[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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Communications
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