[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]






      CREATING JOBS: ECONOMIC OPPORTUNITIES IN EUROPE AND EURASIA

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


                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON EUROPE AND EURASIA

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 27, 2012

                               __________

                           Serial No. 112-143

                               __________

        Printed for the use of the Committee on Foreign Affairs







Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey--
EDWARD R. ROYCE, California              deceased 3/6/12 deg.
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
RON PAUL, Texas                      ELIOT L. ENGEL, New York
MIKE PENCE, Indiana                  GREGORY W. MEEKS, New York
JOE WILSON, South Carolina           RUSS CARNAHAN, Missouri
CONNIE MACK, Florida                 ALBIO SIRES, New Jersey
JEFF FORTENBERRY, Nebraska           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       DENNIS CARDOZA, California
GUS M. BILIRAKIS, Florida            BEN CHANDLER, Kentucky
JEAN SCHMIDT, Ohio                   BRIAN HIGGINS, New York
BILL JOHNSON, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
DAVID RIVERA, Florida                CHRISTOPHER S. MURPHY, Connecticut
MIKE KELLY, Pennsylvania             FREDERICA WILSON, Florida
TIM GRIFFIN, Arkansas                KAREN BASS, California
TOM MARINO, Pennsylvania             WILLIAM KEATING, Massachusetts
JEFF DUNCAN, South Carolina          DAVID CICILLINE, Rhode Island
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
ROBERT TURNER, New York
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director
                                 ------                                

                   Subcommittee on Europe and Eurasia

                     DAN BURTON, Indiana, Chairman
ELTON GALLEGLY, California           GREGORY W. MEEKS, New York
GUS M. BILIRAKIS, Florida            ELIOT L. ENGEL, New York
TIM GRIFFIN, Arkansas                ALBIO SIRES, New Jersey
TOM MARINO, Pennsylvania             THEODORE E. DEUTCH, Florida
JEAN SCHMIDT, Ohio
TED POE, Texas















                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Robert D. Hormats, Under Secretary, Economic 
  Growth, Energy, and the Environment, U.S. Department of State..     8
Mr. Peter Rashish, Vice President for Europe and Eurasia, U.S. 
  Chamber of Commerce............................................    35
Dan Hamilton, Ph.D., director, Center for Transatlantic 
  Relations, The Paul H. Nitze School of Advanced International 
  Studies, The John Hopkins University...........................    48

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Dan Burton, a Representative in Congress from the 
  State of Indiana, and chairman, Subcommittee on Europe and 
  Eurasia: Prepared statement....................................     3
The Honorable Robert D. Hormats: Prepared statement..............    12
Mr. Peter Rashish: Prepared statement............................    38
Dan Hamilton, Ph.D.: Prepared statement..........................    50

                                APPENDIX

Hearing notice...................................................    74
Hearing minutes..................................................    75
Question submitted for the record by the Honorable Gregory W. 
  Meeks, a Representative in Congress from the State of New York, 
  and response from the Honorable Robert D. Hormats..............    76
Question submitted for the record by the Honorable Gus Bilirakis, 
  a Representative in Congress from the State of Florida, and 
  response from the Honorable Robert D. Hormats..................    77
The Honorable Ted Poe, a Representative in Congress from the 
  State of Texas: Prepared statement.............................    79
The Honorable Dan Burton: Material submitted for the record......    80

 
      CREATING JOBS: ECONOMIC OPPORTUNITIES IN EUROPE AND EURASIA

                              ----------                              


                        TUESDAY, MARCH 27, 2012

                  House of Representatives,
                Subcommittee on Europe and Eurasia,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 o'clock 
p.m., in room 2172 Rayburn House Office Building, Hon. Dan 
Burton (chairman of the subcommittee) presiding.
    Mr. Burton. The subcommittee will come to order. The title 
of today's hearing is Creating Jobs: Economic Opportunities in 
Europe and Eurasia. As I have made clear in the past hearings 
and statements, I am concerned about the state of Europe's 
economy and their financial markets. Giving this concern, you 
may be surprised that I think there is a lot of opportunity in 
Europe.
    Despite the current financial crisis, the combined nations 
of the European Union remain the United States' largest trading 
partner. In addition, Turkey, Russia, Central Asia and emerging 
eastern European markets each present additional opportunities 
for American exporters.
    The national tendency during tough economic and financial 
times is to insulate one's self from the fluctuating global 
markets. To some extent this makes sense. Some European 
countries remain volatile, and I just talked to you about that. 
And thus U.S. investors and exporters should remain cautious. 
However, there are European nations who are weathering the 
crisis and present opportunities for U.S. exporters and 
investors to capitalize upon. My colleague just got here.
    We must not forget that growth is an important component of 
the solution to any economic crisis. The United States 
Government can help its citizens create growth by making it 
easier to do business at home and abroad. For example, a zero 
tariff agreement with the European Union would substantially 
increase the total trade and an enormous jump in our exports to 
Europe.
    It is true that tariffs between the U.S. and our European 
partners are low. However, transatlantic trade is so important 
to economies on both sides of the Atlantic that dropping 
tariffs by just a few percentage points would allow U.S. 
exports to increase by tens of billions of dollars. 
Accordingly, some estimate that we could see upwards of 300,000 
jobs created through just the goods portion of such an 
agreement.
    Opportunities exist outside the European Union as well. 
Russia, my colleague and I are working on that. Russia might 
present one such opportunity. From 2005 to 2010, my fellow 
Hoosiers increased our exports of Russian goods by more than 
two and a half times. Russia is going to join the WTO this 
summer, and the increased trade that Russia's WTO membership 
will allow could support here in the United States, 50,000 new 
jobs within 5 years.
    In the current economic climate we can't ignore such an 
opportunity to create jobs. Boy, that is an understatement. At 
the same time, we must preserve U.S. support for democracy and 
human rights. As I am sure everyone in this room knows, it is 
Congress' decision to graduate Russia from the Jackson-Vanik 
amendment and grant Russia permanent normal trade relations. 
Such action is required in order for U.S. companies to reap the 
benefits of Russia's WTO membership. There is a great deal of 
debate as to what action Congress should take. I am concerned 
about the timing of a repeal and what an alternative to 
Jackson-Vanik would involve.
    However, we must also recognize that Jackson-Vanik is now 
largely symbolic. For almost two decades, the President has 
waived Jackson-Vanik anyhow, and granted Russia normal trade 
relations under the full compliance provision of the amendment. 
Regardless, if Congress decides to graduate Russia from 
Jackson-Vanik, we must maintain our support for democracy and 
human rights through a modern, functional replacement that 
recognizes the current situation in Russia.
    Turkey presents another opportunity for greater economic 
cooperation. Between 2005 and 2010, Turkey's GDP grew an 
average of 4 percent as the country's economy diversified. This 
progress continues. In just a few weeks, Turkey will receive 
final bids for a third bridge connecting Europe and Asia across 
the Bosporus. This project is emblematic of the tens of 
billions of dollars that Turkey is going to invest into 
highways and other infrastructure in the coming years as its 
economy continues to grow and diversify.
    In addition to supporting further economic growth with 
Turkey, such developments will leave Turkey better prepared to 
serve as a gateway for Western companies who wish to do 
business in the Middle East and Central Asia. Unfortunately, we 
are often our own worst enemy when it comes to international 
trade.
    The U.S. must be able to move swiftly and decisively in a 
fast-moving global market. We failed to do so recently. Trade 
deals with Colombia, South Korea and Panama lingered for 
several years. As Congress proved by changing the rules when 
President Bush sent to Congress the Colombia agreement, fast 
track authority is no longer viable. Currently the U.S. is only 
participating in one ongoing negotiation, the Trans-Pacific 
Partnership. The United States is not involved in any of the 26 
regional trade agreements listed by the WTO as being under 
negotiation, and we hope that will change. The people of the 
United States deserve better.
    This government, both the administration and Congress must 
get serious. We must improve this government's capability to 
help business and increase exports. If we can't outpace our 
competitors we cede to them the enormous advantage that comes 
with being the world's largest economic power, and this is just 
not acceptable.
    And now I yield to Mr. Meeks, my ranking Democrat.
    [The prepared statement of Mr. Burton follows:]
    
    
    
                              ----------                              

    Mr. Meeks. Thank you, Chairman Burton. And I think, and I 
am going to do this, I am sure again, but I think that since 
the last hearing that we have had, this is the first time we 
have been here after your announcement that you were not 
seeking reelection. And I just wanted to say for the record 
that I believe your district is going to miss you being here. 
They may see you more because you are there, but they are going 
to miss your representation here.
    I want to go on record to say that you have been a very 
good friend. And it may be a little quieter around here without 
you here, but I am sure that you've contemplated and thought 
about it and you will have time to spend more time with your 
beautiful wife and family and maybe play a little golf or 
something of that nature. But you will be missed around here, 
that is for sure.
    Mr. Burton. Well, I am glad you said that last sentence, 
because you started off saying my constituents would miss me 
but you didn't say you would miss me.
    Mr. Meeks. Yes, I would miss you. But we have still got 
some work to do and some time to spend together, and I look 
forward to doing that.
    And I should also say, Under Secretary, it is always good 
to see you. Always good to see you and I look forward to 
hearing your testimony.
    The central question before us today is, how can we 
leverage our commercial relationship with Europe to create jobs 
in America? Trade and investments plays an important role in 
the U.S. job creation efforts, and our biggest and most 
successful commercial relationship is indeed with Europe. In 
fact, this is the largest and most integrated economic 
relationship between two areas in the world.
    President Obama has committed his administration to 
doubling U.S. exports during his first term, and according to 
recent numbers we are within striking distance of that goal. 
Exports are currently growing at an annual pace of about 16 
percent, and this increase has been one of the central drivers 
of the economic recovery, accounting for about half the 
nation's economic growth since the recession ended. The 
administration has bolstered both domestic and global demand 
and pushed through three long-stalled free trade agreements 
with Panama, Colombia and South Korea last year.
    Commerce is a major instrument of foreign policy, and I 
applaud Secretary Clinton for laying out a bold vision for 
Economic Statecraft in her speech on that topic in October last 
year. Free trade and international investment are cornerstones 
of our nation's prosperity, significant generators of jobs in 
America and a great asset for both U.S. workers and companies. 
But trade also stimulates openness, transparency, efficiency 
and accountability. Trade strengthens innovation and drives 
reform on a global scale, and binds us together with other 
nations to ultimately reduce the potential for conflict.
    However, according to a recent report on U.S. trade and 
investment policy by the Council on Foreign Relations, in 
recent years public opinion toward the benefits of 
international trade has declined significantly in the United 
States. And I hope that our panel and the Secretary might 
address ways for us to change this perception. Congress, of 
course, must do its part to address the low-hanging fruit that 
can facilitate trade, exports and investments, and create jobs 
and growth in the transatlantic space.
    This agenda includes granting permanent normal trade 
relations to Russia and Moldova. As Chairman Burton here said, 
Russia will accede to the WTO this summer, while Moldova has 
been a member since 2001. Congress has simply been asleep at 
the switch when it comes to giving U.S. companies the same 
benefits available to other WTO members.
    For more than a decade the United States has been non-
compliant with WTO rules because we have failed to repeal the 
Jackon-Vanik amendment from Moldova, and I fear that we are 
about to commit the same mistake for Russia. If Congress is 
truly serious about creating jobs, growth and export 
opportunities, this is the obvious place to start.
    Bringing Poland and other European countries into the Visa 
Waiver Program. Poland is one of our strongest allies, and has 
emerged as one of the most dynamic economies in Europe. We 
should take advantage of this dynamism by expanding the 
opportunities for U.S.-Polish business relations and tourism. 
U.S. citizens can easily travel to Poland for up to 90 days 
without obtaining a visa, but we have not extended the same 
privilege to Polish citizens. Bringing Poland into the Visa 
Waiver Program will strengthen both our economy and our 
national security, and Congress should act without delay to 
pass the necessary legislation.
    We should update export control legislation. Congress must 
pass and update legislation in order to stay in our cutting 
edge techonology sectors and create new, high quality jobs. The 
current export control statute is anachronistic, a relic that 
fails to recognize the reality of high tech products and 
components that are freely traded on global markets. U.S. 
developers and manufacturers are being excluded from these 
markets for no apparent reason.
    Congress should also fulfill its advisory role to the 
Transatlantic Economic Council. When the Transatlantic Economic 
Council, the TEC for short, was created in 2007, Congress was 
given an advisory role in the TEC's work. This role was 
assigned to the Transatlantic Legislators Dialogue, which 
brings Members of Congress and the European Parliament together 
to resolve regulatory issues at the legislative level. I think 
the TLD's work could provide valuable input to the High Level 
Working Group on jobs and growth, and I suggest we find a way 
to integrate Congress and the EU Parliament input into this 
process.
    And let me just end on this because I think the executive 
branch also has the responsibility to facilitate the jobs and 
agenda growth. One, eliminate or reduce remaining tariffs on 
both sides of the Atlantic. Two, work together with our 
European partners to establish international regulatory rules 
and standards.
    And I know that Chairman Burton would agree on the 
importance of expanding U.S. trade with Russia, and I want to 
conclude on that. On December 16th of last year, Russia 
received an invitation to join the WTO which would 
significantly enhance our opportunities to export goods and 
services to a booming Russian market. However, if U.S. 
businesses are to have the same benefits of Russia's WTO 
membership as all other WTO member countries, Congress must 
extend permanent normal trade relations to Russia and repeal 
the Cold War era legislation that has become redundant. Doing 
so will empower the reformers and innovators that represent the 
future of Russian society, and in fact the leading Russion 
opposition figures have recently called on Congress to do just 
that. Repeal the Jackson-Vanik amendment for precisely that 
reason.
    So I will love and wait to hear the testimony of the Under 
Secretary and our other panelists, and again I thank my friend, 
the chairman of this subcommittee, Dan Burton, for this timely, 
timely hearing.
    Mr. Burton. Very good. Jean, I think you were here next. I 
will get to our vice chairman here in just a minute. But before 
we do, I want to say since they mentioned that I am going to be 
retiring, we are going to miss you too.
    Ms. Schmidt. Well, thank you. And basically I am here to 
just listen and learn. It is very apparent that Eurasia is 
becoming an emerging market that the United States must pay 
attention to. Most importantly, the region of Turkey, because 
it truly is the place where East meets West. And really 
continue to look at Russia as a trading partner. I think that 
in the next 50 years, the ability for Russia to continue to try 
to be a player of both economically and militarily will 
continue to decrease, but the emerging area will be Eurasia, 
most importantly Turkey. So looking forward to your views on 
that. Thank you.
    Mr. Burton. Our vice chairman from the great State of 
Arkansas, Mr. Griffin.
    Mr. Griffin. Thank you, Mr. Chairman. Just quickly I would 
like to point out that I was a staffer for Chairman Burton on 
the Government Reform Committee in 1997, 1998 and 1999, and 
appreciate his service and appreciate your service as well.
    I have a particular interest in our trading with Europe. In 
the 2nd congressional district of Arkansas, which is my 
district, Little Rock is the biggest population center, but it 
is broader than that. It is about eight counties. We have a 
number of European companies that do business and employ 
hundreds of Arkansans, and so I will be real interested to hear 
how we can do more business with Europe.
    Some of the ones that spring to mind are Unilever, which is 
a British/Dutch company. We have, what I understand to be, the 
only Skippy peanut butter producer in the United States. Also, 
L'Oreal makeup, Maybelline, a French company. They have a plant 
east of Little Rock. Dassault Falcon Jets from France. They 
bring jets over from, I think, their headquarters in Bordeaux. 
They don't bring any Bordeaux wine with them as far as I know, 
but they do bring their jets from Bordeaux and they are fitted 
with the interior in Little Rock. And then we have LM Wind 
Power, which is a leader in alternative energy that make the 
big blades for windmills. I have toured that plant.
    And so the European businesses have a large footprint in my 
district. And so when we talk about increased trade and we talk 
about getting more businesses to have a direct investment in 
the United States, for me it is not some academic exercise. I 
mean, we are talking about people who get up in the morning and 
drive to work or they don't. And when we can have more of these 
companies investing directly in the United States either 
because they find a skilled workforce, or the infrastructure or 
they believe in the stability of the United States, whatever 
the reason, we need to be pursuing policies that encourage that 
further.
    And I look forward to hearing your testimony and anything 
that you can advise us on what we can do to increase that. The 
chairman already mentioned that it took us as a country a long 
time to get the three trade agreements that we recently passed. 
They had been languishing for a long time. We need to do 
better. And so I am here to hear your opinions on how we can do 
better. Thank you very much.
    Mr. Burton. Thank you, Mr. Griffin. Mr. Sires?
    Mr. Sires. Thank you. I apologize for being late. Typical 
Hispanic, I am always late. But thank you for being here, and I 
just want to hear what you have to say. I am very interested in 
this part of the law.
    Mr. Meeks. Mr. Chairman, before we go to questions, I just 
want to join you in saying that we are going to miss Jean 
Schmidt. I have had the opportunity to travel with her and she 
is very enlightened on world issues. And I have just got to 
tell you, in getting to know her is getting to like her and 
love her and her whole passion for the world and opening up to 
the world. And so I just wanted to join you. Jean, you will be 
missed here also.
    Mr. Burton. I would just like to say before I introduce our 
first guest that you should get out there and run a marathon 
with her.
    Mr. Meeks. Oh no, I can't compete.
    Mr. Burton. What do you run, about five miles every 
morning?
    Ms. Schmidt. Yes.
    Mr. Burton. Yes, my goodness.
    Mr. Meeks. Even when we are abroad, every morning she still 
gets up, whatever country that we are in, and she will run in 
the morning. I mean it is a routine that she will follow even 
in the highest altitudes. I couldn't believe it.
    Ms. Schmidt. We really need to listen to this testimony, 
but I have just got to say if you want to learn what the world 
is like, get up when the world gets up and see how they 
operate. You really get the best footprint of how a world 
operates.
    Mr. Burton. Mr. Meeks will never get up that early.
    Testifying on the first panel is the Department of State's 
Under Secretary for Economic Growth, Energy and Environment, 
Robert Hormats. Secretary Hormats served in his current 
position since September 2009. Prior to that position at the 
State Department, the Under Secretary was vice chairman of 
Goldman Sachs. Earlier in his career, the Under Secretary 
served as the Assistant Secretary of State for the Economic and 
Business Affairs, as Deputy U.S. Trade Representative, and as a 
senior staff member for the National Security Council. Pretty 
impressive credentialing. And with that we will listen to what 
you have to say.

STATEMENT OF THE HONORABLE ROBERT D. HORMATS, UNDER SECRETARY, 
 ECONOMIC GROWTH, ENERGY, AND THE ENVIRONMENT, U.S. DEPARTMENT 
                            OF STATE

    Mr. Hormats. Well, thank you very much, Mr. Chairman and 
Ranking Member Meeks and members of the committee. It is a 
great pleasure to be here today, and I just wanted to before I 
start, just identify a couple of issues that you have mentioned 
in your opening statements.
    One, I totally agree that there is opportunity in Europe 
and in Russia, Turkey and Eurasia. I think that you, Mr. 
Chairman, pointed out that the worst thing we can do in the 
current environment is turn inward. The best thing we can do as 
all of you have indicated is turn outward and look for new 
opportunities all around the world.
    And Turkey is certainly a growing market. It has certainly 
come on to its own from having a major crisis 10 years ago. It 
is now one of the preemiment emerging economies of the world. 
Russia is a country that now as a member of the WTO, affords 
us, if we take advantage of them, opportunities to sell in a 
growing market that is going to be diversifying. It is a big 
energy market, but it is going to be diversifying into other 
things. So there are really great opportunities here, and the 
question is, how do we take advantage of them? So I really 
appreciate the opportunity. It is very timely in this 
environment to discuss these kinds of issues.
    Let me just discuss for a moment the importance of the 
U.S.-European economic relationship. U.S.-EU bilateral economic 
relations are really one of the central drivers of the global 
economy. Roughly 50 percent of global GDP is accounted for by 
the U.S. and Europe combined. Europe itself is about 18 percent 
of global GDP. Europe is also vital to American exporters. The 
value of American goods and services exports to the European 
Union is actually several times that of our exports to China. 
While China gets a lot of publicity and is a growing market, 
Europe is still a much bigger market for American exports.
    The same is true with foreign investment. Foreign direct 
investment has created millions of jobs on both sides of the 
Atlantic. At last measure in 2010, U.S. foreign direct 
investment in the EU had reached nearly $2 trillion. EU 
investment in the United States is also enormous, $1.5 trillion 
in 2011, creating a lot of jobs in virtually every district, 
every state in this country. We look to Europe to attract more 
foreign investment in the United States over a period of time. 
And we are going to be energizing our Embassies and our 
ambassadors as part of Secretary Clinton's Economic Statecraft 
to be more proactive, working with governors and mayors who are 
already very proactive in attracting foreign investment.
    We look to Europe also for new opportunities for exporters, 
for industrial products, for consumer goods, for agricultural 
goods as well. I mean the area around Little Rock is a big 
exporter of agricultural products, poultry and such things, and 
virtually every state exports agricultural goods, and saying it 
is also a place where a large number of American companies have 
been operating successfully for many decades and seek more 
opportunities there.
    We are also working with Europe to improve the climate for 
trade and investment in third country markets. This is very 
important because there are a number of countries who don't 
share the same notion of rules and obligations under the WTO 
and elsewhere, so we are working with Europe on intellectual 
property and in other areas as well. And of course, Europe has 
been a strong ally as we see in Afghanistan and elsewhere.
    Let me discuss the eurozone crisis briefly. We have 
continued to collaborate closely through the global financial 
crisis, and more recently the current eurozone crisis. We have 
seen a commitment by the EU to address current economic 
challenges not only through fiscal consolidation, which is a 
major priority for some countries to improve their debt 
sustainability, but also by facilitating job creation and 
structural improvements and putting in place measures to assist 
member states in finding a path back to economic growth. We 
know from our own expertise that moving from crisis to recovery 
depends on swift, aggressive action to restore market 
confidence.
    I would also like to outline some of the things that we are 
actually doing in the State Department to promote the 
Secretary's Statecraft agenda. In the written testimony, I 
won't go through this now, I highlight ways in which our 
Embassies and our missions are very actively involved in 
promoting American exports, supporting American companies, and 
attracting investment.
    One example is Boeing's sale of 50 aircraft to Russia's 
Aeroflot. We also worked in Germany with Volkswagen to 
encourage them to build a $1 billion manufacturing plant in 
Chattanooga. This helps U.S. exports, but as Mr. Griffin 
pointed out, there are a lot of opportunities for investment 
all over. And in Indiana, as you have said, Mr. Chairman, there 
is a lot of foreign investment and we are aiming to get a lot 
more. And yes, I think it is a big job creator and I think it 
is underestimated. But Indiana is so so central that, you know, 
it is a great place to invest. You can go anywhere from 
Indianapolis, and it is a relatively short distance. And of 
course Kennedy Airport is a big hub, and your district is 
really very important. It is really the air gateway to Europe, 
so it is an opportunity.
    The volume of U.S. agricultural exports, let me just talk 
about that briefly. In our 2011 statistics, agricultural 
exports to the EU were valued at $9.5 billion, up 8.2 percent 
from the prior year. USDA estimates that for every billion in 
U.S. ag exports there are about 7,800 jobs supported in the 
United States.
    We also have been very active, we have got for the first 
time, Secretary Clinton invited representatives from 200 
institutions, like Chambers of Commerce, from around the world 
to our global business conference to find out how we could do a 
better job. So we are constantly learning and trying to be more 
proactive.
    We also have the Transatlantic Economic Council, which was 
established in 2007, led by the White House and the European 
Commission. We are trying to use that to reduce regulations and 
improve cooperation in a variety of areas. One of the 
highlights of the TEC is the new work program that has been 
announced, which is designed to see if we can find ways of 
strengthening jobs and growth through a working group that has 
been created between the U.S. and the EU. Ron Kirk is our 
representative and Karel De Gucht, the European Commissioner 
for trade, is theirs.
    Let me just mention a few things about trade with Turkey 
and Russia. I know I am out of time. I will just go very 
quickly. First with Russia, I think eliminating the Jackson-
Vanik restrictions as they apply to Russia is critically 
important and providing them with PNTR is very, very important. 
Russia only takes about \1/2\ of 1 percent of American exports 
today. It has the potential to enable American exports to grow, 
if we have the same opportunities as other countries in the WTO 
will have, once Russia accedes to membership in the WTO. If 
PNTR is not provided, if Jackson-Vanik is not lifted with 
respect to Russia, we will be at a disadvantage vis-a-vis our 
trading partners, and we will also not be able to enjoy the 
full benefits of the commitments that Russia has made when it 
joins the WTO. So it is a double negative for us.
    It is also worth pointing out that in the WTO negotiations, 
the United States gave up nothing. All the concessions, all the 
commitments were made by Russia. We have made no concessions to 
them or to any other country. They made concessions in order to 
join the WTO. So this is an enormous opportunity for American 
exporters and American business to take advantage of one of the 
big markets of the world with energy and a lot of other things 
that can enable companies in the United States to do better.
    The other point is Turkey. I totally agree that Turkey is a 
growing market, and a country that has undertaken a lot of very 
important reforms. And lastly, Eurasia, Central Asia, very 
important countries like Kazakhstan, Azerbaijan--we are working 
with these countries. They have a lot of raw materials and a 
lot of growth potential so we should be developing our 
relations with them, and we will be doing that. I have met with 
the President of Azerbaijan, which as you know has a lot of 
energy, and we are going to have a bilateral commission with 
them to try to reduce barriers and increase opportunities.
    So there is a wonderful menu of opportunities here. It is 
up to us to work together, the executive branch, the Members of 
Congress together to find ways of taking advantage of these 
opportunities for American workers and the American people and 
American business.
    So thank you very much, Mr. Chairman. Sorry I went over.
    [The prepared statement of Mr. Hormats follows:]
    
    
    
                              ----------                              

    Mr. Burton. No, that is okay. Thank you very much. You 
mentioned a couple of things that concern me. This Trans-
Pacific Partnership that is already in force has been, I think, 
pretty beneficial. But we haven't had any trade deals with many 
nations over there in recent times. Why is that?
    Mr. Hormats. In the Pacific, you mean in the----
    Mr. Burton. No, I am talking about that we are not seeking 
any trade deals with any other nation right now that I know of. 
You mentioned Colombia.
    Mr. Hormats. Yes.
    Mr. Burton. You mentioned Panama. You mentioned Korea, 
North Korea or South Korea?
    Mr. Hormats. South Korea.
    Mr. Burton. But there is 25 or 30 other opportunities out 
there and we are not taking advantage of them, and I just was 
wondering why.
    Mr. Hormats. Well, the current objective now and where we 
are really devoting most of our attention, Mr. Chairman, is on 
the Trans-Pacific Partnership. Actually I just got back a 
couple of days ago and I have got the voice to attest to this 
from a long trip to Vietnam and to Thailand. Vietnam is a 
partner in these TPP, Trans-Pacific Partnership negotiations. 
So our goal is to really move those along.
    That is the fastest growing area of the world, so what we 
are trying to do is focus our negotiating energies on this as a 
top priority. But we also see the lifting of Jackson-Vanik 
restrictions to Russia as expanding trade opportunities as 
well. So if you combine what we hope will be a success in 
expanding trade opportunities in East Asia and the Pacific 
through TPP and then moving along on Russia as we have both, I 
think all of us have agreed this would be a good idea, that can 
actually boost trade quite substantially.
    Mr. Burton. During your comments, you mentioned the 
European Union and the fiscal problems that they are having. 
One of the concerns that I have had for a long time, and that 
is one of the reasons we were in Brussels and a number of those 
countries over there, is that we don't know exactly how 
involved the United States is financially. I know in the 
International Monetary Fund we have put up about 18 percent.
    But I have been told by some people that the Fed has been 
printing money and they have been investing in bonds over there 
with the European Central Bank, and I don't think anybody 
really knows how deeply we are involved and what kind of risk 
there is in the event that a number of countries go belly up.
    I think Greece is in real, real trouble. I don't see how 
they are going to survive. I know everybody is trying to keep 
them afloat, but it is going to be tough. And then you have got 
Italy, and you have got Spain and Portugal. And if we are 
deeply involved and some of those countries start going belly 
up, they can't make good on their bond payments or the interest 
even, how is that going to affect the United States and our 
investments over there?
    Mr. Hormats. Okay. Well, first the IMF, the first point you 
made. We are a major supporter of the IMF as you correctly 
point out, and the IMF has actually provided a substantial 
amount of money to Europe. But our obligations are really to 
the IMF, and the IMF balance sheet is still very strong. 
Whenever there is a repayment of a loan, the IMF gets first 
preference from whoever the borrower is. So the IMF has really 
never run into, or even come close to, running into any 
financial difficulties. So the contributions we have made or 
what we provide to the IMF----
    Mr. Burton. Let me interrupt because I am running out of 
time. The European Central Bank is doing the same thing that we 
did with QE1 and QE2. They are printing money. And that money 
is going into these countries to help bail them out at a very 
low interest rate, and then a lot of the financial institutions 
are trying to loan it out at a much higher rate so they can try 
to get well of those governments. My main concern is what 
impact, and if you can be concise about this, what impact is it 
going to be if these countries do start going south?
    Mr. Hormats. Well, it is hard to speculate on that because 
I think there is a very good chance that things will get 
better. But there are always risks in any financial environment 
as we have seen. But I think that from an American point of 
view, our money in the IMF is safe. The money that the Fed has 
provided is through swap agreements with central banks, which I 
think are very safe as well.
    I think the big problem that we face for the moment is that 
a weaker Europe, economically, can have very negative 
implications for our trade, and that I think is what you are 
getting at, and I do think that is a concern. And one of the 
reasons we are trying to support Europe is to avoid a 
deterioration financially and from a trade perspective.
    Mr. Burton. No, I understand that and that is one of the 
reasons, I think, that Germany and Merkel over there is trying 
to keep some of these countries afloat, because they are such a 
big trading partner. But I understand the Gordian knot that we 
are in, but I wish somebody could tell me what our exposure 
really is.
    And with that I will yield to Mr. Meeks.
    Mr. Meeks. Thank you, Mr. Chairman. Mr. Secretary, I was 
glad to hear you say, and I was going to include that even in 
my opening remarks, about the other opportunities that lie 
before us as far as the trade with Turkey and the Caucasus in 
Central Asia, because these are also emerging markets 
representing great opportunities for expanded U.S. exports and 
investments.
    Now I also sit as the co-chair of the Services Committee 
and a co-founder of the Services Caucus, I should say, and I 
believe that there are immense possibilities for increased 
trade in the service sectors such as the airline industry and 
telecom and health care and capital markets that will provide a 
significant economic boost to the transatlantic economy.
    And with the failure of Doha, et cetera, what do you think 
about a plurilateral agreement with a number of the 
participants on services where maybe we can agree on the 
services because where we can expand? Because as you know, Dr. 
Hamilton, for example, calls services the sleeping giant of the 
transatlantic economy in some of his previous publications.
    So my first question is, what do you think about the 
services in that regard? I would like to hear your opinion in 
that regard.
    Mr. Hormats. Well, first of all, I agree with Dr. Hamilton 
that services represent an enormous opportunity. A large 
portion of our economy is services. I think manufacturing is 
very important, but services represent a potential opportunity 
that we ought to be developing.
    The second point I would make is, one of the things we are 
doing under this working group on jobs and growth with Europe 
that has been set up with Ambassador Kirk being the American 
co-chair, is to try to find ways of expanding opportunities 
with Europe. And while they are looking at all options, one 
option that lends itself to real progress would be the services 
sector.
    And the other thing is that we are looking, and as you 
pointed out, the WTO is sort of at the moment in a quiescent 
state, but there may be opportunties for groups of countries to 
move ahead on certain aspects of trade liberalization even 
without a complete new success of the Doha Round. So 
identifying opportunities for expanding trade and services 
either with the Europeans through this working group or through 
a group of countries within the WTO who see this as being in 
their common interest would be a very positive thing. And I 
think we ought to look for opportunities to do that because he 
is absolutely right. This is a sector where growth is possible 
and where job creation would be quite substantial of both.
    Mr. Meeks. I would love to continue to talk and work on 
that with the Caucus. I couldn't agree more with you in talking 
about, and what Jean has indicated also with Turkey, in opening 
up that market. I have been talking a lot about Russia and 
Turkey which are tremendously important, huge markets.
    And as a result I have had though, a number of our U.S. 
pharmaceutical companies come to me asking about their access 
to the Turkish market and that issue. So I was wondering, do 
you know what the Government of Turkey is going to do or can do 
to ensure full market access for innovative U.S. medicines, 
because that is also important to get our products out like 
services and medicines.
    Mr. Hormats. Yes. Well, this is an issue with Turkey, there 
is no question about it. We have made a little bit of progress, 
but there are still major problems that need to be resolved 
with respect to Turkey's policies as they relate to the 
pharmaceutical industry that impede access of products into 
Turkey and the ability of some American companies that may want 
to invest in Turkey as well.
    We have had conversations with the Turkish Government at 
very high levels. I, myself, have had several conversations 
with Turkish officials on this. This is something that we work 
with PhRMA on a very regular basis to look for opportunities. 
This is a very high priority for us, I think, and actually over 
a period of time will be for the Turks as well, because they 
need the very best, and they want the very best medicines for 
their people. American companies have, I think, the best 
medicines in the world, the best pharmaceuticals in the world, 
so there should be a match. We just have to keep working at it 
and we still have a way to go.
    Mr. Meeks. One more question, but I agree with you. And I 
should hope that Turkey does want the best, because part of our 
idea is to make sure that we get the products that we export, 
and the U.S. pharmaceutical companies are very important to 
helping with that export initiative and we want to make sure we 
can move it forward.
    Mr. Hormats. Absolutely.
    Mr. Meeks. But let me ask you, what is your position on 
bringing Poland, for example, into the Visa Waiver Program? And 
what explains, if you could, Poland's consistently high visa 
refusal rate despite the fact that it has this booming economy?
    Mr. Hormats. Well, I will have to check with the consular 
affairs people in the State Department on that. But in general, 
if countries meet our criteria for Visa Waiver, we are happy to 
do it. I will certainly check out Poland and get back to you on 
that. But in general, where we can do it and where the criteria 
are met we are happy to do it. We have a number of countries as 
you know that do have it. There are only four, I think, in 
Europe that don't, if I am not mistaken, but relatively few 
anyway. So I will check Poland out. And there are a couple of 
other countries that are in that category that I know you are 
also focused on. So we will get back to you on that right away.
    Mr. Meeks. Thank you.
    Mr. Hormats. Thank you.
    Mr. Burton. Ms. Schmidt?
    Ms. Schmidt. Thank you. I have several questions. The 
first, Congress' role with the Transatlantic Economic Council. 
As you know it was created in 2007, and Congress was given an 
advisory role. That role is specifically assigned to the 
Transatlantic Legislators Dialogue.
    Apart from granting fast track authority, in your opinion 
what role should Congress be playing, and is there legislation 
that we should consider to benefit trade especially in Europe 
and Eurasia?
    Mr. Hormats. Yes, thank you. I have been very actively 
involved in the TEC, and I regard it very important for a 
number of reasons. One of which is that it is focused, as you 
correctly pointed out, on creating new opportunities. A lot of 
those opportunities for the moment are focused on differences 
in regulations and standards, and it has mostly been in the 
realm of the standard setting bodies on both sides. And some of 
them have traditional ways of looking at these things, and the 
flexibility in some cases has not been as great as I personally 
would like it to be.
    On the other hand, they are working at it and we have been 
taking a fresh look at various regulations and standards to see 
where there is an opportunity for some sort of commonality or 
mutual recognition or actually an agreement in terms of 
standards between the U.S. and Europe.
    We have found a few areas where we think we can make real 
progress that probably won't require legislation, at least not 
at the moment. One is on electronic vehicles, e-cars, e-
mobility. And that is, if we can get interoperability and 
interconnections and standards agreed to between the United 
States and Europe, and also standards for smart grids which are 
needed for these cars, then first of all, we can reduce 
barriers between the U.S. and Europe. And second, very 
important, that we can set standards that we and Europe agree 
to and then encourage other countries to apply those standards.
    The role both the U.S. and Europe have now is that we will 
develop high standards, but then other countries like China 
will have more nationalistic or restrictive standards that keep 
American and European cars out of the market. Not just China, 
other countries as well. So these probably won't require 
legislation at the moment, but they will require a lot of work. 
And we have actually made some progress on electric cars. We 
are thinking of moving, do the same thing on electronic health 
records which as you know American doctors and hospitals are 
going to have to comply with. Nanotechnology, a number of 
things where we can actually develop some harmony among our 
regulatory proceedings and have as a result reduced barriers to 
trade across the Atlantic in these areas.
    Ms. Schmidt. Thank you. Speaking of trade barriers, some 
have expressed the fact that our current tax structure can be a 
hindrance to companies trading on an equal and fair level with 
other countries. Regarding the EU and Eurasia and Russia, do 
you see that as part of a trade barrier problem?
    Mr. Hormats. Our companies do express exactly the 
sentiments that you have mentioned. I don't think they are a 
big part of the trade problem with those countries. I think the 
bigger part of the trade problem with Europe, the EU, is 
differences in regulations and standard setting procedures, and 
then differences in things like----
    Ms. Schmidt. Let us go back with that, with standards and 
regulations, et cetera. Europe in some cases is more 
restrictive than the United States, and then there is the 
general fear in the United States that if we apply those 
standards in the United States it will impede our growth as 
well. How do we get around that?
    Mr. Hormats. That is a very good question. We each, in 
Europe and the U.S., want to have standards that are protecting 
the health and safety and well being of our people, but not 
standards that are restrictive and restrict opportunity and 
commerce. One area that I think is very useful to focus on and 
we are seeing it as a high priority is in the area of biotech 
as it relates to agricultural products. Europe has a very, I 
would say restrictive----
    Ms. Schmidt. Restrictive, backward thinking.
    Mr. Hormats. Yes, restricted standards that are not based 
on, in our judgment, good science. And what we are trying to do 
is when there are regulations needed they should be based on 
scientific evidence of their necessity as opposed to political 
pressures.
    Ms. Schmidt. Before I run out of time, do you see Eurasia 
as a little more lenient, the Eurasian countries than the 
European countries or is it a wash?
    Mr. Hormats. Well, Turkey has a number of provisions that, 
when we were talking a little on pharmaceuticals, that are 
again procedures or standards that we think impede, for 
instance, the pharmaceutical goods that we would like to sell, 
medicines that we would like to sell. So our goal again is to 
encourage them when they set standards or when they set 
procedures to do it on the basis of scientific evidence, not on 
the basis of either political pressures or more arbitrary kinds 
of judements.
    So we have no objection and other countries don't to, I 
think, good standards, but what we are concerned about with 
Europe and Turkey in some cases, is that some of those 
standards are not based on scientific evidence of the necessity 
of the standards, but are based on other criteria which are not 
in our judgment appropriate. So that is why most of these 
things are not necessarily tariff barriers, they are more 
regulatory barriers, standard setting barriers or other kinds 
of within-the-border impediments to trade.
    And we think, over a period of time, through negotiations 
and through contact between our regulators things can be 
resolved or at least the barriers can be reduced. For instance, 
with Turkey we have actually had some very good meetings 
between Turkish pharmaceutical regulators and experts in 
various parts of biotechnology with American companies, and a 
lot of exchange of experts and scientists. So we think there 
are opportunities for constructive dialogue on all these areas. 
We are not making as much progress as quickly as we would like, 
but we think there are opportunities.
    And countries want to do right by their people, they just 
in some cases have different philosophies, and we have got to 
continue to keep working on them to get it right as we see it. 
Thank you.
    Mr. Burton. Mr. Sires?
    Mr. Sires. Thank you, Mr. Chairman, for holding this 
meeting. Thank you for being here, Mr. Under Secretary. Over 
the years I read a lot about Russia and how the opportunities 
are in Russia, so a couple of years ago we took a trip and we 
met with, we went to Moscow. Chairman Berman put it together. 
And one of the things that struck me was a couple of things.
    First of all, when we were there, IKEA had spent 3 years in 
Russia. They have made a significant investment. They couldn't 
open up the store because of the corruption. They were being 
shaken down by the local officials. So they had the store open 
for 3 years, they couldn't even open it. So I am thinking in 
terms of investment by us there.
    Secondly, there was a poll by the BBC taken a couple of 
years ago where it said that two-thirds of the Russian people 
do not like or trust the Americans. I mean with things like 
this, how are we going to go over there and invest when all I 
hear is about corruption and about how they don't like 
Americans? Would you just----
    Mr. Hormats. Well, let me just----
    Mr. Sires. This was done by the BBC. It wasn't one of these 
pollings that we do here in America.
    Mr. Hormats. I take your point. First of all, on the second 
half, the popularity of the United States has actually 
increased substantially over the last year or so. But the point 
of corruption, I think the Russian officials also understand 
this is a big issue. One of the things that the Russians have 
done recently is accede to the OECD Anti-Bribery Convention, 
which is a real step forward, which first of all, commits them 
to very high standards on anti-bribery. And second, also 
requires that their laws and their practices be reviewed by a 
committee that includes the United States and other countries. 
So I think they, themselves, understand the point that the BBC 
was making and that you are making, and that this is, if they 
want to progress as a modern economy they have to deal with 
some of these issues that you've mentioned and the BBC 
mentions.
    So these are certainly legitimate issues that we are 
discussing with them, and that I think they, themselves, need 
to get at. Because for the same reason that you mentioned, if 
they want more foreign investment they have to protect 
intellectual property, and they have to make sure that their 
standards, their legal standards and their protection against 
bribery and other things is dealt with in a way that other 
modern countries that want to attract investment are doing, 
otherwise they will lose out on the opportunity to get 
investment.
    Mr. Sires. That was my next issue, regarding intellectual 
properties. They have no regards for intellectual properties. 
That is how I see it. And secondly, this election that Putin 
just won, I mean we were made the bad boys throughout the 
election. His whole campaign was based basically on bashing 
America. So I don't understand why any American companies would 
want to go there knowing there is corruption. They don't like 
us. They bashed us. I mean what is the incentive for us to 
invest in Russia when we have other places?
    Like I have said, I believe we should be investing more in 
South America. We are close. We basically ignore South America 
and Central America. I mean they are our closest neighbors.
    Mr. Hormats. Well, first of all, I agree. We should be 
investing more and trading more with Latin America too, I agree 
with that.
    But with Russia, first of all, there were some remarks that 
Putin made about the United States, but also it is true that 
the Russians have worked with us on a new START agreement. They 
have been very helpful to us in allowing access across Russia 
to Afghanistan. They have agreed to make a number of changes to 
be able to be members of the WTO. They have done a number of 
other things where they have actually been quite cooperative 
with us. We have a bilateral presidential commission with 20 
groups that are aimed at improving relations between us. And I 
think that that is a positive part of the relationship.
    The other part of it is that I think it is useful to bear 
in mind that providing Russia with permanent normal trade 
relations or lifting the restrictions on Jackson-Vanik, which 
are part of the same, is really not done for the benefit of 
Russia. It is done for the benefit of American workers and 
American companies. The business community of the United 
States, which share some concerns that you have mentioned, is 
overwhelmingly in favor of eliminating these Jackson-Vanik 
restrictions as they relate to Russia, because they see two 
things.
    One, they see it as a growth opportunity for them which 
means they will sell more, they will create more jobs in the 
United States and they will be able to produce more revenues 
which they will reinvest here. The second thing is that they 
also see Russia as changing. There is a lot going on in Russia 
that is aimed at improving the Russian economy and modernizing 
the Russian economy. They have been an economy very heavily 
dependent on oil and gas, and now they want to diversify. And 
they know if they want to diversify they have to get other 
companies in there in order to help them do it. And that means 
they have to protect intellectual property, they have to deal 
with issues of corruption, and they have to work within the WTO 
to help diversify.
    So I think that while there are certain good things that we 
have seen going on with Russia, and there are certain negative 
things as you have pointed out, it is important to put those, 
for the moment when we deal with the Jackson-Vanik issue, to 
the side. Not ignore them, but recognizing what Jackson-Vanik 
is, is really if it is sustained and if we don't give them PNTR 
it is just hurting jobs in your district, your district, 
everyone's district, and it reduces an opportunity for us to 
sell. But it also gives other countries, it gives the EU, it 
gives China, it gives every other member of the WTO an 
advantage over our companies in selling to Russia.
    Mr. Sires. Thank you. My time is up. Thank you, Mr. 
Chairman.
    Mr. Burton. Before we go to the next panel I just have one 
question. This relates to what Mr. Sires just asked you. 
Obviously, Congressman Meeks and I and others want to see us 
expand trade and have better relations with Russia, but there 
are a lot of people who invested in Russia's Yukos oil, and a 
dozen Members of Congress, myself included, sent a letter. You 
probably got this letter.
    Mr. Hormats. Yes, I have.
    Mr. Burton. And Russia nationalized it, and as I understand 
it there is $12 billion in U.S. investment that is out the 
window, $12 billion. And people that invested in it just got 
killed. Is Russia willing to make restitution?
    Mr. Hormats. Well, I am glad you raised that because I did 
read the letter, and Secretary Clinton sent back, we have tried 
to respond to this.
    But let me make a few key points. One, there is an effort 
underway now to adjudicate some of the claims. Some countries 
have bilateral investment treaties with Russia and there is an 
adjudication process for their claims. We are watching this 
very carefully, because once we see how those adjudication 
procedures work out, then we can decide how and whether to move 
into a formal process of defending interests----
    Mr. Burton. You don't need to give a real long answer to 
this. The bottom line is there is no indication whatsoever that 
they are going to make good that $12 billion that was invested 
by the U.S. And the thing that concerns me is that I want us to 
expand. Mr. Meeks and I are co-chairing the Russia-America 
business approach.
    But I don't see how we can push forward in the Congress if 
they are going to nationalize companies and then not make good 
the investment that Americans have put into these companies. I 
mean let us say that Mr. Sires has a company that comes in, or 
people that invest from New Jersey who put in a couple billion 
dollars into a company and Russia decides, Putin decides that 
he wants to nationalize it because it is going to be beneficial 
for the government. There has got to be some kind of commitment 
by Russia that they are going to make good on those things. And 
as far as adjudicating is concerned, that is baloney. I mean if 
they owe the money they ought to pay the money.
    Mr. Hormats. We have not given up on this issue. We have 
not decided at this point what course to take.
    Mr. Burton. Let me just end by saying this. When you 
negotiate and talk to those people over there, they want to do 
business with us because we are a big market. I know they want 
to expand their trade with us. Please tell them that that is a 
thorn in the side of the Congress of the United States, and 
tell them the people who want to work with them are very upset 
that there is American investors that are getting taken to the 
cleaners by that.
    Mr. Hormats. Mr. Chairman, I agree with you. And I think 
that it is imperative for us as the government, the government 
officials that work with the Russians and are working trying to 
expand opportunities for the American business community and 
American workers to point out to the Russians where we think 
their conduct is inconsistent with the broader rules of the 
international system.
    And these kinds of things do present a problem. Certainly 
they present a set of concerns to American businesses that are 
interested in investing or trading. But one of the reasons 
their joining the WTO is a positive thing is because it does 
suggest that they want to play by international rules.
    Mr. Burton. I understand that.
    Mr. Hormats. But we have got to make sure that they play by 
international rules across the board. So I have no problem at 
all with what you are saying.
    Mr. Burton. Just carry the message to them, would you? I 
mean and tell Secretary Clinton to do that too.
    Mr. Hormats. I will certainly, and your letter was very 
compelling and I do think there are a lot of important points 
to be made that you mentioned.
    Mr. Burton. And the next letter will be accompanied by the 
ball bat.
    Mr. Hormats. Okay.
    Mr. Burton. Thank you very much.
    Mr. Hormats. Thank you very much for having me, Mr. 
Chairman, members of the committee, and I just want to say it 
is a privilege testifying. Your message about our taking a very 
firm role where we think American interests are not being 
honored by the Russians, is very important.
    I would make the point that passing PNTR gives us an 
opportunity in Russia and will help American business and help 
American companies, but we also have to be very firm on a 
number of other issues and investment would be one of them. 
Intellectual property is another, the kind of things that you 
have mentioned. We have to have a dialogue. We agree with them 
on some things, we disagree with them on others. But where 
American economic interests are at stake, then the Secretary's 
Statecraft initiative and agenda is going to mean that our 
ambassadors and our officials here are going to take very firm 
positions in favor of American workers and businesses and 
adherence to global rules.
    Mr. Burton. Thank you.
    Mr. Hormats. Thank you very much.
    Mr. Burton. We appreciate you being here today.
    Our next panel, we have two distinguished guests. First we 
have Peter Rashish. He is the Vice President for Europe and 
Eurasia for the U.S. Chamber of Commerce, and maybe you can 
answer some of the questions that we raise as well. Prior to 
coming to the Chamber, he worked as a senior advisor for Europe 
at the McLarty Associates, and has consulted for organizations 
such as the World Bank, Atlantic Council and the German 
Marshall Fund.
    We are also joined by Daniel Hamilton, director of the 
Center for Transatlantic Relations at The Paul H. Nitze School 
of Advanced International Studies at Johns Hopkins University. 
He has also held a variety of senior positions in the U.S. 
Department of State, including Deputy Assistant Secretary for 
European Affairs and associate director for the policy planning 
staff for two Secretaries of State.
    And we welcome you both, and we are sorry that this ran a 
little longer than we thought but we do appreciate very much 
you being so patient with us.
    So we will start with you, Mr. Rashish.

 STATEMENT OF MR. PETER RASHISH, VICE PRESIDENT FOR EUROPE AND 
               EURASIA, U.S. CHAMBER OF COMMERCE

    Mr. Rashish. Thank you very much, Chairman Burton, and 
Ranking Member Meeks and members of the committee. I am pleased 
to have this chance to testify today on behalf of the U.S. 
Chamber of Commerce, on proposals to create American jobs 
through closer economic ties to Europe and Eurasia.
    With more than 12 million Americans unemployed, no priority 
facing our nation is more important than putting our people 
back to work. While both fiscal and monetary policy can 
contribute to creating jobs and the conditions for economic 
growth, let us not forget the vital role that trade policy can 
also play in overcoming our jobs crisis. After all, we should 
remember that outside our borders we find the markets represent 
80 percent of the world's purchasing power, 92 percent of its 
economic growth and 95 percent of its consumers. The resulting 
opportunities are immense.
    The question is where shall we focus? The Chamber believes 
that exactly 50 years after the passage of the Trade Expansion 
Act under the administration of President Kennedy, which paved 
the way for free trade between the U.S. and the European 
Union's precursor, the Common Market, it is time again to make 
Europe a priority in U.S. trade policy. The U.S-EU economic 
relationship is the world's largest and most robust. Together 
we generate half of the global GDP, and according to a CRS 
study more than $1.5 trillion in goods, services and income 
receipts flowed between the U.S. and the EU in 2010 alone.
    U.S. firms have direct investments of nearly $2 trillion in 
the EU, 20 times what they have invested in China. The Chamber 
welcomed the creation of the High-Level Working Group on Jobs 
and Growth which the leaders set up at the U.S.-EU summit in 
November, and we are pleased to see that the Working Group is 
considering ideas that closely reflect some proposals that the 
Chamber has made for transatlantic trade.
    The Chamber believes we should seek a transatlantic 
economic and trade pact by means of negotiations in five areas. 
Tariffs, services, investment, regulation and public 
procurement. First, on tariffs, one study has shown that 
eliminating all of them would increase trade by more than $120 
billion, and GDP by $180 billion over 5 years. And while it is 
true that the tariffs between U.S. and Europe are low, because 
of the sheer volume of the trade between the two sides, it is a 
fact that fully one-third of all tariffs that the U.S. pays are 
paid to the EU.
    Second, on regulatory cooperation we think the U.S. and the 
EU should create a legal mechanism that would allow both of our 
regulators with appropriate legislative oversight to determine 
that the transatlantic counterpart on the other side has a 
compatible regulatory regime whose health and safety 
determinations they can generally accept. Doing so could help 
overcome the unnecessary regulatory barriers that we face, 
which are estimated to cost about $300 billion a year to our 
companies.
    Third, a high standard investment agreement could 
capitalize on the unique $3.4 trillion relationship we have 
with the U.S.-EU in investment. Right now the investment is 
facilitated by a series of bilateral treaties, but we now have 
the chance to have a first class EU-wide agreement with 
commitments to allow capital to move freely and to avoid 
discriminating against transatlantic investors in establishing 
and operating investments.
    Fourth, on services, despite the fact that the U.S. and the 
EU dominate the global services trade, unnecessary barriers 
still thwart our global competitiveness and are now fracturing 
the transatlantic capital market. We should place particular 
emphasis on creating a single digital services market across 
the Atlantic and on facilitating the free movement of workers 
through an approach to visa policy that responds to the needs 
of today's transatlantic businesses.
    Finally, on procurement, we welcome the new U.S.-EU 
Government Procurement Forum and urge that it be leveraged to 
fully open markets at all levels of the government and public 
entities. Each of these steps would bring significant economic 
benefits, potentially dwarfing the value of all other U.S. 
bilateral free trade agreements that we have entered into, and 
with our shared values, similar legal systems and high 
standards of labor and environmental protection, an agreement 
with the EU should be easier than many people think. Also, a 
recent PEW poll found that Americans support trade with Europe 
by a very healthy 58 percent to 28 percent margin.
    Now the idea of launching an ambitious transatlantic trade 
and economic initiative is gaining momentum partly, I think, 
owing to a number of efforts the Chamber has made advocating 
for it both here and in Europe.
    Chancellor Merkel of Germany and British Prime Minister 
Cameron both called for a U.S.-EU trade initiative in their 
remarks at the World Economic Forum in January. President 
Sarkozy and Chancellor Merkel urged the EU heads of state in 
government that met at the end of January, to make 
transatlantic economic relations a key part of the EU's reform 
agenda. And then a letter signed by 12 of the EU heads of 
government, including the U.K. Prime Minister and Italian Prime 
Minister Monti ahead of the most recent summit the EU held on 
March 1st, also signaled their support for a transatlantic 
trade deal.
    On the U.S. side, Secretary of State Clinton declared in 
early February that the new U.S.-EU High-Level Working Group on 
jobs and growth should be at the forefront of our efforts to 
put our people back to work and that America and Europe can and 
should be trading more with each other.
    European business groups have also endorsed it including 
our partners at BUSINESSEUROPE, the umbrella federation of 
European business, and just last week, the Chamber and 
BUSINESSEUROPE and ten other U.S. and European business 
federations issued a joint statement calling on President Obama 
and his European counterparts, when they next meet on the 
margins of the G8 summit at Camp David, to commit to launching 
ambitious transatlantic talks by the end of the year.
    With both the U.S. and European Union facing fiscal and 
macroeconomic challenges at home and new economic powers around 
the globe, the declaration states that a transatlantic trade 
investment and regulatory initiative can provide an 
unparalleled opportunity to instill confidence in our 
economies, enhance the global competitiveness of our firms and 
in so doing, reinforce our joint capacity to maintain and 
modernize the rules based international trading system which 
has benefited the global economy for over 60 years.
    Let me conclude by saying that at a time when jobs and 
growth are our top priorities, it is gratifying that a possible 
transatlantic economic trade pact is on the agenda, and the 
U.S. Chamber of Commerce looks forward to working with members 
of the committee on these issues as well as on issues of Russia 
and its membership in the WTO, which the Chamber strongly 
supports, as well as Turkey, where we believe that there are 
strong economic opportunities given the size of both of our 
economies. Thank you very much.
    [The prepared statement of Mr. Rashish follows:]
    
    
    
                              ----------                              

    Mr. Burton. Thank you.
    Mr. Hamilton?

    STATEMENT OF DAN HAMILTON, PH.D., DIRECTOR, CENTER FOR 
 TRANSATLANTIC RELATIONS, THE PAUL H. NITZE SCHOOL OF ADVANCED 
       INTERNATIONAL STUDIES, THE JOHN HOPKINS UNIVERSITY

    Mr. Hamilton. Thank you, Mr. Chairman. It is a pleasure to 
be here before the committee. I have submitted a testimony for 
the record, and I have also provided a one-page handout of some 
facts about the transatlantic economy you might have as an 
addendum there. It is based on a survey we just released this 
week called The Tranatlantic Economy 2012, so I do believe it 
is the latest data that you might have about the state of the 
relationship.
    I believe the opportunity for a U.S.-European transatlantic 
partnership for jobs and growth is actually quite considerable. 
It also gives us both, the U.S. and Europe, an opportunity to 
leverage growth markets elsewhere. And I believe that if one 
thinks about this initiative not only in a transatlantic 
context but how both economies can reposition themselves vis-a-
vis other growth markets that is what really opens up a lot of 
potential.
    We have had a lot of the data here for you so I won't 
repeat it all, but simply to say we are still each other's most 
important markets. We are each other's most profitable markets 
for our companies as well, and the largest source of onshored 
jobs for each other in the world. A $5 trillion transatlantic 
economy, employing up to 15 million workers on both sides of 
the Atlantic, truly dwarfing most other real relationships. And 
that investment is what drives the transatlantic economy.
    Whereas our relations with Asia and Europe's relation with 
Asia are trade driven, our relations across the Atlantic are 
investment driven. It is a simple but really profound 
difference to understand. Much of the media equate just trade 
with commerce, but trade is a very misleading benchmark of 
commerce. You have to include the investment flows to get a 
full picture. And if you do that you see where the jobs are and 
where the growth can be.
    There is more European investment, for instance, in the 
State of Indiana than all of U.S. investment in China and Japan 
and India put together, just Indiana. And the same is true for 
Ohio and the same is true for New Jersey and New York. These 
investments really create jobs. Our estimate is, direct 
investment of European companies in the State of Indiana 
provide about 70,000 jobs just directly. If you include trade 
and you include the indirect effects of such trade and 
investment, I would estimate about 200,000 Indiana jobs are 
related to commerce with Europe. And if you take Ohio, we 
estimate 106,000 jobs directly from European FDI into Ohio, and 
if you do all of the numbers again and extrapolate, I estimate 
300,000 Ohio jobs related to commerce with Europe. If you take 
New Jersey, 136,000 jobs directly supported by European FDI in 
New Jersey, and if you do the trade numbers and then the 
indirect, my estimate would be 350,000 jobs in New Jersey 
directly tied to commerce with Europe. These are where the jobs 
are, and if one can expand the opportunities in that way, it is 
really a direct impact on our jobs.
    So we are the most deeply integrated economies in the 
world. We have probably the freest economic relationship in the 
world, but our economic relationship is not free. There are 
still many barriers. So it seems to me that we have an 
opportunity to advance a three-point agenda. One point is what 
we have focused on, which is to open up the transatlantic 
markets. I agree with Peter's points and Secretary Hormat's 
points about the basic issues. Zero tariff on goods. Services, 
major services, are the sleeping giant of the economy. 
Regulatory cooperation, because most barriers are not trade 
barriers, they are non-tariff barriers. A transatlantic 
investment pact, because investment drives the economy. And the 
Smart Visa element, which is quite critical.
    But the point I am trying to make is that if we only think 
about it in the narrow transatlantic context, we are missing 
actually the real potential of this initiative, which is to 
reposition the United States and Europe vis-a-vis other growth 
markets. So it seems to be a second point of our agenda must 
not just be a standard, normal economic negotiation. It must be 
that the U.S. and EU say together that we believe in and will 
act on certain core principles of the international economic 
order that we believe in.
    These principles are under some attack today. There are 
many rising powers that have been chosen whether they agree to 
them or not, and we have issues with some rising powers that 
haven't agreed to them. If the U.S. and the EU as the major 
force in the global economy can say we are acting together and 
reinforce our belief in these principles, that will send a very 
strong message to third countries. And these are not 
necessarily contentious principles across the Atlantic.
    My last point is that we should also use the transatlantic 
relationship to strengthen the multilateral system. Many 
critics would argue that a large transatlantic initiative would 
subvert the multilateral system because we are so big. I think 
one has to address that by saying, Mr. Meeks mentioned that 
before, take areas where we basically agree across the 
Atlantic, but because we can't get everybody in the world to 
agree, we don't agree, and let us just move forward with those. 
Let us open those markets.
    Trade faciliation is a good example. In the Doha Round we 
had basically agreed, but because everybody didn't agree there 
is no agreement. But why don't we just move forward, say others 
can join us but we are moving ahead. We could be pioneers in 
free markets and open trade just as we always have been.
    And so it seems to me, to conclude, that the real 
opportunity here is to open transatlantic markets, to act on 
the defined, the ground rules of international economic order, 
and to take the multilateral system into new areas where it 
hasn't gone before. Thank you.
    [The prepared statement of Mr. Hamilton follows:]
    
    
    
                              ----------                              

    Mr. Burton. Thank you. You didn't mention, since Mr. Meeks 
wasn't here you didn't mention how many jobs would be impacted 
by trade. Yes, sure, go ahead real quick. I think he needs to 
know that.
    Mr. Hamilton. We do a survey of the transatlantic economy 
by jobs trade investment for each U.S. State. My estimate at 
the moment for New York, European FDI, that is direct 
investment in the State of New York provides about 230,000 
jobs. And if you take trade and you take the indirect effects 
of that with distributors, suppliers, all of that, my estimate 
would be 700,000 jobs in New York State are directly related to 
commerce with Europe.
    Mr. Burton. Let me start the questioning by asking about 
the economic problems in Europe. I think you have made, both of 
you have made a very, very strong point that we are locked 
together with Europe whether we would like it or not. And if 
many of the countries in Europe go south, belly up, it is going 
to have a devastating impact not only on them but on us as 
well.
    And I would like to know from your perspective, since you 
are with the Chamber, and you have expertise, Dr. Hamilton, 
what is the situation right now? Prime Minister Merkel can't 
keep all those countries afloat, and almost all those countries 
are in debt. Even France, I think they are about 100 percent of 
GDP as far as their debt is concerned. Greece is way, way up 
there. Italy is up there. Portugal, Spain, Ireland has still 
got problems although they are working pretty hard on that.
    So what is the answer and should we be doing what we are 
doing? I mean we are increasing our investment in Europe by 
leaps and bounds, not just the International Monetary Fund, but 
by currency swaps. So I know this is a tough question for you, 
but I would like to know where we are and what we are going to 
be able to do about that because it has a direct bearing on 
investment in Europe and trade.
    Mr. Rashish. Thank you, Mr. Chairman, for that question. 
First, let me say I think you are right that we do find 
ourselves in this relationship of interconnectiveness with 
Europe, and so in many ways their fate is our fate. And so 
given the existing stock of investment that we have put into 
Europe up until now, you know, putting aside anything we might 
put in there in the future, we certainly want to make good on 
what we have as best we can. And I think so it is in our 
interest that the Europeans manage their debt crisis in the 
right way. And I think it is also at the same time, important 
that we think of initiatives like a trade and economic policy 
liberalization which can help make the most of what we have got 
in Europe up until now and would also make Europe a much more 
attractive place to invest in the future.
    And I think there are some reasons to be optimistic that 
Europe will continue to be a good trade and investment partner 
for the United States, even just looking at it through the lens 
of the current debt crisis. First, they have had this crisis 
and they have had to create a lot of institutions on the fly 
that have not done a bad job of coming up with some financial 
packages to not only assist indebted countries, but also to 
help ward off future crises.
    But perhaps even more important, I think, is what a number 
of the individual countries have done themselves. If you look 
at some of the policies undertaken in Ireland, okay, that is a 
small country, but if you look at Italy. Italy was talked about 
even less than 1 year ago as a possible risk to the whole 
system. You are hearing a lot less about that now because Prime 
Minister Monti has really had the courage to engage in a lot of 
not just fiscal consolidation, but also he is trying to get to 
do some things which are going to lead to economic growth. And 
you see that is common in the bond markets now significantly. 
There are still challenges, but he is already feeling, and I 
think somewhat deservedly, so confident that he just recently 
gave a little talking-to to the Spanish Prime Minister saying, 
you know, why aren't you guys keeping your deficit under 
control?
    So I think that if you combine some things admitted on the 
EU level with some of the things that are being done in some of 
the important member states, and I don't mean to say that the 
Spanish Government, the new Spanish Government, I think, does 
have a strong reform package and I think has a good chance of 
success. I think that there is reason to be optimistic. I think 
the Greeks, they have recently had a renegotiation of the Greek 
debt. Certainly Greece is perhaps more challenging from a 
growth perspective than some of the other markets, but it is 
also a small country.
    So I think that given all we have got invested in Europe 
and given the fact that you also have a lot of very strongly 
performing countries in Europe and in the eurozone, certainly 
there are some that are in crisis, but if you look at Germany, 
The Netherlands, Austria, Sweden, Finland, there are a number 
of very strong economies that are good partners for us, and I 
think over time the eurozone will work out its problems. I 
think growth may not be as high as they want, but I think the 
more we trade with them the more the chance is that that growth 
will be at the level we want.
    Mr. Burton. Mr. Hamilton, do you want to make a quick 
comment? Let me just say that I will submit, if you don't mind, 
some questions for the record because I don't want to take the 
time of my colleagues. Mr. Hamilton?
    Mr. Hamilton. Thank you so much. Yes, I believe that while 
Greece is still in trouble and basically has defaulted, they 
have done what they can to construct a firewall so that 
whatever happens to Greece should not ripple back through the 
rest of the other European economies. And I think the efforts 
they have put together in terms of a very, very big facility to 
make sure these other economies don't go anywhere, coupled with 
reforms that Peter mentioned, and the Chancellor's decision 
that they really do have to support this no matter what it 
takes, will move forward.
    I think the point for the United States though is that 
because of this deep integration I have talked about, we have 
never had a greater stake in each other's economic success than 
we do today because of these transmission belts that I 
mentioned. One consequence right now of the problems that 
Europe has is that this flow of FDI, of investment from Europe 
into the United States, to American States and cities, has 
slowed down. So that of course accentuates our own problems, 
because this source of onshore jobs is not as strong as it has 
been. That has some problems for us.
    I think in Europe, the problem is that the competitive 
ability of many of these countries is starting to break apart. 
Some countries in Europe are world-class innovators and 
competitors, and others are having significant challenges, and 
that is going to be their challenge.
    But for American companies, a single pan-continental market 
of 500 million people is a big, big boon for American companies 
who know how to work in the big continental market. And you see 
that American companies are not withdrawing from Europe, in 
fact, they are investing more. Even in Ireland, which you would 
think given its troubles people would have left, they have not. 
American companies have sort of doubled down on Ireland and 
invested even more, and is a primary source of the Irish 
economy these days.
    And even 2 percent growth, even small growth in a market of 
500 million people could be much more important to American 
companies than 10 percent growth in a very tiny market. Just 2 
percent growth in Europe would create a market every year the 
size of the country of Argentina. It is not 10 percent growth 
in Argentina, it is Argentina. And that is what we are talking 
about. So even small growth in a very big market could be more 
important to American companies than big growth in a very tiny 
market.
    Mr. Burton. Thank you very much. Mr. Meeks?
    Mr. Meeks. Thank you, Mr. Chairman. Let me ask just a 
couple of general questions which I am concerned about. I have 
voted for just about every trade agreement that we have come up 
with, but it seems as though from 1999 to 2010, positive 
sentiments in regards to free trade agreements, and this is 
according to a Wall Street Journal/NBC News survey, declined 
from 39 percent to 17 percent, while negative sentiments grew 
from 30 percent to 53 percent of those respondents. And I have 
difficulty sometimes, but I am just wondering by asking you, 
how do you think we should explain this shift in Americans and 
their thought with reference to international trade agreements?
    Mr. Rashish. Thank you, Congressman. I think that when we 
look at trade, Europe is a great asset in that sense. I think 
trade with Europe is a very good place let us say to start if 
you want to try to get those numbers up a little bit. Europe is 
a large regional economy like ours, a population even bigger 
than ours, of GDP roughly the same size of ours, has a very 
similar standard of living on average. It has very similar 
approaches to regulation and to policy making. And so I think 
that if we want to try to convince Americans about the benefits 
of trade that Europe is an attractive place to start. It 
doesn't present the kind of challenges that a number of other 
of our free trade agreements have posed because of the 
differing levels of development, for example, between us and 
our trading partners.
    Now it is also true though that because Europe is large and 
advanced and is mature also politically in many senses, it is 
going to be much more even handed kind of negotiation. We are 
not going to be able to tell the Europeans what to do and they 
aren't going to be able to tell us what to do. But I do think 
that it is a good place to start if we want to have a campaign 
to say why trade can be beneficial to Americans and can create 
jobs.
    Mr. Hamilton. I have been struck by the submissions that 
have been presented to the government in the consultation 
process for the High-Level Working Group on this initiative. If 
you look at it, across the board there is support for this, 
across what have been in other trade negotiations maybe some 
problem. The AFL-CIO, for instance, has submitted a very 
positive statement about the potential of a transatlantic 
agreement, as has the Chamber. So from business across the 
board, different political actors, you see some agreement here.
    I think the other thing to think about is that, you know, 
many of our other trade agreements are trying to essentially 
bring our relations with other countries up to the standard we 
already have with Europe. We don't have really many trade 
barriers with Europe. And so if we limit this initiative to a 
standard free trade agreement, with all the caveats I mentioned 
that trade really isn't the problem, we are not really moving 
things very much forward. We should think of a 21st century 
type of new initiative that takes the entire system forward. 
And because we are half the global economy that is what we can 
do. And that is rooted in areas where it is distinctively 
transatlantic, like services, where we really have an 
opportunity here to change the whole playing field for the 
globe if we can move ahead with the Europeans.
    Mr. Meeks. I agree. But I tell you what my further concern 
is. For example, are we trailing the European nations? Even 
with some of the lesser developed nations, Europe has now done 
some 36 free trade agreements in comparison to our what, 14? So 
it seems as though whether it is less developed countries, et 
cetera, it seems as though it is a difference of opinion over 
there. They are moving forward on free trade and we are half 
stepping in one sense. What is your thoughts on that?
    Mr. Rashish. Thank you, Congressman. It is very true that I 
think the EU has what you could call the more activist trade 
agenda than we do right now. First, you have to remember that 
trade is, it has grown, but trade is a smaller percentage of 
our economy than it is in the EU where the Europeans are used 
to trading with each other for hundreds of years. So I think in 
most European countries at least, particularly in the smaller 
ones which are more exposed, but in most European, the idea of 
trade is something very natural. So they have that starting 
point that I think we don't have as a big continental country 
with only two neighbors.
    And the other thing I think to remember is that trade is a 
very powerful policy tool, almost foreign policy tool for the 
European Union. Trade is where the EU really has the most 
confidence of all areas to pursue policies, you know, where the 
European Commission has the confidence to pursue policies on 
behalf of all of the 27 member states. And so I think a lot of 
energy is put into trade policy, whereas the United States, we 
are a mature nation with full institutions, full Federal 
institutions and we have a lot of ways to pursue our interests, 
economic or foreign.
    But in Europe, a lot of that is put into trade policy and I 
think that partly also accounts for why they have many more 
FTAs they are negotiating compared to the United States.
    Mr. Hamilton. One example of that is the EU and Canada are 
close to concluding a comprehensive agreement. It is not 
getting much attention in the United States, but when it 
happens some people are going to start to look. And if you look 
at some of the provisions of that agreement, it goes much 
further than normal free trade agreements because it is with 
another major industrialized country. And that is going to 
happen soon. And it reinforces your point, the EU is going 
around doing all of these sorts of trade deals. They are 
probably going to do some more with Japan also. We have done 
some, and much of it overlaps actually when you come down to 
it.
    So one of the proposals I would make for a transatlantic 
partnership is that we align and codify all of those bilateral 
free trade agreements we have with all those other countries 
and simply put them together. That itself would open up huge 
amounts of new opportunities with us being the drivers again, 
and that is my point. We can take the initiative here, we just 
need some political will on both sides to do that.
    Mr. Meeks. Thank you.
    Mr. Burton. Ms. Schmidt?
    Ms. Schmidt. Thank you. Mr. Rashish, in your testimony you 
highlighted the fact that small and medium size businesses are 
often overlooked in trade debates despite the fact that such 
businesses are increasinly engaged in the export market.
    Can you discuss the impact that elimination of tariffs and 
greater regulatory cooperation will have on small businesses? I 
know we look at the large conglomerates, but what about the 
small businesses?
    Mr. Rashish. Thank you, Congresswoman. Well, I would say 
that in general, smaller companies have more of a challenging 
time reaching foreign markets than the larger companies and 
that particularly, smaller companies have a harder time dealing 
with regulatory barriers. It is very expensive for a small 
company to have to comply with two or more series of regulatory 
regimes to get their products certified and tested and 
certified.
    So I think the more we can make progress particularly on 
the regulatory side to be able to deem the U.S. and European 
approaches to regulation as equivalent so that small companies 
would only have to get their products tested and approved in 
one market that would particularly be a boon to smaller 
companies.
    Ms. Schmidt. Thank you. Mr. Hamilton, the U.S. as we know 
is pursuing trade agreements at a slow or snail's pace, and my 
concern is that it can cost us market share in the global 
community. I understand that the transatlantic relationship in 
trade and investment eclipses any other relationship, but the 
loss of market share can be such a slow leak that it only is 
noticed over time.
    You just mentioned the issue with the EU and Canada. Can 
you elaborate a little bit more on that and as well as our lack 
of moving forward, not maybe as quickly as the EU is with 
trade, but a little more quicker paced than we are right now?
    Mr. Hamilton. Yes. The EU-Canada comprehensive agreement 
will start to address a number of the issues that we have been 
mentioning. It goes into investment, for instance, which is a 
significant element also in the Canadian-EU relationship, and 
it starts to establish certain principles by which they will 
act. And I think it is interesting that they might be ahead of 
the U.S.-EU relationship in some of these areas even though our 
economic relationship is so much bigger. And it has some 
implications probably for NAFTA that have not been addressed 
very much, because obviously Canada is a key part of NAFTA. The 
EU has already a economic agreement with Mexico, they just 
don't have one with us.
    And if you go back to the point that was being made, all 
around the world both the U.S. and the EU have been trying all 
of these bilateral agreements or regional types of efforts, but 
we haven't done it with each other. This is the big hole in the 
trade picture. But it is also the big hole in these 21st 
century issues where in services, in investment, in regulatory 
cooperation, we have the opportunity to set the standards in 
ways that could be the core of much higher and better global 
standards across the board and could open up third markets.
    We are the biggest service economies in the world. We are 
each other's most important services markets, and most people 
in the U.S. and Europe work in the services economy. So if we 
could open up the next 20 percent of that market, it would also 
have a significant impact not only for us but on other 
protected markets. Brazil, for instance, is a big services 
economy but it is very protected. And if we are going to go 
forward and open up that will exert a bit of pressure on third 
countries.
    Ms. Schmidt. And my last question is regarding Russia. 
Trade with Russia has been mentioned. There is some concern 
about nationalization with foreign investment. How concerned is 
the Chamber and its members with those issues?
    Mr. Rashish. Thank you. I think the Chamber is concerned 
about those developments, but I think that we do believe that 
granting permanent normal trade relations to Russia and 
allowing our companies to fully benefit from Russia's 
membership in the World Trade Organization is one way to help 
with those and other challenges of operating in the Russian 
market. WTO membership including the participation by our 
companies in the Russian economy will create more competition 
in the Russian economy. It will bring new ways of doing 
business to the Russian economy. It creates new interdependence 
between the Russian economy and the U.S. and other economies 
around the globe. And I think the more that that happens the 
more we can be optimistic that these kinds of issues that you 
mentioned will present a decreasing challenge in the years to 
come.
    Ms. Schmidt. Thank you.
    Mr. Burton. Mr. Sires?
    Mr. Sires. Thank you, Mr. Chairman. As I look at this whole 
picture I have to somehow partition the EU and then Russia and 
then Turkey, because I guess when you talk about the EU the 
risk is less when you make a deal. We have a lot more things in 
common obviously. But when we talk about Russia and Turkey, I 
mean the risk/reward there, the risk is just much, much higher 
to cut some of these deals.
    So my concern is, we talk about Turkey and we keep pushing 
Russia and everything else, but to me the risk is just an awful 
lot for us when we can actually do a deal with people that we 
have certainly, I don't want to say more in common, but just a 
more common way of thinking. To me, Russia joining the WTO, I 
just wonder how much they are going to abide by the changes 
that they had to make. Because I mean China does whatever it 
wants basically. There is very little intelluctual properties 
concern and so forth.
    So I guess what I am saying is, do we partition it? I mean 
there seems to be a whole menu here, and even within the 
European Union there is a whole menu. Italy certainly can 
withstand a lot more changes than some of these other countries 
because I think they have more liquidity, is that the right 
word I am using, than Portugal or Spain. So I mean how do you 
pursue when you have such a menu, a trade agreement?
    Mr. Rashish. Congressman, thank you for the question. I 
mean I do share your inclination to want to have an agreement 
between the United States and the EU because I think it is 
something we could actually do pretty quickly for the reasons 
you state, because we are so similar. And I think even though 
we are already very integrated as to economies, because the 
relationship is so big there are definitely still huge gains we 
can tap and should tap.
    At the same time, let me talk about Turkey, because I think 
we can and should do both. Turkey is an incredibly important 
country from the strategic point of view for the United States, 
and I think it is more broadly given its location. It has also 
been experiencing very dynamic growth and a very active 
international economic diplomacy. It is reaching out into new 
markets.
    But given the importance of our bilateral political 
relationship and given the size of our two economies, the trade 
investment relationship between the United States and Turkey is 
seriously underdeveloped. And I think that that means there are 
important opportunities for our firms. I think it means that if 
we were to increase our trading investment relationship with 
Turkey that we would even have a more robust relationship with 
them and they with us. And I think that given where the kinds 
of both economic and political challenges are and are likely to 
be, a strong commercial relationship with Turkey could really 
yield many benefits for us.
    Now it is true that there a number of challenges that we 
face. The U.S. faces a number of policy and regulatory 
challenges in terms of market access, and on the Turkish side 
they face a number of more market based challenges because it 
is not a good match up between their companies and the U.S. 
market. But the U.S. Chamber has recently issued a report which 
I am happy to send you, to the member and you and your 
colleagues separately, which takes stock of where this 
relationship is and points to a number of both policy and 
business community actions we can take to increase the size of 
this relationship.
    Turkey wants to be one of the ten largest economies by the 
year 2023, which is the 100th anniversary of their founding as 
a republic. It is challenging, but given that they have tripled 
their economy over the last 10 years it is not impossible. To 
get there they are going to need to make a lot of policy and 
regulatory reform,s and so I think that gives us an opportunity 
to say to them, we want to be part of that but we also want to 
make sure that our companies have the access we need to help 
you achieve what is your goal.
    Mr. Hamilton. I agree with that on Turkey, and so let me 
leave that. But the point of your question leads me to sort of 
make this statement. I think the international economic order 
as we have built it over the last six decades is in danger of 
being eroded because a lot of rising powers don't necessarily 
agree with some of the basic principles that we have put in 
place.
    And it seems to me that over time, the West if you will, 
U.S. and Europe, we have become hesitant, a bit divided and 
really less assertive about the need for those types of 
principles. And we tend to go to these countries, each of us, 
through one door or the other trying to get them to buy into 
our or their principles, U.S. or European. In the end we say, 
take this standard, take that standard. We end up with the 
Chinese standard that way. And I think we need to be aware of 
that. That is why I say we are competitors, but if we could 
agree across the Atlantic that there are still basic principles 
of the international economic order that we will both act on 
also vis-a-vis third countries, I think it is a much more 
assertive statement that will sort of deal with this. It is 
like termites in the woodwork, you know, it is like an erosion 
constantly whether it is corruption or some of these other 
issues. And so having a robust new transatlantic partnership, I 
think, helps us deal with third country problems in Russia or 
in China.
    When the U.S. and the EU do get together, for instance, we 
had on consumer safety, many problems a few years ago, if you 
remember. The U.S. and the EU finally decided, let's go to 
Beijing together about consumer safety issues. And actually 
they did produce more progress with the Chinese on that issue 
than we have on a lot of other issues. But if we don't sort of 
stand up for that as I say we will have the Chinese standard. 
We will have the lowest common denominator type of world, and I 
don't think that is in either the U.S. or the European 
interest.
    Mr. Sires. I haven't raised the issue of security yet. 
Because I had people from the EU come see because I represent 
the Port of Newark and the Port of Elizabeth, which entries, 
you know, to a great deal of commerce. And we are talking about 
who should secure the containers that are coming in from 
Europe, whether it should be in Europe or it should be us. And 
I think that is something that has to be addressed eventually 
if we are going to have any kind of a deal.
    Right now I visit the ports, and I think we do a fairly 
good job of trying to see what is in these containers, and I 
often ask this question to the port people who handle it. But I 
think eventually that is going to be a big issue, whether they 
do it at port of departure or we do it at port of entry. And 
that will cost us money, but I think it is going to have to be 
done with just about every country that we deal with, 
especially if it is not the European Union but some of these 
other countries where there are still active people who want to 
do harm to our country. So I was just wondering how you feel 
about that.
    Mr. Rashish. Well, Congressman, thank you. The U.S. and the 
EU have recently arrived at an agreement on certain aspects of 
this issue to recognize the way each does look at cargo coming 
into our ports. And I think that is a great example of the kind 
of progress on an important regulatory issue, and I think we 
can certainly make further progress within the context of a 
trade negotiation and on this issue and others. But I fully 
agree that that should remain at the top of the agenda of our 
bilateral cooperation.
    Mr. Hamilton. There is disagreement on secure trade these 
days. I think the premise of your question is, on what basis 
will we come to these agreements? Will we come together again, 
lowest common denominator or high standards? If we can't agree 
on some basic principles governing secure trade with those 
countries most like ourselves, how would we possibly think we 
are going to have arrangements with many, many others who don't 
share some of the basic premises?
    So an agreement across the Atlantic in these areas can 
serve as the core for a much broader global effort. If we don't 
get that we get nothing. And so I think that is maybe one way 
to think about it. I would just take this to say it is not only 
about secure trade. It is really about all the flows that 
connect us, it is goods, it is services, it is ideas, it is 
people, again, and we need to have more resilient free 
societies today.
    Cyber tends to be kind of the issue everyone focuses on 
but, you know, if the electrical industry is attacked it 
doesn't matter how many cyber programs you have in place 
because they are all related. And again, if we and the 
Europeans can't come to some basic terms about how we will 
build resilient societies together to keep everything flowing 
so free societies work but that people feel safe, I don't 
believe we are going to have any global agreements, because 
they have to be built on certain principles. And we should 
establish those principles with our closest partners, most of 
whom are our core allies as well.
    So I would begin with the transatlantic, what I would call 
the resilience initiative as well, it is a little different now 
than what we have been talking about, but I think it is equally 
important because it actually is what people worry about. All 
of those flows that keep our societies moving are susceptible 
to disruption, either man-made or from Mother Nature. And if 
there was a massive disaster in Europe or here that taxed our 
societies, we should say to each other, let's come to each 
other's assistance and let's put in place the modalities to do 
that. We haven't thought that in the United States that we 
might have to need that help, but we had Hurricane Katrina. We 
have had other kinds of disasters where we have needed that 
help, also in New York.
    Mr. Sires. Sounds to me like John Lennon in his song. Thank 
you very much.
    Mr. Burton. He has ports in his district. I think you might 
have gathered that.
    Ms. Schmidt, did you have any other questions?
    Ms. Schmidt. Yes, I have a follow-up for you gentlemen. One 
of the concerns that has been raised are some of the barriers 
that our foreign allies have with our own products, basically 
Turkey and the whole pharmaceutical industry. And my question 
is, are the barriers there because of the fear of our products 
or because of a fear of the economic impact to Turkey?
    And I look at the agroscience that we do in the United 
States and the reluctance of the EU for our products, not built 
out of fear of the kind of agriculture that we are growing 
here, the products that we are growing here, but basically that 
if they allow our products over there it will create an 
economic, they will lose market share because we grow more 
quantity at a cheaper price over here. So looking at that model 
in Europe's reluctance with our agricultural products, is that 
the same kind of issue with Turkey? Is it a fear that they are 
going to lose their market share of their own drugs, or is it 
truly a fear of our product quality?
    Mr. Rashish. Thank you. I think when you look at the issues 
that the U.S. pharmaceutical and other foreign research based 
pharmaceutical sectors face in Turkey, there are two sorts of 
challenges they find. One is a challenge that is not particular 
to Turkey, but what I think the pharmaceutical companies in the 
U.S. would say is particularly challenging, and that is 
Turkey's pricing policies there which they are the government 
pricing policy, how much they will pay and reimburse for 
medicines which makes it challenging for them to operate there. 
But again it is not----
    Ms. Schmidt. I take it then, more than what the actual 
product is.
    Mr. Rashish. Yes, that they are concerned about. Yes, about 
the level. And again, it is not an issue that you only have in 
Turkey. You have this issue in a number of EU countries where 
these policies are still national and not at an EU level.
    You also have an issue in Turkey about the way the Turkish 
Government wants to certify the safety of pharmaceutical 
products. That I do not think is really because of a concern 
about the quality of our products, but I think our companies' 
products are getting caught up in that net. So it may be 
inadvertent but it is still a very strong concern.
    Mr. Burton. And now for our last questioner of the day, my 
good buddy.
    Mr. Meeks. My quick question is this because I am, along 
with Mr. Burton have been a strong advocate for removing 
Jackson-Vanik, and we have been talking regularly about Russia. 
But what about Moldova? They have been a part of the WTO for 
awhile, do you see any reason why we shouldn't lift, and grant 
PNTR standards to Moldova?
    Mr. Rashish. Congressman, I am sorry to have to say this in 
what is your last question, but I would like to check with 
colleagues and get back to you on that if I could.
    Mr. Meeks. Okay.
    Mr. Hamilton. If I could just briefly, I believe there have 
been some recent changes in Moldova which are encouraging in 
terms of the political process there. And it is probably in the 
United States interest to look hard at those changes and try to 
support them, because Moldova, the poorest country in Europe, 
is also part of what I would call a festering conflict. People 
call them frozen conflicts in Europe, I call them festering, 
because they are not frozen. They are bringing these people 
down because you can't resolve them. The Transnistria conflict, 
there is the conflicts with Georgia, South Ossetia and so on, 
Nagorno-Karabakh. These are still turbulent areas of Europe and 
Moldova is right there.
    So anything that can be done to either commercially or 
otherwise to try to alleviate some of that problem would be in 
U.S. interest, European interest, far beyond just trade. And so 
I think because of these political developments recently with 
the President and so on, one should take a closer look at that 
and see how one could encourage this development.
    Mr. Burton. Well, as I thank you very much for your 
patience and for being here today, I would like to make just 
one comment about Jackson-Vanik. There are some people who are 
leaders in the Congress who still don't want to remove Jackson-
Vanik from Russia. And if you have any ideas on what we could 
replace that with that would not be as onerous that you could 
recommend to us, we will present that to some of those folks so 
that maybe we can move in the direction of removing Jackson-
Vanik and yet still deal with the problem.
    With that thank you very much. I really appreciate you 
being here today. You guys did a great job. Thanks a lot.
    [Whereupon, at 4:18 p.m. the subcommittee was adjourned.]
                                     

                                     

                            A P P E N D I X

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     Material Submitted for the Hearing Record





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[Note: ``A New Era for Transatlantic Trade Leadership,'' a Report from 
the Transatlantic Task Force on Trade and Investment dated February 
2012, and a ``A Bull in Bear's Clothing: Russia, WTO and Jackson-
Vanik,'' a Task Force Paper dated January 2012 by the Bipartisan Policy 
Center, are not reprinted here but are available in committee records.]

                                 
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