    [Senate Hearing 112-783]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-783

                            RUSSIA'S WTO ACCESSION:
                         ADMINISTRATION'S VIEWS ON THE
                       IMPLICATIONS FOR THE UNITED STATES

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

                                    HEARING

                                   before the

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JUNE 21, 2012

                                   __________

                Printed for the use of the Committee on Finance

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                              COMMITTEE ON FINANCE

                         MAX BAUCUS, Montana, Chairman

    JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
    Virginia                             CHUCK GRASSLEY, Iowa
    KENT CONRAD, North Dakota            OLYMPIA J. SNOWE, Maine
    JEFF BINGAMAN, New Mexico            JON KYL, Arizona
    JOHN F. KERRY, Massachusetts         MIKE CRAPO, Idaho
    RON WYDEN, Oregon                    PAT ROBERTS, Kansas
    CHARLES E. SCHUMER, New York         MICHAEL B. ENZI, Wyoming
    DEBBIE STABENOW, Michigan            JOHN CORNYN, Texas
    MARIA CANTWELL, Washington           TOM COBURN, Oklahoma
    BILL NELSON, Florida                 JOHN THUNE, South Dakota
    ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
    THOMAS R. CARPER, Delaware
    BENJAMIN L. CARDIN, Maryland

                        Russell Sullivan, Staff Director

                   Chris Campbell, Republican Staff Director

                                      (ii)

                                C O N T E N T S

                                   __________

                               OPENING STATEMENTS

                                                                       Page
    Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
      Committee on Finance...........................................     1
    Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                            ADMINISTRATION WITNESSES

    Kirk, Hon. Ronald, U.S. Trade Representative, Executive Office of
      the President, Washington, DC..................................     6
    Vilsack, Hon. Tom, Secretary, Department of Agriculture,
      Washington, DC.................................................     7
    Burns, Hon. William J., Deputy Secretary of State, Department of
      State, Washington, DC..........................................     9

                   ALPHABETICAL LISTING AND APPENDIX MATERIAL

    Baucus, Hon. Max:
        Opening statement............................................     1
        Prepared statement with attachments..........................    29
    Burns, Hon. William J.:
        Testimony....................................................     9
        Prepared statement...........................................    40
        Responses to questions from committee members................    45
    Cantwell, Hon. Maria:
        Prepared statement...........................................    58
    Hatch, Hon. Orrin G.:
        Opening statement............................................     3
        Prepared statement...........................................    61
    Kirk, Hon. Ronald:
        Testimony....................................................     6
        Prepared statement...........................................    64
        Responses to questions from committee members................    72
    Vilsack, Hon. Tom:
        Testimony....................................................     7
        Prepared statement...........................................    83
        Responses to questions from committee members................    88

                                 Communications

    Distilled Spirits Council of the United States, Inc..............    93
    National Milk Producers Federation and the U.S. Dairy Export
      Council........................................................    98
    National Pork Producers Council..................................   101

                                     (iii)

                            RUSSIA'S WTO ACCESSION:
                         ADMINISTRATION'S VIEWS ON THE
                       IMPLICATIONS FOR THE UNITED STATES

                                  ----------

                            THURSDAY, JUNE 21, 2012

                                           U.S. Senate,
                                          Committee on Finance,
                                                        Washington, DC.
        The hearing was convened, pursuant to notice, at 9:45 a.m.,
    in room SD-215, Dirksen Senate Office Building, Hon. Max Baucus
    (chairman of the committee) presiding.
        Present: Senators Bingaman, Kerry, Wyden, Menendez, Cardin,
    Hatch, Grassley, Snowe, Cornyn, Coburn, and Thune.
        Also present: Democratic Staff: Russ Sullivan, Staff
    Director; Amber Cottle, Chief International Trade Counsel; Hun
    Quach, International Trade Analyst; Bruce Hirsh, International
    Trade Counsel; Ryan Carey, Press Assistant; and Sean Neary,
    Communications Director. Republican Staff: Chris Campbell,
    Staff Director; Everett Eissenstat, Chief International Trade
    Counsel; Rebecca Nasca, Staff Assistant; Maureen McLaughlin,
    Detailee; Greg Kalbaugh, International Trade Counsel; Paul
    Delaney, International Trade Counsel; Emily Fuller, Fellow; and
    Douglas Peterson, Tax Detailee.

       OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
                MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

        The Chairman. The hearing will come to order.
        First, I want to thank the witnesses for reporting a little
    bit early and changing their schedules. We deeply appreciate
    that.
        It is baseball season, and we should remember the old
    baseball adage, ``Keep your eye on the ball.'' The ball here is
    jobs. Russia's accession to the World Trade Organization this
    summer will mean thousands of jobs here in the United States,
    but only if we pass Russia permanent normal trade relations
    legislation by August.
        As we heard from business and human rights leaders at our
    March hearing, the economic case for PNTR is clear. Russia is
    the 7th-largest economy in the world, the largest economy
    currently outside the WTO. Regardless of what we do here in
    Congress, Russia will join the WTO this summer.
        We have a choice. If we do nothing, the 154 other countries
    in the WTO will gain new access to Russia's growing market and
    we will be left out on the sideline. American workers,
    businesses, farmers, and ranchers will lose out to their
    competitors in China and Europe.
        But if we do pass Russia PNTR, U.S. exports to Russia are
    projected to double within 5 years, and that means thousands of
    new jobs here at home. These new jobs come at no cost to us--
    zero, nada. Unlike a free trade agreement, we do not lower any
    of our tariffs and we do not change any of our trade laws. This
    is a 1-sided deal in America's favor, but only if we act.
        That is why I introduced Russia PNTR legislation last week
    with Senators Thune, Kerry, and McCain. The bill establishes
    permanent normal trade relations with Russia and it removes
    Russia from the 1974 Jackson-Vanik amendment.
        Passing PNTR will ensure that U.S. aircraft and automotive
    exporters benefit from lower Russian tariffs. It would mean
    U.S. service providers gain access to Russia's
    telecommunications and banking markets, and it will guarantee
    U.S. farmers and ranchers greater access to the Russian market,
    including a generous U.S.-specific beef quota of 60,000 metric
    tons.
        That is why U.S. exporters strongly support PNTR. More than
    30 U.S. companies, agriculture groups, and trade associations
    issued statements just last week urging Congress to quickly
    enact the Russia PNTR bill. I am entering a list of these
    organizations into the record.
        Jewish organizations in both the U.S. and Russia also
    strongly support PNTR. Congress originally passed the Jackson-
    Vanik amendment in response to the Soviet Union's immigration
    restrictions on its Jewish citizens. These restrictions no
    longer exist, and Russia has fully complied with Jackson-Vanik
    for nearly 20 years.
        That is why the American-Israel Public Affairs Committee
    and other leading Jewish organizations have urged Congress to
    quickly enact our PNTR bill, and I am entering a letter from
    these groups into the record as well. I am also entering into
    the record a letter from six former U.S. Trade Representatives
    of both parties who believe we must enact PNTR and that we must
    do so by August. By keeping the focus on U.S. jobs--and by no
    means suggesting we ignore the host of difficult issues we face
    with Russia--we must address the human rights, democracy, and
    foreign policy concerns.
        [The list of organizations and the letters appear in the
    appendix beginning on p. 32.]
        The Chairman. The U.S. has other tools to address these
    concerns, and where those tools are not adequate we should
    improve them. That is why I pledge to support Senator Cardin's
    human rights bill. The bill would punish those responsible for
    the death of anti-corruption worker Sergei Magnitsky and others
    who commit human rights violations by restricting their U.S.
    visas and freezing their U.S. assets. Nine members of the
    Finance Committee have co-sponsored this important piece of
    legislation. The Foreign Relations Committee is marking it up
    next Tuesday.
        As I said in the letter to Senators Cardin and McCain last
    week, I will add the Magnitsky bill to our PNTR bill when we
    mark it up in this committee. Passing the Magnitsky bill, along
    with PNTR, will help promote the goals of both bills. Russia's
    Syria policy also continues to be a problem. Moscow's support
    for Assad, despite his regime's gross human rights violations,
    is simply indefensible.
        But as my colleague Senator McCain said, this issue should
    be dealt with separately from PNTR. Secretary of State Clinton
    echoed that yesterday in her op-ed in the Wall Street Journal.
        PNTR is no gift to Russia, and, for U.S. jobs, we need to
    keep our eye on the ball. Failing to pass PNTR will not help
    Syria, it will only harm U.S. exporters and the jobs they
    create.
        The United States also has lingering economic concerns with
    Russia, including inadequate intellectual property enforcement
    and restrictions on our agricultural exports. If we pass PNTR,
    WTO rules will require Russia to enforce U.S. intellectual
    property rights and remove barriers to our agricultural
    exports.
        If Russia fails to do so, we can use the WTO's binding
    legal enforcement procedures. If we fail to pass PNTR, we will
    be stuck with the status quo. None of these additional tools
    would be able to hold Russia accountable. America needs the
    jobs that PNTR would bring. So let us be ready when Russia
    joins the WTO this summer and not lose out to the competition.
    Let us remember to keep our eye on the ball and pass PNTR
    before August.
        [The prepared statement of Chairman Baucus appears in the
    appendix.]
        The Chairman. Senator Hatch?

               OPENING STATEMENT OF HON. ORRIN G. HATCH,
                        A U.S. SENATOR FROM UTAH

        Senator Hatch. Thank you, Mr. Chairman. Thank you for
    agreeing to hold this hearing.
        We will hear two major arguments from the administration
    today, at least in my opinion. First, we must pass PNTR or our
    workers will be disadvantaged when Russia joins the WTO this
    summer. Second, most civil society groups, including many
    groups who initially supported the Jackson-Vanik amendment,
    support removing Russia from that statute. Since neither of
    these points is in dispute, I hope we can quickly move beyond
    these stale talking points. The issue is not whether Congress
    should grant Russia PNTR and remove them from Jackson-Vanik.
    The question is whether this is, in itself, enough.
        Both the chairman and I know that it is not. There is
    already a written commitment that this will not be a clean bill
    and that there will be legislation beyond PNTR included in it.
    We also know that members on both sides of the aisle have
    already raised numerous economic and non-economic issues that
    need to be addressed if this process is to be successful.
        Every day newspaper headlines further document Russia's
    disregard for the rule of law, human rights, and democracy.
    Tens of thousands of Russian citizens have taken to the streets
    to protest the illegitimate Putin regime, at great risk to
    themselves and their families. Russia's efforts to re-establish
    its regional hegemony, including through military occupation of
    regions within Georgia, are well-known.
        Russia publicly seeks to undermine the U.S. missile defense
    system in Europe through military means, if necessary. Russia's
    military support for the Assad regime in Syria and warm
    relations with Iran run counter to U.S. efforts to secure
    regional peace and stability. Just this week, press reports
    detailed plans for Syria, Iran, Russia, and China to engage in
    the largest joint war games ever conducted in the Middle East.
    These military exercises will include the use of Russian atomic
    submarines, warships, and aircraft carriers.
        The commercial environment in Russia continues to be among
    the worst in the world. Long-standing commercial disputes,
    including issues related to the expropriation of Yukos, remain
    unresolved. Robbery and corruption in Russia are endemic.
        The 2011 Transparency International Corruption Perception
    Index ranks Russia at 143 out of 183 countries, just barely
    ahead of North Korea and Somalia. Similarly, the World Bank's
    ``Doing Business'' Index ranks Russia 120 out of 183 countries.
        Russia repeatedly fails to abide by its international
    commitments. They have yet to fulfill commitments related to
    intellectual property rights protection and access for U.S.
    agriculture products made over 6 years ago.
        Of course, despite U.S. ratification, Russia never ratified
    the U.S.-Russia Bilateral Investment Treaty, another clear
    example of their failure to deliver on their economic promises.
        Despite this panoply of problems and Russia's proven record
    as a rogue regime, the Obama administration has not articulated
    a clear and coherent strategy regarding Russia. Instead, they
    ask Congress to simply pass PNTR and remove Russia from
    longstanding human rights law, while ignoring Russia's rampant
    corruption, theft of U.S. intellectual property, poor human
    rights record, and adversarial foreign policy, all for a market
    that amounts to 0.5 percent of U.S. exports.
        The Obama administration argues that the U.S. has no
    leverage over Russia by withholding PNTR, but they fail to
    acknowledge that it was the Obama administration that
    squandered America's leverage when the President decided to
    invite Russia to join the WTO to augment his failed reset
    policy. With this leverage now gone, they argue that the myriad
    of economic problems we confront daily will be resolved through
    WTO litigation. We know from our experience with China in the
    WTO that this simply is not enough.
        What bothers me most, however, is the President's double
    standard in dealing with Russia. Three of our closest allies--
    Colombia, South Korea, and Panama--were forced to wait years
    for consideration of their trade agreements while the
    administration invented problems that had to be resolved before
    it would even act on the agreements. Every one of these markets
    is larger than Russia's when it comes to current U.S. exports.
        The economic arguments for moving each agreement trumped
    any argument one can make about the immediate economic benefits
    of having Russia in the WTO, especially when considering that
    Russia already committed to provide most favored nation
    treatment to our exports under the terms of our 1992 bilateral
    trade agreement.
        Yet, the President forced our workers and our close allies
    to wait for years before they could take advantage of our trade
    agreements. While the President delayed, our workers lost more
    and more market share to foreign competitors.
        Once the President's concerns were addressed, he then
    demanded that Congress renew a domestic spending program, to
    the tune of almost 1 billion taxpayer dollars, before acting on
    these agreements, all because the President insisted that his
    trade policy reflect his ``core values.''
        Well, where are those core values now? When it comes to
    trade with Russia, they vanish. When it comes to PNTR, the
    President asks us to act post-haste. He expects Congress to
    turn a blind eye to the barrage of bad news that demonstrates
    on a daily basis the deteriorating political, economic, and
    security relationships between the United States and Russia.
        We search in vain for coherence or consistency from the
    President on the issue of Russia. Despite my best efforts, I
    cannot discern any consistent principles or values underlying
    President Obama's trade strategy or unravel the logic
    underpinning his flawed approach towards Russia.
        That is one reason I asked for an opportunity to hear
    directly from the administration. These serious issues with
    Russia matter. They cannot be swept under the rug so the
    administration can continue to appease Russians in a vain
    effort to salvage the thin remains of a flawed reset policy.
        Congress and this committee have a right to hear from the
    administration, and when there are policy gaps that harm our
    economy, national security, or strategic interests, Congress
    has an obligation to act with or without the administration's
    blessing.
        With all due respect to our witnesses today--and I happen
    to admire all three of them--I would be remiss if I failed to
    express my disappointment that neither Secretary Clinton nor
    Secretary Panetta could testify today. They were both in the
    Senate recently to testify in favor of the Law of the Sea
    treaty, a fatally flawed document in my eyes which has been
    debated ad nauseam for over 20 years and will not come for a
    vote in the Senate anytime soon.
        So my hope was that they could have participated in today's
    hearing. I expect that we will hear today that Jackson-Vanik is
    a relic of the Cold War, appropriate for its time but not
    today. That may be true, but one fact remains: Russia continues
    to see itself and act as a military, strategic, and economic
    counterweight to the United States. They view every aspect of
    their relationship through this lens, including their
    membership in the WTO.
        An administration reset policy toward Russia that ignores
    this reality and consciously seeks to separate these
    interrelated issues is naive, dangerous, and doomed to failure.
    We should support the ability of American workers to try to
    take advantage of Russia's impending membership in the WTO,
    but, in so doing, Russia must be held accountable for its
    policies.
        If the administration is not willing or able to do that,
    then I think Congress will. Again, Mr. Chairman, I thank you
    for agreeing to hold today's hearing, and I look forward to
    hearing from the witnesses today. I appreciate the witnesses
    who are here, and I am going to listen very carefully to what
    they have to say.
        The Chairman. Thank you, Senator, very much. We all look
    forward to hearing from our witnesses.
        [The prepared statement of Senator Hatch appears in the
    appendix.]
        The Chairman. First, Ambassador Ron Kirk, U.S. Trade
    Representative, is no stranger to this committee. Welcome back,
    Mr. Ambassador. We deeply appreciate your insights.
        Next, we will have Secretary Tom Vilsack from the U.S.
    Department of Agriculture. We appreciate you, Mr. Secretary,
    very much. I must say you are one of the most responsive
    Secretaries I have ever come across. When I call you, you are
    there. It is deeply appreciated. Thank you, Mr. Secretary.
        Next, Deputy Secretary William Burns from Department of
    State, former Ambassador to Russia, has obvious deep insights
    into this issue, and we thank you very much, Mr. Ambassador.
        As we mentioned earlier in the other room, I want to again
    thank you. Chairman Dave Camp of the House Ways and Means
    Committee told me recently how much he deeply appreciated your
    answering the questions that he and other members of his
    committee, bipartisan, asked of you about this question, and he
    found you very responsive, very helpful. So, thank you very
    much.
        Senator Grassley. Mr. Chairman?
        The Chairman. Yes?
        Senator Grassley. I am going to have to go down to
    Judiciary, but I would like to be notified if you are going to
    adjourn so I can come back and ask some questions.
        The Chairman. Sure.
        We are under a tight time frame this morning. I think we
    start the vote at 11 on the farm bill, more amendments, so I
    urge all of us to stay within our 5-minute rule.
        Ambassador Kirk?

       STATEMENT OF HON. RONALD KIRK, U.S. TRADE REPRESENTATIVE,
           EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, DC

        Ambassador Kirk. Thank you, Mr. Chairman, Ranking Member
    Hatch, and members of the committee. I would like to continue
    our discussion about critical steps that Congress can take to
    support jobs for Americans by terminating application of the
    Jackson-Vanik amendment and authorizing the President to
    provide permanent normal trade relations to Russia.
        Under President Obama's leadership, we have worked with
    this committee and this Congress to bring our trade policy into
    greater balance with the needs and concerns of American
    businesses, workers, and families. As you noted in your
    remarks, Mr. Chairman, this is about jobs. As a result of our
    efforts, Commerce estimates that U.S. exports supported at
    least 1.2 million jobs from 2009 to 2011.
        When Russia was invited to join the World Trade
    Organization last December, we said then, and President Obama
    reiterated in Mexico this week, that the administration
    strongly supports legislation to terminate application of the
    Jackson-Vanik amendment and authorize the President to provide
    PNTR.
        Mr. Chairman, we support your efforts to advance such
    legislation in the Senate and coordinate with similar efforts
    in the House. It is important to note this legislation is not
    about giving Russia any special trade privileges, but it is
    about making sure that the agreement applies between the United
    States and Russia so that American companies, workers, our
    farmers, our ranchers, our manufacturers, our innovators and
    service providers, will reap the full benefits of Russia's WTO
    membership and, just as critically, that we will have the
    multilateral trade enforcement tools in place to enforce
    Russia's WTO commitments.
        I think it is important to be absolutely clear that Russia
    will become a member of the World Trade Organization by the end
    of the summer, and, if this agreement does not apply between
    the United States and Russia, our businesses and our innovators
    and exporters will be at a competitive disadvantage compared to
    their global counterparts.
        I have gone into further detail of the impacts of this in
    my written testimony, but I would like to share just a couple
    of examples of how we could be harmed if the WTO agreement does
    not apply between us.
        Our farmers and our ranchers, our agriculture producers,
    will not have the protection of the sanitary and phytosanitary
    agreements that Russia has committed to abiding by once it
    joins the WTO. Our businesses will not enjoy access to Russia's
    expanding services market, which is not covered by the
    bilateral commercial agreement that Senator Hatch referenced
    earlier.
        Our innovators and creators will not reap the full benefits
    of stronger intellectual property rights and enforcement of
    those rights. Just as critically, we will not have access to
    the World Trade Organization's multilateral enforcement
    mechanisms, including dispute resolution, to ensure that the
    rules are followed.
        As many of you have noted, Russia's WTO membership is not a
    panacea, but having clear rules of the road will provide the
    predictability, the transparency, and market access that our
    businesses and exporters have been seeking.
        Our negotiators insisted that Russia integrate the WTO
    rules into its legal regime before it was invited to join the
    WTO, and, as a result, Russia already has in place the laws and
    regulations necessary to implement the WTO rules. But these
    rules are only as good as our ability to enforce them.
    Terminating Jackson-Vanik and extending PNTR to Russia is in
    the absolute best interests of American businesses, workers,
    and innovators, and we will continue to work with this Congress
    to add the other issues that you have articulated this morning.
    But in the meantime, let us not penalize U.S. companies and
    workers by forcing them to effectively compete with one hand
    tied behind their backs.
        I respectfully ask this committee to move forward quickly
    with legislation to terminate Jackson-Vanik and empower the
    President to extend PNTR to Russia. Thank you.
        The Chairman. Thank you, Mr. Ambassador, very much.
        [The prepared statement of Ambassador Kirk appears in the
    appendix.]
        The Chairman. Next, Secretary Vilsack?

        STATEMENT OF HON. TOM VILSACK, SECRETARY, DEPARTMENT OF
                      AGRICULTURE, WASHINGTON, DC

        Secretary Vilsack. Mr. Chairman, Senator Hatch, and members
    of the committee, thank you for the opportunity to discuss the
    benefits to U.S. agriculture of ending the application of the
    Jackson-Vanik amendment and authorizing permanent normal trade
    relations for Russia. The Department of Agriculture strongly
    supports this action to ensure that Russia remains one of our
    top export markets as it joins the World Trade Organization.
        Today, American agricultural exports remain a bright spot
    in the Nation's economy. Last year, agricultural exports
    totaled more than $137 billion, a new record, and supported
    more than 1 million American jobs in communities across our
    country.
        This included nearly $1.4 billion in exports to Russia.
    Because the U.S. imports just $25 million worth of agricultural
    exports from Russia, this contributed significantly to our
    record agricultural trade surplus. I would note for the
    committee that our exporters accomplished this despite Russia's
    imposition of non-science-based sanitary and phytosanitary
    measures and unjustified technical barriers to trade.
        Establishing permanent normal trade relations is not a
    favor to Russia, it is the right thing to do to expand
    opportunity for American producers and create more jobs here at
    home. By establishing permanent normal trade relations with
    Russia, we can significantly expand existing opportunity for
    America's farmers, ranchers, and producers by providing
    improved access to Russia's 140 million consumers and an
    expanding middle class that has grown by more than 50 percent
    in just the last decade.
        By granting Russia permanent normal trade relations, the
    United States will not provide additional market access to our
    domestic markets for Russian agricultural imports. We will
    simply make permanent the market access treatment we have been
    extending to Russia on an annual basis since 1992.
        We also know that, with Russia's membership in the World
    Trade Organization, it will mean that Russia will be obligated
    to apply a trade regime consistent with WTO rules. It will have
    to be transparent in creating and enforcing trade policy, and
    it will be subject to the WTO dispute resolution process.
        Ultimately, this means our farmers and exporters will have
    more certain and predictable market access to Russia and that
    they will not be playing on an uneven playing field against WTO
    member countries around the globe.
        Russian consumers value the quality of U.S. food and
    agricultural products, and their interest is growing by the
    year. U.S. exports of meat and poultry to Russia have remained
    strong over the past few years, and Russia is the world's
    largest importer of beef by quantity.
        We are also seeing diversification of the products we
    export. In fact, last year U.S. exports to Russia constituted a
    wide variety of products and reached new records. Permanent
    normal trade relations with Russia will put our farmers and
    ranchers in the best position possible to continue this
    success.
        Mr. Chairman and members of the committee, in closing I
    would like to note that we are in a time of tremendous
    opportunity to continue record agricultural exports. Tireless
    and determined USDA and USTR negotiators have worked with the
    U.S. agricultural community to overcome unpredictable Russian
    market access hurdles for decades.
        Our recent efforts have resolved issues critical to
    Russia's WTO accession. Establishing permanent normal trade
    relations with Russia will further enhance opportunities for
    U.S. agriculture, and none of us doubts the U.S. agricultural
    exporters' ability to compete and to compete successfully.
        Mr. Chairman, this concludes my statement. I look forward
    to answering any questions that you and the committee may have.
    Thank you.
        The Chairman. Thank you, Mr. Secretary, very much.
        [The prepared statement of Secretary Vilsack appears in the
    appendix.]
        The Chairman. Ambassador Burns?

    STATEMENT OF HON. WILLIAM J. BURNS, DEPUTY SECRETARY OF STATE,
                  DEPARTMENT OF STATE, WASHINGTON, DC

        Ambassador Burns. Thank you very much, Chairman Baucus,
    Ranking Member Hatch, members of the committee. Thank you very
    much for inviting me here today.
        I spent a good deal of my diplomatic career helping
    administrations of both parties navigate our complicated
    relationship with Russia. I have seen moments of considerable
    promise at the end of the Cold War and more recently of
    deepening cooperation on Afghanistan and nuclear arms
    reductions.
        I have seen moments of sharp differences, whether during
    the Russia-Georgia war in the summer of 2008, or over our
    enduring human rights concerns. I have seen, through all those
    years, the importance of carefully assessing what is at stake
    for the United States and being clear-eyed about American
    interests and Russia's long-term evolution.
        That is the prism through which I believe we can see
    clearly
    and unmistakably the importance of terminating application of
    Jackson-Vanik and extending permanent normal trade relations to
    Russia. Jackson-Vanik, as you said, Mr. Chairman, long ago
    achieved its historic purpose.
        Some argue that continuing to apply Jackson-Vanik to Russia
    would give us leverage with Russia. We disagree, and so do
    leaders of Russia's political opposition who have called on the
    United States to terminate Jackson-Vanik. That does not
    diminish their profound concerns about human rights and the
    Magnitsky case, concerns which we strongly share.
        PNTR is not a gift to Russia, it is a smart, strategic
    investment in one of the world's fastest-growing markets for
    U.S. goods and services. A vote to extend PNTR will be a vote
    to create and sustain jobs in America.
        We are under no illusions about the challenges that lie
    ahead. The fact is that U.S.-Russia relations are often an
    uneasy mix of competition and cooperation, and while it may be
    tempting to downplay Russia's importance, we simply do not have
    that luxury.
        As a permanent member of the United Nations Security
    Council, as one of the world's largest nuclear powers, and as
    the world's
    single-largest producer of hydrocarbons, Russia's strategic
    importance to the United States will matter for many years to
    come. To be sure, we have real and continuing differences with
    Russia. We disagree fundamentally about the situation in
    Georgia.
        On Syria, we are urging Russia to push the Syrian regime to
    implement Kofi Annan's 6-point plan, end the violence, and work
    with the international community in promoting a serious and
    rapid political transition that includes Assad's departure. We
    have consistently and directly stressed our concerns about
    human rights in Russia, and we have taken steps to address
    these challenges, including programs that support rule of law
    and civil society in Russia.
        Following the tragic death of Sergei Magnitsky, we imposed
    restrictions to ensure that no one implicated in his death can
    travel to the United States. But we continue to believe that it
    is in America's long-term strategic interests to work with
    Russia in areas where interests overlap.
        Already, our work together over the past 3 years has
    produced significant results, including a new START treaty to
    reduce strategic nuclear weapons and agreement on civil nuclear
    cooperation and military transit arrangements to support our
    efforts in Afghanistan.
        With PNTR, we would add expanded trade to that list. PNTR
    is also an investment in the more open and prosperous Russia
    that we would like to see develop. As the demonstrations across
    Russia over the past 6 months make clear, the country's
    emerging middle class is seeking a more transparent and
    accountable government and a diversified economy.
        We should support these Russian efforts. PNTR and WTO
    membership by themselves will not suddenly create the kind of
    change being sought by the Russian people, but they can help
    open Russia's economy and reinforce rule of law beyond trade.
        PNTR should be one part of a stronger and fuller rule of
    law framework that we pursue with Russia, combined with
    investment protections such as a new bilateral investment
    treaty and the OECD anti-bribery convention which Russia joined
    earlier this year.
        Russia's membership in the WTO will soon be a fact. Failing
    to lift Jackson-Vanik and extend PNTR will not penalize Russia,
    nor will it provide a lever with which to change the
    government's behavior. It will only hurt American workers and
    American companies.
        By extending PNTR we can create new markets for our people
    and support the political and economic changes that the Russian
    people are seeking. PNTR is clearly in our economic self-
    interest, and it is an investment in a better partner over the
    long term for the United States.
        Thank you.
        The Chairman. Thank you, Mr. Ambassador, very much.
        [The prepared statement of Ambassador Burns appears in the
    appendix.]
        The Chairman. I want to ensure that every member of the
    committee has adequate time to ask questions, and the witnesses
    adequate time to respond, so I am going to limit time to 4\1/2\
    minutes per Senator and ask everybody to stay within the 4\1/2\
    minutes.
        I will begin by asking you a question, Ambassador Kirk.
    What would happen if we delayed passage of PNTR legislation
    until next year sometime? Some might argue, why do it this
    year? We can always do it next year.
        Ambassador Kirk. Well, time is a matter of concern for us.
    For that period of time that we are in delay, the WTO agreement
    would not apply to the United States and Russia. Our exporters
    would be at a competitive disadvantage on some issues, not all.
        The bilateral commercial agreement that we have referenced
    does provide some measure of tariff relief, but the new
    disciplines, many of which the United States insists that
    Russia undertake, we would not have the advantage of.
    Particularly, our agricultural industry would continue to be
    frustrated by what we believe is the arbitrariness of some of
    Russia's agricultural standards. We would be foreclosed from
    competing as robustly in the services market and a number of
    other areas that I detailed directly in my full testimony.
        The Chairman. What American companies tell me is that, if
    we wait until next year, other countries will gain an
    advantage, a market share advantage, and we very much would
    disadvantage the United States. It would be difficult in some
    cases to regain that potential lost market share. So it is not
    just losing per se, it is losing with respect to competitors
    who will gain an advantage. Is that correct?
        Ambassador Kirk. Yes, sir. And I think we all know that the
    hardest customer to get is the one that you have lost. We want
    our exporters to be able to go and compete for this market from
    day one.
        The Chairman. Secretary Vilsack, could you tell us what
    additional tools we have in our American toolkit with respect
    to SPS barriers that we face in Russia, assuming we pass PNTR?
        Secretary Vilsack. Well, Mr. Chairman, first and foremost,
    we obviously would see reduced tariffs and quotas that would be
    fixed, that would be beneficial. We would also see
    international standards being applied in the absence of
    country-specific standards or in the absence of a country-
    specific standard that was science-based or had a proper risk
    assessment.
        We would be entitled to notice and comment on any proposed
    trade measures that would be different, or proposed standards
    by Russia. We could request the scientific basis and the risk
    assessment for any proposed change.
        We could suggest and have the power to change or suggest an
    alternative to the country-specific standard if we could
    establish that it would meet or exceed the country-specific
    standard or provide greater protection, and of course we would
    have the remedy--in the event that we did not agree--we would
    have the remedy of going back to a tribunal to basically make a
    decision about what is fair trade.
        If I can just comment on your question to Ambassador Kirk,
    specifically as it relates to the beef trade, which I know you
    have an interest in, we would be providing an advantage to the
    EU, Canada, Australia, and Brazil. This is a market that has
    exploded in the last couple of years for us. It grew by an
    astounding 70 percent last year and nearly doubled in the first
    4 months of 2012. We are gaining market share. We would
    potentially lose that if we do not act quickly.
        The Chairman. There is a long list of measures we could
    take with respect to SPS and helping agriculture. Is there any
    way to quantify? You started to a little bit in your last
    statement, but could you quantify the additional gain,
    potential gain, that U.S. agricultural exporters would have,
    American farmers would have, with the U.S. granting PNTR?
        Secretary Vilsack. Well, I think the experience that we
    have had with China is instructive. When we got them into a
    system, we saw an explosion of interest in agricultural
    products. I can tell you, I was recently in Iowa, and there has
    been a 1,300-percent increase in Chinese trade since China
    became a member of the WTO.
        So, I mean, it is an extraordinary opportunity for us on a
    wide variety of products: apples, grapes, raisins, cherries,
    oranges, grapefruits, nuts, cheeses, whey, soybeans, beef,
    poultry, pork, soups, breakfast cereals, wine. All of that is
    going to benefit from this.
        The Chairman. Thank you very much.
        Senator Hatch?
        Senator Hatch. Well, thank you, Mr. Chairman.
        You have all three testified well as far as I am concerned.
    I respect all three of you. But we have heard several times
    that the administration has taken steps to ensure that Russia
    has fully complied with all of its WTO commitments before they
    joined the WTO.
        Now, given my experience on the U.S.-Korea FTA, where the
    President authorized the South Korean agreement to enter into
    force, even though Korea was not and is still not in compliance
    with all of its FTA commitments, I have to say I have my
    doubts.
        Now, Ambassador Kirk, are you willing to certify in writing
    that Russia has fulfilled all of its WTO commitments, including
    our bilateral side letters, before Congress is to grant PNTR to
    Russia?
        Ambassador Kirk. Senator, I am happy to confirm that for
    you, listening to the concerns of this committee, particularly
    the experience, what some felt, with China. We worked very
    diligently with Russia to have them put the legislative rules
    into place to implement their WTO commitments before we would
    agree to the working part of the report. We have done that, and
    we will give you the examples of those.
        I want to be careful in how we articulate them having the
    legal regime in place to implement their WTO commitments.
    Compliance is going to come by continuing to monitor and make
    sure Russia fulfills both the spirit of what they have done and
    the practice of that.
        But a huge distinction between what we have done here and
    what we did with China is that we did not give Russia any of
    the liberal time lines China was given to change their laws,
    and Russia has put those laws in place.
        Senator Hatch. Are there any defensive concerns which arise
    as a result of Russia's WTO membership?
        Ambassador Kirk. Broadly, because most of what we get from
    Russia is energy-related or extracted materials critical to our
    steel industry and others, I think we will see much more
    offensive opportunities than defensive. But particularly in the
    agricultural industry, we have very serious concerns, and we
    are going to continue to push Russia to adhere to international
    norms, and we will continue to push them to adopt an
    intellectual property rights regime that is above the de
    minimis standards included in the WTO.
        Senator Hatch. Are you aware that one of Russia's senior
    trade negotiators indicated to my staff that he believes U.S.
    trade remedy laws could be vulnerable to challenge due to the
    use of the U.S. Department of Commerce's non-market economy
    methodology. Are you aware of that?
        Ambassador Kirk. I think we are aware of that, but we feel
    very strongly that our trade remedy laws are legally sound. We
    worked with this Congress very recently to address one issue
    that had been raised, and we feel very comfortable about our
    ability to defend those.
        Senator Hatch. Let me just ask another one. Are you aware
    of any laws, regulations, or actions that Russia has taken, or
    is taking, that would be in violation of their WTO commitments
    since they were invited to join the WTO in December of 2011?
        Ambassador Kirk. Senator, I do not know that I am aware of
    anything specific, but I would say, again, the area where we
    continue to be most concerned is in the application of their
    veterinary and agricultural standards, which we will very
    closely watch.
        Senator Hatch. Let me just say, a recently issued European
    Union Commission report clearly documents a number of
    violations and potential violations. Now, I would be happy to
    provide you with a copy of that report, and we look forward to
    learning about the steps that you plan to take to ensure that
    any violation by Russia identified in the report negatively
    affecting our trade is immediately eliminated, if you can.
        I just have a few more seconds. Let me just ask you one
    more question. I understand that the administration has been
    working on an IPR action plan with Russia. Has that plan been
    agreed to? If so, has Russia fully complied with all the terms?
    If it has been agreed to, what mechanisms are in place to
    guarantee continued adherence to this plan? Is the IPR action
    plan enforceable in the WTO if we grant PNTR to Russia?
        Ambassador Kirk. Senator, we have not completed work on the
    action plan. We got a commitment from Russia again to work with
    us on establishing a regime that is in excess of the minimum
    standards required in the TRIPS agreement and the WTO that more
    closely resembles the application of our intellectual property
    rights, and we will be happy to keep you updated on our
    progress on that.
        Senator Hatch. Thank you, sir. I appreciate all three of
    you.
        The Chairman. Thank you, Mr. Ambassador, very much.
        Senator Wyden?
        Senator Wyden. Thank you, Mr. Chairman.
        Gentlemen, Chairman Baucus has correctly said that what we
    are talking about this morning are the issues of human rights
    and American job creation. Now in my view, the Internet is a
    powerful vehicle for both human rights and job creation, and
    the evidence suggests that Russia is now engaged in practices
    that will set back both human rights and American job creation.
        So my question for you, Mr. Burns, is this. This past
    Monday, Reporters Without Borders said that there is increasing
    evidence that the Russian government is launching cyber-attacks
    on independent media websites, pressuring Internet service
    providers to block websites and force the removal of online
    content that the Putin regime does not approve of.
        Does this concern the Department of State, and do these
    actions not represent a real threat to the advancement of human
    rights in Russia?
        Ambassador Burns. Thank you, Senator. Those reports
    certainly do concern the administration, as I know they concern
    you. We have long been concerned about restrictions, sometimes
    severe restrictions, on independent media in Russia. The long
    list of murdered journalists, where those murders have gone
    unresolved, I am familiar personally with a number of them.
        So, it is an issue to which we attach a very high priority.
    Certainly we also attach a high priority to open expression and
    to being able to use the Internet in an open way. A large part
    of our concern about protecting intellectual property rights
    has been directed at ensuring the protection of intellectual
    property, including Internet freedoms as well. So we will
    continue to make this a very high priority.
        Senator Wyden. Let me turn to you on that point, Mr. Kirk.
    Did Russia commit to not discriminating against American
    digital goods and digital services in the U.S.-Russia bilateral
    agreement that paved the way for Russia's WTO membership?
        Ambassador Kirk. Senator, what we got Russia to agree to,
    particularly in them opening up their services market, is that
    they would fully comply with all of our disciplines on that as
    well. The issue of our having the ability, first of all, to
    compete in that market unfettered is one where we did put
    pressure on Russia very strongly, and we will continue to
    monitor them for the behavior that you heard articulated by
    Secretary Burns.
        Senator Wyden. What I would only say is that, in countries
    like Russia that take steps to block Twitter, what they do is
    they quash speech they do not like, so you are talking about a
    human rights issue. But they are also giving an advantage to a
    country's domestic micro-blog service, so they are harming the
    cause of creating jobs in the United States. So, I think we
    have additional work to do.
        I am going to be working with Chairman Baucus and Senator
    Hatch on at least ensuring that we are monitoring what goes on
    in Russia with respect to the Internet, which is such a
    powerful tool for human rights.
        I know time is short, Mr. Chairman. I think I will yield
    back my last minute.
        The Chairman. You bet. Thank you, Senator.
        Senator Cardin?
        Senator Cardin. Well first, Mr. Chairman, I want to thank
    you for your leadership and keeping your eye on the ball here.
    I think that you have brought up a way in which we can get this
    done in this Congress, and I applaud you for that, and I thank
    you for bringing together Senator McCain, Senator Thune, and
    others so that we can have the best chance to pass the PNTR for
    Russia.
        Secretary Burns, I want to sort of focus on part of your
    statement, but also to put this in context. When Jackson-Vanik
    was passed in the 1970s, I am certain that there may have been
    some naysayers at the time saying, why are we dealing with
    human rights on a trade agenda? And I appreciate your statement
    where you say ``Jackson-Vanik has served a noble and historic
    purpose.'' I do not know whether your counterpart at that time
    would have said that, but I think that it clearly has done
    that.
        It is interesting that we were attempting at that time to
    deal with the problems in the Soviet Union on immigration, and
    yet the Jackson-Vanik law was global to all non-market
    economies, recognizing an opportunity to advance human rights.
        You point out, and correctly so that, in regards to the
    Magnitsky tragedy, the administration took action to deny those
    who perpetrated that human rights atrocity from being able to
    come to the United States through a visa.
        However, the tragedy occurred in November of 2009. We asked
    for action a lot earlier through letters and following
    legislation, and it was not until August of last year that the
    administration took action.
        I mention that because of the need for the Congress and the
    executive departments to work together. That is what the
    Magnitsky bill attempts to do. It is global. It provides a
    mechanism for Congress to get engaged with the administration
    on identifying those who have perpetrated human rights
    concerns, and it is a lasting legacy as we move away from
    Jackson-Vanik. Once we do PNTR for Russia, for all intents and
    purposes Jackson-Vanik is a relic of the past, and a proud
    historic relic of what we were able to do at the time.
        The reason I set this up in this framework is that I want
    to give you an opportunity, if you want to take advantage of
    it, to comment as to the chairman's premise. That is, it is
    certainly my intention, and I think the intention of the
    chairman, to combine the PNTR vote with the Magnitsky bill. We
    want to make sure that the administration has an opportunity to
    comment, if you choose to comment, in regards to that
    legislation.
        Ambassador Burns. Well, thank you very much. Senator, first
    I want to express our appreciation for your leadership on this
    whole set of issues on human rights around the world, but
    particularly in Russia. We share, as I said in my opening
    remarks, your concerns and I know the concerns of others on the
    committee about the situation regarding human rights abuses in
    Russia.
        We very much appreciated the constructive dialogue that we
    have conducted with you about how best to approach this. We
    very must appreciate the fact that you have considered some of
    the concerns that we have expressed, and we look forward very
    much to continuing that dialogue.
        As you know, we have approached these issues, which are
    both extremely important, on separate tracks. I listened very
    carefully to what the chairman said, and, as I said, we look
    forward to continuing the dialogue.
        Senator Cardin. I will take that as you taking advantage of
    this opportunity to let us know your views before we act.
        Mr. Chairman, I have no further questions.
        The Chairman. Thank you, Senator, very much.
        Senator Grassley?
        Senator Grassley. Thank you very much. As I indicated to
    you, I apologize for not hearing your testimony because I had a
    meeting of the Judiciary Committee I had to go to. Thank you
    for taking my questions.
        Russia's accession package has been finalized, and Russia
    will soon become a full member of the WTO. Currently, 47
    percent of U.S. pork production capacity is banned from
    exporting to Russia, including 27 percent of my State's
    capacity. Normally, an agreement on plant equivalency would
    address these issues, but no agreement was obtained in
    negotiations with Russia prior to finalizing WTO accession.
        In the past, the United States has obtained such
    equivalency agreements with other acceding countries through
    bilateral agreement or an exchange of letters. The U.S.
    obtained this additional discipline on plant equivalency with
    both China and Vietnam before each of them went into the WTO.
        Two questions, and I will ask both of them. This would be
    to Ambassador Kirk or Secretary Vilsack, or both of you. Can
    you explain why the U.S. treated accession agreements with
    Russia differently than with countries like China and Vietnam?
    And two, is the administration planning to obtain a bilateral
    agreement with Russia to address this plant issue and other
    outstanding SPS matters?
        But before you answer, about 1 year ago now, we visited the
    Russian ambassador with the Leahy delegation. About that time,
    a week later there were a whole bunch of meetings going on in
    Geneva, and we were led to believe this was all going to be
    settled before the accession and our agreement to it.
        The second thing is, I wanted to tell you that I sent a
    letter to the President on these issues, signed by 34 Senators,
    raising these concerns that my questions raise here. So,
    whichever one or both of you would like to respond, I would
    appreciate it.
        Ambassador Kirk. Senator, the issue of the equivalency is
    one that continues to concern us, and we will work on it. As I
    said earlier, the good news is that we learned from our
    experience in China and insisted that Russia put in place the
    laws and regulations necessary to implement its WTO commitments
    beforehand and did not grant them the 10-year period that China
    had.
        The issues around equivalency and SPS standards are those
    that have frustrated us the most and continue to frustrate us,
    and we have been very candid with the Russians about that. But
    we see one of the big benefits of now having them in the WTO is
    we have more tools to be able to resolve those issues.
        But absolutely, we will continue to work with Secretary
    Vilsack and his team on those issues to make sure that we get
    access to this important market for beef and pork, and do so
    according to international standards.
        Secretary Vilsack. Senator, what was able to be locked down
    was a global tariff-rate quota of 400,000 tons for pork, 30,000
    tons for pork trimmings, an end quota tariff of zero, and a
    regime to basically eliminate other tariffs by 2020. Russia
    gets into a system that now gives us a number of opportunities
    to work with them within an international system where they
    have to have science-based rules, risk assessment, et cetera.
        The concern that I have about delay is that we would then
    cede potential market access for our pork products to global
    competitors, which we do not want to do. We can compete, and we
    can compete successfully, if we are given the opportunity, but
    we will not be able to have that opportunity unless you all
    deal with Jackson-Vanik in a timely way.
        Senator Grassley. All right.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator.
        Senator Cornyn, you are next.
        Senator Cornyn. Thank you, Mr. Chairman.
        The Chairman. You bet.
        Senator Cornyn. Good morning. Welcome. I have one question.
    Mr. Burns, maybe you would be the appropriate person, but I
    would be glad to have others comment as time permits.
        My question really boils down to this. Let me state the
    question, and then I will give you sort of the premises that
    give rise to the question.
        What more would Russia have to do to the United States
    before the United States would say Russia has demonstrated
    itself such an adversary of the United States on so many
    different fronts that it is unworthy of PNTR and WTO accession?
        Let me talk about the nature of our relations since 2009
    when President Obama announced a reset. It has been 3 years
    since that reset, and it certainly seems like it has been a 1-
    sided affair, evidence of the fact that we cannot trust Russia
    because of its increasingly hostile attitude toward the United
    States and United States' interests.
        The new START treaty might be one place to talk about,
    given the fact that new START reductions represented unilateral
    U.S. reductions but did nothing to address Russia's massive
    numerical superiority and tactical nuclear weapons; then the
    Civilian Nuclear Cooperation Agreement that has stalled in
    light of Russia's invasion of Georgia.
        Then we see Russian support for despicable regimes like
    Syria, in the face of mass atrocities that President Assad has
    committed against his own people and evidence that Russia is
    arming Assad's regime and murdering innocent Syrians.
        Of course, there is Russia's continuing support for Iran's
    nuclear missile programs, and of course, shielding these
    regimes, as well as North Korea, from actions by the United
    Nations Security Council by exercising its veto; objecting to
    U.S. deployment of NATO missile defense systems in Europe to
    counter Iranian missile threats, followed by threats from
    Russian military officials to launch preemptive strikes on
    those sites; continued military occupation of the Georgian
    territory and its refusal to abide by a 2008 cease-fire
    agreement; unfair elections, including parliamentary elections
    that Secretary Clinton called neither free nor fair; a
    deteriorating human rights record, which I know the chairman
    and others have already addressed, plagued by arbitrary
    detentions, politically motivated imprisonments, and a total
    disdain for the rule of law, for freedom of speech, for freedom
    of the press, and freedom of assembly. And then there is
    widespread government corruption and, as I think, Ambassador
    Kirk, you mentioned, a very poor record of protecting
    intellectual property rights.
        So I guess the question I would put before all of you
    broadly is, given the litany of aggressive acts that Russia has
    taken against the United States and the United States'
    interests, would giving them permanent normal trade relations
    status and WTO accession not be a 1-sided bargain?
        Ambassador Burns. Well, Senator, I will start and try to
    address the concerns in the question that you raised.
        First, as I said in my opening comments, the truth is that
    our relationship with Russia today is a mix of competition and
    cooperation. The differences that you described, the serious
    concerns that you described, are very real, whether it is over
    Georgia, whether it is over Syria, whether it is over human
    rights or corruption in Russia itself, and we have to be very
    clear-eyed about all of those.
        At the same time, I think it is fair to say that we have
    found and built upon some areas, objectively, of common ground,
    in Afghanistan, for example, where most of the U.S. military
    personnel that move in and out of Afghanistan today, most of
    the military equipment that moves to Afghanistan, comes across
    Russia in the northern distribution network.
        That is an area of practical cooperation in which we both
    have a stake. It is not a sentimental interest on the part of
    Russia; it also has a stake in stability in Afghanistan. We
    have, I think, worked effectively together on a range of
    nuclear non-proliferation issues, if for no other reason than
    the two of us, the United States and Russia, today control more
    than 90 percent of the world's nuclear weapons.
        So it is not only the new START treaty, which I think
    helped in the area of strategic arms reductions, it is also in
    the Plutonium Disposition Agreement, where we together agreed
    to destroy, to eliminate, something like 17,000 tons of
    weapons-grade plutonium, which I think sets an important
    example for the rest of the world.
        On Iran, we did vote together in Security Council
    Resolution 1929, which has been the platform in a sense for
    many of the tougher measures that have been taken by the United
    States and the European Union since then, and Russia did
    essentially rip up a billion-dollar contract with Iran for the
    sale of the S-300 missile.
        So I do not mean to minimize any of the differences or the
    concerns that you raised, but I would simply highlight some of
    the areas in which I think we have found ways practically to
    work together and which are important for our interests.
        The Chairman. Thank you, Senator. I am surprised more
    Senators are not here.
        Let me ask you, Mr. Ambassador. We will do a quick second
    round before the vote. These are very real issues, obviously,
    that Senator Cornyn raised. I think they are very real issues,
    and Americans, especially members of Congress, are very deeply
    concerned about the list.
        So, a logical question is: does it help us deal with these
    serious issues with Russia with the passage of PNTR or not? Let
    us just focus on human rights, Syria, all the issues that we
    have been talking about here. Does passage of PNTR help us in
    dealing with Russia or not help us in dealing with Russia?
        Ambassador Burns. Well, I think what I would say, Senator,
    is the following. First, as you and a number of other members
    have said, WTO accession for Russia is a reality so the issue--
    --
        The Chairman. They are there.
        Ambassador Burns [continuing]. So the issue for all of us
    today is whether or not American business, American workers,
    can take advantage of the new more favorable terms of trade. If
    we withhold PNTR, we obviously disadvantage American companies
    and the potential to create many more American jobs.
        I do not believe withholding PNTR adds to our leverage on
    any of the very real differences that we just talked about. I
    think we need to push hard against the Russians on a number of
    those issues and push towards more cooperative approaches on
    some of them, and that is certainly what we are doing with
    regard to Syria, for example.
        I also think--and this would be my final comment--it is
    important to bear in mind that this is not just about the
    Russian government; this is about the evolution of Russian
    society. The emerging middle class in Russia, I think, is a
    significant phenomenon today. You saw the people, tens of
    thousands of people, demonstrating over the last 6 months.
        What they are demonstrating for, it seems to me at least,
    is not just improvements in the standard of living, but
    imbedding the rule of law in Russia over time, having some
    certainty about how their property is protected, and having a
    voice in how political decisions are made.
        WTO accession, extending PNTR, is not a magic formula to
    ensure that all those things happen, but I do believe, over the
    long term, it is an investment in the kind of Russia that that
    emerging middle class wants to see, a kind of Russia that is
    going to have a more open economic and political system, the
    kind of Russia that can be a better partner for the United
    States over time. I think that is something we need to bear in
    mind as well.
        The Chairman. Well, I appreciate that. I was in Russia
    several months ago, talking to human rights groups and also to
    Jewish groups. It was clear to me--they were clear to me, and I
    was a bit surprised, frankly, with their conclusions--that
    Jackson-Vanik is not leverage at all. They earlier thought it
    was leverage, maybe in years past, but not now.
        They believe that they can advance their causes, human
    rights groups can advance their causes much better and more
    quickly with the passage of PNTR. Jewish organizations in
    Russia said the same thing to me. They said they very much want
    PNTR.
        I also noticed the rising middle class in Russia, with more
    money in people's pockets. I mean, there is an energy there
    among the people that I frankly did not suspect I would find.
    But it is clearly there, at least it is in Moscow and St.
    Petersburg. But I do think this will help--passage of this--and
    help in many ways, not just in American jobs. I do not mean to
    minimize that; it is very much about American jobs, but, in
    addition, it would help us deal with these other issues.
        Senator Hatch?
        Senator Hatch. Well thank you, Mr. Chairman. Deputy
    Secretary Burns, it is easy for me to understand why the
    Secretary of State would want you as her deputy. I think you
    have acquitted yourself very well here. But let me just ask a
    few other questions just to follow up so we make a record on
    this.
        If Congress attempts to address some of the ongoing
    challenges with Russia through additional provisions added to
    the PNTR legislation, will the administration cooperate with us
    or object?
        Ambassador Burns. Well, Senator, as I said before, the
    preference expressed by the administration has been to deal
    with very real human rights concerns that Senator Cardin has
    been leading an effort on on a separate track, and we very much
    value the constructive dialogue that we have had on that issue,
    and we look forward to continuing to pursue it.
        Senator Hatch. Well, should we develop a legislative trade
    package that will grant PNTR to Russia as well as address some
    of the issues important to Congress? Will the administration
    support that effort if the Russians threaten to retaliate?
        Ambassador Burns. Well, we are very well aware of some of
    the statements that have been made about potential retaliation.
    This is one of those instances where we clearly have a
    difference over human rights with the current Russian
    government. We need to be plainspoken about our concerns on
    human rights.
        So as I said, while we are well aware of some of the
    statements that have been made, this is an area of difference
    that ought not to in any way inhibit us in expressing our real
    concerns about human rights. It is a set of differences that we
    will have to try to manage as best we can.
        Senator Hatch. Well, if we reach an agreement in Congress
    on how best to grant PNTR to Russia, will the administration
    support us? I guess it depends on what the agreement is.
        Ambassador Burns. Certainly with regard to the legislation
    that is under consideration in both Houses on the Magnitsky
    case, as I said, we have had a constructive dialogue. We are
    going to continue that. We appreciate the fact that some of the
    concerns we have raised are being considered, but obviously
    what our ultimate view will be will depend on the shape of the
    legislation that emerges.
        Senator Hatch. All right. The U.S. Ambassador to Russia,
    Michael McFaul, cites the conclusion of negotiations with
    Russia for their entry into the WTO as a concrete result of
    President Obama's reset policy, yet there is no reference to
    President Obama's reset policy anywhere in your testimony. Now,
    that creates a little bit of obvious confusion.
        So, is the conclusion of negotiations for Russia's entry
    into the WTO a concrete result of President Obama's reset
    policy, or is it not?
        Ambassador Burns. Oh, I think it certainly is in the sense
    that what we have worked hard to do over the last few years,
    the President and Secretary Clinton, is to be straight about
    our differences with Russia, but also to identify areas of
    common ground and build on them. I think expanding
    opportunities for the United States in trade, investment, and
    job creation connected to Russia is very much in our interest.
        It is also in Russia's interest to become a member of the
    World Trade Organization. It is the only way--one of the only
    ways--in which it can diversify its economy beyond what today
    is an unhealthy dependence on hydrocarbons exports. So I think
    it is an area of shared interest through the reset of the last
    few years. That is what we have tried to build on.
        Senator Hatch. Well, thank you.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator.
        Senator Hatch. I will yield back my time.
        The Chairman. Senator Thune?
        Senator Thune. Thank you, Mr. Chairman. I want to start by
    thanking you for agreeing to hold this hearing, and Ranking
    Member Hatch for his tireless efforts to ensure that Republican
    members of this committee would have the opportunity to raise
    important issues regarding PNTR directly with administration
    officials.
        I look forward to working with him. There has been no
    greater advocate for trade than Senator Hatch, and I look
    forward to his leadership in the next weeks as we move forward
    with Russia PNTR and try to get a constructive and bipartisan
    agreement that we can get through here.
        We have heard a great deal about the benefits of enacting
    PNTR for U.S. businesses, farmers, ranchers, and others who are
    conducting business in Russia currently or would like to access
    this growing and prosperous market. I have with me a letter
    today, sent from more than 100 companies, business
    associations, and other groups, that calls on Congress to enact
    PNTR as soon as possible, and preferably before Russia joins
    the WTO in August.
        In my view, the economic arguments in favor of enacting
    PNTR are overwhelming. We are not giving up anything if we
    enact PNTR because we already grant Russia normal trade
    relations status on a yearly basis, and we have done so for 20
    years. Yet, we have much to gain from PNTR, including better
    access to the world's 5th-largest agricultural market and the
    world's 6th-largest economy.
        So the question before us today is not so much, should we
    grant Russia PNTR, but rather, how should we go about doing it
    in a timely manner? By timely, I mean in a manner that does not
    put U.S. companies doing business in Russia at a competitive
    disadvantage.
        I was an outspoken critic of the fact that the Obama
    administration waited more than 2\1/2\ years before submitting
    the free trade agreements with Colombia, Korea, and Panama to
    Congress.
        As a result, trade agreements between Canada and Colombia
    and between the EU and Korea entered into force before our
    agreements took effect. That put American soybean and wheat
    growers, and many other U.S. producers, at a completely
    unnecessary and self-imposed disadvantage. We should not repeat
    that mistake.
        We should instead do everything we can to ensure that we
    enact PNTR before Russia joins the WTO in August, lest American
    agricultural producers and others find themselves at a
    competitive disadvantage again due to the inability of Congress
    and the administration to get things done.
        That is why I joined with Chairman Baucus and Senators
    McCain and Kerry to get the PNTR process started now so that we
    can have a chance to build momentum for PNTR before the August
    recess and before we find ourselves in the midst of a
    presidential election campaign where we know it is going to be
    difficult for Congress to act.
        I believe that Chairman Baucus has outlined a reasonable
    process for moving forward under which a variety of concerns
    regarding Russia can be considered and, where appropriate,
    addressed by amendment.
        In my mind, the most pressing non-economic issue
    appropriate to this debate is how we can foster the rule of law
    in Russia and help the Russian people combat corruption and
    human rights abuses. Certainly Russia joining the WTO, a rules-
    based system, will help in this regard.
        But I also want to emphasize to each of you how important I
    believe it is that a robust version of the Magnitsky human
    rights legislation that is supported by Senators McCain,
    Cardin, Kyl, myself, and others be paired with the repeal of
    Jackson-Vanik.
        Advancing the Magnitsky bill in a forum that can continue
    to enjoy broad bipartisan support is not only essential to the
    process of enacting PNTR, it will also replace an outdated and
    ineffective instrument of U.S. foreign policy, Jackson-Vanik,
    with one that is timely and appropriate given the human rights
    and corruption challenges facing Russian society.
        Chairman Baucus's strong commitment to include a version of
    the Magnitsky bill supported by its bipartisan co-sponsors,
    when this committee considers PNTR, was a major reason why I
    felt comfortable in moving forward as a co-sponsor of Russia
    PNTR legislation.
        I hope the administration realizes that a strong version of
    Magnitsky is judged by its bipartisan co-sponsors as critical
    to getting PNTR done in a timely fashion, and I also hope that
    the administration understands it will need to engage
    aggressively over the next several weeks with members of
    Congress--not just those members of the Finance Committee and
    Ways and Means, but all members--to forcefully make the case
    for PNTR if we are going to get this done.
        I look forward to much more robust and active engagement
    from the administration on this issue between now and the
    August recess.
        I have a quick question, if I might, for Ambassador Kirk
    and Secretary Vilsack, and that has to do with concerns I have
    heard from the agricultural community about Russia's commitment
    to abide by the sanitary and phytosanitary, or SPS, obligations
    that they are undertaking, especially with respect to pork,
    poultry, and meat. It is obviously a very important issue for
    many agricultural States, and I am wondering if you could speak
    to that issue.
        Ambassador Kirk. I will try to leave plenty of time for
    Secretary Vilsack, but this is an issue----
        The Chairman. But not too much. We have a vote.
        Ambassador Kirk. Yes. We are going to continue to follow
    that. The important thing is, Russia agreed that they will
    abide by the WTO principles on SPS standards when they join,
    but this is an area where we know that we are going to have to
    really follow and watch them.
        Secretary Vilsack. Senator, I would just add that it gives
    us the opportunity to actually have a forum in which we can
    adjudicate disputes. Right now we are in a very difficult
    circumstance. They can do things arbitrarily, not science-
    based, not rules-based, without any risk assessment, and we
    have no recourse. This will give us the recourse and the power
    to basically change their views about things.
        I will tell you, if we can compete on an even field, we
    will win that competition every time, but right now it is not
    necessarily even.

        Senator Thune. Thank you.
        Thank you, Mr. Chairman. I got through it as fast as I
    could.

        The Chairman. You did a good job.

        Senator Thune. About as fast as I can read. Thank you.

        The Chairman. I was noting that. All right.

        Senator Thune. Thank you.

        The Chairman. Very good.

        Senator Menendez?

        Senator Menendez. Thank you, Mr. Chairman. Thank you,
    gentlemen, for your service.

        Ambassador Kirk, intellectual property rights and piracy,
    particularly in online piracy, continue to be major issues with
    Russia. The U.S. concerns about copyright infringement, piracy,
    product counterfeiting, and increasingly IP cyber-crime
    originating in Russia have been regularly documented in the
    annual Special 301 reports from the USTR.
        While Russia has begun to address some of these issues in
    their lead-up to WTO accession, there is still a lot of
    progress to be made. So, here is my question. How do you
    propose to prevent a replay of our experience with China on IP
    issues, where years after China joined the WTO we are still
    waiting--still waiting; I have raised this several times when
    you have been here--to see substantial IP enforcement?
        What metrics will you use at USTR to evaluate Russia's IPR
    enforcement efforts and to regularly inform Congress on the
    progress of key action items in this U.S.-Russia IP working
    group?

        Ambassador Kirk. Senator, thank you for your continued
    interest in this. Thank you and all the members for your
    support of our efforts to get stronger enforcement of IP around
    the world. The most important distinction between this and
    China, Senator, is that, in the case of Russia, we insisted
    that they put in place their laws to implement the WTO rules
    before we would allow them to accede to the WTO. In China's
    case, in many cases, they were granted as much as 10 years to
    do that. We learned from that.
        So one real positive is that, the day Russia becomes a
    member of the World Trade Organization, they will be required
    to comply with all of the provisions of the TRIPS agreement.
    Now, as Secretary Vilsack said, we have to monitor that, and we
    will continue to use the 301 tool that you referenced in our
    annual report to Congress, and use all of the disciplines and
    tools available to us through that to monitor them and report
    to you.
        But second, recognizing this is going to be an issue,
    Russia agreed to work with us, and we are working with them
    now, on an enhanced IPR action plan that will go above what we
    see as sort of the de minimis standards of the TRIPS agreement
    in the World Trade Organization.

        Senator Menendez. Which brings me to the second question
    then. The value to U.S. businesses of Russia joining the WTO is
    only achieved if in fact Russia complies with the rules of the
    WTO and we are willing to bring cases against Russia when it
    breaks the rules.
        What assurances can you provide that Russian violations
    would be met with swift action by the USTR so that the
    Russians, unlike the Chinese in the years following their
    accession, are held accountable for their violations?
    Otherwise, all of the commentary of all of the value is
    fleeting.

        Ambassador Kirk. Senator--and I hope this does not sound
    too boastful--I think if there is any area that the
    administration has distinguished ourselves in, it is at our
    very strong elevation of trade enforcement to the same level
    that we have for opening up new markets. I would invite you to
    review our record at USTR under President Obama in bringing
    cases against China, and all other members of the WTO, to
    secure the hard-earned rights that we have fought for. We will
    continue to do that.
        You will recall that in this year's State of the Union
    address President Obama stated his intention to create an
    interagency trade enforcement center so that we have even more
    resources to do that. The President followed that up by
    executive order. We are beginning to implement that. So you
    have my very strong assurance that we will continue the same
    discipline and record on that.

        Senator Menendez. In that interagency process, do you get
    told by State, really do not pursue something because we are
    concerned about other issues that we are dealing with with
    Russia?

        Ambassador Kirk. I am rarely told by State. I have the same
    boss as Secretary Clinton, and I will tell you, this is one
    case in which we are all of one mind. We have moved forward. I
    would invite you to look at our record. I do not think we have
    ever shirked from moving forward on a case against China
    because of----

        Senator Menendez. Which finally brings me to Secretary
    Burns. I am concerned about the pervasive corruption in Russia.
    Many American companies have seen their contracts broken and
    agreements altered by heavy-handed regulations and open-handed
    bureaucrats.
        What will WTO membership do to improve this situation, and
    what specific remedies do WTO arbitration mechanisms provide to
    U.S. companies that are asked to bribe government officials in
    order to get a shipment through Customs or pay kick-backs to a
    procurement official in order to win a contract?

        Ambassador Burns. Well, Senator, let me start, and I will
    turn to Ambassador Kirk on the specifics on WTO. You are
    absolutely right, corruption is a huge problem in Russia. It is
    deeply in the self-interest of Russians if they want to
    modernize their economy and diversify it to address this issue
    more seriously. WTO accession, extending PNTR, in and of
    themselves, are not a magic cure for that problem.
        But I think if Russians employ those steps as part of a
    broader rule of law framework which ought to include a new
    bilateral investment treaty with the United States--and Russia
    recently signed on to the OECD anti-bribery convention, which
    brings more obligations. I think, taken together, those kind of
    steps can, over time, help Russians address what is a very real
    impediment to their economic modernization and growth, and that
    is corruption.

        The Chairman. Thank you very much, Senator.
        Senator Wyden?

        Senator Wyden. Thank you, Mr. Chairman.
        We have been talking about human rights and trade this
    morning. Ambassador Kirk, what I have learned on the trade side
    over the last few months is that, when trade agreements are
    negotiated, industry advisors sit in a far stronger position
    than virtually everyone in the Congress.
        For example, an industry advisor from the Motion Picture
    Association can sit at their desk with a laptop, enter their
    user name and password, and see the negotiating text of a
    proposed trade agreement. Virtually no one in Congress--
    virtually no one in the Congress--has the ability to do that.
    How is that right?

        Ambassador Kirk. Well, Senator, I want to make it plain
    that it is not just industry, but all of the members of our
    trade advisory commissions, which are established by this
    Congress--they are cleared advisors, they have security
    clearances and they represent a broad range of interests from
    industry, environmental groups, business groups. It is a broad
    representation to make sure that we have their views on our
    trade policy as we go forward.
        Every member of Congress--any member of Congress--who wants
    to see the text of any trade agreement that we are negotiating
    has the ability to do so, as long as we do so in a secure
    environment that is private. So, I mean, I would only offer
    that one clarification, that any elected official in this body
    has the ability to see those same texts as any of our cleared
    advisors.
        Senator Wyden. Mr. Ambassador, I do not know of any
    instance where you go in to trade negotiations, these pivotal
    negotiations that are key to creating more good-paying American
    jobs, without the expertise of your staff. As you have
    correctly noted, these are technical issues, and we are not
    allowed to do that. That is why I am saying that these advisors
    are placed in a far stronger position.
        I gather you do not think that is a problem. I do.
    Colleagues here in the Senate on both sides of the aisle do.
    Senator Burr, colleagues in this committee, Democrats and
    Republicans, think it is a problem. I know time is short. I
    just want you to know I am going to stay at it until we get
    this corrected.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator. And thanks to all the
    witnesses. We did it by 11, and I am very proud of you all.
    Thanks. I know you have changed your schedules, all three of
    you, to do this. This has been very helpful. There will
    probably be follow-up questions members of the committee might
    have. I intend to mark up this legislation in July. When we
    come back after the July recess, sometime in July, we will mark
    it up.
        Oh, Senator Cantwell, you are very speedy here, just under
    the wire.
        Senator Cantwell. Sorry, Mr. Chairman. Thank you so much
    for your indulgence here. I was chairing a hearing in the
    Commerce Committee on the new nominee to be FAA Administrator,
    so I apologize for that.
        I would like to enter into the record a longer statement,
    if I could, on this hearing and on Jackson-Vanik, and obviously
    the legacy of Scoop Jackson and the tremendous ability that
    Jackson-Vanik gave to so many people. So if I could do that,
    thank you.
        [The prepared statement of Senator Cantwell appears in the
    appendix.]
        Senator Cantwell. And then obviously I am a co-sponsor of
    my colleague Senator Cardin's legislation. I know that you have
    indicated that you are going to take that up as a separate but
    same track kind of process, so I appreciate that.
        So I guess my question is, what are we going to do about
    issues of national security and technology to make sure that we
    are preserving, as we move forward on PNTR, a sense of making
    sure that the kinds of technologies that are essential to
    national security are protected? And I do not know if that is
    to you, Mr. Burns, or to Ambassador Kirk.
        Ambassador Kirk. Well, Senator, what I would say to you,
    one, is the rules that are in place to protect those
    technologies that are critical to our national security are not
    at all compromised or touched by what we do with PNTR. This
    only addresses the reality that, when Russia becomes a member
    of the World Trade Organization, all of our exporters, farmers,
    and ranchers have the full benefits of that. We do nothing, at
    least in the case of CFIUS, the Committee on Foreign Investment
    in the United States, nothing that we do on the trade side
    lessens the disciplines that we have in place relative to
    protecting our critical national security interests.
        Senator Cantwell. And do you think that list adequately
    covers the issues that are essential to U.S. technology? Do you
    think we need to look at that and update that in any way?
        Ambassador Kirk. For reasons that are articulated, USTR is
    not involved in the development of that. I think that is under
    other agencies, but I would have to defer to my colleagues to
    respond to that.
        Ambassador Burns. I think, Senator, the current CFIUS
    process is a strong one, and I think it gives us the tools that
    we need. It is obviously something that we and other agencies
    keep under careful review, but I believe right now, just as
    Ambassador Kirk said, it leaves us in a very strong position,
    and nothing that happens as a result of extending PNTR in any
    way undercuts that position.
        Senator Cantwell. All right. Well, I thank you. I am
    definitely going to be looking at that and reviewing that as we
    go through this process. Obviously, the Northwest certainly
    believes in opening up new markets and having access to new
    markets, but also, as we can see the challenges as we have
    dealt with piracy issues in China, this is going to be an issue
    of big concern, and we are going to want to make sure that
    essential technologies that are used by our Nation, or areas of
    expertise, are protected. So, I thank you.
        Again, Mr. Chairman, I thank you for your indulgence in
    letting me get the question in, and we will certainly follow up
    with the witnesses.
        The Chairman. Good. Thank you, Senator. Thank you again.
        The hearing is adjourned.
        [Whereupon, at 11:07 a.m., the hearing was concluded.]

                                A P P E N D I X

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