chile 
FTA, we may surely expect impressive benefits from this new agreement 
as well.
    While exports are important, it is worth reporting that imports 
from Chile have also increased. In the end, trade is about more than 
just exporting--it is about more choices at lower costs for consumers, 
and as a result a higher standard of living. Sometimes, as is the case 
with Chile, free trade is about having access fresh grapes in the 
winter and more crushed grapes (i.e., wine) year-round. With Peru, our 
consumers will benefit from more access to healthy foods and vegetables 
like asparagus and fish. This is especially appreciated during the 
winter.
    We appreciate this opportunity to share our strong support for 
PTPA. We believe that trade expansion is an essential ingredient in any 
recipe for economic success in the 21st century, and PTPA is an 
excellent model in this regard. If U.S. companies, workers, and 
consumers are to thrive amidst rising competition, new trade agreements 
such as PTPA are critical. U.S. business is more than capable of 
competing in the global marketplace when trade barriers are removed and 
markets are open.
    Thank you very much.

                                 

    Chairman THOMAS. Thank you. Mr. Souza, before I call on 
you, my friend and colleague, Mr. Nunes, is here. He may want 
to make some statement. I would only ask you, not knowing, were 
your ancestors from the Azores, Mr. Souza?
    Mr. SOUZA. Yes, they were.
    Chairman THOMAS. Then, with pleasure, I will yield to the 
gentleman from California, Mr. Nunes.
    Mr. NUNES. Thank you, Mr. Chairman.
    I want to welcome my Azorean brother here to the Committee. 
He is not from my district but from a little bit north. So, 
welcome, Mr. Souza; and I look forward to your testimony.
    I yield back, Mr. Chairman.
    Chairman THOMAS. Thank you.
    Mr. Souza.
    Mr. SOUZA. First of all, I may not be from your district, 
Congressman Nunes, but we are from the same island in the 
Azores.
    Chairman THOMAS. For those of you who don't understand, I 
will explain the inside joke.
    The Portuguese have been a very significant and important 
people in the development of California and in the Central 
Valley, as is the case with some of the former Yugoslavians, 
all from the island of Split, apparently. Most of those of 
Portuguese ancestry are from the Azores, who have been an 
enormous resource and pool of talent for us in this country. 
For any of you who want to learn more about this, any time 
during July or August if you will go to Pismo Beach, 
California, all of the Central Valley Azoreans, Portuguese 
Americans, are over there; and it is just a lot of fun.
    Nice to have you with us, Mr. Souza.
    Mr. SOUZA. Thank you, Congressman. It is a pleasure to be 
here.
    First of all, before I go on, I am assuming that there is 
no questions from my----
    Chairman THOMAS. We will go through the entire panel and 
then offer questions up so the panelists could have an 
opportunity to respond all together.

 STATEMENT OF RAY SOUZA, OWNER AND OPERATOR, MEL-DELIN DAIRY, 
   TURLOCK, CALIFORNIA, ON BEHALF OF WESTERN UNITED DAIRYMEN

    Mr. SOUZA. Very well. Once again, thank you, Chairman 
Thomas, for holding this hearing today and inviting me to 
testify representing the California dairy industry.
    Mr. Chairman and Members of the Committee, my name is Ray 
Souza; and I am a dairy producer from Turlock, California. I 
have formerly served as president of Western United Dairymen 
and currently hold the position of vice president. I am a 
former president of the Western States Dairy Producer Trade 
Association. I ship to California Dairies, Incorporated, 
California's largest cooperative.
    California milk production growth has averaged 3 percent 
year over year during the past 5 years. Continued production 
growth is expected in California and nationwide as dairy 
farmers continue to increase efficiencies. Growth in domestic 
demand is unlikely to keep pace with the growth in domestic 
milk production. To remain viable, the U.S. dairy industry must 
expand markets for dairy products.
    California is well aligned to be a major supplier of dairy 
products around the world. According to data released by the 
University of California Agricultural Issues Center, the export 
value of California dairy products increased by 35 percent in 
2004; and the U.S. export value of nonfat dry milk increased by 
75 percent, with Mexico being a strong market for nonfat dry 
milk. As a result, dairy made the list of top five agricultural 
commodities exported in 2004 in terms of value.
    Though we have witnessed some success, greater market 
access will be critical to the future growth and economic 
health for the California and U.S. dairy industries alike.
    I am glad to be here today to provide our enthusiastic 
support for this agreement, the PTPA. This is an example of an 
agreement that is balanced because it offers the opportunity to 
grow U.S. dairy exports without potential for a third-party 
country to exploit the agreement and to disadvantage U.S. dairy 
farmers. Peru has a considerable amount of domestic production 
but, along with that, a much larger and more developed domestic 
dairy market than some other countries in the region have.
    As more open trade improves the local economy in Peru, 
California dairy farmers will be positioned to supply that 
market as it continues to grow. National Milk Producers 
Federation estimates that the benefits of this agreement to the 
U.S. dairy industry over the next several years could grow by 
as much as $100,000,000 per year on average; and with 21 
percent of U.S. milk production coming from California, you can 
see why this agreement is so important to Californians.
    The duty free access for cheese, butter, milk powders and 
dairy protein products will be a significant benefit to us. Our 
industry in California has a history of supplying manufactured 
dairy products such as those on the list, and we believe demand 
for those products will continue to grow in countries like 
Peru.
    I would also like to applaud the fact that no features of 
the U.S. milk marketing regulatory system or the dairy producer 
safety net are affected by this agreement. I would also note 
that as long as the European Union continues to use export 
subsidies to sell to Peru, the United States must still use the 
Dairy Export Incentive Program (DEIP), to help build these 
markets there. This would be a good time to note that the 
United States Department of Agriculture (USDA) has not used 
DEIP anywhere in the last 2 years. With farm milk prices now 
nearing historic lows, right now would be a good time to use 
the tool that Congress has authorized, a tool that is fully WTO 
legal, and get the DEIP program fired up, moving dairy products 
to foreign markets and building demand instead of moving 
domestic dairy products to CCC.
    I do want to emphasize, however, that whereas having a Peru 
Trade Promotion Agreement is something we support, U.S. dairy 
farmers want to be sure that their government is going to fight 
for them and make sure that the terms of the agreement are 
enforced. We need to be sure that the Rules of Origin, which in 
this agreement mirrors those of the NAFTA, are enforced to the 
letter.
    We in the U.S. dairy industry have too much experience with 
lack of enforcement of agreements. The dairy industry of 
California is bearing the brunt of an excessive regulatory 
action taken by Mexico in a trade dispute over another 
commodity. In other cases of lack of enforcement, the 
government there has delayed issuing powder quota licenses that 
should have been available to the U.S. exporters since the 
first of the year. If we are going to have these agreements, we 
need to have them in force so that our markets gain the access 
that they should have while we are at the same time giving Peru 
market access here.
    We have also had significant disagreements over the years 
with Canada over the access to their heavily protected market 
for milk and dairy products. The reality is that these 
agreements look balanced at the time they are negotiated, but 
without aggressive enforcement by the U.S. Government, we will 
continue to be the only ones who routinely hold up our end of 
the bargain.
    Also in the enforcement arena are Sanitary and 
Phytosanitary issues that are often raised by our trading 
partners to deny access to U.S. dairy products. USDA maintains 
a list of U.S. dairy plants approved to ship products in the 
export market. The plants on that list should be able to sell 
their products to other countries without unfounded SPS 
barriers thrown up by the receiving countries.
    Thank you again, Mr. Chairman, for allowing me to be here 
today and voice the enthusiastic support of the California 
dairy industry for the Peru Trade Promotion Agreement.
    [The prepared statement of Mr. Souza follows:]

 Statement of Ray Souza, Owner and Operator, Mel-Delin Dairy, Turlock, 
            California, on behalf of Western United Dairymen

    Mr. Chairman and members of the subcommittee, my name is Ray Souza 
and I am a dairy producer from Turlock, California. My dairy was 
started by my grandfather who emigrated from the Azores to the United 
States and was then passed on to my father, and subsequently purchased 
by me. We now milk about 800 cows on the dairy that my grandfather 
started with 17 head.
    Thank you Chairman Thomas for having this hearing and inviting me 
to testify representing the California dairy industry. I formerly 
served as president of Western United Dairymen and currently hold the 
position of first vice-president. I was a former president of the 
Western States Dairy Producer Trade Association. I currently serve on 
the administration's Agricultural Trade Advisory Committee (ATAC). I 
ship to California Dairies, Incorporated (CDI), the largest California 
based cooperative.
    California milk production growth has averaged 3% year-over-year 
during the past five years. Continued production growth is expected in 
California and nationwide as dairy farmers continue to increase 
efficiencies and produce more milk. Growth in domestic demand is 
unlikely to keep pace with growth in domestic milk production. To 
remain viable, the U.S. dairy industry must expand markets for dairy 
products.
    California is well-aligned to be a major supplier of dairy products 
around the world. According to data released by the University of 
California Agricultural Issues Center, the export value of California 
dairy products increased by 35 percent in 2004. The U.S. export value 
of nonfat dry milk increased 75 percent with Mexico a strong market for 
California's nonfat dry milk. As a result, dairy made the list of the 
top five California agricultural products exported by value in 2004.
    Though we have witnessed some success, greater market access will 
be critical to the future growth of the California and U.S. dairy 
industry alike.
    I am glad to be here today to provide our enthusiastic support for 
this agreement for United States-Peru Trade Promotion. This is an 
example of an agreement that is balanced because it offers us the 
opportunity to grow U.S. dairy exports without the potential for a 3rd 
party country to exploit this agreement to the disadvantage of U.S. 
dairy farmers. Peru has a considerable amount of domestic production 
but along with that a much larger and more developed domestic dairy 
market than some other countries in the region.
    As more open trade improves the local economy in Peru, California 
dairy farmers will be positioned to supply that market as it continues 
to grow. National Milk Producers Federation estimates that the benefits 
of this agreement to the U.S. dairy industry over the next several 
years should grow to $100 million per year on average. With 21% of U.S. 
milk production coming from California, you can see why this agreement 
is important to Californians.
    The duty-free access for cheese, butter, milk powders and dairy 
protein products will be a significant benefit to us. Our industry in 
California has a history of supplying quality manufactured dairy 
products, such as those on that list, and we believe demand for those 
products will continue to grow in countries like Peru.
    I would also applaud the fact that no features of the U.S. milk 
marketing regulatory system or the dairy producer safety net are 
affected by this agreement. I would also note that as long as the 
European Union uses export subsidies to sell product to Peru, the U.S. 
must still use its Dairy Export Incentive Program (DEIP) to help build 
that market there. This would be a good time to note that the USDA has 
not used the DEIP anywhere in more than two years. With farm milk 
prices nearing historic lows, right now would be a good time to get 
that tool the Congress has authorized, a tool that is fully WTO-legal, 
by the way, and get DEIP fired up moving dairy products to foreign 
markets and building demand, instead of moving domestic dairy products 
to the CCC.
    I do want to emphasize, however, that whereas having a Peru Trade 
Promotion Agreement is something we support, U.S. dairy farmers want to 
be sure that their government is going to fight for them to make sure 
the terms of the agreement are enforced. We need to be sure that the 
Rules of Origin, which in this agreement mirror those in the North 
American Free Trade Agreement, are enforced to the letter.
    We in the U.S. dairy industry have too much experience with lack of 
enforcement of agreements. The dairy industry in California is bearing 
the brunt of an excessive retaliatory action taken by Mexico in a trade 
dispute over another commodity. In another case of lack of enforcement, 
the government there has delayed issuing milk powder quota licenses 
that should have been available to U.S. exporters since the first of 
the year. If we're going to have these agreements we need them enforced 
so our market access gains are realized along with the increased access 
we've given Peru to the market here.
    We've also had significant disagreements over the years with Canada 
over access to their heavily protected market for milk and dairy 
products. The reality is that these agreements look balanced at the 
time they're negotiated but without aggressive enforcement by the U.S. 
government, we'll continue to be the only ones who routinely hold up 
our end of the bargain.
    Also in the enforcement arena are Sanitary and Phytosanitary (SPS) 
issues that are often raised by our trading partners to deny access to 
U.S. dairy products. USDA maintains a list of U.S. dairy plants 
approved to ship products in the export market. The plants on that list 
should be able to sell products in other countries without unfounded 
SPS barriers being thrown up in the receiving countries.
    Thank you again, Mr. Chairman, for allowing me to be here today to 
voice the enthusiastic support of the California dairy industry for the 
Peru Trade Promotion Agreement. I'd be happy to answer questions on 
this matter.

                                 

    Chairman THOMAS. Thank you, Mr. Souza, as long as we 
maintain close watch on point of origin. Mr. Jara.

  STATEMENT OF DANIEL H. JARA, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, STATEWIDE HISPANIC CHAMBER OF COMMERCE OF NEW JERSEY, 
  JERSEY CITY, NEW JERSEY, ON BEHALF OF HISPANIC ALLIANCE FOR 
                           FREE TRADE

    Mr. JARA. Chairman Thomas, Ranking Member Rangel, Members 
of the Committee on Ways and Means and guests, buenas tardes.
    On behalf of the statewide Hispanic Chamber of Commerce of 
New Jersey and on behalf of the Hispanic Alliance For Free 
Trade, I am pleased to represent our collective Hispanic voices 
at today's hearing and in this debate.
    I am also speaking from the perspective of a small 
businessowner. I am the owner of Rimac Agency, Inc., an 
insurance, Hispanic market and international trade consulting 
firm located in Hackensack, New Jersey.
    My name is Daniel Jara. I was born in Lima, Peru. I moved 
to New Jersey at age 14. I received my secondary, university 
and graduate education from New Jersey schools. I am proud to 
testify in support of the agreement from the perspective of a 
Peruvian Hispanic American hailing from the Garden State of New 
Jersey.
    This agreement is of critical importance for Hispanic 
Americans and particularly to the Hispanic American business 
community.
    Please permit me to briefly mention my two organizations.
    The statewide Hispanic Chamber of Commerce of New Jersey is 
a network of local Hispanic chambers and businesses that 
represent the economic interests of over 40,000 small 
businesses in the State of New Jersey and the Philadelphia 
area.
    The Hispanic Alliance For Free Trade, HAFT, is a national, 
umbrella organization organized in support of free trade. HAFT 
is comprised of a cross section of 130 of the leading and most 
influential Hispanic organizations, including the largest 
Hispanic business organization, the U.S. Hispanic Chamber of 
Commerce, representing over 2 million Hispanic businesses and 
now spanning over 225 local Hispanic chambers across the United 
States and the Commonwealth of Puerto Rico. HAFT was visible 
and instrumental in its support of Domincan Republic-Central 
America Free Trade Agreement (DR-CAFTA) and is now refocused in 
its support of the Peru Trade Promotion Agreement.
    My career in the Hispanic arena spans 18 years at senior-
most local, State and national levels.
    In a relatively short time, our Hispanic community has 
evolved and grown tremendously in both importance and 
influence. According to the U.S. Census, Hispanics are 
currently the largest minority in the United States, with an 
estimated population of nearly 43 million--over 14 percent of 
the total U.S. population--and estimated to grow by 1.7 million 
a year. More than one-eighth of the people of the United States 
are of Hispanic origin and by mid century 25 percent of them, 
that means one of every four people in the United States, will 
be of Hispanic descent.
    Hispanics have particularly distinguished themselves in the 
economic and commercial arena. Hispanics as a community wield a 
great economic power. Hispanic purchasing power is projected to 
reach $1 trillion by 2008.
    It is estimated that there are now over 2 million Hispanic-
owned businesses in the United States. These 2 million 
Hispanic-owned businesses generated almost $300 billion in 
annual gross receipts. By 2010, it is estimated there will be 
3.2 million Hispanic firms, generating $465 billion and making 
them among the fastest-growing business segments in the Nation, 
according to the U.S. Small Business Administration.
    The U.S. Census data shows that the number of Hispanic-
owned businesses has grown at a rate of three times greater 
than the national average. Furthermore, businesses owned by 
Hispanic women grew at the rate nearly six times that of the 
national average. By 2007, one of every ten small businesses 
will be Hispanic businesses.
    Hispanic Americans of Peruvian descent, such as myself, 
will particularly benefit from this agreement. Currently, the 
total Peruvian population in the United States is estimated at 
about one and a half million, many of which reside in New 
Jersey area where I hail and have my business. For example, in 
New Jersey alone, there are 49,846 Hispanic businesses, many of 
them of Peruvian origin. For we Peruvian Americans, PTPA 
represents an increased economic opportunity for our businesses 
here as well as for our family and friends in Peru.
    New Jersey itself has and will benefit tremendously from 
this agreement. In 2005, New Jersey benefited from $33 million 
in total exports to Peru; and, with this new agreement, exports 
to Peru by New Jersey businesses in key industries will rise 
between 45 and 57 percent.
    This agreement is a win-win situation.
    In conclusion, Mr. Chairman and Committee Members, my 
company and the Hispanic organizations, the statewide Hispanic 
Chamber of Commerce of New Jersey and the Hispanic Alliance for 
Free Trade, representing hundreds of the leading Hispanic 
organizations, millions of Hispanic businesses, respectfully 
appreciate the opportunity to come before you today.
    We believe that Hispanic Americans, especially Hispanic 
American businesses, have an edge, a leg up when seeking 
commercial opportunities with this hemisphere. Hispanics are 
able to leverage language, culture and family ties in competing 
for commercial relationships with this hemisphere. As 
Hispanics, we want to see more opportunities being created by 
Hispanics for other Hispanics. The passage of this agreement 
will provide tremendous opportunity for these businesses and 
contribute to continued growth and success of Hispanics in the 
United States.
    Of equal importance, Hispanic Americans--Peruvian Americans 
in particular--very much care about the fate of Peru, its 
people as well as the stability and well-being of this 
hemisphere. Hispanics care and want to give back by providing 
for our families and supporting our countries of origin. We are 
a passionate and hard-working people. We vitally care about 
eradicating poverty by creating economic growth as well as a 
stable and prosperous Western Hemisphere. Support of the Peru 
Trade Promotion Agreement is an important step in this 
direction. We urge your support. Muchas gracias.
    [The prepared statement of Mr. Jara follows:]

  Statement of Daniel H. Jara, President and Chief Executive Officer, 
Statewide Hispanic Chamber of Commerce of New Jersey, Jersey City, New 
         Jersey, on behalf of Hispanic Alliance for Free Trade

    Chairman Thomas, Ranking Member Rangel, Members of the Ways and 
Means Committee and Guests. Buenos Dias!
    On behalf of the Statewide Hispanic Chamber of Commerce of New 
Jersey (SHCC) and on behalf of the Hispanic Alliance for Free Trade 
(HAFT), I am pleased to represent our collective ``Hispanic'' voices at 
today's hearing and in this debate. I am also speaking from the 
perspective of a small business owner. I am the owner of Rimac Agency, 
Inc., an insurance, Hispanic market and international trade consulting 
firm located in Hackensack, New Jersey.
    My name is Daniel Jara and I was born in Lima, Peru and moved to 
New Jersey at age 14 and received my secondary, university and graduate 
education from New Jersey schools. I am proud to testify in support of 
the agreement from the perspective of a Peruvian/Hispanic American and 
hailing from the great ``Garden State'' of New Jersey. This agreement 
is of critical importance to Hispanic Americans and particularly to the 
Hispanic American business community.
    Please permit me to briefly mention my two organizations:

      The Statewide Hispanic Chamber of New Jersey (SHCC) is a 
network of local Hispanic Chambers and businesses that represents the 
economic interests of over forty thousand small businesses from the 
State of New Jersey and the Philadelphia area.
      The Hispanic Alliance for Free Trade (HAFT) is a 
national, umbrella organization organized in support of free trade. 
HAFT is comprised of a cross section of 130 of the leading and most 
influential Hispanic organizations including the largest Hispanic 
business organization--the U.S. Hispanic Chamber of Commerce--
representing over 2 million Hispanic businesses with over 210 local 
Hispanic chambers. HAFT was visible and instrumental in it's support of 
the DRCAFTA and is now refocused in its support of the Peru Trade 
Promotion Agreement.

HISPANIC COMMUNITY
    My career in the Hispanic arena spans 18 years at senior-most 
local, state and national levels. In a relatively short time, our 
Hispanic community has evolved and grown tremendously in both its 
importance and influence. According to the U.S. Census: Hispanics are 
currently the largest minority in the U.S. with an estimated population 
of nearly 43 million (over fourteen percent of the total U.S. 
population) and estimated to grow by 1.7 million a year; more than one 
eight of the people in the United States are of Hispanic origin and by 
mid-century, 25 percent (or one out of every four) people in the United 
States will be of Hispanic descent. Hispanics have particularly 
distinguished themselves in the economic and commercial arena. 
Hispanics as a community wield great economic power. Hispanic 
purchasing power is projected to reach $1 trillion by 2008!

HISPANIC BUSINESSES
    It is estimated that there are now over 2 million Hispanic-owned 
businesses in the U.S. These 2 million Hispanic owned businesses 
generate almost $300 billion in annual gross receipts. By 2010, it is 
estimated that there will be 3.2 million Hispanic firms generating $465 
billion and making them among the fastest growing business segments in 
the nation according to the Small Business Administration. U.S. Census 
data shows that the number of Hispanic-owned businesses has grown at a 
rate that is three times greater than the national average. Further, 
businesses owned by Hispanic women grew at a rate that was nearly six 
times that of the national average. By 2007, 1 out of every 10 small 
businesses will be Hispanic business. (Source Hispanic Trends).

PERUVIAN BUSINESSES / NEW JERSEY AREA
    Hispanic Americans of Peruvian American descent, such as myself, 
would particularly benefit from this agreement. Currently, the total 
Peruvian population in the United States is estimated at about one and 
a half million, many of which reside in the New Jersey area from where 
I hail and have my business. For example, in New Jersey alone, there 
are 49,846 Hispanic businesses many of them of Peruvian origin. For we 
Peruvian Americans, the PTPA represents increased economic opportunity 
for our businesses here as well as for our family and friends in Peru. 
New Jersey, itself, has and will benefit tremendously from this 
agreement. In 2005, New Jersey benefited from $33 million in total 
exports to Peru and with the new agreement, exports to Peru by New 
Jersey businesses, in key industries, will rise between 45% and 57%.
    This agreement is a win-win situation.

CONCLUSION
    Mr. Chairman and Committee Members, my company and the Hispanic 
organizations--the Statewide Hispanic Chamber of Commerce of New Jersey 
and the Hispanic Alliance for Free Trade representing hundreds of 
leading Hispanic organizations and millions of Hispanic businesses, 
respectfully appreciate the opportunity to come before you today. We 
believe that Hispanic Americans, especially Hispanic American 
businesses, have an edge--a ``leg up'' when seeking commercial 
opportunities with this hemisphere. Hispanics are able to leverage 
language, cultural and family ties in competing for commercial 
relationships with this hemisphere. As Hispanics, we want to see more 
opportunities being created by Hispanics and for other Hispanics. The 
passage of this agreement would provide tremendous opportunity for 
these businesses and contribute to the continued growth and success of 
Hispanics in the U.S.
    Of equal importance, Hispanic Americans (Peruvian Americans in 
particular) vitally care about the fate of Peru, its people as well as 
the stability and well-being of this hemisphere. Hispanics care and 
want to give back by providing for our families and supporting our 
countries of origin. We are a passionate and hardworking people. We 
vitally care about eradicating poverty by creating economic growth as 
well as a stable and prosperous Western Hemisphere. Support of the Peru 
Trade Promotion Agreement is an important step in this direction. We 
urge your support. BUENOS DIAS.

                                 

    Mr. SHAW. [Presiding.] Thank you. Ms. Forkan.

    STATEMENT OF PATRICIA FORKAN, PRESIDENT, HUMANE SOCIETY 
                         INTERNATIONAL

    Ms. FORKAN. Mr. Chairman, Members of the Committee on Ways 
and Means, I am pleased to be here today to speak on the PTPA 
but specifically the environmental provisions.
    My name is Patricia Forkan. I am President of Humane 
Society International (HSI). We are the international arm of 
The Humane Society of United States (HSUS). Founded in 1954, 
HSUS today is the largest animal protection organization in the 
United States with over 9.5 million members and constituents. 
Through HSI, we maintain a significant global presence and have 
offices on four continents.
    As President of HSI, I have served on Treasury Employees 
Political Action Committee (TEPAC) for a number of years and 
work closely with USTR and other U.S. Government agencies on 
trade and environmental issues. We have participated in three 
WTO ministerial conferences, and I was on the U.S. delegation 
in Hong Kong.
    In 2005, I appeared before the Senate Committee on Finance 
to testify on CAFTA and discussed our support of the 
environmental provisions of that agreement. It is our view that 
each FTA signed by the United States should be judged on its 
individual provisions and through an objective lens. I don't 
propose to testify today that each and every aspect of PTPA 
will further the aims most important to my organization, that 
is, protecting the environment and promoting the protection and 
humane treatment of all animals, but what I will say is HSI 
views the environmental provisions of this agreement as 
providing needed opportunities and incentives to enhance 
environmental protection in Peru and in the United States.
    I also commend the U.S. Congress for including specific 
environmental negotiating objectives in the Trade Act of 2002, 
the TPA, and in mandating side environmental cooperation 
agreements. We applaud the commitment of the United States to 
include the consideration of the environment along with 
economic and trade policy, something that no other country in 
the world does.
    Turning to the environment chapter of the PTPA, I would 
like to highlight certain provisions.
    First, the environment chapter includes the obligation for 
parties to effectively enforce their environmental laws, 
including MEAs such as CITES. This obligation is subject to 
dispute settlement, providing a very strong incentive for both 
parties to enforce their laws, an incentive sadly lacking in 
most MEAs themselves.
    Second, the parties have agreed to set up an independent 
secretariat to accept information from the public concerning 
environmental enforcement activities. If a country is failing 
to enforce its laws, the public will have a specific mechanism 
to bring these failures to light through access to an 
independent entity not controlled by the government. Increased 
public participation and empowering civil society to monitor 
governments is perhaps one of the best and most low-cost ways 
to ensure effective enforcement.
    Third, as a member of TEPAC, I particularly recognize the 
importance of public participation. For this reason, HSI 
believes that the provision of the PTPA requiring Peru to set 
up and consult an advisory Committee at the national level is 
extremely important. We hope this provision will serve to 
provide Peruvian civil society with a say in their country's 
environmental policies, programs and enforcement regimes.
    Fourth, for the very first time in a trade agreement, the 
United States included a commitment to protect and conserve 
biodiversity. Peru is one of the most biologically diverse 
countries in the world. It is home to very unique species such 
as alpacas, vicunas, river dolphins, as well as some endangered 
species.
    We are perhaps most excited about this biodiversity 
provision. It underscores the U.S. and Peruvian commitment to 
the environment and conservation of biodiversity, including 
endangered species and other animals. Through innovative 
programs and efforts, including through the Environmental 
Cooperation Agreement (ECA), such protections may be increased 
and enhanced.
    Lastly, we are hopeful that the ECA will provide a strong 
basis for ongoing environmental cooperation. I strongly 
encourage Congress to ensure that the ECA is adequately funded 
to be able to achieve the lofty aims originally envisioned by 
TPA. We all are aware of the need to be fiscally responsible, 
but cooperation is an area where we can achieve a great deal of 
good and improve the life and health of people and animals in 
addition to increasing economic opportunities. I recommend that 
Congress set aside a specific amount of funding for 
environmental cooperation with Peru, as you did in the case of 
the CAFTA-DR.
    In summation, HSI and HSUS are strongly encouraged that the 
PTPA will support increased environmental protection in both 
countries. Thank you for allowing me to testify.
    [The prepared statement of Ms. Forkan follows:]

 Statement of Patricia Forkan, President, Humane Society International

    Chairman Thomas, Ranking Member Rangel, Members of the Ways and 
Means Committee, and Ladies and Gentlemen--Good Morning.
    It is my pleasure to be here today to testify on the U.S.-Peru 
Trade Promotion Agreement (PTPA), specifically the environmental 
provisions.

INTRODUCTION
    My name is Patricia Forkan and I am the President of Humane Society 
International (HSI), the international arm of The Humane Society of the 
United States (HSUS). Founded in 1954, today HSUS is the largest animal 
protection organization in the United States with over 9.5 million 
members and constituents. With HSI, we maintain a significant global 
presence and have offices on four continents.
    As President of HSI, I have served on the Trade and Environment 
Policy Advisory Committee (TEPAC) for a number of years now and work 
closely with USTR and other U.S. government agencies on trade and 
environment issues. In addition, HSI and HSUS have participated as 
accredited Non-Governmental Organizations at three WTO Ministerial 
Conferences. Indeed, at the most recent Ministerial meeting in Hong 
Kong, I had the honor of being named as an official member of the U.S. 
delegation. As a result of this experience, I believe that I bring a 
unique and balanced perspective to trade and environmental policy 
discussions.
    About fifteen months ago, I sat before the Senate Finance Committee 
and testified on the Free Trade Agreement with Central America and the 
Dominican Republic (CAFTA--DR) and discussed HSI and HSUS's support of 
the environmental provisions of that Agreement. It is our view that 
each free trade agreement signed by the Untied States should be judged 
on its individual provisions and through an objective lens. I do not 
propose to testify today that each and every aspect of the PTPA will 
further the aims most important to my organization--protecting the 
environment and promoting the protection and humane treatment of all 
animals. But, what I will say is that HSI and HSUS view the 
environmental provisions of this Agreement as providing needed 
opportunities and incentives to enhance environmental protection in 
Peru and the United States.
    I commend the U.S. Congress for including specific environmental 
negotiating objectives in the ``Trade Act of 2002'' or Trade Promotion 
Authority (TPA) and in mandating side environmental cooperation 
agreements. HSI and HSUS applaud the commitment of the United States to 
include environment along with other areas of economic and trade 
policy--something no other country in the world does.

PTPA ENVIRONMENT CHAPTER
    Turning to the Environment Chapter of the PTPA, I would like to 
highlight certain provisions.
    First, the Environment Chapter includes the obligation for Parties 
to effectively enforce their environmental laws--including Multilateral 
Environmental Agreements (MEAs) such as the Convention on the 
International Trade in Endangered Species of Wild Fauna and Flora 
(CITES). This obligation is subject to dispute settlement providing a 
strong incentive for both Parties to enforce their laws, an incentive 
sadly lacking in most MEAs themselves.
    Second, the Parties have agreed to set up an independent 
secretariat to accept information from the public concerning 
environmental enforcement activities. If a country is failing to 
enforce its laws, the public will have a specific mechanism to bring 
these failures to light through access to an ``independent entity'' not 
controlled by the government. Increased public participation and 
empowering civil society to monitor governments is perhaps one of the 
best and most low-cost ways to ensure effective enforcement.
    Third, as a member of TEPAC, I particularly recognize the 
importance of public participation in the development of trade and 
environmental policy. For this reason, HSI and HSUS believe that the 
provision of the PTPA requiring Peru to set up and consult an advisory 
committee at the national level is important. We hope this provision 
will serve to provide Peruvian civil society, NGOs, and the private 
sector with a say in their country's environmental policies, programs, 
and enforcement regimes.
    Fourth, for the first time in a trade agreement, the United States 
included a commitment to protect and conserve biodiversity. Peru is one 
of the most biologically diverse countries in the world. It is home to 
unique species such as alpacas, vicunas and Andean river dolphins as 
well as a number of endangered species including the yellow-tailed 
woolly monkey, yellow-eared parrot, Andean mountain cat, and the Andean 
tapir. We are perhaps most excited about this biodiversity provision. 
It underscores the U.S. and Peruvian commitment to the environment and 
conservation of precious biodiversity, including endangered species and 
other animals. Through innovative programs and efforts, including 
through the Environmental Cooperation Agreement (ECA), such protections 
may be increased and enhanced.
    Lastly, we are hopeful that the ECA will provide a strong basis for 
ongoing environmental cooperation. I strongly encourage Congress to 
ensure that the ECA is adequately funded to be able to achieve the 
lofty aims originally envisioned by TPA. We all are aware of the need 
to be fiscally responsible, but cooperation is an area where we can 
achieve a great deal of good and improve the life and health of people 
and animals in addition to increasing economic opportunities. I 
recommend that Congress set aside a specific amount of funding for 
environmental cooperation with Peru as you did in the case of CAFTA-DR.

CONCLUSION
    HSI and HSUS support the efforts of the United States and Peru in 
including the effective enforcement, public participation, and 
biodiversity provisions in the Environment Chapter of the PTPA. The 
Environmental Cooperation Agreement illustrates the strong commitment 
by both Parties to work together to protect the environment and 
conserve precious natural resources including biodiversity. For all of 
these reasons, HSI and HSUS are strongly encouraged that the PTPA will 
support increased environmental protection in both countries.
    Thank you very much for the opportunity to speak with you today.

                                 

    Mr. SHAW. Thank you. Mr. Santeiro.

   STATEMENT OF FRANCISCO X. SANTEIRO, MANAGING DIRECTOR FOR 
 GLOBAL TRADE SERVICES, LATIN AMERICA AND CARIBBEAN DIVISION, 
FEDEX EXPRESS, MIAMI, FLORIDA, ON BEHALF OF AMERICAN CHAMBER OF 
 COMMERCE IN PERU AND THE ASSOCIATION OF AMERICAN CHAMBERS OF 
                   COMMERCE IN LATIN AMERICA

    Mr. SANTEIRO. Mr. Chairman, Members of the Committee, it is 
an honor for me to testify today in strong support of the PTPA.
    My name is Francisco Santeiro, Frank. I am Managing 
Director for Global Trade Services, Latin America and Caribbean 
Division of FedEx Express.
    I am testifying today on behalf of two organizations. The 
first is the Association of American Chambers of Commerce of 
Latin America (AACLA). The AACCLA is the premier advocate for 
U.S. businesses in Latin America and the Caribbean, and its 23 
member-AmChams represent more than 20,000 companies and over 80 
percent of U.S. investment in the region.
    Second, the American Chamber of Commerce of Peru, which 
represents more than 450-member companies that comprise over 90 
percent of U.S. investment in Peru.
    FedEx is a proud member of both of these organizations and 
a strong supporter of PTPA. FedEx is a $32 billion company, 
offering global express delivery services and other related 
transportation services. FedEx offers a broad range of express 
delivery services to accommodate the widest range of shipments 
to more than 220 countries and territories, often within 24 to 
48 hours. FedEx Express is the largest U.S. company in Latin 
America and the Caribbean and employs more than 3,000 people 
throughout the region.
    Let me quickly echo comments made throughout the day.
    The PTPA will allow U.S. and Peruvian companies to better 
take advantage of a booming bilateral trade relationship, U.S. 
trade with Peru has doubled over the past 3 years, reaching 7.4 
billion last year. I am happy to say that FedEx is carrying a 
good percentage of that freight.
    More than 5,000 U.S. companies export their products to 
Peru. Of these, more than 4,000, or about 80 percent, are small 
or medium-sized businesses. Sales by these smaller companies 
represent more than 40 percent of all U.S. exports to Peru, 
well above the 27 percent share of U.S. exports that America's 
smaller companies contribute globally.
    FedEx knows how important smaller companies are to 
international trade. We help these small and medium-sized firms 
grow by providing access to booming markets such as Peru and 
the access that opportunities to those markets present.
    My company's success is bound to the success of America's 
small companies, just as Peru's development is tied to growth 
in trade with the United States; and PTPA is the partnership 
that can bring us together in a stronger, more effective team. 
The commercial relationship is critical to Peru, as well. 
Consider the findings of a November, 2005, study conducted by 
AmCham Peru with Lima-based APOYO consulting:
    In 2004, U.S. companies employed over 100,000 Peruvians 
directly and generated at least three times as many jobs 
indirectly. Far from leading a race to the bottom, these 
companies are paying wages that are triple the average in 
Peru's urban areas and many times those in rural areas.
    Peruvian exports to the United States supported an 
impressive 800,000 jobs in 2005, three times the number a 
decade earlier. This figure represents more than one-third of 
Peru's formal sector employment, underscoring how economic ties 
to the United States are providing Peru with critically needed 
jobs, income and tax revenues. Peruvian exporters using FedEx 
sell value-added competitive products. Those companies are 
creating jobs--critically needed jobs for Peru.
    The opening of cross-border trade and investment in 
services through agreements such as PTPA is critical for the 
U.S. economy, because the service represents an area of 
competitive advantage for U.S. companies.
    For the specific sector FedEx represents, the express 
delivery services, which has a reference in the treaty, PTPA is 
an outstanding agreement. PTPA has a chapter on customs 
administration and trade facilitation. PTPA will make the flow 
of bilateral trade faster, cheaper and more efficient by 
streamlining the administration of customs and ports.
    Studies have shown that inefficient customs procedures in 
Latin America and the Caribbean add anywhere from 5 to 15 
percent to the cost of trade. At a time when the simple average 
tariff in the region has fallen to about 10 percent, it is 
clear the cost of inefficient customs and ports looms as a 
significant barrier to trade to American companies operating, 
selling to Peru, more significant than tariffs in many places.
    Speed matters, too. In today's competitive global market, 
speed to markets and reduced transaction costs are key success 
factors for any company involved in international trade.
    Nowhere is this clearer than in the express delivery 
business. An express shipment in Taiwan can clear customs 
sometimes in under 15 minutes. In Latin America, the clearance 
times are considerably longer. We need to fix this for our 
American shippers.
    Slow customs procedures represent a missed opportunity to 
take advantage of one of the region's key competitive 
advantages over Asia, namely its proximity to consumer markets 
in United States and Canada.
    While customs reform need not wait for a trade agreement, 
PTPA's approach to trade facilitation offers the advantages of 
certainty, stability and enhanced commonality as well as 
permanence of the reforms. In other words, this kind of reforms 
work best when done in concert, as we have seen in recent FTAs 
implemented by the United States.
    We urge you to bring PTPA up for congressional 
consideration as soon as possible and urge you to cast a 
favorable vote. Thank you very much.
    [The prepared statement of Mr. Santeiro follows:]

Statement of Francisco X. Santeiro, Managing Director for Global Trade 
 Services, Latin America and Caribbean Division, FedEx Express, Miami, 
  Florida, on behalf of American Chamber of Commerce in Peru and the 
     Association of American Chambers of Commerce in Latin America

    On behalf of the Association of American Chambers of Commerce in 
Latin America (AACCLA) and the American Chamber of Commerce of Peru 
(AmCham Peru), it is a high honor for me to appear before the U.S. 
House of Representatives Committee on Ways and Means to testify in 
strong support of the U.S.-Peru Trade Promotion Agreement (PTPA). My 
name is Francisco X. Santeiro, and I am Managing Director for Global 
Trade Services, Latin America and Caribbean Division, FedEx Express.
    I am testifying here today on behalf of two organizations:

      The Association of American Chambers of Commerce in Latin 
America (AACCLA). For nearly a century, the American Chambers of 
Commerce (AmChams) have been the most influential voice of U.S. 
business in Latin America and the Caribbean. Today, these 23 AmChams 
represent more than 20,000 companies and over 80% of U.S. investment in 
the region. With the mission of promoting trade and investment between 
the United States and the countries of the region through free trade, 
free markets, and free enterprise, AACCLA has become the premier 
advocate for U.S. business in the Americas.
      The American Chamber of Commerce of Peru. AmCham Peru 
represents more than 450 member companies that comprise over 90% of 
U.S. investment in Peru. AmCham promotes free enterprise and free 
markets while working to strengthen trade and investment between Peru 
and the United States within a framework of social responsibility and 
the highest business ethics.

    My company is a proud member of both of these organizations and a 
strong supporter of the PTPA. FedEx is a $32-billion network of 
companies, offering a mix of transportation, information, document 
management and supply chain solutions. FedEx offers the widest range of 
transportation services--express, ground, freight and expedited--to 
accommodate the widest range of shipments to more than 220 countries 
and territories, often within 24 to 48 hours. FedEx Express is the 
largest FedEx company in Latin America and the Caribbean, and it 
employs more than 3,000 people throughout the region.
    PTPA promises growth, hope, and opportunity for Peru and the United 
States. It will open markets, foster growth and development, enhance 
the rule of law, and lend support to a close ally. The same is true of 
the recently concluded U.S.-Colombia Trade Promotion Agreement, which 
we also strongly endorse. I will elaborate on these points but wish to 
focus the bulk of my comments on PTPA's benefits for service providers 
and, in particular, for the express delivery industry as an example of 
the agreement's many virtues.

The Agreement with Peru: Growth, Hope, and Opportunity
    First, we would like to give a summary of the arguments in favor of 
PTPA from the perspective of AACCLA, AmCham Peru, and FedEx.
Growth: A Burgeoning Trade Relationship
    PTPA will allow U.S. and Peruvian companies to better take 
advantage of a booming bilateral trade relationship. U.S. trade with 
Peru has doubled over the past three years. Two-way commerce reached 
$7.4 billion in 2005, sustaining tens of thousands of U.S. jobs.
    More than 5,000 U.S. companies exported their products to Peru in 
2003, the most recent year for which data is available. Of those, more 
than 4,000, or about 80%, were small and medium-sized companies. Sales 
by these smaller companies represented 42% of all U.S. exports to Peru, 
well above the 27% share of U.S. exports that America's smaller 
companies contribute globally.
    U.S. farmers and ranchers sell more than $250 million worth of 
agricultural products to Peru each year, and the Agriculture Coalition 
for U.S.-Peru Trade estimates the agreement will boost U.S. 
agricultural exports to Peru by more than $700 million per annum upon 
full implementation.
    Nonetheless, this commercial relationship is even more important to 
Peru. Consider the eye-opening findings of a November 2005 study 
conducted by AmCham Peru with Lima-based APOYO Consulting:

      In 2004, U.S. companies employed over 100,000 Peruvians 
directly and generated at least three times as many jobs indirectly. 
Far from leading a ``race to the bottom,'' these companies are paying 
wages that are triple the average in Peru's urban areas (and many times 
those in rural areas).
      Peruvian exports to the United States supported an 
impressive 800,000 jobs in 2005--three times the number a decade 
earlier. This figure represents more than one-third of Peru's formal 
sector employment, underscoring how economic ties to the United States 
are providing Peru with critically needed jobs, income, and tax 
revenues.

Hope: A Helping Hand for a Close Partner
    The agreement will enhance U.S. efforts to strengthen democracy in 
the Andean region and lend support for the rule of law, investor 
protections, internationally recognized workers' rights, and 
transparency and accountability in business and government. The 
agreement's strong intellectual property and related enforcement 
provisions against trafficking in counterfeit or pirated products will 
help combat organized crime.
    PTPA will promote economic growth in Peru, stabilizing its economy 
and providing its citizens with long-term alternatives to narcotics 
trafficking or illegal immigration. It will promote U.S. security and 
economic interests by forging a deeper partnership with a valued ally 
and setting an example for other countries around the world as we 
pursue our global security and economic goals.
    Like much of Latin America, the Andean region is struggling against 
corruption, which undermines growth, security, and stability. PTPA 
contains critical provisions to enhance transparency and accountability 
in governance, providing Peru with important tools to fight the scourge 
of corruption.

Opportunity: A Level Playing Field in Trade
    To foster democracy and development in the Andean region, the 
United States unilaterally opened its markets to most imports from Peru 
and its neighbors through the 1991 Andean Trade Preference Act, which 
was renewed and expanded in 2002. As a result, fully 97% of all imports 
from Peru already enter the U.S. marketplace duty-free, and the average 
U.S. duty on imports from Peru is just one-tenth of one percent.
    By contrast, the U.S. International Trade Commission reports that 
``most of Peru's average tariff rates range from 12% to 25%.'' In other 
words, Peru enjoys nearly free access to our marketplace while our 
access to theirs remains limited.
    PTPA will fix this imbalance by making this trade relationship a 
mutually beneficial, reciprocal partnership. Four-fifths of U.S. 
consumer and industrial products and more than two-thirds of current 
U.S. farm exports will enter Peru duty-free immediately upon 
implementation of PTPA.

Services: A Great Agreement for Key Growth Industries
    In sum, PTPA is an outstanding agreement whether considered from a 
commercial perspective or on the basis of its foreign policy 
implications. However, its benefits for service providers in the United 
States and Peru deserve further attention. The commitments that Peru 
has made in the agreement to liberalize its service industries hold the 
promise of economic development, higher standards of living, and 
enhanced global competitiveness. This is a win-win agreement for Peru 
and for U.S. service industries.
    According to the Coalition of Service Industries--an active leader 
of the U.S.-Peru Trade Coalition--services represent nearly 78% of U.S. 
economic output, and a similar proportion of private employment. U.S. 
services exports exceeded $323 billion in 2005, and the United States 
enjoys a services trade surplus of approximately $65 billion. As such, 
the liberalization of cross-border trade and investment in services 
through agreements such as PTPA is particularly significant for the 
U.S. economy precisely because services represent an area of 
competitive advantage for U.S. companies.
    Under PTPA, Peru will open up substantial portions of its services 
market, subject to few exceptions. Peru has agreed to significant 
commitments on regulatory transparency and principles to guide 
independent regulatory authorities. Key sectors where new opportunities 
will be created for U.S. companies include telecommunications, banking, 
insurance, distribution, computer, audiovisual and entertainment, 
energy, transport, construction, real estate, construction, 
environmental, professional and other services.
    From a policy perspective, PTPA's services commitments cover both 
the cross-border supply of services and the right to invest and 
establish a local service presence. These obligations are strengthened 
by a set of detailed disciplines on regulatory transparency, which is 
fundamental to meaningful market access to services. In fact, as a 
result of PTPA, Peru has agreed to a series of new commitments that 
extend beyond Peru's existing commitments under the General Agreement 
on Trade in Services (GATS).

Express Delivery Services: An Example of PTPA's Strength
    For the specific service sector FedEx represents--express delivery 
services--PTPA is an outstanding agreement. I'd like to call particular 
attention to PTPA's chapter on customs administration and trade 
facilitation. Trade facilitation is a term of art for reforms to make 
the flow of international commerce faster, cheaper, and more efficient 
by streamlining the administration of ports and customs.
    Why do customs administration and trade facilitation matter to the 
business customers who are moving their merchandise through ports and 
customs, whether by express shipment or other means? Studies have shown 
that relatively inefficient customs clearance procedures in Latin 
America and the Caribbean add anywhere from 5% to 15% to the cost of 
trade. At a time when the simple average import tariff in Latin America 
and the Caribbean has fallen to about 10%, it's clear that the cost of 
inefficient customs and ports looms as a significant barrier to trade--
more significant than tariffs in many places.
    In addition to direct costs, speed is a critical success factor in 
international trade. Nowhere is this clearer than in the express 
delivery business. An express shipment in Taiwan can clear customs in 
less than 15 minutes, but in some Latin American countries the average 
clearance time is best measured in days. For Latin America, slow 
customs procedures represent a missed opportunity to take advantage of 
one of its key competitive advantages vis-`-vis Asia--namely, the 
region's proximity to the rich markets of the United States and Canada. 
Inefficient customs and port procedures squander this advantage. In 
essence, they move Latin America farther away from its key export 
markets.
    It's true that governments may implement customs reforms and see 
benefits for their own competitiveness immediately, regardless of 
whether they sign a trade agreement or other nations reciprocate. 
However, a rules-based approach as exemplified by PTPA offers the 
advantages of certainty, stability, and enhanced commonality. In other 
words, these kinds of reforms work best when done in concert, as we've 
seen in recent free trade agreements implemented by the United States.
    PTPA's chapter on customs administration and trade facilitation is 
actually quite simple. It includes simple obligations for each party to 
publish its customs-related laws, regulations, and procedures on the 
Internet, as well as publish in advance any new regulations that are 
proposed. It provides for the release of goods ``within a period no 
greater than that required to ensure compliance with--customs laws, and 
to the extent possible release the goods within 48 hours of arrival''. 
This language keeps customs administrators focused on the need for 
speed and efficiency, both of which are central to international 
competitiveness in today's global economy.
    PTPA will also put Peru on the path toward greater automation and 
efficient use of information technology in its customs procedures. 
Customs automation will assist Peruvian customs officials as they seek 
to employ modern risk management systems and focus inspections on 
``high-risk goods and simplify the clearance and movement of low-risk 
goods, while respecting the confidential nature of the information it 
obtains through such activities.'' In today's uncertain international 
security environment, such simple steps can ensure that resources are 
focused on safeguarding against real threats.
    These provisions cover customs generally, but for the express 
delivery industry, PTPA is also a model. The agreement specifically 
instructs each party to maintain ``a separate and expedited customs 
procedure for express shipments'' and allow the ``processing of 
information necessary for the release of an express shipment before the 
express shipment arrives.'' These and other provisions lighten the 
burden of paperwork.
    Most importantly, PTPA instructs the parties to ``provide for 
clearance of express shipments within six hours after submission of the 
necessary customs documents, provided the shipment has arrived.'' 
Having a time-specific benchmark is incredibly useful. As customs 
experts often point out, if you can't measure customs clearance times, 
you can't improve them; and if you don't have a goal, you never will.

Conclusion
    Mr. Chairman, Mr. Ranking Member, we greatly appreciate this 
opportunity to testify before this committee in support of an agreement 
that is so clearly in the commercial interest and the national interest 
of the United States. It also will bring real benefits for our friends, 
allies, and neighbors in Peru. Despite the many commitments and 
pressures of the legislative calendar, we urge you to bring PTPA up for 
Congressional consideration as soon as possible--and to cast a 
favorable vote. We urge this for the sake of your constituents, but 
also for the sake of our friends in Peru.
    Thank you very much.

                                 

    Mr. SHAW. Thank you. Ms. Lilygren.

    STATEMENT OF SARA LILYGREN, VICE PRESIDENT FOR FEDERAL 
GOVERNMENT RELATIONS, TYSON FOODS, INC., ON BEHALF OF NATIONAL 
                        CHICKEN COUNCIL

    Ms. LILYGREN. Thank you, Chairman Thomas and Members of the 
Committee, for the opportunity to present the views of the 
National Chicken Council, the USA Poultry and Egg Export 
Council, the National Turkey Federation and the United Egg 
Producers on the PTPA.
    I am Sara Lilygren, Vice President of Federal Government 
Relations for Tyson Foods. Tyson is the leading processor of 
chicken in the United States, with more than 6,500 family farms 
producing the live birds for our production. We are also a 
leading processor of beef and pork, and exports are vital to 
both Tyson Foods and the poultry and egg industry.
    The U.S. poultry associations have long been strong 
supporters of this administration's efforts to liberalize 
international trade, in particular FTAs with certain developing 
and emerging economies in the Western Hemisphere. The U.S.-Peru 
TPA clearly represents one of the best market access 
arrangements for poultry ever negotiated in a FTA.
    The arrangement recognizes interests on both sides of the 
table, providing immediate or near-term market access for 
nearly all poultry products while liberalizing trade in the 
most sensitive product which is chicken leg quarters. The trade 
of chicken leg quarters is addressed through the use of a 
tariff rate quota over a longer period of time. Appropriately, 
the U.S. industry will gain immediate market access duty free 
for 12,000 metric tons of chicken leg quarters.
    The agreement also has a growth factor so that over 10 
years the amount of duty free access will grow to approximately 
24,000 metric tons. The United States has never exported, by 
the way, more than 2,400 metric tons of poultry, including all 
poultry products to Peru in any year. It is a tremendous 
advantage for us.
    In the meantime, the tariffs on all other products will be 
eliminated immediately or will be reduced and eliminated over 
the next 5 years.
    In reaching agreement on the Peru TPA, U.S. government 
negotiators also achieved a number of improvements over past 
agreement TPAs. Most notably, the U.S. government obtained 
specific commitments on the part of the Peruvian government to 
recognize and accept the Animal and Plant Health Inspection 
Service, or APHIS, system for determining disease status and 
the Food Safety and Inspection Service, or SFIS, system for 
approving poultry slaughter and processing facilities.
    In the past, U.S. poultry exports to Peru have been blocked 
by Peruvian government regulators on grounds that the U.S. 
product allegedly posed some threat of avian flu or New Castle 
disease or even salmonella. Hopefully, the commitments that 
Peru has now made to respect the decisions of U.S. animal 
health regulators will ensure that the U.S. industry benefits 
immediately from the market access provisions and won't have 
those benefits blocked by the imposition of nontariff barriers 
in the form of dubious SPS requirements.
    In this regard, the Peruvian agreement is a further 
improvement on past agreements in that our government 
negotiators have anticipated some of the basic implementation 
problems that we have experienced in the past and taken 
measures to eliminate them.
    Economic studies have shown that when the economies of 
developing countries improve and their low-income citizens 
become middle class, the first thing that they spend their 
extra income on is an improved diet with additional farm 
agriculture animal protein; and the least costly and most 
dependable source of dietary protein in the world is poultry 
and egg products. In other words, in the context of a FTA, the 
U.S. poultry and egg industry and the domestic industry of our 
free trade partner aren't competing over a fixed pie with the 
result that increased imports displace domestic production. In 
fact, the greater economic prosperity occasioned by a 
successful FTA can mean a larger market for both domestic and 
imported poultry and eggs.
    In conclusion, Mr. Chairman, the U.S. poultry and egg 
industry, especially its export segment, has worked long and 
diligently to support the administration in its free trade 
initiatives, particularly those in the Western Hemisphere. 
Those efforts have clearly paid dividends with the conclusion 
that the U.S.-Peru TPA represents the best package of market 
access commitments obtained thus far for our sector of the 
economy. We congratulate the USTR and USDA negotiators in their 
work, and we respectfully ask this Committee and its Members to 
fully support the USPTPA when it is ultimately submitted for 
congressional approval.
    [The prepared statement of Ms. Lilygren follows:]

   Statement of Sara Lilygren, Vice President for Federal Government 
  Relations, Tyson Foods, Inc., on behalf of National Chicken Council

    Thank you, Chairman Thomas, Ranking Member Rangel, and Members of 
the Committee for the opportunity to present the U.S. poultry and egg 
producers/processors views, comments, and recommendations regarding the 
implementation of the U.S.-Peru Trade Promotion Agreement. On behalf of 
the National Chicken Council, the USA Poultry and Egg Export Council, 
the National Turkey Federation, and the United Egg Producers, I am 
pleased to share the position of these organizations on the important 
issue of today's hearing.
    I am Sara Lilygren, Vice President of Federal Governmental 
Relations for Tyson Foods. I am pleased to represent the organizations 
supporting the comments being presented. Tyson Foods is the leading 
processor of chicken in the United States with more than 6,500 family 
farms producing the live birds for the company. Tyson is also a leading 
processor of beef and pork. Exports are a vital part of the economic 
well-being of Tyson Foods and the U.S. poultry and egg industry.
    U.S. poultry associations have long been strong supporters of this 
Administration's continuing efforts to liberalize international trade 
and, in particular, of its efforts to forge free trade arrangements 
with certain developing and emerging economies in the Western 
Hemisphere. The U.S. poultry industry was a strong supporter of the 
NAFTA agreement and has worked diligently with both the United States 
government and with its counterpart industry in Mexico to ensure a 
successful and mutually acceptable implementation. Several years ago, 
when difficulties arose with respect to Mexico's implementation of its 
original NAFTA poultry access commitment on chicken leg quarters, the 
U.S. poultry export industry met with its Mexican counterparts and 
developed a joint proposal to resolve the issue through a mutually-
acceptable exercise of the NAFTA safeguard provisions. That proposal 
was eventually accepted by both governments and liberalization of the 
NAFTA poultry markets continued without unnecessary trade disruption.
    Similarly, the U.S. poultry and egg export industries were active 
in assisting the U.S. government to achieve a successful resolution of 
poultry market access during the CAFTA negotiations. All the Central 
American countries had identified poultry products and, specifically, 
chicken leg quarters, as particularly sensitive. Rather than allow 
poultry issues to undermine the negotiations, the U.S. poultry and egg 
industry met with representatives of its counterpart industries in 
Central America and, through a series of meetings over more than a 
year, forged a mutually-acceptable proposal for CAFTA poultry market 
access that was similar in many respects to the solution that had been 
achieved in NAFTA. The proposal was also accepted by the respective 
governments and became the basis for the poultry market access 
commitments in the CAFTA.
    The U.S. poultry industry has not yet realized the benefits of the 
CAFTA negotiations. Full CAFTA implementation has been delayed while 
the parties work to resolve disagreements about the methods of 
implementation for some agricultural products, for intellectual 
property, and for textiles. However, industry leaders are hopeful that 
significantly improved market access will be achieved soon. The CAFTA 
came into force with respect to El Salvador, Honduras and Nicaragua 
earlier this year, and with Guatemala on the first of this month. 
Guatemala is now officially in CAFTA and is a key player in poultry 
trade. The U.S. industry will begin to benefit from a new 21,800 metric 
ton Tariff Rate Quota (TRQ) for chicken leg quarters, as well as 
immediate liberalization or significantly lower tariff rates for all 
other poultry and egg items. A joint arrangement for an export trading 
company is a key component in the process involved in filling the TRQ 
for leg quarters.
    In recent months there have been certain significant steps taken by 
some of our CAFTA partners to recognize and accept USDA regulatory 
systems. In particular, certain progress has been made involving 
APHIS's system for determining the prevalence of animal diseases and 
FSIS's system for approving and inspecting poultry processing 
facilities. However, more needs to be achieved in that area. For 
example, El Salvador continues to block imports of U.S. shell eggs and 
poultry by imposing questionable sanitary inspection requirements and 
that issue needs to be resolved quickly before other countries 
implement similar measures, like the ones published by Honduras last 
month. More progress needs to be achieved for the market access for 
U.S. eggs and poultry negotiated in the agreement. Some progress is 
being achieved with CAFTA partners on Sanitary/Phytosanitary (SPS), 
issues. The U.S. government continues to press for additional 
improvement on these issue.
    As in the cases of NAFTA and CAFTA, the U.S. poultry industry has 
supported the Administration's efforts to forge free trade agreements 
with the countries of the Andean region. In anticipation of Andean FTA 
negotiations, representatives of the U.S. poultry industry met on 
several occasions with their counterpart industries in that region, 
once in Atlanta and once in Cartagena, Colombia. They were never able 
to develop a joint proposal as they had in the NAFTA and CAFTA cases. 
Nonetheless, the U.S. industry has continued its dialogue with the 
Andean region poultry industries during the course of the negotiations. 
Moreover, the industry has worked very closely with our government 
negotiators both at the Office of the U.S. Trade Representative and 
within the U.S. Department of Agriculture to ensure that they fully 
understood the poultry and egg industries' interests in the 
negotiations as well as the areas in which it was possible to construct 
compromise solutions and longer-term liberalization scenarios in order 
to ensure successful negotiations.
    Those close working relationships have been advantageous both to 
our industry and to the U.S. government, as is evident by the results 
recently achieved in the U.S.-Peru Trade Promotion Agreement (TPA). The 
U.S.-Peru FPA clearly represents one of the best market access 
arrangements for poultry ever negotiated in a free trade agreement. The 
arrangement recognizes interests on both sides of the table, providing 
immediate or near term market access for nearly all poultry products, 
while liberalizing trade in the most sensitive product--chicken leg 
quarters. The trade of chicken leg quarters is addressed through the 
use of a tariff rate quota over a longer period of time. Appropriately, 
the U.S. industry will gain immediate market access, duty-free, for 
12,000 metric tons of chicken leg quarters. Initially, any additional 
CLQ imports will be subject to a reasonable over-quota duty of 25 
percent, but that duty will be slowly reduced and eliminated over time. 
The agreement also has a growth factor so that, over ten years, the 
amount of duty free access will grow to approximately 24,000 metric 
tons. This approach presents a considerable opportunity. The United 
States has never exported more than 2,400 metric tons of poultry, and 
that includes all poultry products, to Peru in any year.
    In the meantime, the tariffs on all other products will be 
eliminated immediately, or will be reduced and eliminated over the next 
five years. A few issues remain to be clarified. For example, the U.S.-
Peru TPA calls for TRQ access on a ``first-come-first-served'' basis. 
The industry awaits further information on how such a system will 
operate. However, for the most part, the U.S.-Peru TPA negotiations 
have been a great success and, hopefully, will provide the model for 
poultry market access negotiations in future free trade agreements.
    In reaching agreement on the Peru TPA, U.S. government negotiators 
also achieved a number of improvements over past agreements TPA's. Most 
notably, the U.S. government obtained specific commitments on the part 
of the Peruvian government to recognize and accept the APHIS system for 
determining disease status and the FSIS system for approving poultry 
slaughter and processing facilities. In the past, U.S. poultry exports 
to Peru have been blocked by Peruvian regulators on grounds that the 
U.S. product allegedly posed a threat of avian influenza and Newcastle 
disease or even Salmonella. Hopefully, the commitments that Peru has 
now made to respect decisions of U.S. animal health regulators will 
ensure that the U.S. industry will benefit immediately from the market 
access provisions of the agreement and will not have those benefits 
blocked by the imposition of non-tariffs barriers in the form of 
dubious SPS requirements. In this regard, the Peruvian agreement is a 
further improvement on past agreements in that our government 
negotiators have anticipated some of the basic implementation problems 
that we have experienced in the past and have taken additional measures 
to try to ensure implementation occurs more quickly and smoothly in the 
case of Peru.
    There have been concerns voiced by some that a trade agreement with 
the United States could be ruinous to industries in less developed 
countries. In the case of poultry trade, we do not believe that will be 
true for several reasons. First, the U.S. poultry and egg industries 
have made it their practice to accommodate particularly sensitive 
situations when they occur so that mutually acceptable terms can be 
incorporated into these agreements. In short, our industry sees that it 
is in their interest to be accepted as welcome participants in these 
markets. Secondly, a free trade area with the United States provides a 
developing country with the opportunity to significantly raise the 
standard of living for many of its citizens and thereby to increase the 
consumption of poultry products to the benefit of both the domestic and 
the U.S. poultry industries. Economic studies have shown that when the 
economies of developing counties improve and their low-income citizens 
become middle class, the first thing that they spend their extra income 
on is an improved diet with additional farm agriculture animal protein. 
And, the least costly and most dependable source of dietary protein in 
the world is poultry and egg products. In other words, in the context 
of a free trade agreement, the U.S. poultry and egg industry and the 
domestic industry of our free trade partner are not competing over a 
fixed pie with a result that increased imports simply displace domestic 
production. The greater economic prosperity occasioned by a successful 
free trade agreement can mean a larger market for both domestic and 
imported poultry and eggs.
    In conclusions, Mr. Chairman, the U.S. poultry and egg industry, 
especially its export segment, has worked long and diligently to 
support the Administration in its free trade initiatives, particularly 
those in the Western Hemisphere. In the course of achieving NAFTA and 
CAFTA, we have developed an excellent working relationship with our 
government negotiators, and have reached out to our counterpart 
industries in those countries to help guarantee a successful 
negotiations and also to achieve mutually acceptable results for both 
industries. Those efforts have clearly paid dividends with the 
conclusion of the U.S.-Peru TPA that represents the best package of 
market access commitments obtained thus far. We congratulate the USTR 
and USDA negotiators on their work in that agreement. We respectfully 
ask this committee and its members to fully support the U.S-Peru TPA 
when it is ultimately submitted for congressional approval.

         U.S. Poultry and Egg Exports to Peru--2001 to Present

[GRAPHIC] [TIFF OMITTED] T1576A.001

[GRAPHIC] [TIFF OMITTED] T1576A.002

[GRAPHIC] [TIFF OMITTED] T1576A.003

      The National Chicken Council (NCC) represents companies 
that produce and process about 95 percent of the young meat chickens 
(broilers) in the United States.
      The USA Poultry & Egg Export Council (USAPEEC) represents 
companies that export over 95 percent of U.S. poultry and eggs sold 
into international markets.
      The National Turkey Federation (NTF) represents 98 
percent of the U.S. turkey industry, including processors, growers, 
breeders, hatcheries, and allied industry companies.
      The United Egg Producers (UEP) represents companies that 
produce over 90 percent of the shell eggs.

                                 

    Mr. SHAW. Thank you. Mr. Gibson.

STATEMENT OF BRETT GIBSON, LEGISLATIVE REPRESENTATIVE, AMERICAN 
  FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

    Mr. GIBSON. Good afternoon, Mr. Chairman, Members of the 
Committee. I thank you for the opportunity to testify today on 
behalf of the nine million working men and women of the AFL-CIO 
on the U.S.-Peru Free Trade Agreement.
    Like the other FTA's negotiated by this administration, the 
Peru FTA provides the wrong answers to the challenges faced in 
Peru and United States. This failed model neither addresses the 
problems confronted by workers in Peru nor contributes to the 
creation of good jobs and decent wages at home.
    The workers' rights provisions are entirely inadequate to 
ensure the workers' fundamental rights are respected. At the 
same time, flawed provisions on services, investment, 
government procurement and intellectual property rights will 
undermine the development and ability of both governments to 
protect public health, communities and the environment. 
Inclusion of these weak labor provisions in this agreement is 
inexcusable.
    In 2005, then President Alejandro Toledo publicly expressed 
his support for the inclusion of ILO core labor standards in 
the trade agreement and a mechanism to enforce them. Moreover, 
following the contentious CAFTA debate, then U.S. Trade 
Representative Robert Portman also promised to consider the 
concerns raised by Congress in future trade agreements. Yet we 
continue to see the same weak language again and again.
    Workers in Peru and in the United States deserve 
protections at least as strong as those afforded commercial 
interests; and until these provisions are included in trade 
agreements, they will continue to face strong opposition.
    In addition to the weak provisions included in the FTA, we 
have very serious concerns about Peru's labor laws. As the ILO 
has observed, Peru's laws fall short of compliance with ILO's 
core labor standards, especially freedom of association and the 
right to organize and bargain collectively.
    Moreover, existing laws are not respected and practiced. 
Employers can and often do avoid unions by employing workers on 
short, fixed-term contracts, commercial contracts or by hiring 
workers through a management-dominated service cooperative. 
Should a worker with a fixed-term contract attempt to organize 
or join a union, the contract is simply not renewed upon its 
expiration.
    Protections against employer interference or anti-union 
discrimination are weak. Even when workers do have a collective 
bargaining agreement, employers may unilaterally modify the 
terms and the conditions by negotiating a new contract.
    Most troubling, the law gives the employer the power to 
fire any worker without cause. This effectively eliminates the 
protections for workers to organize, bargain collectively and 
strike.
    Even if Peru's laws were brought fully into compliance with 
ILO standards, the U.S. government would have absolutely no 
recourse to dispute settlement or enforcement if a future 
government were to reverse these gains under this FTA. Labor 
provisions included in the Peru FTA do not include any 
enforceable provisions preventing the weakening of or 
derogation from domestic labor laws. This is not an academic 
point with regard to Peru, whose government in the nineties 
harshly repressed organized labor and substantially weakened 
the labor code.
    The commercial provisions of the agreement also raise some 
concerns. Our trade deficit with Peru alone has already climbed 
from $335 million in 2000 to $2.8 billion in 2005. The 
agreement will likely result in a deteriorating trade balance 
in specific sectors, including sensitive sectors such as 
apparel and metals.
    American workers are willing to support increased trade if 
the rules that govern it promote fairness, stimulate growth, 
create jobs and protect fundamental rights. AFL-CIO is 
committed to fighting for better trade policies that benefit 
U.S. workers and the U.S. economy. We urge Congress to reject 
this U.S.-Peru Free Trade Agreement and begin work on a more 
just, economic, and social relationship with Peru.
    Thank you again, Mr. Chairman.
    [The prepared statement of Mr. Gibson follows:]
    Statement of Brett Gibson, Legislative Representative, American 
 Federation of Labor and Congress of Industrial Organizations (AFL-CIO)
    Mr. Chairman, members of the Committee, thank you for the 
opportunity to testify today on behalf of the nine million working men 
and women of the AFL-CIO on this very important topic.
    The trade debate in the United States continues to be more 
contentious than necessary. It does not have to be this way. We in the 
labor movement, along with our allies in the environmental, family 
farm, small business, development, and faith communities, have 
repeatedly communicated our substantive and concrete concerns about the 
direction of U.S. trade policy to the Administration--through 
testimony, advisory committee reports, and meetings. Yet our concerns 
have been completely ignored, and the Administration continues to 
barrel ahead with ill-advised bilateral trade deals that will only 
further exacerbate our current trade imbalance, and erode the living 
standards of American workers and our counterparts overseas.
    Mr. Chairman, members of the Committee, we ask you to reject the 
Peru FTA and urge the administration to renegotiate this deeply flawed 
deal.
    In our view, the Peru FTA provides precisely the wrong answers to 
the challenges faced in Peru and the United States. The agreement is 
based on a failed model that neither addresses the problems confronted 
by workers in Peru, nor contributes to the creation of good jobs and 
decent wages at home. Once again, 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.
    In addition to the problems outlined above, which are common to all 
of the trade agreements negotiated by this Administration, we continue 
to have very serious concerns about the labor laws of Peru. As the 
International Labor Organization (ILO) recently observed, many of 
Peru's labor laws still do not comply with ILO core labor standards. 
Moreover, existing laws are not respected in practice. Despite 
improvements made to Peru's legal framework in 2003, labor laws today 
do not provide for the full exercise of the most important and 
fundamental workers' rights: freedom of association and the right to 
organize and bargain collectively.
    Workers in Peru suffer from a labor relations system that makes the 
entire employment relationship precarious and unfair. Employers can and 
often do avoid unions by employing workers on short, fixed-term 
contracts, commercial contracts, or by hiring workers through a 
management-dominated service cooperative. Should a worker with a fixed-
term contract attempt to organize or join a union, the contract is 
generally not renewed upon expiration. Those workers hired through a 
cooperative are not considered employees but members of the 
cooperative; thus, they are completely denied the ability to exercise 
their basic labor rights.
    Workers fortunate enough to be in a union are largely unprotected 
from employer interference or from anti-union discrimination, further 
limiting the ability of workers to organize and bargain for better, 
dignified working conditions. Even if a worker does have a collective 
bargaining agreement, employers may unilaterally modify its terms as a 
condition for negotiating a new contract. Most troubling, the law gives 
the employer the power to fire any worker without cause, and without 
the right to legally challenge the action. This effectively eliminates 
the rights for workers hired under direct, permanent contracts to 
organize, bargain collectively, and strike.
    Labor law reform is currently stalled in the Peruvian Congress. But 
even if these reforms were fully implemented, the labor provisions 
included in the Peru FTA do not include any enforceable provisions 
preventing the weakening of or derogation from domestic labor laws. 
This means that even if Peru's labor laws are brought fully into 
compliance with ILO standards, the U.S. government would have 
absolutely no recourse to dispute settlement or enforcement if a future 
government were to reverse those gains and weaken or gut Peru's labor 
laws after Congressional passage of the FTA.
    In addition to our concerns on Peru's labor situation, any vote on 
the Peru 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 Peru, 
until we can rewrite them to protect and advance workers' interests.
Labor Provisions of the Peru FTA
    Like CAFTA, the Peru FTA's labor provisions constitute a 
significant step backwards from existing labor rights provisions in the 
U.S.-Jordan FTA and in our Generalized System of Preferences (GSP) 
program. In the Peru 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 excluded from the 
dispute settlement system and are thus completely unenforceable.
    The USTR has no legitimate excuse for continuing to negotiate these 
weak and inadequate labor provisions. During a visit to Washington, 
D.C., in 2005, President Alejandro Toledo expressed support for 
including an enforceable commitment to comply with ILO core labor 
standards in the trade agreement. Our government has consciously chosen 
not to include this provision in the final text, despite the 
willingness of the Peruvian government to do so. It is no longer 
credible for USTR to claim that other governments are not willing to 
include meaningful worker rights provisions in FTAs.
    The labor provisions of the Peru FTA, like those in all the FTAs 
negotiated by this Administration, are simply inadequate to ensure that 
workers' fundamental human rights will be protected. These weak labor 
provisions:

      do not contain any enforceable requirements that domestic 
labor laws comply with the international standards established by the 
International Labor Organization (ILO). While the labor chapter 
includes a commitment to respect the ILO core labor standards, this 
commitment is not subject to the enforcement mechanisms of the trade 
agreement.
      do not prevent a government from ``weakening or reducing 
the protections afforded in domestic labor laws'' to ``encourage trade 
or investment.'' A government could roll back its labor laws without 
threat of sanction or fine. This is a very real problem. In 2005, for 
example, the Mexican government drafted and attempted to pass 
legislation that would have substantially weakened its labor code. 
Unfortunately, this is an all-too-common occurrence.
      do not include any requirement that countries effectively 
enforce non-discrimination laws, even though this is an ILO core labor 
standard. The Andean governments expressed willingness to include non-
discrimination within the definition of internationally recognized 
worker rights, but USTR refused to make this important change.Penalties 
are Insufficient
Penalties are Insufficient
    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 Trade Promotion Authority, which 
instructs our negotiators to seek provisions in trade agreements that 
treat all principle 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 Peru 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 Peru 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 Peru'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.
Labor Rights in Peru
    Workers continue to face legal and practical obstacles to the 
exercise of their rights to freely associate, to join a trade union and 
to bargain collectively in Peru. Under the autocratic rule of President 
Alberto Fujimori, which lasted from 1990 to 2000, trade unionists 
suffered heavy losses. Collective bargaining agreements were abrogated, 
harsh industrial policies were enacted, and political repression became 
the norm. As a result, there was a sharp drop in the union density in 
Peru, from 21.9% in 1990 to 4.6% in 2002. Similarly, the percentage of 
workers covered by collective bargaining agreements dropped from 37.9% 
to 11.7%, during the same period.\1\ Although the outgoing 
administration of President Toledo took some steps to moderate the 
Fujimori era ``reforms,'' serious problems still persist in the labor 
laws and practices in Peru. Additional reforms to the General Labor 
Law, which would have made additional steps towards bringing the 
country's labor code into compliance with ILO labor standards, have 
been drafted but unfortunately never enacted.
---------------------------------------------------------------------------
    \1\ ILO, Peru: Proposal of the National Program for Decent Work 
2004-2006 (Dec. 2003), p.70.
---------------------------------------------------------------------------
    With the coming of a new administration, it seemed possible that an 
improved General Labor Law could pass soon. However, we are deeply 
troubled by recent remarks made by Congressman Jorge del Castillo, the 
Secretary General of APRA--the political party of president-elect Alan 
Garcia. In the June 22 issue of Gestion, he explains that the current 
congress would not approve the revised General Labor Law. Even worse, 
he goes on to say that the labor reforms do not constitute a priority 
for the new congress, but that they will focus instead on austerity 
reforms and investment policy. His remarks clearly do not bode well for 
Peruvian workers and the prospect for needed labor law reforms.
Right to Organize and Bargain Collectively:
    In 1992, President Fujimori decreed that collective bargaining 
agreements would expire within a year and would thereafter be subject 
to renegotiation. With unions already on the defensive, the gains won 
through years, and in some cases decades, of negotiation were wiped 
away. Today's collective bargaining agreements contain only a fraction 
of the rights and benefits of pre-1992 contracts. Unfortunately, not 
much has changed as to collective bargaining.
    Section 9 of Legislative Decree 728 allows employers to introduce 
changes unilaterally to the content of previously concluded collective 
agreements, a practice denounced by the ILO.\2\ At the expiration of a 
collective bargaining agreement, all previously negotiated agreements 
must be ratified in order for the previously established terms and 
conditions to continue in force. Employers often introduce 
modifications unilaterally as a ``condition'' to move forward with re-
negotiation of an existing agreement.
---------------------------------------------------------------------------
    \2\ CEACR: Individual Observation Concerning Convention No. 98, 
Right to Organize and Collective Bargaining, Peru (2005).
---------------------------------------------------------------------------
    The ILO has also found that legal procedures for addressing anti-
union discrimination and employer interference are so slow as to be 
ineffective. It recently recommended that ``the legislation--make 
express provision for rapid appeal procedures and effective and 
dissuasive sanctions against acts of interference by employers against 
workers' organizations and that cases concerning issues of anti-union 
discrimination and interference should be examined promptly so that the 
necessary remedial measures can be really effective.'' \3\
---------------------------------------------------------------------------
    \3\ Id.
---------------------------------------------------------------------------
Freedom of Association_Right to Strike
    Article 73(b) of the Industrial relations Act of 1992 requires that 
a majority of the workers in a workplace vote in favor of a strike 
before it can be held. The ILO has found such a requirement to be 
excessive, as ILO standards only call for the support of a majority of 
those voting.\4\ The right to strike is further restricted for those 
workers employed in ``essential public services.'' However, the 
government's list of ``essential services'' is vast and goes far beyond 
what is deemed essential under international law.\5\
---------------------------------------------------------------------------
    \4\ CEACR Individual Observation Concerning Convention No. 87, 
Freedom of Association and Protection of the Right to Organize, Peru 
(2005)
    \5\ According to the Public Service Law, essential services are 
defined as: a) health services; b) waste collection and public 
sanitation; c) electricity, water, drainage systems, gas and fuel 
services; d) funeral and burial services; e) prison system; f) 
communications and telecommunications; g) transportation; h) national 
security, national defense and strategic services; i) justice system as 
decided by the Supreme Court; j) others determined under the law.
---------------------------------------------------------------------------
    The ILO has also held that an independent body should determine the 
legality of a strike. In the case of a strike in an essential public 
service, an independent body should also determine how many workers are 
needed to maintain minimum services. In Peru, the Ministry of Labor 
makes these determinations.\6\
---------------------------------------------------------------------------
    \6\ See id, supra, n. 4.
---------------------------------------------------------------------------
    According to the State Department's 2005 Report on Human Rights 
Practices, there was a single legal strike and 45 illegal strikes 
between January and August. Labor leaders alleged that it was difficult 
to get approval for a legal strike and believed that the Ministry of 
Labor was reluctant to do so for fear of hurting the economy.
Use of Short-Term Contracts and Labor Cooperatives to Frustrate Labor 
        Rights:
    Under the laws of Peru, employers may hire new employees through 
renewable, fixed-term contracts, which are typically for no longer than 
a few months. Employees may be employed for years on such contracts, 
despite their temporary nature. However, if an employee attempts to 
form or join a union, the contract is typically not renewed. Further, 
it is more difficult to prove anti-union discrimination in the 
termination of a temporary three-month contract, as the employer can 
justify the dismissal on the basis that the work was temporary and that 
the worker is no longer needed.
    Some workers are also hired through a service cooperative. Workers 
hired by such cooperatives, which are often set up and controlled an 
employer, are not considered employees of the establishment but rather 
are deemed members of the cooperative. Thus, since the relationship 
with the employer is indirect, the employee is not protected by the 
terms of the General Labor Law. Such workers also do not receive 
legally established benefits and protections either.
Forced Labor
    Forced labor continues to be practiced in rural areas of Peru, 
affecting primarily the indigenous populations of Atalaya and Ucayali. 
In 2004, the ILO published the report, Forced Labor In The Extraction 
Of Timber In Peruvian Amazonia as a product of the ILO's special action 
program to combat forced labor. The report found the ``existence of 
forced labor, particularly in work related to the unlawful extraction 
of timber in various regions of the Peruvian Amazon basin. . . . The 
number of persons affected is reported to be around 33,000, mainly 
belonging to various ethnic groups of Peruvian Amazonia.'' \7\ The 
report found extreme cases in which indigenous workers are actually 
captured and forced to work in timber camps, although forms of debt 
bondage is a more common practice. The document also reported that 
major international corporations and powerful timber industry groups 
provided the financing of timber extraction activities.
---------------------------------------------------------------------------
    \7\ CEACR: Individual Observation Concerning Forced Labor 
Convention, No. 29, Peru (2006).
---------------------------------------------------------------------------
    Following the release of the report, the government prepared a 
National Plan of Action for the Eradication of Forced Labor. However, 
the ILO reported that the government did not receive any legal 
complaints concerning forced labor. Given that forced labor is known to 
exist, the absence of any penalties was found to be ``indicative of the 
incapacity of the judicial system to prosecute such practices and 
penalize those who are guilty.'' In accordance with Article 25 of the 
Convention, the Government is under the obligation to ensure that the 
penalties imposed on those found guilty of the exaction of forced labor 
are really adequate and strictly enforced.
Child Labor
    The 2005 U.S. Department of State Report on Human Rights Practices 
notes that although the law generally restricts child labor ''the law's 
provisions were violated routinely in the informal sector.'' The 
National Institute for Statistics and Information (INEI) estimated that 
``2.3 million children between 6 and 17 years of age were engaged in 
work, of which 1.9 million labored in the informal sector.''
    Child labor in the mining sector, a ``worst form'' due to the 
hazards it poses to the health and welfare of children, persists in 
Peru. We note that ILO/IPEC has established programs in Peru to help 
raise awareness of the problem and to expand health and education 
services. However, there is a long way to go before the problem is 
resolved, as thousands of children continue to labor in the mines. Peru 
must take the necessary measures to eradicate the exploitation of 
children in the mining sector and to improve the conditions of work for 
adult miners.
Conditions of Work--Export Agriculture and EPZs
    Workers in the export agriculture sector enjoy fewer benefits, by 
law, than their non-agricultural counterparts. Under Law 27,360 of 
2000, workers are entitled to less vacation, do not receive 
compensation for holidays, and in the case of arbitrary dismissal are 
eligible to collect only up to 15 days wages for each year of service.
    Workers, largely women, who enter this line of work are usually 
between 18 and 25. They work long days, between 9 and 12 hours daily 
and up to 18 to 20 hours during harvest or during the shipment of 
product. In general, they do not receive overtime pay. This situation 
is even worse for those who are transported from their homes to work in 
the fields, as they are unable to return home until the company agrees. 
Fieldworkers are also exposed to toxic pesticides and experience a 
range of occupational health problems, including loss of sight, 
gastritis, fungal infections, breathing problems and back problems. In 
the processing factories, workers are required to stand the entire day 
in highly physical labor without the ability to move about or change 
position. Additionally, workers are not provided adequate protective 
gear and are subject to frequent changes in temperature.
    In the four Export Processing Zones (EPZs), special regulations 
``provide for the use of temporary labor as needed, for greater 
flexibility in labor contracts, and for setting wage rates based on 
supply and demand.'' \8\
---------------------------------------------------------------------------
    \8\ U.S. Department of State, Country Reports on Human Rights 
Practice--Peru (2005).
---------------------------------------------------------------------------
Trade Impacts of the Peru FTA
    The overall trade relationship with Peru is small relative to the 
economy of the United States. However, the trade agreement will likely 
exacerbate the already enormous and growing U.S. trade deficit. In 
fact, the U.S. trade deficit with Peru has grown eightfold in just five 
years: from $335 million in 2000 to $2.8 billion in 2005. In the first 
four months of 2006, the trade deficit reached $900 million, up 27% 
over the previous year at the same time. The agreement is likely to 
result in a deteriorating trade balance in specific sectors, including 
sensitive sectors such as apparel. Imports of cotton apparel from Peru 
doubled in the last five years and are expected to increase. Imports in 
other sectors, especially metals (e.g., gold, copper, and aluminum), 
are projected to increase enough to impact U.S. output and employment, 
according to the recent U.S. ITC study, ``U.S.-Peru Trade Promotion 
Agreement: Potential Economy-Wide and Selected Sectoral Effects.'' 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.
    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 
Peru 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 Peru 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 Peru 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 Peru 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 Peru 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 Peru 
FTA, unless specifically exempted.

Conclusion
    Congress should reject the Peru 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.-Peru FTA and begin work on a more just economic and social 
relationship with Peru.

                                 

    Mr. SHAW. Thank you, Mr. Gibson. Can you give us specific 
examples of labor infractions, giving us the name of the 
company?
    Mr. GIBSON. I would be happy to provide that in writing. I 
don't have any specific companies right now but do know----
    Mr. SHAW. You don't have that information with you?
    Mr. GIBSON. I don't have that information with me, but I 
would be more than happy to provide a written copy.
    [The information follows:]
                                                     August 4, 2006
The Honorable Clay E. Shaw, Jr
1236 Longworth House Office Building
Washington, DC 20515

Re: Violations of internationally recognized labor rights in Peru

Dear Representative Shaw:

    I write regarding your request at the Ways and Means Hearing on 
Peru of July 12, 2006 to provide information as to companies violating 
internationally recognized labor rights in that nation. Below are 
summaries of three recent cases involving serious violations of the 
right to freely associate, to organize and bargain collectively, all of 
which were committed by prominent multinational corporations. As more 
information becomes available, we will be sure to provide you with 
updates and any additional cases.
    You will note that each of these cases involve the use of third 
party contractors as a means of weakening the union. As we have 
explained in the attached fact-sheet, the law permits the use of third 
party contractors to perform the regular, permanent work of an 
enterprise. If a worker so hired tries to organize a union or undertake 
some other concerted activity, s/he is simply not rehired upon the 
expiration of the contract. Further, an employer may just simply fire 
the employee and risk payment of minimal compensation to the worker. 
The ability of an individual worker of limited means to use the 
judicial process to win reinstatement for anti-union dismissal is very 
low.
    Moreover, the ability to employ third-party contractors has led to 
an all out attack on existing trade unions, as employers have sought to 
dismiss their organized workers and rehire them or others indirectly. 
As long as this legal loophole exists, workers in Peru will continue to 
face insurmountable obstacles to their ability to exercise their most 
fundamental labor rights. Most cases of labor conflict in Peru today 
arise from employers' efforts to avoid or destroy unions through 
subcontracting. The three cases provided below are in no way unique; 
rather they are exemplary of increasingly standard practices.
1. Maple Gas Corp.
    Maple Gas Corporation is a Texas-based energy company with 
significant investments in the gas and oil sector in Peru. The workers 
at Maple Gas formed a union on October 25, 2003. The company has tried 
to break the union ever since through threats and intimidation of the 
union's members. After slowly reducing the number of members employed 
at Maple Gas, the company brought a lawsuit against the union seeking 
its dissolution using the argument that the union no longer had the 
minimum number of members. The company's request was ultimately 
rejected because it had relied on false information; the union still 
had the requisite minimum number of workers.
    On July 7, 2006, pursuant to a court order, Maple Gas was directed 
to reinstate Mr. Alex Ruiz Ushinahua, who held the union position of 
Secretary of Organization. In the sentence, the judge indicated that 
the reason for his dismissal was the formation of the union and 
therefore just cause for his dismissal did not exist. The union reports 
that the company continues with its antiunion policies. Maple Gas is 
currently offering members up to 16,000 soles ($5,000) to resign from 
the company and to accept employment in a labor services company, Orus 
Service, created by the company. The workers who have refused to accept 
this proposal have been prevented from entering the worksite, which 
constitutes an arbitrary dismissal prohibited under the laws of Peru.
2. JR Lindley / Coca-Cola / Inca Kola
    JR Lindley, S.A.is a leading bottling company of non-alcoholic 
beverages, such as its flagship product, Inca Kola. After JR Lindley 
purchased 60 % of the shares of ELSA in May 2004, it then became the 
exclusive bottler of Coca Cola in Peru. Through its subsidiary, Peru 
Beverage Limited, Coca Cola owns 38.52% of JR Lindley. Upon the 
purchase of ELSA, JR Lindley restructured the company and undertook a 
mass dismissal. Of the 233 workers who were immediately dismissed, 133 
were union members. The company even dismissed the union's General 
Secretary, Julio Falla Juarez, who had legal protection from dismissal 
(``fuero sindical''). The union alleges that the objective of the 
reorganization and the subsequent dismissals was to break the union and 
to reduce to the maximum extent possible the number of direct employees 
in order to make use of service companies. JR Lindley had done the same 
thing a few years earlier at Inca Kola, when it fired roughly 2,000 
workers. The subcontracted workers there earn far less and have little 
chance of unionizing.
    Although Peruvian law required the company to negotiate with the 
union regarding the terms on which the affected workers would leave 
their jobs and over the measures necessary to limit the personnel 
reduction, the company failed to do so. Subsequently, the Ministry of 
Labor disapproved of the mass dismissal and ordered the reinstatement 
of the dismissed workers. The company refused to accept the finding of 
the Ministry of Labor, prompting the union to file a lawsuit in court 
demanding the reinstatement of the workers. The union won the case, but 
the company disobeyed the judicial order.
    Later that year, the union attempted to bargain collectively with 
the company. However, the negotiations were marked by a delay of almost 
7 months due to the company's refusal to present a final proposal to 
the union. This led the union to eventually break off talks and 
initiate a strike. On September 30, 2004, the union struck in protest 
of the company's lack of attention to the collective negotiation and 
the unjustified dismissal of the workers. During the strike, workers 
were attacked by the police, who tried to enter the union premises 
without judicial order. By day's end, 8 trade unionists were detained 
and 4 were injured.
    Since then, the company bought the ``voluntary'' resignations of 
most of the remaining union members such that today the union has 
nearly disappeared. Of the ten remaining members, including the General 
Secretary, they are awaiting the final decision in their cases. 
Although the cases arose out of the same facts, the initial decisions 
have been inconsistent.
3. Phelps Dodge (Cerro Verde)
    Phelps Dodge-Cerro Verde has for several years contracted with 
services companies to provide labor services to the company. Recently, 
the company unjustly dismissed two workers, Agapito Manuel Miranda and 
Roque Somata Gomez, after 3 years of solid employment with the company. 
It is alleged that the two were dismissed after the company learned 
that a group of workers, headed by the two, had begun to organize a 
union in the company. This case is representative of numerous other 
cases in Peru where workers are fired for attempting to form a union.
    Thank you again for your inquiry.
            Sincerely,
                                       Brett Gibson, Representative
                                          Department of Legislation

                                 

    Mr. SHAW. Mr. McCrery, I understand that you do not have 
any questions? Gentleman from Louisiana.
    Mr. MCCRERY. Yes, Mr. Chairman. Thank you.
    Mr. Gibson, I continue to be somewhat perplexed by your 
organization's positions on these FTAs, given that clearly the 
weight of the evidence is contrary to one of your statements, 
which implied that this agreement will be bad for jobs in the 
United States, when all of the evidence seems to be on the 
other side of that, that as we create more opportunities for 
trade through these FTAs, we actually increase the number of 
jobs and generally they are higher paying jobs than jobs in the 
general economy.
    Also, I want to probe just a little bit this question of 
the labor portions of these agreements, because you are an 
American citizen, right?
    Mr. GIBSON. Yes, sir.
    Mr. MCCRERY. Do you believe that the United States should 
have sovereignty over its own laws?
    Mr. GIBSON. It certainly should.
    Mr. MCCRERY. We should. Well, if you were a citizen of some 
other country, you would probably feel the same way about that 
country, wouldn't you?
    Mr. GIBSON. Perhaps.
    Mr. MCCRERY. Well, at least you are saying that, as an 
American citizen, you think the U.S. Government ought to have 
sovereignty over its own laws, which means we reserve the right 
to make our own laws, right? That is what sovereignty is all 
about, right?
    Mr. GIBSON. Yes.
    Mr. MCCRERY. Well, it seems to me that you are suggesting 
we build into these trade agreements a provision that would 
give up some of our sovereignty. You are saying, okay, let's 
make Peru not only agree to enforce their labor laws, but they 
can't change any of their laws that would go backward, in your 
view, in terms of labor rights. That is giving up their 
sovereignty.
    I assume that if we got Peru to agree to that, they would 
want the same agreement for the United States, which would be 
if we were to go backward in their view on our labor laws that 
they could object and bring it to some tribunal and get a 
judgment, thereby restricting the sovereignty of the United 
States.
    Surely, that is not what you as an American citizen would 
want for our country, just as a Peruvian citizen would not want 
the United States to impose something on his country that would 
diminish the sovereignty of Peru; and yet that seems to be what 
you are suggesting.
    Mr. GIBSON. Can I respond to that?
    Mr. MCCRERY. Sure.
    Mr. GIBSON. I would say what we are asking for here is, 
first of all, I wouldn't want the United States to lower its 
labor laws at any point in the future. Secondarily, what we are 
looking for here is an international standard and international 
norms in these FTAs. With respect to the sovereignty issue, we 
make demands of these other countries in the commercial 
provisions of the agreements, the pharmaceutical provisions of 
these agreements.
    If you look back toward NAFTA chapter 11, our laws have 
been challenged under chapter 11. Let's just take the case of 
Methanex and methyl tertiary-butyl ether (MTBE), a gasoline 
additive, challenging the--a Canadian company challenging a 
California State law banning MTBE. That is another challenge to 
our sovereignty as well.
    So, there is other areas where I think the sovereignty 
issue comes up in a more disturbing manner, but, like I said, 
we are looking for international labor standards here.
    Mr. MCCRERY. Well, I am advised that that case has been 
dismissed, but you get my point: this is not as easy a question 
as you would have some believe, that it is just a matter of 
upholding labor rights around the world. It does have questions 
of sovereignty; and everybody, I would submit, in every country 
feels pretty strongly about protecting the sovereignty of their 
own country.
    So, I would urge you to continue to work with this 
administration and any succeeding administration to get 
agreements that do create job opportunities here in this 
country, as I believe this one would.
    Thank you.
    Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman; and thank you all for 
your testimony.
    Let me ask, before I ask a couple of questions to my friend 
from Louisiana, I had mentioned that it seems to me that the 
United States did impose on the sovereign Nation of Peru that 
it do change its laws. If you take a look at our provisions 
with regard to intellectual property, we said that they cannot 
move forward in this deal unless they conformed their laws to 
the provisions that are on this deal which would require them 
to have stronger laws in place to protect our intellectual 
property and stronger laws to enforce our rights within our 
intellectual property. I think all us of us would agree we are 
pleased that we did that.
    So, with regard to labor, with regard to any produce or any 
service or with regard to intellectual property, it is clear 
that each side is making demands on the other's sovereignty in 
existing laws. So, I think we have to be real clear that what 
we are asking with regard to protection of workers' rights is 
nothing different than what we are requesting with regard to 
protection of intellectual property.
    Let me see if I can ask all of the panelists who represent 
an industry a question, whether it is poultry, whether it is 
textile, whether it is a service, whether it is dairy. If Peru 
had been required in this agreement simply to follow its 
current practices and standards with regard to, say, poultry, 
dairy, service sector, textiles, would you be supporting this 
agreement?
    Anyone who would support this agreement with existing laws 
that Peru has on your industry, please raise your hand if you 
would support this agreement.
    Your industry is?
    Mr. NORMAN. I am in the textile industry.
    Mr. BECERRA. So, if the textile laws remained the same for 
Peru, you would still be supporting this agreement?
    Mr. NORMAN. I would at this point, yes.
    Mr. BECERRA. Anyone else?
    Mr. SANTEIRO. The changes in the customs procedures that I 
referred to are coming perhaps more slowly. There is an 
international tendency in that direction. I think, given the 
fact that FedEx is a strong supporter of free trade, we would 
like to look at the specific issue being discussed before 
making a statement whether we would support it or not.
    Mr. BECERRA. I am just trying to check, because that is an 
instance of what we are telling the countries when it comes to 
protecting their workers and our workers, that just go ahead 
and do whatever you are doing right now with your laws. You 
don't need to change them. I want to make sure that I do--is it 
Mr. Norman?
    Mr. NORMAN. Yes, it is.
    Mr. BECERRA. I want to make sure I understand that, because 
my understanding was when it came to textiles in the CAFTA 
agreement, when it came to NAFTA, when it came to Chile, when 
it came to everything else, you all fought very hard to make 
sure there were changes. So, I am surprised to hear you say 
today that you could live with the current practices and laws 
in place for Peru. That hasn't been your past practice when it 
comes to defending the interests of the industry.
    I would be interested to chat with the folks in your 
industry, in your association, given that you are saying you 
would have been pleased with the existing laws in place in Peru 
when it came to textiles.
    Mr. NORMAN. The ones that are in place today. I do think 
that this agreement gives us the chance to really accelerate 
what we are doing.
    Mr. BECERRA. Well, it does accelerate it, but that is not 
existing law. So then, you do prefer what is in the agreement 
versus keeping what is currently in practice?
    Mr. NORMAN. Yes, we do.
    Mr. BECERRA. I think most of us who argue that we should 
have done the same with regard to protecting worker rights are 
saying simply that, that we can't afford to just ask people to 
stay with the status quo. We want to make sure all of our 
workers are protected, just the way our intellectual property 
should be protected, and just the way we should make sure 
poultry, dairy, textiles, sector services, should also be 
treated, in a way that is as free and fair as possible.
    I have a question for Ms. Forkan. Ms. Forkan, in your 
testimony, you mentioned that the agreement which had the same 
language on labor for environment, that says you must 
effectively enforce your environmental laws, you say that it 
includes multilateral environmental agreements, such as the 
Convention on International Trade and Endangered Species of 
Wild Fauna and Flora.
    I am not sure which agreement you were looking at, but the 
agreement that was signed simply says this. In article 18(2) it 
says, ``A party shall not fail to effectively enforce its 
environmental laws.''
    Then if you turn to article 1813, it defines what an 
environmental law is, and that is any statute or regulation of 
a party. It doesn't deal with any type of international or 
multilateral trade agreement in the definition. So, I hope you 
will take a closer look at the agreement.
    Ms. FORKAN. Can I answer that? Yes, when you sign an MEA, 
you have to have implementing legislation that is domestic 
legislation, so that the United States has implementing 
legislation for CITES, for the International Whaling 
Commission, for all those things. So, we are talking about the 
implementing legislation that is domestically passed.
    Mr. SHAW. [Presiding.] The time of the gentleman has 
expired, and I am going to have to enforce it because we have a 
vote coming up.
    Mr. Weller.
    Mr. WELLER. Thank you, Mr. Chairman.
    I first want to begin by thanking all of the panelists for 
taking the time to be here to discuss what I think is an 
important economic initiative between two friends, Peru and the 
United States.
    Since the issue of labor has come up, Mr. Chairman, I would 
like to ask unanimous consent to include for the record the 
letter from Prime Minister Kuczynski that was forwarded to us 
by the Ambassador of Peru in response to various questions 
raised regarding Peru labor law.
    Mr. SHAW. Without objection.
    [The information follows.]

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    Mr. WELLER. Mr. Gibson, your testimony is consistent with 
the previous testimony by the AFL-CIO before this Committee 
regarding trade agreements, and it is my understanding your 
organization has called for a moratorium on any new trade 
agreements as your current policy. So, your statement is 
consistent with that.
    The question I have for you, you know, Peru has ratified 
all of the ILO's eight core conventions, it has been cited 
several times by the ILO for its progress in improving its 
labor laws and it has ratified 71 ILO conventions. In the last 
5 years, under President Toledo, they have enacted 30 major 
reforms, some as recently as in the past year.
    I guess the question I have is, some of my friends on this 
Committee have suggested we just abandon this agreement, walk 
away from it, and then instead, extend the Andean Trade 
Promotion and Drug Eradication Act, which expires at the end of 
this year.
    Now, under the Andean Trade Promotion and Drug Eradication 
Act, this truck, which is a model of a version of a piece of 
mining equipment, an off-road construction, or in this case, 
truck used to haul products coming out of the mines in Peru, it 
would essentially fill this room if it actually was a real one 
here, it is about a million dollar piece of equipment. It is 
produced by members of the United Auto Workers in Decatur, and 
the parts come from a plant in Joliet, in my district, in 
Illinois, which is represented by the Machinists.
    The concern I have on this truck is that it has a 12 
percent tariff under existing law. So, on a million dollar 
piece of equipment, that is a $120,000 tax on a piece of 
equipment made by union workers in Illinois.
    As you know, with expanded trade with Chile and elsewhere, 
Caterpillar, which is the manufacturer of this, has added about 
over 5,000 workers in Illinois, in my State. So, trade has been 
pretty important to us. If we fail to ratify this agreement, 
that $120,000 tax on this piece of equipment made by union 
workers in my State of Illinois would continue. Also from the 
standpoint of labor, the Andean Trade Promotion Drug 
Eradication Act does not require that countries enforce their 
labor laws, nor that they live up to the obligations of the 
ILO.
    So, my question to you is very, very simple. It is a yes-
or-no question. You have already advocated a no vote on the 
trade agreement, but if the alternative were to be before this 
Congress, would you support or oppose extension of the Andean 
Trade Promotion Drug Eradication Act? What is your 
organization's position?
    Mr. GIBSON. Well, I don't think it is quite as simple as a 
yes-or-no question.
    Mr. WELLER. Well, for us, it is a yes-or-no vote. So, it is 
a simple question.
    Mr. GIBSON. I would think if it was the alternative, we 
would support--we do support trade. I want to make that clear.
    Mr. WELLER. So, you would support continuing a $120,000 tax 
on a piece of union made equipment exported to Peru?
    Mr. GIBSON. I am not prepared to say whether our 
organization would support or not the Andean Trade Act.
    Mr. WELLER. Did you support it before when we originally 
created this a few years ago?
    Mr. GIBSON. I wasn't at the organization at the time.
    Mr. WELLER. So, you don't know. I would like to know, and 
if you could provide for us in writing a yes-or-no answer on 
what your position would be? Now, you have already advocated a 
no vote on this agreement. If you are in opposition to this 
agreement, some have advocated if we are unable to pass this, 
we just extend the existing trade preferences. I would like to 
know from your organization, do you oppose or support that 
extension, if you can provide that to this Committee.
    Mr. GIBSON. Certainly I will provide that.
    Mr. WELLER. Thank you.
    Mr. Jara, I am thrilled to have a small businessman before 
this Committee. One thing I have noted in this trade agreement, 
we often talk about the tariffs and the fact that under the 
Peruvian trade agreement, almost all of them are eliminated on 
our manufactured products as well as our farm products here. 
But also it does away with a lot of what are called non-tariff 
trade barriers. Representing smaller employers, I am wondering 
what your perspective is on that?
    Mr. SHAW. I would have to cut the gentleman off and ask 
that that question be answered by writing.
    Mr. WELLER. Could I finish the question?
    Mr. SHAW. Complete the question. We have a vote on the 
floor.
    Mr. WELLER. I understand, Mr. Chairman.
    What I would ask is if you could give us a perspective from 
the smaller exporters on eliminating these non-tariff barriers. 
A $10,000 permit can be no big deal to a major corporation, but 
to a small exporter it can really make a big difference. I 
would like to hear from you on that.
    [The information follows:]
                                                     August 4, 2006
The Honorable Jerry Weller
108 Cannon House Office Building
Washington, DC 20515

Dear Representative Weller:

    I write regarding your inquiry at the Ways and Means Hearing on 
Peru of July 12, 2006 as to whether the AFL-CIO would support an 
extension of the Andean Trade Preferences and Drug Eradication Act 
(ATDPEA) should it require renewal this year.
    The AFL-CIO would support an extension of ATPDEA with Bolivia, 
Colombia, Ecuador and Peru, so long as the opportunity of extension is 
used to ensure that some of the concerns we have expressed in the past 
with respect to the workers' rights conditions and country coverage are 
addressed.
    With respect to worker rights, we would like to see a streamlined 
submissions process that is both transparent and consistent. The AFL-
CIO would also like to see the labor language strengthened and 
clarified, to ensure that countries are required to respect all the 
core International Labor Organization standards, not just take steps 
toward affording those rights.
            Sincerely,
                                       Brett Gibson, Representative
                                          Department of Legislation

                                 

    Mr. SHAW. The time of the gentleman has expired.
    Mr. Levin?
    Mr. LEVIN. Let me just say the example you used about the 
mines is a very vivid one and the machinery that is used in the 
mines. I suggest that everybody look at what happened to the 
rights of mine workers under the Fujimori administration and 
what happened to their conditions at work, and what is true 
today in terms of the continuation of the subcontracting, 
private contract, short-term contract provisions which have 
become prevalent for people who work in the mines. So, you 
ought to take a look at that.
    Secondly, the sovereignty issue, by definition, trade 
agreements require the giving up of sovereignty. There are 
limitations on tariffs, on investments, on a lot of things. So, 
to use the sovereignty issue as to worker rights is really 
inappropriate. In every agreement, look at the arguments at the 
Doha Round. We would be giving up sovereignty as to our 
subsidization of agriculture.
    Thirdly, in terms, Mr. Weller, of the conventions, those 
conventions were in existence in the Fujimori years. 
Conventions by themselves don't become operative parts of the 
laws of the country. They pass laws relating to the subjects. 
China has signed conventions. Do people have their rights, 
despite the conventions that were signed? The answer is they 
don't. So, we need to look at what the realities are and why it 
matters in terms of how globalization proceeds. That is the 
issue.
    Mr. WELLER. Would the gentleman yield to the point you are 
making? Do you acknowledge though that President Toledo, under 
his administration, has implemented 30 major reforms in labor 
laws?
    Mr. LEVIN. Look, the answer is there were some reforms of 
82-83. I don't know where you get the 30. Today, those laws do 
not meet ILO requirements. When I was in Peru, I asked the ILO 
representatives point blank, is Peru today in practice and in 
law compliant with the basic ILO standards, and the answer was 
no. In terms of GSP, a number of us have put into the hopper 
the extension of GSP, if this does not go into effect to 
replace it.
    By the way, this hearing has been, I think, inadequate in 
pointing out the experience under GSP. The GSP talks about 
taking steps to apply the ILO standards. This document says 
enforce your own laws, whatever.
    With SPS, we don't let Peru enforce their own laws as the 
standard. We never dreamed of doing that. We have forced 
Central American and Latin American countries to agree not to 
use their SPS standards, appropriately. You can argue that they 
are giving up their sovereignty, but we want some safeguards 
for our products. It is important for our country, our 
businesspeople, for the other countries, that there be some 
safeguards that are enforceable relating to the rights of 
workers.
    Your mine example is very fitting. Machinery matters, our 
exporting of it. So, does the conditions of the people who work 
with that machinery.
    Mr. WELLER. Will the gentleman yield?
    Mr. LEVIN. Sure.
    Mr. WELLER. You mentioned the reform was only done in the 
eighties.
    Mr. LEVIN. No, I said there were reforms in 2002 and 2003.
    Mr. WELLER. Under President Toledo, these reforms were 
enacted into law by their Congress in 2003, 2004 and I think 
this past year.
    Mr. LEVIN. Mr. Weller, you didn't listen. Let me take back 
my time. I said it hasn't expired. I said 2002-2003, there was 
a labor reform passed, and it doesn't get at some of the 
problems that persist from the Fujimori years. That is a fact. 
I referred to those laws and I applauded them. They were a step 
forward.
    Mr. SHAW. I assume the gentleman yields back the balance of 
his time.
    We are out of time. I want to thank this panel for being 
here. I think one thing that has been made crystal clearly by 
this hearing is that this agreement means American jobs, better 
American jobs, high paying American jobs, union American jobs, 
and I would hope that the Committee could work out any 
differences it has and pass this by a large majority.
    This meeting is adjourned.
    [Whereupon, at 3:37 p.m., the Committee was adjourned.]
    [Questions submitted by Mr. Weller, Mr. Neal, Mr. Reynolds, 
Mr. Herger, and Mr. Levin to Mr. Eissenstat, and their 
responses follow:]

     Question submitted by Representative Weller to Mr. Eissenstat

    Question: Under PTPA how does dispute settlement for labor and 
environment disputes work, and how is it different from dispute 
settlement for commercial disputes?

    Answer:

      All disputes, whether they concern labor and environment 
matters or other commercial matters, begin with consultations between 
the disputing Parties. In the case of labor and environment, 
consultations are provided for in the Labor and Environment Chapters, 
respectively. For most other cases, consultations are provided for in 
the Dispute Settlement Chapter.
      The Labor and Environment Chapters contemplate 
consultations beginning at a subcabinet level. If the matter is not 
resolved at that level, either disputing Party may seek to elevate the 
consultations to cabinet-level representatives. The Dispute Settlement 
Chapter likewise sets out two levels of government-to-government 
consultations for commercial disputes.
      Where a dispute involves an alleged failure by a Party to 
effectively enforce its own labor or environmental laws, and where 
consultations under the Labor or Environment Chapter fail to resolve 
the dispute within 60 days of the initial request for consultations, a 
Party may pursue the matter under the procedures in the Dispute 
Settlement Chapter.
      When a Party pursues a labor or environment dispute under 
the Dispute Settlement Chapter, the same procedures apply as apply to 
commercial disputes. The only distinction is that the members of panels 
established to review disputes involving labor or the environment must 
have special expertise (as opposed to a looser ``endeavor to select 
panelists with expertise'' for all other disputes).
      Where dispute settlement concludes with a panel finding 
that a Party has not conformed with an obligation under the FT A, the 
ordinary solution will be for the disputing Parties to agree on a 
resolution of the dispute, which normally shall conform to the panel's 
determination. Where appropriate, the disputing Parties may agree on a 
mutually satisfactory action plan to resolve the dispute. This is true 
for labor and environment disputes, as well as commercial disputes.
      However, it may be the case that the disputing parties 
are unable to agree on a resolution. Alternatively, they may agree on a 
resolution, but the complaining Party may believe that the other Party 
has failed to observe the terms of the agreed resolution. In either 
case, the PTP A makes remedies available to the complaining Party.
      In commercial disputes, the remedy for non-compliance by 
a Party is for the complaining Party to suspend tariff concessions 
(that is, raise tariffs) so as to offset the harm to that Party of the 
non-compliance. However, the defending Party may opt to pay a monetary 
assessment in lieu of having the complaining Party raise tariffs. In 
either case, if the disputing Parties are unable to agree on the amount 
by which tariffs may be raised or the amount of the monetary 
assessment, the question may be decided by the panel.
      In labor and environment disputes, the remedy for non-
compliance is payment of a monetary assessment. That assessment would 
go into a fund administered jointly by the disputing Parties. They 
would decide jointly on disposition of the fund's proceeds, with a view 
to using the money to remedy the non-enforcement underlying the 
dispute. If a Party fails to pay the assessment, the complaining Party 
may take appropriate steps to collect it or otherwise secure 
compliance. These steps may include the suspension of tariff benefits.
      Several conditions apply to monetary assessments in labor 
and environment disputes:
      An assessment may not exceed $15 million per year, 
indexed for inflation.
      In determining the level of an assessment, several 
factors in addition to the trade effects of non-enforcement of labor or 
environmental law are to be taken into account. These include: 
pervasiveness and duration of the non-enforcement; reasons for the non-
enforcement; level of enforcement that reasonably could be expected, in 
light of resource constraints; and efforts made to begin remedying the 
nonenforcement.
      The reference to factors in addition to trade effects is 
recognition that in disputes involving non-enforcement of labor or 
environmental laws, it may be difficult to quantifY trade effects.
      A non-complying Party continues to pay monetary 
assessments each year until it has come into compliance with its 
obligations.
                                 ______
                                 

      Question submitted by Representative Neal to Mr. Eissenstat

    Question: In regards to Supreme Decrees, are they similar to 
presidential signings? What are their legal effects? Are they subject 
to any legislative oversight or review? How can they be amended?

    Answer: Supreme Decrees (``decretos supremos'') are similar to 
regulations in our system, not presidential signings. They implement 
laws enacted by the Peruvian Congress. They are issued by the 
President, in conjunction with the relevant Minister or Ministers, 
depending on the subject matter. Some laws may require that the decree 
be approved by the Council of Ministers (akin to our Cabinet), usually 
where the subject matter is cross-cutting or does not fall neatly into 
one Ministry. Supreme Decrees must be published in the Peruvian 
official gazette (Diario Oficial ``EI Peruano'') and usually take 
effect upon publication. They can be amended by the executive and can 
be superseded by a law.
                                 ______
                                 

    Question submitted by Representative Reynolds to Mr. Eissenstat

    Question: How does the Administration plan to ensure that the 
agreement's stringent rules of origin, particularly for dairy products, 
are sufficiently enforced? There is currently a very open flow of trade 
between Peru and neighboring Bolivia, for instance, not to mention 
sizable trade between Peru and other important dairy-producing 
countries, including New Zealand. How will the Administration verify 
that the dairy products receiving preferential tariff treatment under 
this TPA are only those that are made from milk produced in Peru 
itself, as required by the agreement?

    Answer: U.S. Customs and Border Protection (``CBP'') already 
possesses authority to enforce the laws and regulations of the United 
States relating to the importation of goods. The chapter on Rules of 
Origin in the Peru Trade Promotion Agreement provides enhanced 
enforcement provisions to allow CBP to conduct verifications in 
connection with imports, including dairy imports, for which a claim for 
preferential tariff treatment (``PTT'') has been made. The verification 
provisions allow CBP to conduct verifications by means of written 
requests, questionnaires and, visits to the premises of Peruvian dairy 
producers and exporters to verifY compliance with the rules of origin.
    Further, pursuant to these provisions CBP may deny a claim for PTT 
if the Peruvian exporter or producer, or the U.S. importer, fails to 
provide CBP with the information it has requested to substantiate the 
claim for PTT. CBP may also deny a claim for PTT if the Peruvian 
producer or exporter does not consent to a verification visit. Lastly, 
CBP may suspend the claim for PTT for that product and for subsequent 
importations of identical goods if, through verification, CBP finds a 
pattern of conduct indicating that the importer, exporter or producer 
has provided false or unsupported declarations or certifications. CBP 
may suspend PTT until CBP determines that the importer, exporter or 
producer has come into compliance.
    The Agreement also requires each Party to provide for the 
imposition of penalties on an exporter or producer that provides a 
false certification of origin, ifno correction is voluntarily 
submitted.
                                 ______
                                 

     Question submitted by Representative Herger to Mr. Eissenstat

    Question: Regarding the resumption of the U.S.-Peru trade in beef 
products, I was pleased at the great steps forward negotiated along 
side this agreement, such as Peru's agreeing to commit to 
scientifically based, internationally accepted sanitary and 
phytosanitary procedures. However, I remain concerned about Peru's 
reluctance to act fully on its commitments, and accept OIE standards 
for beef from U.S. producers.
    I would appreciate it if you would elaborate on any progress being 
made toward this end, which would allow increased trade for all U.S. 
beef products.

    Answer: I am pleased to inform you that at the end of October, both 
Peru and Colombia lifted their former BSE-related restrictions on 
imports of U.S. beef and beef products, and implemented measures 
consistent with the guidelines on BSE in the Terrestrial Animal Health 
Code of the World Organization for Animal Health (OIE). Both Peru and 
Colombia now are open to all beef and beef products of the United 
States (except high risk materials) when accompanied by a sanitary 
certificate from the United States Department of Agriculture's Food 
Safety and Inspection Service (FSIS). These openings represent progress 
in our efforts to re-open global markets for U.S. beef and beef 
products, and help ensure that U.S. exporters to Peru and Colombia will 
realize the new access our free trade agreements provide in those 
markets when the agreements enter into force.
    In addition to addressing sanitary restrictions related to BSE, we 
also reached agreement with both Peru and Colombia confirming that they 
will continue to recognize the equivalence of the U.S. meat inspection 
system. Further, they will not require plant-by-plant inspections as a 
condition for the importation of U.S. beef and beef products.
                                 ______
                                 

      Question submitted by Representative Levin to Mr. Eissenstat

    Question: Are the two side letters on medicines as enforceable as 
other provisions in the Agreement?
    Answer: In connection with the signing of the PTPA, the United 
States and Peru signed ``Understandings Regarding Certain Public Health 
Measures''; in addition the United States sent a letter to Peru 
confirming the coverage of those Understandings. This response is 
directed to those two documents.
    The main thrust of the Understandings is not to impose specific 
obligations on the Parties, but to reflect the Parties' mutual 
understanding of what the IPR chapter--which does contain obligations--
does and does not do. They constitute a formal agreement between the 
Parties and are, thus, a significant part of the interpretive context 
of the PTP A and the obligations in the
    PTP A. According to Article 31 of the Vienna Convention on the Law 
of Treaties, which reflects customary rules of treaty interpretation in 
intemationallaw, the terms of a treaty must be interpreted ``in their 
context,'' and that ``context'' includes ``any agreement relating to 
the treaty which was made between all the parties in connection with 
the conclusion of the treaty.'' As interpretive context, therefore, the 
Understandings playa significant role in the interpretation of relevant 
obligations in the PTP A.
    Similarly, the unilateral letter does not contain obligations 
directly subject to dispute settlement, but is a confirmation by the 
United States that references to the IPR chapter of the PTP A in the 
Understandings include the parts of that chapter related to data 
protection.

    [Submissions for the record follow.]

                                 

  Statement of Kevin M. Burke, American Apparel & Footwear Association

    Thank you for providing the American Apparel & Footwear Association 
(AAFA)--the national association of the apparel and footwear 
industries, and their suppliers--this opportunity to submit written 
testimony on the U.S./Peru Trade Promotion Agreement (TPA).
    Below are several observations we make with respect to individual 
provisions in the agreement.
    In general, AAFA supports Congressional passage of the U.S./Peru 
TPA as the best way to achieve continuation of the current duty-free 
status for products made in the region using regional inputs. We urge 
Congress to ensure that the transition between the current trade 
preference program and the U.S./Peru TPA is as seamless and transparent 
as possible to prevent any disruption or uncertainty over the 
continuation of the current duty-free status for products made in the 
region using regional inputs.
    Thanks to the efforts of the U.S. negotiators, the agreement's 
flexible and forward-looking footwear provisions should provide new 
opportunities to grow the small, but thriving, footwear trade between 
the United States and Peru. However, the presence of restrictive and 
cumbersome textile and apparel rules of origin (as discussed further 
below) in the U.S./Peru TPA will serve as a deterrent to the 
development of new apparel and textile trade between the two countries.
                                 ______
                                 
    Again, we generally support the agreement's provisions for 
footwear. The rule will ensure that the growth in footwear trade 
between the United States and Peru started under the current Andean 
Trade Promotion & Drug Eradication Act (ATPDEA) will continue. We had 
hoped, however, for an even more liberal rule of origin for non-import-
sensitive footwear articles along the lines of what was negotiated in 
the U.S./Dominican Republic-Central American Free Trade Agreement 
(CAFTA-DR). The CAFTA-DR rules contains only a straightforward tariff 
shift approach while the U.S./Peru TPA also contains a 20 percent value 
added rule. The simpler rule, as contained in the CAFTA-DR, stands the 
greatest chance of helping maintain and grow the footwear trade 
relationship with Peru and serve as an incentive for footwear firms to 
place more business in that country (and away from China, which now 
accounts for more than 80 percent of U.S. imports). We do, however, 
applaud and thank the U.S. government's negotiators for ensuring that 
this provision did not become yet even more restrictive as pushed for 
by the Peruvians.
    At the same time, we are extremely disappointed that the U.S./Peru 
TPA contains very restrictive and, in many cases, unworkable rules of 
origin for apparel and textiles. Because of the agreement's apparel and 
textile provisions, we believe the U.S./Peru Trade Promotion Agreement 
represents a missed opportunity to preserve and expand the region's 
apparel and textile industries. Again, we view the CAFTA-DR provisions 
as a model that would have worked well in Peru. The CAFTA-DR contains 
many forward looking provisions that create export opportunities for 
U.S. textile firms and provide the region the tools it needs to 
effectively compete: cumulation, a robust short supply list, single 
transformation for key products, yarn-forward on essential character, 
inclusion of all apparel and textile products. Many of those features 
are missing from the Peru agreement.
    We do, however, applaud the last minute inclusion of language in 
the U.S./Peru TPA that allows the two sides to eventually negotiate a 
cumulation provision that links this agreement with other agreements in 
the hemisphere. Regrettably, this language leaves the timeline and 
conclusion of the negotiations and the scope of such a provision 
undefined. We would encourage the inclusion of language to clarify and 
encourage the expeditious negotiation and implementation of the 
cumulation provisions.
    Overall, we are again concerned about any possible gap between the 
expiration of the Andean Trade Promotion & Drug Eradication Act 
(ATPDEA) and the implementation of the U.S./Peru TPA. Any gap in 
expiration of ATPDEA and the implementation of the U.S./Peru TPA would 
further erode trade patterns that, in the case of apparel and textiles, 
will already be weakened by the restrictive rules in the U.S./Peru TPA. 
As we are now experiencing with the CAFTA-DR, any gap could cause huge 
costs and disincentives for industry, further driving business out of 
the region. Many U.S. firms are now making sourcing decisions for the 
beginning of 2007--the period after the scheduled expiration of the 
duty-free environment of the ATPDEA. But because there is no duty-free 
certainty--ATPDEA will be expired and it remains unclear if the duty-
free environment of the Peru TPA will take effect by January 1, 2007--
many firms will have no choice but to place business elsewhere.
    We believe there is still an opportunity to rectify this gap by 
including provisions in the U.S./Peru TPA implementing legislation that 
will make clear that a duty-free environment will continue to exist 
notwithstanding the date for ultimate passage of the agreement. 
Moreover, because business decisions are being made now, this 
correction needs to be communicated to the trade community soon.
    Finally, we remain deeply concerned that the Peru and the Colombia 
free trade agreements are currently on separate tracks. The industry 
partnership we have is now regionally based where there is sharing of 
inputs between Peru and Colombia. That sharing of inputs is permitted 
under the ATPDEA but will be prohibited if the Peru and Colombia 
agreements remain separate. This situation also needs to be rectified 
as soon as possible in order for the industry to make its sourcing 
decisions.

                                 

            American Chamber of Commerce of Peru, Lima, Peru

                     By Permission of the Chairman

Introduction
    This statement is submitted on behalf of the American Chamber of 
Commerce of Peru (AmCham Peru), an independent, non-profit organization 
that represents more than 450 Peruvian, American and other foreign 
companies, whose sales altogether account for about an equivalent to 
60% of Peru's GDP.
    AmCham Peru strongly supports the United States--Peru Trade 
Promotion Agreement (PTPA) since it is, without doubt, a win-win result 
for both the United States and Peru. Hence, through this statement, 
AmCham Peru states the reasons of why the PTPA should receive full 
support from the U.S. Congress. Also, it intends to help clarify some 
doubts and concerns that have been exposed by some congressional 
members regarding the agreement.
I. Clarifying major concerns about the PTPA
1) U.S. beef access to the Peruvian market
    Due to the discovery of bovine spongiform encephalopathy (BSE) in 
the United States in 2003, Peru closed its market to U.S. beef. The 
PTPA negotiation has fostered a change in that situation. On May 9, 
2006, after further discussion and in light of the PTPA provisions, 
Peru finally announced a partial reopening of its market to U.S. fresh 
and frozen boneless beef, stomachs, kidneys and livers.
    This improvement on U.S beef access to the Peruvian market started 
on January 5, when Peru sent a letter exchange to Ambassador Robert 
Portman by which it was confirmed that Peru would recognize the meat 
inspection system of the United States as equivalent of its own. This 
was ratified by an additional letter exchange on Sanitary and 
Phytosanitary issues for the PTPA of April 10, in which the 
Certification Statements for Beef and Beef Products were also 
specified, granting free and effective access of all American beef 
(including boneless, bone-in and other variety meats) to the Peruvian 
market by no later than May 31, 2006.
    Moreover, as stated by The National Cattlemen's Beef Association on 
its Issues Update of May-June 2006, ``The Peru Trade Promotion 
Agreement is the best-negotiated free trade agreement for U.S. beef to 
date. It immediately eliminates duties on high-quality beef (grading 
Prime or Choice), and reduces tariffs on all other products in a 
shorter time frame than most agreements''.
2) American investments protection under the PTPA
    The PTPA contains an ``Investment'' chapter, by which it concedes 
national treatment to American investors in Peru and vice versa, as 
soon as the agreement enters into force. Hence, granting a treatment no 
less favorable than that which Peruvian investors may receive locally 
in terms of fair and equitable treatment, full protection and security 
of the investments. In addition, in the event of an investment dispute, 
it includes an Investor-State dispute settlement procedure which 
constitutes an alternative to the local Judiciary Branch; thus, 
allowing a reduction in the transaction costs in terms of time and 
which are inherent to the judiciary and its bureaucracy.
    If implemented, the PTPA would also be beneficial to current 
American investors operating in Peru, since it provides a legal and 
regulatory framework--which includes tax policy--that introduces 
certainty in a long term horizon, vital for minimal-risk corporate 
action planning.
    In terms of the Investor-State dispute cases that were a major 
concern even before negotiations of the PTPA took place, just recently, 
the last pending Le Tourneau case has just been solved (july 6). Also, 
concerns about the possible criminalization of commercial disputes 
which were raised due to the General Electric case should be discarded, 
given the fact that Peruvian Judiciary--through the favorable sentence 
to GE on last November--has already set a precedent that hinders the 
duality of procedures for a single dispute resolution case. 
Consequently, it may prevent new commercial law cases to be processed 
as if they were penal law cases.
3) Labor provisions and its enforcement
    Since long ago, Peru's labor policy has been consistent with 
internationally accepted principles and goals. Peru has already 
ratified and implemented to its own legislation the main ILO 
conventions regarding to Standards and Fundamental Principles and 
Rights at Work. Furthermore, Peruvian government passed different 
Action Plans in order to assure the effective enforcement of labor 
rights in 2005. The USTR has also recognized the Peruvian Government 
efforts to fulfill labor standards.

------------------------------------------------------------------------
               Labor issue                     Government Action Plan
------------------------------------------------------------------------
Child Labor                                 National Plan to Prevent and
                                            Eradicate Child Labor in
                                            Peru, according to C138--
                                            Minimum Age Convention and
                                            C182--Worst Forms of Child
                                            Labor Convention ratified in
                                            2002
------------------------------------------------------------------------
Forced Labor                                National Action Plan to
                                            Eradicate Forced Labor in
                                            2005
------------------------------------------------------------------------
Discrimination                              National Plan for Equal
                                            Opportunities between Women
                                            and Men
------------------------------------------------------------------------
Source: Peru's Ministry of Labor
Prepared by: AmCham Peru

    Nevertheless, some misinformed groups think that there is no labor 
laws enforcement in Peru, despite there is, but to a lesser extent than 
it should be. In fact, the root of the problem is not enforcement of 
labor laws, but the insufficient ratio of coverage of those laws, which 
would prevail as long as informality still exists. Hence, in order to 
attack the problem, the creation of formal firms should be fostered. If 
so, more formal jobs that would be fully protected by current labor 
legislation would be created as well. As a result, more people would 
enjoy the benefits of adequate protection of workers rights, which 
includes current in force rights of free association and to bargain 
collectively, among many others.
    Moreover, formalization combats current informal child labor, which 
does not mainly occur in informal companies but in the streets, due to 
unemployed parents most of the times. As a Peru's National Institute of 
Statistics and Informatics study found \1\--and which is quoted by 
groups such as the AFL-CIO-, child labor is fostered mainly in the 
informal commerce sector of Peru's poorest regions, where insufficient 
well paid jobs are the main reasons for poverty.
---------------------------------------------------------------------------
    \1\ INEI (2002), OIT, IPEC-Sudamerica. Vision del Trabajo infantil 
y adolescente en el Peru, 2001
---------------------------------------------------------------------------
    However, this situation might change if the PTPA is implemented.
    First, the PTPA reaffirms Peru's commitment to respect the 
principles of the International Labor Organization, including 
guarantees to not weaken labor in order to increase trade flows. 
Secondly, due to the PTPA, more jobs would be created in Peru, helping 
diminish poverty rates and diminishing the opportunity cost of 
attending school for children of poor families; thus, diminishing child 
labor rates as well. Thirdly, these new jobs would be formal ones, 
since in order to properly establish a business relationship with their 
American counterparts, Peruvian companies must be formal. To date, many 
Peruvian exporting firms are inspected by U.S. buyers in the 
fulfillment of all basic labor standards, in order to avoid any 
consumer boycott in the U.S. market, which in turn have been serving as 
a formalization boost as well.
    Hence, as the formalization process is accelerated, more Peruvians 
employed by these firms will enjoy the benefits of local labor 
regulations which includes the right of free association, bargain 
collectively, etc. The Andean Trade Preferences for Drug Eradication 
Act (ATPDEA) has shown to be effective in this matter. New agro 
industry Peruvian firms generated by the ATPDEA have helped reduce 
labor black market and are registering and paying social insurance to 
their employees, practice not yet observed in traditional agriculture. 
According to AGAP \2\ and SUNAT,\3\ in 2004 the amount of employees 
with social insurance grew 53% in agro exports sector since ATPDEA 
implementation.
---------------------------------------------------------------------------
    \2\ Asociacion de Gremios Agroexportadores del Peru.
    \3\ Peru's Tax Administration Office
---------------------------------------------------------------------------
    Moreover, the PTPA includes specific capacity building provisions 
for labor issues. Therefore, Peru will acquire the tools and knowledge 
to properly enforce labor regulations, to promote good labor practices 
at all levels and to enhance current action plans enacted by the 
government. This would be a most suitable way to face the problem, 
rather than recurring to commercial sanctions that might not 
necessarily help solving the deficiencies that still remain.
II. Why the PTPA is good for American companies
    By 2003--the most recent year for which data is available-, over 
5,000 U.S. companies--80% of them being small and medium-sized--export 
their products to Peru, according to the U.S. Chamber of Commerce. 
Hence, consolidating and expanding their share in the Peruvian market 
should be a key goal in order to preserve the many thousands of 
American jobs depending on it. The PTPA constitutes a key tool in doing 
so, due to the tariff-free access that over 80% of American products 
would gain immediately after the PTPA is implemented.
    Moreover, having Peru demonstrated a sustained and healthy economic 
growth in recent years--with a GDP that increased 6.7% in 2005--it 
should no longer be seen as just a ``small developing market,'' but as 
one with enormous potential instead, especially for American products. 
Besides, it should be noticed that the United States and Peru are both 
complementary economies, thus not opposing their respective comparative 
and competitive advantages while trading with each other. While Peru 
specializes in agricultural exports and other manufactures such as 
apparel, and products based on natural ingredients, the United States 
specializes in capital goods, high tech products and basic agriculture 
commodities production-where Peru can't effectively compete--and also 
in its highly developed processed food products industry.
[GRAPHIC] [TIFF OMITTED] T1576A.012

    This explains why, even with regular tariffs, Peru has increased 
its imports from the U.S. in more than 46% in the past 5 years, where 
only machinery and equipment products account for 45% of the total. 
Since long ago, the U.S. constitutes the main supplier for capital 
goods for Peruvian companies, whether they are big corporations or 
small enterprises.
    With the implementation of the PTPA, not only current American 
companies that trade with Peru will gain from the tariff-free access to 
the Peruvian market, but also new opportunities will be created for the 
ones that have not yet expanded their supply outside their local 
market. Since the good dynamics of Peruvian economy is fostering local 
investment, the demand for U.S. capital goods products will augment and 
that opportunity can sure be seized by more American SMEs. Hence, 
sharing a part of the more than U.S.$1 billion that the U.S. actually 
exports to Peru in durable goods and thus, creating more jobs for the 
Americans within United States.
    Specifically, the PTPA creates opportunities for American capital 
goods' manufacturers (yarns, equipment for food processing & packaging, 
agricultural, construction, mining, oil & gas industry, plastics and 
resins, chemical materials, etc.) through more trade as well as through 
better access to Peru' government procurement, similar to the Chile and 
Singapore's FTA experiences (+30% increase after implementation).
    Florida, Texas, Illinois, California, New York, Pennsylvania, along 
with most the remaining states can certainly give testimony of the 
benefits it implies for its durable goods local industries, as the tax 
cut on U.S. goods the PTPA would provide are significant.

[GRAPHIC] [TIFF OMITTED] T1576A.013

    Also, the PTPA brings enormous opportunities for American 
agriculture. American exports of agricultural products to Peru account 
for more than U.S.$250 millions, even with no preferential access and 
high trade barriers, whereas Peruvian agro exports enter tariff-free 
into American market. Good news is that the PTPA will immediately level 
the playing field for more than 2/3 of American crops. Cotton, high-
quality beef, wheat, soybeans, apples, cherries, almonds and many other 
American farm exports may enter duty-free immediately to Peru if the 
PTPA is approved, most additional tariffs will be removed within 15 
years.
    According to a study conducted by the North Dakota State 
university, a free trade agreement with Peru is predicted to increase 
American exports of wheat, corn, soybeans products, beef, poultry, 
pork, dairy products, animal fats, cotton, rice and planting seeds, 
most of them in which Peru's is net importer. In that sense, the 
liberalization of tariffs for U.S. crops may lead to the positioning of 
the U.S. as Peru's main provider of these products, since its prices 
would be lower than those of Peru's other current trade partners in 
these products.
    Some key features of the PTPA that would also have a positive 
impact in the rise of agricultural trade with Peru are:
    i) price-band systems used by Peru have been agreed to be 
eliminated after implementation of the PTPA.
    ii) sanitary and phytosanitary measures will be more transparent 
and current non technical barriers to trade will be removed.
    Many American agricultural organizations, such as the American Farm 
Bureau Federation and the National Pork Producers Council, strongly 
support the PTPA. For the latter, with the PTPA U.S. pork exports to 
Peru's 28 million consumers would raise U.S. live hog prices by 83 
cents a head, increasing producers' profits by 7 percent. For AFBF, 
economic analysis shows that the total increase in U.S. farm exports 
associated with the PTPA could exceed $705 million per year after full 
implementation in 2025. Hence, creating more job opportunities in all 
the American farming sector and agricultural production chain.
    The PTPA gives an opportunity to the American textile sector due to 
rules of origins agreements already negotiated. Peru will be able to 
sell their apparel products to the American market, as long as the 
primary inputs used in their manufactures come from either the U.S. or 
Peru. Therefore, American textile industry will have secure clients in 
Peruvian apparel exporters, preventing them from buying from Asian 
providers. As it can be seen, once again both economies are 
complemented. A win-win result.
    U.S. trade in services might as well increase significantly with 
the PTPA, due to the fact that, if implemented, Peru has agreed to 
exceed its WTO commitments for services liberalization, creating 
increased opportunities for American companies. Unlike the WTO services 
agreement, the PTPA uses a ``negative list'' approach, meaning that all 
services are subject to liberalization except those specifically 
excluded. This allows greater market access in emerging services 
industries, because new negotiations will not be necessary to 
liberalize those industries.
    Also the PTPA includes significant liberalization in the key 
financial services sector. With the PTPA, financial services providers 
will have the right to establish subsidiaries or branches of U.S. banks 
and the ability to supply insurance on a cross-border basis. In 
addition, the agreement improves the transparency of Peru's domestic 
regulatory regime for financial services.
    The PTPA would improve the investment climate in Peru, which 
directly benefits American companies' subsidiaries already operating in 
the country. The PTPA consolidates the reforms already carried out in 
Peru, thus preventing future governments from backsliding. Furthermore, 
the PTPA:
    i) provides a stable framework for the rule of law and its 
enforcement (which includes key IPR protection);
    ii) introduces a dispute settlement resolution mechanism that set 
high standards of openness and transparency, as well as juridical 
stability;
    iii) eliminates measures that constrained U.S. firms operating in 
Peru to hire more Americans professionals and to buy inputs locally, 
rather that on a price-quality basis;
    iv) grants non-discriminatory access to bid on contracts for 
Peruvian government procurement;
    v) fosters trade facilitation, improving customs procedures and 
reducing redtape.
    Among other measures that, definitely, secure actual American 
investment in Peru and also foster new ones as well. This would result 
in a virtuous circle that will help dinamyze the economy in Peru as a 
whole, increasing the Peruvian consumption and demand for many of the 
American products and services (including those produced locally by 
American companies operating in Peru).
    In particular, the PTPA will enforce and improve existing 
regulations in IPR helping to diminish piracy rates and informality, 
which involves nearly 60% of the Peruvian economy. Measures included to 
strengthen the copyright industry are: deterrent criminal penalties and 
criminal fines, the use of ex officio authority by criminal and customs 
authorities, deterrent civil fines and expeditious civil ex parte 
searches. For the pharmaceutical and chemical industries, the PTPA 
establishes patent recognition and data protection (5 years for 
medicines, 10 for agrochemicals) for newly developed formulas. Thus, 
more American laboratories might be able to sell its products directly 
to Peruvian consumers as well as through government procurement--
because their return on investments made in R&D activities will be 
protected. In addition, the PTPA will foster income levels increase for 
Peruvians, thus increasing the demand for American patented medicines 
which nowadays represent only 1.2% of total medicines market share in 
Peru.
III. Why the PTPA is good for the United States
    Besides creating more opportunities for American businesses and 
securing more jobs and economic welfare across the United States, the 
PTPA will enforce regional stability in terms of security: better 
economic results in Peru will diminish social distress within and thus, 
prevent social crisis and even the advance of nationalist ideologies or 
the surge of terrorism.
    With the PTPA, opportunities would be granted for Peruvian value 
added agro exports, handcrafts and manufactures, promoting investment 
within the Peru's Sierra and Jungle region and thus creating more jobs 
with better wages, generating disincentives for narcotraficking 
activities. Nowadays and thanks to the ATPDEA, there are a few export 
projects that have recently been implemented in these regions and that 
have proved to be a success as alternative sources of income for former 
illicit coca growers that now sell their licit products to the United 
States.
    Hence, with a PTPA that perpetuates trade preferences granted by 
the United States, Sierra inhabitants would have the tool to 
incorporate themselves into the economic development dynamics, 
experiencing increasing welfare within a democratic political system as 
well. As a result, incentives for supporting a nationalist front and 
political scenario would be decreased and democracy values would be 
accepted by all. Furthermore, people would recognize that economic 
development cannot be sustained if it is not under a democratic 
political and social system.
    In time, when other countries currently embracing nationalist 
ideologies may recognize the positive and decentralized impact free 
trade along a democratic system would have had in the Sierra and Jungle 
of Peru--just like it has already had in most of the Chilean 
territory--it is highly probable that those nation leaders may question 
themselves if protectionism and authoritarism is the right way towards 
economic development. We should not delay in proving them wrong. The 
prompt approval of the PTPA will be very useful for that matter and to 
limit the advance of nationalism within the region.
IV. Why the PTPA is good for Peru
    Same as in the United States, the PTPA will imply an opportunity to 
expand business and create jobs across Peru's more competitive sectors. 
However, since the Peruvian economy still presents high levels of 
poverty (51% of total population), the PTPA constitutes a vital tool to 
effectively fight this situation and to provide the economic welfare in 
a decentralized way. Thanks to the trade preferences granted by the 
U.S. through ATPDEA, Peru has experienced an exports boom that has 
contributed to the rise in employment levels across Peru's Coast region 
mainly. Nowadays, nearly over 800,000 Peruvians have jobs that directly 
depend of the preferences granted by the ATPDEA. It has also had an 
effect on the number of exporting companies to the U.S., having 
augmented in over 26% since the ATPDEA was implemented in 2002.

[GRAPHIC] [TIFF OMITTED] T1576A.014

    If the benefits of the ATPDEA are extended through the PTPA, it is 
strongly expected that a full decentralized development can be achieved 
progressively, reaching also to the rural Sierra and Jungle areas, 
where the biodiversity within the latter provides a huge source of 
business opportunities related to trade with the U.S. and the rest of 
the world.
    Consequently, the PTPA would effectively fight poverty in Peru, 
increasing welfare levels for the poorest: reduction of Peru's tariffs 
on imports of consumer goods and agricultural products from the United 
States will reduce the prices that Peru's poor families must pay for 
basic necessities, thus increasing their purchasing power and 
augmenting their disposable income for expenses such as education, 
health care, etc.
    Also of importance is the improvement in terms of business climate, 
which will have a multiplier effect in the dynamics of Peruvian economy 
as well, not only benefited foreign investors, but local too.
    In sum, by only reviewing the main features that have been outlined 
about the United States-Peru Trade Promotion Agreement, it can 
certainly be concluded that its implementation will definitely be a 
win-win result for both countries. For that reason, we encourage U.S. 
Congressmen to approve this agreement and to not to disappoint the many 
American and Peruvian families whose welfare might be dramatically 
affected with the passage of the PTPA. The Peruvian Congressmen and 
Peruvian President Alejandro Toledo have already bet on the many 
benefits the PTPA will provide for the present and upcoming 
generations. Trade, when having such provisions negotiated and such 
fundamentals in each country, is a useful and effective tool to foster 
economic development. We shouldn't deprive our countries from having 
such a powerful tool.

                                 

           Statement of Bacilio A. Amorrortu, Houston, Texas

    Mr. Chairman, members of the House Ways and Means Committee, thank 
you for the opportunity to testify individually before you on this very 
important issue. This testimony is in memory of my wife Gladys who 
passed away days ago in Houston, Texas.
    I am a petroleum engineer and oilfield services businessman, who 
became a politician. In 1999, I came, this time, to USA seeking for 
freedom and justice, as a victim of a cruel political persecution 
executed by the Peruvian Government. In 2001, the INS United States 
Department of Justice granted me a political asylum ruling, ratifying 
that the Peruvian Government executed human rights violations against 
me. I got freedom. This decision was the result of my 510 pages 
complaint filed against the Peruvian Government. The Peruvian 
Government confiscated my assets. My next step is seeking for justice. 
In accordance with the U.S. Constitution and law, I am here to file a 
political and human rights claim before you and the House of 
Representatives against the Peruvian Government, to get a fair 
reparation or remedy. Also to request you to suspend the implementation 
of the United States-Peru Trade Promotion Agreement until the Peruvian 
Government compromises to comply with this reparation or remedy.
    During the 1980s and 1990s, I came to Texas, USA, with my money and 
monies of my oil company Propetsa and purchased oil rigs, oil 
equipment, trucks, spare parts and technology. Also, I always 
understood that the United States Trade Agreements, like this one, are 
to promote freedom, human rights, democracy and mutual prosperity, and 
to fight against corruption and poverty as well. Therefore, I consider 
solving my mentioned political and human rights claim is one of the 
purposes of this Trade Agreement.
    The following laws of the United States support my Political and 
Human Rights Claim:
    The U.S. Constitution Article I., Section 8, Clause 3: The Congress 
shall power to regulate Commerce with foreign Nations, and the 
International Covenant on Civil and Political Rights that provides in 
Part II Article 2.3. Each State Party to the present Covenant 
undertakes: (a) To ensure that any person whose rights or freedoms as 
herein recognized are violated shall have an effective remedy, (b) To 
ensure that any person claiming such a remedy shall have his right 
thereto determined by competent judicial, administrative or legislative 
authorities, (c) To ensure that the competent authorities shall enforce 
such remedies when granted.
    In the 1980s, as a result of having created hundreds of jobs with 
my company Propetsa, the way I treated my workers, and my social 
services furnished in my region ``Grau,'' I became an oil businessman 
and political leader. The terrorist groups threatened me to stop me 
working for the people and community. Thousands of workers and 
unemployed Peruvians approached me and told me that they believed I was 
the right person to head a political party. In 1990, I was the founder 
and leader of a political party in Peru named ``En Accion,'' and raised 
the political symbol ``the tower'' of energy, fighting politically 
against terrorist group shining path, who collapsed the towers of 
electricity producing blackouts, killing people, and creating terror to 
the Peruvians. I raised the message to increase the oil & gas 
exploration and exploitation to solve the energy problem in Peru. I 
aired a TV spot saying ``the blackouts must no be repeated, join us and 
raise the tower''. Terrorist increased threats against me. This message 
gained support and thousands of supporters.
    In 1992, I filed 230,000 supporter signatures before the Peruvian 
Electoral Court to participate in the national election for Congress. 
The Peruvian Government rejected my participation to be in the ballot. 
I was vetoed. The Peruvian government saw in me a real opposition and a 
presidency alternative. On the contrary, I read that another political 
party would had filed fake signatures and that they would had been in 
the ballot. They were not vetoed. The repressive Peruvian Government 
increased the political persecution against me. They threatened me and 
executed an economical torture shutting down my company Propetsa to 
avoid incomes and confiscated my oil rigs and an important receivable 
account.
    On February 13, 1992, I requested the Peruvian Minister of Energy 
and Mines to pay my oil company a debt owed by the Peruvian Government 
oil company, the same way they did with foreign companies. We agreed to 
audit this claim by the Peruvian State Comptrollership. On May 18, 
1992, during the audit, the Peruvian Government sent unilaterally the 
judicial deposit No. 70880755 to a Civil Judge in favor of my company 
with a diminutive amount. This was a clear sign of obstruction of 
justice and a confiscation of my biggest receivable account asset. 
However, this arbitrary act did not stop the Peruvian Comptrollership 
to issue a ``Special Analysis'' ratifying that the Peruvian Government 
owed to my company a debt in a large amount. This judgment was not 
fulfilled and the Peruvian Government did not pay me or my company. On 
the contrary, foreign companies were paid. I filed a lawsuit against 
the Peruvian Government without success. The 2001 U.S. Department of 
State human rights report about Peru says: ``the judiciary has been 
subject to interference from the executive and is corrupt and 
inefficient''. In 1992, after receiving a copy of the Comptrollership's 
``Special analysis'' ratifying the debt to Propetsa, I apprised the tax 
office (Sunat) that both Propetsa and myself were creditors of the 
State, and that tax liability was to be assessed at zero, since the 
State literally owed me and my company many, many times any tax debt.
Conclusion
    The political persecution has been cruel. I am extremely damaged 
and we did not have the money at the right time to pay complete medical 
exams for my wife Gladys, but the Peruvian Government on June 28, 2005, 
would had sold two of my very expensive oil workover rigs confiscated. 
I do not know the details. My case as a victim of human rights 
violations must not be repeated. This House Committee and the House of 
Representatives should send a strong sign to Peru related to human 
rights and should suspend the implementation of the United States-Peru 
Trade Promotion Agreement until the Peruvian government agrees to pay 
me a political and human rights reparation or remedy claimed.

                                 

Statement of Jeffrey Levin, Schmeltzer, Aptaker & Shepard, on behalf of 
                the Association of Food Industries, Inc.

    This statement is submitted on behalf of the Association of Food 
Industries, Inc. (AFI) in response to the request for written 
statements issued by the House Committee on Ways and Means (Full 
Committee Advisory No. FC-24, June 27, 2006, as revised July 10, 2006). 
AFI is a trade association representing the U.S. food importing 
industry, with approximately 200 member-companies located in the United 
States, as well as approximately 200 associate member-companies located 
abroad which supply the U.S. market. AFI members import a wide range of 
food products from many countries around the world, including Peru (as 
well as other beneficiary-countries under the Andean Trade Preference 
Act (ATPA), and its successor, the Andean Trade Promotion and Drug 
Eradication Act (ATPDEA)). In addition, many AFI associate member-
companies are located in Peru (as well as other ATPDEA beneficiary 
countries).
    AFI brings to the table the perspective not just of U.S. food 
importers but also of U.S. consumers. These are fundamentally important 
constituencies that are too often overlooked in the course of trade 
deliberations in food products, particularly in negotiating objectives. 
Indeed, in reviewing the principal negotiating objectives of the United 
States with respect to agriculture as defined in section 2102(b)(10) of 
the Trade Act of 2002, the emphasis on enhancement of export 
opportunities and the development of overseas markets for U.S. 
producers of agricultural commodities is manifest. Yet, to as critical 
extent, the sweeping benefits gained from the imports side of the 
equation are overlooked. This is unfortunate, because the importing 
activities of the United States have allowed this country to secure a 
ready and uninterrupted access to the widest possible range of food 
products at the lowest possible cost to the American public.
    The U.S. food importing industry is a burgeoning sector of the U.S. 
economy. In large part, this is due to the increasing demands of a 
growing population that is living longer and becoming more ethnically 
diverse with each passing year. The share of the total U.S. diet for 
which imports account has grown considerably in recent years. The most 
recent data issued by the U.S. Department of Agriculture indicates that 
imports' share of the total quantity of food consumed in this country 
increased from 7.8 percent to 11.2 percent over the past twenty years--
a relative increase of 44 percent.\1\ Import supplies greatly increase 
the variety of foods available to the American consumer in line with 
expanding market demands, temper increases in food prices caused by 
adverse weather conditions and other market disruptions, and stabilize 
year-round supplies of fruits and vegetables.\2\ In other words, 
imported foods support adequate supplies of both dietary staples and 
specialty items especially important to an increasingly diverse 
population, and do so at a counter-inflationary cost to consumers. 
Among other things, this allows for greater consumer spending on a 
range of non-agricultural goods and services.
---------------------------------------------------------------------------
    \1\ Jerardo, Outlook Report No. (FAU7901), July 2003, Economic 
Research Service, USDA.
    \2\ According to USDA data, total U.S. imports of agricultural 
products increased from $39 billion in fiscal year 2001 to $57.7 
billion in fiscal year 2005, which represents an increase of nearly 50 
percent in just a four year period. Current projections are that 
imports will hit $65 billion in fiscal year 2006. Electronic Outlook 
Report AES-50 (May 24, 2006), Economic Research Service, USDA.
---------------------------------------------------------------------------
    AFI has long been a strong supporter of trade liberalization 
through the reduction of tariffs and the elimination of non-tariff 
barriers in the course of multilateral and bilateral negotiations. In 
recent years, AFI has actively supported the current Administration's 
free trade agreements (FTAs) program, and has lent its support to the 
FTAs negotiated and implemented with Chile, Australia, Morocco, and 
with the nations of the Central American Economic Integration System 
(CAFTA-DR). In the past few months, AFI has also supported the 
successful effort to negotiate a trade promotion agreement with Peru 
(hereafter ``Peru TPA'').
    AFI stands in strong support of the Peru TPA, and urges 
Congressional approval of the implementing legislation for this 
important agreement as soon as practical. AFI also urges formal 
implementation of the Peru TPA at the soonest possible time, which we 
hope will be January 1, 2007.\3\ AFI and its member-companies 
respectfully submit that the Peru TPA will have tangible and 
significant economic benefits for both the United States and for Peru.
---------------------------------------------------------------------------
    \3\ The ATPDEA is currently scheduled to expire as of January 1, 
2007. It is uncertain at this time whether the Peru TPA will be 
considered, let alone approved, by the U.S. Congress during the current 
Congressional session. It is even more uncertain whether the Peru TPA 
will be implemented by January 1, 2007, even if it is approved sometime 
in the next few months. (In this regard, AFI notes that there is often 
a lengthy lag between U.S. Congressional approval of the implementing 
legislation for a particular trade agreement and the effective 
implementation of that agreement. For example, nearly 18 months elapsed 
between the time when the implementing legislation for the U.S.-Morocco 
FTA was approved by Congress and the actual implementation of that 
agreement on January 1, 2006.) In other words, if the ATPDEA does 
indeed expire as of December 31 of this year without some form of 
renewal or extension, there is a substantial likelihood that the U.S. 
duty rates for imports from ATPDEA beneficiary-countries will revert to 
``normal trade relations'' (NTR) status as of January 1, 2007. This 
would constitute a drastic change in the trade environment, and will 
cause significant harm to U.S. importing companies, U.S. consumers, and 
overseas suppliers. (AFI notes that some, but not all of the imports 
from ATPDEA beneficiary countries, including Peru, are likewise 
eligible for duty-free treatment under the Generalized System of 
Preferences (GSP). In any case, the GSP is currently scheduled to 
expire concurrently with the ATPDEA.).
    On at least two bases, a reversion to an NTR duty structure for 
imports from the ATPDEA beneficiary-countries could also cause 
substantial harm to U.S. companies that are not directly involved in 
importations from ATPDEA beneficiary-countries. First, the currency 
gained by persons situated in the ATPDEA beneficiary-countries through 
exports to the U.S. places significant purchasing power in the hands of 
such persons with which to, among other things, purchase U.S. products 
and services. Second, a significant percentage of the overall value 
chain generated by U.S. imports from ATPDEA beneficiary-countries 
remains in U.S. hands, including air and sea carriers, ports, storage 
facilities, distributors, wholesalers and retailers.
---------------------------------------------------------------------------
    One of AFI's particular areas of interest in the context of the 
Peru TPA is imports of fresh and processed asparagus from Peru. Imports 
of fresh asparagus are classified under two subheadings of the 
Harmonized Tariff Schedule of the United States (HTSUS): subheading 
0709.20.10, HTSUS (fresh or chilled asparagus entered from September 15 
to November 15); and subheading 0709.20.90, HTSUS (fresh or chilled 
asparagus, other).\4\ The NTR duty rates applicable to imports in these 
two subheadings are 5 percent and 21.3 percent ad valorem, 
respectively. Imports of processed asparagus are classified in 
subheading 2005.60.00, HTSUS, with an NTR rate of 14.9 percent. Under 
the ATPDEA, imports of fresh and processed asparagus from Peru have 
been accorded duty-free treatment since 1992.\5\ AFI strongly supports 
the actions of U.S. and Peruvian negotiators to maintain this duty-free 
treatment for imports of fresh and processed asparagus under the terms 
of the Peru TPA. The duty-free treatment accorded to imports of fresh 
and processed asparagus from Peru since 1992 has resulted in pronounced 
economic benefits to U.S. consumers, U.S. importing companies, U.S. 
distributors, the many other companies in the domestic commercial 
chain, the Peruvian economy, and the thousands of people in Peru whose 
livelihood is dependent on trade with the United States. AFI further 
submits that this duty-free treatment has also resulted in an economic 
benefit to U.S. producers and processors of asparagus. The retraction 
of such treatment--if, for example, the Peru TPA is not approved by 
Congress, or is implemented sometime after January 1, 2007, and the 
ATPDEA is not renewed in the interim--will surely result in discernible 
economic harm to these parties.
---------------------------------------------------------------------------
    \4\ In this statement, the term ``fresh asparagus'' is used to 
encompass both fresh and chilled asparagus, classified in the foregoing 
HTSUS subheadings.
    \5\ Imports of fresh and processed asparagus from Peru are not 
currently subject to duty-free treatment under the Generalized System 
of Preferences.
---------------------------------------------------------------------------
    In the past two years, U.S. imports of fresh and processed 
asparagus from Peru had a value of between $110 and $127 million.\6\ 
That is a significant amount of foreign exchange earnings for a country 
with a gross domestic product of only $67.1 billion, and with a per 
capita GDP of only $2,777 per year.\7\ The success of Peru's agroexport 
industry in general, and the asparagus industry specifically, over the 
past decade is one of the signal achievements of the ATPDEA in that it 
has effected the creation of high-value marketable agricultural 
businesses at the expense of illegal coca cultivation. In its most 
recent report on the impact of the ATPDEA, this Commission noted that 
net coca cultivation decreased dramatically, from 115,300 hectacres in 
1995 to 27,500 hectacres in 2004.\8\ The Commission's report states as 
follows:
---------------------------------------------------------------------------
    \6\ In 2004, imports of fresh asparagus from Peru, classified under 
subheadings 0709.20.1000 and 0709.20.9000, HTSUS, totaled 61,352 net 
tons with a Customs value of $98.33 million. In 2005, these imports 
totaled 65,208 net tons with a Customs value of $109.95 million.
    In 2004, imports of processed asparagus from Peru, classified under 
subheading 2005.60.00, HTSUS, totaled 4,672 net tons with a Customs 
value of $8.6 million. In 2005, these imports totaled 7,955 net tons 
with a Customs value of $16.88 million.
    In 2004, imports of fresh asparagus from Peru accounted for 60 
percent, by quantity, of total imports of fresh asparagus, while Mexico 
accounted for 36.5 percent. Although imports from Peru increased in 
absolute terms during 2005, its share of total imports declined to 54.6 
percent, while Mexico's share of total imports increased to 42.4 
percent. Together, these two countries account for more than 95 percent 
of total U.S. imports of fresh asparagus. In 2004 and 2005, imports of 
processed asparagus from Peru accounted for more than 75 percent of 
total imports, while China accounted for almost all of the remainder. 
Together, these two countries account for more than 95 percent of total 
U.S. imports of processed asparagus.
    Source: U.S. International Trade Commission Trade DataWeb.
    \7\ See Background Note: Peru, U.S. Department of State (December 
2005), http://www.state.gov/r/pa/ei/bgn/35762.htm (last visited March 
22, 2006).
    \8\ The Impact of the Andean Trade Preference Act: Eleventh Report 
2004, USITC Pub. 3803 at 4-14.
---------------------------------------------------------------------------
    As noted by USTR, the growth in exports to the United States under 
ATPA has fostered economic development, which is vital to creating 
employment and alternatives to drug-crop production. As in the past, 
the asparagus industry continued to be an important source of 
alternative employment, supporting an estimated 60,000 workers directly 
in asparagus cultivation and processing in 2004.\9\
---------------------------------------------------------------------------
    \9\ Id. at 4-15.
---------------------------------------------------------------------------
    When a trading partner of this country, a political and economic 
ally, garners $127 million worth of export sales to the United States, 
that represents $127 million worth of purchasing power placed in the 
hands of Peruvian nationals, money to a burgeoning middle class to, 
among other things, purchase products exported from the United States. 
U.S. purchases of Peruvian products serve this country's principal 
negotiating objective for trade agreements which, as stated in the 
Trade Act of 2002, is ``to expand competitive market opportunities for 
United States exports.'' \10\
---------------------------------------------------------------------------
    \10\ Trade Act of 2002, Pub. L. No.107-210, 2102, 116 Stat. 994 
(2002), codified at, 19 U.S.C.  3802(b)(1)(A).
    Of course, the elimination of duties applied by Peru on imports 
from the United States under the terms of the Peru TPA also serves this 
principal negotiating objective. As stated by the Office of the U.S. 
Trade Representative:
    This Agreement creates important new markets for U.S. goods. Eighty 
percent of U.S. consumer and industrial products and more than two-
thirds of current U.S. farm exports will enter Peru duty-free 
immediately.
    See http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2005/
asset_upload_file96_8619. pdf (last visited March 24, 2006).
    In its report on the Peru TPA, the Agricultural Technical Advisory 
Committee on Trade In Fruits and Vegetables (``F&V ATAC''), opinioned 
that ``the negotiated agreement provides for equity and reciprocity in 
the reduction and elimination of tariff rates affecting the fruit, nut 
and vegetable sectors.'' http://www.ustr.gov/assets/Trade_Agreements/
Bilateral/Peru_TPA/Reports/asset_upload_file492_8975.pdf (last visited 
March 24, 2006).
---------------------------------------------------------------------------
    While the Peruvian asparagus industry has created tangible economic 
benefits in that country, the U.S. has also derived a significant 
economic benefit from this trade. We respectfully submit that this 
benefit will be furthered by implementation of the Peru TPA. As noted 
by U.S. importer of asparagus from Peru in testimony earlier this year 
before the U.S. International Trade Commission in that agency's recent 
investigation of the economic impact of the ATPDEA on the U.S. economy:
    The vast majority of the value chain generated by sales of Peruvian 
asparagus in this market remains in this country. For example, in 2003, 
the value chain for imports of fresh asparagus from Peru was worth 
approximately $300 million. Of that total, approximately 70 percent 
remained in U.S. hands, including air, sea and land carriers, 
importers, ports, storage facilities, distributors, wholesalers and 
retailers. In other words, for every dollar spent by a U.S. consumer on 
fresh asparagus imported from Peru, 70 cents remains in the U.S.
    Moreover, even of the 30 percent that reverts back to the country-
of-origin, a substantial portion is spent on U.S. inputs such as seeds 
and fertilizers.\11\
---------------------------------------------------------------------------
    \11\ Transcript of hearing before the United States International 
Trade Commission: In the Matter of: U.S.-Peru Trade Promotion 
Agreement: Potential Economywide and Selected Sectoral Effects, 
Investigation No. TA-2104-20 (March 15, 2006) at 34-35 (testimony of 
John-Campbell Barmmer).
    For example, in 2003 (the last full year for which the complete set 
of following data are available), the fob value of Peruvian fresh 
asparagus exports to the U.S. was approximately $78.5 million. The 
comparable cif value was $132.7 million. The value that accrued to 
importers was approximately $20 million, while the value that accrued 
to wholesalers and retailers was approximately $90 million. In 
addition, other value-added in the U.S. (e.g., for storage, fumigation, 
etc.) totaled approximately $15 million. These sub-totals sum to $258 
million, which represents the approximate retail value of fresh 
asparagus imports from Peru sold off the U.S. supermarket shelves. In 
other words, approximately 30 percent of that end-value ($78.5 million 
out of $258 million) remains in Peruvian hands, while the remainder 
($179.5 million out of $258 million) remains here in the United States.
    Sources: Aduanas (National Customs Superintendancy of Peru); U.S. 
International Trade Commission Trade DataWeb; estimates by APOYO 
Consultoria, and the Instituto Peruano del Esparrago y Hortalizas 
(IPEH).
---------------------------------------------------------------------------
    As this witness further noted, imports of fresh asparagus from Peru 
fuel job creation in the United States. Aside from the several hundred 
persons employed or indirectly involved in the process of importing 
asparagus from Peru, these imports result directly or indirectly in the 
creation of at least 5,000U.S.jobs in companies throughout the 
commercial chain.\12\
---------------------------------------------------------------------------
    \12\ Tr. at 35 (testimony of John-Campbell Barmmer).
---------------------------------------------------------------------------
    Imports of fresh and processed asparagus from Peru also serve a 
U.S. market demand that cannot be met by domestic growers alone. In the 
absence of import sources--and principally, imports from Peru--domestic 
production would be woefully inadequate to meet U.S. consumer demand. 
This would inevitably lead to a jump in prices, to the detriment of 
U.S. consumers, and eventually a drop in consumption, to the detriment 
of U.S. producers.
    Another product of concern to AFI and its membership is processed 
artichokes. Peru is the second largest foreign supplier of processed 
artichokes to the U.S. market, with U.S. imports of the product 
totaling 8,888 net tons in 2005, with a Customs value of nearly $17 
million.\13\ Again, these imports enjoy duty-free treatment under the 
ATPDEA, but would revert to a 14.9 percent NTR rate if the Peru TPA is 
not approved and implemented by January 1, 2007, and the ATPDEA is not 
extended in some form prior to that date.\14\ And again, the losers in 
such a contingency would range from U.S. consumers, importers and other 
parties in the commercial chain, as well as interests in Peru.
---------------------------------------------------------------------------
    \13\ Processed artichokes are classified in subheading 2005.90.80, 
HTSUS.
    \14\ Processed artichokes from Peru are not currently eligible for 
duty-free treatment under the GSP.
---------------------------------------------------------------------------
    The Peru TPA does not provide any new benefits for imports of 
products of interest to AFI and its member-companies; it merely 
preserves the situation that has been in place for nearly 15 years. 
This situation has well-served a wide range of economic interests here 
in the United States, as well as in Peru. However, retraction of duty-
free treatment for imports of the product would have a discernible 
deleterious effect across-the-board.
    For these reasons, AFI strongly supports the actions of U.S. and 
Peruvian negotiators, and urges swift approval and implementation of 
this important agreement.

                                 

                                              Bayer MaterialScience
                                     Pittsburgh, Pennsylvania 15205
                                                      July 18, 2006
The Honorable William M. Thomas, Chairman
The Honorable Charles B. Rangel, Ranking Member
Committee on Ways & Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington D.C., 20515

    Dear Mr. Chairman and Ranking Member Rangel:

    On behalf of Bayer MaterialScience LLC (``Bayer''), I am writing to 
express support for the implementation of the United States-Peru Trade 
Promotion Agreement (PTPA). This agreement has the potential to 
significantly enhance market access for U.S. exports to Peru, helping 
U.S. manufacturers to stay competitive with global rivals based in Asia 
and elsewhere.
    In particular, the PTPA would remove tariff barriers that are 
currently one-sided. While most products from Peru already enter the 
United States duty-free, Peru's tariffs represent a substantial hurdle 
to market entry for U.S. exporters. As Peru already has preferential 
trade arrangements with several major economies, including Brazil, 
Argentina, and Chile, U.S. exports have been disadvantaged in 
comparison to those of other foreign chemical producers.
    In June 2004, Bayer submitted written comments to the Office of the 
United States Trade Representative (USTR) outlining the priority of an 
immediate elimination of Peru's tariff on toluene diisocyanate (TDI) in 
the context of the U.S.-Peru free trade negotiations. TDI goes into the 
production of polyurethane foams used in furniture, bedding, automotive 
seating, insulation, construction and other specialty markets. It is 
manufactured by a number of U.S. companies in the states of Michigan, 
Louisiana, Kentucky, West Virginia, and Texas.
    We are pleased to note that Peru's 4% tariff on TDI, classified 
under Harmonized System number 2929.10.10, is scheduled to be 
eliminated upon implementation of the PTPA. This tariff reduction, 
along with those on other U.S.-manufactured products, will serve to 
promote the expansion of Bayer MaterialScience LLC's business in the 
region and bolster U.S. jobs and manufacturing.
    For these reasons, we urge your approval of implementing 
legislation for the PTPA.
            Sincerely,
                                                       Tim Chappell

                                 

                                  California Table Grape Commission
                                                 Fresno, California
                                                      July 18, 2006
Congressman Bill Thomas
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, DC 20515

Dear Congressman Thomas:

    The California Table Grape Commission, on behalf of California's 
fresh grape farmers, is pleased to provide the following comments 
regarding the recently signed U.S.-Peru Trade Promotion Agreement 
(PTPA).
    California fresh table grapes entering Peru currently face a 20 
percent tariff. This tariff will be eliminated upon implementation of 
the U.S.-PTPA, making California grapes more affordable for Peruvian 
consumers and more competitive vis-a-vis other world grape suppliers.
    While California table grapes are currently exported to Peru in 
only limited amounts, the elimination of the 20 percent tariff will 
provide opportunities for a significant expansion of these exports. The 
California Table Grape Commission therefore supports the agreement and 
encourages the House Ways and Means Committee to give it favorable 
consideration.
    The commission would also like to take this opportunity to 
emphasize the importance of lowering tariffs and improving market 
access for California grapes throughout the world. California table 
grape exports have increased significantly over the past ten years due 
to the implementation of a number of free trade agreements. Improving 
global market access remains a top priority for the California Table 
Grape Commission.
    Thank you for your consideration of these comments.
            Sincerely,
                                                      Kathleen Nave
                                                          President

                                 

         Statement of Eric Farnsworth, Council of the Americas
    The Council of the Americas (``Council'') appreciates the 
opportunity to submit testimony in support of the United States-Peru 
Trade Promotion Agreement. The Council is a New York-based organization 
with offices also in Washington representing approximately 175 
companies invested in and doing business throughout the Western 
Hemisphere. The Council is dedicated to the promotion of open markets, 
democracy, and the rule of law in the Americas. Founded in 1965, we 
have been widely recognized throughout the region as the voice of 
Western Hemisphere business and policy for over 40 years.
A Regional Network of Open Markets
    The Council strongly supports efforts to expand trade and 
investment throughout the Americas, both on the basis of U.S. economic 
and national security interests and in the belief that open markets and 
healthy investment flows are critical factors in the search for 
sustainable, equitable growth in the hemisphere. For that reason, we 
are strong advocates for the negotiation of a Free Trade Area of the 
Americas, as democratically-elected leaders first agreed at the 1994 
hemispheric summit in Miami. Such an agreement would provide the very 
underpinnings of broad, sustained U.S. engagement in the region. As 
stepping stones to this ultimate goal, we have supported agreements 
with Mexico, Canada, Chile, Central America and the Dominican Republic, 
and will continue to support new agreements such as the one with Peru 
that can contribute to that overall goal of a hemispheric open trade 
zone. As with the DR-CAFTA, our hope for the Andean region is an 
agreement that boosts regional integration efforts by uniting our 
trading partners in the Andes and throughout the Americas in an 
agreement that applies collectively among all the countries, rather 
than simply on a bilateral basis between each country and the United 
States. Therefore, in the broader context of U.S. strategy for economic 
engagement in the Western Hemisphere, the Council urges policymakers to 
pursue a path of integration and harmonization among existing and 
pending free trade agreements. At the very least, the terms of 
agreements now being negotiated should be conducive to future 
integration. In this way, the bilateral/sub-regional agenda will be a 
path toward hemispheric free trade through the Free Trade Area of the 
Americas, which, despite being delayed, remains our ultimate goal.
U.S.-Peru FTA
    As a next step toward this goal, and in direct support of U.S. 
strategic interests in the critical Andean region, the Council strongly 
supports the pending agreement between the United States and Peru and 
urges its rapid advance through the Trade Promotion Authority-mandated 
process to Congressional approval and timely implementation.

      An Andean Free Trade Agreement is the next logical step 
in a long-term pattern of economic and political engagement of the 
region pursued by Republican and Democratic administrations alike. U.S. 
credibility in the region, as well as with the broader multilateral 
trade agenda, is an important consideration as Congress looks at this 
agreement.
      As an agreement with the potential for regional 
application, the Peru FTA sets the stage for an attractive regional 
market and potentially enhances integration and cooperation among the 
countries of the Andes--a critical ingredient for long-term, peaceful 
and democratic stability in the region and for the effective management 
of the challenge of illicit narcotics.
      The free trade agreement offers important growth 
opportunities for U.S. industry and agriculture by opening a 
significant market, and putting it on a footing for more rapid growth.
      The disciplines contained in the agreement in areas such 
as services, investment and government procurement enhance the 
transparency and accountability of day-to-day governance, which makes 
Peru a more attractive place for foreign investment, while reinforcing 
democratic processes and narrowing opportunities for corruption.
      As a strategic matter, for the last 15 years stemming 
from the 1991 Cartagena Summit, the United States on a bipartisan basis 
has supported economic growth in the Andean region as a bulwark against 
movements inimical to U.S. interests--primarily illegal narcotics 
trafficking--by opening its markets unilaterally to Andean countries 
through the Andean Trade Preferences Act. The ATPA was later extended 
and expanded by the Andean Trade Partnership and Drug Eradication Act, 
now set to expire in December 2006. With economic populism reaching 
across the Andes, the U.S.-Peru trade promotion agreement will move the 
pre-existing relationship to a reciprocal and sustainable basis for the 
first time.
      Perhaps most importantly, the agreement enhances the U.S. 
relationship with a country and its newly-elected government that is a 
much-needed ally in a strategic region during a politically-sensitive 
time.

    The Peru FTA stands on its merits. On the basis of reciprocity 
alone, for 15 years of duty-free access under the ATPA/ATPDEA, it 
should be non-controversial to open the Peruvian market to U.S. goods, 
as ours is already open to theirs. The foreign policy arguments in 
favor of this agreement are equally compelling, if not, in fact, even 
more so.
The Climate for Investment
    The Council's enthusiasm for the U.S.-Peru FTA is the result of 
long-term engagement with political leaders and policy makers in the 
United States and Peru. In the past it has been tempered at times by 
the intractability of certain disputes affecting investors. It is safe 
to say that, wherever investments are made, investment disputes will 
inevitably arise. The issue is not whether such disputes exist. The 
issue, rather, is whether, when they do arise, investment disputes are 
promptly, transparently, and effectively resolved, and whether the 
established patterns of foreign government behavior build momentum and 
goodwill toward their ultimate resolution, or obstruct this goal.
    The Council has long supported an open and rules-based approach to 
trade. In a global economy, investors will look first to the investment 
climate as to whether they will increase or reduce their exposure to 
the countries in question. During the course of the negotiations we 
emphasized the necessity for Peru to demonstrate both the capacity, and 
the willingness, to implement and enforce trade and investment related 
legislation, and to maintain a demonstrated institutional consistency 
across administrations. We called attention to the vexing nature of 
investment disputes in Peru and urged the sequential, definitive 
resolution of disputes, insisting upon a strong, meaningful dispute 
resolution chapter that would provide the opportunity for adequate 
redress in cases where disputes may arise.
    In this regard, the Toledo Administration has exhibited a strong 
commitment as part of the FTA process to resolving investment disputes 
in accordance with the rule of law. Much concrete progress has been 
made. Though some disputes remain, the trade agreement as negotiated 
provides cutting edge protections which, when implemented fully by the 
new Garcia Administration, will give greater confidence to investors 
thus bringing about, over time, the full benefits promised by an 
expanded trade relationship. We stand in favor of cementing these 
efforts through a formalized agreement with Peru.
Conclusion
The Council urges timely and favorable action on the pending agreement 
        with Peru, which we believe will provide a cornerstone for 
        continued democratic and economic growth and development and 
        important new economic opportunities for the United States. As 
        well, the Peru FTA is also an important building block toward 
        the vision of a unified hemispheric market that will enhance 
        U.S. competitiveness and that of its neighbors in an era of 
        unparalleled global competition--and opportunity. The agreement 
        should be passed without delay.

                                 

          Statement of Emergency Committee for American Trade
    These comments are submitted on behalf of the Emergency Committee 
for American Trade--ECAT--an association of the chief executives of 
leading U.S. business enterprises with global operations. ECAT was 
founded more than three decades ago to promote economic growth through 
expansionary trade and investment policies. Today, ECAT's members 
represent all the principal sectors of the U.S. economy--agriculture, 
financial, high technology, manufacturing, merchandising, processing, 
publishing and services. The combined exports of ECAT companies run 
into the tens of billions of dollars. The jobs they provide for 
American men and women--including the jobs accounted for by suppliers, 
dealers, and subcontractors--are located in every state and cover 
skills of all levels. Their collective annual worldwide sales total 
nearly $2.4 trillion, and they employ more than five and one-half 
million persons. ECAT companies are strong supporters of negotiations 
to eliminate tariffs, remove non-tariff barriers and promote trade 
liberalization and investment worldwide.
    ECAT is submitting these comments to express its strong support for 
Congressional approval and implementation of the United States-Peru 
Trade Promotion Agreement (Peru TPA) that will promote new economic 
opportunities for both countries and continued economic reform in Peru. 
This agreement also represents an important tool to foster improved 
ties and promote broader U.S. interests in the region. With the 
completion of the Peru TPA, the United States now has the opportunity 
to implement an agreement that will not only make the relationship 
permanent and more flexible, but will also substantially open markets 
in Peru for U.S. farm products, U.S. manufactured exports, and U.S. 
services.
Major Provisions of U.S.-Peru Trade Promotion Agreement
    The United States and Peru signed the U.S.-Peru Trade Promotion 
Agreement (TPA) on April 12, 2006. The primary provisions of the U.S.-
Peru Trade Promotion Agreement include the following:

      Agriculture: Provides immediate duty-free treatment for 
more than two-thirds of U.S. agricultural exports to Peru, including 
important U.S. exports such as high-quality beef, cotton, wheat, 
soybeans, soybean meal, crude soybean oil, key fruits and vegetables, 
and many processed food products. Tariffs on most remaining products 
will be phased out within 15 years, with all tariffs eliminated within 
17 years, providing improved access for pork, beef, corn, poultry, 
rice, fruits and vegetables, processed food and dairy products. The FTA 
also includes provisions to eliminate sanitary and phytosanitary 
barriers.
      Manufactured Goods: Eighty percentof U.S. consumer and 
industrial exports will receive immediate duty-free treatment, 
including key U.S. exports of auto parts, construction equipment, 
forest products, information technology products and medical and 
scientific equipment. Remaining tariffs will be eliminated on all 
products within 10 years. Peru has agreed to allow trade in 
remanufactured products.
      Information Technology: Provides, via a side letter, that 
Peru will join and become a full participant in the WTO ITA. As a 
result, Peru will eliminate duties on all high-tech products (e.g., 
servers, personal computers, printers) covered by the Agreement and 
allow worldwide exports to enter their markets duty-free. In addition, 
Peru committed to non-discrimination and national treatment of e-
commerce and digital products, and agreed not to impose customs duties 
on products delivered electronically.
      Textiles and Apparel: Expands access to the U.S. market 
through duty-free treatment for apparel made with U.S. and/or Peruvian 
fabric and, for a temporary period, a limited amount of apparel made 
with fabric from third countries.
      Services: Liberalizes services trade and investment in 
Peru through a negative list approach with few exceptions. Investment: 
Expands investment opportunities and incorporates generally strong 
protections, including an investor-state mechanism, for U.S. 
investment.
      Intellectual Property Rights: Includes strong protections 
for trademarks, patents, copyrights, and trade secrets, including 
stronger penalty requirements, patent term restoration and data 
exclusivity.
      Government procurement: Includes important new anti-
corruption, transparency and non-discrimination rules for government 
contracting.
      Transparency: Includes state-of-the-art transparency 
standards, including in such areas as customs and regulatory rulemaking 
(i.e., providing, for example, Internet publication of laws and 
regulations, expedited release procedures, and provisions for express 
shipments).
      Labor and environment: Includes commitments by Peru to 
enforce effectively its domestic labor and environmental laws. The 
parties reaffirmed their commitment to International Labor Organization 
principles and that it is inappropriate to weaken or reduce labor or 
environmental protections to encourage trade or investment. The parties 
also agreed to ensure that their environmental laws provide for high 
levels of environmental protection.
      Dispute settlement: Provides that obligations in 
commercial, labor and environment areas are enforceable through a 
strong and innovative dispute settlement system allowing for monetary 
fines and other penalties for the failure to meet commitments.
Opportunities Created
    U.S. exports to Peru equaled $2.3 billion in 2005, with significant 
exports of machinery, fuel, plastics and processed foods. U.S. imports 
from Peru totaled $5.1 billion in 2005, with major imports of precious 
stones, fuel, apparel and copper. U.S. foreign direct investment in 
Peru equaled $3.9 billion in 2004.
    Most imports from Peru already receive duty-free treatment under 
the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which was 
enacted as part of the Trade Act of 2002. The Peru TPA expands this 
duty-free treatment and makes it permanent.
    The U.S.-Peru TPA will expand opportunities for U.S. producers by 
opening markets and eliminating key barriers. It will also make 
important improvements to investment protections, intellectual property 
rights, digital trade and transparency that will promote the rule of 
law.
    For Peru, the trade agreement will expand opportunities and promote 
economic growth. This is particularly important given that a high 
percentage of workers in Peru are already employed in industries 
connected to the United States.
    Concerns have been expressed that the Peru TPA will undermine 
economic progress in the region by allowing more competitive U.S. 
products, particularly agricultural products, to enter the market. 
These concerns ignore the very positive impact that free trade 
agreements, including the North American Free Trade Agreement (NAFTA) 
have had on economic development. An independent and detailed study by 
the World Bank published at the end of 2003--Lessons from NAFTA for 
Latin American and Caribbean (LAC) Countries: A Summary of Research 
Findings, by Daniel Lederman, William Maloney, and Luis Serven--
analyzed the effects of NAFTA on the Mexican economy, separating out 
the effects of the peso crisis. It found that:

      ``NAFTA has brought significant economic and social 
benefits to the Mexican economy.''
      ``Contrary to some predictions, NAFTA has not had a 
devastating effect on Mexico's agriculture. In fact, both domestic 
production and trade in agricultural goods rose during the NAFTA 
years.'' The report goes on to explain why, citing factors such as 
increased demand and productivity.
      ``In spite of popular perception, there is little ground 
for concerns that NAFTA, or FTAs more generally, are likely to have a 
detrimental effect on the availability and/or quality of jobs. . . . In 
fact, Mexican firms, as those of the region, more generally, that are 
exposed to trade tend to pay higher wages, adjusted for skills, are 
more formal, and invest more in training.''

    In short, for Peru, this TPA is part of its effort to continue the 
reform of its economy and promote economic development, growth and 
opportunity.
Conclusion
    ECAT strongly supports Congressional approval and implementation of 
the U.S.-Peru TPA as soon as possible.

                                 

                       Statement of Exporamerica

    This statement is submitted on behalf of EXPORAMERICA, an 
association of Peruvian apparel companies whose objective is to promote 
increased trade between Peru and the U.S. Exporamerica presented 
testimony at the public hearing conducted by the International Trade 
Commission (ITC) on March 15, 2006 in connection with its investigation 
regarding the Peru Trade Promotion Agreement (PTPA).
I. U.S.-Peru Trade in Fibers, Yarns, and Apparel--A Mutually Beneficial
        Relationship
    Since the implementation of the Andean Trade and Drug Eradication 
Act (ATPDEA) in 2002, trade in textiles and apparel between the U.S. 
and Peru has grown considerably.\1\ In Peru's case apparel exports have 
nearly doubled since 2001 and Peru has surpassed Colombia to become the 
leading Andean exporter of textiles and apparel to the U.S. Although 
Peru supplied only 1% of total U.S. apparel imports in 2005, it was the 
fifth largest source of knit cotton shirts and blouses, with shipments 
of $644 million (equal to 78% of U.S. textile and apparel imports from 
Peru) and a 5% marketshare.\2\
---------------------------------------------------------------------------
    \1\ The ATPA (1991) and the ATPDEA (2002), although used 
interchangeably at times in this testimony, contain differences of 
importance to the textile and apparel industry. According to the 
International Economic Review (published ITC #3571 Nov./Dec. 2002), the 
ATPDEA ``authorizes the extension of duty--free treatment to certain 
products previously excluded from ATPA preferences, including certain 
textiles and apparel, footwear, petroleum and petroleum derivatives, 
watches and watch parts (including cases, bracelets, and straps), and 
certain tuna in smaller foil or other flexible airtight packages (not 
cans). However, ATPDEA did not renew the reduced--duty provisions on 
certain handbags, luggage, flat goods, work gloves, and leather wearing 
apparel.''
    \2\ United States International Trade Comission, ``U.S.-Peru Trade 
Promotion Agreement: Potential Economy-wide and Selected Sectoral 
Effects''--USITC Publication 3855, May 2006, p. 3-22.
---------------------------------------------------------------------------
    Peru's growth has also led to significant benefits for the U.S. as 
demand in Peru for raw materials has outstripped supplies. As noted by 
the I.T.C., U.S. cotton for use in the textile and apparel industry is 
a major export product to Peru,\3\ and the provisions of the PTPA are 
likely to have a significant positive effect on U.S. cotton exports to 
Peru.\4\ In addition, according to the ITC, tariff liberalization under 
the PTPA will likely result in a large percentage increase in U.S. 
exports of textiles and apparel to Peru. These exports consist mostly 
of yarns, fabrics, and garment parts.\5\
---------------------------------------------------------------------------
    \3\ United States International Trade Commission, ``The Impact of 
the Andean Trade Preference Act''--Eleventh Report 2004, USITC 
Publication 3803, September 2005, p. 2-38.
    \4\ United States International Trade Comission, ``U.S.-Peru Trade 
Promotion Agreement: Potential Economy-wide and Selected Sectoral 
Effects''--USITC Publication 3855, May 2006, p 3-7.
    \5\ Ibid p. 3-22.
---------------------------------------------------------------------------
    Building on the benefits of the ATPDEA (which is set to expire in 
December of 2006), and its predecessor the ATPA of 1991, the PTPA has 
been signed by executives of both countries and ratified by the 
Peruvian Congress, but is still pending approval of the U.S. Congress. 
The increasing interconnectedness of the U.S. and Peruvian textile and 
apparel industries, which is a direct outgrowth of the ATPDEA, is also 
creating a mutually beneficial trade relationship that will permit 
industries in both countries to face the stiff competition coming from 
China and other Asian producers, which largely do not use U.S. inputs 
in their textile and apparel production. The PTPA will allow this 
already thriving relationship to grow.
    The emerging ``strategic alliance'' between textile and apparel 
industries in both countries is being replicated in other FTAs between 
the U.S. and its trade partners in the Western Hemisphere. This will 
help Peru and the U.S. to face the threat presented by Chinese and 
Asian competition, which in many instances depends on subsidies; 
artificially low exchange rates to promote exports; and labor that in 
many cases does not conform with minimum, internationally-recognized, 
labor standards, none of which occurs in Peru, a country that 
scrupulously observes the 71 International Labor Organization (I.L.O.) 
agreements to which it has subscribed.
II. Importance of the Textile and Apparel Industry to Peru's Economy
    The textile and apparel manufacturing industry represents around 
10% of Peru's total exports. It is one of Peru's leading industries and 
an estimated source of direct and indirect employment for over 500,000 
Peruvians. As such, it accounts for nearly 20% of the country's 
manufacturing jobs and almost 10% (considering an average family size 
of 5) of Peru's population of 28 million depends on this industry for 
its livelihood.
    It is also one of Peru's fastest growing export industries. In 
2005, Peru exported approximately U.S.$ 1,150 billion worth of textiles 
and apparels, compared to U.S.$ 664 million in 2001. Approximately 
79.2% of Peru's exports were destined to the U.S. market. This industry 
has become successful in large part thanks to the ATPDEA.

[GRAPHIC] [TIFF OMITTED] T1576A.015

    The qualitative importance of apparel exports to Peru becomes 
evident when considering that 70% of Peru's exports correspond to 
minerals (gold, copper, lead, silver, zinc, etc.) and fish meal, all of 
which represent commodities and have little or no value-added. In this 
regard, it is estimated that an article of clothing multiplies the 
value of the fiber approximately 12 times. Peru's apparel industry 
allows for substantial value added because, unlike neighboring Colombia 
or the Central American nations which are overwhelmingly maquila (cut & 
sew) oriented, its industry is vertically integrated throughout the 
productive chain and its niche market is the ``full package'' product. 
Approximately 80% of Peru's textile and apparel exports are represented 
by cotton garments and fabrics. Of this amount, about 80% are knit 
fabrics.
III. Benefits to the U.S. Economy:
A. Cotton
    As is shown in the chart below, the U.S. is Peru's primary trade 
partner and the destination for nearly one third of the country's 
exports. As indicated earlier, Peru's growing exports also benefit the 
U.S. In the case of apparel, 95% of Peru's exports are manufactured 
from cotton fiber. Given that there is a shortfall of cotton production 
in Peru for use in export garments, the country must import cotton to 
meet the demand of its textile and apparel sector. According to the 
ITC, Peru imported an average of 39625 MT of cotton annually from 2000-
2005, of which 27,155 MT, or more than two-thirds, were imported from 
the United States.\6\ This growing consumption of U.S. cotton has been 
spurred by the ATPDEA and will be further encouraged by approval of the 
PTPA.
---------------------------------------------------------------------------
    \6\ ITC May 2006 report, p. 3-8.
---------------------------------------------------------------------------
    It should be noted that, at present, U.S. cotton exports to Peru 
are currently subject to a 12% import duty on the CIF value. Upon 
implementation of the PTPA, this import duty will be eliminated 
immediately. This will further encourage U.S. cotton exports to Peru 
and in turn make Peruvian apparel more competitive price-wise in the 
U.S. market. Moreover, Peruvian imports of a variety of synthetic 
fibers, demand for which has grown on a daily basis, are also likely to 
increase significantly. However, allowing the ATPDEA to lapse without 
the PTPA in place would immediately threaten this thriving relationship 
and hurt Peruvian apparel producers and their U.S. cotton suppliers.

[GRAPHIC] [TIFF OMITTED] T1576A.016

[GRAPHIC] [TIFF OMITTED] T1576A.017

    Recognizing the benefits to the U.S. cotton industry of increasing 
exports of U.S. cotton to the ATPDEA countries, the Memphis, TN-based, 
National Cotton Council (NCC) passed a resolution supporting the 
adoption of the PTPA and its strong rule of origin requirements, and 
informed the U.S.T.R. that the NCC had determined that the agreement 
will be beneficial for U.S. cotton producers and for U.S. textile and 
apparel manufacturers.\7\ The chart below shows the growth in U.S. 
cotton exports to Peru over the last five years.
---------------------------------------------------------------------------
    \7\ ``Cotton's Week'' (NCC Newsletter), February 17, 2006, 
referring to letter from John Maguire, NCC senior vice president, 
Washington Operations to Ambassador Portman.

    U.S. Cotton Exports to Peru (including U.S. Pima and U.S. Upland)
------------------------------------------------------------------------
                                   VOLUME M.T.   CIF VALUE      TOTAL
               YEAR                   FIBER      IN U.S. $    IMPORTS %
------------------------------------------------------------------------
2001                                22,141.82    30,461,31   60.33
                                                 2
------------------------------------------------------------------------
2002                                32,910.34    38,909,09   77.00
                                                 9
------------------------------------------------------------------------
2003                                34,374.10    50,018,14   86.03
                                                 0
------------------------------------------------------------------------
2004                                23,774.70    43,311,25   66.87
                                                 1
------------------------------------------------------------------------
2005                                34,672.84    48,484,84   74.57
                                                 9
------------------------------------------------------------------------

B. Yarns and Fabrics
    The rules of origin agreed to under ATPDEA, and the PTPA, are 
designed to foster the use of inputs produced in member countries (the 
use of yarn or fabrics from third parties--as is the case in some of 
the countries that participate in the CAFTA--is not allowed in PTPA 
except in specific cases). Once the PTPA is in place Peru is expected 
to increasingly meet its unsatisfied demand for yarn and fabrics with 
products manufactured in the U.S., because this is the only way in 
which apparel will qualify for duty free treatment in the U.S. under 
the rules of origin.
    As the ITC notes, U.S. textile firms generally support the rules of 
origin for textiles and apparel under the PTPA because the rules ensure 
that the agreement benefits both parties and will further regional 
integration goals.\8\ Under the agreement, yarns and fabrics produced 
in the U.S. will enter Peru duty free immediately upon implementation. 
This will boost imports from the U.S., which will have an advantage 
vis-`-vis yarn and fabric suppliers that pay a 25% customs tariff to 
enter Peru. Again, expiration of the ATPDEA, without the PTPA in place, 
will interrupt this flow and will threaten the growth in trade between 
both countries that would otherwise be expected from a smoother 
transition from the ATPDEA to the PTPA.\9\
---------------------------------------------------------------------------
    \8\ United States International Trade Comission, ``U.S.-Peru Trade 
Promotion Agreement: Potential Economy-wide and Selected Sectoral 
Effects''--USITC Publication 3855, May 2006, p. 3-23.
    \9\ The National Council of Textile Organizations (NCTO), another 
major U.S. association based in Gastonia, NC, which represents numerous 
yarn and fabric producers throughout the U.S., but who are mostly 
concentrated in North Carolina, South Carolina, and Georgia, is also 
pleased that the PTPA addresses all the major negotiating objectives, 
which significantly enhances the hemispheric supply chain and makes 
these improvements permanent. The structure and rules of the PTPA will 
benefit textile and apparel producers in both countries.
---------------------------------------------------------------------------
C. The Apparel Value Chain in the U.S. and Other Considerations
    In addition to the direct benefits to the U.S. cotton and textile 
industries noted above, growing apparel imports from Peru under the 
ATPDEA have generated benefits to the U.S. economy across the entire 
transportation, distribution, and retail chain. In this regard, if for 
example a clothing garment has a FOB Callao-Peru value of U.S.$ 6.00, 
the price at which the same garment is sold in the U.S. generally 
ranges from U.S.$ 40 to 50. This price differential indicates that a 
greater portion of the value chain involved in Peruvian apparel exports 
remains in U.S. hands. These considerable benefits are distributed 
among U.S. sea, air, and land transporters; couriers; ports; warehouses 
and distribution facilities; and finally retailers. It is also safe to 
say that the Peruvian apparel industry supports thousands of U.S. jobs 
along the value chain associated with this trade. Finally, the last 
link of this value chain is, of course, the U.S. consumer who as a 
result of the ATPDEA has had access at more competitive prices to high-
quality apparel containing in many instances cotton and animal fibers 
unique to Peru.
    In this regard, it is important to mention that Peruvian apparel 
exports include those manufactured with wools from species in the 
camelid family such as the alpaca, llama, and vicuna. This uniquely 
Peruvian production has grown rapidly in recent years, does not compete 
with U.S.-produced apparel, and has resulted in concrete conservation 
and environmental benefits in Peru.\10\
---------------------------------------------------------------------------
    \10\ Once endangered wild vicuna herds, which have some of the 
finest fibers in the animal kingdom, are making a comeback in the 
impoverished Andean highlands thanks to export markets created in the 
last 15 years for apparel made with their wool.
---------------------------------------------------------------------------
    Under both the ATPA, and its successor the ATPDEA, Peru's growing 
apparel industry, its capacity to generate employment, and its need for 
imported and domestically grown cotton and other inputs, has also 
contributed to Peru's success in reducing illegal coca-leaf cultivation 
and providing alternative, legal, employment for tens of thousands of 
Peruvians. This is an important U.S. strategic objective in the war on 
drugs, the struggle against narcotics trafficking towards the U.S., and 
keeping illegal drugs out of U.S. communities and neighborhoods. This 
is also a key reason for approval of the PTPA.
    Figures from the ITCnoted that net coca cultivation decreased 
dramatically from 115,300 hectares in 1995 to 27,500 hectares in 
2004.\11\ Although coca cultivation has risen slightly in Peru in the 
last two years, it is important to note that since 2000, coca 
cultivation in the Andean region as a whole has declined by nearly 30% 
to 158,000 hectares, according to the United Nations Office on Drugs 
and Crime (UNODC).\12\ Given that the ATPDEA has been in place since 
1991, it is clear that this program has been an invaluable tool in 
reducing coca cultivation by spurring the growth of the apparel and 
other export-driven industries in Peru.
---------------------------------------------------------------------------
    \11\ United States International Trade Commission, ``The Impact of 
the Andean Trade Preference Act''--Eleventh Report 2004, USITC 
Publication 3803, September 2005, p.   4-14.
    \12\ UN Office on Drugs and Crime, ``Coca Cultivation in the Andean 
Region: A Survey of Bolivia, Colombia and Peru,'' June 2006, Preface.
---------------------------------------------------------------------------
    In observing the overall picture, it is also important to note that 
Andean apparel exports to the U.S. do not even reach 1.1% of total U.S. 
imports. Therefore, there is no risk of displacement or damage to the 
U.S. from Peruvian apparel imports.

[GRAPHIC] [TIFF OMITTED] T1576A.018

[GRAPHIC] [TIFF OMITTED] T1576A.019

    It should be considered that, as shown in the chart below, Peruvian 
and U.S. economies are complementary in many aspects and barely compete 
against each other, and therefore, a bilateral agreement generates a 
win-win situation for both countries.
    In this regard, it is estimated that for every dollar exported by 
the ATPDEA beneficiary countries to the U.S., 94 cents worth of U.S. 
goods are in turn imported by the ATPDEA countries, whereas by way of 
comparison the Asian countries only buy 14 cents out of every dollar 
exported to the U.S.\13\
---------------------------------------------------------------------------
    \13\ The ATPDEA beneficiary countries are Bolivia, Colombia, 
Ecuador and Peru.

[GRAPHIC] [TIFF OMITTED] T1576A.020

[GRAPHIC] [TIFF OMITTED] T1576A.021

[GRAPHIC] [TIFF OMITTED] T1576A.022

Peru TPA and Labor
    The growth of globalized, export-based industries in Peru has been 
such that in parts of the country such as Ica and La Libertad there is 
full-employment year round and extreme poverty has been reduced by an 
astounding 36% comparable to levels experienced nationwide by countries 
such as Chile. The cotton, textile and apparel industries located in 
these regions have helped to contribute to these successes. Moreover, 
workers in these industries earn good wages by Peruvian standards which 
is helping to reduce Peru's extreme poverty levels. Just recently, for 
example, the Peruvian Prime Minister Pedro Pablo Kuczynski annouced 
that extreme poverty has been reduced from 24% to 18% between 2001 and 
2005.
    In terms of its committment to global labor standards, Peru has 
ratified 71 ILO conventions, including the eight ``core conventions.'' 
It has been praised multiple times by the ILO for its progress in 
improving labor laws. In addition to all of the ILO's Core Labor Rights 
Conventions, the PTPA's labor standards exceed those of five other 
previously-ratified trade agreements: Jordan, Chile/Singapore, CAFTA, 
Bahrain and even the ATPDEA, which does not make ILO or national 
standards mandatory.
    The PTPA goes beyond many other free trade agreements in the 
enforcement of worker rights and dispute resolution. The PTPA-created 
Labor Affairs Council develops public participation in reporting and 
funding to ensure implementation of the agreement and improved 
cooperation and capacity-building mechanisms. Additionally, the PTPA 
holds member countries accountable to effectively enforce existing 
labor laws, under penalty of fines, which are used by the PTPA 
commission to fund projects improving labor right protections. 
Noncompliance results in the formation of an arbitral panel, which may 
fine violating parties up to $15 million per year and suspend tariff 
benefits to the party complained against if necessary to cover the 
assessment.\14\
---------------------------------------------------------------------------
    \14\ Peru Trade Promotion Agreement, Chapter Twenty-One: Dispute 
Settlement.
---------------------------------------------------------------------------
V. Investment and Dispute Resolution
    The PTPA's Investment Chapter will facilitate transactions for U.S. 
industries and banks, as well as commercial and service companies, 
among others, that have investments or are interested in investing in 
Peru. U.S. investors will be treated equally as local institutions. 
Moreover, they will have full freedom to remit investments and profits. 
Therefore, it is possible that U.S. textile companies will install 
industrial plants and trading companies in Peru, which will use 
supplies produced in the United States, such as state-of-the-art 
fibers, yarns and fabrics.
    It should also be pointed out that the PTPA contemplates a dispute 
settlement mechanism, designed to provide security to U.S. investors in 
Peru given that any controversy will be resolved on a fair and 
equitable basis, without the intervention of political or other 
considerations in the settlement of disputes.

VI. Concluding Remarks
    The Peruvian economy, as shown in the chart below, is clearly very 
small in comparison to U.S. economy. However, an emerging strategic 
alliance between the textile and apparel industries of both countries, 
and more broadly between the countries themselves, which has been made 
possible by the ATPA/ATPDEA, and will be enshrined by the PTPA will 
provide stability to the hemisphere based on the common principles 
shared by the U.S. and Peru, such as freedom and democracy, upon which 
fair and prosperous societies are based.
    The ATPA/ATPDEA has brought significant benefits to the United 
States--progress in the ``war on drugs,'' benefits to U.S. consumers of 
imports from Peru and segments of the U.S. economy from distribution 
and manufacturing--as well as to Peruvian economy in general and to the 
apparel sector in particular. If the ATPDEA is allowed to lapse after 
December 31, 2006 with the PTPA in its place, the benefits that 
currently flow to both the Peruvian and U.S. economies from this 
program would lapse as well.
    Exporamerica is pleased that the United States has negotiated a 
free trade agreement with Peru that subject to the rules of origin 
would provide duty-free treatment to imports from Peru. However, it is 
not at all clear whether this agreement will be fully implemented until 
January 1, 2007. For this reason, Exporamerica urges prompt 
consideration and approval by the U.S. Congress of the PTPA, and looks 
forward to working with this body to achieve this objective.

[GRAPHIC] [TIFF OMITTED] T1576A.023

[GRAPHIC] [TIFF OMITTED] T1576A.024

                                 

            Statement of Albert Gavalis, New York, New York
    My interest as an individual public witness rests in my 17+ years 
of marriage to my Peruvian-born wife (whose birthday was recently at 
the end of June)_happy birthday honey! I have NO ``direct'' clients, 
persons, and/or organizations on whose behalf I appear as witness 
OTHER-THAN my wife, Luz Lorena Paredes-Melgarejo-Valenzuela-Gavalis and 
her INDIRECT-LINEAGE, and ``tangential'' FAMILIAL-ASSOCIATION which 
REGIONALLY dates-back 10,000+ years(!).
    I am currently a tax-attorney with Graf Repetti & Co., LLP--
Certified Public Accountants and Business Advisors located in the 
Grace-building, NYC. I have a BA in Fine Arts Magna Cum Laude, 
University of Maryland, an MBA in accounting and finance, Fordham 
University, and a JD in law and postmodern jurisprudence, Brooklyn Law 
School. I am an actively licensed CPA in Maryland and a licensed 
attorney in New York State.

DYNASTIC v. FREE MARKET ECONOMICS--Peru & U.S. Trade
    A market system has not worked in terms of poor people,'' investor 
and now philanthropist Warren Buffett said in his Monday night, June 
26, 2006 interview on the PBS Charlie Rose show. As he gave-away 
$30+Billion to the Bill & Melinda Gates Foundation, he also expressed 
general disagreement with a system of ``Dynastic'' wealth, where wealth 
is passed on through heirs instead of merit or need.
    Peru, a country with extremes of wealth and poverty, is a country 
still entrenched in a system of Dynastic economics including ``ruling-
families'' such as Paredes (pa-ray-days), Miroquesadas (mee-row-kay-
saa-daas), and others--where from the poorest to the wealthiest, one's 
``named'' association with a particular ruling family establishes an 
economic and political enclave of survival.
    The existing and continued efforts by the U.S. in this area will 
produce positive results in the ongoing and continued process of a free 
market economy in peru--overcoming centuries-old recidivistic dynastic 
rein. Continued access to and exchange between the individuous 
economies of U.S. and Peru will open Adam Smith's ``invisible-hand'' to 
correct economic, and oftentimes politically related, injustices in 
that region.
    Buffett [has also previously] pointed out that the World Bank and 
others force countries to accept market reforms, while European and 
North American (and Japan, Australia, . . .) countries maintain huge 
agricultural subsidies. Furthermore, multinational agribusinesses have 
used what could charitably be described as questionable practices to 
obtain land and operational rights in many developing countries. As a 
consequence, people who should be able to both feed themselves and 
export their crops for cash are unable to do either. They end up as 
single crop cultivators getting by on subsistence payments. Because the 
markets are rigged against them and they don't have the power to change 
that fact.\1\
---------------------------------------------------------------------------
    \1\ http://www.freakonomics.com/blog/2006/06/27/warren-buffet-
swats-the-invisible-hand/#comments``anonymous''#10.mathking
---------------------------------------------------------------------------
    The truly poor are not poor because market economies don't work; 
they are poor because their governments don't support rule of law, 
property rights, and free markets.\2\
---------------------------------------------------------------------------
    \2\ Id. at ``anonymous''#14.bozo
    \3\ Freakonomics website www.freakonomics.com of Steven D. Levitt 
and co-author Stephen J. Dubner of the book Freakonomics_A Rogue 
Economist Explores the Hidden Side of Everything
---------------------------------------------------------------------------
    With the advent of the proposals today, Peru will be assisted in 
overcoming political and economic injustices to be a stronger 
government able to continue to support a free market countervailing 
recidivistic and collusionistic Dynastic-based economics.

                                 

   Statement of Barry E. Johnson, Greater Miami Chamber of Commerce, 
                             Miami, Florida

    On behalf of the Greater Miami Chamber of Commerce, I would like to 
state our organization's support for implementation of the U.S.-PERU 
TRADE PROMOTION AGREEMENT (PTPA) by way of submitting this document as 
written testimony to the hearing record for the House Committee on Ways 
and Means.
    In terms of background, with close to 2,000 South Florida 
businesses and nearly 5,000 members the Greater Miami Chamber of 
Commerce (GMCC) is organized to create economic progress for the entire 
region. GMCC is the largest regional chamber of commerce in Florida and 
one of the largest metropolitan chambers in the United States. We 
actively work to strengthen Greater Miami's competitive position as the 
Gateway to the Americas.
    For nearly one hundred years, the Greater Miami Chamber of Commerce 
has championed international business and trade throughout the State of 
Florida. Being keenly interested in the economic issues which affect 
our community, we view the ratification of PTPA as a generator of 
economic opportunities through increased trade flows and jobs, while 
supporting the U.S. foreign policy objectives of strengthening 
democracy in the Americas.
    Peru is a significant market for the State of Florida, accounting 
for $1,366.8 million in total bilateral merchandise trade for 2005 of 
which $879.9 million is in exports. The PTPA will create significant 
new opportunities for U.S. exports by adjusting our trade relationship 
with Peru from one based on unilateral trade preferences to one with 
reciprocal market access.
    The Greater Miami Chamber of Commerce appreciates this opportunity 
to share our strong support for PTPA. We believe that free trade is 
essential for continued U.S. economic growth and success. We thank you 
for your thoughtful consideration of this letter and of this important 
issue.

                                 

             Statement of Grocery Manufacturers Association

    The Grocery Manufacturers Association (GMA) appreciates the 
opportunity to provide the following testimony before the Committee on 
Ways and Means in support of the U.S.-Peru Trade Promotion Agreement 
(PTPA). GMA is the world's largest association of food, beverage and 
consumer product companies. With U.S. sales of more than $680 billion 
dollars, GMA member companies employ more than 2.5 million workers in 
all 50 states.
    GMA strongly supports the PTPA and urges swift approval of the 
agreement by Congress. Peru's economy is one of the most vibrant in 
Latin America, with strong GDP growth fueled by mining and 
construction. According to USDA, Lima is a major market for consumer 
oriented foods. Supermarkets are expanding, creating new opportunities 
for U.S. exports of snack foods, cheese and juices. The PTPA will 
enhance these opportunities by eliminating tariff and non-tariff 
barriers that currently hamper exports of U.S. food and consumer 
products to Peru.

Export Opportunities
    Food, beverage and consumer products currently face an average 
import tariff ranging from twelve and twenty five percent. In addition, 
certain processed food products like cheese face an additional variable 
levy or price band on top of the 25 percent tariff. Under the terms of 
the PTPA, more than two-thirds of food and agricultural products and 
eighty percent of consumer products will receive immediate duty free 
treatment. This includes key export categories like cookies, breakfast 
cereals and pasta. In addition, Peru has agreed to use transitional 
tariff-rate quotas as a means to phase out their price band system.

Import Opportunities
    GMA is pleased that the PTPA is a comprehensive agreement with 
market access commitments for all sectors. We commend the 
Administration for making permanent the Andean Trade Preference Act 
benefits for Peru. Many GMA members benefit from these commitments 
through access to duty-free imports of seasonal vegetables.
    GMA is also pleased that sugar was included in the agreement. We 
are disappointed, however, that sugar was again singled out for special 
treatment in the FTA. Sugar is the only commodity where the prohibitive 
over quota duty will not be reduced, and the amount of sugar access 
provided barely exceeds the minimum boat load. In addition, the 
Administration again included the ill-conceived ``sugar compensation 
mechanism'' in the agreement. This provision actually authorizes the 
U.S. government to pay Peruvian sugar growers not to ship sugar into 
the United States should imports be perceived as destabilizing the U.S. 
sugar program. GMA questions whether USTR would accept such provisions 
were they to be applied against U.S. exports, such as rice or beef in 
the Korean-U.S. FTA. The compensation mechanism is antithetical to the 
notion of open trade and should be excluded from future agreements.

Additional Benefits of the FTA
    As important as the market access provisions of the PTPA are to the 
U.S. food and consumer products industry, the real, long-term benefits 
of the FTA will come from the adoption of new rules that will lead to a 
stronger, more predictable business climate in the region. Enhanced 
intellectual property and investor protections will lead to better 
protections for trademarks and a more secure business environment that 
are essential to increased sales of branded products.
    In the area of intellectual property rights, the agreement goes 
beyond current protections for trademarks to apply the principle of 
``first-in-time, first-in-right'' to all products, including those that 
may contain a place (geographical) name. This means that the first 
company to file for a trademark is granted the exclusive right to that 
name, phrase or geographical place name. This agreement sets an 
important precedent that GMA hopes to replicate regionally and globally 
in order to fight the European Union's approach to geographical 
indications. Under EU law geographical indications (Parmesan, cheddar, 
pilsner) are given priority to trademarks and may cancel protections 
for brands. GMA is fighting this approach in the World Trade 
Organization and believes that the U.S.-PTPA establishes an important 
legal precedent that could serve as a model in these discussions.

Conclusion
    GMA strongly supports the free trade agreement with Peru. We expect 
that U.S. food and consumer product companies will realize significant 
gains from the export and import opportunities provided by the 
agreement. We are hopeful that this agreement will represent the first 
step towards a fully integrated Hemisphere that will allow for 
economies of scale and rationalization of production throughout North 
and South America.
    GMA thanks the Committee for the opportunity to present our views 
at this hearing.

                                 

              Statement of National Pork Producers Council

    Mr. Chairman, Mr. Ranking Member and Members of the Committee:
    The National Pork Producers Council is a national association 
representing 44 affiliated states that annually generate approximately 
$14.35 billion in farm gate sales. The U.S. pork industry supports an 
estimated 566,000 domestic jobs and generates more than $84 billion 
annually in total U.S. economic activity.
    Pork is the world's meat of choice. Pork represents 43 percent of 
total world meat consumption. (Beef and poultry each represent less 
than 30 percent of daily global meat protein intake.) As the world 
moves from grain based diets to meat based diets, U.S. exports of safe, 
high-quality and affordable pork will increase because economic and 
environmental factors dictate that pork be produced largely in grain 
surplus areas and, for the most part, imported in grain deficit areas. 
However, the extent of the increase in global pork trade--and the lower 
consumer prices in importing nations and the higher quality products 
associated with such trade--will depend substantially on continued 
agricultural trade liberalization.

PORK PRODUCERS ARE BENEFITING FROM PAST TRADE AGREEMENTS
    In 2005 U.S. pork exports set another record. Pork exports totaled 
1,157,689 Metric Tons valued at $2.6 billion, an increase of 13 percent 
by volume and 18 percent by value over 2004 exports. U.S. exports of 
pork and pork products have increased by more than 389 percent in 
volume terms and more than 361 percent in value terms since the 
implementation of the NAFTA in 1994 and the Uruguay Round Agreement in 
1995. Total exports increased every year in this period and set a 
record in 2005 for the 15th straight year.

[GRAPHIC] [TIFF OMITTED] T1576A.025

    The following 8 export markets in 2005 are all markets in which 
pork exports have soared because of recent trade agreements.
Mexico
    In 2005 U.S. pork exports to Mexico totaled 331,488 metric tons 
valued at $514 million. Without the NAFTA, there is no way that U.S. 
exports of pork and pork products to Mexico could have reached such 
heights. In 2005, Mexico was the number two market for U.S. pork 
exports by volume and value. U.S. pork exports have increased by 248 
percent in volume terms and 358 percent in value terms since the 
implementation of the NAFTA growing from 1993 (the last year before the 
NAFTA was implemented), when exports to Mexico totaled 95,345 metric 
tons valued at $112 million.

[GRAPHIC] [TIFF OMITTED] T1576A.026

Japan
    Thanks to a bilateral agreement with Japan on pork that became part 
of the Uruguay Round, U.S. pork exports to Japan have soared. In 2005, 
U.S. pork exports to Japan reached 353,928 metric tons valued at just 
over $1 billion. Japan remains the top value foreign market for U.S. 
pork. U.S. pork exports to Japan have increased by 322 percent in 
volume terms and by 191 percent in value terms since the implementation 
of the Uruguay Round.

[GRAPHIC] [TIFF OMITTED] T1576A.027

Canada
    U.S. pork exports to Canada have increased by 1,816 percent in 
volume terms and by 2,422 percent in value terms since the 
implementation of the U.S.-Canada Free Trade Agreement in 1989. In 2005 
U.S. pork exports to Canada increased to 130,581 metric tons valued at 
$396 million.

[GRAPHIC] [TIFF OMITTED] T1576A.028

China
     U.S. exports of pork and pork products to China increased 22 
percent in value terms and 16 percent in volume terms in 2005 versus 
2004, totaling $111 million and 92,255 metric tons. U.S. pork exports 
have exploded because of the increased access resulting from China's 
accession to the World Trade Organization. Since China implemented its 
WTO commitments on pork, U.S. pork exports have increased 60 percent in 
volume terms and 67 percent in value terms.

[GRAPHIC] [TIFF OMITTED] T1576A.029

Republic of Korea
    U.S. pork exports to Korea have increased as a result of 
concessions made by Korea in the Uruguay Round. In 2005 exports climbed 
to 71,856 metric tons valued at $155 million, an increase of 1,425 
percent by volume and 1,705 percent by value since implementation of 
the Uruguay Round.

[GRAPHIC] [TIFF OMITTED] T1576A.030

Russia
    U.S. exports of pork and pork products to Russia increased 48 
percent in volume terms and 71 percent in value terms in 2005 versus 
2004, totaling 40,315 metric tons valued at $72 million. U.S. pork 
exports to Russia have increased largely due to the establishment of 
U.S.-only pork quotas established by Russia as part of its preparation 
to join the World Trade Organization. The spike in U.S. pork export to 
Russia in the late 1990s was due to pork shipped as food aid.

[GRAPHIC] [TIFF OMITTED] T1576A.031

Taiwan
    In 2005, U.S. exports of pork and pork products to Taiwan increased 
to 24,555 metric tons valued at $41 million. U.S. pork exports to 
Taiwan have grown sharply because of the increased access resulting 
from Taiwan's accession to the World Trade Organization. Since Taiwan 
implemented its WTO commitments on pork, U.S. pork exports have 
increased 94 percent in volume terms and 132 percent in value terms.

[GRAPHIC] [TIFF OMITTED] T1576A.032

Australia
    The U.S. pork industry did not gain access to Australia until 
recently, thanks to the U.S.-Australia FTA. U.S. pork exports to 
Australia exploded in 2005 making Australia one of the top export 
destinations for U.S. pork. Even with the disruption caused by a legal 
case over Australia's risk assessment of pork imports, U.S. pork 
exports to Australia in 2005 totaled $60 million--a 463 percent 
increase over 2004 exports.

[GRAPHIC] [TIFF OMITTED] T1576A.033

Impact of Pork Exports on Prices
    The Center for Agriculture and Rural Development (CARD) at Iowa 
State University has calculated that in 2004, U.S. pork prices were 
$33.60 per hog higher than they would have been in the absence of 
exports.
Impact of Pork Exports on Jobs
    The USDA has reported that U.S. meat exports have generated 200,000 
additional jobs and that this number has increased by 20,000 to 30,000 
jobs per year as exports have grown.

Impact of Pork Exports on Economy
    The U.S. Bureau of Economic Analysis (BEA) has calculated that for 
every $1 of income or output in the U.S. pork industry, an additional 
$3.113 is generated in the rest of the economy. The USDA has reported 
that the income multiplier from meat exports is 54% greater than the 
income multiplier from bulk grain exports.

Impact of Pork Exports on Feed Grain and Soybean Industries
    Pork production is a major user of U.S. feed grains and oilseeds. 
U.S. hog slaughter in 2005 consisted of 100.807 million head of U.S.-
fed pigs and 2.774 million head of pigs fed in Canada and imported into 
the U.S. for slaughter. The U.S.-fed pigs consumed an estimated 1.062 
billion bushels of corn, 105.8 million bushels of other feed grains 
such as barley, grain sorghum and wheat and the soybean meal from 418 
million bushels of soybeans.
    U.S. pork exports in 2005 accounted for 12.5% of total U.S. pork 
production. This implies that 136.3 million bushels of corn and the 
soybean meal from 52.2 million bushels of soybean were exported in the 
form of pork from U.S.-fed pigs.

CONGRESS NEEDS TO PASS PTPA
    The Peru Trade Promotion Agreement, when implemented, will create 
important new opportunities for U.S. pork producers. U.S. pork exports 
to Peru currently are restricted by duties as high as 25 percent. 
However, PTPA, if implemented, will establish immediate tariff 
reductions on all pork products. Some pork products will receive 
unlimited duty free access upon implementation of the agreement. 
Tariffs on most pork items will be phased out within five years. All 
pork tariffs will be completely phased out in ten years.
    In addition to the favorable market access provisions, significant 
sanitary and technical issues have been resolved. By a letter dated 
January 5, 2006 the Peruvian government confirmed that it shall 
recognize the meat inspection system of the United States as equivalent 
to its own meat inspection system. The aggressive market access 
provisions coupled with the agreement on equivalence make the Peru 
agreement a state of the art agreement for pork producers to which all 
future FTAs will be compared.
    Live hog prices are positively impacted by the introduction of new 
export markets. Recent price strength in U.S. pork markets is directly 
related to increased U.S. pork exports. Mexico continues to be a strong 
and growing export market for U.S. pork. The same competitive advantage 
that has resulted in expanded U.S. pork exports to Mexico will also 
facilitate an expansion of U.S. pork exports to 28 million new 
consumers in Peru.
    The most important impact of this agreement is the income growth 
that accompanies free trade. Most consumers in Peru currently are at an 
income level that does not allow them to consume meat on a regular 
basis. Prosperity created by a free trade agreement will create 
millions of new customers for U.S. meat and other agricultural 
products.
    According to Iowa State University economist Dermot Hayes, the Peru 
agreement, when fully implemented, will cause hog prices to be 83 cents 
higher than would otherwise have been the case. That means that the 
profits of the average U.S. pork producer will expand by 7 percent.
    Much of the growth in U.S. pork exports is directly attributable to 
new and expanded market access. However, as the benefits from the 
Uruguay Round and NAFTA begin to diminish due to the fact that benefits 
from these agreements are now fully phased-in, the creation of new 
export opportunities becomes increasingly important. PTPA is an 
important part of this process and will bring real benefits to U.S. 
pork producers.

                                 

      Written Statement on Behalf of Peruvian Asparagus Importers 
                 Association, Drexel Hill, Pennsylvania
    This statement is submitted on behalf of the Peruvian Asparagus 
Importers Association (PAIA). PAIA is a not-for-profit association of 
24 U.S. companies that earn a living by importing fresh asparagus from 
Peru.\1\ PAIA presented testimony at the public hearing conducted by 
the International Trade Commission (ITC) on March 15, 2006 in 
connection with its investigation regarding the Peru Trade Promotion 
Agreement (PTPA).
---------------------------------------------------------------------------
    \1\ The member-companies of PAIA are: Altar Produce Inc.; Alpine 
Fresh; AYCO Farms Inc.; Chestnut Hills Farm--Bounty Fresh; CarbAmericas 
Inc.; Central American Produce Inc.; Crystal Valley Foods; Dole Fresh 
Vegetables Inc.; Fru-Veg Marketing Inc.; Globalex Inc.; Gourmet Trading 
Company; Growers Express LLC; Jacobs Malcolm & Burtt; North Bay 
Produce; Pro-Act LLC; Rosemont Farms Corporation; Southern Specialties; 
Team Produce International; Triton International; United Fresh 
International; AL-FLEX Exterminators; Customized Brokers; Hellmann 
Perishable Logistics; The Perishable Specialist, Inc.; and YesFresh, 
LLC.
---------------------------------------------------------------------------
I. The Peru TPA would continue favorable economic trends begun under 
        the ATPA for both the United States and Peru
    PAIA's particular area of interest in the context of trade between 
the U.S. and Peru is imports of fresh asparagus from Peru. Under the 
ATPA and its successor, the Andean Trade Promotion and Drug Eradication 
Act (ATPDEA), imports of fresh asparagus from Peru have been accorded 
duty-free treatment since 1992.\2\ PAIA strongly supports the actions 
of U.S. and Peruvian negotiators to maintain this duty-free treatment 
for imports of fresh asparagus under the terms of the PTPA. The duty-
free treatment accorded to imports of fresh asparagus from Peru since 
1992 has resulted in pronounced economic benefits to U.S. consumers, 
U.S. importing companies, U.S. distributors, U.S. transportation 
companies, the many other companies in the domestic commercial chain, 
the Peruvian economy, and the thousands of people in Peru whose 
livelihood is dependent on trade with the United States. However, if 
the PTPA is not approved by Congress, or is implemented sometime after 
January 1, 2007, and the ATPDEA is not renewed in the interim, this 
will surely result in discernible economic harm to both the United 
States and Peruvian economies.
---------------------------------------------------------------------------
    \2\ The ATPDEA is currently scheduled to expire as of December 31, 
2006. Imports of fresh or chilled asparagus from Peru are not currently 
subject to duty-free treatment under the Generalized System of 
Preferences.
---------------------------------------------------------------------------
    Peru is the world's largest exporter of asparagus,\3\ and that crop 
stands squarely at the heart of a dynamic agroexport sector in Peru.\4\ 
As the ITC has noted in prior reports, asparagus is a perennial crop 
that requires substantial long-term investment. Peru's exceptional 
climate conditions, its favorable geographic location, and the advances 
made by Peru in its management of water supply for irrigation, has 
enabled the country to achieve the highest asparagus crop yields in the 
world.\5\ ``Peru is one of only a few countries whose favorable climate 
enables it to produce asparagus year round.'' \6\ In turn, the 
asparagus-growing industry in Peru is estimated to employ nearly 60,000 
people,\7\ and has enabled regions of the country--such as Ica and La 
Libertad--to become models of economic development and engines of job 
creation. Of these sixty thousand jobs, roughly half are held by women, 
the primary breadwinners in many Peruvian households. The trickle down 
effects of this industry on tens of thousands of Peruvians and their 
families are helping to reduce poverty and raise living standards. The 
Asociacion de Gremios Productores y Agroexportadores del Peru (AGAP) 
(the umbrella organization for Peru's agricultural producers and 
exporters) estimates that the Peruvian agroexport chain as a whole has 
generated 600,000 jobs, three times more than were generated in 
traditional agriculture sectors.\8\
---------------------------------------------------------------------------
    \3\ World Horticultural Trade & U.S. Export Opportunities: World 
Asparagus Situation & Outlook, Foreign Agricultural Service, U.S. 
Department of Agriculture (August 2005) at 1 (data provided for 2004). 
The United States ``is Peru's top market, accounting for 75 percent of 
Peru's fresh asparagus exports in 2004.'' Id. at 3
    \4\ World Horticultural Trade & U.S. Export Opportunities: World 
Asparagus Situation & Outlook, Foreign Agricultural Service, U.S. 
Department of Agriculture (July 2004) at 2 (``In 2003, asparagus became 
Peru's leading agricultural export, valued at a record $206 million, 
bumping coffee to second place.'').
    \5\ The Impact of the Andean Trade Preference Act: Eleventh Report 
2004, Inv. No. 332-352, USITC Pub. 3803 (September 2005) at 2-20.
    \6\ Id.
    \7\ Id. at 3-14.
    \8\ See Improving Competitiveness and Market Access for 
Agricultural Exports Through the Development and Application of Food 
Safety and Quality Standards: The Example of Peruvian Asparagus, A 
Report by the Agricultural Health and Food Safety Program of the Inter-
American Institute for Cooperation on Agriculture (IICA), Tim M. 
O'Brien and Alejandra Diaz Rodriguez (July 2004) at 4-5.
    AGAP discussed this finding in a report that it presented earlier 
this year to the Technical Working Group for the PTPA from the 
Congressional Agricultural Commission in Peru. AGAP's president, Felipe 
Llona Malaga, explained that the high level of employment generated in 
the agroexport sector is concentrated in crops including asparagus, 
artichokes, paprika, onions, grapes, and garlic, particularly in the 
provinces of Lima, Ica, Piura, La Libertad, and others.
---------------------------------------------------------------------------
    According to U.S. Customs, in the past two years, U.S. imports of 
fresh asparagus from Peru had a value of between $100 and $110 million. 
That is a significant amount of foreign exchange earnings for a country 
with a gross domestic product of only $67.1 billion, and with a per 
capita GDP of only $2,777 per year.\9\ Under the ATPA, asparagus 
imports grew by about five times from $31 million to $232 million 
between 1990 and 2005. The success of Peru's agroexport industry in 
general, and the asparagus industry specifically, over the past decade 
is one of the signal achievements of the ATPA in that it has effected 
the creation of high-value marketable agricultural businesses at the 
expense of illegal coca cultivation. In its most recent report on the 
impact of the ATPA, the ITC noted that net coca cultivation decreased 
dramatically, from 115,300 hectares in 1995 to 27,500 hectares in 
2004.\10\
---------------------------------------------------------------------------
    \9\ See Background Note: Peru, U.S. Department of State (December 
2005), http://www.state.gov/r/pa/ei/bgn/35762.htm (last visited March 
22, 2006). Peru's asparagus exports are forecast to increase by an 
additional 3 percent in 2006. World Horticultural Trade & U.S. Export 
Opportunities: World Asparagus Situation & Outlook, Foreign 
Agricultural Service, U.S. Department of Agriculture (August 2005) at 3
    \10\ The Impact of the Andean Trade Preference Act: Eleventh Report 
2004, USITC Pub. 3803 at 4-14.
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II. Economic Benefits of the U.S.-Peru Trade in Asparagus
    While the Peruvian asparagus industry has created tangible economic 
benefits in that country, the U.S. has also derived a significant 
economic benefit from this trade. The vast majority of the value chain 
generated by sales of Peruvian asparagus in this market remains in this 
country. For example, in 2003, the value chain for imports of fresh 
asparagus from Peru was worth approximately $300 million. Of that 
total, approximately 70 percent remained in U.S. hands, including air, 
sea and land carriers, importers, ports, storage facilities, 
distributors, wholesalers and retailers. In other words, for every 
dollar spent by a U.S. consumer on fresh asparagus imported from Peru, 
70 cents remains in the U.S. Moreover, even of the 30 percent that 
reverts back to the country-of-origin, a substantial portion is spent 
on U.S. inputs such as seeds and fertilizers.\11\
---------------------------------------------------------------------------
    \11\ Transcript of hearing before the United States International 
Trade Commission: In the Matter of: U.S.-Peru Trade Promotion 
Agreement: Potential Economywide and Selected Sectoral Effects, 
Investigation No. TA-2104-20 (March 15, 2006) at 33-35 (hereafter ``Tr. 
at ------'') (testimony of John-Campbell Barmmer).
    For example, in 2003 (the last full year for which the complete set 
of following data are available), the fob value of Peruvian fresh 
asparagus exports to the U.S. was approximately $78.5 million. The 
comparable cif value was $132.7 million. The value that accrued to 
importers was approximately $20 million, while the value that accrued 
to wholesalers and retailers was approximately $90 million. In 
addition, other value-added in the U.S. (e.g., for storage, fumigation, 
etc.) totaled approximately $15 million. These sub-totals sum to $258 
million, which represents the approximate retail value of fresh 
asparagus imports from Peru sold off the U.S. supermarket shelves. In 
other words, approximately 30 percent of that end-value ($78.5 million 
out of $258 million) remains in Peruvian hands, while the remainder 
($179.5 million out of $258 million) remains here in the United States.
    Sources: Aduanas (National Customs Superintendancy of Peru); U.S. 
International Trade Commission Trade DataWeb; estimates by APOYO 
Consultoria, and the Instituto Peruano del Esp1rrago y Hortalizas 
(IPEH).
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    In addition, imports of fresh asparagus from Peru fuel job creation 
in the United States. PAIA estimates that aside from the several 
hundred persons employed or indirectly involved in the process of 
importing fresh asparagus imports from Peru, these imports result 
directly or indirectly in the creation of at least 5,000U.S.jobs in 
companies throughout the commercial chain.
III. Peruvian Asparagus Imports are Counterseasonal to U.S. Asparagus 
        Production
    Imports of fresh asparagus from Peru also serve a U.S. market 
demand that cannot be met by domestic growers alone. The most important 
factor here is that imports of fresh asparagus from Peru are largely 
counter-seasonal to the U.S. crop. As the ITC has noted, historically, 
the season for U.S. production has differed somewhat from that of most 
imports from ATPA countries, with the bulk of fresh asparagus imports 
from ATPA countries entered during July through the following January 
when overall U.S. production is low.\12\
---------------------------------------------------------------------------
    \12\ The Impact of the Andean Trade Preference Act: Eleventh Report 
2004, USITC Pub. 3803 at 3-12.
---------------------------------------------------------------------------
    According to official U.S. import statistics for 2005, 85 percent 
of total fresh asparagus imports from Peru entered the United States 
during the months of July through January; only 15 percent entered 
during the remainder of the year (February through June). In contrast, 
the peak production period for U.S.-grown fresh asparagus is February 
through June; therefore, all or nearly all U.S. production occurs 
during a period when the level of imports from Peru is minimal.
    This is not to say that there are no imports of fresh asparagus 
from Peru present in the U.S. market during the peak production period 
for the U.S. crop; as referenced above, imports of Peru during the 
February--June period represent 15 percent of total annual imports from 
that country, or approximately 9,794 net tons (2005 data). However, 
even in this period, imports from Peru largely complement, rather than 
supplant, the U.S. crop. The vast majority of fresh asparagus imports 
from Peru enter the United States through the Port of Miami,\13\ and 
are sold primarily in East Coast markets. Because of the distances 
involved and the high costs for transportation, most of the fresh 
asparagus produced in California and Washington are sold in West Coast 
and Southwest markets.
---------------------------------------------------------------------------
    \13\ In 2005, 89 percent of imports of fresh asparagus from Peru 
entered the U.S. through the Port of Miami. Source: U.S. International 
Trade Commission Trade DataWeb (subheadings 0709.20.1000 and 
0709.20.9000, HTSUS), by quantity.
---------------------------------------------------------------------------
    Therefore, even to the extent that there is some degree of overlap 
between the U.S. production period and imports from Peru, direct 
competition between these sources is reduced. Most of the imports from 
Peru that enter the United States during the February through June 
period are marketed in the East Coast and southeast United States 
regions. Indeed, the advent of year-round availability of fresh 
asparagus from Peru has allowed U.S. consumers in large geographic 
portions of the country to gain access to this product at times when 
supply would simply not exist from U.S. growers. This is one reason why 
per capita consumption of asparagus in the United States has doubled in 
the last decade alone, exceeding the rate of growth exhibited by nearly 
all other fruits and vegetables. As the ITC recently stated, the impact 
of ATPA on U.S. consumers has been significant in that imports of 
Peruvian fresh-market asparagus, together with Mexican exports and U.S. 
production, have resulted in greater availability of fresh asparagus 
throughout the year. This extended availability of fresh-market 
asparagus, together with the overall consumer awareness of, and 
preference for, healthy foods, may be partly responsible for higher per 
capita annual consumption of fresh asparagus in recent years.\14\
---------------------------------------------------------------------------
    \14\ The Impact of the Andean Trade Preference Act: Eleventh Report 
2004, USITC Pub. 3803 at 3-12-14.
---------------------------------------------------------------------------
    Notwithstanding the seasonality and regionality aspects of supply 
and consumption discussed above, the fundamental fact is that since at 
least 1998, U.S. consumption of fresh asparagus has outpaced U.S. 
supply.\15\ Imports are necessary to meet demand in the United States. 
In the absence of import sources--meaning, specifically, imports from 
Peru and Mexico--domestic production would be woefully inadequate to 
meet U.S. consumer demand. This would inevitably lead to a jump in 
prices, to the detriment of U.S. consumers, and eventually a drop in 
consumption, to the detriment of U.S. producers. While domestic 
production of fresh asparagus may have declined in recent years,\16\ 
the decline would surely accelerate in coming years in the absence of 
reliable import supply.
---------------------------------------------------------------------------
    \15\ Total imports accounted for approximately 60 percent of the 
U.S. market for fresh asparagus in 2004. U.S. imports from Peru 
accounted for approximately 60 percent of total imports in 2004, as 
well. See also U.S. Department of Agriculture FATUS data (http://
www.fas.usda.gov/ustrade/). Consequently, Peru's share of the U.S. 
market was about 36 percent (compared to about 40 percent accounted for 
by domestic production).
    Indeed, the quantity of domestic production in 2004 was 
approximately 87,000 net tons, which exceeded the volume of imports 
from Peru that year (61,123 net tons) by 42 percent. About one-fourth 
of domestic production, or approximately 22,000 net tons, was exported.
    \16\ According to the Commission's most recent report on the impact 
of the ATPA, domestic production of fresh asparagus declined 4 percent 
from 2003 to 2004, from 119.4 million pounds to 115 million pounds. 
However, the value of domestic production increased by 10 percent over 
that period, from $136.7 million to 150.4 million. The Impact of the 
Andean Trade Preference Act: Eleventh Report 2004, USITC Pub. 3803 at 
3-12.
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IV. Asparagus and Other Agroexports as a Weapon Against Narcoterrorism
    The intention of the ATPA was to spur the development of 
alternative industries to assist Peru and other Andean countries in the 
``War Against Drugs'' and the struggle against guerrillas and terrorist 
organizations dependent on the illegal coca trade for funding. In this 
regard, the program has succeeded. Thanks to the ATPA and the vision of 
U.S. policymakers, the Peruvian asparagus and a number of other 
industries were able to blossom starting in the early 1990's. These 
industries have helped Peru to sustain some of the highest growth rates 
in Latin America, have provided employment for hundreds of thousands of 
Peruvians, and have helped reduce poverty levels. Just recently, for 
example, the Peruvian Prime Minister, Pedro Pablo Kuczynski announced 
that extreme poverty has been reduced from 24% to 18% between 2001 and 
2005. It is estimated that nearly 1 million jobs in Peru are dependent 
on trade with the United States, most of which is covered by the ATPA 
program.
    As stated earlier the Peruvian agro-export chain has generated 
approximately 600,000 jobs. 10%, or 60,000 of these jobs are held by 
workers in Peru's asparagus industry. The Peruvian Asparagus and 
Vegetables Institute (IPEH) estimates that nearly 40% of the workers in 
the asparagus industry come from areas that formerly supplied workers 
to illegal coca cultivation. Asparagus has been a model for other 
agroexport industries and their growth is having a multiplier effect in 
terms of their impact on trade, job creation in both countries, reduced 
illegal coca cultivation, and reduction of poverty in Peru. Peru's 
paprika industry, for example, has enjoyed export growth of 88% from 
2004 to 2005, making Peru now the top world exporter of paprika, an 
industry which employs 15,000 Peruvians. Another successful example is 
the Peruvian artichoke industry, which has increased exports by 100% 
from 2004 to 2005, and also employs about 15,000 workers.
    It is clear, therefore, that the ATPA spurred industries such as 
asparagus have had a positive impact in the war against drugs in Peru. 
As noted earlier, coinciding with the rise of asparagus and other 
agroexport industries, from 1995 to 2004, the ITC reported that coca 
cultivation has decreased dramatically, from 115,300 hectares to 27,500 
ha in 2004. This has helped to reduce the presence of drugs in U.S. 
communities. In a related event, Peru successfully confronted and 
nearly eliminated the terrorist threat constituted by the radical 
Shining Path narcoterrorist organization during the 1990's, a group 
largely funded by illegal coca production. The PTPA will help 
consolidate these gains against the scourge that the illegal drug trade 
has represented for both countries.
V. Peru TPA and Labor Standards
    In addition to Peru's compliance with ILO's core labor standards 
and the labor rights provided by the country's constitution, the 
asparagus and vegetables industry has implemented best labor practice 
programs (Buenas Practicas Laborales--BPL) to ensure that the industry 
is engaged the creation of a healthy and safe work environment. The 
Peruvian asparagus and vegetables industry is also committed to help 
build schools and health facilities that will contribute to improved 
living standards for their workers, their families, and the rural 
communities where they live.
    The growth of agroexports in Peru has been such that in parts of 
Peru such as Ica and La Libertad there is full-employment year round 
and extreme poverty has been reduced by an astounding 36% comparable to 
levels experienced nationwide by countries such as Chile. Workers in 
these industries make wages of between $5 and $7 per day which is 
considered a good salary by Peruvian standards.
    Peru has ratified 71 ILO conventions, including the eight ``core 
conventions.'' It has been praised multiple times by the ILO for its 
progress in improving labor laws. In addition to all of the ILO's Core 
Labor Rights Conventions, the PTPA's labor standards exceed those of 
five other previously-ratified trade agreements: Jordan, Chile/
Singapore, CAFTA, Bahrain and even the ATPDEA, which does not make ILO 
or national standards mandatory.
    The PTPA goes beyond many other free trade agreements in the 
enforcement of worker rights and dispute resolution. The PTPA-created 
Labor Affairs Council develops public participation in reporting and 
funding to ensure implementation of the agreement and improved 
cooperation and capacity-building mechanisms. Additionally, the PTPA 
holds member countries accountable to effectively enforce existing 
labor laws, under penalty of fines, which are used by the PTPA 
commission to fund projects improving labor right protections. 
Noncompliance results in the formation of an arbitral panel, which may 
fine violating parties up to $15 million per year, and suspend tariff 
benefits to the party complained against if necessary to cover the 
assessment.\17\
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    \17\ Peru Trade Promotion Agreement, Chapter Twenty-One: Dispute 
Settlement.
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VI. Peruvian Asparagus and Environmental Concerns
    Since asparagus cultivation is undertaken almost entirely on 
irrigated desert lands along Peru's coast, the environmental impacts of 
this industry on existing habitats is negligible. In fact, by 
contributing to the successful reduction of coca leaf production in 
biologically sensitive rain forest habitats, the growth of the 
asparagus industry along Peru's arid coast has had, in an indirect 
manner, highly beneficial environmental impacts.
    The growth of the asparagus industry has created a business that is 
a global player and as a result has adopted rigorous international 
standards on environmental management practices and labor standards to 
comply with import requirements in the U.S., the European Union, and 
elsewhere. The Peruvian asparagus industry complies with very exacting 
practices of EUREPGAP and GAP (Good Agricultural Practices) to maintain 
consumer confidence in the quality and safety of its product.
VII. Conclusion
    The duty-free treatment for imports of asparagus from Peru provided 
for in the proposed PTPA will serve a wide range of economic interests 
both in the United States and in Peru. In the United States, a steady, 
year-round demand supply of asparagus enters the U.S. and satisfies the 
increased demand for asparagus in the U.S that domestic production 
cannot meet. Asparagus also accounts for about 5,000 U.S. jobs in 
transportation and distribution.
    In Peru, the asparagus industry, thanks to the duty-free access to 
the U.S. market, has been able to fight extreme poverty by employing at 
higher wages than other Peruvian jobs. Asparagus in Peru has also 
indirectly fought coca production and narcoterrorism by providing an 
alternative source of well-paying employment.
    These great changes could not have been possible without the duty-
free access afforded to Peru in the ATPA and ATPDEA. PTPA is now an 
excellent opportunity to ensure the continued prosperity of these 
industries, and by extension raise living standards in Peru. It is for 
this and the above reasons we urge prompt consideration and approval of 
the PTPA by the Committee, the Full House, and the Congress.

                                 

            Statement of Retail Industry Leaders Association
    The Retail Industry Leaders Association (RILA) welcomes the 
opportunity to submit written comments for the record of this hearing 
on the U.S.-Peru Trade Promotion Agreement (PTPA). RILA strongly 
supports the PTAPA and urges rapid passage of U.S. implementing 
legislation.

RILA and the Retail Sector
    RILA represents the nation's most successful and innovative 
retailer and supplier companies--the leaders of the retail industry. 
Retail is the second largest sector in the U.S. economy, employing 12% 
of the nation's workforce and conducting $3.8 trillion in annual sales. 
RILA's retail and supplier companies operate 100,000 stores, 
manufacturing facilities and distribution centers in every 
congressional district in every state, as well as internationally. They 
pay billions of dollars in federal, state and local taxes and collect 
and remit billions more in sales taxes. They are also leading corporate 
citizens with some of the nation's most far-reaching community outreach 
and corporate social responsibility initiatives.
    The retail sector, along with the suppliers and customers that it 
serves, is an essential part of the U.S. economy. Retailers provide 
good jobs with good benefits, creating opportunities for entry-level 
employment, part-time work, jobs for non-skilled workers, and 
management training. Retailers serve the consumer goods market, an 
essential driver of the U.S. economy; they also serve the global market 
for consumer goods and bring U.S. products to the foreign markets where 
they operate.
    Virtually all of RILA's members, both retailers and suppliers, rely 
on international trade to conduct their businesses. Our members depend 
on imports of both finished consumer products and production inputs for 
merchandise that will eventually be sold at retail. They also seek 
opportunities to expand retail outlets in countries that are open to 
U.S. investment and expand market access for American products.

Benefits of the PTPA
    The PTPA merits strong support and rapid implementation by the 
United States. Putting this agreement into effect will benefit the U.S. 
economy, strengthen freedom and security in our Hemisphere, and promote 
opportunities and efficiencies in the retail/distribution sectors.
    The PTPA will benefit the U.S. economy--producers and consumers 
alike. The PTPA liberalizes conditions for two-way trade between the 
United States and Peru that already exceeds $7 billion annually. U.S. 
exports of farm products, manufactures, and services will all benefit 
significantly. Peru will accord immediate duty-free treatment on 80% of 
its imports of U.S consumer and industrial products and more than two-
thirds of its current imports of U.S. farm products. Additional market-
opening, gradually eliminating all tariffs on U.S. exports to Peru, 
will be phased in subsequently. The Agreement will also provide 
significant market access for U.S. service suppliers, protect U.S. 
firms' intellectual property rights, and establish a more secure and 
predictable legal framework for U.S. investors in Peru.
    The PTPA's impact on U.S. imports from Peru is good news as well. 
Many Peruvian products already enter the United States duty-free under 
the Andean Trade Preferences Program. The preference scheme is 
scheduled to expire in December 2006, however, and in any event 
enshrining this treatment in an international agreement with reciprocal 
obligations will provide added commercial security as well as a firmer 
legal basis under WTO rules. To the extent the FTA liberalizes trade on 
the U.S. side, improving access beyond what has been granted 
unilaterally in the past, this is good news for U.S. consumers--a tax 
cut aimed where it is needed most.
    The PTPA will bolster freedom and security in our Hemisphere. 
Within recent memory, conditions in the Andean region have featured 
chaos, dictators, and armed insurgencies. Today, the region is home to 
fragile democracies that need U.S. support. Elected leaders are 
embracing freedom and economic reform, fighting corruption, and 
supporting U.S. anti-narcotics and anti-terrorism efforts.
    But this positive momentum cannot be taken for granted. Opponents 
of reform in the region remain strong. We believe Chairman Thomas was 
right to emphasize, in announcing this hearing, that the PTPA ``builds 
on our past efforts of granting trade benefits to alleviate poverty and 
eradicate drugs in the region'' and that ``Peru's President-elect 
Garcia is standing up to Cuban President Castro and Venezuelan 
President Chavez in supporting the agreement.''
    By implementing the PTPA, the United States can demonstrate its 
support for freedom, democracy, the rule of law, and economic reform in 
the region, and at the same time can bolster U.S. security. Among other 
things, new economic opportunities will reduce the pressures that help 
produce illegal narcotics activity and illegal immigration.
    The PTPA offers opportunities and efficiencies in the provision of 
retail/distribution services. Commitments accepted by Peru in various 
services sectors, notably including retail/distribution, go beyond WTO 
commitments and promise to dismantle significant barriers. RILA 
anticipates both new opportunities for U.S.-based retailers, and more 
efficient distribution for U.S. companies and products in Peru's 
market.
Improvements Over Time
    No trade agreement is perfect, and as with other agreements, 
experience under the PTPA may reveal opportunities for useful 
adjustments in areas like rules of origin, accelerated tariff phase-
out, etc. Some improvements may require Peru's approval; others may be 
of the type the United States can make unilaterally. The implementing 
legislation should establish a flexible and streamlined framework for 
making such adjustments over time, using available tools such as 
proclamation authority and consultation/layover.

Conclusion
    RILA congratulates the Committee for turning its attention to this 
important agreement, and stands ready to assist as the implementation 
process moves forward. If RILA can be of any assistance to the 
Committee, please contact Lori Denham, Executive Vice President--Public 
Affairs or Allen Thompson, Vice President--Global Supply Chain Policy.

                                  
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