[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
PRESIDENT OBAMA'S TRADE POLICY AGENDA
WITH U.S. TRADE REPRESENTATIVE RON
KIRK AND SECOND PANEL ON THE FUTURE OF
U.S. TRADE NEGOTIATIONS
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
FEBRUARY 29, 2012
__________
Serial No. 112-22
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
78-589 WASHINGTON : 2013
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
WALLY HERGER, California SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas CHARLES B. RANGEL, New York
KEVIN BRADY, Texas FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky XAVIER BECERRA, California
DAVID G. REICHERT, Washington LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana MIKE THOMPSON, California
PETER J. ROSKAM, Illinois JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania EARL BLUMENAUER, Oregon
TOM PRICE, Georgia RON KIND, Wisconsin
VERN BUCHANAN, Florida BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York
Jennifer Safavian, Staff Director
Janice Mays, Minority Chief Cousel
C O N T E N T S
__________
Page
Advisory of February 29, 2012, announcing the hearing............ 2
WITNESSES
PANEL 1:
Ambassador Ron Kirk, United States Trade Representative, Office
of the United States Trade Representative, Testimony........... 7
PANEL 2:
Mr. Tim Harris, President, Harris & Ford, LLC, Testimony......... 54
Mr. Brian Krzanich, Senior Vice President and Chief Operating
Offer, Intel Corp., Testimony.................................. 59
Mr. James H. Quigley, Senior Partner, Deloitte & Touche, LLP,
Testimony...................................................... 75
Mr. Alan Wolff Of Counsel, Dewey & LeBoeuf, LLP, Testimony....... 102
SUBMISSIONS FOR THE RECORD
The Hon. Dave Camp, Letter 1..................................... 133
The Hon. Dave Camp, Letter 2..................................... 135
National U.S. Arab Chamber of Commerce........................... 137
The U.S.-China Business Council.................................. 140
Coalition to Enforce Antidumping & Countervailing Duty Orders.... 156
Business Roundtable.............................................. 159
U.S. Chamber of Commerce......................................... 166
American Apparel & Footwear Association.......................... 179
Center for Fiscal Equity......................................... 184
Consumer Electronics Association................................. 189
Citizen Trade Policy Commission.................................. 191
Intel............................................................ 193
Philippine Embassy............................................... 208
Southern Shrimp Association...................................... 211
MATERIAL SUBMITTED FOR THE RECORD
Questions for the Record......................................... 214
PRESIDENT OBAMA'S TRADE POLICY AGENDA WITH U.S. TRADE REPRESENTATIVE
RON KIRK AND SECOND PANEL ON THE FUTURE OF U.S. TRADE NEGOTIATIONS
----------
WEDNESDAY, FEBRUARY 29, 2012
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:08 a.m., in
room 1100, Longworth House Office Building, the Honorable Dave
Camp (Chairman of the Committee) presiding.
[The advisory of the hearing follows:]
HEARING ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
Chairman Camp Announces Hearing on
President's Obama's Trade Policy Agenda with
U.S. Trade Representative Ron Kirk and Second
Panel on the Future of U.S. Trade Negotiations
Wednesday, February 29, 2012
House Ways and Means Committee Chairman Dave Camp (R-MI) today
announced that the Committee on Ways and Means will hold a hearing on
President Barack Obama's trade policy agenda with U.S. Trade
Representative Ron Kirk and with a second panel of witnesses on the
future of U.S. trade negotiations. The hearing will take place on
Wednesday, February 29, 2012, in 1100 Longworth House Office Building,
beginning at 10:00 a.m.
In view of the limited time available to hear the witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of invited
witnesses will follow.
BACKGROUND:
International trade is an engine for growth and job creation in the
United States. While the United States is the largest economy and
trading nation in the world, 95 percent of the world's consumers are
abroad. The future success of American workers, businesses, and farmers
is therefore integrally tied with continuing America's strong
commitment to finding new markets and expanding existing ones for U.S.
goods and services.
The bipartisan passage of the implementing bills for the Colombia,
Panama, and South Korea free trade agreements in October 2011 marked an
important step forward for U.S. trade policy. This hearing will provide
an opportunity to explore with Ambassador Kirk how the President's
trade agenda will sustain this momentum with respect to current trade
issues, such as: progress in the Trans-Pacific Partnership
negotiations; Russia's accession to the World Trade Organization;
China's trade restrictive practices and non-tariff barriers that
prevent U.S. companies from competing on a level playing field; the
President's trade agency reorganization proposal and National Export
Initiative (NEI); and various bilateral and multilateral trade disputes
and concerns. In addition, Ambassador Kirk's testimony and the second
panel of witnesses will provide an opportunity to focus on long-term
thinking relating to future trade negotiations, including ``post-Doha''
WTO issues such as an international services agreement, Information
Technology Agreement (ITA) expansion, and a trade facilitation
agreement in the age of global supply chains; Bilateral Investment
Treaties (BITs) with China and India and new BITs and investment
opportunities; and the trade and investment relationship with the
European Union, India, and Latin America.
In announcing this hearing, Chairman Camp said, ``Opening new
markets for U.S. businesses, workers, and farmers and strong
enforcement of U.S. rights are essential to driving economic growth and
job creation here in the United States. The three free trade agreements
with Colombia, Panama, and South Korea that Congress passed last year
in a bipartisan manner sent a strong message that the United States has
returned to the trade negotiating table. We are now at an important
juncture to move forward aggressively on the Trans-Pacific Partnership
negotiations and other initiatives to make sure that last year's
momentum is not lost. It's also a critical time for us to look ahead
for future trade and investment opportunities with important trading
partners like the European Union, India, and Latin America to maximize
American competitiveness and ensure that we do not fall behind.''
FOCUS OF THE HEARING:
The first panel of the hearing will provide an opportunity to
explore with Ambassador Kirk current trade issues such as: (1) ensuring
prompt implementation of the three free trade agreements with Colombia,
Panama, and South Korea; (2) seeking to conclude a good Trans-Pacific
Partnership agreement this year; (3) considering Russia's WTO
accession; (4) improving our important trade relationship with China
and addressing China's trade barriers; (5) addressing the Obama
Administration's trade agency reorganization proposal and National
Export Initiative (NEI); and (6) ensuring appropriate trade enforcement
efforts. The first and second panels will also focus on areas of
potential future trade negotiations such as: (1) advancing WTO
negotiations, including ``post-Doha'' issues at the WTO such as an
international services agreement, Information Technology Agreement
(ITA) expansion and a trade facilitation agreement; (2) completing
Bilateral Investment Treaties (BITs) with China and India and exploring
new BITs and investment opportunities; (3) deepening and expanding the
trade and investment relationship with the European Union; and (4)
establishing long-term, closer ties with important trading partners
such as Latin America and India.
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Chairman CAMP. If everyone would take their seats, we are
ready to begin. Well, good morning. I want to welcome everyone
and extend a special welcome to our guest, the U.S. Trade
Representative, Ambassador Ron Kirk, as well as our second
panel of witnesses. I am looking forward to a discussion of the
administration's trade policy agenda and the future of U.S.
trade policy.
We are coming off a strong year in which we saw more action
on trade than the past 5 years. We secured bipartisan passage
of our trade agreements with Colombia, Panama, and South Korea,
which had languished for far too long. This achievement
signified that Congress and the White House, House, and Senate,
Republicans, and Democrats could come together to pursue pro-
growth, pro-job policies.
Our trading partners around the world have taken notice
that we are back at the negotiating table and ready to lead.
And there is further good news: the United States and South
Korea quickly took the necessary steps to allow for entry into
force of the U.S.-South Korea agreement, which will take effect
in 2 weeks. Discussions paving the way for the Colombia and
Panama agreements are also underway, and I encourage an
expeditious completion.
Our recent trade successes have created a momentum--is
somebody's phone ringing here? Hopefully they will hang up
soon.
Our recent trade successes have created a momentum that we
must continue. Hesitation and delay allow our competitors to
take our market share and our jobs. As such, I would like to
flesh out today how this Administration and this Congress can
best promote economic growth and job creation through trade.
The one trade agreement negotiation away is the Trans-
Pacific Partnership, which President Obama announced he would
like to complete this year. This agreement will allow U.S.
goods and services to more easily reach consumers across the
Asia-Pacific region. And the TPP also serves as an effective
counterbalance to China in its own backyard. I welcome interest
by Japan, Canada, and Mexico as long as they will take on what
is already negotiated without delay and build confidence that
they can and will address outstanding bilateral issues.
We also faced Russia's WTO accession. Clearly, our ongoing
relationship with Russia is a complex one, but I note that if
we grant Russia Permanent, Normal Trade Relations will we be
able to obtain the benefits of the concessions Russia made to
join the WTO. We would give up nothing, not a single U.S.
tariff, but we would obtain a new enforcement tool and bring
our two countries closer on multiple fronts. This is a matter
the Committee will have to carefully consider, and I look to
the administration to build confidence and provide leadership
on the economic issues to help explain why America should move
ahead.
One of the largest trade issues that remains is China. With
a population of over 1.4 billion people, the Chinese market
provides tremendous opportunities to sell more U.S. goods and
services, which means more jobs here at home. Despite this
potential, there are far too many problems with China that
continue to put our workers and our businesses at a
disadvantage from indigenous innovation policies to subsidies
to intellectual property theft to currency undervaluation just
to mention a few. We must push China on every front, and the
Administration must ensure that China's commitments are fully
implemented.
This committee has asked the Administration several times
to define clear, concrete metrics to verify success. Tomorrow,
Committee Members will be meeting on a bipartisan basis with
Secretary Geithner, Secretary Bryson, and U.S. Trade
Representative Ron Kirk to discuss the challenges and
opportunities presented by our China relationship.
In addition, Ranking Member Levin, Chairman Brady, Ranking
Member McDermott, and I are introducing targeted legislation
today to make sure that we have the tools we need to address
unfair Chinese subsidies through our countervailing duty law in
a WTO consistent manner, and we expect to move this legislation
shortly.
I spent time talking about the issues on our plate right
now, but what about what comes next? An important aspect of
this forward thinking is renewing Trade Promotion Authority,
and I hope that Ambassador Kirk will share the administration's
views on that topic. Because the WTO Doha negotiations are
dormant, we should focus on a ``post-Doha'' strategy with those
countries that share our views and ambition.
Given that 80 percent of U.S. employment is in services, an
international services agreement holds great promise to
enhanced market access abroad, and I support the
administration's current discussions. Similarly, expanding our
very successful Information Technology Agreement would provide
us with more tariff-free access to foreign markets for our
information technology products. A trade facilitation agreement
could significantly reduce the cost of doing business in the
age of global supply chains.
Expanded investment opportunities are also vital to U.S.
growth. For the last 3 years, the Obama Administration has
placed all bilateral investment treaties on hold. Moving
forward on BITs already begun with China and India and
launching new negotiations should be a top priority. And
finally, we have to think defensively about our strategy when
other countries conclude subpar agreements that don't meet WTO
standards.
So in conclusion, today, I would like to have a
comprehensive discussion about the present and future of U.S.
trade policy and what it means for job creation here in the
United States. And I will now yield to Ranking Member Levin for
the purpose of an opening statement.
Mr. LEVIN. Thank you, Mr. Chairman. We very much welcome
this hearing.
And Mr. Ambassador, we very warmly welcome you here today.
Democrats on this committee have been actively working to
shape a new trade policy responsive to the changing dynamics of
a global economy. We rejected the passive, hands-off approach
that earlier characterized American trade policy and embraced
actively shaping the expansion of trade in ways that grappled
with the impact of trade and broadened its benefits and
minimized its downsides.
These principles have been reflected in our work on this
Committee for several decades now. They drove our work to
ensure incorporating enforceable core labor standards and
environmental standards in trade agreements. Working with the
Clinton Administration to adopt workers standards in the
pioneering Cambodia bilateral clothing agreement and in the
Jordan FTA; opposing CAFTA because of the Bush administrations
rejection of that standard; and when in the majority,
developing the May 10th, 2007 agreement, incorporating the five
basic labor and significant environmental standards into the
Peru agreement.
Those principles guided our refusal to approve the FTAs
negotiated by the Bush administration with Korea, Panama, and
Colombia until significant shortcomings were addressed; working
with you, Ambassador Kirk, and others in the administration.
Together we helped importantly improve those agreements ending
the one-way street of Korea's historically closed auto market,
ensuring that U.S. taxpayers could not use Panama as a tax
haven, developing an action plan to improve labor conditions
and address violence against workers in Colombia.
We are beginning to see tangible results from these
efforts. Ford has already begun shipping cars to South Korea
from the United States of America, and work continues with
Colombia to ensure full, meaningful implementation of the
action plan related to labor rights. Today's hearing will focus
in part on potential new agreements to open new markets for
U.S. goods and services, the Trans-Pacific Partnership,
Russia's WTO accession, the possibility of a U.S. EU FTA, and
the promise of a WTO services ``plurilateral''.
As important as these new opportunities are, they cannot be
our sole focus. A defining trade issue continues to be our
imbalanced trade relationship with China. Unfortunately, the
Bush administration too often adopted a hands-off approach to
this imbalance. It failed to actively implement the special
provision provided for in China's WTO accession for an annual
review of whether China was meeting its obligations. The Bush
administration refused in all four cases presented to it to use
the 421 safeguard against surges in Chinese imports that harm
U.S. industries and workers.
And Mr. Ambassador, this administration took a different
track and used 421.
Our trade with China effects myriad industries in their
efforts to compete within this market in China and globally,
and it is fundamentally affecting the structure and composition
of our economy. A trade policy that ignores or fails to
actively address this reality is incomplete and ultimately will
prove ineffective. So I applaud the President's decision to
create a new Interagency Trade Enforcement Center to enhance
the administration's ability to aggressively challenge unfair
trade practices in China and elsewhere.
I urge the administration to ensure that the ITC is
designed and equipped to fundamentally alter the way trade
cases are developed and prosecuted, and I think, Mr.
Ambassador, you will be talking about that. I also urge the ITC
to focus immediately on China's duties on auto exports, its
practices in rare Earth restraints, its export credit program,
its forced technology transfer, and its lack of transparency
and use of intimidation as a trade policy tool.
The need to actively shape the contents of trade
agreements, and not to assume simply that more is always
better, applies to the important TPP talks. We must closely
evaluate, number one, the challenges presented by unfair
competition from state-owned enterprises, the unique
circumstances presented by a communist nonmarket economy like
Vietnam, and the opportunities and challenges presented by
prospective new entrances, especially Japan, whether with its
longstanding rigid, exclusionary structures; it presents real
new market access opportunities for U.S. companies and workers
and creates a new benefit for our economy, including our
manufacturers.
And finally, with respect to Russia and the WTO, there is a
need to approach key outstanding issues in an active rather
than passive way ranging from IPR enforcement to the rule of
law.
So I look forward to hearing from you, Ambassador, and the
other panelists on how we can continue to craft a trade policy
that will meet the challenges of today and anticipate those of
tomorrow.
Chairman CAMP. Well, thank you. And Ambassador Kirk, again,
welcome, and I just want to congratulate you and your team at
USTR for everything you do, and I just want you to know that I
will do everything I can to make sure that you USTR continues
to maximize its effectiveness by remaining a separate agency
instead of being swallowed up within a larger bureaucracy. And
while I want to shrink government, I don't want to do that at
the expense of efficiency and excellence. So thank you for
being here, Ambassador. We do have your written statement, but
you are recognized for 5 minutes.
STATEMENT OF AMBASSADOR RON KIRK, UNITED STATES TRADE
REPRESENTATIVE
Ambassador KIRK. Thank you, Mr. Chairman and Ranking Member
Levin. To the Members of the Committee, it is an honor to be
with you again.
It was about 12 months ago that I had an opportunity to
discuss our Administration's plan to work through outstanding
issues related to the impending trade agreements with Korea,
Colombia, and Panama, and we expressed our commitment to
renewing Critical Trade Adjustment Assistance for America's
workers, and extending trade preference programs. At the time,
frankly, some of you thought we were seeking too much and
taking far too long, but, notwithstanding, working together, we
accomplished all of this and more last year.
Together, we did the hard work necessary to pass all of
these important measures in one historic evening, and in the
process, I would like to believe we built the new template for
bipartisan support of trade that opens markets and levels the
playing field for American business, workers, farmers,
ranchers, manufacturers, and service providers.
This year, with your help, we are looking to forge ahead on
another ambitious trade agenda. Tomorrow, you will receive
formally our 2011 annual report as well as a comprehensive
outline of our trade agenda for 2012, and in the interest of
time, I would like to not speak to those in detail, but
highlight some of our key initiatives for the coming year.
First, I am proud to report that after the successful
passage of these three trade agreements, we have been working
on implementation of them, and we have finalized our plans with
Korea, and that agreement will be entering into force on March
the 15th. At the same time, we continue to pursue our due
diligence with Colombia and Panama to ensure that they fulfill
their commitments so that those agreements can take effect as
soon as possible.
We are also moving full speed ahead in the Trans-Pacific
Partnership negotiations building on the broad outlines
announced last November at our APEC meeting with the leaders.
We are seeking to conclude this agreement this year and address
crosscutting issues, such as negotiating and promulgating
regulatory coherence among the countries, enhancing the
participation of small business, of trade throughout the Asia-
Pacific, and building regional supply chains that will promote
and sustain U.S. job growth.
As we consider the ambitions of additional countries, we
will closely coordinate with this Committee as well as other
Members of Congress to ensure that these participants meet the
TPP's high standards and address those specific issues of
concern many of you have raised.
As we move forward toward negotiating outcomes, the Obama
Administration will also engage you thoughtfully on additional
trade promotion authority as necessary to approve the TPP as
well as future trade agreements. This year, we are getting even
tougher on trade enforcement, which has been a priority of the
Obama Administration from day one. Yesterday, President Obama
established by Executive Order the Interagency Trade
Enforcement Center to prioritize and more aggressively
challenge the kinds of unfair trade practices that we fight
fiercely every day, from China's improper restrictions on
industrial raw materials to improper subsidies by the European
Union and other partners.
Right now, we also have an opportunity to defend the rights
of U.S. workers and businesses by working to pass the
legislation referenced by Chairman Camp that will ensure our
ability to remedy the harmful effects of unfairly subsidized
imports from China and other countries. And we are ready to
bring Russia into the rules-based system in a way that gives us
more enforcement tools to enable enhanced market access and a
level playing field for U.S. exporters. And that is why the
administration will seek to terminate Russia's Jackson-Vanik
status to ensure that American firms enjoy the same job-
supporting benefits of Russia's WTO Membership as our
international competitors.
Broadly speaking, our pursuit of enhanced trade to support
American jobs extends across all geographic regions in all
economic sectors. For example, we are engaging with the
European Union to deepen our Trans-Atlantic trade relationship,
and we are eager to work with you to make immediate progress
with Sub-Saharan Africa and our CAFTA countries on issues like
third-country fabric and textile and apparel rules of origin.
At the WTO, we will continue to pursue fresh, credible
approaches to multilateral market opening trade negotiations in
the Doha realm, but also in other plurilateral options such as
services and information technology.
In conclusion, I would like to thank the Committee for your
thoughtful consideration of critical trade issues and continued
support for our ambitious agenda. Working together, I have no
doubt that we can stay on track to meet our goal of doubling
U.S. exports and ensure that our trade policy continues to
create job-supporting export opportunities for all Americans.
Thank you.
[The prepared statement of Ambassador Kirk follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman CAMP. Well, thank you very much, Ambassador Kirk.
Our number one focus in Congress is jobs. And our push for
better protection of U.S. intellectual property rights in China
is all about jobs. Now, the International Trade Commission, an
independent agency, recently did an analysis, and they
determined that if China improved its IPR protection on the
same level as we have in the United States, it concluded that
U.S. exports to China would increase by $21.4 billion and that
sales by U.S. companies in China would increase by $87.8
billion and that more than two million jobs would be created in
the United States.
What is your Aministration doing to create these jobs? And
are there any additional tools you need to be effective in this
area?
Ambassador KIRK. Well, we are aggressively pursuing a very
broad strategy to challenge, we think, some of China's
restrictive and discriminatory policies not only in the area of
information technology, but the underlying industrial policies.
We use all the tools available to us such as challenging some
of these policies directly in the WTO which resulted in the win
on the issue of entering our films into Chinese markets and
getting adequate compensation and protection for U.S.
intellectual property.
We use all of our bilateral engagements to raise these
issues from President Obama's frequent meetings with President
Hu and Premier Wen to the recent visit of Vice President Xi,
and the Strategic and Economic Dialog and the JCCT. But the
bottom line, Mr. Chairman, is China presents a unique
opportunity because of their explosive growth, but we all know
of the frustrations that many of our businesses face because
China has not fairly enforced the rules and recognized
international standards in terms of respect for intellectual
property and others.
But we will continue to engage them to get them to
recognize and respect the rule of law, enforce intellectual
property rights, and particularly combat piracy and
counterfeited goods that resulted in the type of numbers that
you referenced.
Chairman CAMP. Are there any additional tools you need to
be more effective in this area?
Ambassador KIRK. We believe--we think right now that we
have a sufficient number of tools. But I will be honest; part
of the President's rationale for bringing together all of our
agencies through this Interagency Trade Enforcement Center is
to make sure that we are adequately and efficiently using the
resources that we have.
As you know--or maybe the Committee does not know--our
Administration has brought cases against China at twice the
rate of the previous Administration. But more critically, at
least right now, we have won every case we have brought against
China. But we have had to be fairly selective in doing that,
because in many cases, these are horribly resource intensive.
It takes an extraordinary amount of work and time to gather the
intelligence because of the non-transparency of China's system.
So we do think the creation of this Trade EnforcementCenter
will go a long way in making sure that we aren't resource
constrained and we are operating as efficiently and
thoughtfully as we can.
Chairman CAMP. Well, and I know you know the stakes are
enormous and the jobs that would be created in the United
States, if we're able to simply bring them to the same standard
on intellectual property we have, is significant. Two million
jobs is important.
I wanted to shift to another area. Japan is interested in
joining the TPP or Trans-Pacific Partnership, and I also
understand Canada and Mexico are as well. Particularly with
Japan, it shows how TPP can further integrate the Asia-Pacific
region. If Japan adopts the high standards of the TPP, there
are obviously potentially many benefits to many sectors of the
economy as well as many industries. But I know there are a
number of significant outstanding issues that will need to be
addressed, and I have heard from a number of industries about
Japan's persistent barriers such as in autos, agriculture, and
services, including issues about Japan Post.
Now, in my opinion, Japan's interest in joining creates a
unique opportunity to address some of these barriers to U.S.
exports and investment, and that is an opportunity we have not
had. But what steps is the Administration taking to address the
outstanding concerns about Japan's discriminatory policies and
to ensure that Japan is ready to meet the TPP's high standards?
Ambassador KIRK. Well, that is--Mr. Chairman, you framed
both the question and I think part of the response in exactly
the same manner. I guess the attractive part of this equation
was your statement ``if Japan meets all of the high
standards.'' And we would say that for any of our partners in
APEC, that what we have said is TPP is not something you are
invited to. It is something other countries have to ascribe to.
And--we want high standards, because the future of our
economic growth is going to be based on our ability, as the
President says, to out-innovate, out-educate, out-sell the rest
of the world. We have a very innovative manufacturing model
now, and we aren't going to compromise that by entering trade
agreements that allow countries to undercut that. But for all
the reasons you articulated, we very much welcome Japan's
expression of interest in joining us.
But I would say one of the strengths of our form of
government is our transparency. And as you know, we welcome
Japan's entry. We immediately began to proceed under the manner
that Congress dictates to think about bringing in new
countries, and we put a notice in the Federal Register inviting
comments not only on Japan, but Mexico and Canada. And the
upshot of that is Japan knows exactly, because all of these
comments are public, what the concerns of our industries are.
And so we are now engaging with them, frankly, in a very
honest dialog based on feedback we have gotten from your
Committees and industries on how we would address that. We have
made it plain we welcome Japan's entry in the TPP. As you know,
part of our deliberation as an Administration as to whether we
would join was based on our belief that, one, it was in our
competitive advantage to be in on the ground floor drafting
what we believe will be the standard portrayed in the 21st
century, but also to believe this could become the vehicle that
rationalized trade in the Asia-Pacific, which is the fastest
growing region in the world. So there is an implied bias on our
part that other countries would join, but we have been very
honest they have to meet those standards.
So there are outstanding issues we are working with each of
them to resolve, but we will work through them with all of
those issues that have been raised. And then, frankly, it is in
Japan's hands to demonstrate its willingness to address these
issues.
Chairman CAMP. All right. I just can't underscore how
important addressing these persistent barriers are going to be
as we move forward on that. So thank you very much.
And with that, I will recognize Mr. Levin.
Mr. LEVIN. Thank you, Mr. Chairman. I want to quickly pick
up on that, because the question is regarding Japan and TPP
whether TPP would be an adequate instrument to really open up
Japanese markets. And so when we say that there are standards
within TPP, the question is whether there are adequate
standards and whether that would be adequate enough to change
historic closed markets in Japan.
I went through a brief history of trade policy, because I
think it is important to remind us where we were and how far we
have come. And for years, there was a failure to address the
structural challenges presented by Japan in agriculture and in
industrial areas. For example, they manufactured in 2010 almost
10 million autos, and their domestic market is less than five
million. And so if they were granted TPP entry and the tariffs
went down to zero, their manufacturers would save roughly a
billion dollars. And so far, the savings they have had from
their closed markets have been used to sell the same auto here
cheaper than it is sold in Japan.
So you ask an important question, Mr. Chairman. And we have
to be darn careful. We say ``we welcome.'' The question is
whether a welcoming will lead to addressing historic closed
markets. It has been a one-way street. And I think as we talk
about China, we should be--we should remember the difficulty
that we have had with Japan.
I very much welcome the President's decision to create the
ITC, Mr. Ambassador, and you are going to take the lead. And I
think it signals a much more vigorous effort by this
Administration than past Administrations to get at the problem
of an inadequate two-way street in trade with China and their
using their structures to give them advantages that are
inimical to fair trade--to free trade.
So I saw this story--and it was in The Detroit News--about
the Ford F-150. I could take a DVD and use that as an example,
but we would have to buy it illegally. So I didn't want to do
that. But you could take a DVD selling for $1 in China, which--
about something that just came out, and they sell it.
So this is a story about a Chinese truck that imitates the
Ford F-150, which is apparently a complete imitation. And I
think it raises all kinds of questions. I think China's entry
into the WTO was necessary. We set some provisions in there
that unfortunately weren't enforced. Now, the Administration is
doing so. But I think that this picture shows the challenge
that we face in making sure that China plays by the rules.
So we welcome their participation, but we have to insist
that there be a fair set of rules that they follow, and I hope
very much that this establishment of the ITC will be not only a
signal, but an embodiment of a new effort to insist that China
play by the rules. Is that really what you're after?
Ambassador KIRK. Well, I think the short answer is going to
be yes. I just would like to--and you know how much you and I
think alike on these. I just want to make one point. For us,
this isn't a new effort. And again, I remind you when we were
here last year--and this committee has always been wonderfully
welcoming and supportive of us. But the biggest questions last
year was why is everything taking so long, and we were very
emphatic in our belief that our objective wasn't just to pass
three trade agreements, but to really build a new template for
trade, and I just--I said that from day one.
If you go back to the first trade agenda we filed with you,
we identified enforcement as one of the keys to--we believe--
beginning to rebuild America's trust in our trade policy. And
so this is a continuation of that. And in short answer, I would
say to you, we have heard your concerns. On TPP, even though we
don't have trade promotion authority, we calculated that we
have visited with Members of Congress and their staff over 350
times to hear your concerns on a range of issues. Those are
important to us, but we are in a good place. And I would say
this committee and Congress deserve a lot of credit.
The manner in which we passed the trade agreements, renewed
Trade Adjustment Assistance, the trade preferences, and the
strong bipartisan vote sent an unequivocal message to the
world: The United States is ready to do business. We are open
to do trade on the right terms. And we have got a great
opportunity to move forward with that.
So one, we want to address these concerns, but we also want
to do it in a way that allows us to try to take advantage of
this and get access to these new markets.
Mr. LEVIN. Thank you.
Chairman CAMP. Thank you.
Mr. Herger is recognized.
Mr. HERGER. Thank you, Chairman Camp.
Ambassador Kirk, I want to join in thanking you for your
efforts on free trade agreements this last year. As we continue
to look for ways to increase exports and spur job creation in
the U.S., I am concerned by the Administration's seemingly
paralysis on bilateral investment treaties.
As you know, exports and investments go hand in hand. U.S.
investment abroad allows U.S. agricultural producers,
manufacturers, and service providers to reach foreign
customers. As such, we should be pursuing BITs to ensure that
U.S. investments abroad are protected from arbitrary government
actions and discrimination, further paving the way for U.S.
exports to reach foreign markets.
Almost 3,000 BITs have been concluded worldwide, yet the
U.S. is party to only about 40 of them. Those numbers
demonstrate the extent to which U.S. businesses and their
workers are being left behind in the global economy.
Unfortunately, the Administration has announced no new plans
for bilateral investment treaties since 2009. And the existing
negotiation on the China, India, and Mauritius bilateral
investment treaties have been on hold for over 3 years, because
the Administration has not been able to conclude a review of
the U.S. model that you use to negotiate BITs.
Mr. Ambassador, what plans do you have for moving our BIT
negotiation forward and announcing negotiation for additional
countries without further delay?
Ambassador KIRK. Mr. Herger, thank you, and I appreciate
your honest expression of your concern on this. But I would
like to tell you, just as we brought a very deliberate approach
to negotiating the FTAs, we try to bring that same thoughtful
deliberation to the BIT, the bilateral investment treaties.
We are hopeful that we will conclude our work on the new
BIT model in the very near future. We have, in fact,
intensified our engagement, at the same time, though, with
important potential partners like India and China. We built on
the successful visits of Prime Minister Singh to the U.S. and
President Obama to India, for example, and got India to agree
to a more robust engagement. We had one session in India in
December. We are traveling to India within the next several
weeks for the next meeting on that BIT. We have had over five
sessions with China. We concluded a BIT with Rwanda, and again
we hope to conclude work on the model BIT within the very near
future that will allow us to go forward more aggressively.
Now, I appreciate your illustration of the numbers of BITs
signed by other countries, but we have been trying to be much
more deliberate through the President's National Export
Initiative, frankly, working with our businesses and using a
very targeted data-centric model for where we would go. The
good news is, most countries in the world would welcome the
opportunity to have an FTA, a BIT, or a TIFA with the United
States. But we think that is a unique opportunity we have to
induce them to change their behavior in many places.
But we want to go to markets in which it is in our
collective best interests that will support that underlying
concern that Chairman Camp mentioned, and that is job growth
here and expanding our economy.
So I have heard you. Hopefully, we will give you good news
on conclusion of the model BIT. But I do want to assure you
that we are engaged, in particular, with India, with China, and
Mauritius, and we will be looking for appropriate partners as
we go forward.
Mr. HERGER. Well, Mr. Ambassador, I appreciate that, and I
appreciate your hard work. But again, putting this in
perspective, 3,000 negotiated worldwide, and we are party to
only four of those. And we haven't had one since 2009. I would
hope that we could, again, move a little more rapidly than we--
--
Ambassador KIRK. I do. And I don't mean to minimize that,
but all agreements aren't equal. I mean, in one example, the
Korea Free Trade Agreement is economically more compelling than
the last seven trade agreements that we've done. So we are
going to do them where they make sense, where they help us and
help our manufacturers get important markets, and we still--I
mean, I would remind you the United States is still the best
market for foreign direct investment by a wide margin, almost
670,000 Americans owe their jobs to investment here. We are the
most open market in the world. Our economy is still larger than
the next two economies in the world. So we want to be very
targeted and discreet where we use these. But I appreciate your
encouragement.
Mr. HERGER. Thank you.
Chairman CAMP. All right. Thank you.
Mr. Johnson is recognized.
Mr. JOHNSON. Thank you, Mr. Chairman.
Ron, welcome back. I'm delighted to see you. You probably
liked the Mayor's job better than the one you have right now.
Ambassador KIRK. This has been--but they have both been
very rewarding. Thank you, Sam.
Mr. JOHNSON. Well, I know you're finally able to take care
of the free trade agreements with the three countries you
mentioned. You better than most know the importance of trade
with respect to jobs and economic growth, especially how it
affects the Dallas area.
So with that, let me ask you about the President's goal to
double exports in relation to the President's corporate tax
reform proposal he put out last week. As you may know, in that
proposal, the President called for a minimum tax on foreign
earnings of U.S. multinationals. Given today's global economy,
I am trying to understand why the Administration would propose
to make it tougher for U.S. companies to compete overseas,
which would then make it harder for U.S. companies to increase
their exports and create American jobs.
Later on, we are going to be hearing from Intel's chief
operating officer, who, in his written testimony, puts it best
by saying, ``The revenue we generate outside the United States
helps create and sustain our high-paying jobs at home.''
So let me ask you: Wouldn't you agree this tax proposal
would make it harder for American companies to compete
globally?
Ambassador KIRK. Well, first of all, Congressman, it is
always good to be with you, and I appreciate your strong
support. You are probably not going to be surprised that I may
not readily agree with your last statement. And you correctly
noted--and I am proud to be a former Mayor of Dallas, home of
the world famous Dallas Mavericks; thank you for bringing that
up. But I am not a tax expert.
Sam, I would tell you everything we are doing as an
Administration is designed to encourage job growth here at
home. We recognize we live in a very different world now. And
for many of our multinational corporations, whether it is Intel
or Boeing or Microsoft or Google, they have to be engaged
around the world. That is okay. But that ought to be a business
decision. It ought not be one that our Tax Code incentivizes
because they have the ability to make profits abroad and keep
them home.
Now, where I would agree with the gentleman from Intel is
that absolutely what we want to protect is that research, that
investment, that core technology in which Apple creates the
iPad here, and it may be assembled elsewhere. But millions of
Americans have their jobs because we design, we create products
from California to Texas to Illinois, and then they may be
assembled elsewhere. We want to support that. But the President
simply wants to use our ability to leverage our tax policy,
which is a choice that says if we're going to incentivize
behavior, we want to incentivize behavior that encourages
keeping those jobs here.
Now, you asked about our National Export Initiative. The
President challenged us in the State of the Union 2 years ago
to double exports. We did that for a simple reason; we know
about every billion dollars in exports support about 5,000 jobs
at home. And if we could do that, that would be two million
jobs. And one of the good news stories of our economic
recovery--and we all know it is not enough--exports are helping
to drive that. Our exports are up about 34 percent since that
challenge. They were up 14.5 percent in 2011. Particularly in
the farm economy we had a record year, almost $140 billion in
agriculture exports with a $41 billion surplus.
So this is working, but we want to make sure we continue
that, because we are beginning to face headwinds as the global
economy begins to stagnate in other places. Our tax policy can
complement that by making sure we do things to create more
manufacturing here. And what we are beginning to hear from
manufacturing, particularly when the President held his in-
sourcing conference, was more and more business had begun to
realize, particularly with China where wages are beginning to
rise and China's continued inability or lack of will to protect
core intellectual property that, in many cases, they are better
served bringing those jobs here. We think we ought to have a
tax policy that helps sustain that.
Mr. JOHNSON. I agree with you, and I don't think we ought
to double-tax people just for working overseas either. And I
know you agree with that. We need to make it easier, not
tougher, for American companies to compete globally.
Ambassador KIRK. We would agree on that.
Mr. JOHNSON. And I think you agree with that. And thank you
for being here today, Ron. We appreciate you.
Ambassador KIRK. Thank you. Good to see you.
Chairman CAMP. Thank you.
Mr. McDermott is recognized.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Mr. Ambassador, Washington state--Exhibit A, for the
argument, that trade represents enormous opportunities for U.S.
workers, farmers, and business. According to The Washington
Public Ports Association, roughly one in four jobs in
Washington state is tied to foreign exports, and pay for those
jobs is about 46 percent higher than the average in the state.
But my constituents believe--and I agree with them--that we
have to get the full bang for our buck from all the trade
deals. When a country signs a trade agreement with the United
States, they have to fulfill their obligations. If we--if they
fall down on the job, the United States should use every
available tool at its disposal to make them live up to their
commitments. It is just basic fair play.
Last year, my Democratic colleagues and I called for the
development of a comprehensive and robust strategy to help
rebalance our trade relationship with China, and pleasing to
all of us was that the President responded and created the
Enforcement Center in the ITEC in his Administration. This ITEC
will increase the administration's ability to make sure that
China and other trading partners keep their promises.
But it needs to be made clear; China's unfair trade
policies have consequences not just for the United States and
other developed countries, but for the developing countries as
well, including countries in southern Africa. We can help
lesser developed Sub-Saharan African countries compete against
China by extending the third-country fabric provision, one of
the most important elements of the African Growth and
Opportunity Act. This provision, which expires in September,
allows apparel producers in these countries to use third-
country fabric in making apparel that gets duty free treatment
under AGOA.
Sub-Saharan Africa competes with China in manufacturing
exports. Last year, Charlie Rangel and I introduced legislation
to extend the third-country provision until 2015. Identical
legislation was introduced by Senators Baucus and Hatch last
December. Now, both Chairman Camp and trade Subcommittee--Brady
committed months ago to moving this legislation, and yet there
is no action. Buyers are already turning away from the AGOA
region, because they project out 9 months when they're planning
their purchase of apparel. They can't turn on a dime. So this
waiting until September to pass the extension doesn't really
make any sense.
And I understand some Republicans have concerns about
sending a revenue measure over to the Senate. If they need an
ironclad agreement from Senators Reid and McConnell that there
won't be any shenanigans, well, they will get one. We cannot
wait any longer to act if we're serious in our economic
development strategies.
I also want to take a moment to applaud the work of the
USTR on Boeing-Airbus case in the 2011 appellate body decision
that ruled that Airbus launch aid and other subsidies violated
WTO. If the UA continues to drag its feet and doesn't withdraw
the subsidies, then we should go directly to the compliance
proceeding.
My staff has been working with Mr. Reichert's staff, the
Senate, and folks in Congress that will really help the
National Export Initiative to make us better at exporting. This
bill will have no cost and will solve some real problems to
increase exports, and I just want you to know that we
appreciate your team's efforts on that behalf.
But I have one question for you. The May 10th changes--we
are talking now about TPP and IPR medicines--the May 10th
changes struck a fair balance between timely access to
affordable medicines in developing countries and protection for
innovation. In the TPP negotiations, USTR has proposed an
alternative that throws off this balance in favor of protecting
innovation. How have the other TPP countries, especially the
developing ones, reacted to that proposal when it was tabled in
the TPP negotiations?
Ambassador KIRK. Well, first of all, let me thank you for
your kind words for USTR about Airbus. That is, I think, as
good an example of where smart enforcement policy helps sustain
jobs. It is spectacularly the largest, most commercially
significant case ever decided within the WTO identifying almost
$18 billion in WTO non-consistent subsidies of Airbus to the
harm of Boeing and their workers, and we are going to continue
to insist that the EU complies with that.
With respect to the Trans-Pacific Partnership and access to
medicines, frankly, again--and I think I have mentioned the
extraordinary number of consultations we have had with
Congress. We have had even more with NGOs and others. What we
are seeking to do is make sure that we have the strongest
disciplines in terms of protecting intellectual property, which
is the lifeblood of America's economic growth, but also making
sure we have access to medicines, that we encourage those that
are involved in the production of these new lifesaving drugs to
bring them to market soon.
We have a new approach that we are trying. It is called
TEAM, Trade Enhancing Access to Medicines. We don't think it
does anything to diminish what we accomplished in the May 10th
agreement. We have been very plain that we at least want to
start with the premise, with respect to the Trans-Pacific
Partnership, that we are to build on what we have learned in
the past.
For the most part we have been doing trade agreements on
the same model that has existed for the last 10 to 15 years.
And we have a lot of challenges that didn't exist then--the
involvement of state-owned enterprises, the explosion of the
generic pharmaceutical industry, and we want to just make sure
that we get the right balance between the two. That is what we
have tabled. You have to know some of our partners don't want
to do any of this, but I--while I--we will applaud, and the
United States has a better than commendable track record of
making sure that poor people around the world have access to
these lifesaving medicines. We think it is not in our interest
to do it in a manner that undercuts the basic premise of who
does R&D and brings these medicines to life.
Chairman CAMP. All right.
Ambassador KIRK. So we are trying to strike the right
balance.
Chairman CAMP. Thank you. Time has expired.
Mr. Brady is recognized.
Mr. BRADY. Thank you, Ambassador. I join Chairman Camp in
thanking you and commending USTR for the good work on moving
these trade agreements forward. Trade is jobs. It is the
economic freedom to buy and sell and compete around the world
with as little government interference as possible, and we know
the world has changed. It is not enough to simply buy American;
we need to sell American in every corner of this globe.
Clearly, with the passage of the three trade agreements,
America is back on the trading field in a big way, but it is
important that we not return to the sidelines. Our competitors
are very aggressive, reaching negotiations that put us at a
disadvantage. So it is important that we have a very
aggressive, a very ambitious, as you said, 21st century trade
agenda.
I commend your efforts on enforcement. I think they are
critical, and I support them. But enforcement alone is not
enough. We need an aggressive agenda that finds new customers
for our businesses and our farmers, that tears down trade
barriers and fights protectionism anywhere in the world. And it
finds ways to move our goods and services better, faster, and
cheaper to the customers in this world. That is what today is
about, about finding out what that new 21st trade agenda ought
to be.
So first, I want to start by issuing a broad invitation to
all those in this room today and those listening to submit
comments for the record for this hearing about what should be
in the pipeline strategically from a market standpoint, from a
facilitation effort, and for the next trade agenda for America.
And secondly, in going forward, Ambassador, I want to ask
you specifically about Trade Promotion Authority. One of the
lessons we learned from the three trade agreements was how
invaluable a role having a clear up or down--timely up or down
vote on those agreements was. You are currently negotiating the
Trans-Pacific Partnership critical agreement. The President has
indicated he would like to see it completed this year. It is
important to our agriculture, service companies, technology,
and manufacturing businesses throughout America. So clearly
moving this forward this year is important, but how do we do
that without trade promotion authority?
So my first question is: When will the President submit TPA
for Congress's consideration.
Ambassador KIRK. Mr. Chairman, first of all, thank you for
your strong support. I agree with you. First of all, we aren't
going to conclude TPP without trade promotion authority. And we
want to engage, frankly, with the leadership of this Committee
on what we want in the elements of that bill, and then we will
timely submit it to you.
But we have got to have it. We need to have it. It gives
that protection of fast-track, which as you know, was
invaluable. We would not have been able to pass the trade
agreements with Korea, Panama, and Colombia without it. And one
of the reasons we have had so many consultations with you is we
hope as we get there, we have built up enough trust as to what
elements--what is in that package. Then we can--design a
thoughtful bill and move it hopefully rather efficiently
through our committees of jurisdiction.
Mr. BRADY. Do you expect that? The reason I ask, one, Trade
Promotion Authority is where Congress gives clear negotiating
authority to the White House with clear negotiating objectives
from Congress. And in return, we provide that timely up or down
vote without amendments.
It is critical that our negotiating partners know that they
have that assurance when negotiating important agreements like
the Trans-Pacific Partnership. So do you expect us to see TPA
from the White House sometime by the middle of this year, in
the third quarter? With the work that you are doing on TPP, do
you expect to conclude that by the end of the year, so this has
to be in advance of it?
Ambassador KIRK. Mr. Chairman, I don't want to handicap
whether it is the middle of third quarter, but obviously, if we
are going to meet that objective of concluding, we are going to
have to have it before the end of the year. I would say--and my
thanks to the committee--that the credibility we gained by the
strong vote in this Congress on the three FTAs sort of answered
the questions from some of our negotiating partners, on whether
we had the political move to go forward.
So one, it has not been a hindrance to us in terms of our
negotiating thus far, and we have negotiated other trade
agreements ahead of time without it. But obviously, we are
going to have this resolved before we would bring TPP forward.
Mr. BRADY. Thank you. I think we have another chance for
more bipartisan success on jobs for America through trade, and
I think that is critical. Thank you, Ambassador.
Ambassador KIRK. Yes.
Chairman CAMP. Thank you.
Mr. Davis is recognized for 5 minutes.
Mr. DAVIS. Thank you, Mr. Chairman.
I appreciate you being here, Ambassador. We talked in
December with Ambassador Marantis on a Trade Subcommittee
hearing on the TPP. During that hearing, I asked Ambassador
Marantis about the letter the Kentucky delegation had sent you
opposing USTR's proposal to exclude certain products,
specifically tobacco. And the response that we got back from
your office said that you were ``still developing our
negotiating position for the TPP'' end quote.
As an ambitious trade agreement that I think has huge
positive economic and national security implications for this
country, I was wondering if you could tell us what factors are
being considered in consultations to reach a decision regarding
carve-outs, specifically the tobacco carve-out. And can you
tell us if you are going to, in fact, exclude tobacco from the
entire TPP or specific chapters.
Ambassador KIRK. Well, first of all--and thank you,
Congressman Davis, but let me make it clear. We have not tabled
any proposal to exclude tobacco or any product. So I know there
is great concern from the Kentucky delegation. I was with
Governors Beshear from Kentucky and Perdue from North Carolina.
We understand their very strong passion on this. As you know,
there are equal concerns from NGOs and those in the healthcare
field that we not table anything that would restrict this
administration's, this Congress' ability to regulate in the
interest of public health.
And because of the passion on this on both sides, first of
all, we have not tabled anything. We are trying to seek the
proper balance between our stated objective of having a high
standard, comprehensive agreement in which everything is on the
table and as few carve-outs as possible, and at the same time,
maintaining that core underlying standard of all trade
agreements, and that would be nondiscrimination, that we would
not treat other countries' manufacturers' products any
differently than here--and that is the overall environment in
which we are trying to come up with the proper balance on
tobacco. But we have not yet concluded that.
But I want to make it plain. We have not tabled anything
that would exclude tobacco or any other product.
Mr. DAVIS. Could you commit to us that you will stay in
dialog with us as this position unfolds so that----
Ambassador KIRK. Absolutely.
Mr. DAVIS. And I'd like to switch subjects to another area
of real concern. We talked a lot in this Committee about
manufacturing. I spent my post-military life in manufacturing,
and there are policies that really date to the Cold war on dual
use technologies that don't reflect the reality of the
international marketplace right now, specifically in the
machine tool industry, which has always been at the heart or
the cornerstone of American manufacturing.
I have two of the most successful machine tool producers in
the world headquartered in northern Kentucky--Mazak North
America and MAG, the former Cincinnati Machine. And for
example, five-axis metal cutting machines, which are at the
core of any product production, whether it is automotive,
aerospace, any other type of manufacturing are tightly
controlled by the U.S. Government.
Currently, it is creating huge competitive problems for us
in Asia, in India, in Russia and China. And right now, there is
at least 13 Chinese machine tool companies that build five-axis
machines. They are exporting into other countries. The
Europeans have a tremendous market advantage because of this
issue.
And I would like you to comment first on the challenges
that--how can we work together to overcome this export control
problem on what are obviously technologies that are widely
available right now, and there are no defense constraints on,
potentially changing the rules on that.
And also dealing with the issue of visa control, many of
our international businesses that are very, very dependent on
international exports to fit with the President's plan to
double exports can't, in fact, get their foreign clients here
through the visa process with the State Department. I know it
is not directly under your jurisdiction, but as a trade
ambassador, I think ultimately this affects your ability to
promote American manufacturing and ultimately American jobs
that will create a lot of export revenue for us.
Ambassador KIRK. Well, Congressman, yours was both a
question and an answer, and I want to tread carefully, because,
as you know, one of the realities of my job is that Congress
retained the ability to implement commercial treaties, and you
were very prescriptive about what I do. And one of the things I
am most reminded of is that I am not supposed to make
immigration policy, nor trade policy. But I----
Mr. DAVIS. Feel free. Everybody else does it, too. So----
Ambassador KIRK. I would say I think the President has--I
mean, the common sense of what you have said--if part of our
growing our economy and creating jobs is taking advantage of
the opportunity to sell more of what we make to the rest of the
world, it would just make sense that our customers ought to be
able to come here and learn about the products and have access
to the people that are going to be supplying them and teaching
them. I think the President has said--is correct; the best way
to address this is part of comprehensive immigration reform,
but you have stated the obvious. We frustrate our own efforts
when our visa laws are so--can be so restrictive that it makes
it difficult to support our underlying ambition to sell more
around the world. But I would just say I think that speaks to
the need for Congress in a bipartisan way to do something that
makes sense.
With respect to export controls, as you know, the President
asked then Secretary Gates to work with Secretary Locke at
Commerce to modernize our export control regime. Many of these
laws made sense 50 years ago when we were in a Cold war with
Russia. We will absolutely not compromise on the core
underlying principle that we aren't going to share technology
with countries that might seek to use that against us. But for
the overwhelming majority of products, we think that should be
modernized.
I know Secretary Bryson is working in an expedited manner
to try to address that, because we have heard from too many
businesses like the one you mentioned that the United States is
just losing out on technology that people can easily go buy in
another market. And we want to have that opportunity for our
manufacturers.
Mr. DAVIS. Thank you.
Thank you, Mr. Chairman.
Chairman CAMP. Thank you very much.
Mr. Neal is recognized.
Mr. NEAL. Thank you, Mr. Chairman.
Mr. Ambassador, I have been hearing from companies in
Massachusetts, as we discussed earlier this morning, that
manufacture here in the U.S. and also import that a free trade
agreement with the European Union could be beneficial both in
opening European markets for U.S.-made products and for
reducing cost to U.S. consumers for certain European products
that they import.
The Port of Boston would be an obvious gateway to expand a
trade with the EU. Is USTR considering a U.S.-EU FTA, and what
might be the status of your discussions with your EU
counterpart about this possibility?
Ambassador KIRK. Congressman, we are engaged at the
direction of President Obama following the visit of the
President of the EU here last fall. He and President Barroso
instructed us to create what they call a high-level working
group. And with strong encouragement from businesses across the
country, we are exploring all options. Now, we have been very
careful not to cast it or bias it ahead of time by saying it
would or would not be an FTA, and frankly--and it is a great
opportunity to remind us that by a huge margin, this is the
largest commercial relationship in the world.
And frankly, one of the things I instructed our negotiators
is to adopt, I guess, the trade equivalent of a Hippocratic
Oath--let's do no harm--because this relationship has sort of
worked without government--but we are exploring everything
across all areas from a services liberalization to non-tariff
regulatory coherence. We have had about five meetings since the
presidents have asked us to do that, but have tried our best to
not restrict our teams as they work through it, but be
practical, see where we have opportunities to liberalize trade,
take cost out of the systems, but try and not prejudge the
outcome.
Mr. NEAL. And on a more parochial matter, we spoke again
about enforcement today, and China has had severe problems with
mandatory third-party auto liability insurance markets, and as
this problems have become more compounded, the difficulty we
have is that when we thought this was going to be an opening
for American financial services. If anything, it has been a
stalemate. I think that might be the best description. So I
know that you have embraced firm enforcement as part of your
tenure. And I hope you won't take your foot off the pedal on
this issue.
And I hope we are not going to lose momentum to make sure
that China doesn't drag its feet in fulfilling its promise. As
we indicated, there has been a huge chasm between those who
thought that this was destiny in terms of new financial
opportunities only to discover the impediments in those markets
have not turned out to be quite what was anticipated. And
enforcement remains a big issue for all of us here, and I think
that with full market access for our companies, that they will
be able to readily apply for licensure along those lines.
Ambassador KIRK. Yes. First of all, again, I think the
President's initiative in creating the taskforce demonstrates
our resolve to keep our foot on the pedal. And with respect to
the third-party liability in the auto industry, one of the
better outcomes from Vice President Xi's recent visit was we
were able to get a very firm commitment from China that they
will open up that market.
Now, what we have to do is make sure we are diligent, as
you said, working with China that they will move quickly to
implement the regulatory changes to enhance that. But
hopefully, by the time I see you again, we will have companies
selling in that market.
Mr. NEAL. Thanks. Thanks, Mr. Ambassador.
Thanks, Mr. Chairman.
Chairman CAMP. Thank you. Mr. Reichert is recognized.
Mr. REICHERT. Thank you, Mr. Chairman. Welcome, Mr.
Ambassador. Good to see you again. And again, congratulations
to you and your team, and I really appreciate your presence
here and your open, honest answers. We have worked well
together, the Committee and your office and my office
personally. I appreciate your efforts.
I want to touch on something. My focus will be all on jobs.
And of course, this, you know, trade is essentially really,
bottom line, about jobs. I know you're not a tax expert, but I
just want to mention the Harbor Maintenance tax and how it
impacts, especially the West Coast and the business that we're
losing to Vancouver and Prince Rupert ports. The Longshoremen,
Longshore Union and our Port Authority people are very, very
nervous about how this impacts our trade opportunities
especially in Washington State, in my case.
If you could respond in writing, we'll follow up this
question with a letter, and hopefully we'll get an answer back
on what the administration's policy might be on this. So as far
as the free flow of electronic information, you've touched on
it just a little bit, it's critically important, as you know,
to U.S. companies that sell goods and services over the
Internet. The e-commerce--and e-commerce is something we know,
I think, a little bit, we know a little bit about in Washington
State, but we know that some foreign governments block, you
know, these efforts and the flow of information. Other foreign
governments require online service suppliers to process data
locally or to locate servers in their contracts.
These types of restrictions can impede trade, undermine the
competitiveness of U.S. companies, and cost American jobs. This
is a real twenty-first century trade issue. And to create a
free trade agreement included landmark provisions on these
cross-border data flows. Do you agree that the Trans-Pacific
partnership must include strong provisions ensuring the free
flow of electronic information?
Ambassador KIRK. Absolutely we do, Congressman Reichert.
And first of all, thank you again. You have been wonderfully
supportive, and I appreciated your hosting the ASEAN trade
ministers with us when we came out. But we agree with you, and
I think you know we have worked with you and other Members to
table what we believe is a very thoughtful, commonsense e-
commerce provision in the Trans-Pacific partnership for the
reasons that you articulated.
Mr. REICHERT. Thank you. And my last question, quickly, is
regarding the Export-Import Bank. And, you know, we hear the
administration talk a lot about manufacturing, but it's kind of
rare when you hear officials talk about the importance of
services. And we all know that services are 70 percent of our
economy and 70 percent of our jobs, getting back to jobs.
Services like financing, insurance and express deliveries don't
just create jobs, but they create high paying American jobs and
further, they enable manufacturing and they enable exports. And
the Export-Import Bank is up for reauthorization.
There are many who talk about the banks in terms of what it
means for America's largest employers, but a lot of folks
really sort of dismiss the small business impact here of the
Export-Import Bank. Can you explain, really, how important it
is for the Export-Import Bank and their relationship with small
businesses in the United States, please?
Ambassador KIRK. Thank you. I'm happy to and again, I
recognize I'm here as U.S. Trade Representative, but, you know,
one of the good things we've worked with you on, exports are a
great story right now. Our exports are up. We are in records
across all services, all sectors. Manufactured goods are up 34
percent, agriculture is up 31 percent, services is up 21
percent in comparison to 2009. In just about every country in
which we trade, we have a surplus in services. Seventy percent
of Americans work in the service sector. Ninety-seven percent
of U.S. exporters are small businesses, many of them in the
service sector.
So first of all, we acknowledge everything you say,
Congressman. We are working. That's why we are specifically
addressing services liberalization in the Trans-Pacific
Partnership. It is one of the larger opportunities we have in
Korea; for example, which has over a half a trillion dollar
services market. But I think it's also critical, that Congress
renew and extend the authority of the Export-Import Bank. I
think, and forgive me, I don't know the exact numbers, I want
to say they have about a hundred billion dollar lending cap.
They are effectively at about 95 percent of that. That's going
to run out in the next 2 months.
And so as well as we're doing, we're going to lose the
ability to finance many of our products, and particularly, for
small businesses. And so I think it's critically important that
the Export Banks' caps be lifted, they be extended. They cost
the taxpayers not one single dollar. They are financed through
their transactions. It's one of our better stories. They enable
many of our small businesses to grow and compete. So hopefully
we can work with Congress to extend that.
Mr. REICHERT. Thank you.
Chairman CAMP. All right. Mr. Boustany is recognized.
Mr. BOUSTANY. Thank you, Mr. Chairman. Congratulations,
Ambassador Kirk, on getting a job well done with you, your
staff working with this Congress to get these three free trade
agreements finalized. That is singularly the most important
jobs legislation this Congress has passed. And it's bipartisan.
It's something we should all be proud of. But that doesn't
constitute a twenty-first century trade agenda. In fact, if I
could use a simple football analogy, it's almost as if we're
deep in our own territory playing defense and we finally
created a turnover. Now we can go on offense, but now we have
to take advantage of this and move forward.
And so we need to continue to knock down barriers, you
know, continue with enforcement, and also look at hurdles that
we have to overcome here internally. And I want to join with
Chairman Herger over my concerns about the lack of progress on
getting a model bid in place and also moving forward with the
negotiations on a bid with both China and India.
But if I could direct my questions to you on a couple of
things with regard to China. Obviously, a broad range of issues
out there. But two often overlooked areas are SMEs and the
impact that they play on getting American exports into the
Chinese market and services where we have a growing trade
surplus of services. But we still have major problems there. I
mean, for instance, currently we have 27,000 U.S. SMEs that
exported to China in 2009. We can grow this, and this is an
area that I think clearly my district we're seeing expanded
activity, but there are significant barriers and problems in
place.
The same thing with services. Even though we do have a
surplus with China, there are a number of issues with licensing
and so forth that we need to--I would like to know what is the
administration doing specifically in these two areas and what
are our metrics. I mean, beyond just hearing what President Hu
has said, statements from Wang Qishan, Mr. Xi was here earlier,
but what is going on. How are we ensuring this follow-through
in China on these things that we're agreeing to and what are
the metrics to show progress?
Ambassador KIRK. Okay. If I could take those separately
because with the SMEs, through our export promotion activities,
our Trade Policy Coordinating Committee, we have very specific
metrics, but in many cases not country-specific. Maybe I will
take that remark back.
I think you all know we have only, surprisingly, about
280,000 businesses in the U.S. of any size that export. Ninety-
seven percent of those are small businesses. One of the first
things I did was ask the ITC to do a study to help us
understand who they were. And that's, from my bias back when I
was a Mayor; the most important thing is to find out who your
customers are.
So one of our first metrics is one, if we could just double
the amount of small businesses that export because small
businesses who export grow more, pay more, hire more. We
represent only about 1 percent of the universe of all small
businesses in the U.S. Now we've been more discriminating than
that because our SBA administrator helped us understand small
business is broad enough to capture everybody from the sub
shop, but, you know, of those that could export, we're trying
to double that. We're providing more knowledge, more trade,
promotion authority, financing, a number of those things. But
if we can double that, get that from 1 percent to the global
average of 2 to 3, I think you can understand the role that
will play in jobs.
Secondly, I'll be honest, many of our small businesses
export to only one country, one customer. So that's a great
place to start. If they're exporting, they're not afraid of it,
and we're working to help them grow and expand. Now, I'll be
honest. With many of our small businesses, the best advice we
tell them, you be very careful about going to a country like
China because frankly, you know, Boeing can survive a five-year
fight over Airbus. That small business that Congressman Neal
and Congressman Davis mentioned, they can't. And we really
steer----
Mr. BOUSTANY. I've had companies that have had similar
problems.
Ambassador KIRK. Right.
Mr. BOUSTANY. But one, we try to work with them to make
sure they go somewhere there is going to be respect for rule of
law; their product isn't going to be ripped off. Broadly on
China, we're doing everything through the strategic and
economic dialogue, the JCCT. We are taking them to court. They
have a very close service market. As you know, we sought WTO
panel consultation, for example, in the payment of electronic
services to try to open up that market, but the pace nearly
isn't to our satisfaction. And again, one of the rationales
behind creating this trade enforcement center is so we can be
more aggressive in taking some of those challenges.
Mr. BOUSTANY. Thank you. I yield back.
Chairman CAMP. Thank you. Mr. Becerra is recognized.
Mr. BECERRA. Thank you, Mr. Chairman. Ambassador, thanks
for being with us. And let me congratulate you and the
administration for the work you've done, the successes you've
had. And I believe that America, its workers, its
entrepreneurs, its businesses, its farmers are all very much
looking forward to your continued success as we try to open up
markets in a fair and competitive way for our businesses and
our workers here in this country.
I also want to applaud you, by the way, for the work that
this administration has done and its recent announcement, in
fact yesterday's announcement, about the establishment of the
trade enforcement center. That, I believe, will help us
continue in this march towards the competitive and level
playing field for American businesses and American workers. I
hope that you can get that up and running very quickly. If we
have that robust commitment to enforcement, I think that will
be the key to helping establish broad support for a trade
agenda here domestically and certainly to help make sure that
we have that even playing field abroad for our companies and
our workers to get out there and open up markets.
I wanted to focus most of my time, if I could, just on the
questions pertaining to the trade agreements that were recently
signed. I just got back a couple of days ago from Colombia and
had a great visit, a remarkable visit with President Santos of
Colombia who is trying to do some remarkable things for the
country. They have made some great strides in the last several
years, and they acknowledge that it is because of U.S. support
and investment and cooperation that they've been able to make
some tremendous progress there. And they are working with us to
try to make sure that implementation of the different
commitments and promises made in this trade agreement are
achieved.
One of those very important commitments was in the area of
labor, as I know you know this very well because you were very
key in getting those terms agreed to. President Santos seems
very committed to making sure we're well on our way to getting
those pieces of the puzzle in place on the Colombian side. I'm
hoping that you can give me a sense of what we're going to do
to help monitor and assist Colombia as it tries to move forward
because some of those commitments are going to be tough. They
require institutional change.
The issue of assassination of individuals simply because
they happen to be trade unionists or the issue of the
suppression of the ability of workers to try to collectively
bargain are still there. And the President was very clear that
he is committed to try to move forward on improving the
situation there for Colombian workers so that American workers
and American businesses can trade on an open and level playing
field. But can you tell me what we're doing to try to, for
example, help them further integrate these commitments into
their institutions?
Ambassador KIRK. First of all, Congressman, again, thank
you for your kind words, and thank you for your strong support
and advocacy on a number of these issues. One, I would hope
that perhaps if not with you personally, my staff could follow
up with your team just to get a better sense of what you
learned.
One, I would say we have made very good progress, not only
with Korea, which will go into force March the 15th, but Panama
and Colombia as well. We realize, as Congressman Brady said,
the first step is passing these agreements, but to get the
benefits, we need to get them entered into force. I know for
you and many Members of the Committee, particularly from the
Democratic party, absent this strong labor action plan, we
wouldn't have gotten the strong bipartisan support we did.
Because of that, the President made a commitment we would make
sure that that was implemented, not only in the letter, but the
spirit of it as well.
Now we have some more work to do, but we have been very
encouraged, frankly, with President Santos' very quick
implementation of a number of those. As you know, one of the
reasons we delayed bringing Colombia forward, we wanted to see
these changes in law. We didn't want lip service. He did that.
He appointed, I think, to many people's, frankly, surprise, one
of the most respected labor leaders in Colombia as the new head
of a new separate labor ministry.
And Minister Pardo, I believe, came and met with a number
of you here. He has met with labor leaders here. They have
moved to hire many of the inspectors within the Labor Ministry
that we've asked. They have worked, frankly accepted technical
assistance from our Department of Labor, as well as the
International Labor Organization. They have moved to address
concerns in some of the most important sectors we asked them in
terms of not only identifying issues, but bringing--holding
people accountable.
Now there is more to do, but at least it feels like they
are absolutely meeting both the letter and the spirit of what
we have asked them to do. And so we have made this a very
collaborative process. And I very much have to highlight the
strong involvement of Secretary Solis and her team and working
with them. But at least thus far, it has been a very good,
strong collaboration, and we'll continue to monitor and give
them that technical assistance where they have asked for it.
Mr. BECERRA. And my time has expired. So I'll just close by
just saying that I agree with everything you said. And maybe we
can work with them on their inspections and on their
interpretations of some of the laws. But I agree with you,
they're trying to make progress. And thank you, Mr. Chairman.
Chairman CAMP. Thanks. Mr. Buchanan is recognized.
Mr. BUCHANAN. Thank you, Mr. Chairman, and I want to thank
the Ambassador for being here today and especially, as
everybody has mentioned on the free trade agreements, it's huge
to Florida. As you know, Ambassador, we've talked about it. We
have 14 ports, $68 billion worth of economic activity. And so I
want to thank you again for your leadership on that.
Jobs. That's what we're all here for today. Last year I
introduced a 10 point jobs plan. One of the key parts of the
jobs plan was China's blatant disregard for intellectual
property rights. It was reported by the U.S. International
Trade Commission that Chinese piracy and counterfeiting cost
American businesses an estimated $48 billion in 2009. The
report concluded that 2.1 million jobs could be created in the
U.S. if China complied with their international obligation to
protect and enforce intellectual property rights. Ambassador,
what are we doing about that and are these numbers remotely
correct? That's what I've been told and verified. So I wanted
to get your thoughts on this.
Ambassador KIRK. Well, not having been involved in this
study, and I think Congress very wisely separates the analysis
of the value of our trade work from the responsibility to
negotiate and enforce them between USTR and the International
Trade Commission, but your numbers seemed at least remarkably
similar. I think it was Chairman Levin that mentioned the same
study.
From my perspective, again, my bias having been a local
official, if it's two hundred jobs, you know, if it's a
thousand, they're worth fighting for. But clearly, China could
be much more aggressive in enforcing and combating piracy and
theft. It cost us billions of dollars of revenue to American
businesses and lost jobs. And for that reason, it is one of the
issues that we most persistently and singularly raise with
China to work at, from engagements by President Obama and Vice
President Biden to our work at the JCCT.
One of the practical facts that we've heard from many of
your businesses is that China typically tends to respond when
we have an event. When we have a presidential visit, we do
something. And they love special campaigns. And so for 6
months, they do really good. And then they go right back to
doing what they're doing.
Mr. BUCHANAN. Well, they're saying 2.1 million jobs could
be created. So I would like to have you look at that.
I just want to touch on another question. The Panama trade
agreements. It's been brought up by a lot of businesses in
Florida to me is that even though they've been enacted, the
U.S. exporters are still unable to reap the benefits of the
agreements until it actually goes into force. That means U.S.
exporters still face tariffs in Panama. Meanwhile, Canada and
European unions and others are taking advantage of doing
business with Panama.
What can we do to move these along more aggressively. I
know you're working on it, but what more could we be doing, in
terms of the administration, to get these enacted because it's
costing us, you know, not only business, but jobs all over the
country. But I'm looking at Florida.
Ambassador KIRK. Well, frankly, Congressman, you've done
your part in giving us a strong vote, and I just want to assure
you, we're moving as aggressively with Panama. We sent teams
down to Panama last fall. The good news, we just received some
of the documentation that Panama is required to submit. And now
we're going through the process of analyzing that to make sure
it does what we want. But we are moving as diligently----
Mr. BUCHANAN. Do you have a time line, or maybe you have
something because I get asked that a lot exactly where----
Ambassador KIRK. You know, I hate to put a specific time on
it. You know, we wanted to have them all done as soon--we're
aware they have been at that trade agreement with Canada, and
we don't want to lose ground. The other element, and it goes
to, if I could, just the point you made about infrastructure
and similarly Mr. Reichert and Mr. Boustany. We have a great
opportunity with the opening of the Panama Canal, but a
challenge to address our port infrastructure all around the
country because that's going to be a huge opportunity for us to
increase our exports.
Mr. BUCHANAN. Thank you. I appreciate the opportunity.
Chairman CAMP. Thank you. Mr. Smith is recognized.
Mr. SMITH. Thank you, Mr. Chairman, and thank you,
Ambassador. I appreciate your service and certainly, the
agility of USTR to, I guess, act with the benefits of Americans
in mind in production and certainly Nebraska agriculture. I was
wondering if you could provide an update on Japan's age
restriction on the U.S. beef imports to 30 months and under and
also how the U.S. is assessing Japan's interest in joining the
TPP.
Ambassador KIRK. Thank you, Congressman. The exclusion of
U.S. beef from the Asian market, as you know, over the last 8
years has been crippling to our beef industry. We have done a
better job of getting back into on U.S. agriculture exports to
Korea. And the good news, with two-thirds of tariffs Korea has
going away on March 15th, we expect to see our agriculture
exports there do even better.
We have met with Japan I can't tell you how many times to
try to get them to comply and accept the fact our beef is as
safe for consumption as any in the world. The good news, we
have pressed them that they are now undertaking the risk
assessment they have told us that they would to determine the
safety of our beef. We are hopeful we can get them to conclude
that and we can be back into that market soon because it is
critical for beef suppliers all around the U.S.
Mr. SMITH. Right. And certainly, this speaks to the
sanitary, and vital sanitary issues that a lot of times our
trade partners, I guess, don't go off of the science-based
standards. What do you see as perhaps an opportunity to perhaps
go beyond what past trade agreements haven't stated or even
beyond what the WTO has in place?
Ambassador KIRK. Well, our first goal for all of our
partners, whether its China, Japan, Mexico, Europe is look,
just play by the rules and accept sound science. We can't allow
cultural differences of the others to distort the market. So
one, we seek that level of compliance with everyone. Two of the
opportunities we have are if we can get other countries into
the Trans-Pacific Partnership, one element is going to be some
of the strongest sanitary and phuto-sanitary standards. And
secondly, we referenced earlier one of the real benefits. For
example, if we can lift the Jackson-Vanik restrictions when
Russia joins the WTO, for the first time they would have to
adhere to those sanitary and phuto-sanitary standards.
So we're using the opportunity to grant permanent, normal
trade relations to Russia, as well as the development of the
TPP, to try to enhance those standards and open up markets for
American agriculture. And I referenced earlier, I won't go
through it, but agriculture is one of our good news stories in
our export policy. I'm sure you know we had a record year last
year. $140 billion dollars with a forty-one billion dollar
surplus.
Mr. SMITH. Right. And you touched a little bit on the
situation with Russia. Now very specifically, there have been
very tangible, negative results from the restrictions that
Russia has placed on U.S. pork. I mean, we had record levels of
exports of pork to Russia and then when some, I would say, non-
science-based issues entered the equation, the numbers changed.
What can you assure us will be done about that.
Ambassador KIRK. Again, the first step would be for us to
recognize that our granting Russia permanent normal trade
status is decidedly in our interest. We are not required to
lower one tariff. It would, for the first time, give our
exporters, our farmers, at least access to dispute resolution.
But we would have also the opportunity to compete for those
TRQs.
And I have to tell you the point, no one has been more
supportive broadly of our trade initiatives than the pork
industry. But I understand their very legitimate frustration in
Russia because of the behavior of their Agriculture Ministry.
But having more tools to confront them, Congressman Smith,
would be the first step. And that's why we will be working with
you to address the issue of Jackson-Vanik.
Mr. SMITH. Great. I appreciate that. And I think, you know,
in closing, there are some great opportunities in the world.
Obviously you've touched on those. Great background in
agriculture now with the numbers speaking for themselves of
what trade can accomplish. And so I'm excited that our governor
is planning to travel to China this summer on a trade mission.
And so I think the opportunities are out there, and I look
forward to working with you to make sure that we do move
forward with a level playing field in mind. Thank you.
Ambassador KIRK. Thank you, sir.
Chairman CAMP. Thank you. Mr. Doggett is recognized.
Mr. DOGGETT. Thank you, Mr. Chairman. And thank you,
Ambassador. Good to have you here. I think all of us recognize
the potential of the Trans-Pacific partnership, and as with any
trade agreement, there are pluses, and there are minuses. My
concern would be that there is as much attention at USTR
focused on minimizing the harm from such an agreement as
maximizing the many potential good benefits of the agreement.
My understanding from prior testimony we had from your
office is that you envisioned having the same standard applied
to New Zealand and us and Vietnam. Is that correct? Do you
expect there will be separate provisions so that some countries
are dealt with differently than others?
Ambassador KIRK. Congressman, without knowing
specifically--and it is always good to see my mother's
congressman.
Mr. DOGGETT. That's right.
Ambassador KIRK. She will send you her regards. And I am
glad it sounds like we finally got a map in Texas.
Mr. DOGGETT. Right.
Ambassador KIRK. Our ambition, at least among the nine
countries that initially decided to go down this road together,
was let us not wait on what is going to happen in Doha or APEC;
let us try and develop a new trade model for the twenty-first
century with the highest standards knowing every country is
going to have some challenge.
But at least let us start with the proposition, we want a
high-standard agreement that everybody has got to play to and
that this would not be the place to try to draw those
distinctions between developed economies or maybe least-
developed or emerging economies, that if you sat at the TPP
table, which we gave Vietnam 24 months to make that decision,
for example, then we would say, ``You take all the time you
need to come here, but here is the price of admission. We are
going to ask you to aim high and reach high.'' And at least
that is the method by which we have progressed to this point,
Congressman, and we still want to adhere to that.
We want to have a high-standard agreement to which all of
the parties are sort of on the same level, and the decision as
to whether you want to meet those standards is up to individual
countries. But from our perspective, we want this to be applied
across the board.
Mr. DOGGETT. Do you anticipate then asking Vietnam to meet
International Labor Organization standards, core principles?
Ambassador KIRK. Yes, we do.
Mr. DOGGETT. And given its history of a lack of protection
for workers, how do you see them getting there?
Ambassador KIRK. Look, this is going to be a big lift for
them. But to their credit, I would say this, there were no
surprises. We were very honest. We were going table a labor
agreement that incorporates core American values. Vietnam has a
further road to travel, but at least every step of the way,
they have said, ``We understand that, and we are going to
aspire to that.''
Now our team just came back from Vietnam. We were
encouraged. They have, for the first time, sort of welcomed the
ILO to come in and help them design some of their structures.
They have got a lot to do. I don't want to underscore the fact
this is, for Vietnam, a much heavier lift than others. We are
doing everything we can to provide them technical assistance.
There are some areas they are going to say--they are going to
do the, we are new, we are young, but that is inherent in any
trade negotiation.
Mr. DOGGETT. Are there also transshipment issues with
Vietnam, Malaysia, some of the other countries? And has
transshipment of Chinese goods picked up in Korea since that
agreement has been ratified?
Ambassador KIRK. It has not in Korea. Because of you all's
concerns, particularly about North Korea, as you know, we were
very careful to craft an agreement, and I would say--Korea and
the U.S. were interested in drafting an agreement that would
help businesses in Korea and the U.S., not in China. That issue
has come up particularly in the textile chapter, frankly,
because there are some American businesses who don't want any
restrictions on their ability to take goods from China and ship
them through.
We think this should be for the benefit of Vietnam, and we
also want to protect a U.S. textile industry that, perhaps more
than any other industry, feels like they have not been as well
represented in our trade agreement. So we are trying to get the
proper balance with our yarn-forward provisions and others that
will protect the interest of our textile industry that is doing
okay, but gives the incentive to Japanese suppliers, and not
those being----
Mr. DOGGETT. And what about the concerns that this
Committee and you have dealt with on many occasions concerning
currency manipulation in Asia. Would you expect that this
partnership would address the currency manipulation problem?
Ambassador KIRK. Well, we are going to have an opportunity,
as the Chairman said, I think, to talk extensively about that
and other issues. We know that's an issue for you, but our
partners understand our concerns. Typically, that's an issue
that's been difficult to define in the context of a trade
agreement. But the core for us, we want an agreement that gives
American exporters, farmers, entrepreneurs access to what is
going to be the fastest growing region in the world, but gives
us a level playing field and the opportunity to create jobs
here.
Mr. DOGGETT. All right. Thank you.
Chairman CAMP. Thank you.
Mr. Shock is recognized.
Mr. SHOCK. Thank you. Welcome, Ambassador. Thank you for
your good work on the three trade agreements. Appreciate your
leadership on that.
Questions about TPP, first question about U.S. biological
medicines, many of which are produced in my home state of
Illinois. When your Deputy Ambassador Marantis was here last
December, I specifically asked him about whether or not USTR
would be working to ensure that the same U.S. laws that protect
U.S. biologic pharmaceuticals here in our country, specifically
the 12-year period, would be included in TPP to ensure that
those same safeguards and IP protections are in place in the
countries we are about to trade with.
Do you know if USTR has made a decision on that?
Ambassador KIRK. Again, this is an issue, Congressman,
where we understand that there are very strong differences. We
are aware. Congress, I think, in the health care bill put in a
12-year period for biologics, but as you know, the
administration in its budget has wanted a 7-year period, and I
think you can understand where my equities would come down on
that, but we have not tabled a provision on the biologics yet
as we continue to try to see if we can't find the proper
balance between the two.
Mr. SHOCK. Well, I am not sure even the most optimistic
Member of congress would assume that the President's budget's
going to pass considering the fact last year his budget didn't
get a single vote, even from his own party, but having said
that, whether the period is 7 years or 12, would it be a more
fair question to say regardless of what the U.S. law is of the
land at the time you negotiate TPP, that it will be your
objective to ensure that whatever that period of protection is
in U.S. law, you will work to try and get that same protection
as a part of TPP?
Ambassador KIRK. We are going to try to get the strongest
provisions that we can, and understand, this is one where we
have some of the strongest headwind because of some of the
other countries that frankly have a very different approach to
this.
Mr. SHOCK. Well, you can understand our concern in terms of
protecting our jobs here in the country in intellectual
property and the money that is invested there if we don't have
those same protections.
Ambassador KIRK. Yes, sir.
Mr. SHOCK. Second, state-owned enterprises, you are well
aware of the large amount of foreign and direct investment
specifically from the country of China. Overwhelming majority
of that foreign direct investment is from state-owned
enterprises. What assurances can you give us that TPP will have
not only mechanisms in--not only rules in place, but most
importantly, mechanisms in place to enforce competitive
disadvantages that state-owned enterprises may have when
dealing with market-based companies here in the United States?
Ambassador KIRK. Well, the best answer I can give you, and
understand, we haven't finished, but I will tell you for
precisely the reasons you articulated, Congressman, this is the
first time we have ever tabled a separate chapter on state-
owned enterprises. We have heard from you, but just as
critically we have heard from businesses the frustration with
dealing with them, competing with them, and for that reason, we
have insisted, and we have tabled, a chapter on state-owned
enterprises to make sure that if they are going to be there,
they have got to be transparent. They have got to operate on
market principles, and then having disciplines that we didn't
know about, say, for example, 10 years ago, trying to build
those into the Trans-Pacific Partnership.
Mr. SHOCK. I have a specific question about whether or not
the administration is prepared to rethink the need for
maintaining high tariffs on consumer goods. As you know, when
we do that oftentimes it is consumers who pay those higher
tariffs, specifically one industry is the footwear companies
who--virtually no footwear is produced here in the United
States, and by having large tariffs on U.S. based companies,
produced goods overseas and import, you are basically taxing,
quite frankly, the middle class and the people who are buying
those consumer goods.
I have heard the administration say we need a 21st century
approach to this. How do you see that shaking out?
Ambassador KIRK. Some of your colleagues from the northeast
would be quick to tell you there is some footwear made here
with L.L. Bean and with New Balance, and again, as with
everything, we want to strike that appropriate balance. If
there is anything on which we all agree, the real winner of
trade liberalization are consumers. But even the American
public have told us they don't want to trade cheaper t-shirts
and tennis shoes for jobs. So we want the right balance to make
sure we aren't punishing consumers, but we want to protect
America's manufacturing base where we can.
Mr. SHOCK. Okay. Finally, the pork industry in the United
States is being significantly hurt by Canada's recent addition
of Federal subsidies, their provincial and Federal Government
subsidies, of their hog industry, and as a result, pork
producers here in the United States have calculated it is going
to cost thousands of jobs, putting our pork industry at a
competitive disadvantage because the Canadian government has
decided to subsidize their production.
I am just wondering if Canada's inclusion in TPP eventually
would--that perhaps would be something that would be on your
radar to get them to back down from their federal subsidies of
that industry.
Ambassador KIRK. It would be, and as you heard me say,
Congressman, no industry has been more supportive of our trade
liberalization than the pork industry. One of the issues they
have raised, and we will address with Canada honestly using the
information we've gathered from the Federal register process we
went through in terms of their joining TPP, would be this
issue.
Mr. SHOCK. Okay. Thank you.
Chairman CAMP. Thank you.
Ms. Jenkins is recognized.
Ms. JENKINS. Thank you, Mr. Chair, and thank you, Mr.
Ambassador, for joining us and all your good work last year on
the trade agreements.
The free flow of electronic information is critical to U.S.
companies that sell goods and services over the Internet and
unfortunately some foreign governments blocked those flows.
Other governments require online service suppliers to process
local data or to locate servers in their countries. These types
of restrictions can impede cross-border trade, undermine the
competitiveness of U.S. companies, and cost American jobs. This
is true certainly here in the 21st century.
Do you agree that the TPP agreement must include strong
provisions ensuring the free flow of electronic information and
can you just comment?
Ambassador KIRK. Congresswoman, I agree with you completely
and for that reason we have tabled provisions to address
exactly what you say.
Ms. JENKINS. Okay. Thank you.
And then to follow-up on Representative Smith's questions,
being from Kansas and Nebraska, farmers and ranchers rather
important to those of us in the Heartland and certainly our
U.S. farmers and ranchers continue to face these significant
sanitary and phytosanitary barriers in their efforts to export
to China.
I am concerned that China continues to maintain a series of
regulations and restrictions on U.S. exports of fruit,
potatoes, beef, pork, poultry, et cetera, that aren't supported
by science and the independent U.S. International Trade
Commission estimates that elimination of Chinese tariffs and
nontariff measures could lead to an additional 3.9 billion to
5.2 billion in U.S. ag exports to China. These new exports
would support tens of thousands of good paying American jobs.
What is the administration doing to address the persistent
tariff and nontariff barriers that block U.S. exports to China?
Ambassador KIRK. Well, again, Congresswoman, I mean I
couldn't agree with you more, we have visited Kansas and I have
talked with Senator Roberts and others extensively. I don't
disagree with anything you have said. We continue to press
China to adhere to sound sanitary, phytosanitary standards. We
have challenged them in the WTO against, we think, non-
consistent duties they have put on poultry. We have challenged
them.
We got a little bit of relief in the JCCT 2 years ago, if
you remember, after the--no, I am not supposed to call it swine
flu, whatever we call it, the viral scare.
Ms. JENKINS. H1N1.
Ambassador KIRK. H1N1.
Ms. JENKINS. Yes.
Ambassador KIRK. We were able to get back in that market.
Know that we work, I mean, almost daily with Secretary Vilsack
and his team to try to get China to a better position, that
they will do it, and where we can't do it in negotiation, we
have demonstrated we are not afraid to take them to the WTO,
and I would just say again, that is one more, I think, evidence
of the wisdom of the President in creating this Interagency
Trade Enforcement Center.
Ms. JENKINS. Well, we thank you for your past support and
encourage you to stay diligent and help us out. Thanks.
Ambassador KIRK. We will, but, also, don't forget about
Africa. When we had the AGOA forum here last year, we
deliberately took them to Kansas because it was a great
opportunity. They wanted to study more some of our standards in
terms of agriculture production and you all were a great host.
Chairman CAMP. Thank you.
Mr. Thompson is recognized.
Mr. THOMPSON. Thank you, Mr. Chairman. Ambassador, thank
you for being here.
I want to follow-up on something that Mr. Brady said
earlier about your shop working with overseas markets to help
us here in the United States, and I just want to put a mention
that Governor Brown, our Governor in California, is leading an
effort to recruit businesses for California in China, business
for California in China, so our folks can do business in that
country, and your work with California would be very, very
important and very much appreciated.
I want to talk a minute about flowers, and you and I have a
little history here. You know my concerns. In my district, I
have the largest cut flower and greens farm in the country and
we are being absolutely hammered by the cheaper Colombian
imports, and as I say, we have talked about this before, and I
want to know what you can do to help especially now with the
trade agreement that was signed pertaining to Colombia.
Ambassador KIRK. Well, first of all, and I understand that
on the programmatic side because USTR's primary
responsibilities are negotiation, there is little we have
there, but I commit we will continue to work with you and
whether it is Transportation or others, to see if there isn't
some vehicle that we can try to ensure the competitiveness of
those California growers. And I very much appreciate your
continued advocacy on this.
If I might just digress 1 minute, I would tell you at the
meeting President Obama hosted with the national Governors on
Monday, almost singularly one area of cooperation with the
Governors and administration was in our need to do more in
exporting. If I could draw the Committee's attention, Mr.
Chairman, we have launched two important initiatives. One in
terms of every state is trying to get foreign investment, but
through Commerce there is a great new program called Select
USA. We are trying to make it easier to draw in foreign
investment, but particularly the biggest concern we have heard
from small business is the confusion of where we start, and
last week we launched a new tool called Business.USA.org, where
the idea was to have one single point of entry, particularly
for small businesses, to try to understand all the tools that
we have available.
Mr. THOMPSON. Thank you. And I appreciate the help on the
cut flowers. The transportation issue is an important one. It
would be critical to supporting California business.
Capcom is a company in the Bay area. It started there
about 1985. They do videogames. They employ hundreds of
American workers. The owner of that company is a constituent of
mine and they are having a real tough time with counterfeiting
going on in China and they have abandoned all of their efforts
to fight this piracy problem because they found out that the
company that is stealing their software has close ties with
China's Cultural Ministry. So I am hoping that the Trade
Enforcement Committee will be able to intercede and help out,
notwithstanding the association that these pirates have with
foreign governments.
Ambassador KIRK. First of all, we would be happy to learn
more about that, but I would say again, one of the key asks
that we had at least year's JCCT was we wanted China to
institutionalize at the highest level a governmental entity to
deal with piracy and counterfeiting. They have agreed to do
that.
Secondly, one of the reports that we present to you every
year is our 301 report on other countries' compliance with
intellectual property rights. For the first time, last year in
February we submitted to you what we called a notorious markets
report identifying specifically the worst of those actors. It
was a small step, but because of that, we were able to get
China to shut down one of their worst sites for piracy, the
Baidu website. But I understand the frustration of that small
business and----
Mr. THOMPSON. Thank you.
Ambassador KIRK.--we will continue to watch that.
Mr. THOMPSON. And then, as you know, the solar
manufacturers filed an anti-dumping illegal subsidies case
against China and what is happening in regard to our solar
panels here in this country is costing us greatly in jobs. Do
you have any update on the status of that claim?
Ambassador KIRK. As you know, the ITC, I believe, accepted
the case. It is now going through the investigatory period with
the Department of Commerce and we have to stay separate from
that. But the one thing I love about our job is we try to hear
from everyone. You should know there is a huge divergence of
thought among the solar industry on this because we are--and we
absolutely don't want to yield to the issue of China dumping--
but the United States also enjoys a huge surplus because we
produce most of the components and the more technologically
advanced components and we have a very healthy surplus. But we
will wait to see what the judgment is from the Department of
Commerce.
Mr. THOMPSON. Thank you.
And, Mr. Chairman, I think it is important to note that
Allen Edmonds still making shoes in Wisconsin, one of the
greater companies around.
Chairman CAMP. Note that the footwear for much of our
military is made in Big Rapids, Michigan as well.
So Mr. Roskam is recognized.
Mr. ROSKAM. Thank you, Mr. Chairman. Thank you, Ambassador.
Ambassador, I represent suburban Chicago and we have had a
very positive exchange with your staff, who has been incredibly
helpful. What I want to do is just highlight for you an issue.
You and I had a conversation about this last year. Let me just
read you a few paragraphs, kind of a short, encapsulated
summary, and then I have a specific ask at the end.
In suburban Chicago, there is a company called Fellows
Manufacturing. These are the folks behind the bankers' boxes
and shredding machines and so forth, a stellar reputation, 550
Illinois employees, and in a nutshell, they entered into a
joint venture in China in 2006, which went well for 3 year, and
then in 2009, it just devolved into a nightmare. The nightmare
now has involved theft of their property. They have been locked
out and they have lost tools and it has been dramatic to say
the least. They have now been involved in a Chinese court to
try and seek justice, and over the past year, it has become,
you know, increasingly murky. And your staff has, again, been
really helpful on this.
My question is would you be willing to raise this? You know
how this works. If the trade ambassador raises it, it has the
imprimatur and you are able to move the ball significantly
based on your personal attention, and so I just wanted to ask
if you would be willing to raise this issue with the Chinese
Ministry of Commerce?
It is also my understanding that you are going to be
dispatching a delegation on intellectual property issues next
month and there may be an opportunity there as well, but,
again, your staff has been incredibly helpful and I just wanted
to make a personal appeal.
Ambassador KIRK. First of all, Congressman, thank you for
bringing this to our attention. We have worked with you and not
only will we raise it and have I raised it, but this was also
one of the issues raised both at the Vice Presidential level
and at the Presidential level.
We are more than concerned and alarmed over the rise in
trade secrets theft and--it is a tragedy. We are hearing it
from small companies like Felloes, and larger companies as
well, and I guess the only change since last year is for the
first time it has gotten rampant enough that the companies have
now gotten more engaged than many were before because they have
realized they have nothing to lose. But we will continue to
work with you on that.
Mr. ROSKAM. Thank you, Ambassador. I yield back.
Chairman CAMP. Thank you.
Mr. Gerlach is recognized.
Mr. GERLACH. Thank you, Mr. Chairman. Mr. Ambassador, thank
you for joining us today.
I have two local companies in my area that have raised a
couple issues and I would like to ask you about that. The one I
will simply end by just sending you a letter, if you don't
mind, and if you could review it and respond, that would be
much appreciated.
Ambassador KIRK. Yes, sir.
Mr. GERLACH. The other issue involves the issue of
reinsurance in Brazil. I have a local company who has found an
opportunity to do some reinsurance business down there, but
apparently recently the Brazilian government has passed two
resolutions, 224 and 225, that prohibit local insurers from
associating themselves, in essence, with other companies from
other countries and in essence trying to create a monopoly for
those companies in that country on the reinsurance market.
I know you are aware of the issue. Can you update us on the
status of what your office might be able to do to encourage the
Brazilian government to relook at its policy to create this
monopoly situation that is uncompetitive for our companies here
in the United States? And with the fact that the Brazilian
President will be visiting in the not too distant future, might
that not be a good opportunity at some point to raise this
issue with he and his government officials to discuss it?
Ambassador KIRK. Congressman, to prove I can be somewhat
brief, I would say yours is both a question and an answer, and
I would only correct you to say the president is not a he, but
a she. It is----
Mr. GERLACH. Oh, I'm sorry.
Ambassador KIRK.--President Rousseff. No, no, no. We are
exceptionally frustrated, I will be honest, with Brazil's
market. But I would also tell you that that is part of the
rationale behind President Obama's decision last year to make
Brazil, Chile, and El Salvador his first foreign trip. We see
enormous opportunities to expand our trade relationship within
the hemisphere and we are hopeful that President Rousseff's
reciprocal visit perhaps might be the impetus to being to
loosen up some of these opportunities.
And we applaud Brazil's growth. They had this extraordinary
find in terms of energy. We are, frankly, hopeful that the
challenge of reaping the benefits of this new energy
opportunity, and hosting both the World Cup and the Olympics,
perhaps might overwhelm Brazil enough that they would be
welcoming of our assistance in some of these areas like
services and insurance.
Mr. GERLACH. Okay. Thank you for that.
And, as I say, the other issue involves a CAFTA issue
involving a company in my area that is one of the largest
retailers of school uniforms and there is this yarn forward
issue that is affecting their ability to continue to do
business. So I, if you don't mind, will send you a letter on
that and if you could review and respond, it would be
appreciated.
Ambassador KIRK. We will.
Mr. GERLACH. Okay. Thank you.
Chairman CAMP. Thank you.
Mr. GERLACH. Thank you, Chairman.
Chairman CAMP. Mr. Blumenauer is recognized.
Mr. BLUMENAUER. Thank you, Mr. Chairman. Thank you, Mr.
Secretary, for being here. We appreciate your patience, and you
have had expressed around the table, virtually all of us are
interconnected with this global economy.
I have two things that I will follow with you in terms of
letter. I don't want to take you unawares, but I want to put
them on as part of the record, a follow-up. And then one that I
would like to engage you in further discussion.
One, just reference to the footwear, I come from the
Pacific Northwest. I have people in my district who manufacture
footwear in the United States, but you will be receiving a
letter that is circulated by Mr. Shock and me about this issue
that deals with being serious about the tariff approach because
the value of the footwear industry is here in the United States
where the manufacturing, the design, the product--a lot of the
manufacturing that comes here that is done domestically comes
from a product that is imported to the United States and duty
free. This is distorted. It is not good long-term business for
the United States. So I would like you to look at this letter
signed by other Members.
The other letter that I will give you deals with the Peru
free trade agreement. I spent a lot of time in working on the
environmental and labor provisions so that we could have
something that would be bipartisan, that would speak to
concerns we have all heard at home, and particularly as it
relates to Peru and illegal logging. Having spent so much time
on that, I am a little dismayed, frankly, at the lack of
progress, and we have met with the Peruvian authorities. They
have done a little bit. I will be sending you a letter that I
would hope that you could give some attention to because we
want the integrity of these environmental protections respected
so it will make further progress in international trade easier
for you and for Members of congress.
But the point that I would like to engage with you here in
my remaining two and a half minutes or so, which I will turn
over to you, speaks to what has happened with government
procurement. You probably won't be here for testimony that will
be delivered by Mr. Krzanich from Intel. Part of it speaks to
this inequity. The brick countries are really not playing fair.
They haven't been signatory to the GPA, and we are getting all
sorts of unfair practices that are costing American technology
in particular, but in a wide range of areas.
Frankly, this mystifies me. I think that if they are not
going to play games, we ought to be much more aggressive in
terms of our government policies toward their procurement
activities here. This is not a two-way street. I find that
outrageous and I am wondering if there isn't something we can
do to push back unless and until they are signatories and they
play by the rules.
Ambassador KIRK. First of all, Congressman, thank you for
your cooperation with us on the other two issues. I will
respond in writing, but I think you know we have continued to
work with Peru to make sure that they understand that that
Forestry Annex was real and it is in their interest and we are
working and we will continue to.
On GPA, one, I would be interested, and maybe I will have
one of my staff stay, because I agree with you. But the
fundamental premise of the government Procurement Agreement is
if you aren't a Member of it, you don't get the benefits of it.
So, frankly, I will be curious to hear what the gentleman from
Intel says. But China, Russia, those countries that are not
signatories to the government Procurement Act have no
protection or no access to any of our access that we grant to
other signatories.
Now, it is an issue that we continue to press China on
because one of the commitments they made when we granted them
permanent normal trade status is they would join the government
Procurement Agreement. They have tabled an offer that we think
falls far short of what we need, but they have not yet----
Mr. BLUMENAUER. Right, but there are examples of Chinese
contracts in the United States that use some government funding
that, frankly--I mean we have--the bridge in--building the Bay
Bridge, $400 million of Chinese steel, and frankly a screwed up
job. It was defective. It ended up costing more in the long
run, but our being more aggressive about where they are
beneficiaries of money either directly or indirectly that is
taxpayer money, that we turn this spigot back unless and until
they play by the rules for our companies.
Ambassador KIRK. Well, I don't disagree with your premise.
I would love to know what those specific cases are so we can--
--
Chairman CAMP. Okay. Thank you. Time is expired.
Mr. Paulson is recognized.
Mr. PAULSON. Thank you, Mr. Chairman, and thank you, Mr.
Ambassador, for being here today.
You made some comments earlier about the working
relationship we have with the EU and the high level working
group I think you said that has been appointed to that and I
appreciate those comments. That is the largest commercial
relationship by far that exists and I would like to stay
engaged on this issue as well and make sure we are able to
maximize the potential in that transatlantic economic
relationship.
I also wanted to ask this, is that I know last June there
was several technology companies, many that have roots to
Minnesota actually, Best Buy, Honeywell, 3M, as well as U.S.
Chamber and the Retail Industry Leaders Association,
Entertainment Software Association, they filed comments with
the USTR in strong support of your proposal to update the
Information Technology Agreement, ITA, with the WTO, and I
understand it has not been updated since 1996. So it does not
include connected devices with Internet or Wi-Fi capability,
like Smartphones, televisions, e-readers, et cetera, and these
are hugely popular items and they are growing with consumers,
and so if this agreement were updated, it would absolutely help
lower duties and reduce costs for consumers.
Can you just update me and the Committee where USTR stands
with the WTO and the efforts to get this IT updated and what
can the Committee, what can congress do to help disagreement
kind of move forward and help reflect modern technological
advances and developments?
Ambassador KIRK. Well, thank you, Congressman, and one, I
cannot tell you the value to our negotiators of what this
congress did in a bipartisan way and the message you sent last
fall in passing all of our trade agreements because, people in
Geneva that frankly wanted to hide behind other things
questioned our political will. There is more we can do, but,
one, you just sent a strong message. As I told them, ``You give
us a good deal and our congress will move on it, but there is
never a time to take a bad deal''.
Now, I will say that one of the things all of you asked me
was for an assurance that we wouldn't just sign an agreement
out of deal fatigue if we didn't get the right deal. Because we
insisted we have a more honest approach than that. The good
news is we now have a little more latitude, frankly, to look at
other ways we can liberalize trade. One of the opportunities a
number of countries, including the U.S., has embraced is a more
honest discussion about modernizing the ITA.
Perhaps I can follow-up so I don't take up more time, but
we are working collaboratively with a number of countries that
are interested in this initiative and you correctly note, this
is one that our industry is wildly supportive of and so we will
continue to work with you and industry to see whether we
achieved this both in product coverage or others, but it is
something we are very supportive of.
Mr. PAULSON. Yes, I appreciate that. I would absolutely
like to try and help you with it and help in any way possible.
Let me follow-up too because you made some comments earlier
about the biopharmaceutical and medical technology industries
and that is obviously critical to the future of our economy
right here in America, and these are industries that do support
very good, very high paying jobs. They depend on the strong
intellectual property rights and the innovation that created
the industry, especially in the areas of drugs and devices, the
research and development, and it comes from our workers here.
And it is these strong IPR protections, including data
protection, that make it commercially sustainable for these
biopharmaceutical firms to invest so substantially.
Do you agree in general that to encourage American
innovation in this sector, that we need to help and make sure
we are pressing for the same high standards and IPR protections
in the TPP countries that are part of that structure going
forward so we can move forward with keeping the R&D here and
protecting that IPR?
Ambassador KIRK. Absolutely. Yes, sir.
Mr. PAULSON. Good. Well, I appreciate that.
Mr. Chairman, I yield back.
Chairman CAMP. Thank you.
Mr. Marchant is recognized.
Mr. MARCHANT. Thank you, Mr. Chairman.
Ambassador, as you know, my district includes the Dallas-
Fort Worth Airport and Los Colinas. So you know how important
trade is to my district and our region and we are privileged to
have someone that is so familiar with that area as trade
representative.
We have just passed the Colombian and Panama trade
agreements and some people are suspecting that both the
administration and congress is going to rest on their laurels
now and not pursue any kind of additional trade agreements in
South America. I think in April there is a summit that is
hosted by Colombia, a lot of American states down there. Do you
anticipate going--having representation at that gathering and
do you anticipate opening discussions about new trade
agreements in South America?
Ambassador KIRK. Absolutely. And thank you, Congressman.
Your hometown is blessed to have a really young, dynamic Mayor
that I think is going to have a great career as well.
Kenny, as you know, we don't want to lapse in too much of
our Texas pride. No state benefits from exporting more than
Texas. We are the number one exporter and we have been. It is
important to note that in addition to Panama and Colombia, our
largest trading partners are still Mexico and Canada. A lot of
the benefits are to our region, but we aren't going to rest.
Two of the countries critical to moving the Trans-Pacific
Partnership forward, for example, are Chile and Peru. We have a
trade agreement with Chile, but I will be joining the President
for the Summit of the Americas, and again, part of President
Obama's deliberate decision to go to South America first last
year was to begin to try to set new dynamics for increased
trade relations between us and our partners in South America
and the Caribbean.
Mr. MARCHANT. And on a second note, just recently I had the
opportunity to visit troops in Afghanistan and we had an
opportunity to stop in Pakistan and I can tell you that they
had a major emphasis that both the prime minister, the
president, and the parliamentary members, their emphasis was on
trade and could I ask you what the trade--as trade
representative, what is being done in--as far as you said you
are going to India, but what is being done in Central Asia,
Pakistan specifically, in opening up trade relations?
Ambassador KIRK. Congressman, thank you so much for raising
this because it hadn't gotten as much attention. One of our
more important initiatives that I referenced in my opening
remarks is what we can do to help stabilize this region, not
just in Pakistan. Pakistan, we would very much welcome their
coming back to the table and frankly, that is one of the
countries we could conclude a BIT with, for example, pretty
quickly, but we have a broader initiative that we call MENATIP.
It is the Middle East North African Trade and Investment
Partnership. Recognizing one of our real challenges, whether it
is in Egypt or Libya and others, we applaud this Arab Spring,
but as you know, one of the challenges for their leaders is to
show this dividend of democracy. We think we can be a partner
with them, but we are having to tread very carefully so that
this is seen as something that they embrace and initiate. So we
have had teams recently in Egypt. We have gone to other trade
partners in Jordan and Bahrain, to see how we can work
collaboratively, because in many cases, they are constrained
because of barriers among one another.
So we are doing everything we can to work with them both
bilaterally, but also pluralaterally to grow the seeds for
increased trade and investment throughout the region.
Mr. MARCHANT. Well, the central message from their
parliamentary leaders was that an escalation in trade talks
would significantly help in deescalating the tensions between
Pakistan and our country over there. So----
Ambassador KIRK. As you know, we have heard not just from
them, but you have heard it from Secretary Gates and our
military leaders, countries that generally find a way to do
business together and find a common future in trade are less
likely to go to war with one another.
Mr. MARCHANT. The prime minister's message primarily was
trade not aid. So thank you very much.
Chairman CAMP. Thank you.
Mr. Berg is recognized.
Mr. BERG. Thank you, Mr. Chairman. Thank you, Ambassador
Kirk.
I wanted to talk a little bit about Russia and where we are
going there, and, you know, probably the first question I have
is a lot of our tariffs are relatively low right now, and so if
we don't really change any of our agreements with Russia, you
know, what would be the negative impact, the status quo, on
business, on labor, on agriculture?
Ambassador KIRK. Well, first of all, thank you,
Congressman.
If we were to grant Russia, which I hope we will, permanent
normal trade status and lift the Jackson-Vanik restrictions,
the good thing is not one thing is required from the United
States. We don't have to lower our tariffs. We don't have to
change any of our laws. This is decidedly about whether
American businesses, farmers, small businesses, will reap the
benefits of, frankly, all of the efforts that Russia will
undertake to, in many cases, lower their tariffs, open up their
service markets, begin to conform to sanitary and phytosanitary
standards. And I want to make it plain. I know there are very
legitimate, strong concerns on other issues, but the simple
fact is our extending permanent normal trade relation status to
Russia is singularly in our interest.
Now, we do have a bilateral trade framework agreement, that
dates back to 1992. But for us to reap the real benefits and
not be put at a competitive advantage, I can't make it any
plainer than the Chairman did in his remarks. This is
singularly in our commercial interest to do this.
Mr. BERG. What would be the big benefits for our economy if
we did take those steps, both repealing of the Jackson-Vanik,
as well as a permanent normal trade relations?
Ambassador KIRK. Well, I mean, Russia is the largest
economy of the world not in a rules-based trading system. We
have a number of U.S. companies and interests in the Baltics
and the region, but Russia can be, you know, the launching pad
for further integration there. It gives us protection we don't
have now. For example, if we have businesses there and they are
experiencing challenges, you know, we can talk about it, but we
don't have a lot of tools to move it.
We think there are a lot of offensive categories, and I
can't believe--you know, even though I'm from Texas, I really
am a city boy--but I can't believe the whole time I spent about
talking about agriculture. This is a huge market for us for
pork and for grain, for those industries. In terms of
manufactured goods, the automotive industry, aircrafts,
technology--with all of the opportunities for joint venturing
in energy exploration. These are great immediate opportunities
we could reap, but, again, if Jackson-Vanik stays in place, our
exporters, our businesses are going to be competing with one
hand behind their back because we won't get that tariff benefit
differential through the WTO.
Mr. BERG. I can clearly see your passion on this, so I
guess the question is what--you know, what are you--what is the
administration doing to move this forward? I mean I see it is
number three on your list here. What are----
Ambassador KIRK. Well, as you know, we have begun to engage
Congress on the need to do this and we will work with the
leadership of this Committee and the Senate Finance Committee
in particular on the appropriate time and vehicle to bring this
up. But we have been very plain and I stated this in my remarks
last year. This is something collaboratively we need to work to
achieve.
Mr. BERG. Has the President came out with a statement
supporting the repeal and supporting the permanent relations?
Ambassador KIRK. Yes, he did. In fact, I think the
President referenced it in his State of the Union Address.
Mr. BERG. Okay. Then from the administration standpoint, is
there anything else that you are planning to do or can do to
help remove some of the political barriers to taking this a
step forward?
Ambassador KIRK. Well, we have engaged the business
community. Again, we have begun to discuss this issue with
members. Again, there are other issues, Members legitimately
concerned, again, but we have done everything we can to try to
socialize the issue so that--look, many--those of us who--and I
hate being one of those old enough to remember the debate about
granting China PNTR. I mean, these are very, very difficult
decisions, but we are trying to create the right environment.
We can have it in a dispassionate way as possible and hopefully
work with the leadership to get an affirmative vote.
Mr. BERG. If there is things that leadership feels would be
helpful the administration to do to this move forward, you are
willing to help in that manner however it goes?
Ambassador KIRK. Absolutely.
Mr. BERG. Okay. All right. Thank you.
I yield back.
Chairman CAMP. Thank you.
Ms. Black is recognized.
Ms. BLACK. Thank you, Mr. Chairman, and again, Ambassador,
thank you so much for being here with us. We always learn so
much with these dialogs.
As you know, the United States has long enjoyed a large
service trade surplus and U.S. services firms are global
leaders across many service sectors, especially, for example,
business services like banking and insurance and so on. The
average wage in these business services is substantially higher
than in the manufacturing service. These are good jobs, and the
business service sector alone dwarfs the entire manufacturing
sector.
Promoting more U.S. service exports will be important on an
ongoing source of well-paid U.S. jobs, and that is, of course,
something we are all looking forward to make sure that we have
more U.S. jobs and especially those high paying jobs, and yet
the President's National Export Initiative that is led by
commerce appears to focus principally on manufacturing exports.
What are you doing to ensure that the administration's
export promotion initiative is seizing the opportunity that we
have to generate good U.S. jobs by expanding our services
exports?
Ambassador KIRK. Well, thank you for your question and let
me at least try to--not necessarily disagree with you, but
assure you that we are as aware of the importance of the
service industry to our economy and our exports as you. It is
absolutely an integral part of our National Export Initiative.
We had a meeting of the President's Export Council and trade
policy coordinating group yesterday. We spent a large part of
our time looking at opportunities to further expand the service
industry.
Our services exports are up about 21 percent since we
started the Export Initiative. Many of our services, frankly,
support the manufacturing industry. It is a place that we
believe, frankly, that the numbers that we use in terms of our
ambition for Korea are understated because we don't capture
services data as well as we do hard goods data, but, for
example, in Korea, you heard even their president say, this is
a half a trillion dollar services market. It is a huge
opportunity for us. And particularly in our Trans-Pacific
Partnership, we have engaged with the Service Industry
Coalition and other groups on a number of opportunities to make
sure we are addressing their concerns in an offensive way.
So it is something we embrace. It is an area that we have a
surplus in just about every region in the world and we think it
is a critical place America can help other economies meet their
ambition while creating jobs here at home.
Ms. BLACK. I hear you saying that you are engaging. Can you
give me anything more specific in what you are doing in order
to help promote the service industry?
Ambassador KIRK. Not that they are the only group, but one
of the strongest resources we have is the Service Industries
Coalition, for example. We have worked with them to hold
seminars for other countries, frankly, on how partnering with
the United States where, frankly, we have resources and
competencies that they may not, is not a threat to them, but it
is a way we can jointly help them achieve some of their broad
ambitions.
Our WTO ambassador, Ambassador Michael Punke, for example,
met with the Service Industries Coalition yesterday to talk
both about some practical things we can seek, the opportunity
we have now in Geneva to expand trade and services, as well as
some ideas that we can incorporate into our Trans-Pacific
Partnership.
Ms. BLACK. And I appreciate what you are saying. I guess I
am just not hearing from you anything specifically that you----
Ambassador KIRK. Within the Trans-Pacific Partnership, we
are specifically tailoring chapters that will expand and
promote nondiscriminatory access----
Ms. BLACK. Okay.
Ambassador KIRK [continuing]. To our services markets.
Ms. BLACK. Okay.
Ambassador KIRK. I mean I am sorry if I did not make that
clear.
Ms. BLACK. Okay. Well, I appreciate that, and again, you
know, jobs, jobs, jobs are so important for us here in the
United States, but I think we have to be very aware that as
things are different than they were years ago, and that this is
an industry where it is good paying jobs and I don't want us to
overlook that, and obviously manufacturing is important too,
but as we move on in this new age of where jobs are seen as the
jobs that are the future jobs with high paying, I want to be
sure that we are making sure we are staying where we need to be
in that industry.
Thank you.
Ambassador KIRK. Yes, ma'am.
Chairman CAMP. Thank you.
Mr. Reed is recognized.
Mr. REED. Thank you, Mr. Chairman, and thank you, Mr.
Ambassador. Just wanted to echo the sentiment from my
colleagues, just applaud your efforts in your office and the
recent success with Korea, Colombia, Panama. We did a lot of
work trying to advance that cause and I just so appreciate all
the efforts that you have done there.
And so I wanted to go back to our future trade agenda and
in particular Russia and the focus on Russia and bringing them
as they move into the potential WTO establishment, and what I
am concerned about is I am all about free trade, but it has to
be free, fair trade, and specifically as part of Russia's
accession into the WTO had agreed to concessions to open its
market, such as reducing its export tariffs; however, recently
the Russian Government has taken administrative actions that
would undermine these export concessions. For example, a draft
decree would cut off exports of metals, such as tin, magnesium,
and titanium, just to name a few, key materials used by the
steel industry and other manufacturers in my district from
selected Russian ports. I believe that was issued in December/
January of this year.
And I was wondering if you are aware of that action by the
Russian Government and what your thoughts on that would be, and
also your assurances or concerns, if any, about Russia
complying with the potential WTO requirements.
Ambassador KIRK. Congressman, first of all, we are aware of
it. We are troubled by it. I hope I don't sound repetitive or
redundant, but it is precisely again one of the reasons that we
need to bring Russia fully into the WTO and the United States'
exporters ought to have that protection. Right now if we don't
lift Jackson-Vanik and grant them PNTR, you and I can talk
about it and shake our heads, but I don't have the ability to
take them to the WTO, as I did China. Just last week, since you
mentioned raw materials, the very first case we filed in 2009
was a case in the WTO that challenged China's restraints on raw
materials that are critical to the steel industry and this was
a case where, you know, not just the United Steelworkers, but,
you know, U.S. Steel Company and others had come to us and
said, ``This is harmful to us.'' We acted on it and we got a
ruling from the WTO that validated our concerns almost 100
percent.
Having that in hand, that would greatly enable us to then
challenge Russia in a more formal way if we can't get them to
redraw these export restraints by dialog, but I would go back--
it absolutely makes the case why we would be benefited by
having full access to all of Russia's inclusion in the World
Trade Organization, including dispute settlement.
Mr. REED. Well, I so appreciate that, and I so appreciate
what you did with the China situation and also the rare earth
and the aggressive nature and I applaud you on that effort.
And so what I am hearing is that if we get Russia to the
WTO in full PNTR status, that you would give me the assurance
that if this type of behavior or these type of government
decrees occur in the future, that we will vigorously go after
those potential situations. Do I have that assurance from you,
Mr. Ambassador.
Ambassador KIRK. Yes, you do.
Mr. REED. All right. Thank you so much.
With that, I yield back, Mr. Chairman.
Chairman CAMP. Thank you.
Dr. Price is recognized.
Dr. PRICE. Thank you, Mr. Chair. Mr. Ambassador, I want to
thank you for your service and also for your patience today.
You have been here for a good long time.
I want to ask just a couple of very specific questions. The
first is on state-owned enterprises. I think that Japan's
interest in the TPP creates an opportunity to address a number
of barriers to U.S. exports and investment. Issues such as
Japan Post remind us the market dangers of government provided
benefits in state-owned enterprises because then they create an
unlevel playing field in those countries. You have heard others
talk about the state-owned enterprises and the problems and
challenges in China.
What are your thoughts on discouraging the proliferation of
market impacting state-owned enterprises among those countries
with which we hope to expand our trade, with specific attention
to Japan?
Ambassador KIRK. Well, first of all, we share your concerns
about the presence of state-owned enterprises wherever they are
and I am happy to follow-up with you directly, Congressman, but
it is precisely the reason in the Trans-Pacific Partnership
negotiations that we are tabling for the first time a chapter
that would deal with the disciplines of state-owned
enterprises. We have learned from some of the lessons that we
had with respect, say, to China and others and we have
consulted with business and with Members of Congress and at
least are insisting that we be knowledgeable and thoughtful
about that and address that.
With respect to Japan Post, this is an issue we have
challenged Japan regularly since we have been in. I have
visited with a number of our insurers. This is an important
market. You may or may not know AFLAC, for example, I think
some 75 percent of their revenue comes from Japan. You know,
thus far, fortunately because of their own politics, they have
not moved on that. But we have not yielded in insisting that if
they are going to open that market up and they are going to
allow a state-owned entity to compete, it has to be on market
terms and nondiscriminatory terms and we will continue to
insist on that.
Dr. PRICE. And I hear that, the market terms again, and you
mentioned earlier that--the two items, transparency and market
principles. We would suggest that it is virtually impossible to
have market principles work with state-owned enterprises, so--
and I would urge you to be very, very challenging to those
countries that want to make it so there isn't a level playing
field.
One other issue I want to talk about, in Georgia we are
increasingly concerned and remarkably frustrated by India's
position to deny access to U.S. poultry into their Indian
market, a market with really great potential, and although they
use a variety of excuses and trade barriers to prohibit the
importation of U.S. poultry, the one that they keep coming back
to is a concern about viral disease, avian influenza, and
although it sounds foreboding, there is no scientific basis for
their concern.
So I wonder what the administration has done to convey the
use--their concern about the use of such non-scientifically
based measures to prevent trade that is clearly inconsistent
with the WTO, and if this continues, does the administration
plan to seek to enforce our rights under the WTO?
Ambassador KIRK. We are extraordinarily frustrated with
India's continued non-application of internationally recognized
scientific standards. Our American poultry, it is safe. There
is no reason for them to deny us access. We have raised this at
every opportunity we have engaged India, including past trade
policy forums. We would continue. We have continued to press
them. It is our practice, though, not to publicly state whether
or when we will take legal action within the WTO.
Dr. PRICE. Is it fair to say that that still remains an
option that the administration is considering?
Ambassador KIRK. It is certainly an option that is on the
table. I think you could examine our actions in China on
similar cases and others to perhaps lead you to the conclusion
that you want to draw.
Dr. PRICE. And I appreciate that. We would encourage the
administration to move with dispatch. This has been a long,
ongoing battle and one, again, for which there is no scientific
evidence. Thank you so much.
I yield back.
Chairman CAMP. Well, thank you, and thank you, Mr.
Ambassador, and thank you for being here for allowing all
Members who wish to ask questions the chance to be able to do
that.
Senator Baucus and I wrote you and Secretary Geithner in
January and we did receive a response regarding China's
currency and their exchange rate policies and particularly with
regard to the upcoming seminar and the World Trade
Organization. I want to thank you for the response to that
letter, and without objection, I would like to enter both
letters into the record and just tell you again how much I
appreciate all of your efforts and your testimony here today
and also want to acknowledge Luis Jimenez, who I understand is
leaving your operation and going to be heading over to the
White House. So we expect to see him frequently in his capacity
in Legislative Affairs there, and I know that Mr. Levin would
also like to make a comment.
[The insert of The Honorable Dave Camp #1 follows:]
[The insert of The Honorable Dave Camp #2 follows:]
Mr. LEVIN. Well, Mr. Ambassador, we really appreciated all
of your testimony and your expertise, and if I might just say a
word to your pal Luis. As you know, he has worked incessantly
on these issues and has represented you and USTR and the
administration so well. And Luis, we wish you well. As the
Chairman said, we won't say so long since we will be seeing you
very often.
Mr. JIMENEZ. Thank you.
Chairman CAMP. Again, thank you very much, sir.
Ambassador KIRK. Thank you.
Chairman CAMP. And now I would like to turn to our second
panel.
We have with us today Mr. Tim Harris, President of Harris &
Ford, Mr. Brian Krzanich, Chief Operating Officer of Intel
Corp., Mr. James H. Quigley, Senior Partner, Deloitte & Touche,
and Mr. Alan Wolff, Of Counsel, Dewey & LeBoeuf.
I've asked these witnesses to take the long view today,
specifically with respect to new negotiations and already today
we have addressed our relationship with China and Russia, the
TPP negotiations, and the need for strong enforcement.
At this point, I would like to discuss what steps we should
be taking in undertaking new negotiations to best position the
United States and I welcome our panel.
Mr. BRADY. Well, I want to join with Chairman Camp and
thank our witnesses for being here today and again looking at
the long view specifically with respect to new negotiations and
we reserve 5 minutes for each of the testimony.
So, Mr. Harris, I yield to you. Thank you for being here
today.
Mr. HARRIS. To Chairman Camp and Ranking Member Levin and
Members of the Committee, I am Tim Harris, cofounder of Harris
& Ford, a distributor based in Indianapolis, Indiana, and
again, I thank you for this opportunity to allow me to present
our views on U.S. trade policy.
When I look at Harris & Ford, Harris & Ford we are, again,
a distributor. We focus in food, pharmaceutical, cosmetics, and
the industrial marketplace. We started out on two empty paint
pails that the painters left behind, didn't really have money
for furniture or anything else, and I remember walking in,
seeing those two empty paint pails and I said to my partner,
Joe Ford, I said, ``Man, thank God we got furniture,'' and he
said, ``Where do you see furniture?'' And I said, ``Man, where
I came from, Joe, that is furniture.''
When we started out, we didn't have very much. We had an
idea. We had experiences, but companies like Procter & Gamble
opened up their doors and allowed Harris & Ford to distribute
their products, yet and still most companies, both suppliers
and customers, were reducing their distributor base. So what we
had to do, we had to create a niche. We had to find a way into
the marketplace and the way that we did that was we created
what we called a consolidation model. Did it first with
Pillsbury where we were able to go into plants and they
eliminate 210 suppliers in favor of Harris & Ford. I should say
consolidate those.
We went from distributing products in the U.S. to traveling
abroad with, again, multibillion dollar companies of the likes
of Coca-Cola, traveled to China and begin to import products
like saccharine sweeteners, ascorbic acid, of course vitamin C,
citric acid, and other products that were used as preservatives
for primarily food and cosmetics.
As time went on, we seen that our customer base, a lot of
their growth market was overseas or offshore to India, to
China, to South Africa, to Europe, et cetera, and what we did,
we went from having our model that we used just domestically to
employing that internationally.
Let me just say to you right now, Harris & Ford went from
sitting on those two empty paint pails with zero customers and
now Harris & Ford is about a $200 million distributor. Harris &
Ford sells to North America, Central America, Western Europe,
Asia, as well as the Middle East. There are 27 countries that
we export product to, 18 companies that we import product from.
When I look at Harris & Ford, and again trying to be very
concise here, and I think about the U.S. trade policies,
countries where it is easy to work in, countries where it is
difficult for us to work in, there is three points that I would
like to leave with the Ways and Means Committee here. First of
all, in the countries where you set the rules of engagement,
where the rules are like the U.S. rules, like Mexico, like
Canada, it is easy for us to do business in those countries,
much more difficult in countries like Brazil, Argentina, and
China, Saudi Arabia. So one thing we are asking that you set
the rules of the road.
Secondly, I want you to understand that we are just one
link in the supply chain and when you help our customers win,
the Krafts, the Procter & Gambles, the Coca-Colas, if business
is easy for them to do offshore, it makes it easy for us to do
business with them as well.
Third, and final, I would like to say again that a lot of
companies that export are the same companies that import. I
heard Representative Kirk express some concerns about China
pirating. I heard some concerns about assets being taken from
U.S. companies over in China. And it is much easier if we work
with a company like Procter & Gamble that carries us there with
them and do business with them. It is much easier. It is much
safer.
So, again, I would like you to consider the statements that
I made and I thank you for your time.
Chairman CAMP. Thank you, sir. Your full statement will be
put in the record.
Mr. HARRIS. Thank you.
[The prepared statement of Mr. Harris follows:]
[GRAPHIC] [TIFF OMITTED]
Congressman BRADY. Mr. Krzanich.
STATEMENT OF BRIAN KRZANICH, SENIOR VICE PRESIDENT AND CHIEF
OPERATING OFFICER, INTEL CORPORATION
Mr. KRZANICH. Thank you, Congressman Brady, Members of the
Committee. I appreciate the opportunity to appear here before
you today and discuss the future U.S. trade policy.
Intel is a Fortune 50 company, a leading manufacturer of
computer communications and networking products. We have
approximately 100,000 employees worldwide, with more than half
of those in the U.S.
Even during strained economic climate, Intel has continued
to invest in the U.S. to stimulate economic and job growth.
Since 2009, the company has announced plans to build two
new factories in Oregon and in Arizona, and update its existing
manufacturing facilities in those two states and in New Mexico.
These projects required an investment of between $18 and
$20 billion and are underway currently.
When we complete these projects, we will have created more
than 15,000 construction jobs, and we will have created and
maintained thousands of permanent jobs, all of which are
sustained by overseas sales of our products. Trade is important
to us.
While Intel manufacturers three-quarters of its products in
the U.S., it generates more than three-quarters of its revenue
from overseas.
Our ability to export and sell to 95 percent of the world's
consumers living outside the U.S. has led to record earnings
during these turbulent times.
In fact, microprocessors have been the leading U.S. export
when averaged over the last 5 years. However, many U.S.
industries, not just ours, are highly dependent on market
access overseas to create and maintain domestic jobs.
Robust free trade agreements are essential to market access
and continued growth.
I want to briefly make three points today in support of the
need for the U.S. Government to pursue a more ambitious trade
agenda. Each of these points is discussed in detail in our
written submissions.
My first point is that existing trade agreements need to be
expanded. Too many key markets are subject to too few existing
trade rules. I have several brief examples.
The WTO information technology agreement or the ITA, has
dramatically increased U.S. exports by eliminating Custom
duties in many countries on a range of technology products that
were in existence at the time it was negotiated.
Mexico, Brazil and several other notable countries are not
ITA Members. They are not signatories of the ITA.
Many of the digital products developed in the last decade,
such as multi-processors, video game consoles, DRAMs, are not
covered by the ITA.
The Information Technology and Innovation Foundation
estimates that the ITA expansion would increase direct U.S.
exports by $2.8 billion, boost U.S. revenues by over $10
billion, and support an estimated 60,000 new jobs.
Intel strongly supports the administration's recent efforts
to begin negotiations to expand Membership and product coverage
on the now 16 year old agreement.
My second example, a more broad example, is the need to
expand the existing agreements to pertain to government
procurements, which we heard this morning limits companies on a
significant share of the global economy.
Yet none of the BRIC countries are Members of the WTO
government procurement agreements or the GPA, which prohibits
discrimination against foreign suppliers. This has enabled
China, India and Brazil to pursue measures designed to favor
local suppliers, especially those in the electronic sector.
The U.S. Government needs to find a way to incentivize
other large governments to join the GPA with similar
transaction coverage.
The second major point I would like to make this morning is
the U.S. Government must enter into additional robust trade
agreements on an accelerated basis.
Trade flow data shows how important FTAs are to the U.S.
economy. Trade agreements between the U.S. and 17 countries
accounted for 41 percent of the U.S. exports in 2011, even
though these countries represent only 7 percent of the world
economy.
U.S. exports to every single FTA partner country have
increased dramatically after these agreements were implemented.
U.S. exports create and sustain U.S. jobs.
Robust FTAs open up new markets to our exports and reduce
the cost of doing business overseas. We need more FTAs to
create more U.S. jobs.
Yet the U.S. has not kept pace with other countries in
opening new markets abroad, especially in the fast growing
economies of Asia and Latin America, and they are now major
engines of global growth.
As the global competitiveness increases, our pace to
increase market access for U.S. goods and services needs to
accelerate.
My third major point and my final one, the U.S. government
must use a variety of mechanisms to tackle more complex non-
tariff barriers.
Some governments are linking more traditional NTBs, such as
local content measures, with new entities that promote
discriminatory technology standards and favor domestic
intellectual property rights, all with the objective of
creating national manufacturing champions and increasing
indigenous innovation.
Mr. BRADY. Mr. Krzanich, I apologize. Time has expired. I
would like to come back to your points during the questioning,
if I may. Thank you, sir, and welcome.
[The prepared statement of Mr. Krzanich follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. BRADY. Mr. Quigley.
STATEMENT OF JAMES H. QUIGLEY, SENIOR PARTNER, DELOITTE LLP
Mr. QUIGLEY. Thank you, Congressman Brady. I appreciate the
chance to testify here before the Committee on the future
directions of international trade policy and negotiations.
I have submitted a written statement and I ask that be
included in the record of the hearing.
My name is Jim Quigley. I am a senior partner of Deloitte
LLP, and prior to that role, I was the chief executive officer
of Deloitte Touche Tohmatsu Limited, a global network of
Deloitte Member firms around the world that provides services
in 153 countries. We definitely have an interest in your work
on trade.
This hearing is both important and timely because there is
no more significant issue facing our Nation than the need for
economic growth and jobs.
Trade negotiations to open markets and strengthen the rules
of fair international competition are a critical component of
the policies needed to address growth and employment.
Deloitte has long supported the multi-lateral trading
system and like many others, we had hoped for a successful
conclusion of the Doha development round of negotiations with
agreement on a broad market opening package for services,
manufactured products and agriculture. Unfortunately, this
appears to be beyond the reach of negotiators in the
foreseeable future.
Although the suspension of the Doha round is disappointing,
it does give us an opportunity to reassess our negotiating
objectives and launch some initiatives that might prove more
successful in the immediate timeframe.
Over the past few years, I have had the good fortune to co-
chair the Transatlantic Business Dialog and over the past
several months, I have served as a Member of the Transatlantic
Task Force on Trade and Investments, sponsored by the German
Marshall Fund of the United States and the European Center for
International Political Economy.
Both have recently articulated their visions for the future
of global trade and investment built on a strong transatlantic
platform.
This makes both good political and good economic sense. The
U.S. and the EU already have the largest trade and investment
relationships in the world.
We enjoy relatively similar wage and benefit structures and
labor rights and worker protections. We have common concerns
about the environment and the health and safety of our
citizens, and we have generally robust intellectual property
protections, and we have a shared view of the global trading
system based on free markets and fair competition.
Given the level of integration that already exists, we have
an opportunity to raise the transatlantic relationship to a
whole new level, a real partnership for jobs and growth.
In this connection, I hope the high level working group
that Ambassador Kirk earlier referenced that is co-chaired by
him and Commissioner DeGucht will set an ambitious agenda,
constrained neither by old trade concepts, such as FTAs, nor by
past issues where agreement has proved elusive.
We should strive for a truly barrier free transatlantic
marketplace. This could bring enormous benefits in three ways.
First, it would add hundreds of billions of dollars to our
economic output, more than $120 billion from the removal of
tariffs, and more than $210 billion from the removal of even
half of the non-tariff barriers.
This is to say nothing of the potential gains in the
service sector.
Second, it would also allow us to tackle issues that are
significant to business in the 21st century that have not been
addressed or only timidly addressed in multilateral
negotiations, such as services, information flows, government
procurement, the movement of talent, product and service
standards, and regulations, to name some of the prominent few.
Third, it would set the stage for engaging other countries
in more productive negotiations.
Success on the transatlantic front might draw other
countries into negotiations so that their companies can remain
competitive in a transatlantic marketplace, and others might be
encouraged by seeing that new and innovative solutions can be
found to difficult issues.
Negotiations between the U.S. and the EU to achieve these
objectives should not be pursued as a single undertaking where
success in one area is dependent on success in all others.
Negotiations should seek positive outcomes in each area at
whatever negotiating pace is possible. Forward movement should
not be stymied by attempting to resolve up front all those
difficult issues that have proven intractable in the past.
The goal here is not to build a transatlantic fortress.
Quite to the contrary, we should use progress in the
transatlantic space to engage third countries and pave the way
for broader trade liberalization and economic cooperation in
services, investment regulation, and other areas I mentioned.
Our objective here should be forward movement on a broad
front but rooted in the transatlantic commitment to a trading
system based on free markets and fair competition.
Stalemate serves no one's purpose and certainly will not
lead to growth and employment that our economy and others so
desperately need.
Thank you again for the opportunity to express these views,
and I would be happy to respond to questions.
[The prepared statement of Mr. Quigley follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. BRADY. Thank you, Mr. Quigley.
Mr. Wolff, welcome.
STATEMENT OF ALAN WOLFF OF COUNSEL, DEWEY & LeBOEUF LLP
Mr. WOLFF. Thank you very much, Mr. Brady, Mr. Levin,
Congressman Camp, other Members.
I started my education on trade in this room 42 years ago,
and it is continuing today.
I have for the record a longer written statement plus an
attachment from the National Foreign Trade Council on trade
objectives going forward.
A couple of points I would make at the outset. One is we
have come through a major financial crisis and recession
without the trade world collapsing, so actually our trade
agreements work in a broad sense.
We have heard a lot about complaints today, and we have a
lot of complaints, but in fact, overall, protectionism has not
surged, which is amazing.
We have a negotiation underway in TTP (the Transpacific
Partnership), which is really very vibrant. It is a great
opportunity. It may be very well the template for all future
trade agreements.
We have a positive development with the President's
initiative with respect to trade agreement enforcement, which
we hope works out well.
You, Mr. Chairman and Ranking Member Levin, have introduced
legislation to fix a hole in our countervailing duty law with
the Court making a mistake in the GPX case. The amendment would
allow the commerce department to countervail, again, against
subsidies from China.
The rest of the story is far more troubling. The point I
would emphasize most is the role of state owned enterprises in
international trade. It has been brought up by several Members
today.
In this regard, most of the examples that are mentioned are
from China. Wind energy equipment of foreign companies declined
in sales in China from 75 percent of the market to 10 percent
of the market in 5 years, 2005 to 2010. The causes of that
decline were first that the purchasers were state owned
enterprises but there were a variety of other measures.
State owned enterprises are not only a China problem.
Chairman Camp and Mr. Price mentioned that Japan continues to
be a significant problem with respect to the ability of
Americans to sell financial products. There is discriminatory
regulation. There is no level playing field. These factors also
affect express delivery services.
If we do not cure the problem with Japan Post, we will have
the same problem in India, we will have the same problem in
China, we need to cure the state owned enterprise problem, and
TTP as Ambassador Kirk mentioned has a chapter which I am told
looks very good in this regard.
Services negotiations. Brad Jensen for the IIE estimates
that there are three million additional jobs in business
services that would occur if we can open up foreign markets.
We have a lot of problems with respect to information
technology that Mr. Krzanich mentioned, and cross border data
flows. Food security is being addressed in the wrong way in
Geneva by countries wishing to put on more export restrictions
rather than fewer.
We have dead letter provisions in the GATT. The currency
provision (GATT Article XV) not used. The transparency
provision (GATT Article X) is not really used. The TRIPs,
(Trade Related Intellectual Property) provisions, are not
effective because performance is not measured in results, it is
measured in process. Process is not good enough.
We are losing many billions of dollars as you all know with
respect to losses due to loss of protection of IP under TRIPs.
We need to reinvigorate the WTO. We need to make sure TPP
lands safely as soon as possible.
I would like to make a pitch since most Republican
candidates at least, (I am not sure the President does) carry
the Constitution in each of their pockets, that Article I
states that actually the buck starts here, and trade promotion
authority, I think, has to be made permanent, and the debate to
do so should start now. The guidance as to what is to be done
with it has to come from this Committee.
You in this Committee and in this Congress have to set the
objectives, and I think you should set them every 4 years for
every Administration.
There is a lot to be done with respect to trade law
enforcement, and in my remaining 5 seconds, I would just say we
do not have the intelligence and analytical capability devoted
to foreign trade barriers that allow us to set trade policy
correctly or trade negotiation objectives correctly.
We are operating in the dark, and we need to put resources
into understanding the barriers that American exporters face.
Thank you very much.
[The prepared statement of Mr. Wolff follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. BRADY. Mr. Wolff, thank you. Thank you for all the
testimony. I want to begin by reiterating the point Chairman
Camp and I made at the initial portion of this hearing which is
what we truly want to invite all interested stakeholders, job
creators, in addition to the witnesses here today in giving
recommendations to this Committee for the record on where we go
next.
I cannot emphasize how interested we are in hearing your
views on what is next for trade policy for America.
I want to thank the witnesses for raising the issue of non-
tariff barriers, what we are finding in the 21st Century global
marketplace is it is not enough simply to bring down the
tariffs and the quotas. We often find there are locked doors
beyond that making it difficult for us to sell and compete.
We also discovered some of those non-tariff barriers are in
essence like trying to put an American plug into an European
socket. Different standards, different regulations in
telecommunications, technology, financial services, security,
and food safety. All those block our ability to sell our goods
and services around the world.
Thank you for the emphasis on that. It needs to be part of
our 21st Century approach.
I want to ask a specific question of each of our panelists
about trade facilitation, and what we have learned since the
global trade flows decreased significantly in 2008 and 2009 was
moving goods cheaper, faster, and better around this world is
critical to trade, competition and lower prices.
Yet, there are a number of barriers to that. I know in the
developing countries, we are seeing great interest in the WTO
and trade facilitation. We see developing countries like Africa
who have an interest in trade facilitation as a means of
reducing the costs of doing business among themselves as well
as their trade partners.
My question is how would a new trade facilitation agreement
affect your ability to sell throughout the world and to create
jobs here in the United States, and what barriers do you see as
the most significant that will be part of that discussion?
Mr. Wolff, why don't we start with you.
Mr. WOLFF. Many of the Members of the National Foreign
Trade Council are amongst the largest trading companies in the
world, global companies. Moving goods across borders is still
all too difficult.
Tariffs have come down a lot in most places, not every
place, obviously. Customs' procedures are still a real problem,
and if we are going to salvage anything out of the Doha Round,
one of the major things to salvage is the agreement on trade
facilitation. It actually would promote development. The Doha
development agenda could be made real with an agreement on
trade facilitation.
I know Ambassador Kirk is pushing this issue very strongly
as well in TPP. It means a lot to American business.
Mr. BRADY. Thank you, Mr. Wolff. Mr. Quigley.
Mr. QUIGLEY. I think anything we can do to reduce the
amount of friction in the pipe is obviously going to increase
its throughput.
We are strong supporters of the idea of standards, mutual
recognition of those standards, and then fair enforcement in
order to promote fair competition.
Trade facilitation absolutely can increase our exports and
the amount of global trade that we have. That becomes the
engine of jobs and growth.
Mr. BRADY. Thank you, Mr. Quigley. Mr. Krzanich, you made
the point you are manufacturing here but selling and exporting
around the world. Trade facilitation is key?
Mr. KRZANICH. Yes, sir, Mr. Brady. As I mentioned, most of
our product is manufactured in the U.S., 75 percent, but 75
percent of our revenues from outside trade agreements give us
access to 95 percent of the consumers that lie outside the U.S.
Trade agreements are critical to our access to markets at a
fair and even cost.
Mr. BRADY. Thank you. Mr. Harris, you are a distributor.
Obviously, you have to get the product to the customer. Trade
facilitation an important part of what should be America's new
trade agenda?
Mr. HARRIS. Very important. I think two of the areas where
we see we could benefit is relative to the tariffs, if the
tariffs were removed. The second area is relative to Customs.
Somebody mentioned that.
A company like Harris & Ford, we filled out paperwork or we
actually had our expediters fill out paperwork, and they had a
``1'' instead of a ``3.'' We found it, corrected it. We were
fined $78,000 on one transaction. On that particular product,
there was zero duty on that product.
Mr. BRADY. Apparently we found a new way to balance the
budget here in Washington.
Mr. HARRIS. I think so.
[Laughter.]
Mr. BRADY. Grant Adonis, former trade leader at USTR, made
the point that time is a trade barrier, and we need to focus on
real 21st Century means to decrease that time, that cost, and
we will create jobs in America as a result.
Thank you very much. I would like to yield to Ranking
Member Levin.
Mr. LEVIN. Thank you. Welcome.
Mr. Wolff, you talked about the need for more resources,
especially in language. I hope this new proposal of the
administration will lead to that. They are asking for more
resources. We will see if they are given that.
Mr. Harris, your story is a story that should be heard by
small businesses and medium sized businesses throughout the
country because, while they are important in terms of trade,
too few still participate. That has been a problem for a long
time.
Let me just zero in on a couple of other issues. I just
have a couple of minutes.
Mr. Quigley, let me just talk to you about services. Within
WTO, services' negotiations really never got off the ground. I
think that is a fair characterization. It kind of went up in
smoke.
What do you think? How do we do it better but differently?
Mr. QUIGLEY. There is no question there is a huge
opportunity that simply has not been looked at, when we look at
the scale of services in our economy and the opportunity that
is there in a global marketplace.
Moving that up the agenda and then trying to advance
something as we have advocated in a transatlantic way as a
starting place, and then invite other countries to join an
agreement that we might be able to reach between Europe and the
U.S., I think, would be an important first step.
Mr. LEVIN. You think there is reality to that in terms of
discussions with the Europeans?
Mr. QUIGLEY. I do indeed. I think we have a mutual
opportunity that we should not squander, if the U.S. and Europe
as this huge market that we represent when we work on a
combined basis, if we want to influence the future direction of
trade negotiations, we need to come together.
I believe that the high level working group that has been
formed and this notion of a vision for the 21st century gives
me hope that in fact we can engage on these issues and advance
the ball.
Mr. LEVIN. Mr. Krzanich, you were somewhat optimistic in
terms of relations with China. On page ten, you talk about a
number of the JCCT commitments that have been implemented, but
then there are others that have not, so the administration may
want to carefully track the completion of the Chinese
commitments made to date.
I am not sure, I am thinking back when there was
competition between our high tech industries in Japan, and the
difficulties that we had to barriers.
Do you face similar problems in China? I am not clear from
your testimony. How free are you to work there, to trade there,
to feel protected there? You are such a vital industry.
I may be putting you on the spot. If there is a conflict
there in terms of your proprietary interests, do not answer
beyond what you should, but just in the minute or two I have
left, describe what it is like.
Mr. KRZANICH. I would say that one of the major concerns
that we have is that China has listed semiconductors as one of
their strategic industries. You see them putting together
programs and policies that really favor and try to establish
this industry.
That puts pressure on us around intellectual property
protection, and then also it started to creep into other areas,
of our ability to do trade in that area as well.
Them picking out semiconductors as a growth and a
strategic industry has become one of the issues for us.
You asked how free are we to do business there. We have
been able to do business very well there from the standpoint of
being able to get our product in and out of there and being
able to manufacture, and we do have manufacturing in China, but
we continue to see pressure on their part to get access to that
intellectual property that resides there, and we are finding
that we are having to be more and more careful about how we
manage that.
Mr. LEVIN. Do you expect the U.S. Government to be helpful
to you? Even companies as large as yours probably cannot do it
alone. You need a vigorous USTR and governmental presence to
help you.
Mr. KRZANICH. Yes, it is critical that Government helps us
remain having access to those 95 percent of consumers outside
the U.S., and helping us break down these non-tariff barriers,
the ones where governments employ standards that favor local
contents.
Mr. LEVIN. Thank you.
Mr. BRADY. Thank you. Mr. Herger is recognized.
Mr. HERGER. Thank you, Chairman Brady. I would like to ask
a question of each of our panelists. With the Doha round at an
impasse, what WTO initiatives would be the most beneficial to
you? Beginning with you, Mr. Harris.
Mr. HARRIS. I think I will have to pass on that. I cannot
answer that.
Mr. KRZANICH. I do not know if I know exactly which of the
WTO initiatives would be best. You are asking for specific
initiatives.
I think anything that continues to lower the trade barriers
and these non-trade tariffs that are being applied by
governments is good, but I do not have specifics beyond that,
sir.
Mr. HERGER. Thank you. Mr. Quigley.
Mr. QUIGLEY. Our recommendation given the fact that we are
a decade in and we seem stalled is that we move on. The way we
recommend moving on is let's look at U.S. and Europe and what
can we do together in terms of that huge platform that we
represent, and if we can build some principle based standard
approaches to some of the matters that have become so difficult
on the Doha round, and then other countries decide they want to
join, to participate in this U.S./Europe market, now we have
the U.S. and Europe driving standards, driving for mutual
recognition, driving forward and facilitating trade.
That is our recommendation, that we move on, and we move on
with our partners in Europe, and let's make something happen in
a bilateral way that will then lead to plural lateral kinds of
agreements.
Mr. HERGER. Thank you. Mr. Wolff.
Mr. WOLFF. Three possibilities exist currently, I think. A
services agreement among a coalition of the willing. There are
meetings going on in Geneva now among those countries, about 20
countries, that believe they can get something done in Geneva
on services, to see whether it be done with full participation
of all the WTO Members, it could become a WTO agreement.
Under GATS, the General Agreement on Trade in Services,
there is the possibility of having less than most favored
nation treatment, so one can have an agreement in the WTO that
does not apply to everybody, just those who are willing to
play.
Second, an expanded ITA, the Information Technology
Agreement, there is sentiment to go forward with that.
Third, an agreement on Environmental Goods and Services
would benefit all countries. Going to zero tariffs. In
addition, an agreement on trade facilitation, as mentioned
earlier. What is not possible in Geneva, we will do in TPP, and
TPP will become the template for what happens in WTO later.
Mr. HERGER. Thank you.
Mr. BRADY. Thank you, Mr. Herger. Mr. Davis is recognized.
Mr. DAVIS. Thank you, Mr. Chairman.
I would like to touch on a question that I opened up with
to Ambassador Kirk. I would like to talk about the impact of
Federal regulations on your ability to export, more
specifically in the area of manufactured goods.
MAG, a very successful machine tool producer that is
located in my district, and a systems company, has a tremendous
amount of their success tied to international business.
In fact, a very large portion of their business portfolio
is export of products internationally. It creates a tremendous
amount of jobs in the automotive, aerospace, and industrial
equipment industries.
According to MAG, obsolete Cold war export regulations
significantly limit their export market. For example, the dual
use technology question that is largely outdated right now,
particularly in the area of machine tool manufacturing.
For example, five axis metal cutting machine tools continue
to be tightly controlled by the Federal Government. However,
this technology is now available as a commodity worldwide,
putting U.S. suppliers at a severe disadvantage.
There are now at least 13 Chinese machine tool builders
building five axis machines that as a matter of policy, the
Aviation Industry Corp. in China will only commit to a maximum
of ten percent of its import purchases to the U.S. machine tool
industry due to the U.S. export policy for five axis machine
tools.
This puts European competitors at an immediate advantageous
position to capture the rest of the market share in the fastest
growing market in the world.
MAG informs me that they could increase their annual
machine take output in Northern Kentucky and the commensurate
job creation associated with this by 30 percent, creating many
new jobs, focused on export, because of this approval process
if it were to be modernized.
From your view, how do U.S. regulations impact your ability
to compete in international markets, and what should we as
Congress be doing to ease any regulatory burdens that companies
experience?
I would just open it up to the panel in general.
Mr. WOLFF. The National Foreign Trade Council spends a good
deal of its time on export control matters and sanctions. The
controls and sanctions really have to be multilateral, not
unilateral to be effective. If something is available generally
from other sources, it must not be restricted from the United
States.
We are concerned about national security, but we also have
to be concerned about our industrial base. Our industrial base
is impaired if goods are generally available from other places
and we are the only country restricting the exports.
Mr. DAVIS. Would anybody else care to comment?
Mr. KRZANICH. I will comment. I think you made one very key
point in that many of those regulations and rules were defined
a long time ago when those technologies were unique or at a
different level of acceptance or availability.
We see some similar trends in our industry as well, as
competing power becomes higher. Things that were considered
super computers before are available on your desktop and
eventually in your palm of your hand.
We also see things like radiation hardness, where we start
to shrink geometries and just make things smaller. Things
become just naturally more radiation hardened.
Some of those regulations need to be updated for what the
current trends in technology are.
Mr. HARRIS. I am just going to make the comment that again
at Harris & Ford, we are the small business represented here.
Thirty percent of the products we purchase are from overseas,
the majority of that by far is from China. As far as the
exports, there is a disproportionate amount of exports versus
imports.
Anything that you can do that lowers the barriers for our
customer base enables Harris & Ford to be able to participate,
and particularly, I am thinking in China, because that is where
our imbalance is.
Mr. QUIGLEY. I would just comment very quickly, Deloitte is
not a manufacturer, but from my Transatlantic Business Dialog
approach, what we have often times aspired to this barrier free
market between the U.S. and Europe, and when it comes to these
issues, we always advocate the notion of can we establish
global standards and with global standards, have mutual
recognition of those standards, and with that mutual
recognition of those global standards, then create a barrier
free market, where growth can in fact occur.
Mr. DAVIS. Thank you very much. Mr. Chairman, I yield back.
Mr. BRADY. Thank you, sir. Mr. McDermott is recognized.
Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Krzanich, we
pass laws here and the Government tries to do things to help,
but I would like to have your assessment of at least one thing
that has been tried.
I understand you have a serious problem with counterfeit
chips being imported into the United States. The National
Defense Authorization Act of 2011, the NDAA, included a
provision to ensure that Customs can work with rights' holders
such as Intel, to more effectively identify and combat IPR
infringing products.
In the State of the Union, the President made clear that
beefing up IPR enforcement at the Border will be a top
priority.
Would you agree with that, that the implementation of the
NDAA provision is one way they can do that, and are you working
with the administration to make sure that happens?
Mr. KRZANICH. The simple answer is yes. Enforcement of
those counterfeiting rules and having the Custom agents being
able to enforce them at a stronger level is good. Yes, we are
working with the administration.
Counterfeiting is much broader than products just working
their way back into the U.S. Remember, I said 95 percent of the
consumers are outside of the U.S., 75 percent of our revenue is
from outside the U.S.
It is really much more global than that, and what we really
need to do is really focus on externally as well.
It is counterfeiting going on in China and those products
are probably never coming back into the U.S., but they are
being sold throughout the world, and really having all of the
countries enforce these counterfeiting rules and regulations.
Mr. MCDERMOTT. If they present to you some chips and say
these are coming from somewhere, do you have some way to make
sure those chips are not your chips? How do you work with
Customs in dealing with that?
Mr. KRZANICH. Yes, sir. We have a system. Think of it as
like a bar code that every part has, that is unique to that
part. It is generated during the manufacturing process, and
tells us exactly the identity, where it was manufactured, what
date, all that kind of information.
When Customs hands us a part it questions whether it is
counterfeit or not, we can tell almost immediately now whether
it is counterfeit or not.
Mr. MCDERMOTT. It is not reproducible by somebody else and
putting it into another part?
Mr. KRZANICH. No. We would know, it is unique to that part
and it has a unique generation code. It is not a simple number
like you could understand otherwise.
Mr. MCDERMOTT. You are saying the biggest problem is not
parts coming in here, but really what is going on----
Mr. KRZANICH. I am saying it is a global issue broader than
just the U.S.; yes.
Mr. MCDERMOTT. How can we be helpful in the global issue?
Mr. KRZANICH. I think it is back to the discussion that we
have had all morning here in this session and the session prior
as well, around really having the government help us with
protection of intellectual property rights in all of these
countries.
All of this is around--whether it is counterfeit parts or
counterfeit software or counterfeit products in general, it is
around support of intellectual property rights.
Mr. MCDERMOTT. Can it be done in a country that does not
want to put the hammer down on those people who are making
counterfeit things? We are talking about China here. Obviously,
there are lots of other places.
Mr. KRZANICH. I think it has to be tied to broader
initiatives. You are right, probably just this initiative on
its own would not be enough to get them to move.
When you tie it to other trade efforts and make it broader
than just this one, access to our markets, teaming with other
countries that have intellectual property to protect as well,
and access to those markets, I think you can incentivize them
that to play in this global economy, you have to play by a
certain set of rules, and that includes protection of
intellectual property.
Mr. MCDERMOTT. Do you think as the Chinese move up the
scale of manufacture from fabric and bicycles and now they are
getting into electronics, that they will have more interest in
this kind of enforcement?
Mr. KRZANICH. Just my own observations from my time in
China, I would say yes, you see less counterfeit as you travel
the streets of China.
I think also any country that as you start to develop your
own intellectual property, you start to become more and more
interested in intellectual property protection.
I think there is a natural evolution that will occur as
well; yes.
Mr. MCDERMOTT. Thank you very much for your testimony.
Mr. BRADY. Thank you. Chairman Camp is recognized.
Chairman CAMP. Thank you. Mr. Wolff, you mentioned
permanent Trade Promotion Authority and that this Committee
should establish some guidance, and there should be objectives.
What kind of things did you have in mind?
Mr. WOLFF. I sat through 2 years here when the first Trade
Promotion Authority was put through. The House actually passed
you, Mr. President, can change any law subject to just an
override, and the Senate said we are not doing that, we are
going to have fast track.
I think executive agreements need domestic implementation
for trade, similar to treaties. Our treaty power, the way we
handle treaties is in the Constitution and is permanent. There
is a mechanism for doing it.
That does not mean there should not be checks and balances
within the committee structure to make sure that any agreement
that comes through gets scrutinized and approved.
I think the objectives have to be upgraded and changed
regularly, and if the objectives are not met, they would not
qualify for this permanent fast track in effect.
Namely, you have heard here today new issues, the cross
Border data flows, information technology products that are no
longer adequately covered by agreements.
We have now very outdated--not all of them but many of
them--objectives in existing law. We are pretending, at least
the administration is pretending that the procedures exist.
I would say put the procedures into place, put them in
permanently, and update the objectives at least for every new
Administration, no less than frequently than that.
Chairman CAMP. Thank you. To our other witnesses, obviously
bilateral trade with India and Brazil has grown rapidly in the
last few years. They are important markets for our exports and
also for services.
There are practices that have been occurring in both of
those countries, and certainly in China, as we had been talking
about earlier today, but the Indian and Brazilian markets as
well but in a different context.
What do you think about these protectionist policies? What
effect do they have in our ability to enter into and sustain
business in those markets, and what should we do about it?
Should we pursue bilateral investment agreements or should we
negotiate around them with others who are interested or both?
Mr. Harris, why don't I start with you, and we can just go
down the line.
Mr. HARRIS. Again, in speaking with our staff that handles
that part of Harris & Ford, as I mentioned earlier, it is more
difficult for us to work with Brazil than Mexico or Canada.
If we could extend something similar to an agreement where
you, the House here, the Ways and Means Committee sets the
rules, that will make it easier for Harris & Ford to do
business with Brazil.
The paperwork with Brazil is a nightmare for a small
company compared to Mexico or Canada.
Chairman CAMP. All right. Mr. Krzanich.
Mr. KRZANICH. I think you stated the problem very well. I
would like to say countries like Brazil are some of our fastest
growing markets now for our industry as well.
I think the time is now to try to institute these kinds of
programs. Their markets are not as developed and as big as say
China, for example. They do not have the large internal market
that they can capitalize on as well.
I would say the answers are similar to what we said
throughout this conversation, that we really need to put
together trade agreements that break down these non-trade
barriers, these government driven programs.
I think now is the time to do that because they are going
to be incentivized because access to our market is a bigger
incentive for them, so they will be more willing to negotiate
now than late, so the time is critical.
Mr. QUIGLEY. Nothing to really add other than to just
simply restate that because of the scale of those markets, the
pace at which they are growing, we cannot ignore them. I think
some of the tactics that we could use to try to influence the
behavior is just simply negative lists.
Name and shame of practices that we believe in fact are
protectionist in their very nature, and as those economies
mature, grow and want a stronger seat at the global table, they
need to be ready to play by the global rules, and to call them
out, I think, is one of the tactics that could be used to start
to influence the behavior.
Chairman CAMP. Thank you. I yield back.
Mr. BRADY. Thank you. Dr. Boustany is recognized.
Dr. BOUSTANY. Thank you, Mr. Chairman.
Mr. Wolff, we are engaging in TPP negotiations without
trade promotion authority. In your testimony, you talked a lot
about state owned enterprises and the problem it poses.
I guess my question would be given that our Committee has
to provide guidance and certainly once the trade promotion
authority is in place, we will go forward hopefully with an
agreement, what would you like to see in a chapter on state
owned enterprises? Can you go into a little more detail there
to give us some guidance?
Mr. WOLFF. First there must be no discrimination in
regulation. This is a major problem. We see it in Japan. It is
true in China and India. The Vietnamese economy, of course, has
a huge number of state owned enterprises.
Eliminating discriminatory regulations that favor of SOEs
as opposed to private players in the market is one aspect of
dealing with the state-owned enterprise problem.
Obtaining market access, where a network is controlled by a
state owned enterprise, is equally important. There have to be
obligations to have state owned enterprises live up to the
national treatment obligations of the country involved.
Obtaining transparency. There is no transparency with
respect to the operations or subsidies to state owned
enterprises. This is a major problem.
China is the number one example in the world. We have to
think about what rules we want to apply to China when we are
negotiating the rules in TPP. When the Chinese government makes
a pronouncement, those company executives that know they have
only one shareholder know exactly what they are supposed to do,
and that means--I gave the example of wind energy procurement,
wind turbines, in China--don't buy foreign products.
Those are all state owned enterprises that do the
procurement. When they stopped buying foreign products, it was
in part because there was in China an indigenous innovation
policy, which now the Indians are following in their telecom
area.
The bid procedures are entirely secret; they are considered
a state secret. You can go to prison for revealing those
measures.
Transparency is very important. National treatment
obligations on the state owned enterprise itself would be very
important. Market access in a real way is vital.
We are not against state owned enterprises as such--but if
they are going to act in the commercial arena, they ought to be
governed by the same rules.
Dr. BOUSTANY. Held to the same standards.
Mr. WOLFF. Yes.
Dr. BOUSTANY. Thank you. Mr. Quigley, I questioned
Ambassador Kirk earlier with regard to services. We have a
trade surplus with China, some $7.5 billion in surplus. I
personally believe it should be much higher, and I think there
is potential room for growth there.
China imposes all kinds of equity limitations in key
sectors, banking, insurance, retail, telecom. There are
licensing issues and so forth. The list goes on and on.
What are your views on how we can deal with all this and
better create opportunities for our services companies in
China?
Mr. QUIGLEY. I think the visibility once again is just
simply a first step in the right direction, and given the scale
of the trading relationship that exists between China and the
U.S., I believe we can have discussions related to services and
can begin a more disciplined and more open approach to
services, and we should not put it in the ``too hard'' file.
It is just simply so large, and there is mutual benefit
that is available, so I think keeping it at the top of the list
and pushing on services as one of those areas where we just
simply have not invested much time at this point is something
that is definitely worthy of the energy of those that want to
work on trade policy and trade negotiations.
Dr. BOUSTANY. Thank you. Mr. Krzanich, you mentioned
government procurement agreement certainly with China and other
countries, the BRIC countries.
I can assure you our Committee is really pushing on the
administration to use every bit of leverage it has with these
countries to move forward, to see that these countries follow
through with their WTO obligations.
Mr. BRADY. Thank you. Votes will be called in the next
minute or two, and we want to get to all the Committee Members,
so we would like to move this along.
Ms. Jenkins is recognized.
Ms. JENKINS. Thank you, Mr. Chair, and thank you all for
being here today.
There is no doubt that China's currency misalignments is a
serious problem, but it seems it is not the single most
pressing problem. China maintains a number of discriminatory
and distortionary industrial policies that harm U.S. companies
and their workers.
In addition to currency misalignment, these include
subsidies that distort competition, lack of regulatory
transparency, a closed capital account, harmful indigenous
innovation policies, failure to adequately protect intellectual
property, and many other barriers to U.S. exports and
investments.
I would just like each of you maybe to comment, how does
the currency rank in terms of other barriers that you face in
China, and what do you all consider the most significant
barriers that you face?
Mr. Harris, and then down the line.
Mr. HARRIS. The currency itself, I think my customer base
that I serve would speak better to that. I can tell you that
one of the most alarming events I have ever had in business was
when I was with one of the Vitamin C manufacturers in China.
We were negotiating, that was the goal, to negotiate volume
and pricing. When they said to us that we have already met with
the other three major Chinese Vitamin C producers and they will
sell you 10,000, this one will sell you 11,000, this one will
sell you 12,000, they already had the meeting as we were flying
over, and already had set the price.
Certainly, things of that nature have to be addressed
because what happened in our industry was it drove out every
Vitamin C manufacturer in the U.S.
That is why I am happy and excited about our companies
moving over and manufacturing there because that will eliminate
or reduce those types of things from happening.
Mr. KRZANICH. For us, we both import and export out of
China. Currency manipulation is not really a big factor for us.
I do not consider us really experts on this subject.
From our point of view, I think we think we should take a
broader look at China and these countries, how we manage trade.
It is much further than just the currency issue itself.
Ms. JENKINS. Thank you. Mr. Quigley.
Mr. QUIGLEY. No comment on the currency issue. I would just
simply say that in our business, it is regulatory coherence
that we are seeking and getting to those common global
standards and then mutual recognition that would be the
enabler.
Ms. JENKINS. Fair enough.
Mr. WOLFF. China's undervaluation of its currency, I think,
causes most problems in this country--wiping out manufacturing
competing with imports that have in effect a 20 percent (or
whatever it is today) subsidy.
On entry into China, since we are not competing very often
in commodities but in higher value goods, it is other types of
barriers that are really the major problem that people have
mentioned.
If someone in China will not buy something from a foreign
source, if a state owned enterprise will not buy something from
the United States, or will not buy something unless it is
invented with Chinese technology, then currency values do not
matter at all.
Ms. JENKINS. Thank you. I yield back.
Mr. BRADY. Thank you. Mrs. Black.
Mrs. BLACK. Thank you, Mr. Chairman. I am going to be
really brief. I just want to follow up on the comments and the
dialog that I had with the Ambassador.
Mr. Quigley, this goes to you. I recognize, maybe not right
in my district but in Tennessee around me, are very important
professional services that are exported.
I do not know that we are really putting a lot of emphasis
on that. I know the President in his agenda has looked more at
the manufacturing side.
I would just like you for the record to talk about where
you see the importance of these professional services being
exported, and in particular, how that really helps us with
creating more jobs and not just jobs but very well paying jobs.
Mr. QUIGLEY. There is no question that the markets are
global and the professional services market is also global.
Having the ability to move intellectual property and then also
people across Border becomes the great enabler of growing those
businesses and at the pace they could grow, so access to
movement of talent and VISAs, that we would like to be able to
move people here, and also move people from here overseas, and
getting to the point where we have a coherent tax policy that
enables that becomes the objective.
We at Deloitte, more than half of our jobs are outside the
United States, but those firms are actually owned by partners
in those individual countries.
For us, I do not view it as a huge impediment, but the
ability to move talent does sometimes get in the way, and the
ability to share intellectual property across Border.
Mrs. BLACK. With that being said, what would you say would
be the number one barrier?
Mr. QUIGLEY. Again, I go back to the regulatory coherence,
the inability and the degree of difficulty and frankly the huge
costs associated with dealing with separate sets of regulations
country by country for a product that is fundamentally viewed
for its global nature.
I really hope we can get to regulatory coherence, and that
would be a big enabler of continuing to grow the professional
services market.
Mrs. BLACK. I hope so, too, for the sake of our American
workers for jobs and jobs that pay well.
Thank you. I yield back my time.
Mr. BRADY. Thank you. Mr. Reed, for the final questions.
Mr. REED. Thank you, Mr. Chairman. Thank you to our panel.
If I could focus a little bit on you, Mr. Harris. I come
from a rural agricultural based, small business based area of
New York State.
You made some comments in your testimony, I believe, about
how small business needs to work with the world, I think that
is a phrase you kept utilizing.
I am interested, from your frontline perspective and
experience and from a small business perspective, and a lot of
my constituents being small businesses, what is the most
important next step, or what is your vision for a trade policy
that could advance the small business opportunities on the
world stage?
Mr. HARRIS. Again, I am going to say that we are more small
business in the services business. What we do at Harris & Ford
is we do the things our customers do not want to do themselves.
We specialize in the small stuff. Logistics, finding
synergies, things of that nature.
I am not trying to be evasive, but whatever is done to
allow--I mentioned three companies that have really been
instrumental, and there are others, in Harris & Ford's growth,
but let's say, for example, Kraft. We sell over 500 products
and to several countries.
Whatever is done to allow them to do business easier, it is
just a pull through effect for Harris & Ford. We get business
because you helped them regulatory-wise. Same way with Coke,
Gatorade.
Whatever you do that helps them ease their transactions
internationally, it helps us as a small business. We patch the
tires and we do the little stuff, but we do it well.
Mr. REED. Being a small businessowner myself, I can relate
to that.
One last question. Mr. Quigley, you had some suggestions
about how WTO was not addressing or utilizing all the tools.
You said there was another tool that you envisioned outside of
the WTO, I believe, in some testimony to my colleagues.
I just want to delve into that. What specifically would you
suggest outside the WTO that could be utilized to address the
concerns that the WTO is not doing?
Mr. QUIGLEY. I just think we have a huge opportunity with
the colossal market of Europe and the colossal market of the
U.S., and a wonderful and robust trading relationship today, to
take an U.S.-EU approach to global trade.
If we can in fact build a free trade agreement or other
bilateral trading arrangements between the U.S. and Europe, and
then we construct it in such a way that third countries could
participate, we could start to move the trade agenda forward on
the U.S.-EU approach, and key players in Asia would want to
join because they want access to that U.S. and European market.
I think there is an opportunity that is not exploited fully
there. That is what we hope this high level working group that
Ambassador Kirk is co-chairing with Commissioner DeGucht has
the potential of doing, and helping to enable global trade
through this stronger partnership for the 21st century between
the U.S. and Europe.
That is the opportunity we see.
Mr. REED. Mr. Wolff, with your 20 years plus or how many
years experience you have, do you see that as an opportunity to
develop and promote?
Mr. WOLFF. Absolutely. I am a multilateralist at heart.
Doha is stalled. We cannot get as much done there if anything
at all. I would look to see what could be done with the EU. I
hope they are not looking inward so much because of current
financial issues that the EU cannot join hands across the ocean
and conclude a good agreement with the United States.
The EU is negotiating with Canada, for example, and getting
better market access right across the Border from us in
government procurement than we have under NAFTA.
We cannot stand still. I think we ought to prioritize, EU,
Canada, Brazil, India, and the largest markets, and improve
those agreements where we have some and get agreements where we
do not.
Mr. REED. Very good. With that, I yield back.
Mr. BRADY. Great testimony, very insightful. On behalf of
Chairman Camp, I want to thank you for being here today.
The hearing is adjourned.
[Whereupon, at 2:48 p.m., the Committee was adjourned.]
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The Honorable Dave Camp, Letter 1
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Questions For The Record
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