[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                    THE TRANS-PACIFIC PARTNERSHIP: 
                       OUTLOOK AND OPPORTUNITIES

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

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 1, 2013

                               __________

                           Serial No. 113-45

                               __________

        Printed for the use of the Committee on Foreign Affairs


Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, 
SCOTT PERRY, Pennsylvania                Massachusetts
STEVE STOCKMAN, Texas                AMI BERA, California
RON DeSANTIS, Florida                ALAN S. LOWENTHAL, California
TREY RADEL, Florida                  GRACE MENG, New York
DOUG COLLINS, Georgia                LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina         TULSI GABBARD, Hawaii
TED S. YOHO, Florida                 JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

         Subcommittee on Terrorism, Nonproliferation, and Trade

                        TED POE, Texas, Chairman
JOE WILSON, South Carolina           BRAD SHERMAN, California
ADAM KINZINGER, Illinois             ALAN S. LOWENTHAL, California
MO BROOKS, Alabama                   JOAQUIN CASTRO, Texas
TOM COTTON, Arkansas                 JUAN VARGAS, California
PAUL COOK, California                BRADLEY S. SCHNEIDER, Illinois
SCOTT PERRY, Pennsylvania            JOSEPH P. KENNEDY III, 
TED S. YOHO, Florida                     Massachusetts


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Edward F. Gerwin, Jr., president, Trade Guru LLC.............     5
Mr. Steven Metalitz, counsel, International Intellectual Property 
  Alliance.......................................................    16
Mr. Amgad Shehata, vice president, International Public Affairs, 
  United Parcel Service..........................................    24
Ms. Celeste Drake, trade and globalization policy specialist, The 
  American Federation of Labor and Congress of Industrial 
  Organizations..................................................    29

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Mr. Edward F. Gerwin, Jr.: Prepared statement....................     7
Mr. Steven Metalitz: Prepared statement..........................    18
Mr. Amgad Shehata: Prepared statement............................    26
Ms. Celeste Drake: Prepared statement............................    31

                                APPENDIX

Hearing notice...................................................    70
Hearing minutes..................................................    71
Material submitted for the record by the Honorable Ted Poe, a 
  Representative in Congress from the State of Texas, and 
  chairman, Subcommittee on Terrorism, Nonproliferation, and 
  Trade:
  Letter to the Honorable Ted Poe, dated August 2, 2013, from the 
    Greater Houston Partnership..................................    72
  Statement from former Congressman Anh ``Joseph'' Cao...........    73
  Partial list of Montagnard prisoners as of February 2012.......    79


        THE TRANS-PACIFIC PARTNERSHIP: OUTLOOK AND OPPORTUNITIES

                              ----------                              


                        THURSDAY, AUGUST 1, 2013

                     House of Representatives,    

        Subcommittee on Terrorism, Nonproliferation, and Trade,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 1:30 p.m., in 
room 2200 Rayburn House Office Building, Hon. Ted Poe (chairman 
of the subcommittee) presiding.
    Mr. Poe. The subcommittee will come to order. Without 
objection, all members may have 5 days to submit statements, 
questions, and extraneous materials for the record, subject to 
the length limitation in the rules.
    I am a strong supporter of promoting United States exports 
and increasing trade. To put it simply, I am a free trader. 
With unemployment 7.6 percent, we should be doing everything we 
can to create jobs for Americans, in America. Free trade 
agreements like the ones we have with Panama, Colombia, and 
South Korea grow jobs in the United States, help our economy 
get back on track and strengthen friendships abroad. Open trade 
is good policy and it makes sense.
    Right now, we are in the middle of negotiating a new 
agreement, the Trans-Pacific Partnership or the TPP, as an 
opportunity for the United States to expand its trade network 
in the Asia-Pacific region and beyond. TPP will open trade 
between the United States and 11 other countries. This would 
make it America's largest free trade agreement. Combined, these 
11 countries account for 40 percent of the global GDP; and 30 
percent of the entire world trade. We can make it even bigger 
after TPP is signed. It is possible for more countries like 
Taiwan to join. And I hope that is a strong consideration.
    For years now, many TPP countries have been experiencing an 
explosion in economic growth. The Asia-Pacific region alone is 
expecting to grow by 6 percent this year. This means more 
foreign consumers will want to import U.S. goods. That, in 
turn, will drive job growth in our manufacturing, shipping, and 
services industries. To put this in perspective, TPP countries 
represent a $1.7 trillion trading relationship for the United 
States. This makes it the largest export market for the United 
States.
    Many Americans are excited about what TPP will bring for 
them and their businesses. I know this because I have been 
hearing from my neighbors in Houston, Texas, how TPP will 
benefit our area. The Port of Houston is the biggest port in 
the United States on a per tonnage basis. With the expansion of 
the Panama Canal, we are primed to export even more to Asia. 
Three weeks ago, the Department of Commerce announced that 
Houston was the number one exporting metro area in the entire 
United States with a total of $110 billion in exports last 
year. That number will increase once we expand our markets 
through TPP. Houston will be able to build upon its close ties 
with Canada, Japan, Mexico and Singapore and the well 
developed, already emerging trade relationships with Malaysia, 
Australia, and Chile.
    America's other major shipping hubs like Los Angeles, Long 
Beach which my colleague, Mr. Lowenthal, represents in his 
district, will see a lot of growth from TPP as well. The United 
States needs to be involved in trade agreements with these 
countries, otherwise, we may find ourselves shut out of a 
booming market. The United States is not the only player in the 
international trading market. The European Union, for example, 
has already negotiated agreements with Canada, India, and 
Japan. And China, Japan, and South Korea have also been having 
trade talks among themselves.
    At the same time, I think it is very important that we need 
to make sure this agreement is fair, fair to all countries 
concerned and it is fair to the United States. United States 
companies are not afraid of competing in international markets, 
but it is important that TPP creates a level playing field for 
all. And what I mean by that is we have to make sure that 
United States companies do not face a disadvantage from state-
owned enterprises in other countries or risk having their 
intellectual property stolen by other nations. We need to 
understand the obvious and make sure that this does not occur. 
We need to set high standards in this area. This agreement is 
not about setting in stone already unfair advantages. Countries 
should not be able to steal American intellectual property.
    TPP is more important than the specific countries involved 
because it has the opportunity to set a strong precedent for 
future American trade agreements. This will especially be true 
as China opens up its economy to more exports and looks to sign 
its own agreements, competing with us and its own agreements to 
join existing countries.
    TPP is touted as a 21st century high-standard agreement. 
Our witnesses today will speak specifically about these 
principles and will be speaking for their industries. I look 
forward to hearing from them about what high quality free trade 
agreements should look like and what we should look out for in 
case there are some important issues that we may miss.
    I will now yield time to the ranking member, Mr. Sherman 
from California.
    Mr. Sherman. I have a different view. The definition of 
insanity is to keep doing the same thing over and over again 
and expect a different result. We have been traveling this road 
for 20 years. We have the largest trade deficit in the history 
of the world. But one bright spot, as the chairman points out, 
is our ports where there are good jobs unloading the imports 
from other countries and sending back the containers empty or 
crammed with waste paper.
    Washington's trade policies over the last two decades have 
created huge profits for Wall Street and an eroding middle 
class here at home. Now as to this TPP, it will eliminate over 
1100 tariff lines among the parties, a massive trade deal with 
consequences that could very well be negative. We must be 
skeptical of this TPP because we were not skeptical as we 
should have been of the earlier agreements.
    The United States International Trade Commission has said 
our trade deficit with China would grow by $1 billion if we 
provided for permanent MFN. Instead, that trade deficit 
exploded from $84 billion in 2000 to $315 billion in 2012. 
According to the Economic Policy Institute, the U.S. trade 
deficit has eliminated or displaced 2.8 million American jobs.
    In the early 1990s, the supporters of NAFTA criticized 
their critics as being Luddite protectionists. Almost two 
decades later, we know what the numbers are. We have posted a 
trade deficit with Canada and Mexico nearly every year since 
the enactment of NAFTA, most recently $62 billion with Mexico 
and $31 billion with Canada.
    Now I am concerned about the rules of origin which have yet 
to be negotiated in this deal, but we may be signing a free 
trade pact with China that is unilateral. That is to say, free 
access to our markets with us getting no access to theirs. Why? 
Well, let us look at the U.S.-Korea free trade agreement where 
goods can be 65 percent made in China. Then 35 percent South 
Korean content, but that includes Chinese workers living in 
barracks in South Korea, free access to the United States.
    One trembles when we think that the same negotiators may be 
involved in negotiating the rules of origin agreement in this 
latest deal.
    Let us look at the U.S.-Korea free trade agreement. Our 
trade deficit hit an all-time high in May of this year, $2.46 
billion in 1 month. Imports hit a record high in that month of 
$5.7 billion while U.S. exports in May were only 3.2 In fact, 
U.S. exports to South Korea from January through May of this 
year were lower than U.S. exports during the same period last 
year before the free trade agreement.
    We are going to be looking at a free trade agreement with 
Vietnam, a state-controlled economy. So the access we will have 
to their markets will be whatever their state-controlled 
economy decides to accept, whereas their access to our markets 
will be unlimited. Celeste Drake, I believe, mentions in her 
testimony, state-owned enterprises are common, not only in 
Vietnam and Malaysia, they could represent a threat to us, 
given America's lack of comprehensive manufacturing strategy 
that is particularly the case. This TPP arrangement gives those 
who oppose the Buy American agreements which Congress has 
passed a chance to try to override them through the treaty 
process.
    And then finally, and this is a threat to our national 
security. We have used sanctions as an effective means of our 
policy and we are hoping very much to prevent a nuclear Iran 
through sanctions. Well, what does this agreement do? I am told 
that apparently, the USTR has agreed to text in which our right 
to impose sanctions is subject to a tribunal's review. For 
example, the U.S. free trade agreement with Korea either party 
can have national security sanctions and that claim of national 
security is self-adjudicated whereas under the draft that 
appears we are prepared to accept a tribunal that could very 
well decide that we can't impose sanctions.
    This agreement, therefore, poses a threat to our national 
security, as well as to our economy. I look forward to its 
substantial improvement. I yield back.
    Mr. Poe. I thank the ranking member for his comments. He 
pointed out exactly why we are having this hearing, to find out 
the good, the bad, and the ugly about the TPP, to put it 
bluntly.
    The chair will recognize other members who wish to be 
recognized for 2 minutes.
    Mr. Kinzinger from Illinois.
    Mr. Kinzinger. Thank you, Mr. Chairman, and welcome to our 
large and overwhelming hearing room. Thank you all for coming. 
We are here today to discuss the possibility of the largest and 
most comprehensive trade agreement in our nation's history. The 
TPP is being negotiated by 12 countries including 4 with which 
we do not have existing trade relationships. No doubt, this 
would be an impressive accomplishment, a win for American 
business and middle class families.
    In 2012, U.S. trade with TPP countries totaled more than 
$1.5 trillion. By lowering barriers and increasing market 
access for U.S. companies, the trade and the American jobs it 
supports can be made even greater. In addition, increasing 
trade, achieving a high standard agreement on this scale can 
have positive, long-term effects for U.S. businesses and 
innovators. Aiming high has the potential to influence future 
trade negotiations, lifting standards all over the world and 
serving as a permanent boost for American jobs and the American 
economy.
    There are certain issues that American trade 
representatives should give special priority to. These include 
ensuring market access to foreign countries for American 
agriculture producers, enhancing intellectual property right 
protections, ensuring regulatory transparency and 
competitiveness, and ensuring access for small businesses. 
These issues are at the core of what a 21st century trade pact 
should look like which is why they are included and should 
remain a top priority for U.S. negotiators.
    Mr. Chairman, I yield back.
    Mr. Poe. The gentleman yields back. I am going to introduce 
each of the witnesses and give them time for opening 
statements. Without objection, all the witnesses' prepared 
statements will be made part of the record. I ask that each 
witness please keep your presentation to 5 minutes because you 
may be gaveled. And as a former Judge, that is not a pleasant 
experience.
    If I mispronounce your name, I apologize. My name is Ted 
Poe and I have been called tadpole and many other things, so I 
will do the best I can with each of your names. But thank you 
for being here, all four of you.
    Mr. Edward Gerwin, Edward Gerwin is the president of Trade 
Guru, LLC and provides analysis and strategic advice on trade 
policy for domestic and international clients. He previously 
served as a senior fellow for trade and global economic policy 
at Third Way.
    Mr. Steven Metalitz is a partner in the Washington, DC, 
office of Mitchell, Silberberg & Knupp, LLP and counsel to the 
International Intellectual Property Alliance. For 20 years, he 
has advised on domestic and international anti-piracy and other 
copyright matters.
    Mr. Amgad Shehata is the vice president of International 
Public Affairs for UPS. He is based in Washington, DC. He 
serves as the chair of the Canadian-American Business Council 
and is treasurer for the Express Association of America.
    Ms. Celeste Drake is the trade and globalization policy 
specialist at the AFL-CIO. She actively follows negotiations 
for Trans-Pacific Partnership free trade agreements where she 
advocates for policies to ensure shared gains from trade.
    Mr. Gerwin, we will start with you. You have 5 minutes.

 STATEMENT OF MR. EDWARD F. GERWIN, JR., PRESIDENT, TRADE GURU 
                              LLC

    Mr. Gerwin. Thank you, Mr. Chairman. Mr. Chairman, Ranking 
Member Sherman, and members of the subcommittee. The TPP has 
the potential to be a transformative 21st century trade deal--
one that opens key global markets for American goods and 
services, while supporting stronger economic growth, good jobs 
for our workers, and key American values. In my prepared 
statement, I have discussed the TPP and its potential benefits 
from three different perspectives.
    First, how can the TPP be a transformative trade deal for 
America? Second, what recent trends are relevant to U.S. trade 
in the Asia-Pacific region? And third, how can we determine if 
the TPP is a good deal of the United States?
    Let me highlight a few points. The TPP can be a 
transformative trade deal in many ways. There are two ways that 
stand out. First, the TPP could strongly orient America's trade 
toward the Asia-Pacific, especially toward dynamic markets in 
East Asia. These markets are forecast to grow two, three, or 
even four times faster than ours. By 2020, the Asia-Pacific 
will add 1.2 billion new middle class consumers to the global 
economy.
    In a report last year for Third Way, I detailed how these 
consumers and Asia's growing businesses increasingly want what 
America excels in making--from heavy equipment and healthcare 
to financial services and wholesome food. A growing Asia has 
huge potential for America's producers and workers, but to 
reach this potential, we will need strong agreements to clear 
away the many trade barriers that still block our access to the 
region.
    The TPP could also enhance America's leverage in defining 
new rules for global trade. A number of key developing 
countries--including China and India--often support rules that 
protect their markets and favor their state-owned enterprises. 
A strong TPP could help America and like-minded countries to 
push back and advance an alternative vision that stresses high 
standards and open, transparent, and fairer trade.
    My prepared statement also highlights three important trade 
trends that are relevant to the TPP. First, there has been an 
explosion in new trade deals in Asia. In the last decade alone, 
Asia's trade agreements have grown from 3 to 50, and 80 deals 
are currently in the pipeline.
    Secondly, America's share of trade into key Asian markets 
has been plummeting, falling by over 42 percent between 2000 
and 2010. Meanwhile, China and Korea are growing their shares 
of these markets by 14 percent.
    Third, new studies show that countries are increasingly 
making things together. Because of strong supply chains in our 
region, for example, exports from Canada and Mexico to the rest 
of the world often contain a very high level of American 
content made by American workers.
    These trends highlight the need for a TPP that would get 
America back in the race for new trade deals, that would 
increase our share of trade into the region, and that would 
help America and American workers seize opportunities in global 
supply chains.
    Finally, for the TPP to be a good deal for the United 
States, it should be comprehensive and ensure broad access to 
foreign markets for both goods and services. It should have 
high standards on issues like intellectual property and food 
and technical rules. And it should promote key American values 
like nondiscrimination, due process, and protection of workers 
and the environment.
    If America is going to prosper in the 21st century economy, 
the TPP must also be part of a broader U.S. strategy--one that 
includes very strong trade enforcement: Investing in 
infrastructure, innovation, and worker training, and one that 
provides adequate funding for our hard-working trade officials.
    Thank you again for the opportunity to testify and I very 
much look forward to your questions.
    [The prepared statement of Mr. Gerwin follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Poe. I thank the gentleman.
    Mr. Metalitz, 5 minutes.

   STATEMENT OF MR. STEVEN METALITZ, COUNSEL, INTERNATIONAL 
                 INTELLECTUAL PROPERTY ALLIANCE

    Mr. Metalitz. Thank you very much, Chairman Poe, Ranking 
Member Sherman, members of the subcommittee. I appreciate this 
chance to present the views of the International Intellectual 
Property Alliance on progress toward the TPP agreement.
    IIPA represents the U.S. copyright-based industries that 
contribute so much to our nation's economic health, 
international competitiveness, and to good, U.S. jobs. A strong 
TPP has enormous potential to open up important foreign markets 
to the copyrighted products and services that are the fruit of 
American creativity, ingenuity, and talent. Recently, that 
potential dramatically expanded as three of our four largest 
trading partners came to the TPP table. But these gains can 
only be achieved if the TPP embodies both high standards of 
copyright protection and enforcement and strong compliance 
mechanisms to ensure that our trading partners deliver on their 
obligations.
    Businesses and consumers around the world have demonstrated 
an insatiable appetite for U.S. books, music, movies, software 
applications, and other copyrighted works. But our industries 
still encounter many barriers overseas, most notably pervasive 
piracy. Piracy of U.S. works makes it difficult for legitimate 
distributors to gain a foothold in overseas markets and when 
those distribution channels do get established, piracy online 
or offline stunts their growth. This explains why it has been a 
cornerstone of U.S. trade policy for more than two decades 
under both Republican and Democratic administrations and with 
strong and consistent bipartisan support from Congress to get 
our trading partners to ensure the adequacy of their copyright 
laws and their regimes for enforcing those laws.
    Free trade agreements are a powerful tool for advancing 
this goal.
    The Korea FTA, approved last Congress, exemplifies this 
effort. It includes a state-of-the-art copyright chapter that 
we have urged U.S. negotiators to employ as a benchmark in the 
TPP. Even in those TPP partners that have relatively modern 
copyright laws, there are important and in some cases long-
standing gaps that hamper our industry's ability to fully 
compete in those markets. TPP offers the potential to resolve 
some of these problems.
    My written testimony gives several examples. I will just 
mention a few. We want the TPP partners to harmonize the term 
of protection of copyright, rather than simply meeting the 
minimum requirements in that area. We want them to enforce 
strong, legal protections for technological measures that 
right-holders use to protect their works, including meaningful 
remedies against trafficking in tools and services aimed at 
circumventing these controls. These technologies are absolutely 
essential to cloud computing services and to a lot of new ways 
of delivering copyrighted materials to the public. These 
governments should set a strong example by ensuring that their 
public sector uses only legal and licensed software. They 
should enact and implement deterrent civil and criminal 
remedies to copyright infringement and they should choke off 
the main supply channel for online movie piracy by specifically 
outlawing unauthorized camcording of films in theaters. This 
has been shown to be very effective everywhere it has been 
done.
    These issues are complex and we know that negotiating them 
with such a large group of major trading partners is especially 
challenging. The U.S. negotiators have worked hard and with 
unstinting dedication and our industries are committed to doing 
whatever we can to enable them to bring back a high standard 
TPP agreement with an exemplary copyright chapter. That outcome 
is critical not only to the continued growth of the U.S. 
copyright industries, and thus of the U.S. economy as a whole, 
but also to bolstering innovation, the healthy growth of the 
internet, and free expression.
    Our industries are proud of their role in providing more 
creative works to more people in more ways at more price points 
and on more devices than ever before in human history. A TPP 
that builds on KORUS FTA will help spread this creativity and 
innovation benefitting the citizens of all the TPP partner 
countries.
    Finally, the ultimate outcome of the TPP depends on a 
vigorous, prompt, and consistent compliance effort. Concluding 
a successful TPP agreement is only the first chapter. The rest 
of the story will be written in the legislatures, ministries, 
and market places of our trading partners. The U.S. Government 
needs to redouble its efforts and its commitment of personnel, 
intellectual bandwidth, and other resources to proactively 
enforcing our trade agreements including what the IIPA hopes 
will be a strong and comprehensive copyright chapter in the 
TPP.
    Thank you again for inviting me and I welcome your 
questions.
    [The prepared statement of Mr. Metalitz follows:]

    
    
    
    
    
    
    
    
    
    
    
    
                              ----------                              

    Mr. Poe. I thank the gentlemen.
    Mr. Shehata, 5 minutes.

 STATEMENT OF MR. AMGAD SHEHATA, VICE PRESIDENT, INTERNATIONAL 
             PUBLIC AFFAIRS, UNITED PARCEL SERVICE

    Mr. Shehata. Chairman Poe, thank you, and Ranking Member 
Sherman, members of the subcommittee. Thank you for the 
opportunity to testify on the Trans-Pacific Partnership 
agreement and its effects on the U.S. economy. I am testifying 
today on behalf of UPS and our nearly 400,000 employees working 
in the United States and around the globe.
    In 1906, an enterprising 19-year-old, Jim Casey, borrowed 
$100 from a friend and established American Messenger Company 
in Seattle, Washington. A lot has changed in 100 years. The 
American Messenger Company became United Parcel Service which 
eventually grew into the world's largest package delivery and 
logistics company. Today, UPS operates in 220 countries and 
territories with a fleet of 100,000 vehicles and is one of the 
world's largest airlines.
    We handle more than 6 percent of the U.S. GDP and 2 percent 
of the global GDP every day.
    With 95 percent of the world's consumers living outside of 
the United States, new trade agreements like the Trans-Pacific 
Partnership are critical to providing U.S. businesses greater 
access to the global marketplace. The TPP's agreements are 
important to the global economy, stems from its recognition of 
some of the fastest-growing regions in the world. With Japan's 
recent entry into the negotiations, alongside the likes of 
Singapore, Vietnam, and Malaysia, a successful TPP would be the 
most commercially significant free trade agreement ever 
negotiated; as we heard earlier, representing a third of the 
world's trade and 40 percent of global GDP, strategically 
integrating American supply chains with the Asia-Pacific.
    UPS's goals within the TPP. Free trade agreements such as 
the TPP offer real, tangible benefits to UPS and our customers. 
As a global transportation company, UPS is expected to benefit 
greatly from the growth in trade. In our experience, with every 
new FTA, UPS's export volume to that particular market 
increases on average over 20 percent in the first year. Of 
course, it is not enough to fill planes with goods if one 
cannot quickly get shipments to customers, freely establish as 
a foreign company, hire your own people or confidently invest 
in these foreign markets. In many of these markets we face a 
highly regulated transportation sector, complex board of 
procedures, and incoherent domestic regulations which 
effectively prevent us from providing the best and most 
competitive services to our customers.
    Through the TPP, we expect to secure critical commitments 
on market access, customs and trade facilitation, and 
regulatory disciplines which will allow us to compete on a 
level playing field. We operate in the new reality where 
businesses are linked together through a web of interconnected, 
predictable, and efficient supply chains. Inputs come from all 
over the world and are shipped to create products with the 
greatest values for consumers here in the U.S. or for eventual 
export. In order to enable these supply chains, UPS seeks 
strong commitments on customs and trade facilitation for 
express shipments including a competitive de minimis as well as 
electronic pre-clearance and guaranteed time release. Measures 
such as these are the basic building blocks of a modern and 
fluid trading regime. And best of all, these improvements and 
efficiency and regulatory coherence do not have to compromise 
the supply chain security. And in fact, can improve by 
leveraging new technological advancements.
    In conclusion, exporting to new markets continues to be the 
lifeblood of growth for the American economy and services are 
the central nervous system on which U.S. businesses rely, 
particularly SMEs. These businesses cannot penetrate foreign 
markets without support of a competitive and fluid supply 
chain. They must have free access to foreign markets and 
nondiscriminatory treatment within those markets. Given the 
TPP's ambition for market access and setting a global gold 
standard, it is timely for this subcommittee to be holding its 
hearing today. At this critical point in global economic 
recovery, it is imperative that the U.S. continue to 
demonstrate its leadership in advancing a global trade agenda. 
We must oppose demands to accept protectionism. We cannot 
afford to turn the clock back on international trade, 
particularly the growing Trans-Pacific market.
    After the 18th round of negotiations this month in 
Malaysia, we are enthused by the vigor with which the U.S. and 
all other parties are attempting to close open items within the 
remaining chapters and successfully conclude negotiations this 
year.
    Thank you again for your attention and your ability to 
focus on this very important issue. A comprehensive and 
commercially meaningful TPP is of vital importance to the 
expansion and prosperity of America's economy. Thank you.
    [The prepared statement of Mr. Shehata follows:]

    
    
    
    
    
    
                              ----------                              

    Mr. Poe. I thank the gentleman.
    Ms. Drake, you have 5 minutes.

STATEMENT OF MS. CELESTE DRAKE, TRADE AND GLOBALIZATION POLICY 
 SPECIALIST, THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF 
                    INDUSTRIAL ORGANIZATIONS

    Ms. Drake. Chairman Poe, Ranking Member Sherman, members of 
the committee, good afternoon. I appreciate this opportunity to 
testify on behalf of the AFL-CIO on the outlook for the Trans-
Pacific Partnership trade and globalization agreement. I have 
submitted written testimony for the record and will summarize 
my comments here.
    American workers already live in a global, economic 
environment which includes deep trade ties with TPP partner 
countries, but those trade ties are severely unbalanced, 
particularly with Japan with which we have a trade deficit of 
more than $76 billion, $52 billion in autos alone. The AFL-CIO 
does not believe that more of the same trade policy that 
brought us NAFTA and the WTO is going to fix the problem. Those 
deals have cost America's workers nearly $700,000 and 2.7 
million jobs respectively. They have led to increasing trade 
deficits and flat wages. This model of trade liberalization is 
also contributing to a declining share of national income for 
workers even as their productivity rises. In other words, as 
workers help their employers make record profits, they aren't 
seeing rewards that are commensurate with their efforts. 
Entities as diverse as the Federal Reserve Board and the 
Economic Policy Institute have documented this trend. We can do 
better which is why seeing the potential of a new trade model 
in the TPP, the AFL-CIO has actively engaged with the 
administration, Members of Congress, negotiators from each TPP 
country, and a variety of international allies to engage in 
this process and try to shape the deal into one that promotes 
American interests and not just the interests of its global 
business sector.
    Unfortunately, the publicly-available evidence has made us 
concerned that the TPP could repeat the mistakes of past trade 
policy which closed factories, sent jobs to overseas' 
sweatshops and failed to protect workers, small businesses, 
family farms, and even our national security. To attempt to 
address some of the shortcomings of past trade policy, the 
administration secured a preliminary deal with Japan in April, 
but the deal excluded a number of critical issues including 
concrete commitments on currency, auto parts, rules of origin, 
and labor rights.
    American workers are not confident that the deal is strong 
enough to pry open Japan's closed markets or create a level 
playing field, particularly in the auto sector.
    To promote the shared prosperity necessary to increase net 
exports and reduce our perennial trade deficit, we ask for your 
assistance in ensuring that the TPP charts a new course. It 
must include commercial terms that don't dilute Buy American 
policies or let foreign state-owned enterprises use subsidies 
to harm U.S. businesses or their workers. It must require 
reciprocal market access and strict rules of origin that 
promote jobs here or in TPP partner countries, but not in 
countries like China that have not made commitments to us.
    In addition, all TPP countries must agree to enforce the 
ILO core labor rights which empower workers to seek improved 
wages, benefits, and working conditions. Enforcement measures 
when governments refuse to protect those rights must be at 
least as swift, effective, and meaningful and those for 
commercial violations. The TPP must not give foreign investors 
the right to bypass our courts to challenge American laws that 
they don't want to follow. Investment policies to protect our 
states, cities, and workers against companies seeking to thwart 
the people's will.
    To really grow the American economy, the TPP must also 
require nations to uphold basic environmental standards, 
contain an effective mechanism to address currency manipulation 
which has been used by China, Japan, and South Korea to 
advantage their own exports, include banking and insurance 
rules that promote economic stability, ensure imports including 
food and toys are safe, ensure the rights of publicly-supplied 
services like electricity and water and contain intellectual 
property rules that support American innovation and the arts 
without making life-saving medicines unaffordable.
    The TPP countries account for one third of global trade and 
40 percent of global GDP and that is before additional 
countries joined, so we can't afford to get it wrong. To avoid 
a repeat of the mistakes of NAFTA, we encourage all members of 
this committee to review the developing TPP test. Your input 
could be vital to creating good jobs and fair opportunities for 
businesses in your district.
    I thank the committee for its time and would be pleased to 
answer any questions.
    [The prepared statement of Ms. Drake follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Poe. I thank all four of our witnesses. Just so 
everyone knows, in approximately 30 minutes we are supposed to 
have votes, so I will save my questions until last and we will 
see how many members we can get in before votes. The chair 
recognizes the gentleman from Illinois, Mr. Kinzinger.
    Mr. Kinzinger. Thank you, Mr. Chair. Thank you for that. I 
am going to hopefully keep this under 5 minutes. Politicians 
talking get old sometimes.
    Several countries not currently involved in the 
negotiations have expressed interest in signing on to the TPP 
once it is done, such as Taiwan. What is the likelihood that 
they will and what kind of opportunity does this present for 
U.S. trade. And I will ask just the three gentlemen here at the 
end if you can answer that.
    Mr. Gerwin?
    Mr. Gerwin. Yes, Congressman. I think it does create an 
opportunity for those countries to join on. As I mentioned in 
my testimony, one of the things that is good about the TPP is 
that we have an expanding group of countries that are 
coalescing around high standards. And other countries are 
attracted to that because I think they believe very strongly 
that if they don't get in the game, they are going to get left 
out. So I think there is a certain degree of attraction that 
the TPP has that will bring in other countries. I know other 
countries--not only in Asia, but in Latin America--have been 
expressing interest in joining.
    Mr. Kinzinger. Good. Mr. Metalitz?
    Mr. Metalitz. Yes, I would agree with what Mr. Gerwin said. 
It certainly provides that opportunity. It is a very complex 
negotiation even now and so I think the focus should be on 
getting that high-standard agreement in place and then if there 
are countries that are willing to step up to those standards 
they could certainly be considered at that point.
    Mr. Shehata. I guess a way to certainly raise the game of 
countries that want to join it is a template that forces them 
to live with disciplines that make open economy a reality. So 
from a UPS standpoint, we believe in a very efficient supply 
chain, so if those countries abide by standards that allow for 
that movement and velocity of goods, we think it is a good 
idea.
    Mr. Kinzinger. Do you believe there are negotiating areas 
in which the U.S. position will change if Congress weighs in 
and presses hard enough? And if so, what are they?
    Ms. Drake, I will start with you.
    Ms. Drake. I believe if Congress weighs in and presses hard 
enough the USTR could change its negotiating objectives in any 
area. Congress has the authority under the Constitution to 
negotiate international trade so the administration should 
follow Congress' wishes. I think it would be important 
particularly for Congress to weigh in regarding state-owned 
enterprises. I know from speaking with negotiators from other 
countries that they do not like the U.S. proposal. They do not 
want their state-owned enterprises to be subject to disciplines 
that would level the playing field. So that would be one 
potential area and I would also ask Congress to look at other 
commercial sectors like rules of origin, Buy American, and 
these kinds of things to help us propose exports.
    Mr. Kinzinger. Okay, sir?
    Mr. Shehata. Yes, actually, from a state-owned enterprise's 
standpoint, my comments officially were focused on a level 
playing field. We do have concerns to ensure that within the 
negotiations on a level playing field against state-sponsored 
or state-owned enterprises is critical and it is a focus area 
of UPS.
    Mr. Metalitz. I think Congress has weighed in in many ways 
already in support of strong copyright protections in this 
agreement, but I think it would be valuable to continue to do 
so. This is a tough negotiating area on some issues and so it 
is important to express that.
    Mr. Kinzinger. Any thoughts, Mr. Gerwin?
    Mr. Gerwin. Yes, Congressman. I agree with Ms. Drake. I 
think state-owned enterprises are a very, very important issue 
to focus on, not only for this agreement, but because we are 
setting a template for the world and we can use this to 
pressure other countries that are not part of these discussions 
like China to reconsider their policies on state-owned 
enterprises as well.
    Mr. Kinzinger. And then finally, what are the most 
significant obstacles that will impede the 12 countries 
involved in the TPP from reaching an agreement by the end of 
the year? And I will ask all four of you. I have got 1 minute 
left.
    Mr. Gerwin?
    Mr. Gerwin. I think the biggest obstacle, Congressman, is 
the lack of comprehensivity. If the agreement is not 
comprehensive, if we are not willing to enter into a 
comprehensive agreement, the other countries we are negotiating 
with will not as well and we will enter into this downward 
spiral where momentum will come out of the negotiations. And if 
we do get something, we are not going to get something that is 
in the best interests to the United States.
    Mr. Metalitz. I would agree with that. This is a complex 
agreement, but if we don't aim for a comprehensive agreement 
that is possible, then we are not going to succeed.
    Mr. Shehata. I think the recent acceptance of Japan to the 
agreement may have some delaying consequences. So we need to 
ensure that like Canada and Mexico that we bring them on board 
quickly.
    Mr. Kinzinger. Okay, Ms. Drake?
    Ms. Drake. The most controversial issues appear to be 
labor, environment, intellectual property, state-owned 
enterprises and investment. And my advice would be to weigh and 
get these things right, rather than rush to finish.
    Mr. Kinzinger. I thank the witnesses, Mr. Chairman, thank 
you. Ii yield back.
    Mr. Poe. I thank the gentleman. The chair recognizes the 
ranking member for 5 minutes. Mr. Sherman.
    Mr. Sherman. Thank you. I have got so many questions here. 
My colleague from Long Beach will be asking one that I wanted 
to ask, but it relates more to his district than mine and I 
still have too many questions. I have some efficiency ideas.
    I would ask members of the panel to raise their hands if 
they believe that this agreement is going to reduce our trade 
deficit with the countries involved. Now I will let you know 
that our trade deficit currently totals $154 billion, half of 
that if you exclude Japan. So how many people think it will 
reduce? Mr. Gerwin, okay. And how many people think it will 
increase our trade deficit? Okay.
    Which of you, either yourself or on record or your 
organizations are on record as predicting that MFN for China 
would dramatically increase our trade deficit? I see one hand. 
So the others who ventured--and that is Ms. Drake.
    So the other two gentlemen here didn't get it right on 
China, but they are confident that they are going to get it 
right this time. And who here predicted that we would see an 
increase in our trade deficit with Korea after the Korea free 
trade agreement? I see Ms. Drake raising her hand. I see the 
other panelists not.
    So nothing more connotes insanity than doing the same over 
and over again and expecting another result.I21Mr. Gerwin, I 
want to focus on the footnote that we got in our most recent 
agreements with Panama, Colombia, Korea and that stated that if 
we invoke the essential security provision allowing us to take 
action essential for our own national security interests or for 
international peace and security that that matter was not 
subject to review. Can you shed any insight as to why we would 
in effect be erasing that that we got in the Korea free trade 
agreement by not having it in the TPP?
    Mr. Gerwin. I am afraid I can't, Congressman. I don't know 
exactly what is being discussed in the current context of the 
TPP and I must say I am not--I can't say I am a specialist on 
national security issues.
    Mr. Sherman. Well, this is the subcommittee on terrorism 
and nonproliferation as well as trade and to think that we 
would sit by while that footnote is obliterated by those who 
want to make ever-greater concessions on trade issues during 
these negotiations is surprising. And perhaps we can get 
Government witnesses to come before us here and find out why 
they are hell bent on sacrificing our national security 
interests in an effort to go forward with this agreement.
    Ms. Drake, can you give us a little insight as to what this 
enormous trade deficit means for working families in the United 
States?
    Ms. Drake. Absolutely. The trade deficit represents lost 
jobs, either directly, they were here, they were shipped 
overseas so that different services could be produced there and 
then exported back to the U.S. Or they are a lost opportunity 
where it could have been job growth within the U.S., but it was 
job growth elsewhere.
    Just from the first year of the Korea FTA which you 
discussed a bit in your opening statement, 1 year doesn't make 
a trend, but those first-year numbers are quite disturbing and 
it looks like the $5.8 billion increase in our deficit from 
that first year represented about 40,000 jobs that American 
workers could have had.
    Mr. Sherman. If I can interrupt and you are the only person 
here representing an organization who predicted something close 
to that result. What about currency manipulation? Raise your 
hands if you or your organization have been actively calling 
for enforcement of the rules against currency manipulation. 
Again, we see only Ms. Drake's hand go up.
    And I would just ask how can you call it a free trade 
agreement if American workers are protected by an organization, 
namely the U.S. Government that is unwilling to invoke the 
currency manipulation provisions that we have now, unwilling to 
call China a currency manipulator? I fear for the American 
people that they have to live with the trade decisions made by 
this Government. I yield back.
    Mr. Poe. To answer the gentleman's question, the United 
States Trade Representative was invited to testify and refused 
to testify. You can take that however you want to take it.
    Mr. Sherman. Those with good cases don't hesitate to 
present them.
    Mr. Poe. Silence speaks loudly. The chair will recognize 
members of the subcommittee and then I see that we have some 
members of the full committee here.
    Mr. Rohrabacher, as procedure, we will take those 
individuals and then ask questions at the end.
    Mr. Lowenthal from California is recognized next.
    Mr. Lowenthal. Thank you, Mr. Chair, and thank you Ranking 
Member also for this. You know, I have a question to follow up 
on what Ms. Drake had said before about looking at how these 
really make sure that we as we promote free trade, we also 
protect American workers. We promote jobs here. And so I want 
to give you an example of something that is recently come to my 
attention.
    The question is how does this all fit together? Two large 
grain conglomerates, Mitsui and Marubeni, which are Japanese 
grain conglomerates have locked out members of the ILWU. I 
don't know if you are aware of that in both Oregon and in 
Washington State. At grain export facilities, they have locked 
out these workers despite the fact that the American member of 
the Northwest Grain Handlers Association, Cargill, has reached 
an agreement with the ILWU with the help of Federal mediators. 
And so, you know, how are these--now we are about to engage in 
a trade agreement with Japan. How are these American workers 
going to be treated by Japanese companies? Should we be 
considering Japanese participation in the Trans-Pacific 
Partnership when, in fact, we are beginning to document locking 
out workers that could be a radical harm to American workers? 
And shouldn't we ensure that these foreign-based companies 
treat American workers with the respect and the dignity they 
receive, or should we just kind of disregard this and just move 
forward.
    My question is to you, Ms. Drake?
    Ms. Drake. American workers are very concerned about Japan 
joining the TPP. We are not sure that either the U.S. or Japan 
are ready for the kind of negotiations they would need to make 
sure that workers can get the best deal.
    When foreign investors, be they Japanese or from any other 
country, invest in the U.S., they should absolutely be held to 
the highest standards, the same standards as any other producer 
in the U.S. in terms of compliance with workplace safety laws, 
labor laws, wage standards, environmental regulations, all of 
it. And in fact, the AFL-CIO has suggested as one tool to 
incentivize foreign employers to operate here to comply to not 
give them access to some of the special privileges in a trade 
agreement such as investor/state dispute resolutions unless 
they absolutely have clean hands and don't have unfair labor 
practice allegations against them or don't have unpaid taxes 
and that kind of thing.
    Japanese corporations, in particular, tend to have good 
relationships with their Japanese unions and then often somehow 
it doesn't translate when they operate in the U.S. And so in 
particular, the United Auto Workers have been very involved in 
trying to improve those relationships and actually get some 
recognition agreements and some contracts with the Japanese 
auto makers.
    Mr. Lowenthal. One additional question and we have heard 
about safety issues, now about labor issues, environmental 
issues, some of the other unfinished business about state-own 
enterprises, some of the investment issues around investment of 
foreign corporations and legal issues around that where it will 
be heard.
    I have another question. This committee, since I have been 
on Foreign Affairs under the leadership of both Chairman Royce, 
Chairman Smith have really taken a very aggressive stand and 
myself about human rights violations, especially about one 
country that wants--one or more of these countries like 
Vietnam. This is a very critical issue to members of this 
committee. Should human rights--should we be rewarding 
countries that have severe human rights violations? I ask any 
member of the panel.
    Mr. Gerwin. Congressman, I absolutely agree. These are, as 
I mentioned in my testimony, I think it is extremely important 
that we use these agreements to promote American values.
    Mr. Lowenthal. That is a critical American value.
    Mr. Gerwin. That is absolutely a critical American value. 
But one of the things that often happens is that others are 
doing trade agreements as well. For example, China is doing 
lots of trade agreements. One of the things that China has done 
is taken the issue of labor, and taken the issue of the 
environment off the negotiating table in their trade 
negotiations with other countries. So if we don't do these 
trade agreements and do the best we can to enforce things like 
labor and the environment and other important American values--
--
    Mr. Lowenthal. If it is not even being discussed, is it not 
a race to the bottom?
    Mr. Gerwin. No, Congressman. I think it enhances our 
ability to have good relations with these countries and to push 
them to improve their economies and to improve----
    Mr. Lowenthal. So first we reward them and then we push the 
issue or do we do it before we----
    Mr. Gerwin. Well, I think we are doing it in multiple 
contexts, but I think having closer relationships with them is 
helpful. And as I said, countries like China don't care.
    Mr. Lowenthal. I hope you are right, but most human rights 
organizations have indicated just the opposite. They have not 
since asking to join the TPP, their human rights violations 
have escalated rather than not escalating.
    Mr. Poe. The gentleman's time has expired. The chair 
recognizes the gentleman from Texas, Mr. Castro, for 5 minutes.
    Mr. Castro. Thank you, Chairman Poe. I thank each of you 
for coming and lending your testimony on this issue today. I 
have a question around our previous labor agreements and how 
well we have enforced or how well actually the other countries 
have enforced labor provisions and how well we have done in 
overseeing those issues in terms of labor and the environment, 
et cetera, and also the evolution of what we have required of 
other countries in terms of labor conditions, working 
conditions, going from NAFTA forward?
    Anybody on the panel is fine.
    Ms. Drake. I am happy to start.
    Mr. Castro. Sure.
    Ms. Drake. The commitments in labor that the U.S. has asked 
for in its free trade agreements certainly have evolved over 
time and have improved generally over time. It wasn't 
necessarily straight line, but it started with sort of a side 
agreement that was largely unenforceable with NAFTA to a CAFTA 
standard of enforced labor laws to what is now the high water 
mark of the March 2007 agreement in Peru which again is a 
promise to be a floor and should be higher in this agreement.
    Mr. Castro. So you would agree that it is going in the 
right direction?
    Ms. Drake. It is going in the right direction, but it is a 
weak tool because it involves sort of diplomatic relationships 
and there is no sort of hard penalty that puts in place 
immediately, but it highlights promises and it does put 
pressure on countries to comply. It is just that it is a slow 
process. But we encourage it to get stronger and stronger.
    Mr. Castro. And I guess that is what I am trying to get to 
the bottom of. There is sometimes a difference between what you 
have on paper and what happens in practice. So my question is 
essentially about the gap there. But you know, I take the point 
to heart about the trade deficit although I do think you have 
got to ask yourself the question about both parties, do both 
parties do better even though you may be buying more of their 
stuff than they are of yours, do both parties do better by the 
agreement? I think that is something that we struggle with.
    The reason I ask the labor question is because what we have 
seen over the years is America losing jobs to other countries, 
places where workers can be paid essentially a pittance for 
their work. We have got to improve the labor conditions and the 
working conditions and really the wage conditions in other 
countries if we are going to be successful in keeping American 
jobs in America. And so I see that as an opportunity in these 
agreements and really it is something that should be 
fundamental to them. I don't think that we can be shut off from 
the reset of the world. I do think that we need to engage other 
countries in trade, but I do think that the agreement should be 
done in a useful way that accomplishes also making sure that 
American workers are able to compete fairly against people in 
other countries.
    If you all have any comments on anything I have said?
    Mr. Gerwin. Yes, Congressman Castro, a couple of things. 
First of all, I would like to address the question of our trade 
deficit which has been discussed. If you look at our agreements 
with free trade agreement countries, we actually have 
manufacturing goods, services goods, and ag goods surpluses 
with those countries. The reason we, for example, have mostly 
trade deficits with Canada and Mexico is because we import a 
lot of oil from those countries. The real drivers of our trade 
deficits are China, a country that we don't have a free trade 
agreement with, and petroleum. So I think when we are talking 
about free trade agreements and deficits, I think it is 
important to drill down and see the effects that the agreements 
themselves have.
    Mr. Castro. So your point is that in certain sectors or 
industries, we are actually coming out ahead?
    Mr. Gerwin. Yes, I mean if you look at manufacturing 
services and ag. and you aggregate our free trade agreements 
historically, we are doing well. So I think that is important. 
And I will reiterate the other point. I think it is very 
important for us to get the highest possible labor standards 
and environmental standards that we can get in these agreements 
and one of the things the TPP could help us do is go back and 
perhaps improve the agreements that we have, the side 
agreements we have with Canada and Mexico, now that they are 
part of the TPP.
    Mr. Metalitz. If I could just add one point to what Mr. 
Gerwin said on the first point? If you look at the sectors that 
depend on copyright protection on books, on music, on 
publishing, on software, these are big exporters, $130 billion 
in foreign sales and exports, far bigger than many 
manufacturing industries, for example. And that has continued 
and if we can get stronger protections in these countries, we 
are going to be exporting more and we are going to be creating 
more jobs in the United States in all of those industries. So I 
think they get to look at it on a sector----
    Mr. Castro. Just to make a final comment on that, Chairman, 
last week and several of us were in Los Angeles. Lucille 
Roybal-Allard, a congresswoman from Los Angeles, led a 
discussion with the Motion Picture Association and former 
Senator Dodd who now heads up that organization was there and 
he was talking about the very extensive problem that you have 
with piracy in China and in other countries, so I hear you on 
that.
    Mr. Poe. The gentleman's time has expired. I will yield 
myself 5 minutes. We are in the process of votes. We will try 
to finish before the voting process because it is going to be a 
long process.
    Mr. Gerwin, you mentioned something about oil. I realize 
that oil, exporting into the United States, affects the overall 
trade deficit of the United States because we import so much 
oil. How much is it? The trade deficit made up of importing 
crude oil is what percentage?
    Mr. Gerwin. You know, I don't know the precise number, 
Congressman, but I think it is about a third.
    Mr. Poe. Does anybody else want to weigh in on that?
    Mr. Gerwin. We did a study when I was at Third Way and I 
think if you called oil its own country, I think it would be 
like our number three trade deficit country.
    Mr. Poe. Hopefully, we will change that and become an 
exporter, especially of natural gas. That is a different issue 
however.
    Four of these countries are on the intellectual property 
watch list which means that we are watching them. Should we 
include them in the TPP, especially Vietnam as pointed out they 
have got some other issues. They don't treat their own people 
right. They have got human rights violations, international 
trafficking. Should we just exclude those four or should we try 
to do something with them?
    Mr. Metalitz?
    Mr. Metalitz. Yes, those countries, I think it is important 
that those countries be involved in the TPP, but I think the 
fact that they are on the watch list and in one case on a 
priority watch list from USTR is significant and it raises 
issues that need to be addressed in the TPP negotiations.
    Chile is on the priority watch list. We signed a free trade 
agreement with Chile that had very strong copyright provisions 
and they simply have not implemented many of them and that is 
setting a terrible example for our future TPP partners. They 
may be thinking well, we can sign up----
    Mr. Poe. Let me interrupt just for a second. So they don't 
agree. They are still violating the rules. They are cheating. 
And so what are we doing? Saying woe is me or taking them to 
the international court? What are we doing?
    Mr. Metalitz. Well, there are steps that could be taken 
under our free trade agreement.
    Mr. Poe. Are we doing anything?
    Mr. Metalitz. I don't think we are doing enough. It is a 
source of frustration----
    Mr. Poe. I am going to have to ask a lot of questions here. 
Our negotiators, are they good negotiators? Are diplomats 
negotiating this or do we have some horse traders in there 
fighting for America? I am serious about this. As the ranking 
member has pointed out, we go in to these agreements and all of 
a sudden we find out maybe we didn't get the best deal and then 
we come back and we show it to the American public and it is a 
done deal and it is a deal.
    I am asking your opinion of the negotiators for the United 
States. It is an opinion. Everybody has got an opinion.
    Ms. Drake?
    Ms. Drake. If I may, we would like to see USTR do a lot 
better. For instance, we think that in the Korea FTA it was a 
huge mistake to let that 35 percent regional value content go 
for automobiles. That left jobs on the table and USTR could 
have done a heck of a lot better. And we have meetings with 
USTR fairly regularly. As I said, they do have an open-door 
policy and we are constantly saying we need you to really go 
after rules or origin, market access commitments, reciprocal 
market access commitments that get good jobs for Americans. And 
as was mentioned, allow workers in other countries to have 
rights that they can raise their own wages.
    Mr. Gerwin. Mr. Chairman, I think we also need more of 
them, too.
    Mr. Poe. More negotiators?
    Mr. Gerwin. More negotiators. Ambassador Froman has said 
that the serious budget issues that USTR has makes it difficult 
for them to go and do some of the kinds of assessments they 
need to do in foreign countries to determine whether those 
countries are actually violating things like intellectual 
property rights.
    We only have 200 plus people at USTR. It has a lot of 
responsibility and I think they need some more resources.
    Mr. Poe. Would you recommend, the four of you, as I am 
nearly out of time that Congress, this committee, make a list 
of recommendations that we put on the table to make sure we 
think these are the best in America's interest to go after them 
on these issues. Let us make this part of the deal, while it is 
still in flux and it hasn't been signed yet. Would you agree 
with that, yes or no. I will just go down the list?
    Mr. Gerwin. Yes.
    Mr. Metalitz. Yes.
    Mr. Shehata. No.
    Ms. Drake. Yes.
    Mr. Poe. Okay, why no? Why do you think Congress should----
    Mr. Shehata. I'm going to wrap my answer in the question 
you asked earlier in regards to are they doing the best job 
they possibly can? I think they have been engaged for 3\1/2\ 
years. They have learned the issues. They have America's 
interest in mind. They are trying to take our core beliefs and 
instill them in a number of countries through an agreement that 
has discipline on getting them to where we need to go.
    So my answer of no is we need to give them more horsepower, 
but we need them to be able to achieve what we ask them to do.
    Mr. Poe. And as Ms. Drake said, not rush through this, but 
get it done right, rather than just get it done.
    Last comment, just brief answer from one of you on the 
state-owned enterprises. I am very concerned about these state-
owned enterprises competing with Americans because they seem to 
cheat. Should this be a bigger issue? Should we emphasize this 
more in the TPP negotiations that we want--they have to go by 
the same rules, even though they are state-owned enterprises, 
yes or no?
    Mr. Gerwin. Absolutely. We are certainly concerned with how 
the governments operate state-owned enterprises, especially in 
terms of respecting intellectual property. That is essential.
    Mr. Poe. Okay.
    Mr. Shehata. Critical, definitely very important.
    Ms. Drake. It is a critical issue.
    Mr. Poe. Okay, thank you. I thank all four of you. I see 
that Mr. Rohrabacher is here. I will stay if the other members 
want to go on the House floor.
    And Mr. Rohrabacher, do you want to ask some questions?
    The question is, Mr. Rohrabacher, do you want to ask any 
questions?
    Mr. Rohrabacher. Yes, I do. Thank you, Mr. Chairman.
    Mr. Poe. You have 5 minutes.
    Mr. Rohrabacher. I have 5 minutes, all right. I was just 
noting again as some of the other members did that we have 
Vietnam right in the middle there of all these other countries 
and there are some questionable political institutions or lack 
of institutions in some of these countries, but Vietnam is an 
out-and-out dictatorship. It is the dictatorship of the 
proletariat. You go there and they are still talking that 
stupid way.
    Is there some notion that we are going to be more 
successful in Vietnam that by trading with them they are going 
to become a freer society? That didn't work in China, did it? 
China isn't any more democratic today than it was--in fact, 
some people think it is less democratic today because they are 
using our computers to track down their dissidents. Is this 
just another mistake in an idea that we are going to make them 
more liberal by trading with them, the old hug a Nazi, make a 
liberal theory? [Laughter.]
    Does anybody want to tackle that?
    Mr. Gerwin. Well, Congressman, there is a difference 
between what we are proposing to do with Vietnam and what we 
have done with China. We have traded more with China. What we 
are proposing to do with Vietnam is to make them sign up to a 
whole bunch of new commitments including things like labor and 
the environment and rule of law and notice of process 
rulemaking, all of that. And if they are not willing to sign up 
to that, they are not going to do an agreement with us. And I 
think those kinds of deeper commitments can be helpful. A big 
slog, I understand that.
    Mr. Rohrabacher. I think if you really dig down, you are 
going to find out that countries like Vietnam, governments like 
Vietnam, actually have constitutions. They have signed on to it 
with their people and then they don't pay any attention to it 
whatsoever. I mean the Soviet Union had a wonderful 
constitution. Signing on isn't the point. Actually, it is 
enforcing something that somebody signed on and I see our 
representative from labor is shaking her head. Maybe you can 
tell us do we enforce, do we have a history of enforcing these 
types of agreements once we have got countries like Vietnam 
under signature?
    Ms. Drake. Not strongly enough. For example, we have been 
told for years that signing countries up will exactly as you 
say, will liberalize, will improve human and labor rights 
conditions, et cetera, et cetera. What we found particularly 
with the CAFTA countries is that labor rights have been 
degraded. The same is true in Mexico and in many other 
countries and we are afraid that just sort of signing Vietnam 
up might lead us to a situation that is similar to Colombia 
where there is a labor action plan, there are commitments for 
what is going to be better, but the real day-to-day rights for 
workers change very little, if at all.
    Mr. Rohrabacher. Is there a right to strike? Is there a 
right to strike in Vietnam? Do people have a right to strike in 
Vietnam?
    Ms. Drake. There is not. It is illegal.
    Mr. Lowenthal. Only dissidents.
    Mr. Rohrabacher. That is right. You know, years ago when I 
was a young man which is many, many years ago when I was 19 I 
spent some time in the Central Highlands of Vietnam. I was not 
in the military, but I was with the Montagnards up there and I 
couldn't help but note that there are 350 Montagnards right now 
being held in prison because they are evangelical Christians. 
They have managed to be converted to Christianity.
    I just can't imagine that it is consistent with our values 
that we are going to declare that a country that holds 350 
people and that is just these Montagnard Christians, they hold 
other religious people in prison, that we are going to lump 
them in with other free countries as if there is no difference 
in our relationship between New Zealand and this communist 
dictatorship that still tries to stamp out people's belief in 
God. I just can't believe we just ignore that fundamental fact 
that is staring us in our face.
    I think that the decisions we have, Mr. Chairman, are more 
than economic decisions. We are defining ourselves to the world 
as to what we believe most and if we believe that like we have 
been dealing with China that just making money is the only 
thing that America is all about I just don't think that people 
will respect us and we won't be any more prosperous of safe 
because of it. Thank you very much.
    Mr. Poe. I thank the gentleman. I want to thank all four of 
you for being here. There will be more questions in writing 
submitted to you from members of the panel, just so you know 
they are coming. Don't take a long time in answering them. So 
without objection, all members may have 5 days to submit 
statements, questions, extraneous materials for the record, 
subject to the length limitation in the rules of this committee 
and the committee is adjourned. Thank you again.
    [Whereupon, at 2:38 p.m., the subcommittee was adjourned.]
                                     

                                     

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