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




 
               BENEFITS OF EXPANDING U.S. SERVICES TRADE
              THROUGH AN INTERNATIONAL SERVICES AGREEMENT

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 20, 2012

                               __________

                          Serial No. 112-TR06

                               __________

         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
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               SHELLEY BERKLEY, Nevada
LYNN JENKINS, Kansas                 JOSEPH CROWLEY, New York
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

        Jennifer M. Safavian, Staff Director and General Counsel

                   Janice Mays, Minority Chief Cousel

                                 ______

                         SUBCOMMITTEE ON TRADE

                      KEVIN BRADY, Texas, Chairman

DAVID G. REICHERT, Washington        JIM MCDERMOTT, Washington
WALLY HERGER, California             RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California              LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida               JOSEPH CROWLEY, New York
ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
AARON SCHOCK, Illinois
LYNN JENKINS, Kansas


                            C O N T E N T S

                               __________

                                                                   Page

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

                               WITNESSES

PANEL 1

Ambassador Michael Punke, Deputy United States Trade 
  Representative and Permanent Representative to the World Trade 
  Organization (WTO), Testimony..................................     7

PANEL 2

Dr. J. Bradford Jensen, Professor of Economics and International 
  Business, McDonough School of Business, Georgetown University, 
  Testimony......................................................    18
Mr. Thomas Klein, President, Sabre Holdings, Testimony...........    31
Mr. Karl Fessenden, Vice President, Power Generation Services, GE 
  Energy, Testimony..............................................    40
Mr. Charles Lake, Chairman, Aflac Japan, Testimony...............    47
Mr. Daniel Brutto*, President, UPS International, Testimony......    59

*Mr. Brutto will also testify on behalf of the Coalition of 
    Services Industries (CSI).

                       SUBMISSIONS FOR THE RECORD

Coalition of Services Industries 1...............................    74
Coalition of Services Industries 2...............................    78
U.S. Chamber of Commerce.........................................    97


  BENEFITS OF EXPANDING U.S. SERVICES TRADE THROUGH AN INTERNATIONAL 
                           SERVICES AGREEMENT

                              ----------                              


                      THURSDAY, SEPTEMBER 20, 2012

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

    The Subcommittee met, pursuant to call, at 2:30 p.m., in 
room 1100, Longworth House Office Building, the Honorable Kevin 
Brady (Chairman of the Subcommittee) presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

  Brady Announces Hearing on the Benefits of Expanding U.S. Services 
           Trade Through an International Services Agreement

Thursday, September 13, 2012

    Congressman Kevin Brady (R-TX), Chairman, Subcommittee on Trade of 
the Committee on Ways and Means, today announced that the Subcommittee 
will hold a hearing on the benefits of expanding U.S. services trade 
through an international services agreement. The hearing will take 
place on Thursday, September 20, 2012, in 1100 Longworth House Office 
Building, beginning at 2:00 P.M.
      
    In view of the limited time available to hear 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:

      
    On July 5, 2012, the United States and a key group of other World 
Trade Organization (WTO) Members announced plans to intensify ongoing 
discussions in Geneva on an international services agreement to define 
``the contours of an ambitious agreement on trade in services.'' Thus 
far, twenty economies--both developed and developing--are 
participating, representing a strong majority of global services trade: 
Australia, Canada, Chile, Colombia, Costa Rica, the European Union, 
Hong Kong, Israel, Japan, Korea, Mexico, New Zealand, Norway, Pakistan, 
Peru, Singapore, Switzerland, Taiwan, Turkey, and the United States. In 
their July 5 statement, the participating economies noted that the 
initiative is meant ultimately to reinforce and strengthen the 
multilateral trading system. Participants also stated that the 
agreement should be comprehensive in sectoral scope, contain new and 
enhanced rules that countries have developed since the WTO General 
Agreement on Trade in Services entered into force in 1995, increase 
market access commitments to be as close as possible to countries' 
current practices, and produce new market access improvements.
      
    An international services agreement could generate substantial 
benefits for the U.S. and global economies. The services sector 
accounts for the largest share of most economies, and the United States 
exports more services than any other country--fourteen percent of 
global services exports. According to a July 2012 report by the 
independent U.S. International Trade Commission (ITC), U.S. cross-
border services exports totaled $518 billion in 2010, generating a $160 
billion trade surplus--the world's largest. Services exports sold by 
U.S. firms invested abroad totaled $1.1 trillion in 2009. Globally 
competitive U.S. services firms have very significant market shares in 
many services subsectors, including infrastructure services, movie and 
television production, engineering, financial services, computing and 
IT services, consulting, publishing, education, healthcare, retail, 
tourism, telecommunications, logistics and distribution, agricultural 
services, and professional services.
      
    Services trade is a major source of well-paying U.S. jobs. The 
services sector employs over 80 percent of Americans, according to the 
ITC. One subset of services that is highly tradable--business services, 
such as industrial design, accounting, and legal services--account for 
approximately a quarter of U.S. private-sector jobs. These services are 
also highly paid, very substantially exceeding average U.S. wages.
      
    Services exports are growing, rising from approximately 8 percent 
of U.S. exports in 2000 to over 12 percent in 2010. U.S. services 
exports encounter substantial non-tariff barriers (NTBs) around the 
world, however, which keep our services trade from reaching its full 
potential. Traditional barriers to services exports include sectoral 
prohibitions on foreign participation, foreign equity limitations, 
discriminatory regulatory requirements, lack of transparency, and 
nationality requirements for service providers. In addition, U.S. 
services firms are encountering a new generation of 21st-century NTBs, 
including restrictions on data flows, forced localization, and unfair 
competition from state-owned enterprises. The degree of U.S. openness 
to services is far greater than the average around the world. As a 
result, an international services agreement may create disproportionate 
opportunities for U.S. services exporters as the United States pushes 
countries to approach U.S. levels of openness.
      
    In announcing this hearing, Chairman Brady said, ``Expanding 
services trade means creating good U.S. jobs. I am enthusiastic about 
the work USTR is doing in Geneva to move toward launch of negotiations 
on an international services agreement. A services agreement would 
reduce barriers abroad for U.S. services providers and produce major 
benefits and job growth here at home. By ensuring that benefits are 
available only to those countries that commit themselves to the high 
standards of the agreement, we can encourage participation by a wide 
range of developed and developing countries. I am also optimistic that 
a successful agreement will help reinforce the important role of the 
WTO.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is on the benefits of expanding U.S. 
services trade, including by negotiating an international services 
agreement. The hearing will address the importance of services exports 
as a source of well-paying U.S. jobs and economic growth. In addition, 
the hearing will examine the current state of ongoing discussions 
concerning an international services agreement and explore how best to 
support a successful initiative.
      

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 
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From the Committee homepage, http://waysandmeans.house.gov, select 
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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 or 
WordPerfect document, in compliance with the formatting requirements 
listed below, by the close of business on Thursday, October 4, 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) 225-6649.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
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    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
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be accepted for printing. Instead, exhibit material should be 
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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 
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accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available at 
http://www.waysandmeans.house.gov/.

                                 

    Chairman BRADY. Good afternoon. I want to welcome everyone, 
extend a special welcome to Ambassador Michael Punke and our 
private sector witnesses. Welcome, Ambassador.
    Let me also recognize Bob Vastine, the longtime President 
of The Coalition of Service Industries who stepped down 
yesterday and Ambassador Peter Allgeiere, CSI's newly installed 
President. These are two great leaders. Bob has had a long and 
distinguished career in government and the private sector, and 
we have all benefited so greatly from his tremendous expertise 
and sound contributions. Thank you, Bob.
    And as Co-chair of the Congressional Services Caucus, I 
join CSI and its Members in expressing appreciation for Bob's 
work and in wishing him well and in welcoming Peter, with whom 
I look forward to working with in his new role.
    I would also like to take a moment to acknowledge the 
service of Viji Rangaswami, the Ways and Means Minority Chief 
Trade Counsel, who will be leaving the Committee after over a 
decade of service. She has made important contributions in her 
work on free trade agreements, our preference programs, our 
trade remedy laws, trade adjustment assistance, and China 
policy. Viji, we will miss your enormous expertise, your spirit 
of compromise and your good humor. I know that my colleagues 
join me in wishing you the best of luck.
    In this economy creating U.S. jobs must be job number one. 
That is why we are here today to discuss U.S. services trade. 
We have a major opportunity at hand. By negotiating an 
International Services Agreement that lowers barriers to U.S. 
service exports, we can rev up a great engine of American job 
creation.
    The service sector accounts for over three-quarters of 
American jobs and economic growth. These are not the 
stereotypical low wage, low skilled jobs that some would 
scornfully call McJobs. Services jobs pay well. For example, 
our businesses services sector, which includes engineering and 
design, computing and data processing, consulting and other 
services provided to business, these jobs pay nearly 20 percent 
more on average than jobs in manufacturing, averaging nearly 
$60,000 a year higher than the national average. With over a 
half trillion dollars in services exports last year, America is 
the world's most successful services exporter. In fact we 
export more services than the two next largest service 
exporting countries combined.
    Because American service providers are such strong global 
leaders across many services sub-sectors, the United States has 
long generated a large trade surplus in services, which helps 
offset our deficit in goods trade.
    Our global competitiveness is not automatic, however. 
American service providers must be able to maintain a global 
presence to sell our services around the world. Their success 
depends on having on the flexibility to move their data and 
their know-how around the world. Yet U.S. service providers 
continue to face major trade barriers. For example, countries 
impose equity caps, restrict data and capital flows, dictate 
the nationality of senior officials and impose discriminatory 
licensing and regulatory requirements. But if we are able to 
lower services trade barriers around the world, our American 
services providers are well positioned to compete and win and 
will generate major new U.S. employment.
    These employment gains will come not just in the services 
sector, but throughout the American economy. That is because 
services trade facilitates all economic activity. E-Bay 
recently did an interesting study that found its online auction 
services have allowed a vast number of small businesses in the 
United States to become exporters. The National Association of 
Manufacturers and the Farm Bureau have produced two papers, and 
without objection I enter them into the record, laying out the 
many ways their members depend on U.S. services firms' global 
operations to design, finance, market, transport and service 
American agriculture and manufacturing exports.
    The papers follow:
    National Association of Manufacturers Paper
    American Farm Bureau Federation Paper
    Chairman BRADY. In short, we focus on services not instead 
of manufacturing and agriculture but to the benefit of 
manufacturing and agriculture. As a result, I am very 
enthusiastic about the work that Ambassador Punke is doing in 
Geneva on services trade policy. Thanks to his leadership, 19 
WTO members, accounting for three-quarters of global services 
trade, agreed in July to intensify discussions this fall about 
an International Services Agreement.
    This is an opportunity to extend to a much broader set of 
country the higher standard services rules from our bilateral 
trade agreements. By pursuing an ambitious agreement that 
results in real trade gains for participants, we can generate 
new momentum for trade liberalization and ultimately 
reinvigorate WTO negotiations that create incentives for broad 
Membership. The benefits of the agreement should be available 
to all WTO members that are willing to commit to the 
agreement's high standards.
    An International Services Agreement holds great promise for 
American workers and our economy, and I believe it would be met 
with bipartisan enthusiasm in Congress.
    And before yielding to the Ranking Member, without 
objection the opening statement of all Members will be included 
in the record.
    At this time I yield to Mr. McDermott for his opening 
statement.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Before I read my 
statement I would like to acknowledge Viji's leaving. As a 
Member who represents a very trade dependent district with a 
major port and a major exporter of the United States and a lot 
of other large exporters operating out of my State, when you 
become the ranking member on the Ways and Means Committee on 
the Trade Subcommittee, you ought to know something, but I 
admit I am a doctor and I don't know very much. But without the 
assistance of Viji as a teacher, I would not be able to do this 
job. And we will miss her, I will miss her, and the committee 
will miss her. And I want her to know it and she didn't want 
anybody to say anything publicly about her, but Viji, please 
stand up. She always knew that the Member was the one who 
should be out in front.
    This hearing really is an opportunity to consider the 
importance of trade and services and the prospects of 
negotiating an International Services Agreement under the 
auspices of World Trade Organization, but before we think about 
the future prospects I would like to briefly recall where we 
have been the last few years with the WTO Doha Round.
    Doha was proceeding slowly to a dead end, yet some in the 
international community were cheering us on, we are almost 
there, we are almost there. I don't know how many times I have 
heard people come in my office and say that. But fortunately 
the USTR wasn't interested in proceeding on a path to a dead 
end. Ambassador Punke, you deserve a great deal of credit for 
helping steer the WTO members onto a more constructive path, 
one that I think will strengthen the WTO as an institution in 
the long run.
    What is more, our stakeholders and our trading partners 
appreciate your frank, but respectful and deliberative approach 
to these challenges. Thank you for your work on these issues 
and for testifying here before us today.
    This new path is just beginning to take shape, but it looks 
as if trade and services, a major and growing component of the 
world's trade and area where the United States enjoys a trade 
surplus, will be an important part of the path forward.
    In my view, the International Services Agreement under the 
auspices of WTO is an exciting opportunity. It appears to be 
the best way to achieve two objectives that often compete with 
one another in trade negotiations, ambition and inclusion. We 
want an ambitious agreement, one that significantly opens new 
markets for U.S. companies and workers. At the same time we 
want to promote a more inclusive international trading system; 
one that encourages the participation of all countries that are 
willing to make ambitious commitments.
    The WTO is the best place, it may be the only place for 
such an agreement to be negotiated. To open new markets we will 
need to tackle new barriers. Among other things, that means 
ensuring state-owned enterprises compete on a level playing 
field, that data flows are not subject to unjustifiable 
restrictions, and that standards are not used to discriminate 
against foreign suppliers.
    I hope the United States and other interested WTO members 
will lay the groundwork this fall for a successful negotiation. 
In particular, I would be interested in getting a better 
understanding of the position of our European partners in this 
endeavor. At the end of the day I am confident that the EU will 
recognize that a services agreement would benefit European 
service suppliers just as much as American suppliers. I also 
expect Brussels will recognize the systemic importance of 
negotiating an ambitious new agreement under the auspices of 
the WTO.
    And I commend the chairman for having this hearing. Thank 
you.
    Chairman BRADY. Thank you, Mr. McDermott. And I am very 
pleased to turn to our first witness, Ambassador Punke, who is 
Deputy U.S. Trade Representative and Permanent U.S. 
Representative to the World Trade Organization. Ambassador, 
thank you for coming today and for the energy, creativity and 
intelligence that you bring to the important work you are doing 
in Geneva. We look forward to hearing from you, and you have 5 
minutes.

  STATEMENT OF AMBASSADOR MICHAEL PUNKE, DEPUTY UNITED STATES 
TRADE REPRESENTATIVE AND PERMANENT REPRESENTATIVE TO THE WORLD 
                    TRADE ORGANIZATION (WTO)

    Ambassador PUNKE. Thank you, Mr. Chairman and Members of 
the Committee. I very much appreciate the invitation to speak 
before the Committee today. My focus will be on our efforts to 
develop a new International Services Agreement, but I want to 
take a moment to frame the efforts with a brief assessment of 
the state of play in the World Trade Organization.
    The WTO is clearly an institution at a crossroads. After 
more than a decade of unsuccessful negotiations in the Doha 
Round, the collective Membership finally acknowledged last 
December that the round is at impasse. This situation has 
resulted in a fair amount of doomsday predictions in Geneva. 
But our view is that the WTO can't fix its problems without 
first acknowledging them. What is more our successful effort to 
turn the page on Doha is creating important new opportunities. 
It has provided a useful reminder of non-Doha aspects of the 
institution. It has also challenged us to learn from our 
collective mistakes in the Doha negotiation and to craft more 
constructive and productive pathways forward.
    Already only 8 months after the eighth Ministerial 
Conference there is a marked new energy in Geneva. Technical 
negotiations on a multilateral trade facilitation agreement are 
advancing. Discussions are underway to expand the product 
coverage of the Information Technology Agreement, or ITA. These 
efforts are examples of how we are pursuing the President's 
goal of doubling U.S. exports and creating new jobs for 
America's farmers, ranchers, workers, companies and 
entrepreneurs.
    And as we look to new pathways in Geneva our work this year 
on services is particularly promising. Over the past several 
months we have been working with a group of like minded WTO 
members to explore new ways forward. This group with the 
admittedly bad name of Really Good Friends of Services, or RGF, 
first got together in the early years of Doha Round as a means 
for those Members with a strong interest in services to 
coordinate their efforts. A hallmark of the RGF is its 
diversity. The group includes a mix of developed and developing 
countries that substantially reflects a cross section of the 
interest of the WTO as a whole. Above all the RGF discussion 
has motivated by the conviction that opening up services 
markets is a critical factor in supporting economic 
development.
    The genesis of the ISA, the International Services 
Agreement, lies in our hard nosed assessment that we simply 
will not be able to make progress on services trade 
liberalization any time soon under existing WTO frameworks. The 
positions of the major players are too firmly entrenched and 
too closely tied to a web of other issues.
    Meanwhile we hear the frustration from stakeholders who are 
understandably fed up with a lack of progress. The world has 
changed and our rules need to catch up. To take but one example 
Internet usage is 500 times greater now than when the Doha 
Round was launched in 2001, bringing with it a multitude of new 
issues related to cross border trade, such as policies that 
affect data flows and storage. Our stakeholders want us to get 
to work in addressing these and a host of other issues.
    Faced with a choice between doing nothing or trying 
something different, we have begun to explore the feasibility 
of using a new multiparty services trade agreement to lay the 
pathway to further globalization services liberalization.
    The most logical place for us to start was to look at the 
more than 100 service agreements that have been notified to the 
WTO in the 18 years since the General Agreement on Trade in 
Services entered into effect, an exercise that we have 
conducted over the past 8 months. Many of these agreements 
achieve a much higher standard for market access and 
incorporate new or improved rules to address real world 
problems.
    We believe it is time for forward thinking WTO members to 
consolidate these improvements and lay the foundation for 
extending them to the multilateral system. The first step in 
achieving our vision is to bring the achievements of these 
varied agreements under a single umbrella, the ISA. Like 
existing U.S. FTAs, the agreement would encompass all service 
sectors and modes of supply, and impose a high standard for 
liberalization. The agreement would also provide a new platform 
where we could work to build a stronger international consensus 
on improved rules to address now issues.
    The potential benefits are compelling. By moving to a 
multiparty agreement that reaches across geographic lines, we 
can create a steppingstone from the web of bilateral and 
regional deals back toward the multilateral system. By 
establishing high standards for market access we can influence 
the norms of international trade. By developing new provisions 
we can provide leadership to the global trading system.
    In addition to these systemic benefits, the ISA also offers 
the potential to strengthen our economic relationship with the 
other participants. In just 6 months the RGF group has grown 
from 16 Members to 20. The United States currently has FTAs 
with only 10 of the 20 Members. The ISA therefore offers a 
venues to work on deeper services integration with partners as 
diverse as Japan, Taiwan, Israel, Pakistan and Turkey.
    Progress to date has been extremely encouraging. Last 
summer we reached agreement on a core set of objectives and 
agreed to intensify our efforts this fall. Our next step is for 
the group to develop more specific negotiating parameters so 
that each participant can conduct domestic consultations 
necessary in order to proceed.
    As for timing we do not have a hard deadline but would like 
to see things move forward as quickly as possible. We are 
planning to have monthly meetings from September through 
December. Throughout this process the administration will 
continue to consult closely with Congress and stakeholders to 
develop and refine U.S. objectives.
    We very much appreciate this hearing as a part of that 
process and look forward to the conversation today.
    Chairman BRADY. Thank you, Ambassador.
    [The prepared statement of Ambassador Punke follows:]

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    Chairman BRADY. Members, as we move forward in this round, 
with Mr. McDermott's permission, we are going to limit 
questions to 3 minutes. Here is the schedule for our witnesses 
and the audience. We have a classified briefing at 3 o'clock 
regarding Libya, Egypt and other matters with Secretary 
Clinton. We expect votes to occur at the end of that classified 
hearing around 4 o'clock, 4:15. And so at 3 o'clock we will 
recess until 5 minutes after the last vote in that series.
    So Ambassador Punke, I'm very impressed with the large 
group of important WTO members you are bringing to the table 
for the ISA. It appears though several of the leading emerging 
economies, China, India and Brazil for example, don't seem to 
be interested in pursuing this agreement. Yet you look at some 
of the more important emerging economies that are joining, such 
as Turkey, Pakistan, Panama, Mexico, Costa Rica, Colombia, Peru 
and Chile, because of how quickly those emerging economies have 
moved forward, those are real promising markets in services. 
And so if we reach agreement, we have the chance to produce we 
think some real trade benefit.
    And so our challenge is to achieve robust emerging market 
participation. So the two questions, one I am interested in 
your views in how we keep those countries interested and at the 
table as you move through it. And second, my thought is that we 
are going to be better able to achieve maximum participation to 
the degree that benefits should be available to any WTO member 
that agrees to meet the high standard and available only to 
those members. And so I would like your remarks on that.
    Ambassador PUNKE. Well, thanks for that. I think it is 
important to emphasize that our preferred method of expanding 
services liberalization was through the Doha Round and through 
the broadest multilateral configuration possible. The fact of 
the matter is that on an intensive basis for the first 2 years 
that I was in my position in Geneva and long before that, we 
had been trying to engage in that services conversation and 
with emerging economies and it was not successful. They are not 
ready to move right now on services trade. And so it was only 
very reluctantly that we came to the conclusion that the only 
decision that we faced was wait for them for some indeterminate 
period of time or to move forward with a smaller group of like-
minded members. And obviously the choice that we have embraced 
is to move forward with those who are ready to move forward 
now.
    I think what we are seeing is that that is a way of 
creating momentum. And the worse thing I think that we could do 
in Geneva is have a situation where we have completely ceased 
to be able to conduct trade negotiations anymore. And so I 
think the path that we are pursuing with the plurilateral 
agreement with the ISA is an opportunity to show momentum and 
then build outward from that.
    The other aspect of your question, Congressman, concerning 
how we extend these benefits, I think it has been the very 
strongly held position of the United States that it is not 
acceptable for major participants to free ride on concessions 
made by others. And so we have been very clear from the 
beginning that when it comes to major participants in the 
global trading system that we can't envision an outcome in 
which countries would have the benefit of concessions without 
providing obligations themselves.
    Chairman BRADY. I think that is where we hit the right 
balance between ambition of higher standards but also maximum 
participation. So thank you.
    Mr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. As you are putting 
this together, some WTO members want to do it, some don't. 
Those who are sitting out, some of them think that this will 
weaken WTO as an institution if you would have a subset of 
people negotiating in this way, and the European Union in some 
ways is a part of that or at least seems to be. I would like to 
hear your feeling about the negotiation, what it does to the 
whole WTO to have one set willing to negotiate and another set 
sitting out sort of waiting for I don't know what, Godot I 
suppose. So I really would like to hear your insider 
perspective on those negotiations and what is going on that 
they don't want to participate in the larger negotiation.
    Ambassador PUNKE. Well, to take the Europe piece of your 
question first, we have been engaging over the course of the 
last several months and weeks in an ongoing conversation with 
our European colleagues to figure out the best way to 
accommodate our mutual interest and needs in this negotiation 
and others. And the line that that conversation takes is not 
always a straight line, in fact it seems to be always a jagged 
line. But I do feel like in the last couple weeks in particular 
that we have gotten closer to figuring out a pathway that both 
of us can agree upon for moving in particular the ISA forward.
    Congressman, we have our next meeting of the Really Good 
Friends in the first week of October, and I am very hopeful at 
this juncture that we will be in a position then to give more 
clarity to what that path would be.
    But I want to touch briefly on the broader question you 
asked, which is how does the system accommodate at the same 
time these multilateral discussions with discussions in other 
configurations, for example plurilateral discussions. And you 
would get the sense sometimes from listening to the recent 
debate that this is the first time that there has ever been a 
plurilateral in the history of the WTO. And in fact that is 
decidedly not the case.
    In fact, in December at the ministerial meeting on the 
opening day the members of the WTO ballyhooed as one of their 
great achievements a plurilateral agreement, which by the way 
happens to not be extended on an MFN basis, and it is called 
the GPA, the Government Procurement Agreement. And so we all 
ballyhooed that result on day one of the ministerial meeting 
last December and on the last day of the ministerial in 
December people were gnashing their teeth about a possible 
plurilateral kite called the International Services Agreement 
that somehow is going to bring down the system.
    We think that the system for a long time has been able to 
accommodate plurilateral agreements, multilateral obligations. 
Many of the countries that are most critical of the ISA for not 
being multilateral discussions are some of the same countries 
that are most active in pursuing bilateral agreements. And so 
the fact of the matter I think is that there is a lot of 
resilience in the system and the worst thing we can do in 
Geneva, as I said before, is to have a situation where no 
negotiations are taking place.
    Mr. MCDERMOTT. Thank you.
    Chairman BRADY. Mr. Reichert is recognized for 3 minutes.
    Mr. REICHERT. Thank you, Mr. Chairman. Welcome and thank 
you for your testimony, Ambassador. I am a member of the 
President's Export Council and also the cochair of the 
Congressional Services Caucus, and part--some of the 
discussions that we have around this issue is how do we 
emphasize the services sector as an enabler of economic 
activity and a facilitator for trade of manufactured and 
agricultural goods. And I think--I applaud you for being a 
champion of this, because more and more people across the 
country really need to become aware of the fact that the 
services sector is truly a player when it comes to increasing 
our trade and decreasing our trade deficit.
    So my question is you have discussed in your testimony the 
WTO agreement that focuses on the services, the General 
Agreement on Trade and Services, GATS, and it was negotiated 
over 16 years ago. Since that time economies have evolved and 
in response we have developed important new liberalizing rules 
for services. So for example, our trade agreement with Korea 
takes steps to ensure that countries do not unnecessarily 
restrict cross border data flows. Now we are seeking to further 
develop those rules in TPP. Could you elaborate on the new 
services trade rules that have been developed since GATS?
    Ambassador PUNKE. I think that the first part of your 
question is something that has really been driven home to me in 
listening to conversations, for example this week as part of 
the CSI's summit on services, and that is that not only are 
services important to economies for the services that countries 
export, including the services obviously that we export, but 
having modern services available in your country is a 
fundamental element of the basic infrastructure of being a 
modern economy. And as you emphasized and as Chairman Brady 
emphasized, having good services is a critical component for 
conducting successful trade in manufactured goods and in 
agricultural goods.
    In a typical automobile factory, for example, 20 percent of 
the jobs are services jobs, like design and advertising. A car 
that rolls off of the assembly line in Detroit requires 10 
million lines of computer programming to run the computer 
systems on a typical car. So this line between services and 
manufacturing and agriculture, as you point out, is one that 
breaks down pretty quickly when you start to look at the real 
world examples. Yet, as important as services are, and when you 
think about how quickly technology changes, it is phenomenal 
that we haven't in a multilateral setting updated our agreement 
for 16 years.
    I mentioned that if you go back to 2001 Internet usage was 
500 times less than what it is today. If you go back to when 
the GATS was signed in 1994 we didn't have an Internet and yet 
that is our basic document for, our basic multilateral document 
for establishing the rules on services trade.
    The issue that you raised, data flows and data protection, 
is one of the critical ones that I think many members of the 
Really Goods Friends group are interested in developing new 
disciplines to address. And I think that is a reflection of the 
recognition in all of our countries that we need to update our 
rules.
    Mr. REICHERT. I appreciate it. Thank you, Mr. Chairman.
    Chairman BRADY. Thank you. Mr. Herger is recognized.
    Mr. HERGER. Ambassador Punke, I believe the Trans-Pacific 
Partnership is an important vehicle for expanding U.S. services 
trade. I am also enthusiastic about the ongoing high level 
working group with the European Union which I hope will lead 
among other things to important new services trade commitment 
between our world leading services economies. Could you 
describe the relationship among TPP, The EU initiative and an 
International Services Agreement?
    Ambassador PUNKE. Well, it is an important question and I 
think all three of the four that you are talking about give us 
different opportunities for promoting the same goal of 
increasing our services trade. I think as a very general matter 
that when you look at bilateral agreements versus regional or 
plurilateral agreements versus multilateral agreements the 
advantage that you have with a multilateral agreement is it 
that you have the broadest coverage in terms of participants, 
but oftentimes because of that broad participation you get 
commitments that are not as deep. I think the other end of the 
spectrum is a bilateral agreement, where you have a very narrow 
number of participants, namely two, but you have the potential 
for very deep commitments.
    I think what the ISA gives us is potentially something in 
between. And on the one hand we have a very significant number 
of participants already. The 20 participants that have begun 
this discussion comprised about 70 percent of global trade and 
services already. And yet some of those participants in that 
group, as I mentioned half of them, are countries that the 
United States doesn't have Free Trade Agreements with. And many 
of the important ones are not participants in something like 
TPP. For example, we have Turkey and Israel that are 
participating in the ISA discussion.
    So I think the ISA gives us both an opportunity to 
negotiate disciplines that might not be covered in other areas 
and an opportunity to bring participants into the discussion 
that we otherwise wouldn't be talking to. That is just the 
significance of the group itself. Beyond that systemically I 
think creating this platform already has drawn the interest of 
five countries who have decided that they want to participate 
in this formative stage. And I think there is even greater 
potential if we can create this platform in a successful way to 
attract others into what we hope will be an ambitious level of 
obligation.
    Mr. HERGER. Thank you.
    Chairman BRADY. Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman, and thank you, 
Ambassador, for coming here today. In early July in a press 
release the WTO members participating in International Services 
Agreement discussions said that they would undertake necessary 
consultations or procedures prior to any negotiations.
    Can you perhaps reflect or share your perspective on the 
steps that USTR or the EU or other countries are taking with 
respect to those consultations or procedures?
    Ambassador PUNKE. Well, I will comment on ours. I think 
that exercises like this hearing obviously are a critical part 
of our ability to provide transparency to the discussions that 
we are having. In the ISA we are obviously in a very early 
stage where we haven't yet even agreed specifically on what the 
architecture of the agreement will be, but we have made a very 
large effort to reach out to members of your staff, you know, 
going back even to last December I think when we were first 
starting to talk about the potential of exploring with other 
partners in Geneva the possibility of a new type of services 
agreement. We have taken a lot of opportunities to discuss this 
with various stakeholder groups, including this week for 
example participants in the CSI summit.
    I would anticipate, Congressman, that as this process and 
the architecture becomes clearer that the formal and informal 
consultation that we have with Congress and stakeholders will 
intensify. For example, through mechanisms like public hearings 
and Federal Register notices.
    Mr. SMITH. Thank you, I yield back.
    Chairman BRADY. Thank you. Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman. I apologize for being 
late. As you know the full committee is on the floor currently 
debating the TANF legislation.
    Mr. Ambassador, some of the countries currently causing the 
most difficulty for U.S. service suppliers are not 
participating in these negotiations for a plurilateral services 
agreement. Example, Brazil. Recently Brazil implemented very 
restrictive reinsurance limitations requiring insurers to cede 
more than 40 percent of gross written premium to local 
reinsurers, not unlike China in restricting insurers from 
ceding more than 20 percent of a single line of business to an 
affiliate. What are the strategies afoot with your office to 
encourage some of our market priority countries, such as 
Brazil, to join these negotiations so that we can actually 
allow American companies to fully compete and participate?
    Ambassador PUNKE. Well, Brazil is a country right now where 
I don't want to over promise, because frankly we have been 
addressing this type of issue with Brazil for a long time in 
the WTO context and we have been frustrated in that effort. One 
of the things that was interesting in the discussion that we 
listened to this week in CSI, at the Coalition of Services 
Industries summit, was a discussion by a large number of 
developing countries that see services as an important 
component of their development strategy, specifically opening 
up their services market as a component of their development 
strategy. And we heard countries like Costa Rica and Mexico 
talk about how important that that has been for them. They have 
come to that conclusion through their own analysis and process. 
Brazil seems not to have come to that conclusion yet. In many 
instances China seems not to have come to that conclusion yet. 
And that is at the end of the day I think the reason why we 
haven't made more progress multilaterally on services, is 
because major players like India, China and Brazil simply don't 
see the universe that way yet.
    That is frustrating, but at the same time I think what we 
have decided is that we are not going to let that keep the rest 
of us from pursuing liberalization, for example, through the 
ISA. In the meantime I think we have to address the type of 
issue that you are raising, reinsurance in Brazil for example 
through bilateral opportunities.
    Mr. NEAL. And foreign direct investment in China, that is a 
compelling issue as well, the limitations that they placed on 
competition. I think that is a considerable issue for this 
committee. The advocacy that we often take is to open markets 
everywhere only to discover some of the trade practices that 
are embraced down the road really don't level the playing 
field.
    Ambassador PUNKE. Well, and China is an interesting example 
and obviously is a very large focus of our efforts in Geneva 
and across the board in terms of our trade policy. We have had 
one small success with China recently in the services area, 
specifically on the investment issue with third party auto 
insurance. And as you know, Congressman, the Chinese opened up 
that market last spring.
    Mr. NEAL. Right.
    Ambassador PUNKE. We have been watching very carefully how 
the implementation of that obligation is taking place. Our 
initial signs are that this is starting to create opportunities 
for our insurance companies. The Chinese ultimately came to the 
conclusion that it was in their interest to and helpful to them 
to have that competition and to have our high quality services 
providers in that market.
    Obviously we need to be able to succeed ultimately to have 
more countries come to that conclusion, which we see as being a 
very obvious one, that services are a fundamental part of your 
infrastructure.
    Mr. NEAL. The 49 percent rule, as you know, is problematic 
in terms of control.
    Chairman BRADY. Thank you, Mr. Neal. Ambassador, clearly 
there is bipartisan interest for this agreement. This is 
important work, you are doing good work, and I appreciate and 
encourage you to continue the consultations with both parties 
as you go forward on this agreement. Thank you for making time 
on your busy global schedule to be with us today.
    As I mentioned, because of a classified briefing the 
subcommittee stands in recess unless 5 minutes after the last 
vote in the next series, which we expect will be somewhere 
between 4:15 and 4:30.
    [Recess.]
    Chairman BRADY. Folks, with Mr. McDermott's permission, 
with the vote schedule and all that continues to change today, 
we want to be very respectful of your time. So we are going to 
continue with our second panel of witnesses. We will break for 
votes, come back for questioning. Again, we will try to move 
through this as best we can. Thank you for your patience here.
    I am very pleased to be able to introduce such an 
impressive set of senior representatives from the private 
sector. They represent a wide spectrum of services subsectors, 
from education, the airline optimization, to energy services, 
to insurance, to express delivery.
    Dr. Brad Jensen is a Professor of Economics and 
International Business at Georgetown University's McDonough 
School of Business. He will testify about his groundbreaking 
research on services trade, which the Peterson Institute 
published to great acclaim last August. Dr. Jensen is also 
prepared to discuss the increasingly dynamic education services 
sector given his employment in that sector.
    Mr. Tom Klein is President of Sabre Holdings, a leader in 
providing software and consulting to optimize the efficiency of 
the airline industry. Sabre's leadership in the travel services 
sector, which is the largest U.S. services export, is further 
reinforced by its ownership of Travelocity, the online travel 
reservation site.
    As Vice President of GE Energy, Mr. Karl Fessenden leads 
General Electric's Power Generation Services business. And I 
proudly represent the Eighth District of Texas, where energy 
services are key to who we are. So I look forward to hearing 
Mr. Fessenden's testimony.
    Mr. Charles Lake is chairman of Aflac Japan. He is based in 
Tokyo. So I believe he gets the prize for traveling the 
farthest distance to be able to testify before us today. 
Financial services, including Aflac's insurance business, are 
one of the largest U.S. services exports. So I look forward to 
hearing Mr. Lake's testimony.
    And finally, Mr. Dan Brutto is President of UPS 
International. He will speak to us about logistics services, 
and specifically express delivery, which is probably the 
quintessential example of a service that facilitates U.S. 
trade.
    Gentlemen, thank you for coming to speak with us today. I 
ask that you limit your statements to no more than 5 minutes. 
So let's start with Dr. Jensen.

STATEMENT OF DR. J. BRADFORD JENSEN, PROFESSOR OF ECONOMICS AND 
     INTERNATIONAL BUSINESS, MCDONOUGH SCHOOL OF BUSINESS, 
                     GEORGETOWN UNIVERSITY

    Mr. JENSEN. Chairman Brady, Members of the Committee, thank 
you.
    Chairman BRADY. If you could hit that microphone.
    Mr. JENSEN. Chairman Brady and Members of the Committee, 
thank you for the opportunity to testify regarding the 
significant and often overlooked opportunity for growth through 
exports of U.S. business services. I think we all recognize 
that the service sector is large and diverse, I think too 
diverse to be analytically tractable. So for my comments today, 
I would like to focus on what I call business services, which 
are the industries classified by the North American Industrial 
Classification System, starting with five. This includes the 
information sector, which includes importantly software, media 
industries, telecommunications and Internet; the finance 
sector, insurance, professional, scientific and technical 
industries--think accountants, architects, engineers, 
attorneys--and administrative support sector.
    This might sound niche, but these sectors, what I call the 
business service sector, accounts for 25 percent of employment 
in the United States labor force. In contrast, the 
manufacturing sector accounts for 10 percent of employment. So 
the business service sector is two-and-a-half times the size of 
the manufacturing sector in terms of employment.
    In addition, these are good jobs. The wages in tradable 
business in business services are 20 percent higher than the 
wages in manufacturing. In addition, business services are 
tradable. U.S. exports of services are growing rapidly, and now 
account for 30 percent of U.S. exports. And business services 
are an important source of this growth.
    I would like to understand better what is going on. 
Unfortunately----
    Chairman BRADY. Dr. Jensen, if you would--either someone 
has to get up when the alarm is ready to beep, or we are having 
some technical difficulties. Can you punch your microphone off 
and on again? That is not it. Does someone have a BlackBerry 
close to the microphone? Let's try it again, Dr. Jensen. You 
have a great testimony. I just want to make sure it works. Try 
it again.
    Mr. JENSEN. Thank you. Okay. So U.S. exports in services 
are growing rapidly, now account for 30 percent of U.S. 
exports. And business services, the kinds of things that I 
classify as business services, are an important source of 
growth. So I would like to understand better what is driving 
this. Unfortunately, however, official statistics do not 
provide anywhere near enough detail to examine trade in 
services adequately. A big part of my research has been to 
develop a methodology that allows us to identify, using the 
geographic distribution of production of services within the 
United States, allows me to identify at a very detailed level 
what business services are traded within the United States, and 
thus what are at least in principle tradable internationally.
    What I can do is then add up at a very detailed level how 
much employment there is in tradable business services. And 
what we see is that there is a big chunk of employment in the 
United States. Fourteen percent of the labor force is in 
tradable business services. This is larger than the entire 
manufacturing sector.
    Beyond the size of the tradable business service sector, 
what might be more surprising is how different the workers in 
this sector are. Workers in tradable business services are 
qualitatively different than either workers in manufacturing or 
workers in nontradable business services. They have much higher 
educational attainment and much higher earnings. Workers in the 
tradable business service sector are twice as likely as workers 
in either manufacturing or nontradable business services to 
have a college degree and an advanced degree.
    Business services are very skill-intensive. The skill 
intensity of business services, combined with the fact that the 
U.S. is still a relatively skill abundant place, means that the 
U.S. has comparative advantage in these activities. The U.S. 
consistently runs a trade surplus in business services. Yet in 
spite of comparative advantage in services and globally 
competitive service firms, as represented by the other 
panelists, U.S. business service firm participation in 
exporting lags the manufacturing sector. When we look at the 
share of business service firms that export, it is much lower 
than in the manufacturing sector. Only 5 percent in business 
services compared to about 25 percent in manufacturing. If I 
look at exports to sales ratios in tradable business services, 
much lower than in manufacturing. We should be exporting more.
    The reason is we are--certainly a key contributor to this 
is, this data from the World Bank suggests, is that the large, 
fast growing markets have relatively high barriers to services 
trade. India, Indonesia, China, Brazil all have high 
impediments to services trade. We need to kick the door down. 
There is enormous opportunity here. And I think my time is up. 
So thank you.
    Chairman BRADY. Thank you, Dr. Jensen, very much.
    [The prepared statement of Mr. Jensen follows:]

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    Chairman BRADY. Mr. Klein.

      STATEMENT OF THOMAS KLEIN, PRESIDENT, SABRE HOLDINGS

    Mr. KLEIN. Yes. Mr. Chairman, Members of the Committee, 
thank you for the opportunity today. Our team in South Lake, 
Texas, is honored for this opportunity. Sabre Holdings is a 
software and electronic services distribution company.
    Chairman BRADY. Mr. Klein, can you make sure the microphone 
is on?
    Mr. KLEIN. Yes, sir. Our company is a software and 
electronic distribution services company serving the global 
travel industry. We employ about 10,000 people, 4,500 in the 
United States, and do business in 135 countries around the 
world. You may recognize Travelocity.com, our consumer brand. 
Sabre helps airlines be more efficient. We make it easier for 
travelers around the world to visit the United States, where 
tourism and business travel dollars work to strengthen our 
economy and count as exports.
    Although we are a mid-sized company, we believe we can 
compete with anyone in the world, and we focused intensely on 
the international market. In our fastest growing business, our 
software business, in 2001 just 12 percent of our revenues came 
from international markets. But we invested heavily to build 
out our global capabilities. It took time, it took money, and 
we have seen great results. Today, we have 65 percent of our 
revenues from those businesses coming from international 
markets. That number will increase to about 75 percent over the 
next 3 years.
    We are meeting the global demand by creating many new high 
paying jobs. Since the beginning of 2010, we have added over 
1,400 positions globally, and more than 800 of these jobs in 
the United States. The average American technology worker at 
Sabre makes $87,000 per year.
    Yet as innovative and world class as our software services 
become, the international playing field is not always level. It 
is often tilted. In those cases, we find it difficult, if not 
impossible, to compete.
    We all know that we need update our international legal 
framework for services. The WTO General Agreement on Trade 
Services is over 15 years old. In that time, we have seen the 
travel industries change dramatically. We have also seen the 
technology industry change dramatically. More than ever, 
individuals are searching for and booking travel online. And 
the biggest growth in consumer-driven travel is outside the 
United States. Yet the trade rules haven't kept up. Governments 
take advantage of this vacuum to create protective measures and 
stymie competition.
    An International Services Agreement is a strong step in the 
right direction. And taken at its fullest potential, a high 
standard agreement will lower barriers to important markets, 
create much needed pressure on other countries that are not 
participants in this discussion, like China, and will help 
generate momentum toward liberalization more broadly at the 
WTO.
    Such an agreement has the potential to help our company in 
a number of ways. One important benefit that a services 
agreement may offer is increased transparency. The more 
countries play by the same rules, and the more we know what 
those rules are, the easier it is to do business and resolve 
disputes when they arise. FTAs have traditionally included 
strong transparency provisions, for example, requirements that 
countries publish regulations in a clear and timely manner, and 
consult with stakeholders. Replicating these successes on a 
large scale would only benefit American companies, small and 
large alike, doing business overseas.
    One challenge for companies like ours is that countries 
often deny operating licenses to foreign companies in order to 
protect their own domestic enterprises. For example, China's 
state-owned travel distribution monopoly, TravelSky, is the 
only licensed provider of passenger reservation services and 
airport departure and control systems in that country. Foreign 
competitors, including Sabre, are fully shut out.
    Another challenge in our industry is often called in the 
technology industry the big data trend, how to store and search 
and access huge amounts of data in a way that is timely and 
useful for consumers. In a global environment, having control 
over how that data is stored and distributed and used is 
critically important to our business and our customers. An 
agreement that ensures that data can flow freely across borders 
would be a powerful tool for our business.
    The value of trade agreements is proven by our own 
experience in Chile. We have had tremendous success there, 
including with LAN Airlines, which recently chose Sabre as its 
airline reservation system and operation system provider. Our 
presence in that country before the FTA was much smaller, with 
a European competitor dominating the market. After the FTA was 
signed, the Chilean Government put out an RFP requiring any 
bidder to use our European competitor's automation services. We 
brought that violation to the FTA, to the attention of the 
Department of Commerce, and within 2 days our government 
officials communicated the concerns to the Chilean officials, 
who acknowledged the violation and fixed the RFP. It was 
breathtaking how quickly things can happen when there is 
clarity around what the regulations are.
    What is more, we looked at the numbers, and we also saw a 
significant increase in visitors to the United States from 
Chile following the enactment of that FTA. That means more 
travel and tourism dollars going to our local economies to 
create jobs here at home.
    Mr. Chairman, thank you for holding this hearing. As was 
reported yesterday, the travel industry has been and continues 
to be one of the strongest job creators in the current economy. 
And our view is that a high standard International Services 
Agreement would only help continue that trend.
    I look forward to your questions.
    Chairman BRADY. Thank you, Mr. Klein.
    [The prepared statement of Mr. Klein follows:]

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    Chairman BRADY. Mr. Fessenden.

 STATEMENT OF KARL FESSENDEN, VICE PRESIDENT, POWER GENERATION 
                      SERVICES, GE ENERGY

    Mr. FESSENDEN. Chairman Brady, Ranking Member McDermott, 
and distinguished Members of the Committee, thank you for the 
opportunity to testify today on trade and energy services. Just 
a moment of background on myself. I joined GE in 1996, and have 
had leadership roles in the services side of both the aviation 
business as well as the energy portfolio over the last several 
years. Today, I will describe my Atlanta-based global 
organization, Power Generation Services, known as PGS. I will 
share how we provide services across the U.S., across 
international borders through our commercial presence abroad. I 
will also discuss the challenges and opportunities we face and 
the ways the committee can help us overcome them. This subject 
is key, because removing barriers to energy services creates 
opportunities to grow the U.S. economy and to increase U.S. 
jobs.
    APEC's recent success capping tariffs on some 54 
environmental goods shows we can still make progress on trade 
liberalization. Similar efforts should be now undertaken on 
services, particularly energy services. Energy services is 
crucial to how GE helps our customers to provide clean, 
efficient, and reliable power. PGS provides electric utilities 
with services to support GE's gas and steam turbines, as well 
as other related equipment. Service support begins as soon as 
we install the plant at the inception of the power plant, and 
lasts until it is retired, which could be as long as 30 years. 
Our services span from contractual maintenance and equipment 
repairs to part provisioning and monitoring and diagnostics. We 
have nearly 7,600 employees in over 100 countries, of which 
4,100 are based in the U.S., and we have more than 50 GE sites 
in 15 countries on six continents, and are in nine joint 
ventures.
    GE's ability to be a large manufacturer in the U.S. is 
directly tied to the services we provide, and is a key reason 
our customers purchase power generation equipment from us. 
These factors offer opportunities and challenges. Gas turbines 
are GE's and our country's biggest clean energy export. We make 
these turbines in Greenville, South Carolina, where we have 
3,400 employees. We also make steam turbines in Schenectady, 
New York, where we have 1,400 employees. Over 250 small to 
medium-sized businesses in 24 States feed into our supply 
chain. In the last 2 years, we have exported 100 percent of the 
gas and steam turbines we manufactured in the U.S. Providing 
services for these turbines is a long term repeat business that 
keeps jobs in the U.S. Clearly, it is key that we are able to 
service this equipment globally.
    However, many countries enact restrictions that prevents or 
delays us from providing these services. The two restrictions 
that most limit my business are entry requirements and forced 
local content requirements. My workforce includes 4,000 
employees who spend most of their time at our customers' sites 
making repairs and installing new parts. Today's environment 
demands that we are able to rapidly deploy these highly 
specialized energy services workers to sites in countries other 
than their home country. However, entry requirements, such as 
visa application and work permit processes by host nations, 
impedes us from quickly deploying them and delays the host 
nation from receiving the services they provide. The 
consequences of not responding due to lengthy work permit 
processes or customs delays are power outages and financial 
losses.
    Local investments can help develop stable, prosperous 
economies by expanding long-term business opportunities. GE 
knows firsthand the benefits of being a responsible local 
business. We have seen how governments attract investments in 
local markets by establishing dynamic and entrepreneurial 
policies. However, in recent years numerous countries have 
imposed forced local content measures which we believe are 
inefficient and ineffective, and should be avoided. Their 
widespread adoption may discourage foreign direct investment 
and inhibit economic growth.
    We believe strongly in the power of free trade and open 
markets to strengthen the countries we trade with and invest 
in, supporting jobs, competitiveness, better governance, and 
strengthens the United States. In 2011, services accounted for 
almost 30 percent of GE's total revenues. As services grows in 
GE's portfolio, we rely on our ability to send an employee at a 
moment's notice to locations around the world. We believe we 
must establish multilateral agreements on liberalized trade and 
energy services. We should push for incorporating meaningful 
measurements and commitments in our FTAs. And we should develop 
a model international agreement to facilitate movement of 
highly trained energy services personnel between countries.
    Thank you for the opportunity to speak today.
    Chairman BRADY. Thank you, Mr. Fessenden.
    [The prepared statement of Mr. Fessenden follows:]

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    Chairman BRADY. Mr. Lake, because the voting clock is 
quickly winding down, we are going to finish with your 
testimony, recess until 5 minutes after the vote series, which 
is just two or three, and then finish with Mr. Brutto. So Mr. 
Lake, you are recognized.

        STATEMENT OF CHARLES LAKE, CHAIRMAN, AFLAC JAPAN

    Mr. LAKE. Thank you very much. Mr. Chairman and Members of 
the Subcommittee, thank you for this opportunity to testify.
    Aflac is a major employer in the United States, and a 
leading exporter of service to Japan. Thanks to the strategic 
leadership of our global CEO, Dan Amos, Aflac has been very 
successful. In 2011, Aflac, which operates as a branch in 
Japan, generated $18.4 billion in revenues there. It is the 
number one life insurer in Japan in terms of policies in force.
    As U.S. service companies export their products to the 
world, it is critical that our government continues to 
vigorously enforce existing trade agreements, especially in 
light of the efforts to address new trade challenges. In 
addition, the United States should lead efforts to craft a WTO-
plus International Services Agreement. Such an undertaking is a 
critical complement to efforts already underway to develop new 
global financial regulatory standards.
    Allow me to explain. Following the global financial crisis, 
efforts to strengthen the global economic and financial 
regulatory architecture by creating new international rules and 
standards are underway, being led by the G-20 and the Financial 
Stability Board. We firmly support these efforts, and agree 
that the global crisis requires global solutions. The work of 
these entities must be underpinned by the international regime, 
such as the WTO, which are fundamentally defined by the legal 
authority in their Member governments granted through treaty or 
through commitments to undertake domestic implementing 
measures. These commitments contain clear legally binding 
rights and responsibilities. By contrast, institutions such as 
the G-20 or FSB have been established not through formal 
treaties, but through the political commitments of their 
respective leaders. Consequently, the scope of their activities 
must be limited by the existing authority of their member 
countries' executive branches.
    However, in the rush to respond to challenges created by 
the global financial crisis, sometimes institutions overstep 
these limits. For example, in late 2011, International 
Association of Insurance Supervisors, or IAIS, began a review 
of how foreign branches are supervised around the world. From 
the beginning, this IAIS effort appeared to be agenda driven, 
with apparent bias against foreign branches, with this 
workstream leading toward the establishment of principles that 
would allow domestic regulators to force insurance companies to 
convert their branches into locally incorporated subsidiaries. 
This would be inconsistent with the legally binding commitments 
made by the many IAIS Members to abide by the WTO General 
Agreement on Trade and Services, or GATS. GATS prohibits any 
government measure that restricts the form of legal entity 
through which GATS Member provides services in another Member's 
territory.
    In Japan, we are starting to see troubling signs in 
relation to this issue. According to a recently released policy 
statement, FSA is forcing--appears to be forcing foreign 
branches to convert to subsidiaries, which would be at odds 
with Japan's GATS commitments.
    Another major challenge facing U.S. companies is that posed 
by state-owned enterprises, or SOEs, that compete with private 
insurance companies. There are many state-owned life insurance 
companies in Asia, including China Life Insurance, Life 
Insurance Corp. of India, Korea Post Insurance, and Japan Post 
Insurance.
    These and other challenges facing the U.S. services 
industry point to a huge need for a strong WTO-plus 
International Services Agreement. For the ISA to have 
relevance, it must address issues that confront us in the 21st 
century, while building onto WTO's GATS. There is no question 
that the G-20, FSB, and IAIS must continue their important work 
to strengthen the global economic and financial regulatory 
architecture. But given that these efforts can also lead to 
dramatic changes in the competitive environment, due care must 
be exercised to ensure that the process is not distorted to 
achieve the protectionist goals of their respective Member 
governments.
    To this end, achieving a WTO-plus ISA can have a dramatic 
impact in preventing protectionism and promoting fair and free 
trade in services, while complementing the growing efforts of 
entities like the G-20, FSB, and IAIS. This calls for strong 
U.S. leadership. And to that end, in such efforts we stand 
ready to support this Subcommittee, the executive branch, and 
our State governments to craft a coherent integrated approach 
that achieves a win-win outcome for the United States and our 
trading partners around the world.
    Thank you.
    Chairman BRADY. Thank you, Mr. Lake.
    [The prepared statement of Mr. Lake follows:]

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    Chairman BRADY. The Committee stands in recess until 5 
minutes after the last vote, which should be very soon. Thank 
you.
    [Recess.]
    Chairman BRADY. The hearing is called back to order. Thank 
you again for your patience, all of you. Mr. Brutto, you are 
recognized.

 STATEMENT OF DANIEL BRUTTO, PRESIDENT, UPS INTERNATIONAL, ON 
         BEHALF OF THE COALITION OF SERVICE INDUSTRIES

    Mr. BRUTTO. Chairman Brady, members of the Trade 
Subcommittee, on behalf of UPS and the Coalition of Service 
Industries, thank you for the opportunity to address the 
critical issue of removing obstacles to global trade in 
services. As President of UPS International responsible for our 
company's global expansion, I can think of no trade issue that 
affects the U.S. economy more profoundly than the services 
sector. The U.S. is the world's most successful services 
exporter, so expanding service trade through an International 
Services Agreement would greatly benefit the United States.
    Services are the lifeblood of our economy and of global 
commerce, the indispensable enabler of everything from trade in 
agriculture and manufacturing to the development and sale of 
high-tech products. If you want to make it, move it, buy it, or 
sell it, you need services. Professional, financial, retail, 
and of course delivery and logistics services to get products 
to market. The beneficiaries of efficient, unrestricted express 
delivery services are not just Fortune 500 manufacturers with 
global supply chains that depend on fast-cycle logistics. There 
are also millions of small and medium-sized enterprises trying 
to ensure their products cost-effectively reach the shelves of 
the global marketplace, or to the doorsteps of their customers 
in Beijing and Berlin, as well as Beaumont and Berea.
    At UPS, we have been working in a partnership with the U.S. 
Commercial Service for the last 5 years to support U.S. 
companies in exporting to countries around the world. In 2010, 
we launched the Beyond One: New Export Markets initiative to 
support efforts to expand the global reach of businesses that 
currently export to only one country. This is an issue that 
rises to the very top of our organization. Our Chairman and 
chief executive officer, Scott Davis, serves on the President's 
Export Council, and UPS has supported the national export 
initiative since its inception in 2010.
    The U.S. leads the world in services. This sector accounts 
for more than three-quarters of our Nation's private sector 
GDP, and over 83 percent of our private sector employment. That 
is the good news. The problem is that we face significant 
barriers from complex customs processes, limited market access, 
to new areas like forced localization and unfair advantages 
given to state-owned enterprises.
    A recent study by GeorgetownUniversity international trade 
economist and this panel's first witness, Brad Jensen, suggests 
that removing these barriers would create three million more 
jobs in the U.S. So how do we create these jobs? A range of 
initiatives hold promise. Allow me to identify a few.
    First, the U.S. can and should continue to support the 
development of an international agreement on trade and 
services. And we applaud the work of the previous panel's 
witness, Ambassador Michael Punke, who is leading the ISA 
effort in Geneva. Although the world has witnessed rapid cross-
border growth in services in trade and investment, the Doha 
Round after a decade has made little progress in liberalizing 
this sector on a multilateral global basis. That is why we need 
the negotiation of an ISA. An ISA that is open to like-minded 
WTO members will help achieve a high standard agreement that 
provides nondiscriminatory market access, most favored nation, 
and national treatment. Ultimately, such an agreement would 
strengthen the WTO itself.
    In addition to supporting international service agreements, 
regional plurilateral agreement like the TPP offer an important 
pathway to move the ball forward on services liberalization. We 
are glad to see that Mexico and Canada are on track to join the 
TPP, and we hope Japan will make the necessary commitments to 
join in the near future. These three countries alone buy almost 
25 percent of the U.S. service exports. Other regional trading 
partners who share our liberalization should also have a way to 
join. Overall, the current TPP Member countries' efforts to 
include high standards services commitments will make this an 
important agreement for trade and services.
    Third, there are bilateral opportunities for advancing open 
trade and services, including express delivery services. The 
U.S.-European Union High-Level Working Group is an important 
venue for that work. UPS is very supportive of the possible 
launch of negotiations of a U.S.-EU Free Trade Agreement to 
strengthen our strategic economic partnership across the 
Atlantic. We see strengthening the U.S.-EU trade relationship 
as a cornerstone of our own success.
    In fact, our pending acquisition of Netherlands-based TNT 
Express underscores our commitment to supporting the growth of 
trans-Atlantic trade in helping the U.S. and European customers 
better tap the global market. This acquisition, our largest in 
our 105-year history, broadens UPS' global footprint. When you 
take a strong European brand and you combine it with a great 
American brand, the winners are the customers. And UPS is 
especially excited about the possibilities what a combined 
brand means to our customers here in the U.S. So a stronger 
partnership in trade between the U.S. and EU in time will bring 
tremendous benefits for both the U.S. and European exporters 
alike.
    In difficult economic times, it is all too easy to become 
protectionist, but that policy never leads to economic growth 
or job creation. We have seen a growing list of restrictions 
being introduced abroad on trade services. We cannot afford to 
ignore these if we seek robust economic growth. Especially at 
this critical juncture in the global economic recovery, the 
U.S. must continue to provide an open market for trade and 
services on all fronts. An International Services Agreement 
holds great promise for expanding U.S. services exports and 
strengthening the WTO, as do each of the other initiatives I 
have discussed. Now is the time to pursue these to further 
stimulate U.S. growth and job creation. Thank you for the 
opportunity to testify.
    Chairman BRADY. Thank you, Mr. Brutto.
    [The prepared statement of Mr. Brutto follows:]

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    Chairman BRADY. We will start member questions of 3 
minutes.
    One of the key takeaways from the testimony is how 
facilitating services exports helps our small and medium-sized 
business exports and helps our manufacturing and agriculture 
sectors as well. So this is all complementary. Mr. Brutto, real 
quickly, do you have any metrics at UPS to show how when you 
export more it helps facilitate small and medium-owned 
businesses do the same?
    Mr. BRUTTO. Yeah, absolutely. And I can tell you that our 
most recent free trade agreements, our volume for small and 
medium-sized businesses is up over 20 percent. So our trade to 
South Korea with U.S. exports, our trade to Colombia, to 
Panama, we have seen that growth. That gives our U.S. exporters 
access to those markets. The major inhibitor, though, is the 
complexity of duties and taxes and customs. The second is 
access to capital and understanding the markets, and sometimes 
a different currency. And three is the ability to sell the 
products in those foreign markets. And certainly the U.S. 
Commercial Service is working with us. It has helped many small 
and medium-sized customers. In fact, we have educated well over 
2,000 small and medium-sized customers so they can effectively 
get into multiple markets.
    Chairman BRADY. Right. And certainly Dr. Jensen's testimony 
is that the upside potential on this is remarkable for us. Mr. 
Fessenden, how does the export of GE's energy services help 
drive demand for GE's manufacturing side?
    Mr. FESSENDEN. Well, certainly as I spoke our services is a 
revenue stream for 20 to 30 years after the initial 
transaction. But that initial transaction, of course, and the 
services are all based upon--or a lot of it is based upon our 
manufacturing of parts and repairs that comes out of the United 
States in support of our global business. So we are very tied 
to continuing to grow the manufacturing sector through the 
service support. It is very important.
    Chairman BRADY. All right. Thank you, sir. Dr. Jensen, I 
know it is always a challenge to measure services on trade 
data. Government data is frankly not very good for services 
trade. I fear we often make policy decisions with a fraction of 
real time data. But to conclude, what have researchers found 
about facilitating services exports as far as helping 
manufacturing and ag become more competitive as well?
    Mr. JENSEN. So the research is limited because the data 
impediments are large.
    Chairman BRADY. Yeah.
    Mr. JENSEN. There has been work that the World Bank has 
done that has looked at countries that have liberalized their 
services sector and find that it does increase productivity in 
the manufacturing sector. Work that I have been involved with 
the OECD suggests that increased business service imports 
increases exports' share of output, particularly in commodity-
type manufacturing products. So I think, you know, we think of 
business services as facilitating manufacturing trade and also 
increasing the value of manufacturing trade.
    Chairman BRADY. Right. Thank you, Mr. Jensen. Mr. 
McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Klein, I 
noticed when I was reading your testimony you were talking 
about a provision in the Colombia implementation bill that 
gives you some problems with Customs and the whole Customs 
funding.
    Could you explain a little bit more in depth what you are 
talking about and why it makes a difference to Sabre? I don't 
know what exactly your business model is, but I don't 
understand how you and Customs get tangled up.
    Mr. KLEIN. Sure. I think it really affects the travel 
industry and the tourism industry into the U.S. And let me 
explain. There were some numbers released yesterday that 
suggest that the tourism to the United States drives about $153 
billion of exports. That is up 8 percent in 2011 versus 2010. 
Customs staffing and efficiency at the airports is a barrier to 
people wanting to come to the United States. The expectation 
across the travel industry, and our view is, that we should 
have world class services in our airports, that we should do 
the best job of anybody in the world of moving people and 
welcoming guests into the country, in that there is significant 
job creation and export benefit when we do. That problem is 
about to get bigger. We had a long term, almost a 10-year loss 
in tourism market share, global tourism market share in the 
United States. We went from 17 percent of global tourism to 
12.5 percent. And we are back on the upswing. Again, big growth 
number last year. We are going to continue to grow. The budget 
for the CBP is tight, and they are not going to be able to add 
officers with this current budget. The view is they won't be 
able to add officers at the rate they are going to need to to 
deal with the growth in tourism. And over time, that will hurt 
our ability to drive exports in the country.
    So, look, it is--there is a bit of impact on our company. I 
think this is a broader issue for the tourism industry and for 
export and jobs growth in the United States because of the 
impact of international tourism.
    Mr. MCDERMOTT. How do you measure the amount that standing 
in line impacts people's desire to come to the United States? I 
now have the global entry thing, which I suspect all of you do 
who are tooling around on the international scene. You walk 
through, put your fingerprints down, and away you go. And I 
watched those long lines at Seattle when I came back the last 
time, and I wondered how you measure the impact of that. People 
say I am not going to the United States because I have to stand 
in line?
    Mr. KLEIN. That is a very fair question, Congressman. I 
think there is two things here. And I think from an industry 
perspective, the view would be in the United States we should 
be able to do this really well, and we should welcome guests 
into the country. And people are coming here, they are spending 
about $4,000 a day. And when they get here, it drives jobs. We 
think the numbers are around for every 33 visitors we get, 
there is a job creation, one job created for every 33 visitors. 
To measure the exact impact is difficult. But the industry has 
done research around barriers to wanting to visit the United 
States. And one of them is perception of whether we want people 
to come here, and whether we are welcoming them, and then what 
the experience is when they get here, what the hassle factor is 
in coming through Customs and Immigration. And it is a factor 
in people's decisions when they have choice.
    Mr. MCDERMOTT. Thank you.
    Chairman BRADY. Thank you, Mr. McDermott. Mr. Reichert.
    Mr. REICHERT. Thank you, Mr. Chairman. And thank you for 
your testimony and your patience this afternoon. As I mentioned 
earlier, I am on the President's Export Council, and the 
cochair of the Goods Movement Caucus. And there is a challenge 
in educating people on the need--well, on the benefit that 
services provides and enables and facilitates trade of 
manufacturing goods and agricultural goods. So I want to focus 
a little bit on how services exports facilitate trade in other 
U.S. sectors.
    And so just to Mr. Klein real quick, you have explained how 
services such as those offered by Sabre enhance the efficiency 
of airlines, and how this both aids U.S. airlines exports and 
facilitates tourism and travel to the United States. But how 
could a services environment help a company like we have in 
Washington State called Boeing?
    Mr. KLEIN. Sure. Thank you, Congressman. I think there is a 
couple ways. One, the optimization software that we sell to 
airlines helps them either optimize revenues or reduce costs. 
And healthier airlines are more likely to either refleet, 
modernize their fleet, or hopefully in a best case scenario, 
grow their fleet. I have a current example, a recent example at 
Aerolineas in Argentina, where they frankly didn't have the 
capability internally with their current systems to make some 
of those long-term fleet planning decisions and to decide what 
markets, what new markets might be profitable to fly into. We 
installed a series of operations software there, we put 
consultants on the ground to help them use it, and they now do 
have a fleet plan that also led to a commercial decision to 
join the Sky Team Alliance, which Delta is the big partner in 
that alliance, which adds 4,000 destinations in Argentina for 
Sky Team. It adds lots of options for Aerolineas coming north. 
Aerolineas is primarily a Boeing fleet. They do have a small 
aircraft fleet 190 or so Embraers who all have GE engines on 
them. And they are going to be in the process now of 
modernizing and also expanding their fleet in response to some 
of the intelligence they have gotten out of the systems we have 
provided. Those are just decisions they wouldn't have been able 
to make without our tools or potentially some of our 
competitors' tools.
    Mr. REICHERT. I think it is important to note that I think 
Mr. Fessenden said that 30 percent of your business is 
services. So your employees understand it, and I think most of 
the employees at the companies that you represent understand 
that services is a key part of your business. How do we get 
that message out to the rest of the country is my question. And 
I don't have time for you to answer it. But I look forward to 
visiting with you maybe in the future.
    Thank you, Mr. Chairman.
    Chairman BRADY. Thanks, Mr. Reichert.
    Mr. HERGER.
    Mr. HERGER. Thank you, Mr. Chairman. I appreciate hearing 
the panel's experience on the role foreign direct investment 
plays in allowing your companies to export around the world, 
and how it impacts jobs in the United States. And in your 
experience, have you found that making investments abroad has 
helped or hurt your ability to create jobs here at home?
    Mr. BRUTTO. I guess I will answer that. Simple. For UPS, 
every 22 packages that we export out of the U.S. creates a 
full-time U.S. job. So the simple math. The more we export out 
of the U.S.--and by the way, we started our international 
business essentially in 1975 in Canada, and in 1976 in Germany. 
And we he have created literally thousands of U.S. jobs. And it 
is simple. I am overseas all the time. That is where I spend 
most of my time. I primarily work with companies to accept U.S. 
packages, as well as send their packages to the U.S. market. 
But a simple thing for us is 22 packages equals a full-time 
job.
    Mr. HERGER. Anyone else?
    Mr. KLEIN. Yes, at our company, in our software business 
most of our growth is international growth, ex-U.S. growth. On 
a 20 percent growth rate, we will increase jobs by about 10 
percent. Half of that 10 percent will be in the United States. 
And as I said, those are $87,000 a year jobs on average. So it 
is good job growth whenever we get points of growth outside the 
U.S.
    Mr. FESSENDEN. Congressman, I would just like to add that, 
as I mentioned, 100 percent of our gas turbines and steam 
turbines manufactured in Schenectady, New York, and Greenville, 
South Carolina, and the 250 small and medium businesses that 
support our supply chain in the U.S. all were exported. And 
then we have 20 to 30 years of service revenue that will take 
parts that are manufactured from that supply chain and export 
them. So it is extremely important and supportive of U.S. jobs.
    Mr. LAKE. If I may just jump in to make a comment on this 
as well. As I mentioned, in Japan we are generating $18.4 
billion in revenue. Of that, pretax operating earnings that 
same year is $3.8 billion. Of that, 80 percent on average we 
repatriate back to the United States, which are reinvested in 
building our infrastructure here as well. So that is how we 
generate jobs as a company, as Aflac agents, and so on.
    Mr. HERGER. You know, I might mention something that you 
are already aware of. What you have just said is not getting 
out to the American people. You know, when they hear and are 
aware of jobs going abroad, they assume we are losing American 
jobs. So I don't know what it is collectively we need do as 
businesses to get this message out, but it is imperative to be 
able to allow us in the Congress--some of us are already with 
you--but certainly in the Congress to be able to make sure that 
we do this. Maybe a last very quick one. I am interested in 
hearing from the panel about the types of nontariff barriers 
you encounter that undermine your ability to export services.
    Maybe specifically, Mr. Lake, would you start off with what 
Aflac faces in Japan?
    Mr. LAKE. I mentioned in my testimony two issues with 
respect to inside the border measures that affect our business. 
Certainly the state-owned enterprise issues that go beyond 
banking, insurance, express delivery as well, and how in an 
integrated way they create challenges for us. And I think that 
the key to understanding that is it is not even foreign versus 
domestic, it is private sector versus government-owned 
entities. That Banking Association of Japan, Life Insurance 
Association of Japan all very much want the same outcome, which 
is level playing field. And so this is very different from the 
kind of trade friction issues that we had 20, 30 years ago that 
warrants a strategic approach. And it is, again, not only in 
Japan, but it is in Korea and China. So those are the examples 
that I would cite.
    Mr. HERGER. A very important hearing, Mr. Chairman. Thank 
you very much. But these are certainly issues that we as a 
Congress need to really concentrate. And of course we are 
talking with our allies, with our good friends, but yet we need 
a level playing field. Certainly the American people are 
demanding that. So thank you very much.
    Chairman BRADY. No, thank you, Mr. Herger. Mr. McDermott is 
recognized for a deeply probing question.
    Mr. MCDERMOTT. I don't know if I can rise to that level.
    Mr. Lake, I want to hear about Japan Post. I have been over 
there and I have talked to them and talked to the Japanese 
Members of the Diet about these whole issues. From your point 
of view, explain to us what it is that makes it hard for you to 
do business, a service business in Japan in competition with 
the Japan Post.
    Mr. LAKE. We as a company believe that we can compete with 
anybody as long as the playing field is level. And from that 
point of view, what are the advantages that Japan Post has that 
we do not? Japan Post is allowed to operate a banking holding 
company, insurance holding company in a way that we certainly 
wouldn't. There are a number of measures that are applied to 
Japan Post in a way that they are not applied to any other 
private sector, not only Aflac. So at the end of the day, if 
you go through all these measures that are applied, they are 
gaining advantages that no private sector company has, which 
gives them, with respect to capital, with respect to 
regulation, with respect to operating throughout Japan, the 
kind of advantages that no one has.
    So it is not a question of ownership, but it is the 
specific measures that are applied to help then gain the 
competitive advantages that they have. That is part of the 
reason why, as I mentioned earlier, that domestic companies 
just last week as well as this week issued statements again 
calling for level playing field, and not allowing expansion of 
business because it is so huge, it is so difficult to compete 
with those advantages that I just talked about. And I think, as 
you know better than anybody else, this Committee has expressed 
concerns the past 10 years. The executive branch has as well. 
And I think we are coming to that point, in which they are 
about to expand further, that warrants appropriate response of 
this Committee as well as the United States Government, in our 
view, to deal with those issues.
    Mr. MCDERMOTT. Thank you.
    Chairman BRADY. All right. Thank you, Mr. McDermott. I 
think I speak for more than myself in saying this hearing has 
been very helpful in helping us document what a great 
opportunity you have at hand. By negotiating an International 
Services Agreement, we can expand our services sales around the 
world and rev up this great engine of U.S. job creation.
    I want to thank each of the witnesses for their patience, 
for their insight, and for your ongoing work in keeping America 
globally competitive. I want to invite all of you to join me in 
enthusiastically supporting the work the USTR is doing to move 
forward with establishing an ISA.
    Our record is open through October 4, 2012. I urge 
interested parties to submit statements for the record. On 
that, this hearing is adjourned.
    [Whereupon, at 5:45 p.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]

                                 
                   Coalition of Services Industries 1

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                        U.S. Chamber of Commerce

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