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





                 RUSSIA'S ACCESSION TO THE WORLD TRADE
                    ORGANIZATION AND GRANTING RUSSIA
                    PERMANENT NORMAL TRADE RELATIONS

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

                                HEARING

                               before the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 20, 2012

                               __________

                           Serial No. 112-25

                               __________

         Printed for the use of the Committee on Ways and Means






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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

       1Jennifer M. Safavian, Staff Director and General Counsel

                   Janice Mays, Minority Chief Cousel







                            C O N T E N T S

                               __________

                                                                   Page

Advisory of June 20, 2012 announcing the hearing.................     2

                               WITNESSES

Ambassador Ron Kirk, United States Trade Representative, 
  Testimony......................................................     7
Ambassador William Burns, Deputy Secretary, United States 
  Department of State, Testimony.................................    16

Panel 2:

Mr. Doug Oberhelman, Chairman and Chief Executive Officer, 
  Caterpillar Inc. on behalf of The Business Roundtable and The 
  National Association of Manufacturers, Testimony...............    56
Mr. Wayne H. Wood, President, Michigan Farm Bureau, Testimony....    68
Mr. Michael Rae, President, Argus Ltd., Testimony................    73
Mr. James P. Mackin, Senior Vice President and President, Cardiac 
  Rhythm Disease Management, Medtronic, Inc., Testimony..........    79

                       SUBMISSIONS FOR THE RECORD

Computer & Communication Industry Association....................   102
Distilled Spirits Council of the United States...................   105
National Milk Producers Federation...............................   110
National Pork Producers Council..................................   113
U.S. Chamber of Commerce.........................................   117

                   MATERIAL SUBMITTED FOR THE RECORD

Questions for the Record:

    Questions....................................................   124

 
RUSSIA'S ACCESSION TO THE WORLD TRADE ORGANIZATION AND GRANTING RUSSIA 
                    PERMANENT NORMAL TRADE RELATIONS

                              ----------                              


                        WEDNESDAY, JUNE 20, 2012

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

    The Committee met, pursuant to call, at 9:30 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

              Chairman Camp Announces Hearing on Russia's

             Accession to the World Trade Organization and

            Granting Russia Permanent Normal Trade Relations

Wednesday, June 20, 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 
Russia's accession to the World Trade Organization (WTO) and granting 
Russia permanent normal trade relations (PNTR). The hearing will take 
place on Wednesday, June 20, 2012, in 1100 
LongworthHouseOfficeBuilding. The first panel will consist of 
Administration witnesses and will begin at 9:30 A.M. The second panel 
will consist of private sector witnesses and will begin at 2:00 P.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:

      
    In December 2011, the WTO Membership invited Russia to become a 
Member of the WTO. Under WTO rules, Russia will automatically join the 
WTO thirty days after depositing its instruments of ratification, which 
is to occur once the Russian legislature votes on the WTO accession 
package. That vote is likely to occur in the next few weeks.
      
    Russia is currently the largest economy that is not a WTO Member. 
As a member of the WTO, Russia will be required to decrease its tariffs 
and remove barriers to imports of goods and services. Russia will also 
be required to comply with WTO requirements regarding transparency in 
setting rules, intellectual property rights (IPR) protection, science-
based sanitary and phytosanitary (SPS) standards, and other 
obligations. WTO Members will be able to use the WTO's dispute 
settlement procedures to enforce these obligations.
      
    The United States does not now provide Russia unconditional normal 
trade relations, or permanent normal trade relations (PNTR), as 
required under WTO rules, because Russia is subject to Title IV of the 
1974 Trade Act, including the so-called ``Jackson-Vanik'' amendment. 
This law requires annual determinations to provide normal trade 
relations for all countries that were Communist when the law was 
enacted, instead of the permanent, unconditional trade relations that 
the United States typically offers to WTO Members. To avoid being in 
violation of its WTO obligations, the United States has invoked ``non-
application'' of WTO rules with respect to Russia, which it can revoke 
at any time if Congress passes PNTR. The effect of the non-application 
is that the United States and Russia would not have a WTO relationship, 
and neither Russia nor the United States would have rights or 
obligations under WTO rules with respect to each other. This could 
place American employers, workers, farmers, and ranchers at a 
disadvantage in the Russian market versus their competitors in other 
WTO Members.
      
    In announcing this hearing, Chairman Camp said, ``We should explore 
every opportunity to open markets for U.S. employers, workers, farmers, 
and ranchers. Granting Russia PNTR is a way to create American jobs and 
increase our exports. If Congress does not grant Russia PNTR, the 
benefits of Russia's membership in the WTO will go only to our foreign 
competitors. Clearly, there are non-economic concerns with Russia, but 
blocking PNTR does not increase our leverage in addressing those items. 
I look forward to the administration's active engagement on all of the 
issues surrounding Russia PNTR.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing will be the significant opportunities 
presented upon Russia's accession to the WTO and commercial areas 
requiring continued attention, such as enforcement of IPR and Russian 
SPS standards relating to U.S. agriculture exports. The hearing will 
also explore the impact on U.S. employers, workers, farmers, and 
ranchers if Congress does not grant Russia PNTR and they are unable to 
obtain the benefits of Russia's membership. In addition, the hearing 
will provide an opportunity for addressing Members' non-commercial 
concerns regarding Russia.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Thursday, July 5, 2012. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

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

                                 

    Chairman CAMP. Good morning. I want to welcome everyone and 
extend a special welcome to our guest, the United States Trade 
Representative, Ambassador Ron Kirk, and the Deputy Secretary 
of the United States Department of State, Ambassador William 
Burns, as well as our second panel of witnesses, which will 
begin at 2 o'clock this afternoon.
    I am looking forward to a discussion about Russia's 
accession to the WTO and permanent normal trade relations, or 
PNTR, for Russia. Our ongoing relationship with Russia is a 
complex one, but also one with considerable potential for both 
countries. That is why I welcome Russia's membership in the 
WTO, and that is why I support PNTR for Russia.
    The economic benefits are clear; greater opportunities for 
U.S. employers, farmers and ranchers to sell American goods and 
services to Russia. We would give up nothing, not a single U.S. 
tariff, but we would obtain a powerful new enforcement tool and 
important rights, while bringing our two countries closer 
together on multiple fronts.
    No matter what, Russia will join the WTO in a couple of 
months, and to obtain the benefits of the concessions Russia 
made to join the WTO, we must grant Russia PNTR. However, 
Russia continues to generate considerable skepticism on Capitol 
Hill. Some of the skepticism is rooted in the significant 
bilateral commercial issues that we have with Russia. For 
example, Russia continues to be on USTR's priority watch list 
for inadequate enforcement and protection of intellectual 
property rights. This problem is especially acute regarding 
Russia's failure to address Internet piracy.
    Another serious problem is Russia's abuse of sanitary and 
phytosanitary requirements to keep out U.S. meat exports. When 
Russia joins the WTO, it must adopt science-based SPS 
requirements that reflect international standards. But there is 
the concern that Russia will continue to discriminate against 
U.S. meat exports, particularly pork.
    These issues reflect the overall concern of how much Russia 
will live up to its WTO obligations. It is one thing for our 
country to promise to follow WTO rules, but it is another to 
actually follow those rules. Members must have confidence that 
these outstanding commercial issues will be adequately 
addressed, and that the administration has a plan to ensure 
that Russia lives up to its WTO commitments.
    Member skepticism about Russia is also due to non-
commercial issues, and I share the view of many Members that 
Russia poses significant problems relating to foreign policy 
and human rights. However, while these issues must be 
discussed, I believe that holding up PNTR because of nontrade 
concerns does not increase our leverage to address them and 
does not delay Russia's WTO accession.
    I also think that legislation granting Russian PNTR should 
be clean and targeted, or else the legislation could be unduly 
complicated and delayed.
    I welcome today's hearing so that Members can raise the 
issues that are on their minds about Russia, giving the 
administration the opportunity to respond to all concerns. In 
my view the Administration has not been vocal enough in 
promoting PNTR, although I do note an op-ed in the Wall Street 
Journal by Secretary of State Hillary Clinton, which is 
certainly very welcome on this issue. I am glad to see that 
Monday's joint statement by the President and Russian President 
Putin began by mentioning Russia's accession to the WTO and 
granting Russia PNTR, and I hope that the President will follow 
up with even more engagement with Congress and the American 
people and a strategy for Congressional consideration of PNTR. 
I hope that today's hearing will be an important step in the 
administration's effort to make its best case for why Russia--
why Congress should act this year on PNTR.
    Finally, I also welcome the opportunity to hear from the 
private sector this afternoon about why Russia joining the WTO 
and granting Russia PNTR is so important to them. Russia has a 
significant and growing economy, yet our economic relationship 
with Russia isn't that large. This imbalance indicates a 
substantial new opportunity to sell our goods and services in 
Russia and create jobs here at home. However, every day we 
delay gives our foreign competitors and their workers a chance 
to get ahead, something we can hardly afford at this time.
    Chairman CAMP. Before yielding to the Ranking Member, 
without objection, the opening statement of all Members will be 
included in the record.
    And at this time I yield to Mr. Levin for his opening 
statement.
    Mr. LEVIN. I thank you, Mr. Chairman.
    Welcome to our two distinguished witnesses and to everybody 
else who is here to listen today.
    We need forthright consideration of what PNTR means and how 
it fits within an overall relationship with Russia. I urge that 
these are key points. One, Jackson-Vanik was an amendment to a 
trade bill--that is often forgotten--that was an important part 
of trade policy at that time. That amendment has served its 
purpose with respect to Russia. Russia now has a 20-year record 
of allowing its citizens to freely immigrate. Despite earlier 
efforts to repeal Jackson-Vanik separately, it has not proven 
possible to do so, and it should now be repealed as part of 
action on PNTR.
    Two, there are clear commercial advantages to granting 
Russia PNTR. PNTR gives U.S. companies, workers and farmers 
full advantages of Russia's WTO Membership. And as we all know, 
failing to grant PNTR does not prevent Russia from joining the 
WTO; it only prevents the U.S. from gaining the benefits of 
Russia's WTO Membership.
    Three, based on past experiences there is reason to be 
concerned whether Russia will live up to the letter and spirit 
of its WTO commitments. In addition to a general concern as to 
whether Russia will comply with its obligations, there are 
specific concerns over Russia's enforcement of intellectual 
property rights, its commitment to the WTO information 
technology agreement, and its unjustified barriers to U.S. meat 
exports. We will likely discuss all of these issues in this 
hearing.
    Because follow-through is so important, as has been 
discussed between our staffs and with the Senate, we should 
spell out specifically these trade issues in the PNTR 
legislation not as conditions, but as clear understandings as 
to what actions will be taken by Russia.
    Four, there is real, significant cause for concern about 
the status of the rule of law and human rights today in Russia. 
For two reasons, and I emphasize this, there is need to find 
ways to reflect that concern in the PNTR legislation. If there 
is an absence of the rule of law in the area of human rights, 
it is more likely to also be absent in other areas, including 
commercial relations. Further, trade between nations needs to 
be viewed as more than just about dollars and cents because its 
impact is more than just that.
    This needs to be reflected in the contents of trade 
agreements, including PNTR, as was true with China PNTR. So 
PNTR legislation should not be enacted without the Magnitsky 
bill to address gross human rights violations. And we should 
consider other legislative proposals to strengthen the rule of 
law in Russia and to protect and make whole U.S. investors that 
have been harmed by the lack of rule of law there.
    Number five, I believe that everybody on this committee 
shares a deep concern about tragic events in Syria. As we meet, 
its government is engaging in the slaughter of its people, 
including innumerable innocent, helpless children. Somehow each 
of us must raise our voices.
    In a joint communication on Monday, President Obama and 
President Putin stated their purpose to, and I quote, 
``prioritize the expansion and diversification of our bilateral 
trading investment through nondiscriminatory access to our 
markets based on international rules. An important step in this 
direction is Russia's accession to the WTO.'' In the same 
communication the two Presidents expressed their intention to 
stop the bloodshed in Syria and called for, and I quote, ``an 
immediate cessation of all violence and express full support 
for the efforts of the U.N. League of Arab States Joint Special 
Envoy Kofi Annan, including moving forward on political 
transition to a democratic, pluralistic political system,'' end 
of quotes. The Two presidents were, in quotes, ``united in the 
belief that the Syrian people should have the opportunity to 
independently and democratically choose their own future,'' end 
of quotes.
    There is an overarching need to see if in the near future 
Russia acts to implement its words. I know that PNTR may or may 
not provide this Congress considerable leverage regarding 
Russia's conduct relating to the Syrian government, and that in 
general there can be perils in linking trade and overall 
foreign policy issues. At the same time the particular 
situation in Syria is extraordinary and dire. Therefore, I urge 
that in order for us on this Committee to carry out our 
responsibilities with jurisdiction over trade issues, we work 
together on a bipartisan, bicameral basis on a PNTR bill that, 
number one, includes the mentioned provisions relating to trade 
enforcement; two, will include Magnitsky legislation; and 
three, with the clear understanding that after a bill is 
reported out of Committee in the near future, action on the 
floor will be withheld for a period of time to determine 
whether Russia will join our Nation and others in steps to 
address the Assad regime's horrendous violence against its own 
people. We can do no less. Trade is about commerce. It also can 
be about conscience.
    Thank you.
    Chairman CAMP. Thank you very much.
    We will now turn to our panel of Administration witnesses. 
And I want to welcome Ambassador Ron Kirk, United States Trade 
Representative, and Ambassador William Burns, Deputy Secretary, 
United States Department of State. Thank you very much for 
being with us today. And each of you will have 5 minutes to 
present your testimony, with your full written testimony being 
submitted for the record.
    And, Ambassador Kirk, we will begin with you. Welcome.

     STATEMENT OF AMBASSADOR RON KIRK, UNITED STATES TRADE 
                         REPRESENTATIVE

    Ambassador KIRK. Good morning. Thank you, Mr. Chairman, 
Members of the Committee. To Chairman Camp, Ranking Member 
Levin and Members, I am here to share our thoughts with you 
about how we can work collaboratively together to take an 
important step to help support jobs for Americans, and that is 
by terminating the Jackson-Vanik amendment and authorizing the 
President to provide permanent normal trade relations to Russia 
in order to secure a level playing field for U.S. exports of 
goods and services to this large and growing market.
    Under President Obama's leadership we have worked with this 
Committee and this Congress as a whole to bring U.S. trade 
policy into greater balance with the needs and concerns of 
American businesses, workers and families, and I believe these 
efforts are contributing to our U.S. economic recovery.
    The Commerce Department estimates that U.S. exports have 
grown by one--jobs supported by U.S. exports have grown by at 
least 1.2 million jobs from 2009 to 2011 under the President's 
National Export Initiative.
    As we said last December, when Russia was invited to join 
the WTO, and as President Obama amplified in Mexico, the 
administration strongly supports legislation to terminate 
application of the Jackson-Vanik amendment and authorize the 
President to provide permanent normal trade relations to 
Russia. And we join you, Mr. Chairman, and the Ranking Member 
in your efforts to advance such legislation in the House and to 
coordinate with similar efforts in the Senate.
    It is important to note, as both the chairman and Ranking 
Member have noted, this legislation doesn't give Russia any 
special trade privileges. Rather the purpose of this 
legislation is to ensure that the WTO Agreement applies between 
the United States and Russia so that American companies, 
American workers, our farmers, ranchers, manufacturers, 
innovators and service providers reap the full benefits of 
Russia's WTO Membership, and, just as critically, that they 
will have access to the multilateral trade enforcement tools in 
place to enforce Russia's WTO commitments.
    I want to be very clear: Russia will be a Member of the 
World Trade Organization by the end of the summer, and if the 
WTO Agreement does not apply between the United States and 
Russia, our businesses, and innovators and exporters will 
effectively be at a competitive disadvantage compared to their 
local counterparts.
    I have gone into this in more detail in my full testimony, 
but I do want to highlight just a few of the important examples 
that would operate to our detriment.
    Many of our businesses won't enjoy the guaranteed access to 
Russia's expanding services market which isn't covered by our 
previous bilateral agreements. Our ranchers, farmers and 
agricultural producers won't enjoy the protection of the SPS 
agreement that requires science-based sanitary and 
phytosanitary measures. Our innovators and creators won't reap 
the benefits of stronger protection and enforcement of 
intellectual property rights that Russia has agreed to as part 
of its WTO accession. And finally, we won't have access to the 
WTO's multilateral enforcement mechanisms, including dispute 
resolution.
    Russia's membership in the WTO won't solve all of our 
concerns about Russia, but having clear rules of the road will 
provide the predictability, transparency and market access that 
our business and exporters seek. Indeed, our negotiators 
insisted that Russia integrate the WTO rules into its legal 
regime before it was invited to join the WTO, and as a 
consequence Russia has already put in place the laws and 
regulations necessary to implement the WTO rules. But as you 
have both noted, these rules and obligations are only as good 
as our ability to enforce them.
    Terminating Jackson-Vanik and extending PNTR to Russia is 
in the absolute best interest of American businesses, workers 
and innovators, and we will continue to address trade and other 
issues with you along with the Russians. But in the interim, 
let us not penalize U.S. companies and workers by forcing them 
to effectively compete with one hand tied behind their backs. I 
respectfully ask you to move forward quickly to terminate 
Jackson-Vanik and empower the President to extend PNTR to 
Russia.
    Thank you for your time. I look forward to engaging your 
questions.
    Chairman CAMP. Thank you very much, Ambassador Kirk.
    [The prepared statement of Ambassador Kirk follows:]


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    Chairman CAMP. Ambassador Burns, you are now recognized for 
your statement. You have 5 minutes.

  STATEMENT OF AMBASSADOR WILLIAM J. BURNS, DEPUTY SECRETARY, 
               UNITED STATES DEPARTMENT OF STATE

    Mr. BURNS. Thank you very much, Chairman Camp, Ranking 
Member Levin, Members of the Committee. Thank you very much for 
inviting me here today.
    I have spent a good deal of my diplomatic career helping 
administrations of both parties navigate our complicated 
relationship with Russia. I have seen moments of considerable 
promise at the end of the cold war and more recently in 
deepening cooperation on Afghanistan and nuclear arms 
reductions. I have seen moments of sharp differences, whether 
during the Russia-Georgia war in the summer of 2008 or over our 
enduring human rights concerns. And I have seen through all 
those years the importance of carefully assessing what is at 
stake for the United States and being clear-eyed about American 
interests and Russia's long-term evolution.
    That is the prism through which I believe we can see 
clearly and unmistakably the importance of terminating 
application of Jackson-Vanik and extending permanent normal 
trade relations to Russia. Jackson-Vanik, which restricts trade 
with countries that limit emigration, was adopted by Congress 
four decades ago to help thousands of Jews leave the Soviet 
Union. It long ago achieved this historic purpose.
    Some argue that continuing to apply Jackson-Vanik to Russia 
would give us leverage with Russia. We disagree, and so do 
leaders of Russia's political opposition. They have called on 
the United States to terminate Jackson-Vanik despite their 
profound concerns about human rights and the Magnitsky case 
concerns, which we strongly share.
    PNTR is not a gift to Russia; it is a smart, strategic 
investment in one of the world's fastest-growing markets for 
U.S. goods and services. A vote to extend PNTR will be a vote 
to create and sustain jobs in America. When Russia joins the 
World Trade Organization later this summer, it will be required 
for the first time to establish predictable tariff rates, 
ensure transparency in enactment of laws, and adhere to an 
enforceable mechanism for resolving disputes. If we extend PNTR 
to Russia, we will be able to use WTO's tools to hold it 
accountable for meeting those obligations. Until then Russia's 
markets will open, our competitors will benefit, but American 
companies will be disadvantaged.
    We are under no illusions about the challenges that lie 
ahead. The fact is that U.S.-Russia relations are often an 
uneasy mix of competition and cooperation, and while it may be 
tempting to downplay Russia's importance, we simply do not have 
that luxury. As a permanent member of the United Nations 
Security Council, as one of the world's largest nuclear powers, 
and as the world's single largest producer of hydrocarbons, 
Russia's strategic importance to the United States will matter 
for many years to come.
    To be sure, we have real and continuing differences with 
Russia. We disagree fundamentally about the situation in 
Georgia. On Syria we are urging Russia to push the Syrian 
regime to implement Kofi Annan's six-point plan, end the 
violence, and work with the international community in 
promoting a serious and rapid political transition that 
includes Assad's departure.
    We have consistently and directly stressed our concerns 
about human rights in Russia, and we have taken steps to 
address these challenges, including programs that support rule 
of law and civil society in Russia.
    Following the tragic death of Sergei Magnitsky, we imposed 
restrictions to ensure that no one implicated in his death can 
travel to the United States. But we continue to believe that it 
is in America's long-term strategic interest to work with 
Russia in areas where interests overlap. Already our work 
together over the past 3 years has produced significant 
results, including the New START Treaty to reduce strategic 
nuclear weapons, an agreement on civil nuclear cooperation, 
military transit arrangements to support our efforts in 
Afghanistan, and cooperation on Iran sanctions. With PNTR we 
would add expanded trade to that list.
    PNTR is also an investment in the more open and prosperous 
Russia that we would like to see develop. As the demonstrations 
across Russia over the past 6 months made clear, the country's 
emerging middle class is seeking a more transparent and 
accountable government and a diversified economy. We should 
support these Russian efforts.
    PNTR and WTO membership by themselves will not suddenly 
create the kind of change being sought by the Russian people, 
but they can help open Russia's economy and reinforce rule of 
law beyond just trade. PNTR should be one part of a stronger 
and fuller rule-of-law framework that we pursue with Russia, 
combined with investment protections such as a new bilateral 
investment treaty and the OECD Antibribery Convention, which 
Russia joined earlier this year.
    As Ambassador Kirk said, Russia's membership in the WTO 
will soon be a fact. Failing to lift Jackson-Vanik and extend 
PNTR will not penalize Russia, nor will it provide a lever with 
which to change the government's behavior. It will only hurt 
American workers and American companies. By extending PNTR we 
can create new markets for our people and support the political 
and economic changes that the Russian people are seeking. PNTR 
is clearly in our economic self-interest, and it is an 
investment in a better partner over the long term for the 
United States.
    Thank you.
    Chairman CAMP. Thank you very much for that testimony.
    [The prepared statement of Mr. Burns follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman CAMP. Ambassador Kirk, last October Mr. Levin, 
Senator Baucus, Senator Hatch and myself sent you a letter 
urging you to insist that Russia meet high standards in the 
negotiations regarding their accession to the WTO. And some of 
those concerns in the letter were raised were about Russia's 
protection of intellectual property rights, their commitment to 
join the information technology agreement and its unscientific 
and opaque sanitary and phytosanitary standards, and its auto 
investment policy. We obviously said these issues should be 
significant to the Congress in considering whether to remove 
Russia from Jackson-Vanik.
    And my question to you is did Russia agree to a high 
standard agreement to accede to the WTO as we asked for in our 
October letter of last year, and have those concerns that we 
raised in that letter been sufficiently addressed?
    Ambassador KIRK. Mr. Chairman, I believe that we were able 
to address all of those concerns with the exception of the auto 
provisions, which we have worked with Russia to make sure that 
is phased out with the WTO and consistent.
    More critically, on IPR Russia has already passed and put 
into place laws to improve its intellectual property rights 
regime. The day that Russia becomes a Member of the WTO, it 
will be in full compliance with the trips-related aspects of 
the world trade agreement organizations. They will also become 
a part of the ITA when they join. And we have gotten Russia to 
agree that they will comply with the WTO's disciplines as it 
relates to the application of sanitary and phytosanitary 
procedures as well.
    Because of many of the concerns raised by this committee, 
the strongest lesson that we learned and discipline we brought 
to this process was to have Russia put these rules in place 
before it joined the WTO rather than giving them the liberal 
time to change their laws as we did in the case of previous 
accession. So we have addressed all of those on the case of 
autos. We got Russia to agree to dial that back in terms of the 
content required, and they would phase that program out by 
2018.
    Chairman CAMP. I am glad to hear much of that. And I 
understand we will have to watch Russia very carefully. But 
just to clarify, in your view will Russia be in compliance with 
its WTO commitments on day one when they become a Member?
    Ambassador KIRK. In most of those areas, Russia has adopted 
the WTO rules, but as we have seen with other countries, we 
still have to be diligent in holding them accountable. There is 
still--the WTO rules for us represent, and I don't mean this in 
a pejorative way, a de minimis. In many cases our own standards 
for intellectual property rights, as you know, are much higher, 
and we detail those in our annual report to Congress in the 301 
report.
    So we will also work with Russia on an action plan to try 
to attack Internet powers, for example, and force these 
disciplines at a higher level. But Russia will be in compliance 
with its WTO commitments the day that it becomes a Member.
    Chairman CAMP. Thank you.
    And, Ambassador Burns--and, Ambassador Kirk, you may want 
to answer after I give him a chance to comment on this--I said 
in my opening statement that a lot of skepticism about granting 
Russia PNTR relates to noncommercial concerns. Why does the 
administration think we should go ahead with Russia PNTR 
despite those concerns, and what is the administration doing to 
engage and convince Members of the benefits to the United 
States in moving forward?
    Mr. BURNS. Well, Mr. Chairman, thank you very much. I would 
say first, as Ambassador Kirk has emphasized, extending PNTR 
was very much in America's economic self-interest, and 
withholding PNTR at this stage is only going to disadvantage 
American workers and American businesses.
    Second, we also understand the importance of Russia's 
accession to the WTO and extending PNTR to further embedding 
the rule of law in Russia and providing reinforcement for the 
efforts and the aspirations of an emerging middle class in 
Russia, people who want to see greater accountability and 
transparency. And I do believe it is a smart long-term 
investment in the emergence of that kind to Russia.
    Third, as both you and Ranking Member Levin have pointed 
out, we have a very complicated relationship with Russia. We 
have some quite significant differences over questions like 
Syria, over Georgia, over human rights concerns in Russia, and 
we are not at all shy about expressing those concerns. We have 
taken specific steps on human rights, for example, following 
the unlawful detention and tragic death of Sergei Magnitsky, 
using existing authorities under the Immigration and 
Naturalization Act, as well as a proclamation that President 
Obama issued last year to ensure that no one implicated in that 
tragic death can enter the United States. And we also 
appreciate very much the continuing dialog we have had with the 
sponsors of legislation in both Houses on the Magnitsky case. 
We appreciate the fact that some of the concerns we have raised 
have been addressed, and we look forward to continuing that 
dialog.
    On Syria, President Obama was very direct in the long 
conversation, candid conversation, he had with President Putin 
in Mexico a couple of days ago about our conviction that the 
longer the bloodshed continues in Syria, the greater dangers 
for the Syrian people, but the greater dangers for a region 
which already has more than its share of instability. And that 
adversely affects not only the interests of Syria and the 
region, but also the United States and Russia.
    There is no prospect for a stable outcome in Syria so long 
as Bashar al-Assad is in power. There is an urgent need for a 
political transition, which Kofi Annan is trying to draw up, 
that requires the firm support of the international community 
if it is ever going to be put into force, and that requires 
Russia to make some choices about where its interests lie.
    Chairman CAMP. Thank you. That was a pretty complete 
answer.
    Ambassador Kirk, do you have anything to add?
    Ambassador KIRK. Mr. Chairman, I think we are one mind on 
this. Both you and the Ranking Member have noted, I think, the 
commercial imperative for this. We understand the difficulty is 
that for some the timing probably could not be worse because of 
our concerns over human rights and others. But I do believe the 
most responsible action we can take now with Russia's certainty 
of becoming a WTO Member is to move forward and repeal Jackson-
Vanik and give the President the authority to grant them 
permanent normal trade relations.
    Chairman CAMP. All right. Thank you.
    Mr. Levin may inquire.
    Mr. LEVIN. Thank you, and thanks again for your testimony.
    Let me just say a few things if possible. So, the record is 
clear. A number of us have been working to repeal Jackson-Vanik 
for some time separately from PNTR. The Russian government 
wasn't interested. And our government wasn't committed to that 
idea, and we did not want to give up PNTR to repeal Jackson-
Vanik. It is the only say we have. If we grant PNTR by 
repealing Jackson-Vanik, we are out. I mean, you can consult 
us; it doesn't matter Republican Or Democratic administrations. 
That was true with China. That was our handle on this Congress 
playing a role. And so now we should repeal Jackson-Vanik as we 
take up PNTR.
    Second, I don't think Russia PNTR can pass except on a 
bipartisan, bicameral basis, and I hope very much we can work 
on that basis. I hope, Mr. Chairman, our staffs have had some 
discussions about provisions relating to IPA. They still 
haven't signed on to IPR, to SPS. And there is interest in the 
Senate in putting in some provisions that aren't conditions 
that state clearly our concern in these areas, and I hope we 
can continue to work on these and incorporate them in a PNTR 
bill.
    On human rights let me just say a word. I am glad, Mr. 
Secretary, you indicated your desire for continuing dialog, 
because I think it is now clear that without a human rights 
provision, it will be difficult for PNTR to pass the Senate and 
the House. I think it is not only difficult, but I think it is 
also unlikely.
    And I just want to point out there is a precedent for 
incorporating human rights provisions in PNTR. That was true in 
China PNTR, as a human rights provision was placed in there 
establishing the Congressional Executive Commission that has 
been a very valuable tool in terms of issues relating to human 
rights, including worker rights in China. It was not the 
complete answer, but it was in there as one step.
    And let me just last say something about Syria. I heard the 
President last night after the G-20 meeting talk about this and 
indicated his hope that there would be some movement in the 
next few weeks by the Russians carrying out what they indicated 
their belief in the joint communication. And I think it is 
important for us in the Congress to indicate our concern that 
in the next weeks that there be movement by Russia, because to 
bring up PNTR, if there are pictures of mass slaughter in Syria 
by the government, it makes it extremely difficult to move a 
trade bill.
    I mean, trade is not only commercial, as I said. We have 
boycotts. We use trade boycotts for nontrade purposes. And so I 
think it is wise for us to make clear that we want some 
movement. I don't say that is leverage, but I think this 
Congress needs to find a way to express itself in support of 
the Administration's effort to move Russia to not look the 
other way in the Security Council or other places as the 
killing of innocent people in Syria continues.
    Thank you.
    Chairman CAMP. Mr. Herger is recognized for 5 minutes.
    Mr. HERGER. Ambassador Burns, your experience gives you 
particular insight into Russia, both as government and people. 
Corruption has been a barrier to greater economic engagement 
between our two countries. I would like to know how Russia's 
membership in the WTO would improve the business climate, and 
also what impact it would have on the lives of the Russian 
people.
    Mr. BURNS. Thank you very much, sir.
    I am convinced that Russia's WTO accession and the 
extension of PNTR over the long term will contribute to 
embedding the rule of law in Russia and to a more transparent 
and accountable system of governance. It will help Russia to 
modernize and diversify its economy to move beyond what is now 
an overdependence on oil and gas exports. It will help provide 
positive reinforcement to one of the most significant phenomena 
that I think you see in Russia today, and that is the emergence 
of a middle class of people who have an interest in the rule of 
law, the kind of rule of law that the WTO helps to protect, to 
protect their property and to provide some consistency in the 
way in which not only the economic system, but ultimately the 
political system operates. So I think it is a very smart long-
term investment.
    Corruption, as you rightly said, is a very significant 
problem in Russia; it is something that former President 
Medvedev acknowledged on a number of occasions, but frankly the 
Russian government has not done very much at this stage to 
address.
    I think WTO accession, playing by international rules and 
international standards through the enforcement mechanisms that 
exist, joining the OECD Antibribery Convention, which Russia 
did last year, hopefully beginning to negotiate a new bilateral 
investment treaty between the United States and Russia, all of 
those steps, I think, can help contribute not only to a better 
partner for the United States in Russia, but to a more open, 
economic and political system in Russia over the coming years.
    I don't mean to suggest WTO accession or extending PNTR is 
a magic cure or an overnight cure, but I do believe it is a 
very important contribution to that sort of a more positive 
evolution in Russia.
    Mr. HERGER. Thank you.
    Ambassador Kirk, there is a lot of doubt in Congress about 
whether Russia would live up to its WTO obligations. Russia has 
a poor track record on economic reform, and many are skeptical 
that Russia's joining the WTO would improve that record. 
Russia's past international behavior also does not give much 
assurance that it will respect politically sensitive rulings by 
the WTO's dispute settlement body. While WTO members can 
retaliate if Russia does not comply with its obligations, the 
fact that a large portion of Russia's exports is energy and 
highly sought commodities may mean that retaliation is not a 
viable option for many WTO Members.
    What do you think can be done to address this mistrust and 
ensure that Russia lives up to its obligations, and would 
denying PNTR address this problem?
    Ambassador KIRK. Well, Mr. Herger, if I might, I will start 
at the end. Denying PNTR would absolutely not address the 
problem and actually put us in a much less difficult--a much 
more difficult position because we wouldn't have access to any 
of the dispute settlement mechanisms within the WTO to take any 
of the actions that you mentioned.
    I don't feel comfortable suggesting that we should trust or 
to try to predict Russia's behavior in the future. I would say 
to you, for many of the reasons articulated in Chairman Camp in 
his letter from this Committee to us last October, our 
negotiators worked very hard with Russia through the working 
part of the report before they came into the WTO to have them 
put the rules of the WTO in place and to amend their laws. I 
can only tell you that they did that. By now extending them 
PNTR, we would have the full range of disciplines available to 
us to protect our interests, including pursuing dispute 
settlement actions within the WTO.
    And I can only ask you to look at this administration's 
record, and I think we have demonstrated no hesitancy to do 
that against any WTO Member. And I would remind you that in the 
State of the Union last year, the President committed and has 
done so to create an Interagency Trade Enforcement Center so 
that we would bring even more resources and discipline to our 
ability to protect America's interests.
    So I can tell you that we are prepared to take actions. We 
will also continue to work with Russia in good faith to try to 
get them to comply with the rules that they have agreed to.
    Chairman CAMP. All right. Thank you. Your time has expired.
    Mr. Rangel is recognized for 5 minutes.
    Mr. RANGEL. Thank you once again, Mr. Chairman, Mr. Levin. 
And it is good to see my good friend, the Ambassador, and also 
my career diplomat, which it is also a pleasure to see my 
country moving in that direction.
    My problem is that I don't know what this complex 
relationship is with the Soviet Union any more than I know what 
it is with the people in China. We have voted to allow China to 
get into the WTO, and we have out challenges with this 
complicated situation as we encourage them to move toward more 
a democratic principle. There is not a meeting that we don't 
have that situation has improved and is fluid, and it takes 
more time because it is still a developing country.
    And I still get the impression with Russia that they are 
untrustworthy. This is language that, of course, diplomats 
can't use, and I encourage diplomacy rather than invasions. But 
the truth of the matter is that I think I heard you say, 
Ambassador, that we can only hope that they do the right thing; 
we can only hope that they comply with the WTO, they are a 
world force militarily and economically, and that it is in our 
best economic interest to have some type of an agreement rather 
than just allow it to be there.
    But at some point in time I wish that we can be candid 
enough to share with me what is the objective that the Russians 
have, what is their relationship with Iran, what is their 
commitment to world peace? Because if they have a different 
philosophy, I don't see how we are protecting ourselves by 
having these type of unenforceable agreements, and they have an 
agenda that has us on the destruction list.
    And I know right now you are not in a position to say that 
they are enemies, but I don't think that you are in a position 
to say they are friends. I mean, the way I look at it, if 
European or Israel, you are our only friends, and the rest of 
it we have to play with China and with Russia to see what those 
people that are a threat to the entire world, that we have to 
ask them, which side are you on, which side is Russia on when 
we are talking about terrorists and the security of the United 
States, which side are they on?
    Mr. BURNS. Well, Congressman Rangel, I would be glad to try 
to address that.
    As you rightly said, our relationship with Russia today is 
a very important one, but it is a mix of cooperation and 
competition. Over the last 3 years, we have deepened 
cooperation on some issues, some challenges, which are very 
important to both of us. Afghanistan is one example where 
today, because of transit arrangements that Russia has entered 
into with the United States and our ISAF partners, most of the 
American military personnel that move to Afghanistan come 
through the northern distribution network across Russia. And 
the significant majority of military equipment that we move 
also comes through Russia. That is a very tangible contribution 
to a high priority for the United States and an issue on which 
Russia has a significant stake. So I offer that as one example 
of where we have found common ground unsentimentally, because 
this is very much in Russia's self-interest as well, and we 
have been able to build on it.
    At the same time we are clear about areas where we have 
differences over human rights, as we have discussed before, and 
over Syria. We need to try to work through those differences, 
be honest about them in our dialog with Russia, and to look for 
ways in which we can narrow the differences over time.
    Mr. RANGEL. Mr. Ambassador, what would you say 
professionally is the overall international objective? Is it 
fear of the United States? Is it apprehension with Communist 
China? I mean, what is the motivation that we can't get their 
cooperation on issues that concern the United States security, 
but theirs as well? I mean, what are they trying--are they 
looking to conquer the world, as one might say that China has 
indicated that she is going to be the next world power?
    Mr. BURNS. I think with regard to Russia, Congressman, that 
is not the ambition. I think Russia, both as a government and 
as a society, is very much at a crossroads today. There is a 
deep interest on the part of not only the government, but the 
people in modernizing the economy and building the kind of 
prosperity, which clearly an emerging middle class wants to 
build in Russia and that requires diversification of the 
economy beyond overdependence on oil and gas exports, that 
requires becoming more competitive in other sectors, and it 
requires the rule of law. I think that is an area in which WTO 
accession, extending PNTR is a smart investment for the United 
States.
    Mr. RANGEL. But it doesn't give us too much encouragement 
as with China that we have any tools that enforce the violation 
of the WTO regulations.
    In other words, I don't get the concept, and maybe this is 
the wrong forum, I think it is the wrong forum, but friendship 
never is considered to be a factor in these negotiations. All 
of this is at arm's length. And if that is the way it is, that 
is the way it is. But it is hard for us to go back home and 
explain our relationship with these Communist countries and 
their violations of international standards and then to define 
what is our relationship with them.
    Thank you. I don't need an answer to those things because 
it is probably too complicated.
    Chairman CAMP. If you want to just quickly, because we are 
way over time.
    Ambassador KIRK. I did want to clear up one point, Mr. 
Rangel, that I hope I didn't give the impression that saying by 
letting Russia coming into the WTO, we could only hope. If 
there is any reason for us to repeal Jackson-Vanik and grant 
PNTR, it is that we no longer have to hope. We now have the 
enforceable disciplines of the World Trade Organization. And I 
think this administration has demonstrated, as I said in 
response to Mr. Herger, that we will not hesitate to protect 
our rights within the WTO. So we will have clear, enforceable 
rules.
    Chairman CAMP. Thank you very much.
    The chairman of the Trade Subcommittee Mr. Brady is 
recognized for 5 minutes.
    Mr. BRADY. First, Mr. Chairman, thank you for hosting this 
hearing. It is a very important topic.
    At the end of the day, this is a bipartisan jobs bill, and 
in this economy it is not simply buy American, we have to sell 
American all throughout the world. Russia is the 11th largest 
economy, and sales to Russia matter for our manufacturing 
companies at home, for our farmers and ranchers, for our 
technology companies, and for our energy industry as well.
    And this is also about accountability. Russia is the 
largest economy in the world that is not in the WTO rules-based 
system. So this gives us Americans the opportunity to hold them 
accountable, to play by the rules. Those are two very strong 
reasons to pass this as a clean bill and do it as soon as 
possible.
    There are, as Chairman Camp mentioned, Ambassador, real 
concerns about Russia's living up to its commitments. I have 
concerns about intellectual property rights. I am not pleased, 
and I know the pork industry is concerned, about discriminatory 
and nonscience-based SPS rules, to market access there, and I 
encourage you to continue working in those areas.
    So what I want to ask you how will USTR ensure that Russia 
will live up to its new commitment? And, Ambassador Burns, and 
Ambassador Kirk, if you will leave me 1 minute, I want to ask 
Ambassador Burns a question about Syria as well.
    Ambassador KIRK. Thank you, Mr. Chairman, and I appreciate 
you framing this as it is, because this is about protecting and 
giving us the opportunity to support more jobs by selling to 
Russia.
    Mr. Chairman, I hope we have demonstrated that we will 
vigorously monitor Russia's behavior, but probably no--none of 
our exporters have been more frustrated by, frankly, the 
arbitrariness of Russia's rule standards than in the ag sector. 
Having them a part of the WTO discipline, and agreeing from day 
one that they will now comport with the rules and the standard 
on sanitary and phytosanitary standards is going to be a big 
behavior.
    Now, we have to monitor that and stand up to it, but 
specifically, as it relates to our pork and beef and poultry 
producers, we also negotiated a greatly expanded tariff rate 
quota. If we don't move forward in a positive way, we lose the 
benefits of all of that, and we are back where we are now 
basically complaining about it. We will have the right to go 
in, take them to the WTO, and enforce our rights.
    Mr. BRADY. All right. Thank you, Ambassador.
    Ambassador Burns, there has been in a general sense a 
concern that this strengthens President Putin at home, but you 
made the point that his political opponents within the country 
support Russia moving into a rules-based system. And there has 
been not just today, but in a general sense a thinking that 
perhaps withholding or delaying PNTR would somehow provide us 
additional leverage as we continue to work with and push Russia 
regarding Syria. Can you comment on both of those?
    Mr. BURNS. Sure. I would be glad to, Congressman.
    First, I would reemphasize that we do have differences over 
Syria with Russia today, as the President emphasized when he 
met with President Putin 2 days ago in Mexico. We are going to 
continue to urge Russia strongly to join the international 
community in trying to ensure a rapid and serious political 
transition in Syria in everyone's interest.
    I do not believe, however, that withholding PNTR gives us 
leverage with Russia on that issue. I do believe that moving 
ahead on PNTR not only provides all of the economic benefits 
for American workers and American companies that Congressman 
Kirk has stressed, but it also is the smart investment in the 
rule of law in Russia.
    That is exactly why, as you said, sir, many of the leading 
political opponents and the sharpest political critics of the 
current Russian government have been strongly supportive of WTO 
accession and repeal of Jackson-Vanik, precisely because they 
understand that encouraging the rule of law, greater 
accountability and transparency in Russia is in the long-term 
interest of a more open economic and political system. And so I 
think it is very important to keep in mind that perspective as 
we move forward.
    Mr. BRADY. Thank you, Ambassador.
    I yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    And the Ranking Member of the Trade Subcommittee Mr. 
McDermott is recognized for 5 minutes.
    Mr. MCDERMOTT. Thank you for coming, and thank you, Mr. 
Chairman, for calling this hearing.
    All of a sudden in this Committee, and you have heard it 
from a number of different points of view, worry about the 
human rights issues in some of the countries we trade in. We 
have gone through it with China, we have gone it through 
Colombia, we have gone through it in a variety of places, and 
this interaction between trade and human rights is a very 
complex one.
    The use of Jackson-Vanik obviously had a point at some time 
in the past. Probably for the last 10 years it has been 
irrelevant, because the Russians were letting people do 
whatever they wanted. So it didn't really make any sense, but 
we kept it because it was, quote, ``our lever.''
    And now we are sitting here talking about letting the lever 
go, and everybody is talking--you heard the chairman or the 
Ranking Member Mr. Levin talk about the Magnitsky case as if 
there is not a provision in the agreement that has to do with 
civil rights, however you want to put it, human rights, then it 
is going to be hard to pass.
    I am not sure everybody on this Committee understands the 
Magnitsky case and why it is sitting there, why is it being 
discussed here. And I would like you, for the benefit of all of 
us, to tell us what that--why that case is a case we ought to 
be discussing when we are talking about trade.
    Mr. BURNS. Congressman, first, as you know, we have been 
pursuing our concerns about the Magnitsky case on a different 
track from trade. And as I said before, we have had continuing 
constructive dialog with sponsors of legislation in both Houses 
on the Magnitsky case.
    Sergei Magnitsky was a lawyer who was detained, brutally 
treated, and then died in detention in 2009. A series of 
Russian investigatory commissions found that he had been 
treated--mistreated brutally.
    Mr. MCDERMOTT. What were the charges under which he was 
detained?
    Mr. BURNS. This was with regard to alleged corruption in 
the case of diversion of tax revenues, as I recall, charges 
which are unfounded and which the investigatory commissions 
that were undertaken, these are Russian investigatory 
commissions agreed were unfounded. They also highlighted the 
brutal treatment that he received before his death in 
detention.
    As a result of that, the executive branch has used existing 
authorities under the Immigration and Naturalization Act, as 
well as new powers which President Obama made clear in a 
proclamation which he issued last year, to ensure that no 
Russian official implicated in that wrongdoing in the tragic 
death of Sergei Magnitsky can enter the United States.
    So we take this issue very seriously. We share the serious 
concerns of the Members of the Congress. We have acted on it, 
and we look forward to continuing our dialog as part of our 
broad range of concerns about human rights in Russia. But as I 
said, we pursue that on a track that is separate from the issue 
that we are discussing today on extending PNTR.
    Mr. MCDERMOTT. Where do you see the use of that issue in a 
trade negotiation--or I guess that is what you would call this 
bill that we have in front of us a kind of a trade negotiation 
bill. How do you word that so that you make that something that 
is enforceable or even can be judged? I mean, I am not quite 
sure if we are talking about cutting off trade with them, or 
are we simply saying that we want you to know we want you to be 
good boys? I mean, is that what we put in? You must be good 
people; you must follow the rule of law with no enforcement? 
Tell me how to think about this.
    Mr. BURNS. Well, Ambassador Kirk may want to add to this, 
but as I said, Congressman, we are pursuing these issues on 
different tracks. Doesn't mean we take human rights concerns, 
in particular the Magnitsky case, any less seriously. As I 
said, we have already acted to demonstrate our concern on that 
case, but we believe repeal of Jackson-Vanik, extending PNTR 
makes sense on the merits as Ambassador Kirk has described.
    Ambassador KIRK. I don't know that I can add much more than 
Secretary Burns other than that in order for us to have the 
full benefits of Russia's WTO Membership, we have to be able to 
extend most-favored nation status on a permanent, 
nonconditional basis.
    Our challenges, as you have noted, even though we have left 
Jackson-Vanik in place, we extend it to them annually, but it 
is conditional, and that is the difficulty we have. And I 
believe that we just have to be able to address these issues 
simultaneously, but then we have made it plain that we think 
and we would like to have a clean bill that addresses only the 
repeal of Jackson-Vanik and PNTR while we would continue to 
work with the Congress to address the human rights concerns.
    But I do want to underscore what Secretary Burns said. We 
have not waited to act. We have provisions in place, and the 
Secretary of State and the President have used those to address 
the concerns around the Magnitsky case.
    Chairman CAMP. All right. Thank you.
    Mr. Tiberi is recognized.
    Mr. TIBERI. Thank you. Thank you, Ambassador Kirk.
    I am kind of conflicted. On one hand we have seen and we 
heard the benefits to American farmers, American manufacturers, 
American technology companies of opening up this vast market 
and the opportunities to expand American goods. On the other 
hand, as Mr. McDermott just mentioned, you have clear human 
rights violations. As Mr. Levin said, we have a situation in 
Syria. I have an employer in my district who has been active in 
Russia for many, many years, and they have seen a trend over 
the last several years that worries them so much that they are 
actually withdrawing their investments in Russia because of 
their concern about corruption, lack of transparency, human 
rights violations, even though this is a huge market and a huge 
opportunity. And they are speaking with their wallet.
    So my question to you, Ambassador and Mr. Burns, is how do 
we proceed, and do we proceed by doing this, what you are 
advocating, do we lose our leverage in the future, do we lose 
what little leverage we have in trying to deal with opening up 
this market for our companies, with dealing with these human 
rights violations, with dealing with the corruption issue by 
giving it away now? And if we do do this, what further leverage 
do we have if that corruption and transparency, and the human 
rights violations get worse?
    Ambassador.
    Ambassador KIRK. Congressman, for the reasons I stated, and 
I hope I don't sound repetitive----
    Mr. TIBERI. No, you are not.
    Ambassador KIRK [continuing]. But for the reasons that your 
chairman articulated, and precisely for the reasons you 
articulated, we think the most responsible course of action is 
to make sure that businesses like that that you represent at 
least have some recourse.
    I would say that absolutely the right thing to do to 
protect the interest of American businesses and workers is to 
make sure they reap the full benefits of Russia being in the 
WTO. All of us, I think, are conflicted because of what the 
other reasons you all have articulated, but I can't in my mind 
give you any example how us not moving forward in a manner 
recommended by your chairman gives us any more leverage than 
Russia.
    And as Secretary Burns has noted, and I was just in Russia 
2 weeks ago for the APEC summit and then in Moscow, the human 
rights activists and others in Russia are supportive of this 
because they believe putting Russia on a path that they begin 
to have the type of transparency in the operation of their laws 
as we do, and begin to act disciplines that are based on the 
rule of law, along with the other steps that the Secretary 
noted, embracing the principles of the Antibribery Convention 
within the OECD will over time help to create a better 
environment.
    But we know these are complex relationships. This won't be 
the end of our engagement with Russia. We will continue to 
press them on other interests of human rights and stability 
within the region. But the responsible course for us to take to 
protect those like the company you recommended is to make sure 
that we move forward and repeal Jackson-Vanik.
    Mr. TIBERI. Mr. Secretary, can you add anything to that?
    Mr. BURNS. No. I entirely agree with what Ambassador Kirk 
just described. I think withholding PNTR does not provide us 
any additional leverage. I think moving ahead on PNTR not only 
benefits American companies and workers over the long term, 
builds greater respect for the rule of law and the kind of 
level playing field in Russia that benefits not just us, but 
Russia's economic and political evolution. We have lots of 
differences with Russia we have to engage seriously on, but I 
don't think withholding PNTR helps us on any of those issues.
    And last, I would simply cite again the voices of some of 
the sharpest critics of President Putin and the current Russian 
government who have made the case for moving ahead with WTO 
accession and repealing Jackson-Vanik.
    Mr. TIBERI. Can you provide that information to us?
    Mr. BURNS. Sure. I would be glad to.
    Mr. LEVIN. Will you just yield?
    Mr. TIBERI. I will yield my 2 seconds.
    Chairman CAMP. Seventeen seconds.
    Mr. LEVIN. I think it is also correct that some of the 
opposition support the Magnitsky bill. I think that is true, 
Mr. Secretary. So I think we need to be a bit careful.
    And let us remember Jackson-Vanik was a human rights 
provision in a trade bill. So that precedent goes back decades. 
It isn't as if we are talking about something without any 
precedent.
    Thank you for yielding.
    Mr. TIBERI. I yield back.
    Chairman CAMP. Given the balance, I am going to go two to 
one now. So Mr. Davis is recognized for 5 minutes.
    Mr. DAVIS. Thank you very much, Mr. Chairman.
    I would like to follow up on this particular issue and 
address Ambassador Burns first and then ask Ambassador Kirk to 
comment.
    When we had spoken at a previous meeting, I brought up the 
cold war. Some of us here were in the military or in Foreign 
Service at that time and saw it was a very imperfect execution 
where we were negotiating with an open hand on one count, and 
on the other hand we had complications in various parts of the 
world, Latin America, Africa, Southeast Asia, Eastern Europe.
    And I suppose as we dealt with this, we were conducting 
trade, beginning to conduct trade, conducting intellectual arts 
and athletic interchanges during the seventies and the early 
eighties, and also dealing with very, I believe, much more 
serious human rights violations on the part of the then-Soviet 
Union.
    Considering that we have permanent normal trade relations 
with China, which has an ongoing issue as they are moving into 
a more integrated society and more into the world, addressing 
some of these same issues with the rise of democratic and human 
rights activism in their home country, which we have been very 
supportive of, but the economic relationship between our two 
countries is frankly critical to both at this point.
    I would like to move into one other area. I understand that 
Israel and Russia have a visa waiver program between their two 
countries, and one of the objections that I have heard to the 
repeal of Jackson-Vanik and moving in this direction from many 
of my colleagues is a concern over the situation with Syria and 
Iran, and that in some way there might be a threat to Israel.
    What I would appreciate some commentary on is the current 
relationship between Israel and Russia, which appears to be 
quite robust. And, in fact, I would surmise, from my position, 
that, in fact, the repeal of Jackson-Vanik would be better for 
Israel than keeping it in place because of this connectedness 
that Russia would have not only in a WTO, but our ability to 
exercise greater linkage with less subjectivity in our 
policies, ultimately leading to a long-term game as we played 
30 years ago. Would you comment on that?
    Mr. BURNS. Yes, sir. I agree with you. I think Israel and 
Russia today have a growing relationship. I understand that 
President Putin may be planning to visit Israel sometime this 
summer. It is a fact that something like 20 percent of the 
current population of Israel are of Russian-speaking origin. 
And so the ties that bind Russia and Israel, I think, are 
increasing. That doesn't mean that there aren't differences and 
concerns over Iran, over Syria, over some of the same issues, 
which in some cases also divide us from Russia today.
    But, you know, obviously the Israeli government can speak 
for itself, but I think there clearly is a broadly shared 
interest in Russia's integration into the global economy to 
encouraging a rules-based approach to Russia's economic 
modernization and to playing by international rules.
    Mr. DAVIS. So, in a sense it would be enhancing to Israel's 
security versus the status quo that we have now in some degree 
in both in the region and for their economy if this were to 
continue?
    Mr. BURNS. I think for all of the reasons I mentioned 
before, Congressman, I think this is not only in the short-term 
economic interest of the United States, extended PNTR, but it 
is also a smart long-term investment in Russia's evolution. It 
is not a magic cure. I don't mean to pretend that. There are a 
number of other steps that need to be taken over time. But I 
think this can contribute to the evolution of that kind of 
Russia we would like to see develop over time.
    Mr. TIBERI. Appreciate it.
    Ambassador Kirk.
    Ambassador KIRK. I don't know that I could add much more, 
Congressman, and I want to be careful, as I said, because we 
care deeply about human rights concerns. But I do believe if 
you look over the last 50 years of trade policy, not just the 
U.S., but around the world, that a case can be made that 
liberalizing trade in a way that it encourages people to engage 
in commerce is a critical part of an overall strategy to move 
people away from violence. And so I think the benefits of 
having a stable system whereby people can have a more hopeful 
future has implications just beyond the commercial part of it.
    And I do want to say there are those in Russia that very 
much believe it is in their interests, as Secretary Burns has 
said, to diversify their economy so more people can participate 
than just those who are involved in energy and extractive 
materials. And I believe that that leads to a more stable, open 
society that has to be a benefit not just to Russia and the 
U.S., but to Israel and others in the region as well.
    Mr. DAVIS. Thank you. I yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Doggett is recognized.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    Thank you for your testimony. I believe for a number of 
years that we needed to move forward with Russia entering the 
WTO and with the repeal of Jackson-Vanik, but I fully subscribe 
to the comments and the issues that have been raised by Ranking 
Member Levin as an excellent statement of where we are today.
    Indeed, as Ambassador Kirk just testified, the timing could 
not be worse for consideration of this matter. We know that 
over the course of the last year, the Russians have harassed 
and libeled our very excellent ambassador, Ambassador McFaul, 
to Russia. We know they had a very questionable election; that 
this very month the Russian Duma approved legislation to raise 
the fine on anyone who participates in an unauthorized protest 
from $60 to $9,000 for just showing up at a protest.
    We know that the Russians' main interest in trade of late 
appears to have been forwarding weapons to the Assad government 
in Syria to murder its own people, including, as the Secretary 
of State recently observed, sending the attack helicopters that 
we see on television each night to murder innocent women and 
children in Syria.
    Even the Washington Post editorial board, which I believe 
has been a cheerleader of every trade agreement that Ambassador 
Kirk or any of his predecessors in any administration has ever 
advanced here, says that a bill that grants Russia trade 
preferences and removes human rights conditions hardly seems 
the right response to Mr. Putin's recent behavior.
    The Magnitsky case is not about one of the many courageous 
human rights protesters in Russia; it is directly linked to 
trade. It involves an attorney who found that in one of the 
largest investment firms in Russia, that the kleptocracy there, 
the Interior Ministry and the police, stole $230 million. It is 
important not only from a human rights standpoint, but it is 
important from a commerce and trade standpoint in why it should 
be involved in this case.
    Now, you both told us in your testimony that opponents of 
the Putin regime are in favor of lifting Jackson-Vanik, but 
that is only half the story, and it is only half the story from 
a number of months back. I am sure you recall the op-ed that 
appeared from Boris Nemtsov in the Wall Street Journal back in 
March, and let me just quote from it, because I think it is an 
important part of the story that has not been told this 
morning: Jackson-Vanik is a relic, and its time has passed, but 
allowing it to disappear with nothing in its place and right on 
the heels of the fantastically corrupt election of March the 
4th turns it into little more than a gift to Mr. Putin. 
Replacing Jackson-Vanik with the Magnitsky bill would promote 
better relations between the people of the United States and 
Russia, while refusing to provide aid and comfort to a tyrant 
and his regime at this critical moment in history.
    That is a more full and complete statement of what the 
opposition has said than we have heard this morning.
    I believe that, Ambassador Kirk, that you are sincere in 
saying that you care about human rights, as we all do, in 
Russia. The question is whether we are going to do anything 
about it. Senator Baucus has made it clear that the Magnitsky 
bill, some form of it, will be joined to this trade agreement. 
Senator McCain has been quoted this morning as saying that 
anything less than the full Magnitsky bill attached to this 
measure will doom it to failure.
    Putting aside, as it is difficult to put aside, the 
problems in Syria, which raise real questions about whether we 
should act immediately on this, at a minimum I believe Senator 
McCain is right, and that the Magnitsky bill, without all the 
ifs, ands, and ors that are designed to make it meaningless and 
let the administration waive or postpone or delay or circumvent 
its requirements, if you want this measure passed, just simply 
do what has been proposed in the Senate and incorporate the 
Magnitsky bill with this measure, and we can move forward on 
it.
    Though I often disagree with Mr. Brady on these matters, I 
agree fully with his comments as quoted in today's 
Congressional Quarterly that if it is the will of the Senate or 
the House that this be incorporated, that that is what will 
need to be done. Well, it is the will of at least this Member, 
and I think of a number of others, that we not at this critical 
time in our relations with Russia forget about these other 
issues. They can be combined, and we can and should move 
forward with a full and complete response to the outrage that 
is happening there.
    I yield back.
    Chairman CAMP. All right. Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    My microphone is--we will try it that way.
    I want to just comment and touch on the human rights issue. 
I am an old cop, as both of you know, so if I can just kind of 
bring this down to maybe our everyday life. We build 
relationships every day with each other, within our family, 
outside our family, and across this country, State to State, 
government to government, agency to agency. We have these 
struggles, and I might be just oversimplifying this, but I feel 
sort of from my heart that I have to mention this.
    What do we do with people in our community who are 
sometimes acting out in ways that we don't appreciate, even in 
ways that threaten us, even in ways that have taken the lives 
of others, maybe some of our friends and family Members? What 
do we do with folks who are drug addicts, who are alcoholics, 
or who are homeless? Russia has all of those problems.
    The relationship we have with each other every day, we 
reach out a hand of friendship to those folks. We don't judge 
them because of the things that they have done or will do, but 
we reach out a hand. And what happens when you reach that 
handout? A lot have times you have success in building a 
relationship, a friendship that changes that person's behavior.
    Now, I have been conflicted in my sheriff's career from 
time to time, and I am just going to share a quick story. My 
partner was shot and killed in 1982. I was the only homicide 
detective there. They put me in the back seat with this guy 
after he was running for 3 weeks in the woods. My job was to 
arrest him, advise him of his rights, take him to jail, hold 
him accountable to the rule of law.
    But the other thing that I did, after 3 days this man was 
hungry, he was thirsty, and his handcuffs were too tight. I 
stopped and bought him food, gave him water, and loosened his 
handcuffs.
    We need to be building a relationship with Russia. We know 
the rule of law is there. WTO is the rule of law that we can 
apply. If we do nothing, we lose not only the opportunity to 
help change a country, but change a world. We not only lose the 
opportunity to do that, but we lose the opportunity to build 
jobs here in the United States. So when we build that 
relationship, we build--we start to build a relationship built 
on trust.
    And so my sermon is over. So in building on that trust, my 
interest, of course, in my district, there are two now; one is 
intellectual property rights, and some have touched on that 
today already, and the other is in the agricultural area. And I 
just would like to know from both of you, how will you monitor 
Russians--Russia's compliance and enforcement and keep Congress 
informed in the progress that we might be making as we build 
that relationship in protecting intellectual property rights 
and in the agricultural industry.
    Ambassador KIRK. Mr. Reichert, thank you for your question.
    Again, by repealing Jackson-Vanik, we make sure--and you 
represent a part of the country in which innovation is just 
embedded in our lifeblood. But we make sure that those 
innovators, these next generation of entrepreneurs that are 
going to come up with the next products to drive our economy, 
are going to be protected, and they are going to have the 
disciplines that protect every other Member of the WTO, which 
will enjoy those disciplines when Russia becomes a part of the 
World Trade Organization.
    Now, if we don't move forward we aren't going to have that 
ability. We will not have the enhanced ability to combat piracy 
and counterfeiting and go in and get protection for our 
innovators than if we go forward and move. And I want to be 
careful that my comments about timing are not taken out of 
context. I was responding to the Member's question about 
timing, but I made it plain that the appropriate thing for us 
to do is to act.
    As Chairman Brady says, and Mr. Doggett acknowledged, this 
is a jobs bill. And believe me, I know this is a tough vote for 
many of you because of the human rights concerns, but I also 
know the beating that all of us will take from the American 
public if we stand by and do nothing, and then you begin to 
hear from our farmers and our manufacturers that we are at a 
competitive disadvantage because, whether it is Europe or 
Israel, and they are our friends, they are going to reap the 
commercial benefits of this. And we would be paying tariffs, 
sometimes double what other countries would be paying, and we 
wouldn't have any benefits of the rules system, and that is not 
an environment that I want to put American business and 
workers.
    And so we have to be able to work with Congress to address 
the very real concerns on human rights, but we should also act 
responsibly and make sure we give American businesses and 
workers the chance to go in and compete for these new market 
opportunities that the rest of the world is going to compete 
for.
    Chairman CAMP. All right. Thank you.
    Dr. Boustany is recognized
    Mr. BOUSTANY. Thank you, Mr. Chairman, for holding this 
hearing, and, gentlemen, thank you for your testimony.
    Without going into all of the foreign policy concerns and 
human rights issues that you have already catalogued and has 
been discussed extensively, Ambassador Burns, I want to thank 
you for being here today for providing your extensive 
experience in dealing with Russia, the difficulties in dealing 
with Russia. I think what you have done in your career 
exemplifies the finest tradition that was set forth by George 
Kennan as we dealt with Russia. So I want to thank you for 
that.
    Clearly, granting PNTR at this point to Russia does not 
give us leverage. That has been set forth, and it is pretty 
clear. But I firmly believe that a vibrant, growing trade 
relationship with Russia based on rule of law with real 
enforcement mechanisms and the connectivity that is going to 
grow as a result of that will help us create and build leverage 
as we deal with Russia.
    A second point I would like to make is that in looking back 
at Russian history, whether it is Czarist Russia, Soviet 
Russian and today, one of the main motivations in foreign 
policy has always been deep water, warm--deep warmwater access. 
That is what motivates them primarily in Syria; it certainly 
has motivated much of their foreign policy over many decades. 
So clearly building a trade relationship with Russia would help 
us work with them to alleviate those concerns, and hopefully 
help us to modify some of their foreign policy behavior in the 
long run.
    One final point I want to make about this before asking a 
question is that in the context of the crisis in Europe right 
now, the financial/economic crisis, it is going to be 
critically important to see integration of Russia into the 
global economy through this. And if we stay on the sidelines 
with this, we are really hurting moving forward and trying to 
solve some of these global economic problems. Our trade policy 
in this is a critical part, a component, of our foreign policy, 
and it has to be looked upon as such. So I find myself in 
complete agreement with both of you gentlemen as to the 
compelling reasons why we need to move forward with this.
    Furthermore, Chairman Brady and others mentioned jobs. In 
2011, Louisiana saw $135 million in exports for Russia; not 
big, but clearly an area where we can grow in agriculture, oil 
and gas, machinery exports. I have companies in my districts, 
small companies, that will benefit from an expanded export 
market there with enforcement mechanisms. So it is a jobs bill.
    Ambassador Kirk, I have one quick question. We have gone 
through a lot of this with China, and we are still dealing with 
difficulties with them acceding to the WTO government 
procurement agreement. We have heard a lot of comments about 
how difficult it is for U.S. companies to deal with the Russian 
government.
    Could you outline some of the commitments Russia has made 
to us so far to join the government procurement agreement under 
the WTO? When will those negotiations begin? Give us some sort 
of sense of a timeline and also lessons learned from dealing 
with China on this, how we can make sure that we move forward 
on this in a timely manner.
    Ambassador KIRK. Thank you, Dr. Boustany, and thank you for 
acknowledging the role that this can help build small exporters 
not just in Louisiana, but all around the country.
    And I would remind the Committee, 97 percent of U.S. 
exporters are what we define as small businesses. I know we 
tend to think it is just Boeing and Ford and Caterpillar, but 
it is small entrepreneurs from Washington to Texas to 
Louisiana.
    The most important lesson we learned from China was we were 
going to give Russia 10 years to kind of adapt and change their 
laws as we did China. And we have heard that from you, we have 
heard that from businesses, and I can't emphasize enough I 
think the important work our team did with Russia. We asked 
them to make those changes in their rules before we would agree 
to the working party report and even invite them to join, and 
they did that. And so when Russia becomes a Member, Dr. 
Boustany, at the end of the summer, for the most part on 
balance they have changed and put in place those rules on IPR 
and others you have heard me to articulate.
    Now, the government procurement agreement, like the 
information technology agreement, were sort of subsets of 
Members. China was given 10 years to join the GPA, and as we 
know, they still haven't. We got Russia to agree to less than 
half of that. So they have agreed they will seek admission to 
the government Procurement Act in particular within the next 4 
years, but we have actually begun to work with them on 
strategies on how they can do that. It takes a little bit of 
effort to get their documents ready, but we are working with 
them on that already.
    Mr. BOUSTANY. I thank you for the answer.
    I yield back.
    Chairman CAMP. Thank you.
    Mr. Blumenauer is recognized.
    Mr. BLUMENAUER. Thank you.
    I would appreciate it if you could, Ambassador Kirk, if you 
could just pick up where you left off.
    I appreciate attempts to inform and modify the approach we 
are taking to Russia based on the somewhat challenging and 
erratic response with China, but I am trying to get a sense of 
where is the leverage. We had agreements. We had timetables. I 
was one who actually supported extending most favored nation 
status to China, trying to get them in a framework where it 
looked like we would be better off. That has had mixed results, 
as you know.
    We have talked a little bit about this, and I know you have 
been focusing time and attention, but I want to get a sense of 
what is different here with Russia in terms of being able to 
actually have the leverage or the mechanisms to help make sure 
that it will, in fact, be different and the things that we have 
on paper are going to make a difference for American commerce.
    Ambassador KIRK. Thank you, Congressman. I do appreciate 
the dialog we have had on that.
    The single biggest difference, Congressman Blumenauer, is 
that Russia undertook these obligations before they joined the 
WTO. In many cases countries will argue because of their state 
of development, or capacity, or, you know, lack of rulemaking 
expertise, they should be granted 5 years, 10 years, some, you 
know, period of time to adjust and make those rules.
    We learned from our experience with China, frankly, and we 
have heard again not just from Members of this Congress, but 
more critically from our businesses let us not do that again. 
So it is one of the reasons we took about the--you know, we 
dedicated most of 2010 working with Russia to put in place the 
rules, the changes to their law, that would have them be 
compliant with the rules of the WTO the day they come in. That 
is the single biggest difference.
    When Russia comes into the WTO at the end of summer, they 
will be in compliance and held to the standards, more 
importantly, of our disciplines on everything from intellectual 
property rights, sanitary, phytosanitary standards. We don't 
have to do a thing.
    And I want to clear up one thing. This is not a gift to Mr. 
Putin of Russia. The United States is not having to change one 
law, do one thing differently for Russia. The only issue before 
us is whether or not we are going to give the benefits of all 
our hard work to having Russia do this and make sure those 
benefits operate for American workers and exporters.
    So I know I am going to sound repetitive, but the single 
biggest difference is that we heard you, we learned from that, 
and we went to Russia and said, you are going to have to do 
this up front, and they did it.
    Now, we are going to monitor them. We are going to hold 
them accountable, just as we would not only China, or Mexico, 
or Canada, or Europe, but we are way ahead of the game compared 
to the experiences we have had in the past.
    Mr. BLUMENAUER. Thank you, sir.
    Secretary Burns, you have heard some apprehension expressed 
from colleagues on both sides of the aisle on this situation we 
are facing with Russian involvement with Syria, troubling 
developments still in Russia. But I wonder if you could just 
take a step back for a moment and set in context about the 
difference that we are facing today versus the situation of 30 
and 40 years ago in terms of the relative balance, the 
progress, the prospects for profound differences going forward 
in Russia.
    Mr. BURNS. Well, Congressman, I think the situation inside 
Russia, with all of the difficulties Russian society continues 
to face, is profoundly different today than it was 30 or 40 
years ago, and the same is true of our relationship with Russia 
compared to what it was three or four decades ago.
    I think within Russia, what you have seen over the course 
of recent years, but particularly over the course of the last 6 
months, with many of the demonstrations that you have seen, 
demonstrations animated in large part by an emerging middle 
class, is a thirst on the part of people not just for the 
benefits of an improving standard of living, which is a real 
concern on the part of people in Russia, just as it is in our 
country and anyplace else in the world, but also a thirst for 
greater participation in how important decisions are made in 
their societies, a thirst for the application of the rule of 
law so that there is some predictability and accountability. I 
think that is a very important phenomenon.
    It is not going to transform Russia overnight, but it is 
also a trendline that is not going to go away either. And I 
think it is a trendline which, through a variety of means, it 
is important for us to try to reinforce. There are limits to 
our ability to influence that, but there are some things we can 
do, and I think encouraging Russia to integrate into the global 
economy, to play by international rules, to encourage the 
emergence of rule of law in Russia is a very smart strategic 
investment for the United States, and the investment over time, 
the emergence of a better and more predictable partner in 
Russia. It is not going to change a lot of the differences and 
the difficulties we have today, but I think it offers 
considerable opportunity.
    Mr. BLUMENAUER. Thank you.
    Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Roskam is recognized.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    You know, maybe just more of an observation than a question 
for our witnesses, but when you have the benefit of sitting and 
listening for a couple of hours, you kind of notice the pattern 
and the cadence to this ongoing narrative and how it is being 
really disclosed and explained to the public.
    I think, Ambassador, you put it well when you said that 
this is no gift to Putin; that the whole question is how do we 
position the United States vis-a-vis opportunities and the job 
creation theme that Mr. Brady mentioned.
    I am from Illinois, and Illinois is the second largest 
exporter to Russia. I think that is largely based on 
Caterpillar's presence in Mr. Schock's district, and probably 
the suppliers in my district in suburban Chicago.
    And, Ambassador, you made reference just a second ago to 
reinforcing a trendline. I think, you know, some of the time we 
come in--we come in to the great debate and discussions of our 
day, but it is an ongoing enterprise. We don't come in just 
with the ability to write a script clean from the very 
beginning. If you could, you can imagine a very different 
interplay and different dynamics, and we would insist upon 
this, and we would insist upon that, and we would walk away 
and, you know, the whole drama of how these things are 
negotiated.
    But that is not the card deck that we are dealt. That is 
not the hand that we are dealt. We are dealt a situation on a 
multilateral arena, a lot of moving parts, clearly, that we 
have heard discussed today.
    And so the question is before this Committee that now finds 
itself in the middle of this drama, how do you sort of isolate 
one of these areas that is, to go to your point, Ambassador, 
moving and reinforcing a trendline from a trade point of view 
that is positive, and also saying, all right, let us enforce or 
reenforce or give support to this emerging middle class in 
Russia to empower them on what? Goals that are mutual, and that 
is a growing democratization, rule of law, and to begin on the 
commercialization of that effort that is a building block to 
move forward.
    Now, it just so happens that there is an economic benefit 
to the United States. That is not to say that all the drama, 
and the hardship, and the coarseness actually of Russian 
foreign policy adventures are to be ignored, but that is to say 
let us take advantage of this area where we can move the ball.
    So, look, I appreciate the challenge of articulating this. 
I appreciate the responsibility that this Committee has in 
communicating to our colleagues the nature of this opportunity, 
and also the recognition that if you are going to go to a clean 
slate, you might do something different. But the whole question 
now is can this committee use its influence and its ability to 
persuade other Members to come along and take advantage of 
something that makes good commercial sense and ultimately 
foreign policy sense?
    So we are--you know, speaking on behalf of this Member--
pleased to be working with the administration now and trying to 
make this effort. But it is a pivotal time, but it is a pivotal 
time in terms of the trendline, and I appreciate the 
opportunity.
    Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. Thank you.
    Mr. Pascrell.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    I want to start by commending both of you for the hard work 
you have put in. I have noticed in the past couple of years 
that for the first time I can feel some confidence in carrying 
out and implementing conditions on trade throughout the world 
from the United States. I think we are trying to get some 
enforcement abilities. I know that isn't easy.
    But I must say about what we have before us today, yeah, we 
must deal with the cards that we have dealt to us, but I would 
venture to say that if at 9 o'clock this morning we were told 
we would be a day and a half late, that the Russian government 
had a shipload of vehicles and weaponry which was headed toward 
Syria and wound up in England on the way to Syria, and then 
suddenly turned around--that is what we are told--that didn't 
happen in a vacuum. I would say that perhaps maybe the chairman 
or some of us would have asked for this committee hearing not 
to happen today, because this the kind of betrayal that we are 
very used to. This is very serious business.
    As we talk about trade between our two countries, and 
Russia accessing WTO, and innocent people, citizens--and I am 
not telling you something you don't already know, but I want to 
reiterate this because this is important. When people dismiss 
the question of human rights as almost like an addendum, that 
really sets me off. I want you to know that. And while no one 
is advocating violations of human rights, we are sitting here 
talking about a deal, and what is happening in another part of 
the world is affecting us just as well as American citizens.
    So I want to associate myself with the comments of my 
colleagues regarding the relationship between trade and human 
rights. As Mr. Levin stated, Jackson-Vanik was a human rights 
amendment to a trade deal, to a trade bill. So it is entirely 
appropriate that we insist that if we repeal one human rights 
provision, we replace it with another, the Magnitsky bill, 
which I am a cosponsor.
    I am also incredibly concerned with the timing of this bill 
with reports of election fraud in Russia, we didn't invent 
that; Putin's inconceivable actions with regard to that; 
selling weapons to the Assad regime right in the face. I mean, 
what is going on right now, we have a discussion in Mexico, for 
one, just as we are taking the possibility of Russia's 
accession into the WTO. I find that like a Fellini movie. It is 
bizarre. And for us not to be affected by that and simply think 
that we are just talking about a trade deal here, and we can 
take it out of context, as some have suggested, and forget 
about those kinds of things I don't think is realistic, Mr. 
Ambassador. I really don't.
    We can't change Russia. Russians change Russia. So I would 
like to ask you a couple questions along those lines. Given the 
difficulty that we have experienced and the resources spent 
holding China to the commitments--and that is the big deal 
here, how do we do this, how do we hold a country to its 
commitments to us once we sign the deal when they join the 
WTO--what has USTR done differently this time to ensure 
Russia's compliance? If I can ask that question.
    Ambassador KIRK. Yes, Congressman, my response will be very 
similar to that--to Mr. Blumenauer's in that one of the most 
important differences in our approach, Congressman Pascrell, 
was that we again insisted that Russia make those critical 
changes to their laws necessary to comply with the WTO rules on 
the front end. China was given a 10-year grace period to do 
that. We did not do that in this case.
    Mr. PASCRELL. Mr. Ambassador, we have been told that about 
some other trade deals. I won't go through chapter and verse 
with regards to that. I would like to request that you provide 
my office with a comprehensive written itemized list of the 
differences between Russia's WTO accession agreement and 
China's, and why there isn't improvement. If I could ask 
through the chair that information.
    Chairman CAMP. I am sure the Trade Office will respond in 
writing.
    Mr. PASCRELL. I would appreciate that, Mr. Chairman. Thank 
you very much.
    Chairman CAMP. Thank you.
    Time has expired. Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman, and thank you to our 
ambassadors here today. I appreciate your service in so many 
ways, and certainly this issue is one that is by no means an 
easy situation. And I don't expect you to be too repetitive 
here, but I do want--and I appreciate the attention given to 
the sanitary and phytosanitary issues that we know exist.
    Hearing from meat and poultry producers in Nebraska, for 
example, there is a bit of skepticism in terms of how effective 
our efforts can be in terms of enforcement and various other 
nontransparent standards that really have no basis in science, 
and I know that there are concerns with other countries as 
well.
    Can you highlight perhaps a timeline that we could expect? 
I know that it has been mentioned the WTO accession with 
Russia, you know, improves many things and does open up some 
access there, but there is still, like I said, that skepticism 
that does exist, that that may not be as effective of a tool as 
perhaps we would like it to be. If you could elaborate, 
Ambassador Kirk.
    Ambassador KIRK. I can, and I will try to be brief.
    The WTO accession process is sort of a three-part process. 
They appoint a group of Members to work with the country on 
different issues that we have bilaterally, and we actually 
produce a working party report, which then goes to our 
ministerial. All of this happened last fall in which we 
formally invited Russia to join the WTO. Then Russia has to 
undertake a final set of legislative actions, which they have 
introduced in their Parliamentary body 2 weeks ago, and they 
have until, I believe, August the 23rd to complete that 
process. Every one of us believes they will do that because 
they have initiated to do it. Thirty days after that, Russia 
will be a Member of the WTO.
    So the concerns about timing and why now is there is some 
sense of urgency that if we don't act, we will be in a 
situation where we have not acceded to that process because of 
the presence of Jackson-Vanik. When Russia becomes a part of 
the WTO, they have agreed they will apply the SPS disciplines 
within the body. Now, you and I both know then we have to 
follow them and see how they implement that and make sure that 
they are science-based as opposed to what they say. And just as 
we have with other countries, we will be prepared from day one 
to challenge those actions, those standards that we believe are 
not WTO-consistent, but at least we have that ability. Right 
now our frustration is all we have had is a conversation.
    Additionally, since you mentioned agriculture in 
particular, we negotiated a higher TRQ, a tariff rate quota, 
specifically for WTO Members. If we don't go forward and repeal 
Jackson-Vanik, we lose the benefit of that. So we would not 
have the benefit of competing under the TRQ for the higher 
amount. We wouldn't have the ability to challenge their 
standards if they aren't compliant with the SPS rules of the 
WTO. It isn't going to be a panacea, but at least we will have 
an enforcement monitoring mechanism that we have lacked up 
until now.
    Mr. SMITH. Okay. Thank you.
    Ambassador KIRK. I hope I didn't leave you more confused 
than when I began.
    Mr. SMITH. No, I appreciate that. And if you could just 
keep us informed as perhaps new developments occur, I would 
appreciate that. And I will also submit some additional 
questions for the record and would appreciate a written 
response. So thank you. I yield back.
    Chairman CAMP. Thank you.
    Mr. Schock is recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman, and thank you to both 
of our witnesses here.
    First my question dealing with human rights as was 
mentioned by my colleagues on this side and my Democratic 
colleagues as well. Russia is already failing to comply with 
the existing commitments to the U.S. made as a part of its WTO 
accession.
    In 2006, Russia signed letters as part of its U.S.-WTO 
working party agreement with specific and time-binding 
undertaking to improve its IP protections and access for 
agricultural goods. It has failed on those undertakings. It has 
further reneged on them by halting and banning U.S. poultry 
imports on the ground of arbitrary and nontransparent sanitary 
requirements in 2010, as was mentioned by Representative Smith. 
And Russia has a track record of noncompliance with its 
international obligations.
    Additionally, Russia has signed numerous international 
agreements under U.N. human rights, anticorruption, 
antitorture; the Helsinki Human Rights and Rule of Law Courts; 
the Council of Europe Rule of Law, Human Rights and 
Anticorruption Conventions; however, it does not comply with 
any of them. Compliance with the European Human Rights 
Convention was the precondition of Russia joining the Council 
of Europe in the late nineties. Today Russia is the worst 
violator of almost all of those basic human rights enshrined in 
the convention.
    I mention all of these in detail because I think we share a 
concern, those of us on this Committee and representatives. We 
hear from our constituents the great concern about Russia's 
willingness to really deal with these commitments, and then the 
question of whether this is somebody we would want to enter 
into an agreement with.
    My question for Ambassador Burns is whether your opinion of 
us establishing PNTR with Russia will help us press any of 
these issues.
    Mr. BURNS. Well, Congressman, I do believe it is an 
investment in the rule of law in Russia, aside from all of the 
practical benefits for American workers and American companies. 
There is a lot to be concerned about about Russian compliance 
with international obligations and certainly about the human 
rights situation in Russia today. And we have not been shy 
about expressing our concerns, nor have other countries around 
the world, in support of a number of very thoughtful Russians 
who have raised these concerns and are working to build a more 
open society over time.
    But as I said before, I truly do believe that taking this 
step that we are discussing today, extending PNTR, because 
Russia is going to become a Member of the World Trade 
Organization, is not only a benefit to the United States and to 
our economic interests, but it is also an investment in a 
Russia in which rule of law is going to be more respected over 
time.
    Mr. SCHOCK. So you would subscribe to, I guess, the one of 
two paths that we can go down. One is either isolationism as a 
means to try and force them to do what we want, or bridge 
building as was described by Representative Reichert as a means 
to get them to do more of what we would like. You would prefer 
bridge building as opposed to isolationism.
    Mr. BURNS. Well, Congressman, you know, the truth is that 
in a complicated relationship like the one we have with Russia, 
we have to on the one hand be very direct where we have 
concerns about human rights, or Syria, or Georgia or other 
issues that divide us. But at the same time, I think we have to 
bear in mind what serves our own national interests especially 
economic self-interest, but also look at the way in which 
Russian society can evolve, and how we can best serve that over 
time. And so I know it is a complicated situation in which to 
navigate, but I think that is the reality of what we are 
dealing with.
    Mr. SCHOCK. Ambassador Kirk, again, welcome back to the 
Committee. It has been great working with you. Congratulations 
on all of the advancements we have been making with trade since 
you have been our ambassador to trade. We appreciate all that 
you have been doing.
    I guess my question would be very direct and frank to you 
about the administration's willingness to play a role in 
advocating for this within the Congress. Having been a part of 
the Colombia, Panama and South Korea trade agreements, to be 
very honest with you, while you were very active and other 
Members of your team, I did not sense a great amount of effort 
being put forward on behalf of the White House encouraging 
Members of Congress to get on board with those trade 
agreements.
    Clearly this is going to be a controversial move, clearly 
based on the concerns raised by Republicans and Democrats on 
this committee, certainly will be shared by the Congress at 
large. What does the President specifically and the higher-ups 
of his administration--have they communicated with you their 
willingness to really play a role, knowing that this is an 
important issue for the business community for us to address 
before the election? What is their willingness to really get 
involved with the lobbying and encouraging of Members of 
Congress to go in this direction?
    Chairman CAMP. And if you could answer quickly, because 
time----
    Ambassador KIRK. I will.
    I will remind you that I am a part of the administration. I 
represent the President and Congress on trade matters.
    The President spoke to this directly in Mexico. The 
President has spoken before. I will remind you when I was here 
urging the Congress to move on Panama, Korea and Colombia, I 
raised the issue of repealing Jackson-Vanik then, and the 
response from the Committee was, we won't talk about it until 
we do Panama, Korea and Colombia. I understood that.
    But the administration is engaged. But this Congress 
singularly has the ability to repeal Jackson-Vanik and give the 
President the authority to grant PNTR, but we will be working 
with the leadership and Congress to get that done.
    Chairman CAMP. All right. Thank you.
    Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chairman, and thank you for 
holding this important hearing.
    Thank you, gentlemen, for joining us today and for your 
good work.
    Ambassador Kirk, as you know, service jobs account for 80 
percent of U.S. private sector employment, and we enjoy a 
substantial trade surplus in services. As a result we must 
focus on ensuring that this important part of our economy 
continues to grow internationally.
    How will Russia's WTO Membership give U.S. service 
providers better access to the Russian markets, and do you see 
any particular sectors of the service industry especially 
benefiting from greater access to Russian markets?
    Ambassador KIRK. Well, thank you, Congresswoman. I 
appreciate you bringing it up, because this is one area that 
this is clearly a win for us.
    We have had for the last 20 years or so a bilateral 
commercial agreement with Russia. Services is not covered under 
that at all, so right now we have effectively no access to that 
market. When Russia becomes a part of the World Trade 
Organization, they have committed to reasonably full 
liberalization of their services market. And you will hear, I 
think, from industry this afternoon, but it is the one area 
that I think many of our businesses are most excited. I don't 
have the full list, but everything from banking, financial 
services, telecommunications, audiovisual, a number of sectors 
in which we excel.
    And as you noted correctly, we have a trade surplus. We 
would have access to Russia's market if we repeal PNTR. More 
critically, if we don't, that is one area where we would get 
none of those benefits.
    And 80 percent of Americans are employed in the service 
sector. We are proud of what we are doing in manufacturing. In 
others it is back-up. But it would be a huge loss for us were 
we to deny our service sectors access to this important growing 
market.
    Ms. JENKINS. Excellent. Thank you.
    And finally, the role of state-owned or controlled 
enterprises in the global economy is a growing concern. The 
governments that own or control such companies often give them 
unfair advantages ranging from providing favorable financing to 
exempting them from taxes and regulations. So how will Russia's 
WTO Membership address Russia's state-owned and -controlled 
enterprises?
    Ambassador KIRK. The WTO doesn't have specific disciplines 
on that, but we have recognized--again this Committee has 
raised this issue with a number of countries from China, 
Vietnam and others. And what we have engaged in bilaterally is 
the need to bring that transparency and discipline so that they 
operate more like for-profit groups.
    Now, in many areas, Congresswoman, Russia has agreed to 
reduce a percentage of their government ownership. In some of 
the energy sectors and others, they have already put those out, 
frankly, for privatization. So, I mean, again, we are going to 
have to monitor them. But I think, as Ambassador Burns has 
noted, Russia understands they need to reform and modernize 
their economy. But that could be an important opportunity for 
us in some of those sectors where Russia puts these particular 
industries out for purchase by the private sector.
    Ms. JENKINS. Okay. Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. Thank you.
    Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman.
    Let me get your views on the Russian Government's 
expropriation of the large oil company Yukos. When Russian 
authorities dissolved Yukos, it took over its assets, Yukos 
investors, including many from Massachusetts, received nothing. 
I understand a number of these investors have petitioned the 
State Department to espouse claims of all U.S. investors in 
Yukos, and espousal certainly would be helpful to many of my 
constituents who invested in Yukos and thousands of others 
throughout the country who collectively lost $12 billion.
    Mr. Ambassador, I am interested in your observations on how 
Russia should be held accountable for its massive expropriation 
of U.S. investments in Yukos. I would also be interested in 
both of you having an opportunity to comment on how State 
Department efforts to secure compensation for harmed U.S. 
investors can complement the extension of PNTR and achieve a 
sustainable investment climate for U.S. business.
    Mr. BURNS. Thank you, Congressman.
    We obviously are strongly supportive of the interests of 
American investors. We have expressed over the course of a 
number of years, both publicly and also directly to senior 
Russian officials, our concerns about the Yukos case, and in 
particular our concern that the claims of American investors be 
addressed fairly and correctly.
    There are a number of international arbitration processes 
under way right now, which we are monitoring very carefully. We 
are taking careful consideration of the request for espousal 
that has come to the U.S. Government and evaluate that partly 
in light of how we see these international arbitration 
processes unfolding. But I can assure you that we continue to 
take this very seriously, and we will continue to make it a 
high priority in defense of American claimants.
    Mr. NEAL. And for many of those who lost money, as you 
know, that is how some retirements are paid, and that guarantee 
of retirement has been abridged by this decision to expropriate 
Yukos. And I hope that this remains a priority because it is a 
difficult issue, as you might expect, going forward.
    And secondly, and just as importantly, according to the 
AFL-CIO, Russia's labor code fails to secure fundamental labor 
rights, and its enforcement is worse, citing brutal assaults on 
union leaders and censorship of union communications. Will 
either of you please comment on Russia's record on labor rights 
and how you think we can respond to this record?
    Ambassador KIRK. We have heard from the AFL-CIO and have 
pressed and will continue, Congressman, to press Russia on 
improving their record and respect for unions and others. I 
would only add in response to Ambassador Burns' response to 
your other question on Yukos, it is one of the reasons we are 
also moving simultaneously to engage Russia on a bilateral 
investment treaty that would give us a tool that would not only 
protect those investors, but at least give us another vehicle 
to engage Russia on these issues of labor and worker rights in 
particular.
    But we are going to have to continue to engage them on 
that. The WTO doesn't extend the labor rights. That is 
typically done through our free trade agreements, or in the 
case if we could get them to move forward a bit, we would at 
least have a discussion on some minimum standards.
    Mr. NEAL. I mean, I understand how difficult this is and 
the challenge that is out there for all of us, because we all 
see what the final game plan might look like if we can get past 
some of these interceding difficult issues. But in the decision 
to expropriate Yukos, that was a pretty good hit for a lot of 
people, and I hope that you will not let that issue recede in 
our collective or individual memories.
    Thank you, Mr. Chairman.
    Ambassador KIRK. We will not.
    Chairman CAMP. Thank you.
    Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Chairman Camp, for holding this 
important hearing today. And I would also like to thank our 
witnesses.
    I would like to give a special thanks to Ambassador Kirk, 
because I know with these other trade agreements, without your 
leadership and us working together, I question whether they 
might have got done. So I want to personally thank you for 
that.
    To me, it is about jobs. That is why we are here today. 
With sustained high unemployment in Florida and other places, 
it is imperative that we explore ways to expand the economy. In 
2010, my home State of Florida, our overall exports, shipment 
of merchandise to all markets totaled about $55 billion. Of 
that, less than $150 million went to Russia, and that was in 
2010. I am pleased to say that in 2011, we did double it up to 
about $300 million in terms of exports to Russia from Florida. 
But thinking about that, Russia is the world's ninth largest 
economy, and yet accounts for a small fraction of goods 
exported from Florida, and I am sure the country as well.
    Ambassador Kirk, will PNTR with Russia help increase trade 
for Florida?
    Ambassador KIRK. Well, Congressman, first of all, thank you 
for your kind words and your work with this. And I want to be 
careful. My job is to make sure I try to increase trade for 
everybody, not just Florida, but from Illinois to Texas, to 
Maine and others. But Florida----
    Mr. BUCHANAN. I said Florida and the country, but I am 
looking at Florida.
    Ambassador KIRK. Florida is one of those States that is 
uniquely positioned because you are such a major port and a 
gateway, I think, to benefit as well.
    And I might note that thanks to the work of this Committee 
on Panama, Korea and Colombia, that the agreement with Korea 
went into effect on March 15th after only 6 months, the 
agreement with Colombia is now in effect, and we are moving 
forward quickly with Panama as well.
    But we will have the ability to increase our exports to 
Russia only if--I know it is going to sound like a broken 
record--we need to give American exporters' businesses the 
ability to go and compete, and that would require us repealing 
Jackson-Vanik and granting PNTR.
    Mr. BUCHANAN. Let me ask you, Ambassador, and maybe you 
touched on this, because I had to run out for a minute, but do 
you have any figures in terms of what it might mean to Florida 
or the U.S. in terms of jobs going forward? I mean is that 
something you have looked at?
    Ambassador KIRK. We are working on those, Congressman. We 
can try to noodle a little bit what we sell. There is about a 
40, I think, 9 billion dollar relationship now. Much of that is 
energy, petroleum products, extracted materials we buy from 
Russia. But because they are going to bound their tariff rates 
for the first time, we know that our tariffs in most cases are 
going to drop, you know, by 10, 20 percent or more. So for what 
we sell, that will be a benefit.
    Congresswoman Jenkins mentioned in particular one of the 
areas we think we have a huge opportunity, frankly, is in 
services, because we have been denied access to that market. 
And then Russia--notwithstanding our difficulties, Russia is 
one of our strongest markets for protein, for beef and pork and 
poultry. If we can get them to adhere to more recognized 
international standards, I think we can see growth in all of 
those as well.
    Mr. BUCHANAN. Thank you.
    Just quickly, I know my time is short, but, Ambassador 
Burns, let me ask you, and I know it has been touched on a 
little bit, the Middle East, as all of us know, is a very 
dangerous place. Israel has been a bastion of freedom in the 
area and a great ally to the U.S. and obviously in a very tough 
spot. I am concerned about Russia's support of the repressive 
regimes of Syria and Iran. Does the State Department share 
those concerns? I am sure you do, and I am sure you touched on 
it, but I would like to take a minute and get your thoughts on 
that.
    Mr. BURNS. Well, on Syria we certainly do share widespread 
concerns about the horrific situation on the ground for 
Syrians, and will continue, as the President did in his meeting 
with President Putin on Monday, to push Russia to speak out and 
act more forcefully in support of a real political transition 
in Syria, which is the only way in which you are going to see a 
stable future there and the only way in which you are going to 
avoid the spillover of sectarian violence into other parts of 
the region that already has more than its share of troubles.
    We have worked, I think, effectively together on the 
Iranian nuclear issue. Both Russia and the United States share 
an interest in ensuring that Iran does not acquire a nuclear 
weapon. In the most recent five-plus-one talks with the 
Iranians in Moscow over the last couple of days, I think the 
one thing that was striking was the unity of the five-plus-one 
group, including Russia and the United States, in stressing the 
need for Iran to meet its international obligations. And so we 
will look forward to continuing to work with Russia on that 
essential issue as well, which is extremely important not just 
to the United States, but to Israel as well.
    Mr. BUCHANAN. Thank you both, and, Mr. Chairman, I yield 
back.
    Chairman CAMP. Thank you.
    Mr. Marchant is recognized.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Greetings to you, Ambassadors.
    The question that I have today has to do with direct 
investment in Russia. There are many businesses in my district 
and in Texas that, instead of taking their business over there, 
they choose to make direct financial investments in existing 
companies that are in Russia.
    Does granting the PNTR enhance the protections that those 
investors have in the companies that are there, and does the 
Membership in the WTO give any additional protections to those 
that choose to make direct investment instead of building 
plants there?
    Ambassador KIRK. Congressman, it will certainly open up 
more markets, particularly in services Russia is committed to. 
But to get the full protections, we will want to negotiate, and 
we are engaging Russia commensurate with this on a bilateral 
investment treaty, which would really cement the protection and 
treatment for U.S. investors directly in Russia.
    But as one of the commitments Russia is making as part of 
the WTO, they are opening up their economy for more investment 
so the people don't have to, say, invest in another company. 
They would be able to buy those companies and have 100 percent 
ownership of them in many very critical areas.
    So it is a good step forward. They will have much more 
protection, Congressman Marchant, than they have now. But I 
want to make it plain, we would really advance the ball even 
further if we are able to move forward with Russia to complete 
a bilateral investment treaty, and we have engaged them about 
reinvigorating that.
    Mr. MARCHANT. And the threshold for that would be granting 
this PNTR?
    Ambassador KIRK. Yes. If we don't repeal Jackson-Vanik, to 
the degree that Russia is opening up liberalizing its services 
market, investment market, we lose all of the benefits of that. 
We would have some protection under this bilateral commercial 
agreement we have had, but it did not cover services and 
investment. That would be one area that we have a really 
glaring lost opportunity.
    Mr. MARCHANT. Thank you.
    Ambassador Burns, do you have anything to add to that?
    Mr. BURNS. No, sir, not today.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mrs. Black is recognized.
    Mrs. BLACK. Thank you, Mr. Chairman.
    And, Mr. Kirk, I want to go back to the service industry, 
because, as you know from previous hearings, it is one of those 
areas I am very concerned about. And obviously the service jobs 
represent about 80 percent of our U.S. private-sector 
employment, and we do have a trade surplus in services. So that 
is a very, very important industry.
    Do you see any particular service sectors of the service 
industry especially benefiting from the greater access to 
Russia's market?
    Ambassador KIRK. Well, as I said to Congresswoman Jenkins, 
I believe that we will see a number of areas, because we have 
been locked out of their services market generally. They are 
going to liberalize in everything from banking, and finance, 
and audiovisual and telecommunications.
    I think there are a number of areas that would benefit, and 
some of it will depend on the interest of our industry. When I 
was in Russia 2 weeks ago, I met with our American Chamber of 
Commerce, and there were over 160 businesses there that are 
just anxious for us to lift Jackson-Vanik so they can begin to 
explore opportunities.
    But I think it is a--because they have been so closed, it 
is sort of a wide-open territory for us. But U.S. service 
providers are some of the best in the world. Whether it is 
architects, finance, engineering, you know, and agribusinesses 
and others, this is a huge opportunity for us.
    Mrs. BLACK. Okay. So I would like now then to turn our 
attention to government procurement. And my understanding is 
that it is very difficult for U.S. companies to sell to the 
Russian government. Has Russia made any commitments to join the 
WTO's government procurement agreement?
    Ambassador KIRK. As part of their WTO commitments, they 
have--that is, you know, a separate agreement of like-minded 
countries, Congresswoman, but they have agreed that they will 
seek participation in the government procurement agreement 
within 4 years from when they become a member.
    Mrs. BLACK. We are all frustrated that China committed to 
joining the GPA. Did China make the same commitments as Russia 
in this regard?
    Ambassador KIRK. No. And one of the lessons I was sharing 
with your committee, your committee members, is perhaps the 
most compelling lesson that we heard from this committee, was 
let's not give Russia that 10-year liberal period that China--
China agreed that they would join the GPA within 10 years. But 
we asked Russia to make those changes to their law and adopt 
those disciplines of the WTO before they entered, and others 
would come into effect on day one. And that is probably the 
most important difference between our experience here and what 
we went through with China.
    Mrs. BLACK. And then finally, I know we have had a big 
concern about intellectual property with China. And looking now 
at Russia and making sure that we don't get into that same 
situation with them, can you talk a little bit about how we 
might monitor Russia and in the compliance and enforcement?
    Ambassador KIRK. Yes, ma'am. One, as you know, we provide a 
report to Congress every year, our 301 report, on the 
compliance of all of our partners around the world with the 
intellectual property rights commitments.
    Again, most importantly for Russia, the day they become a 
member of the World Trade Organization, they will have to 
comply with the world trade--what we call the TRIPS agreement, 
the trade-related aspects of intellectual property rights. So 
we will have substantially enhanced protection from day one.
    Secondly, we recognize, though, this is sort of the lowest 
common denominator in terms of protecting IPR, and we are 
separately negotiating and working with Russia on an 
intellectual property rights action plan to provide an enhanced 
level of protection.
    Mrs. BLACK. Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. Thank you.
    Mr. Berg is recognized.
    Mr. BERG. Thank you, Mr. Chairman.
    I want to thank our witnesses here for being part of this 
critical and important discussion debate.
    North Dakota, of course, granting permanent trade relations 
are very important. Our farmers, ranchers and small business 
have been critical in really growing our jobs in North Dakota, 
and this obviously helps move them even further forward. North 
Dakota since 2000 has increased trade over 400 percent. And a 
lot of the trade that we are doing with Russia--I think last 
year we had close to $30 million of trade with Russia, and that 
has actually gone up almost 300 percent the first quarter of 
2012.
    And so I guess just to boil it down kind of a bottom line 
as it relates to these groups, and a lot of our trade is ag 
machinery coming from North Dakota to Russia, but really I 
would ask Ambassador Kirk really two questions: One, how will 
this benefit those farmers and small businessmen in North 
Dakota? And then also, how would they be disadvantaged if we 
don't move forward with this?
    Ambassador KIRK. Thank you, Congressman.
    The benefit immediately--and my staff always cringes when 
you all ask me about specific tariff lines, but I remember this 
one. I can tell you because Russia will bind their tariff rates 
from day one, the tariffs, for example, on ag machinery is 
going to come down dramatically. So that, you know, is a 
benefit to your producers and sellers. They can cut their 
costs; they can sell more machinery.
    More critically, if we don't repeal Jackson-Vanik, we are 
going to be at that higher arbitrary rate against competitors 
from around the world. They are your farmers, your ranchers 
that maybe sell pork or protein or soybean critically will now 
for the first time have Russia in a system where they have 
agreed they will have to apply internationally recognized 
science-based standards in the sanitary and phytosanitary area. 
Again, if we don't repeal Jackson-Vanik and extend PNTR, we 
have none of those protections.
    Now, this isn't going to cure everything overnight, but it 
is the one area where for now all we have had the ability to do 
is talk. If we repeal Jackson-Vanik, we have an actionable tool 
that we can use to protect particularly those in our 
agribusiness.
    Mr. BERG. Thank you. I will yield back.
    Chairman CAMP. Thank you.
    Thank you both for your testimony. The committee stands in 
recess until 2 o'clock or until after a series of votes that 
may begin at 1:45, whichever is later. Thank you.
    [Recess.]
    [2:30 p.m.]
    Chairman CAMP. Good afternoon, and welcome back to the 
Committee on Ways and Means hearing on Russia's Accession to 
the World Trade Organization and granting Russia PNTR. We will 
now hear from our private sector witnesses, and today, four 
witnesses will join us on our second panel.
    Our first witness will be Mr. Doug Oberhelman, Chairman and 
Chief Executive Officer of Caterpillar. He is also testifying 
on behalf of the Business Roundtable and the National 
Association of Manufacturers.
    And after him, we will hear from Mr. Wayne Wood, The 
President of the Michigan Farm Bureau.
    And a special welcome to you, Wayne. You have been a good 
friend to Michigan agriculture for many years.
    Often people think of Michigan as only a manufacturing 
State, but we both know that Michigan has a well-developed 
agricultural industry as well.
    Our third witness will be Mr. Michael Rae, President of 
Argus Ltd.
    And finally, we will hear from Mr. Pat Mackin, Senior Vice 
President and President, Cardiac Rhythm Disease Management for 
Medtronic, Inc.
    Before we begin, I would like to ask Mr. Schock to provide 
further introduction to Mr. Oberhelman.
    Mr. SCHOCK. Thank you, Mr. Chairman.
    And thank you, Doug, for being back at this committee.
    For those that don't know, Doug Oberhelman is the chairman 
and chief executive officer of Caterpillar, Incorporated, based 
in my hometown of Peoria, Illinois. Caterpillar is the 
country's and the world's leading manufacturer of construction 
and mining equipment, diesel and natural gas engines, 
industrial gas turbines and diesel electric locomotives. Doug 
joined Caterpillar fresh out of college as a financial analyst 
and over Doug's 35-year career, he has held a variety of 
positions within Cat around the globe. He was elected as vice 
president and chief financial officer of the company in 1995 
and became a group president and member of Caterpillar's 
executive office in 2002.
    In October of 2009, he was named vice chairman and chief 
executive officer elect. During this time, he led a team that 
developed the future strategic plan for the company. In 2010, 
Doug was elected chairman and chief executive officer.
    In addition to his work at Caterpillar, he serves as a 
director of the boards on Eli Lilly, World Resource Institute, 
Wetlands America Trust, and the Nature Conservancy, Illinois 
Chapter.
    Doug is also the vice chairman and incoming chairman of the 
National Association of Manufacturers.
    Once again, welcome back, Doug, it is great to have you.
    Mr. OBERHELMAN. Good to see all of our representatives 
here. I did bring a little show and tell piece for all of you. 
This is a truck built in Illinois.
    Chairman CAMP. You may want to turn on your microphone.
    Mr. OBERHELMAN. This is a truck built in Illinois. Thank 
you. Thank you, Mr. Congressman. It carries a 100 ton payload. 
This is one of our smallest ones. We have a leading position in 
this around the world, but it is this truck and other machines 
like it that are made in Illinois and are only made in Illinois 
for Caterpillar around the world that we are talking about 
today selling more of eventually to Russia. So on behalf of 
Caterpillar----
    Chairman CAMP. Before you begin, we will introduce another 
witness.
    Mr. OBERHELMAN. Oh, I am sorry.
    Chairman CAMP. And then I will come back to you.
    Mr. OBERHELMAN. I am ready to go, Mr. Chairman.
    Chairman CAMP. I am glad you are. Now we know why 
Caterpillar is such a successful enterprise.
    Mr. Paulsen is going to provide a further introduction to 
Mr. Mackin.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    I also just want to welcome Mr. Pat Mackin who is here 
today from Medtronic in my home State of Minnesota. And 
Medtronic, as most folks on this panel know, is a global leader 
in medical technology, and I think he is also going to 
demonstrate one of the products that they produce in terms of 
its American components and why trade is so important to the 
United States and to companies like Medtronic.
    Pat is the senior vice president and president of the 
Cardiac Rhythm Disease Management at Medtronic. He first joined 
Medtronic as vice president and general manager of the 
company's endovascular business back in October of 2002. He has 
also served abroad and so he has experience understanding the 
competitiveness that other countries and other organizations 
provide and face as a component of trade and tax policy, et 
cetera. So he is a valuable resource to us here today, Mr. 
Chairman.
    And I think he will also explain pretty directly why this 
issue of extending permanent normal trade relations to Russia 
is so critical to providing job growth here in the United 
States.
    And so, with that, I will yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    We welcome all of you to the Ways and Means Committee. We 
look forward to your testimony. I would ask that each of you 
keep your testimony to 5 minutes.
    So, Mr. Oberhelman, you will be first. Your written 
statement, like all of those on the panel, will be made part of 
the record, and you are recognized for 5 minutes.

  STATEMENT OF DOUG OBERHELMAN, CHAIRMAN AND CHIEF EXECUTIVE 
OFFICER, CATERPILLAR INC., ON BEHALF OF THE BUSINESS ROUNDTABLE 
         AND THE NATIONAL ASSOCIATION OF MANUFACTURERS

    Mr. OBERHELMAN. Thank you, Mr. Chairman, and it is a 
pleasure to be here on behalf of Caterpillar, and the National 
Association of Manufacturers and the Business Roundtable. And 
it is a pleasure and an honor to share our views on Russia's 
entry into the WTO and the discussion on why we need permanent 
national trade relations with Russia.
    We are also pleased to co-chair the Coalition for U.S.-
Russia Trade, which is a pretty broadbased group of 
manufacturing services and ag interests around the country. I 
have provided my written comments, and I would like to make a 
few points that I think are most important to this discussion.
    Russia is a huge opportunity for the world, sixth largest 
economy, 142 million people, growing middle class. We are 
pleased to say that Russia has more dirt and energy than 
anybody else, and as a Caterpillar person, I like that. It is a 
hardworking population and very educated, and I think you all 
know that.
    In theory, Russia should be a major export destination for 
American companies. Unfortunately, it is not. As a rule, the 
European and Asian manufacturers that we compete with do a far 
better job in Russia than we do. In fact, the United States 
accounts for only 5 percent of Russia's imports.
    At Cat, during the last 5 years, we have exported about $2 
billion of U.S. goods to Russia. That is not too bad, but I 
think we could do a lot better. Keep in mind, we exported last 
year alone $20 billion from the United States. That is why 
Russia's accession and membership in WTO is critical. The price 
of admission to WTO included a commitment from Russia to 
further open its market and provide better protection of IPR 
property rights and a lot of other reforms.
    Part of that commitment includes reducing tariffs. At Cat, 
we would see an immediate tariff reduction on this truck of 10 
percent immediately. And that is important because really our 
only competition for this truck in the worldwide market is from 
Japan. If we don't allow ourselves to compete with the Japanese 
in Russia via WTO, we see a 10 percent price premium on day 
one. These are American jobs out in Illinois versus Japanese 
jobs over in Japan. Critical.
    As it stands today, 154 WTO members will benefit from 
Russia's WTO membership. As I mentioned, Japan is one of them. 
One notable question mark is the United States, however. Will 
American companies, workers, and farmers benefit from Russia's 
more open market, or will we get left behind? That is up to all 
of you to decide.
    I believe without PNTR, American companies run the risk of 
being outliers in the Russian marketplace. The cold war is 
over. The Jackson-Vanik amendment is outdated as Russia no 
longer restricts Jewish emigration.
    Our relationship with Russia is complicated, and I 
understand that, but we believe delaying PNTR while we try do 
solve the other issues would be counterproductive or worse.
    As an example, I remember so well in the early 1980s, a 
total embargo by the United States on Russia. We gave up, as a 
result of that embargo, hundreds of pipe-laying machines for a 
pipeline they were putting through. Immediately, our Japanese 
competitor received the orders. Russia built the pipeline on 
time. All we did was cost our central Illinois workers about 
12,000 man years of production. American jobs.
    Two thousand twelve is a lot different than the early 
1980s. We need jobs badly in this country and manufacturing 
jobs. These are high paid, union hourly jobs out in central 
Illinois. It is a critical time, and we need more exports and 
manufacturing jobs. Cat employees could certainly benefit, as I 
described. Russia could see more mining trucks and bulldozers 
from Illinois, more gas turbines from California, more skid 
steers from North Carolina, and more engines and locomotives 
from Indiana, jobs all across States that you all represent.
    At Cat, we move dirt and create energy, and as I said 
earlier, Russia has more dirt and energy than anybody else. It 
just doesn't make sense to give our foreign competitors an 
advantage in the Russian marketplace. Instead, we need to act 
with urgency and make up the lost ground that we have today.
    Mr. Chairman, Ranking Member Levin, and members of the 
committee, Russia's membership in the WTO is a good thing. It 
is an important step in the right direction. We don't want to 
repeat the mistakes of the past and give our competitors a 
chance to leapfrog us further in Russia. The best way to keep 
that from happening is for Congress to approve PNTR before the 
August recess so that on day one, American companies and 
workers can benefit. On day one, a 10-percent increase in our 
price or decrease depending on what we do with PNTR.
    Mr. Chairman, thank you. I will be pleased to take any 
questions, of course.
    [The prepared statement of Mr. Oberhelman follows:]


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    Chairman CAMP. Thank you very much. We will begin 
questioning after the entire panel has given their statements.
    Mr. Wood, you are recognized for 5 minutes.

  STATEMENT OF WAYNE H. WOOD, PRESIDENT, MICHIGAN FARM BUREAU

    Mr. WOOD. Thank you, Mr. Chairman.
    I would say good afternoon to the Committee members. My 
name is Wayne Wood. I am a dairy farmer from Marlette, 
Michigan. I currently serve as president of the Michigan Farm 
Bureau and also am a member of the American Farm Bureau Board 
of Directors. Part of my responsibility there is to serve on 
the American Farm Bureau's Trade Advisory Committee. I will 
summarize my full statement.
    Approval of permanent normal trade relations with Russia is 
the American Farm Bureau Federation's top trade priority for 
2012. Russia was invited by the WTO to become a Member on 
December 16, 2011. Long negotiations resulted in Russia 
committing to enact many trade-related domestic reforms.
    Russia is expected to complete adoption of those measures 
and formally join the WTO this summer.
    PNTR for Russia must be enacted by Congress in order to 
guarantee U.S. access to the market opening and legal 
commitments that are part of Russia's WTO accession agreement. 
Farm Bureau supports the legislation introduced by Senator 
Baucus last week, which extends PNTR to Russia. U.S. farmers 
and ranchers will have more certain and predictable market 
access as a result of Russia's commitment not to raise tariffs 
on any products above the negotiated rates and to apply non-
tariff measures in a uniform and transparent manner.
    In particular, Russia has committed to applying the WTO 
Agreement on sanitary and phytosanitary measures, limiting its 
ability to impose arbitrary sanitary measures that would impede 
further trade with Russia. Russia's compliance with its 
obligations, including those on tariffs and non-tariff 
measures, will be enforceable through the WTO dispute 
settlement procedures.
    In 2011, the United States was the third largest supplier 
in the Russian market where the U.S. imports of U.S. food and 
agricultural products exceeded $1.36 billion.
    Congressional approval of PNTR will result in improving 
market access for U.S. agriculture. Upon accession, average 
tariff rates for agriculture goods will drop from 13.2 to 10.8 
percent. The tariff reductions and market access for 
agricultural products contained in Russia's accession agreement 
will assist in expanding trade opportunities for U.S. 
agriculture to Russia.
    With regard to sanitary and phytosanitary measures, Russia 
has undertaken commitments on how it will comply with the WTO 
SPS agreement affecting trade in agricultural products. This 
will provide U.S. exporters of meat, poultry, and other 
agricultural products an enforceable set of disciplines against 
trade restrictions that are not based on science and a risk 
assessment.
    Russia has agreed to rules harmonizing SPS measures applied 
in Russia with the international standards. Russia's accession 
negotiations focused on ensuring that Russia would pass and 
implement laws and resolutions requiring its government 
agencies to follow international SPS standards.
    The history of Russia using SPS barriers to stop imports of 
U.S. pork in 2009 and poultry in 2010 make it critical that 
Russia become a part of an enforceable rules-based organization 
and that the U.S. be able to use science-based WTO commitments 
to ensure consistent trade.
    While not all of agricultural trade issues were settled in 
the accession agreement, including specific concerns for pork 
and dairy exports, there is ongoing discussion between the U.S. 
government and Russia about improving the conditions of trade 
for these commodities. We support the continuing efforts by the 
Office of the U.S. Trade Representative and the United States 
Department of Agriculture to improve agricultural trade with 
Russia.
    On behalf of producers across the country, we urge USTR and 
all other agencies involved in enhancing agriculture trade to 
vigorously support the appropriate enforcement of sanitary 
phytosanitary rules. The importance of exports is not lost on 
Michigan's more than 2,000 hog farmers, who raise 2.1 million 
hogs annually. The ability to export pork products without the 
impediments to countries around the world, including Russia, 
generates an additional $110 million for Michigan farmers and 
is important to the future success of Michigan agriculture.
    Russia needs to embrace economic and trade reform, and the 
WTO is the most effective means to achieve that goal.
    In conclusion, Farm Bureau supports nations becoming a 
Member of the World Trade Organization as long as they agree to 
conduct themselves in accordance with WTO rules.
    An agricultural trading relationship based on international 
scientific standards and expanding opportunities will benefit 
both the U.S. and Russia. Our competitors for the Russian 
market will have the benefit of Russia's accession agreement 
commitments when Russia becomes a full WTO Member.
    American agriculture must not lose market opportunities to 
other countries due to inaction. Farm Bureau urges Congress to 
support the granting of permanent normal trade relations with 
Russia.
    Thank you, Mr. Chairman, and Members of the Committee.
    [The prepared statement of Mr. Wood follows:]


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    Chairman CAMP. Thank you.
    Mr. Rae, you have 5 minutes.

        STATEMENT OF MICHAEL RAE, PRESIDENT, ARGUS LTD.

    Mr. RAE. Thank you.
    Chairman Camp and Members of the Committee, thank you for 
the invitation to speak on a topic which I know very well. It 
is U.S. trade with Russia. I am happy to speak to you as 
president of Argus Limited, a company with 31 years of 
experience in business with Russia and as a Member of the U.S.-
Russia Business Council. In fact, I began doing business in 
what was then the Soviet Union back in 1973. It is 
coincidentally even before the enactment of the Jackson-Vanik 
amendment.
    In retrospect, the amendment achieved its goals, but 
clearly, it has no place in today's world. When I began my 
business career, Secretary of State Henry Kissinger wisely saw 
that building trade relations was a good way to diffuse tension 
between the superpowers. Thus, began the period of detente, 
which was the first real break in the cold war.
    Please bear in mind that all of this was just over 10 years 
after the Cuban missile crisis and the building of the Berlin 
Wall. Veteran entrepreneur and Russian business expert, Dr. 
Armand Hammer, then chairman of California based Occidental 
Petroleum Corp., came to the Soviet Union with pioneering deals 
involving trade and fertilizer chemicals and the construction 
of plants and pipelines. I met Dr. Hammer on a number of 
occasions and was involved in subcontracting under the 
Occidental Petroleum umbrella.
    At that time, just to let you know how things have changed, 
everything was conducted exclusively with Soviet foreign trade 
organizations. You were dealing basically with the government. 
Negotiations were endless, nerve-wracking and arduous. 
Extracting concessions in price and terms was the main object 
for the Soviet side and occasionally political lectures 
accompanied the negotiations.
    I founded our company, Argus Limited, perhaps at what was 
maybe the worst of times in 1981, a time alluded to previously, 
a time of embargoes. Many industrial products that were made in 
the United States were considered to have military 
applications. Thus exporting them to Russia was controlled very 
strictly by the U.S. Department of Commerce.
    Despite all the ups and downs, we persisted. Argus came to 
specialize in supplying U.S.-made equipment and services for 
the construction and rehabilitation of oil and natural gas 
pipelines, principally for welding high alloy steel cross-
country pipelines as well as products to protect steel pipe 
against corrosion. In addition, we supply equipment and 
services for testing the pipewelds, bending the pipe, and 
testing the integrity of the pipelines after they have been 
built.
    We also offer a full array of equipment to clean up oil 
spills and to remediate the land, which was polluted by 
petroleum. Our company Argus became a one-stop shop for the 
Russian pipeline construction industry. We are a factory 
authorized distributors for America's leading companies in our 
field, none of whom are really household names. We provide 
services in the form right now of contract welding of pipelines 
and we operate oil waste sludge treatment facilities in Russia.
    Things have changed a lot. The monopoly of the government 
trading corporations is over. We are dealing with oil companies 
and contractors of all kinds. Even as we speak, our technicians 
are working welding on land and offshore on the Russian pipelay 
barges in the ArcticSea and around Exxon's oil fields offshore 
Sakhalin Island, north of Japan.
    We were pleased to learn last year that our sale of 
American-made compression equipment which is used in testing 
the integrity of gas pipelines in Siberia, was the largest U.S. 
EX-IM bank deal in Russia over the last 15 years. Yet, it was 
only $45 million, which in fact is a small figure compared to 
the potential for U.S. exports to Russia.
    We achieved a 95 percent U.S. content on that particular 
contract.
    Year in, year out, our major vendor is Houston-based CRC-
Evans Pipeline, a world class manufacturer, now part of the 
Stanley Black and Decker group, with plants in Houston and 
Tulsa, Oklahoma. Another vendor is the Polyken Division of 
Berry Plastics, based in Franklin, Kentucky, which has been 
providing corrosion protection for steel pipes in the Russian 
market since the seventies.
    Repealing the Jackson-Vanik amendment with respect to 
Russia will bring U.S.-Russian trade relations into harmony 
when Russia joins the WTO later this year. But what are the 
benefits that it would bring to the U.S. businesses. There are 
very many, many of them dealing with improved transparency.
    One good example is World Customs magazine regularly rates 
the Russian customs service near the bottom of its list in 
terms of transparency and convenience. The documentation 
requirements are extreme. A simple typographical error can lead 
to having a shipment of goods being seized indefinitely. 
Harmonization of customs procedures for the WTO will go a long 
way to overcoming that obstacle.
    Finally, I would like to--there are a lot of things I could 
say, but I would like to make a separate comment on visa 
facilitation. When you are in the services businesses, you need 
to get people into and out of the country in an efficient way. 
Russia presently has a very laborious multiple entry visa 
system, which requires people to leave the country every 90 
days out of 180. We are convinced that the visa regime will be 
greatly improved with the onset of the WTO.
    In summary, Russia is presently the world's number one 
producer of oil and the number one producer and exporter of 
natural gas. American companies are ideally suited to service 
that industry. Plentiful supply of energy sources benefits us 
all. We have acute competition from other countries, as my 
colleagues have said, and we need all the help we can get. 
Russia's business climate has improved, but it will improve 
even more greatly with the WTO.
    Chairman Camp and Members of the Committee, please do all 
in your power to remove the restrictive legislation as soon as 
possible, paving the way for fruitful trade to revitalize 
American manufacturing and meet the President's goal of 
doubling U.S. exports in 5 years.
    Thank you.
    [The prepared statement of Mr. Rae follows:]


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    Chairman CAMP. Thank you.
    Mr. Mackin, you are recognized.

    STATEMENT OF JAMES R. MACKIN, SENIOR VICE PRESIDENT AND 
 PRESIDENT, CARDIAC RHYTHM DISEASE MANAGEMENT, MEDTRONIC, INC.

    Mr. MACKIN. Chairman Camp, Ranking Member Levin, Members of 
the Committee. It is my pleasure to be here today to present on 
behalf of Medtronic and the medical device industry. We are in 
support of Russia's accession to the WTO and urge support for 
legislation granting permanent normal trade relations with 
Russia.
    This summer, Russia will formally join the WTO. According 
to some estimates, Russia's accession to the WTO could double 
U.S. exports, supporting U.S. jobs in many sectors, including 
some of my colleagues here, agriculture, manufacturing and, in 
our case, technology.
    U.S. economic benefits from Russia joining the WTO are not 
automatic. They will only become available and enforceable if 
Congress passes the PNTR.
    A little bit about Medtronic. We were founded in 1949 in a 
garage in Minneapolis, and today we are the largest standalone 
medical device company with over 40,000 employees around the 
world. We serve 120 countries, including Russia. We have over 
71,000 different technologies in production. We are the global 
leader. We have treated over 7 million patients per year, which 
means about every 4 seconds, somewhere someone in the world 
will get a Medtronic technology will improve their life or 
potential for survivability.
    Russia's one of the fastest growing countries in the med 
tech sector. We are a very key player in this segment in the 
Russian medical device market. Currently, Medtronic works with 
more than 400 health service institutions, hospitals in Russia, 
and we serve more than 75 cities. Since 2005, Medtronic has 
trained more than 10,000 professionals in Russia as they become 
familiar with our technologies. In the last 5 years alone, 
nearly 70,000 patients in Russia have benefited from our 
technology.
    Russia's population as you have already heard, 142 million, 
is the ninth largest in the world. But today only about 20 
percent of Russians have access to quality health care. The 
government expands or plans to expand access to medical care in 
Russia, making this a significant emerging market for a company 
like Medtronic that provides cutting-edge technologies. 
Spending on health care in Russia is on the rise.
    Today its four times higher than it was in 2001, reaching 
almost $93 billion last year. Since the Russian health care 
market is almost entirely public, we rely on the Russian 
government to pay for our products.
    At the same time, the incidents of chronic disease is high, 
in fact too high. Cardiovascular disease alone is responsible 
for more than half the deaths in Russia and the scores of 
diabetes is also on the rise. Still, there are too many 
patients in Russia without access to our therapies to treat 
those and other chronic illnesses. Devices that are commonplace 
here today like this pacemaker I am showing, and I am glad that 
the size of our product is a little smaller than the Catapillar 
guy, so I could actually bring one in for you. But most 
patients in Russia can't get a pacemaker today. Only 20 percent 
of them have access to health care.
    At the same time, spending on health care in the interest 
of chronic disease will continue to grow and making products 
like this available to them will be very important.
    Nearly two-thirds of Russians medical equipment is obsolete 
so the demand for medical devices is great, and Russia 
currently imports almost 60 percent of their medical devices to 
date, 25 percent of those imports come from U.S. companies, 
making us the second in market share after Germany.
    Russia has agreed to substantial tariff reductions, as is 
in the case of Caterpillar, and on day one, if this doesn't 
pass, we will have about a 5 percent price differential for our 
products. Meanwhile PNTR does not require any tariff reductions 
or market liberalizations by the U.S. Russia's WTO commitments 
promise to greatly improve the climate for companies doing 
business with Russia. There are robust laws to protect and 
enforce intellectual property rights, which are essential for a 
thriving and successful innovation environment like medical 
technology, and a strong intellectual property environment is a 
non-negotiable element of any investment.
    U.S. companies will benefit from Russia's adherence to the 
rules of international trade regarding intellectual property 
rights as well as science and risk-based regulations but only 
if Congress passes PNTR. Approval of PNTR is a critical step 
toward ensuring U.S. companies like Medtronic remain 
competitive in that market. If PNTR is not in place when Russia 
joins the WTO, we will not be able to take full advantage of 
the market open benefits and other commitments made by Russia, 
nor able to enforce them when necessary.
    In contrast, all other WTO countries, including European 
competitors, will enjoy the benefits immediately. If PNTR is 
not granted, they will have a competitive edge over Medtronic 
and other U.S. companies in this increasingly important Russian 
market. Without PNTR, U.S. companies will sit on the sidelines 
on the Russian market at a disadvantage for lucrative contracts 
without the full tools of the WTO relationship.
    If Congress fails to grant PNTR, Russia will accede to the 
WTO but only U.S. companies will be penalized. Further, we fear 
any lost market share or forfeited growth opportunity will be 
hard to reclaim in the future. Medical technology is the 
priority sector under the President's National Export 
Initiative, a solid source of American competitiveness and 
jobs. Russia is one of the fastest growing markets in the world 
for medical technology and Russia's accession to the WTO will 
give U.S. companies like Medtronic a significant opportunity to 
expand our export sales into Russia. This will lead to job 
creation here at home but only if we compete with PNTR.
    Going back to my pacemaker example, of over 900 components 
that are in the pacemaker, almost all of those are tied to U.S. 
jobs and manufacturing facilities in many of the areas that you 
represent.
    We cannot afford to miss this opportunity to remain 
competitive. I urge Congress to ensure that U.S. companies can 
take full advantage of Russia's WTO accession from day one by 
passing legislation to grant PNTR status for Russia now.
    Once again, I want to thank Chairman Camp and Ranking 
Member Levin for the opportunity to present here today, and we 
will move to questions.
    [The prepared statement of Mr. Mackin follows:]


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    Chairman CAMP. Thank you very much.
    We are now going to move to questions. We have a couple of 
members who were not able to question in the first panel so we 
will go to them first.
    Mr. Paulsen, you are recognized for 5 minutes.
    Mr. PAULSEN. Thank you, Mr. Chairman, and you kind of 
summed up, Mr. Mackin, I was going to ask you, without the 
passage of PNTR, what that would mean actually for a company 
like Medtronic and maybe you can elaborate a little bit in 
terms of the competition that is out there from your 
competitors in other countries, for instance if you are going 
to do business say in Brazil or you are going to go somewhere 
else, what does it mean when you don't get to enter the market 
in a country like Russia, for instance? Because this is an 
opportunity where I think we have heard testimony today where 
this is a win-win for us to making sure we have got--now that 
Russia is going into the WTO, maybe elaborate a little bit 
about the results of us not actually moving forward with this. 
This a lose-lose, right, I think for a company like a Medtronic 
or Caterpillar or the others that are here today.
    Mr. MACKIN. Yeah. So, in the case of Russia, one of the 
competitors in our market is a German-based company. Without 
the passage of PNTR, they will immediately get a competitive 
advantage. They won't pay any tariff, and they won't have any 
of the restrictions that we will be up against from not passing 
this. We have experience in Brazil for other reasons. We left 
Brazil 20 years ago when their currency fell down, and that 
same competitor went into that market and is now the market 
leader. Whereas U.S. companies like Metronic are the market 
leaders in every other market in the world. We are not in 
Brazil because we weren't there on day one, and I fear that 
exact same thing is going to happen in Russia if we don't pass 
PNTR. They will get in first. They will train the physicians. 
They will build the relationships, and they will put a corner 
on the market, and then it is going to be very difficult to 
reclaim if that happens. So actually passing this as fast as 
possible is very important for us.
    Mr. PAULSEN. Mr. Oberhelman and others, can you comment 
from your perspective, a similar situation or?
    Mr. OBERHELMAN. Yeah. I would echo what my colleague said 
here, but in our case, we have seen it so many times around the 
world. Our only competition for the types of work that is being 
done in Russia is non-U.S.--Swedish, Chinese and Japanese, for 
the most part. There are a few ours. And I hate to cede 
American jobs because we can't compete because of a tariff 
premium, which is what we will see on day one, and allow or 
competitors to get kind of benchmark position as first in first 
movers, and we have seen that everywhere we go. It just is a 
lot harder to compete once you are not established and are the 
leader going in or where you are today.
    And Brazil, in our case, is a great example. We have been 
there a long time. We are the industry leader. We can keep the 
Chinese at bay and compete with them, but only because we have 
such a presence there. We do not have that in Russia today.
    As a short anecdote here, we are in Russia every day trying 
to win deals and the first bullet point by any of the Russian 
negotiators on that side of the table is you are not a reliable 
supplier; we prefer Japanese because they won't do to us what 
you did to us back in the embargoes of the eighties, and it 
happens every day. They have long memories, as we all do where 
we are trying to negotiate deals, and we have that to overcome, 
not to mention a price premium down the road if we are not 
careful. So it is a very serious situation and a huge 
opportunity for us, and that is really what I think all of us 
are talking about here, the opportunity that in our case add 
American jobs for our companies at a time when we really need 
jobs.
    Mr. RAE. If I could add a word to this. We start out with a 
geographic disadvantage. For example, our leading competitors 
in the welding area, we are working with Lincoln Electric in 
Cleveland, Ohio. Our competitors are either Swedish or German. 
So the product is right there. We have to bring the products 
there, store them, pay oftentimes large fees storing them in 
duty-free warehouses on the borders of Russia. If we in 
addition face tariff differences, it is really going to be a 
killer. And this is a lot of business. I mean, the companies 
whose products we sell, we keep a lot of people working in the 
factories in the States. So that is my addition.
    Mr. PAULSEN. Mr. Wood, anything?
    Mr. WOOD. Thank you for the opportunity. As you know, 
American agriculture has a lot to gain. If our consumers take a 
look at the importance of exports in maintaining a stable food 
supply here in the United States, they certainly recognize the 
importance of having the opportunity to take that, take that 
relationship to Russia and supply that market over there.
    We have the opportunity to enhance our markets. We have the 
opportunity to continue to provide high-quality food around the 
world, and we don't want to find ourselves in a position of 
becoming the residual supplier when other countries are short.
    So we are asking for the opportunity to compete.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Nunes.
    Mr. NUNES. Thank you, Mr. Chairman. I will be real brief.
    When we look at Russia over the last 12 years, my personal 
opinion is, is that we have really become or we are looking at 
what has become authoritarian, almost a dictatorship, with a 
growing population that is trying to revolt against that 
authoritarianism that is taking place there.
    And so I understand all of the business reasons to vote for 
this, but we are going to see opposition to removal of these 
barriers by folks who will say that we are choosing big 
business over human rights.
    So I would just pose to the panel, maybe we will start on 
the left and give each of you an opportunity just to answer 
those.
    Mr. OBERHELMAN. Sure. Yeah. I have got two things I would 
like to say to that. Again, with my National Association of 
Manufacturers hat on, about 80 percent of those, 90 percent of 
those 12,000 Members are small enterprises, under 500 
employment level. And the debate for them is the same that I 
have described here. Many of them are suppliers to us. Many of 
them export directly to Russia. It is not just big business 
that is really looking for this opportunity.
    Second, while I could acknowledge kind of the macro 
political points you are making, we take as an American country 
something very, with a very high bar to Russia and that is our 
standards and values from this country. And it has manifested 
itself in something called the Foreign Corrupt Practices Act. 
In every country where I have gone in my 37 years at 
Caterpillar, where we go in and compete against other countries 
who don't have that level of standards, we raise the bar in the 
country in which we are competing, whether it is Russia, Brazil 
I mentioned earlier, Indonesia. I can give example after 
example after example where not only our standards are higher, 
our laws are higher. And that in my mind has encouraged country 
after country after country to acknowledge a higher standard 
and a much better bar on the playing field in terms of a lot of 
the things you are talking about. There are issues.
    Mr. NUNES. Thank you, Mr. Oberhelman.
    Mr. Wood.
    Mr. WOOD. Well, while I certainly respect your opinion on 
this, I would say to you, when we look at things worldwide, 
when we look at a society that wants to take control of the 
future, not only in their lives but in their country's lives, 
we have to recognize that protein and the availability of food 
and having their stomachs full certainly helps make that 
change. If your concern is that the dictatorship will not get 
the food to the people, which we have heard before, you know, 
we certainly don't enhance that by not providing the food.
    We believe that the middle class in Russia is growing, just 
as it is in China, and that the opportunity for them to enhance 
their diet through quality American agricultural products is 
one that certainly would be very beneficial to the future of 
Russia.
    Mr. NUNES. Thank you, Mr. Wood.
    Mr. Rae.
    Mr. RAE. Thank you.
    As far as I understand what we are really talking about is 
the repeal of the Jackson-Vanik amendment. It is outdated. I 
don't think there is anybody here who if they read it would 
disagree that it is not time to take it away. Leaving it is a 
symbolic gesture toward, of some concern we have for human 
rights wouldn't make sense because what we are talking about if 
you look at it very specifically allowing Jewish emigration 
from Russia. That has happened. Everyone who wanted to leave 
left. It worked.
    But it--what we are talking about is an anachronism right 
now and so to take--to still have this on the books as a 
discriminatory feature which would harm our ability to have a 
WTO relationship with Russia, I just don't get it.
    Mr. NUNES. Thank you.
    Mr. MACKIN. Yeah, the human rights issues are obviously 
very important, and I think that is part of your guys' job to 
figure out. I mean, I think from a Medtronic and a medical 
device industry standpoint, I think that is better left in the 
hands of Congress to figure out how to best handle that.
    I think, from an American competitiveness, American jobs, 
the Russian market is 140 million people. It is going to 
explode over the next decade, and passing this or not passing 
this will decide whether or not the U.S. plays in that market 
or not. It is my fastest growing country in the world right 
now. If we don't get access to PNTR, we are going to open up 
the market to foreign competitors, and we are talking about 
lots of jobs for Americans.
    The other thing is we are talking about life-saving medical 
technologies here. They are going to be growing their health 
care spending as the middle class evolves, and the market is 
going to happen and the question is do you want American 
companies there or not.
    Mr. NUNES. Thank you.
    Thank the panel.
    Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman. I thank you for 
holding the hearing.
    I thank the witnesses for being here. Mr. Chairman, I would 
like to yield my time to Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you.
    Thank you, Mr. Thompson.
    Mr. Oberhelman, can you--you mentioned you have currently 
$2 billion that you have been able--business that you have been 
able to accomplish in the last 5 years, a little back-of-the-
envelope calculation suggests that you represent 2 or 3 percent 
of our total exports to Russia right now, just your company. Do 
you have any sense at all about what the upside of that could 
represent as the country with the most dirt and the most 
energy.
    Mr. OBERHELMAN. Yes. Thank you.
    It is really hard to estimate that because it depends on 
the growth of Russia, and if we can engage Russia in a way to, 
one, enhance and open their economy, which I think we do by 
engaging them and taking them, taking some of the things to 
them that WTO brings, like a level playing field for imports, 
exports, intellectual property among other things, the economy 
does start to grow, we could easily see, easily see a factor of 
maybe 5 to 10 times what we are exporting as a country today, 
and obviously, we would benefit from that as well.
    We have been very lucky because Russia really needs things 
around oil and gas and mineral extraction, and we supply that. 
But every day, it is a challenge to compete there and bringing 
them into WTO really opens the boundaries and levels that 
playing field, and that is probably the single biggest thing 
that is the benefit to the world trading system and to 
companies that compete. If we aren't allowed to compete because 
we have a premium on tariffs or whatever it is because we are 
not part of WTO, we sacrifice that, one for our companies and 
for our jobs.
    Mr. BLUMENAUER. You also referenced long memories. I mean, 
we have had over the last 70 years, ups and downs with the 
former Soviet Union, allies winning World War II, bitter 
adversaries to where 50 years ago, on the brink of perhaps 
nuclear war, coming back. You referenced this long memory. I 
think every Member of the Committee is deeply concerned about 
what is happening in Syria, deeply concerned about the bumpy 
ride of late in Russia.
    I am curious if you or other panel Members would care to 
elaborate on what it means to enhance and engage the Russian 
economy, people who are well educated, people who are going to 
have a fast-growing economy, what is the potential for us to 
have perhaps more of a breakthrough than we have seen, for 
example, in China with having this level playing field and a 
different type of commercial relationship.
    Mr. OBERHELMAN. I for one will start and certainly deeply 
believe in an open and fair and free trading system around the 
world. The days are gone when we represented 5 percent of the 
world's population and 95 percent of the world's commerce. It 
is not quite the converse of that, but it is getting that way. 
We need markets for our jobs. And in hearing rooms all over 
Washington, we are talking about how to create more 
manufacturing jobs. Certainly trade has done that over the 
years.
    I like to look forward in terms of Russia. I lived through 
the cold war, I guess, as a kid and saw a lot of that and the 
real deep gives and takes, but I don't know how in this day and 
age in 2012, we can ignore a market of 2012 and let other 
countries potentially influence that trading system and not us. 
And I for one would like to be engaged and influence them 
through WTO and other regimes that we have to take them on.
    I think it is up to the State Department and the 
administration to engage them on human rights like we do with 
many countries around the world. America is a beacon for human 
rights. We need to keep that going, but I don't know how we can 
ignore 95 percent of the world's markets, consumers, and 
population outside of our borders.
    Mr. BLUMENAUER. Other panel members have any observations 
about this engagement and what difference it will make from 
your vantage point?
    Mr. WOOD. Thank you. From our vantage point, we look at 
this as, do we play in this game or do we not play in this 
game? American agriculture is very productive. Somebody is 
going to get that market, and somebody is going to have the 
benefits of that market to help balance their supply at home. 
So enhancing that quality of life in Russia certainly provides 
an opportunity for our enhancement of jobs here in the United 
States.
    Just think about the fact that the world trade tariff rate 
quota for fresh and chilled beef is going to be 11,000 tons. 
But they are willing to give U.S., U.S. specific, the 
opportunity of 60,000 tons of chilled beef. That is just one 
example of how we can help them out and help ourselves out.
    Mr. BLUMENAUER. Thank you.
    Chairman CAMP. Time has expired.
    Mr. Wood, you mentioned the importance of the Russian 
market. And in 2010, the U.S. was the third largest supplier to 
the Russian market, and exports of food and agricultural 
products were almost $1.3 billion.
    On the other hand, their discriminatory requirements in 
their non-science-based sanitary and phytosanitary standards, 
they have been a challenge for a lot of years for our farmers. 
And it makes it very difficult for us to export into the 
Russian market.
    What do you think are the most significant barriers to 
agricultural exports to Russia? And how do you think their 
Membership in the WTO will help address those barriers?
    Mr. WOOD. Thank you, Mr. Chairman.
    The most significant barriers as we see them is the 
instability of what they are going to do with the tariffs, what 
they are going to put in as sanitary, phytosanitary standards, 
which are not transparent or risk based. And the issue of, you 
know, rejecting, and that became a real issue with both the 
poultry and the pork. As we got product there, they would 
reject the whole boatload because of one little thing.
    The opportunity for them to be part of WTO and for us to 
give this relationship provides us the opportunity to have an 
outside party enforce some of the standards that the rest of us 
operate under and a discipline system that allows us to 
challenge their thinking if they do know how to play by the 
rules. The important part here to remember is that the WTO 
permanent normal trading relations also provide us the 
opportunity to have stability, to have uniform standards, and 
to open that market for agriculture products.
    Chairman CAMP. Thank you. Mr. Levin.
    Mr. LEVIN. Thank you.
    I note your testimony is important, instructive, so let me 
just make a few comments.
    Mr. Rae, really the main issue before us isn't Jackson-
Vanik. As I said this morning, a number of us wanted to end it 
separately from the PNTR issue. And there was resistance to 
doing that from Russia, also some within our country.
    I think there is a broad feeling that Jackson-Vanik is now 
no longer necessary. It is interesting though when you say it 
worked, it did. It was a human rights provision within a trade 
bill. And there was some resistance, if not then, I wasn't here 
then, but after that, to having a human rights provision in a 
trade bill. But the problem with that argument was that 
Jackson-Vanik was working for hundreds of thousands of people I 
think in the end in terms of their lives.
    And we are facing not the identical issue but another human 
rights issue relating to the Magnitsky bill, and I think we are 
going to have to resolve that as was resolved with Jackson-
Vanik decades ago.
    Mr. Chairman, you raised issues, outstanding issues, like 
phytosanitary. And I do think it would be wise for us to have 
some clear reference in our bill to it because, as you 
mentioned, Mr. Wood, there are several areas that haven't been 
yet fully resolved and that are under further negotiation.
    And I don't suggest we refer to them as conditions, but I 
do think we need to signal this Committee and the Congress the 
need to resolve them.
    And the same is true about IPR. I think Mr. Kirk, 
Ambassador Kirk, discussed this morning that there is in 
process an action plan which hasn't been resolved, and there is 
some very considerable work that still needs to be done. And if 
it isn't completed before we were to act on PNTR, I think it 
would be important for us to have some clear reference to that.
    And to finish. I think your reference to jobs, and others 
have mentioned it, Mr. Oberhelman, is very germane. And it is 
another day, but I hope this Committee will be taking up jobs 
legislation, because you very saliently point out that jobs are 
at stake in this legislation, but in terms of numbers, we have 
got many, many more thousands of jobs at stake whether or not 
we take action in this Congress. And I hope we will listen to 
you and your emphasis on the importance of jobs.
    So, again, thank you for your testimony. I think they are 
positive steps toward action. Thank you.
    Chairman CAMP. Thank you.
    Mr. BRADY.
    Mr. BRADY. Thank you, Mr. Chairman, for holding this 
hearing and thank you to all of the witnesses. This is very 
helpful.
    This is an opportunity for a bipartisan jobs bill at a time 
when our companies, our farmers, and ranchers are looking for, 
technology companies are looking for new customers and 
competing around the world.
    There have been some suggestions that we delay moving on 
this bill as a Congress or that we withhold passage of--repeal 
of Jackson-Vanik in hopes of achieving some goals. And I want 
to ask your view of that delay or withholding.
    Seems to me that each of you are selling products that 
require a reliable partner, and you are selling products that 
are not quickly replenished. We are not selling copy paper that 
you are replenishing every 2 weeks but major equipment that 
goes with the high-ticket items--and not just the sale of 
equipment but the service, the repair, and the relationship 
that goes with it. I think in agriculture, you are selling a 
reliable partnership in Russia. In technology, I would imagine 
some of those med tech devices are expensive but require 
extensive service agreements.
    So if you lose these contracts to Japan and China and 
Sweden and others, is it accurate to say they are not easily 
recouped, that these have longstanding job damage upon us if we 
don't act promptly to move this?
    And I would start with Mr. Oberhelman and walk down. Can 
you comment on the long-term impact of delays that cause you to 
lose these contracts?
    Mr. OBERHELMAN. Yes, I will, but first, I would like to 
comment on the delay question you asked, Mr. Congressman. A 
delay would be devastating. And I think it is exactly the wrong 
thing to do because a delay only hurts our country.
    We have lost leverage on this debate with Russia. We need 
to engage them on all levels from human rights to business to 
WTO, whatever it may be, in other ways. The leverage is gone 
because on day one of the bill or day one of WTO, as you 
suggest, our competitor, Japanese competitor for example, goes 
in and sells a truck that will last maybe 12 to 15 years. And 
we see that today I referenced that pipewire business back 25 
years ago. Those Japanese pipewires are still around over there 
doing something inside Russia, and we haven't sold any since 
that time. So not only do we lose the new sale, which are jobs 
in this case Decatur, Illinois, but the parts and aftermarket 
and service business for that for the lifetime of that truck or 
bulldozer, which is in excess of 15 years in many, many cases. 
So once you see the first deal, it is hard to get back; it is 
hard to get that back. We lost check 85 percent market share 
with the embargo. We have not--we are nowhere near close to--
probably 10 percent of that today.
    Mr. BRADY. After all of these years?
    Mr. OBERHELMAN. Especially after all of these years.
    Mr. BRADY. Thank you.
    Mr. Wood.
    Mr. WOOD. Well, you know, the opportunity may not come for 
many, many years. We looked at a soybean embargo. We looked at 
a seed embargo, and we have been a long time overcoming that.
    In American agriculture's eyes, this issue is one of delay, 
inaction becomes an action. It sends a signal to what America 
expects out of agriculture. This is an opportunity to enhance 
that by opening a market, by leveling the playing field that we 
always talk about in trade, by providing the rules that we know 
ahead of time to play by, and so I would urge on behalf of 
American agriculture that we move and we move expediently and 
continue to negotiate any of the final details that we need to.
    Mr. BRADY. Thank you very much. Mr. Rae.
    Mr. RAE. Yes. I think timing is everything. Your question 
about delay, we are looking in our industry at the construction 
of some very important 56-inch gas pipelines both throughout 
the Asian part of Russia and Europe. The timing is all coming, 
this autumn and into next year. The timing for us would be 
terrible if we were kind of kicked out of the box. We do the 
best we can to get specified but every company that we have has 
a competitor. The company that I mentioned from Houston has a 
very formidable competitor in France for automatic welding 
technology, which will pretty much be ceding the business that 
we built up over all these years to them
    Mr. BRADY. So that is a very large opportunity on the time 
table?
    Mr. RAE. Yes. The timing is key.
    Mr. BRADY. Can I ask 10 seconds for a reply?
    Mr. MACKIN. Yeah, really simply, my business we had 50 
percent worldwide market share for Medtronic. In Russia, we are 
growing at 30 percent, and we have 50 or 60 percent market 
share. If this doesn't happen, that will probably be cut in 
half similar to what you heard from Caterpillar in my fastest 
growing market.
    Mr. BRADY. Thank you very much.
    Chairman CAMP. Thank you.
    Mr. Schock is recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman.
    Well, a lot of my good questions have been taken by my 
fellow Committee Members.
    I thought I would follow up with Mr. Oberhelman. 
Specifically you mentioned that some of your European and Asian 
companies are already doing better in Russia than you, even 
though Caterpillar is the leader in what you build around the 
world. Why is it that they are already doing better than you 
there even before August?
    Mr. OBERHELMAN. Several things. Certainly the embargoes 
mentioned did not help us. The long tail on not being there and 
trying to penetrate the long memories that they have that they 
used to negotiate against us.
    But second, and it is kind of a Ways and Means discussion, 
competitiveness of U.S. companies over my career is in 
question. When I started at Cat, we did, for example, and this 
is near and dear to this Committee, we did tax analysis at 35 
percent plus 3 percent for States, 38 percent statutory rate. 
Every one of our competitors at that time, and there weren't 
many, Europeans primarily and one or two Japanese companies 
paid 60, 70 percent in tax rates. Today, we are still at 38 
percent, going up, by the way, and all of our competitors today 
pay a tax rate that is a factor less than that. In most cases, 
many factors less than that.
    Mr. OBERHELMAN. So reform on that is needed. The overall 
aggressiveness of our government to help exporters compared to 
aggressiveness of European and Japanese to help their 
exporters. Ex-Im Bank is a classic example. We just went 
through a huge debate on that. Europeans and Japanese export 
credit agencies would never think about, or the Canadians would 
never think about a discussion like that. They use that as a 
way in which to compete.
    I mean, we ought to have the debate with all the 
competitors not to have export credit agencies, I understand 
that, but as long as we have it, how can we tie one hand behind 
our back and expect to compete in Russia against the Japanese 
or Europeans?
    So there are a couple of examples for you, Mr. Congressman.
    Mr. SCHOCK. Great.
    I wanted to follow up, too, on Mr. Brady's question about 
the first-mover advantage and to the point where we haven't 
caught up because of the embargo of decades ago. When you sell 
a piece of equipment, I know some of your colleagues at Cat 
have told me this, you know, whether it is a X million-dollar 
piece of equipment, over the lifetime of that piece of 
equipment, tell the Committee a little bit about how much in 
part, services and so forth, what that means in terms of jobs 
and revenue for the company.
    Mr. OBERHELMAN. I will put my sales hat on, Mr. 
Congressman, and go at it. But this hundred-ton truck, for 
example, is a couple million dollars, and it will be worth 
three times that over its lifetime in parts and service revenue 
to us and our distribution over its life, whether it is 8 to 12 
years, depending on the application. So it is a huge 
opportunity that we miss out on if we don't get the initial 
sale.
    Mr. SCHOCK. So the initial $2 million, couple million 
bucks, and then over a 12-year period three times that amount?
    Mr. OBERHELMAN. That is a fair average to use for our 
equipment that is in production 24 hours a day, 7 days a week, 
like this truck is.
    Mr. SCHOCK. And finally, I am just curious if any--what 
percent of the business you all are doing in Russia is with 
actual state-owned enterprises as opposed to privately held 
corporations?
    Mr. OBERHELMAN. Well, I will start on that. The majority of 
our businesses have some state-owned enterprise ownership, 
probably less than we would see in China, but certainly that is 
a big player in that part of the world.
    Mr. SCHOCK. Okay. How about the other panelists?
    Mr. RAE. The way it works with us is that we are selling to 
primarily private contracting companies, who in turn are 
building pipelines for Gazprom, which is now 50 percent plus 
one share owned by the government, up from 35 percent. And then 
the other pipeline operator is a state company called 
Transneft. But we are not dealing directly with them, we are 
dealing with people who are getting contracts from them to 
build pipelines, and we are helping those people build the 
pipelines.
    Mr. MACKIN. We don't do anything with state-owned. It is 
all private, mostly on the distribution side. So the selling 
and the servicing of the technology.
    Mr. SCHOCK. Okay. All right.
    Well, I just say in closing I think the degree we want to 
influence the humanitarian issues there and the political 
situation there, I think to the degree we can empower and build 
the wealth of the private sector is to the degree we can change 
the political system there. So I think that is a point to be 
made that the people that we are working with, the people that 
are buying our products, and the people who will benefit 
financially from it in many cases are ordinary Russian 
businesspeople who can be a part of helping to change that.
    So thank you all for--Mr. Rae, you had a----
    Mr. RAE. I just wanted to make one comment on that last 
point you had, which I think Congressman Blumenauer raised, 
too. It is the whole soft power thing. We were talking about 
how much things have changed. Nobody could travel before; 
nobody could ever leave Russia. We are inviting people who are 
customers of ours, they are coming to America, they are 
familiarizing themselves, they are tourists coming here, they 
are watching American movies, television shows. That soft power 
argument, I think, is one that is going to help us out with 
this whole human rights issue. It is not going to be a 
dictatorship forever.
    The more that we have this kind of contact--before it was 
all very controlled. Official delegations that were watched by 
KGB minders and all that kind of thing, that is all gone. So we 
have a real possibility to do something. And business can be 
the facilitator for that.
    Mr. OBERHELMAN. I mean, if I can just add, Mr. Congressman, 
a bit parochially, I might say, and I attribute this to Joint 
Chiefs of Staff Mullen, who said, the greatest might America 
has is a strong economy. And I think that is well said, whether 
it is competing with Russia or competing with any other country 
in the world. We have to be strong economically, and more jobs 
here allow us to do that and engage then those countries in a 
much stronger way.
    Mr. SCHOCK. Excellent point.
    Thank you guys.
    Mr. BRADY [presiding]. Thank you.
    Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chairman.
    Thank you all for joining us. I appreciate your insights.
    Mr. Mackin, given that you help run a high-tech company, I 
imagine that protecting your intellectual property rights is a 
significant concern. How important is it to you that Russia 
will be subject to the WTO's obligations for protecting 
intellectual property rights? And understanding that we have to 
keep a close eye on Russia, particularly on enforcement, are 
you satisfied that Russia will be in compliance with its 
obligations upon accession?
    Mr. MACKIN. Obviously as a high-tech medical device 
company, intellectual property is the lifeblood of our company. 
The invention, the protection of the invention over the life of 
the patents, and the respecting of those intellectual 
properties over that period are crucial to our business model. 
That is the first point.
    The second point is that in 20 years in the medical device 
field, I have never been involved with any intellectual 
property problem in Russia. That is not to say that it can't 
happen or won't happen, but it doesn't exist at this point, at 
least in the medical-device sector.
    I think the third piece is that one of the advantages of 
WTO is that there will be a mechanism by which to raise 
grievances. So if in the future something does happen, I think 
this has been brought up by several of the panel members, this 
will provide a mechanism to raise a grievance to go after 
something like an intellectual property violation. And then we 
will obviously defend our intellectual property on a global 
basis through our own mechanisms from a legal standpoint, but 
WTO does provide a venue and a mechanism to raise those type of 
grievances.
    Ms. JENKINS. Thank you, Mr. Chairman. I yield back.
    Mr. BRADY. Thank you.
    Mr. Marchant is recognized.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    This question is for Mr. Oberhelman. You talk about the 
jobs that can be created through the treaty. How quickly will 
it take--once we take action, and you begin to be able to 
meaningfully bid on these projects, how long will it take for 
that to translate to jobs?
    Mr. OBERHELMAN. Yeah. Thank you, and it is a good question. 
In our case it would take several months, because the bidding 
process typically is longer. And the pipelines my colleague is 
mentioning here are on the books, they are going to happen. 
When they are let for bid, it is a process that takes a while, 
and if we win the bid, it takes a while to get equipment there. 
So really inside of 1 year would be a fair answer to that in 
terms of seeing increased exports. And I think I can safely say 
that would happen.
    Mr. MARCHANT. So fairly immediately in government?
    Mr. OBERHELMAN. Fairly quickly.
    Mr. MARCHANT. Is there a ready workforce? If you need to 
hire new employees, are there people ready to go to work?
    Mr. OBERHELMAN. We are ready to go, yeah. We are ready to 
go. We have been--in this particular case in Decatur, Illinois, 
where these trucks are made--our large bulldozers are made in 
Peoria, Illinois, where I live, and our large loaders are made 
near Chicago--we have lots of capacity to meet this demand that 
we would see in the first couple of years, so no problem.
    Mr. MARCHANT. So then are your suppliers ready to step up 
their operations, and fill the orders, and provide the 
components?
    Mr. OBERHELMAN. Well, that is a fair question. I think a 
lot of that depends on what the economy is a year from now. 
And, boy, we all need a better economy in this country, and I 
would like to see a shortage, but today I don't see that. In 
fact, I see it slowing down, if anything, a little bit. We are 
doing pretty well. But I would not put worker availability on 
the list here with us or our supply chain.
    Mr. MARCHANT. So this could be something that, other than 
the House sending 30 jobs programs over to the Senate that they 
are using basically as doorstops, the bills, this could be 
something we could do, both Houses could do, tangibly that 
within a year would result in new jobs, new economy throughout 
the supply chain?
    Mr. OBERHELMAN. Definitely. A brand new market, increased 
shipments and exports at a time when the world is a little soft 
would be--I can't say would be a boom, because in an $70-
billion company, it would take a lot to move the needle, but 
for Russia and for these trucks, it would really help us 
immediately.
    Mr. MARCHANT. Thank you.
    Mr. Mackin, people in Russia that are getting these 
pacemakers, do they have a--is there a broad range of companies 
worldwide that are willing to come in there and fill the void 
if you were to be capped in what you would be able to do?
    Mr. MACKIN. Yes. There is five what I would call major 
players, and there is a few minor players. The biggest one, not 
dissimilar to some of my colleagues, is a German company in 
particular that will immediately see this as an advantage, 
competitive advantage, and kind of swoop in like they did in 
Brazil.
    And I think it is different from the Caterpillar example, 
well, you sell the truck, and there is this tail. Our challenge 
is if you train the doctor on this device, or you train it on 
the competitive device, that is what they learn to put in, and 
in a year or two from now, if it takes that long, the game is 
going to be over. The market first-mover advantage is gone, and 
to break back into that is very difficult. The market is 
happening now.
    Mr. MARCHANT. And, Mr. Wood, is there plenty of capacity? 
Do the farmers in the United States have plenty of capacity to 
ship grain and chilled beef and pork if the market is ready to 
be opened up?
    Mr. WOOD. Somebody is going to fill that market. U.S. 
farmers look forward to filling that market. There is capacity.
    We talked about intellectual property rights here a minute 
ago. That is important to us, and we always look at that as a 
high-tech country, but we look at that in genetics in what we 
are doing to ably increase food supply, whether it be animals 
or whether it be crops. Those types of advancements certainly 
would help farmers address this market.
    If we really think about American agriculture, it responds 
to the demand; sometimes an overresponse, and that is when we 
need your help, but it will respond. The food--the products 
will be there, and it won't take that long to get it there.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Mr. BRADY. Thank you.
    Mr. Boustany.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    My home State of Louisiana has a real stake in this. We are 
a State that depends very heavily on trade and exports. We 
typically rank somewhere in the top 10 among the 50 States. And 
here we are looking at an economy in the top 10 in terms of its 
size, 142 million people, with a growing middle class, and yet 
we are only getting $135 million worth of goods to Russia from 
Louisiana based on 2011 numbers. We have huge room to grow in 
this market.
    And just a couple of examples. These are from the Business 
Roundtable. Louisiana was a top supplier of PVC plastics to 
Russia in 2011, with $21.4 million in exports. But EU and China 
accounted for more than 60 percent of the Russian imports, so 
they are beating us there.
    Louisiana exported $6.3 million in heterocyclic compounds 
to Russia in 2011. Russian imports have increased 25 percent 
per year since 2000, but the U.S. share has fallen from 17 
percent to 5. So, I mean, we are losing ground now, and if we 
don't do this, clearly we are going to lose out further.
    The same thing in poultry exports, similar types of 
numbers.
    So I think the case is there to move forward. I know many 
of the companies in my State that export are small companies. 
They are small businesses in oil and gas, chemicals, oil and 
gas equipment, farmers. We export rice. To me, having the 
enforcement and dispute resolution mechanism in place is 
absolutely critical for these small businesses, and I would 
like for all of you to comment on that. I know you are all from 
large companies, except maybe the Farm Bureau representing 
farmers. But could you comment on the importance of having that 
enforcement mechanism and dispute resolution mechanism in 
place?
    Mr. OBERHELMAN. I will start, again representing the 
National Association of Manufacturers, which is really a huge 
organization of very small manufacturers. The WTO mechanism is 
critical. We would not be having this debate today if we didn't 
see the benefits of WTO coming. So I think given that that is 
already on the horizon, we have used it everywhere in the world 
for the 154 countries that are in the WTO effectively, they 
have used it with us when we are not playing by the rules, it 
is a great mechanism to level the playing field around the 
world. And I would compliment you, Mr. Congressman, on the Port 
of New Orleans, which is one of most efficient ports in the 
country. We use it a lot, and it has capacity for more exports.
    Mr. BOUSTANY. Absolutely.
    Mr. OBERHELMAN. So you are set up and ready to go.
    Mr. BOUSTANY. Thank you.
    Mr. Wood, do you have something?
    Mr. WOOD. I would only concur that the level playing field, 
knowing the rules, knowing what is expected, and recognizing 
the stability of the standards and the enforcement system is 
very important as we look at the future of American agriculture 
and food production.
    Mr. BOUSTANY. Thank you.
    Yes, sir, Mr. Rae.
    Mr. RAE. I wanted to say that I am not from a large 
company. Actually our firm is considered a small company. And I 
understand exactly what you are saying.
    One of the things I mentioned in my remarks was about the 
difficulties with customs procedures; a little story about 
somebody putting a comma in the wrong place, and the customs 
seized the goods, confiscated the goods, several containers' 
worth, and it took several weeks to get it out. If you are a 
small company, and you are going to get paid only after those 
things are delivered to your customer, you are really in 
trouble.
    And a lot of smaller companies are getting very eager and 
trying to do more exporting, and they need to have some 
protection. So if there is more transparency, there is more 
rule of law, and all of these things somehow--they won't go 
away right away, but they will go away. Russia is going to be 
brought into the mainstream of the world trade system. It is 
going to benefit the smaller exporters as well.
    Mr. BOUSTANY. Thank you.
    Mr. Mackin, we share a common interest. Your business is in 
the medical field. I was in cardiovascular surgery as a 
surgeon. I used a lot of the products that you guys sell. And 
we have been a world leader in this area. And you were 
answering Mr. Marchant's question earlier about losing market 
share. You and I talked a little bit about the loss of market 
share in Brazil.
    We have a trade surplus in services, and oftentimes in the 
medical field, the commodities, the technology you sell also 
comes with complementary increase in services linked to that. 
So could you comment on some of that and the potential for loss 
in market share if we don't move forward?
    Mr. MACKIN. We have had the opportunity to open lots of 
markets. As I mentioned, we serve 120 countries around the 
world. And as you well know as a cardiac surgeon, the training, 
the infrastructure, not just of the physician, but of the 
nursing staff, actually outfitting and equipping a hospital 
with technologies that are compatible to the systems that work 
with the Medtronic system. In addition, we actually have a full 
line. We sell products for diabetes, heart surgery, 
interventional cardiology, so we have a full suite of programs.
    These are literally a country where hospitals are opening, 
brand new government-funded hospitals, beautiful towers that 
are going to get filled up with equipment. Just like you guys 
said, someone is going to fill the farming void, someone is 
going to sell trucks. And I think the missed opportunity to be 
there on day one, we will be out of the game. And again, it is 
a barrier that doesn't need to exist.
    Mr. BOUSTANY. Thank you. I see my time is expired. Thank 
you, Mr. Chairman.
    Mr. BRADY. Thank you, Dr. Boustany.
    You made the point about small and medium-size companies. I 
note the research done by the National Association of 
Manufacturers show that more than 8 out of 10 of the companies 
that sell to Russia are small and medium-size companies, and 
that what they sell account for 44 percent of what we sell, 
which is much higher than it is in the rest of the global 
market. So your point is noted.
    And for the final question today, Mr. Berg.
    Mr. BERG. Thank you, Mr. Chairman. I have been waiting for 
this.
    First of all, I just really want to thank the panel here. I 
mean, you guys are the job creators. You are the ones that are 
making it happen. And I step back, and I just think America is 
headed down the wrong direction, and we got to get this turned 
around, and we got to create prosperity, we have got to create 
jobs, we got to make that happen. And what you are talking 
about is exactly what we need to do.
    You know, it struck me here, it was great listening, but, 
Mr. Mackin, what struck me really hard is if we don't do 
something, it is not like we stay even. If we don't do 
something--in fact, the analogy I had in my head, it is like 
when you are at these airports, you are on these moving 
walkways, but if you got on the wrong one, by us doing nothing, 
we will fall further and further behind.
    And, Mr. Rae, you talk about a small company. I am 
actually--before I was in this business, we shipped to Russia. 
We had just a handful of employees, but we shipped something I 
don't think any of you shipped. We shipped live cattle. And so 
we flew 160 open heifers at a time. And it was a $3,000 plane 
ticket for each one. But I can imagine if those had gotten held 
up at customs, you know, I mean, how could you bring that 
shipment back? It would be just so far out of the market and 
very difficult to do.
    So, again, bottom line, I just really want to thank you all 
that you are here. I mean, this is about jobs. You hit the nail 
on the head. This is about jobs, this is about our future, this 
is what we need to do. And these are good American jobs that--I 
just loved your statement. I won't have it right. But I am not 
willing to accede American jobs to another country, and those 
would happen pretty darn quick.
    Maybe just a final real specific question would be just as 
it relates to agriculture and ag equipment. If there is 
something specific, just how this will benefit--you know, Mr. 
Wood, maybe if you want to just talk about agriculture in 
general, and then, Mr. Oberhelman, if you want to talk just 
about ag equipment, I would appreciate that.
    Mr. WOOD. Well, how specifically will we benefit? You know, 
that is a great question. And we will benefit because we will 
be able to move American agriculture forward because we have 
got another market open to us, a market that we know the 
playing rules and that we can compete with the rest of the 
world.
    Your analogy of us falling behind in the airport is great, 
that moving sidewalk, and that is exactly what is going to 
happen. And we continue to look at farm programs, and a lot of 
those farm programs can be solved by opening up an export 
market to allow us to obtain those markets. If we look long 
range, that certainly benefits the American consumer because it 
provides a stable food supply here that we know how it is 
produced and not dependent on the rest of the world.
    So, you know, I think we have a great opportunity with 
agriculture. We continue to enhance that productivity and will 
continue to do it as long as we have access to markets.
    Mr. BERG. Thank you.
    Mr. OBERHELMAN. I will just comment briefly. An interesting 
statistic, 6 of our 10 largest export markets are Latin 
America, Colombia being one of them, Peru, Chile. Small 
countries, but huge markets. Russia is a country 10 times 
bigger than Peru in terms of population with minerals and 
energy of probably 1,000 times greater. Imagine what we could 
export and the jobs we could add over time and keep our foreign 
competitors at bay.
    Mr. BERG. Well, thank you.
    Mr. Chairman, I will yield back. Thanks for your time.
    Mr. BRADY. Well, thank you.
    This has been a terrific panel. I want to once again thank 
our witnesses for appearing today.
    And let me note for our witnesses that Members of the 
Committee may submit questions for the record. If they do, I 
hope you will respond promptly.
    Mr. BRADY. Again, an excellent hearing. The Committee is 
adjourned. Thank you.
    [Whereupon, at 3:50 p.m., the Committee was adjourned.]

    [Submissions for the Record follow:]

             Computer & Communication Industry Association


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             Distilled Spirits Council of the United States



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                   National Milk Producers Federation


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                    National Pork Producers Council



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                        U.S. Chamber of Commerce


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                   MATERIAL SUBMITTED FOR THE RECORD
                       Questions for the Record:
                               Questions


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