[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.]



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