[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
U.S.- EU TRADE AND INVESTMENT PARTNERSHIP NEGOTIATIONS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TRADE
OF THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 16, 2013
__________
Serial No. 113-TR02
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON Y. SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY K. DAVIS, Illinois
KENNY MARCHANT, Texas LINDA T. SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD C. YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JAMES B. RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Cousel
______
SUBCOMMITTEE ON TRADE
DEVIN NUNES, California, Chairman
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois RON KIND, Wisconsin
LYNN JENKINS, Kansas
CHARLES W. BOUSTANY, JR., Louisiana
PETER J. ROSKAM, Illinois
C O N T E N T S
__________
Page
Advisory of May 16, 2013 announcing the hearing.................. 2
WITNESSES
Chairman Devin Nunes, Representative of the State of California.. 5
Honorable Charles B. Rangel, Representative of the State of New
York........................................................... 8
Ambassador Stuart E. Eizenstat, Partner, Covington & Burling LLP,
on behalf of the Transatlantic Business Coalition, Testimony... 13
Ms. Inga Carus, President & CEO, Carus Corporation, Testimony.... 25
Mr. James Grueff, Principal, Decision Leaders, Testimony......... 35
Mr. Greg Slater, Director, Global Trade and Competition Policy,
Intel Corporation, on behalf of the Business Coalition for
Transatlantic Trade and the Coalition of Services Industries,
Testimony...................................................... 40
SUBMISSIONS FOR THE RECORD
The Honorable Erik Paulsen....................................... 76
Handmade Toy Alliance............................................ 77
ACLI............................................................. 85
American Farm Bureau............................................. 89
GWU.............................................................. 92
IPMI............................................................. 95
NAM.............................................................. 97
Public Citizen................................................... 98
Shellfish Growers Association.................................... 104
USIFI and IFAI................................................... 107
MATERIAL SUBMITTED FOR THE RECORD
Questions for the Record......................................... 112
U.S.-EU TRADE AND INVESTMENT PARTNERSHIP NEGOTIATIONS
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THURSDAY, MAY 16, 2013
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:55 p.m., in
room 1100, Longworth House Office Building, the Honorable Devin
Nunes [Chairman of the Subcommittee] presiding.
[The advisory of the hearing follows:]
HEARING ADVISORY
Chairman Nunes Announces Hearing on U.S.-EU Trade and Investment
Partnership Negotiations
1105 Longworth House Office Building at 2:00 PM
Washington, May 9, 2013
House Ways and Means Trade Subcommittee Chairman Devin Nunes (R-CA)
today announced that the Subcommittee will hold a hearing on
negotiations of a U.S.-EU trade and investment partnership agreement.
The hearing will focus on the opportunities and challenges presented by
the President's notification to Congress that he intends to negotiate
such an agreement. The hearing will take place on Thursday, May 16,
2013, in 1100 Longworth House Office Building, beginning at 2:00 P.M.
In view of the limited time available to hear the witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of invited
witnesses will follow.
BACKGROUND:
The transatlantic economy is the largest and most integrated in the
world, comprising 50 percent of global GDP and generating approximately
$5 trillion in total commercial sales each year. The European Union and
United States account for 30 percent of world trade. Each day, $2.7
billion of goods and services are traded bilaterally, supporting
millions of jobs in both economies. Five of the top ten export markets
for U.S. services are in Europe. Direct investment by the United States
and the EU into each other's markets totals more than $3.7 trillion.
Europe is by far the largest destination for U.S. outbound investment,
with Europe accounting for a roughly equal amount of U.S. outbound
investment. In comparison, China ranks 12th as a U.S. investment
destination, behind Belgium, France, Germany, Ireland, the Netherlands,
Switzerland, and the UK, among others. This longstanding integration
translates into significant U.S. jobs: approximately 15 million workers
in the United States are employed as a result of transatlantic trade.
On March 20, 2013, President Obama notified Congress of his intent
to enter into formal trade agreement negotiations with the EU, thus
beginning a 90-day consultation period with Congress that will expire
on June 18, 2013. The President's notification emphasizes that a U.S.-
EU trade and investment agreement would address both traditional tariff
barriers as well as important regulatory and other non-tariff barriers,
including sanitary and phytosanitary barriers to U.S. agriculture
exports. A U.S.-EU trade and investment agreement would also provide an
opportunity to broaden and deepen cooperation on third-country issues.
In announcing this hearing, Chairman Nunes said, ``A comprehensive
and ambitious transatlantic agreement would promote economic growth,
strengthen an already strong economic alliance, and serve as an
influential model promoting free trade and open markets around the
world. The agreement is also an opportunity for the United States to
resolve long-standing regulatory barriers, and, in particular,
regulatory barriers not based on sound science that block our
agriculture exports. Furthermore, an ambitious agreement can help to
set the rules of global trade and strengthen U.S.-EU cooperation in
addressing barriers in third countries.''
FOCUS OF THE HEARING:
The focus of the hearing is on the benefits of expanding U.S.-EU
trade, including through the negotiation of a trade and investment
agreement. The hearing focus will include: (1) tariff barriers to
trade; (2) regulatory barriers, including sanitary and phytosanitary
barriers to U.S. agriculture exports; (3) opportunities for regulatory
cooperation and coherence; (4) services and investment barriers; and
(5) ways to strengthen cooperation between the United States and the EU
with regard to third-country issues.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
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For questions, or if you encounter technical problems, please call
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Chairman NUNES. Good afternoon. I want to welcome everyone
to our hearing on the U.S.-EU trade and investment partnership
negotiations. Today's hearing focuses on the enormous potential
that exists in a U.S.-EU trade and investment agreement. The
U.S.-EU economic relationship is the largest and most
integrated in the world, comprising 50 percent of global GDP,
supporting millions of U.S. jobs.
Although it is a deep and mature relationship, we can do
more. The timing is exactly right to promote growth in both of
our economies, and I strongly support negotiations for an
ambitious and comprehensive trade and investment agreement.
From a strategic perspective, the United States and Europe
have long been close allies in the effort to open markets and
to promote free trade. These negotiations are an opportunity to
strengthen an already strong economic alliance and serve as an
influential model to promote free trade and open markets around
the world. However, we should also recognize that these
negotiations will not be easy. They will require enormous
creativity and flexibility on both sides of the Atlantic.
Any agreement must be ambitious and comprehensive with all
issues on the table. A critical area for me is agriculture and
SPS. This area has been exceedingly, longstanding difficult and
frustrating, which must be resolved. In particular, I would
like to see sufficiently enforceable obligations that go beyond
the WTO SPS chapter. I know many of my colleagues share this
concern.
This hearing provides an opportunity to hear from the
private sector about the potential benefits and challenges of
these negotiations, and particularly, I hope that we will learn
more from our witnesses about the following issues. One,
addressing traditional barriers to trade, including the
elimination of tariffs and liberalizing tariff rate quotas.
Two, resolving services and investment barriers, and
establishing strong rules in these areas that can be jointly
promoted in our engagement with other countries.
Three, creating specific commitments and an ongoing agenda
to identify and eliminate unnecessary regulatory barriers,
including sanitary and phytosanitary barriers to U.S. ag
exports. The EU regulatory process is often non-transparent and
prevents U.S. stakeholders from participating, and is
unpredictable. An agreement should address the EU's practices
on a comprehensive, horizontal basis.
Four, exploring opportunities for regulatory cooperation
and coherence by eliminating redundancy and inefficiency
without weakening our respective high standards.
And five, finally, five, developing and strengthening
cooperation regarding our shared concerns with trade and
investment policies in third countries, such as anti-
competitive behavior from subsidized state-owned enterprises
and policies that undermine intellectual property rights.
Today's hearing also highlights the need to develop and
pass bipartisan trade promotion authority to provide a clear
framework for Congressional consideration and implementation of
trade agreements, as well as to set out negotiating objectives
for this negotiation. I welcome the Administration's interest
in TPA, but call for further and intensified engagement from
USTR and the White House.
It is now my pleasure to yield to Ranking Member Rangel for
the purpose of an opening statement.
[The prepared statement of Chairman Nunes follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. RANGEL. Thank you, Mr. Chairman.
Let me say, first off, I want to thank you and your staff
for the very cooperative way in which you pulled together this
most important hearing, and I want to thank you for having it.
The timing is just right. We are in the midst of a 90-day
layover period following the administration's notification that
it intends to enter into these talks.
This time gives us a chance to think about the
opportunities that this kind of deal could provide. Any
reduction in foreign trade barriers has the potential to
strengthen our economy, and in that sense, this agreement is no
different. Today one-third of all tariffs on U.S. exports
through the world are paid to the EU. A successful TTIP would
eliminate those tariffs, but the bigger issue is nontariff
barriers. An agreement with the European Union gives us a
chance to address issues, such as regulatory nontariff
barriers. There are certainly cases where these nontariff
barriers arise because of a desire to protect regulatory
burdens can be shared perhaps through exchanging inspection
results or other information concerning public health risks,
but a successful TTIP negotiation will do more than simply
improve our bilateral relationship.
An agreement between these two global leaders together
accounting for nearly half of the world's GDP and 30 percent of
world trade gives us the chance to establish new rules and a
new framework for global trade. These rules should address
critical issues that are not adequately addressed under
existing arrangements.
Some of these issues include, first, ensuring that exchange
rates are not manipulated to gain unfair advantage in trade.
Europeans are not current manipulators, and neither are we, but
we can work together to develop a standard to capture what is
or isn't permissible in this area.
Two, ensuring that state-owned enterprises are not granted
unfair advantages over private enterprises. We and the
Europeans share the view that state capitalism puts our
companies at a competitive disadvantage.
There is no guarantee that we will succeed in reaching a
deal that works for both sides, as it must. The European
negotiators will have to consult closely with the European
parliament and also the 27 member states, and our negotiators
will have to consult closely with the Congress and regulatory
agency, and especially this subcommittee.
At the same time, we should maintain our sense of the
bigger picture. Our relationship with Europe is unlike any
other. We share common objectives, common values, and this
agreement has the potential to raise the bar for the next
generation of trade agreements. We should capitalize on this
opportunity.
And I look forward and thank all of the witnesses for their
presence and tolerance with our agenda, and especially to
Ambassador Eizenstat for his long commitment to public service.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rangel follows:]
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Chairman NUNES. Thank you, Mr. Rangel.
And I want to thank Mr. Rangel and his staff, because we
have set upon this Congress to make this committee as
bipartisan as possible, and this is, I think, an extraordinary
achievement, because all four witnesses were agreed upon by
both Mr. Rangel and his team and our team on our side.
Thank you, Mr. Rangel.
Mr. RANGEL. Thank you, Mr. Chairman.
Chairman NUNES. Our first witness will be Ambassador
Eizenstat, former Ambassador to the EU, who also served in a
number of other important roles, including deputy treasury
secretary, undersecretary of state for economic, business and
agricultural affairs, and Undersecretary of Commerce for
International Trade. He now heads the international practice at
the law firm of Covington & Burling, and is U.S. co-chair of
the Transatlantic Business Council.
After him, we will hear from Inga Carus, CEO of Carus
Corporation, an SME chemical manufacturer based in Illinois.
Our third witness will be Jim Grueff, who is currently
Principal at Decision Leaders and formerly served as the lead
U.S. negotiator for the WTO sanitary and phytosanitary
agreement, among a number of other senior positions in the
foreign agricultural service.
And last, we will hear from Greg Slater, Director of Global
Trade and Competition at Intel, who is also testifying on
behalf of the Business Coalition for Transatlantic Trade and
the Coalition of Services Industries.
We welcome all of you, and we look forward to your
testimony. Before recognizing our first witness, let me note
that our time this afternoon is limited, so witnesses should
keep their testimony to 5 minutes and members should keep their
questioning to 5 minutes.
Ambassador Eizenstat, your written statement, like all of
the witnesses, will be made part of the record. And you are now
recognized for 5 minutes.
STATEMENT OF STUART E. EIZENSTAT, PARTNER, COVINGTON & BURLING
LLP, ON BEHALF OF THE TRANSATLANTIC BUSINESS COALITION
Mr. EIZENSTAT. Chairman Nunes, my long-time dear friend,
Ranking Member Rangel and distinguished members of the Trade
Subcommittee. The TTIP provides the opportunity to garner more
bipartisan support than almost any other economic agreement,
and that is because the EU has very high labor standards and
environmental protections, making some traditional opponents of
free trade agreements less likely to oppose TTIP on these
grounds.
TTIP would be the most comprehensive trade agreement the
United States has ever entered into in history in terms of the
dimensions and areas it covers. The significant economic
benefits of the agreement are enormous. TTIP would provide a
deficit-free way of creating jobs and growth. At a time when
both sides of the Atlantic are suffering from subpar economic
and job growth and high levels of unemployment, a successful
TTIP can add anywhere between a half to one full percent of
gains in GDP on both sides of the Atlantic.
Together, the EU and U.S. account for almost half of the
global output of goods and services and almost a third of
global trade, but even more so, transatlantic investment dwarfs
those huge trade numbers and is the backbone of our mutual
economies. There is more than three and a half trillion dollars
in two-way foreign direct investment between the EU and the 27
EU countries and the U.S. American companies invest more in
tiny Ireland than in China.
Another unique dimension to transatlantic trade is the high
degree of integration across the pond. Intra-firm trade between
U.S. and EU parent companies and their subsidiaries account for
almost 40 percent of the trade between us.
Individual U.S. States will also benefit from a successful
TTIP. For example, both California and New York rank first and
second, respectively, as the top two States with jobs supported
directly through European investment, and second and third
after Texas by total goods exports to Europe by value.
There is also a geopolitical importance to this agreement.
It sends an important signal that we remain dedicated to
Europe. European nations share our core values of democracy,
free speech, respect for human rights and the rule of law, and
they are our key allies as we face difficult global challenges.
There are essentially two competing models of governance in
this world: One is our free market democratic model, and the
other is the autocratic state-controlled, state-dominated
model. A successful TTIP can demonstrate that our model of
governance can produce tangible gains for our people on both
sides of the Atlantic and, more broadly, is the best model to
meet the challenges of the 21st century.
It is true that there are daunting challenges because of
the comprehensive nature of the negotiations, but these are
manageable. For example, we have agreed already that the EU and
U.S. will make the foundation of TTIP the most comprehensive
free trade agreements that each has entered, and fortunately,
on both sides, that is with Korea. The EU-Korea and U.S.-Korea
agreements, therefore, are a way of harmonizing as a forced
order of business a workable framework agreement. This can be
done in fairly short order, giving each other, in effect, what
each of us gave to Korea.
Eliminating tariffs alone would boost U.S. exports by 8
percent and EU exports by 7 percent.
I would like to focus the rest of my testimony on the top
priority of the Transatlantic Business Council, and that is on
regulations. And this is really critical. I want to take this
from a micro to a macro perspective. If, Mr. Chairman, ranking
member and Members of the Subcommittee, we can agree on common
standards, these will become global standards for our products
around the world rather than China's. This will give us an
enormous competitive advantage. The biggest potential benefit
of TTIP is, therefore, in the area of regulation.
There are indeed many regulatory differences, and these
have long acted as a break on transatlantic trade and growth.
We do have different regulatory philosophies, and I certainly
have the scars in negotiations to show that, but we have come
to a point in the 21st century when we should have confidence
that each other's regulatory standards are adequate to protect
our publics and our companies. Our goals should be regulatory
convergence and coherence to avoid impediments to trade.
In new and emerging technologies like nanotechnology or
internet technology, we should seek identical standards and
make those the world's standards. We should strengthen the EU-
U.S. high level regulatory cooperation forum to get our
regulators together, who often only think domestically and not
internationally to develop common approaches. And we should
adopt the concept of tested once, tested in both markets even
if each other's standards are somewhat different.
I would like to close by focusing on a few areas of prime
importance to the TBC companies. One is services. The volume of
EU-U.S. bilateral trade in services totals almost $350 billion,
the highest in the world. It is essential that both governments
ensure the importance of trade and investment in services,
including an agreement which would allow enforceable
obligations for the free flow of data across borders while
taking into account protections of privacy.
You mentioned, Mr. Chairman, and this is really important,
state-owned enterprises. State-owned enterprises are eating our
lunch on both sides of the Atlantic, and it is not acceptable.
We need to have enforceable disciplines against countries like
China that provide unfair subsidies and unfair advantages
against our private sector companies, and TTIP is the place
where we can develop disciplines to make sure that those
companies, if they are state-controlled, don't get the kind of
access that they otherwise would have.
It is also essential that financial services be included in
the agreement. TTIP offers a terrific opportunity to coordinate
the extensive but often disparate array of financial
regulations. And, again, if we can agree on these, these can
become global standards and help us develop financial market
regulations in third countries that will be important.
Two last areas. Intellectual property. There is an
unprecedented theft of intellectual property from cyber-
attacks--they are in effect state-sponsored IP theft--from
forced technology transfers, and for the lack of protection of
our intellectual property in emerging countries. This is our
seed corn. This is our advantage in the world. We must have the
highest levels of IP protection in this agreement and then
propound those to the world, aligning U.S. and EU positions in
multilateral dialogues and encouraging robust third country IP
protections.
And last is in life sciences. This is, again, an enormous
area where European and American global companies still are
highly competitive. We are leaders here, but if we are going to
stay as leaders, TTIP must present an once-in-a-lifetime
opportunity to address longstanding issues in intellectual
property protection and regulatory and market access that they
can improve efficiency, patient outcomes and overall business
environment.
TTIP should ensure responsible data sharing that protects
patient privacy, maintains the integrity of the regulatory
review process, and preserves incentives for biomedical
research.
In conclusion, I believe that we are embarking on an
unprecedented bipartisan effort to demonstrate that free
markets and free peoples can deliver, and I think we are going
to succeed. Thank you.
Chairman NUNES. Thank you, Ambassador.
[The prepared statement of Mr. Eizenstat follows:]
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Chairman NUNES. Ms. Carus, you are recognized for 5
minutes.
And if we can keep it as close to 5 minutes as possible. I
don't want to be a time clock monitor here, but I know that we
are going to have votes in probably another hour, hour and a
half, so we want to make sure that we get all the testimony and
allow all the members time to ask questions.
Ms. Carus, you are recognized for 5 minutes.
STATEMENT OF INGA CARUS, PRESIDENT & CEO, CARUS CORPORATION
Ms. CARUS. Okay. Thank you. Chairman Nunes and
distinguished members the subcommittee, my name is Inga Carus.
I am president and CEO of Carus Corporation. Thank you for this
opportunity to speak today.
Carus Corporation of Peru, Illinois, is a family-owned
company that was founded by my grandfather 98 years ago. Carus
is an environmental products and services company. We
manufacture products which are used by our customers both in
the public utility sector as well as in private industry for
the purification of water, air and ground water. We currently
have about 400 employees.
In recent years, Carus has expanded from a single location
in LaSalle, Illinois, to become a global corporation with
locations in the U.S., Europe and Asia. Carus plans to expand
further as we look for new opportunities to develop new and
unique products for environmental markets.
In both the U.S. and EU, small and medium-sized SME
manufacturers are key drivers of economic growth. I believe
that advancing open trade policies with the EU could create new
and dynamic commercial growth and export expansion
opportunities for U.S. small, medium and large enterprises
alike. While there are difficult hurdles to a successful TTIP
negotiation, the potential benefits in terms of growth,
productivity and job creation are huge.
Current tariff barriers on transatlantic trade in chemicals
are relatively low, averaging around 3 percent. However, due to
the high volume of trade, the benefits of removing the
remaining tariff barriers would be significant. The American
Chemistry Council estimates that eliminating remaining duties
on transatlantic trade just in chemicals could result in
savings of around $1.5 billion a year. These savings would
immediately reduce the costs of production for business, and
the benefits would be reflected throughout the economy.
As an example, Carus Corporation would save 5 and a half
percent of the duties on our products of material that we ship
from Illinois to Carus Europe. This would result in savings to
my company of $5 million over 10 years, which we would use to
create good jobs and grow exports.
The potential cost savings for governments and industry
alike from enhanced regulatory cooperation are even greater
than this. The goal in pursuing closer regulatory cooperation
between the U.S. and EU should be to explore opportunities for
creating efficiencies between regulatory systems while
maintaining high levels of protection for human health and the
environment.
An example of additional costs generated by regulatory
barriers for Carus is the difference in standards for chemicals
used for water treatment in the U.S. and the EU Some EU member
states also request a separate registration for chemicals in
water, further encumbering trade.
While the U.S. and EU regulate chemicals in different ways,
Carus Corporation sees the TTIP as an important opportunity to
promote efficient and effective regulatory approaches and
explore opportunities for cost reductions and burden sharing.
Specific actions to enhance transatlantic regulatory
cooperation include efforts to promote scientific cooperation.
The goal should be to minimize the potential for imposing
additional regulatory barriers when revising or developing new
regulations and to develop a common scientific basis for
regulations. In our view, the chemical industry is well placed
to be a priority sector for enhanced regulatory cooperation
under TTIP.
TTIP should also focus on ensuring greater transparency in
transatlantic cooperative activity between regulators. This
would help enhance stakeholder confidence and support for
regulatory cooperation. An example which has cost Carus a large
amount of time and resources is obtaining approval for a
drinking water chemical in the EU, a material which has been in
common use and has been approved for drinking water treatment
for decades in the U.S.
The EU-U.S. drinking water standards are different. And
although a product has been long approved by the EPA in the
U.S., the approval process in the EU does not recognize this
and can take years. We applied for EU approval for sodium
permanganate in 2005, and it was in use in the United States
for decades. And although we received approval 3 years later in
2008, for those 3 years, we could not sell the product in
Europe. And we are still waiting today, 8 years later, for some
EU member companies' approval who have not approved it yet.
Carus Corporation strongly supports the launch and timely
completion of negotiations on a transatlantic trade and
investment partnership. For the chemical industry and for
thousands of small- and medium-sized manufacturers in the U.S.,
like Carus, it has the potential to provide a significant boost
to growth and job creation, which in turn would promote
innovation and strengthen the international competitiveness of
U.S. exporters.
Thank you, again, for inviting me here today. I look
forward to your questions.
Chairman NUNES. Thank you, Ms. Carus.
[The prepared statement of Ms. Carus follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman NUNES. Mr. Grueff, you are recognized for 5
minutes.
STATEMENT OF JAMES GRUEFF, PRINCIPAL, DECISION LEADERS
Mr. GRUEFF. Thank you, Mr. Chairman and Congressman Rangel,
for the invitation to be here with you today.
TTIP presents unique and extraordinary opportunities and
challenges for U.S. agriculture and for those in the U.S.
Government who will oversee or conduct the TTIP agriculture
negotiations. There is a long and difficult history of
agricultural trade policy conflicts between the U.S. and the
EU, and that will be an important feature of this negotiation.
The two sides also have shown very different approaches to
negotiating their free trade agreements. The U.S. has pursued a
strategy of including virtually all agricultural products in
its FTAs, with few notable exceptions. The EU, on the other
hand, has been much more selective in the inclusion of
agricultural products in its bilateral trade agreements.
Therefore, for example, just agreeing on the range of products
for which tariffs will be reduced or eliminated will probably
be a daunting challenge in itself.
Looking at the scope of issues that can comprise the
agriculture negotiations, it is clear that the most challenging
area will be health-related import restrictions, known as
sanitary and phytosanitary barriers, or SPS barriers as they
are called.
Much of the difficulty in the U.S.-EU agriculture
relationship derives from fundamental differences in their
approaches to food and food production and in the management of
the health risks from food and agricultural products. The U.S.
asserts that it applies the science-based approach to risk
management and health-related import restrictions that is
completely consistent with the SPS agreement of the World Trade
Organization.
The EU believes that the WTO provides the latitude to take
a more risk-averse approach to risk management. This is
embodied in the EU's so-called precautionary principle, which
essentially states that health-related preventative measures
can be applied, including import restrictions, when it is
scientifically uncertain but possible that a risk exists.
These policy differences have real trade consequences. U.S.
agriculture has indicated that addressing SPS barriers, the
health-related barriers that block access to the EU market, is
its top priority in the TTIP negotiations. These issues
include, among others, the EU approach to regulating the use of
agricultural biotechnology, the EU ban on anti-microbial washes
for poultry meat, the beef hormones case, the EU ban on the
beef and pork feed additive ractopamine and the possibility of
a new trade-blocking in EU policy on cloning.
Many of these issues are complicated, longstanding and very
politically sensitive, but this is what the TTIP can offer: the
opportunity to bring unprecedented, high level attention to the
SPS issues that are the most difficult agricultural disputes in
the bilateral relationship.
In addition to the existing disputes, U.S. agriculture is
advocating the concepts of SPS-Plus and SPS enforceability.
SPS-Plus means essentially that the TTIP would contain SPS
rules and disciplines that go beyond what the WTO currently
provides, and enforceability means that the TTIP would have its
own self-contained SPS enforcement mechanisms that would be
much quicker than the WTO dispute settlement process.
These are both very worthwhile objectives, but here is a
note of caution. The EU's history of SPS decision-making
indicates that finding agreement on these new concepts will be
very difficult. Also, based on recent experience in the context
of the transpacific partnership negotiations, it may be
questionable whether the U.S. Government's interagency process
will agree to pursue these new concepts for the TTIP.
But I believe there is a larger dilemma here regarding TTIP
and the SPS issues. It will take time to make progress on the
SPS issues. However, leaders at the top levels on both sides
have said or implied that the TTIP is essentially an effort to
provide much needed economic stimulus as quickly as possible.
The EU Trade Commissioner stated that he wants these
negotiations completed by the end of next year, which would
indeed be a very quick outcome. This is not a time frame that
would be conducive to resolving the SPS issues of concern to
U.S. agriculture.
I would suggest to you that decisions regarding the scope
of the agriculture negotiations, especially decisions on the
inclusion of the SPS issues, should be under serious
consideration now and certainly should be made before the
substantive negotiations begin.
Thank you for your attention.
Chairman NUNES. Thank you, Mr. Grueff.
[The prepared statement of Mr. Grueff follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman NUNES. Mr. Slater, you are recognized for 5
minutes.
STATEMENT OF GREG SLATER, DIRECTOR, GLOBAL TRADE AND
COMPETITION POLICY, INTEL CORPORATION, ON BEHALF OF THE
BUSINESS COALITION FOR TRANSATLANTIC TRADE AND THE COALITION OF
SERVICE INDUSTRIES
Mr. SLATER. Thank you, Mr. Chairman. And thank you,
Congressman Rangel and----
Chairman NUNES. Mr. Slater, if you could turn your mike on,
please.
Mr. SLATER. I apologize.
Chairman NUNES. Okay.
Mr. SLATER. Thank you, Mr. Chairman, members of the
subcommittee.
I work for Intel Corporation, but today I am appearing
before you on behalf of the Coalition of Services Industries,
or CSI, and the Business Coalition for Transatlantic Trade, or
BCTT.
CSI is the primary policy advocacy association for U.S.-
based global services, and BCTT was established last year to
support the TTIP negotiations. Its steering committee is co-
chaired by multisectoral industry organizations and companies
like Intel.
Both CSI and BCTT support the negotiations of an ambitious,
comprehensive and high standard agreement between the U.S. and
EU. I would like to make some suggestions today on how to
achieve that objective.
First, a comprehensive agreement must take into account
evolving business models as it seeks to fully liberalize trade
in goods and services. U.S. manufacturing companies are
increasingly using services both to manufacture and in their
product distributions like never before, because of increased
global competition, wiser use of global supply chains, and new
opportunities provided by the information economy. This
accelerated integration of goods and services has blurred the
distinction between manufacturing and service companies. Trade
policy needs to catch up to this trend, and negotiators should
not look at goods and services as separate silos.
Also, market access commitments should apply to the entire
supply chain by taking into account interrelated services, or
that is, services that are in different categories but
complement each other. And trade barriers for any one link in
the chain can undermine a service as a whole.
Moreover, all basic ways of delivering services should be
liberalized and for all types of companies. Manufacturing
businesses regularly look at the services they are using and
change their approach because their innovation capabilities are
becoming increasingly collaborative and cross-border, involving
multiple sites and parties. So, for example, stringent mobility
rules for highly skilled employees can impair both the
development of new goods and the delivery of additional
services.
In brief, market access commitments for services should be
recorded on a negative list with only a minimum number of
nonconforming measures subject to timetables for full
liberalization.
Second, negotiators need to creatively use all available
mechanisms to reduce and remove nontariff barriers, or NTBs, in
a transatlantic economy. These mechanisms can include
regulatory simplification, interoperability, mutual
recognition, convergence and even harmonization where
appropriate. TTIP also needs to establish a framework for
ongoing regulatory cooperation to reduce and remove future
NTBs.
In addition, TTIP needs to establish global principles, as
Ambassador Eizenstat mentioned, that the U.S. and the EU should
promote to minimize NTBs in emerging markets where they are
used more frequently to build up local industries and national
champions. For example, new localization barriers to trade in
the BRIC countries can force U.S. and EU companies to either
move businesses' operations overseas or to forego important
market access opportunities.
Similarly, TTIP should address technology mandates that
require the use of domestic technologies, which are on the rise
and can significantly undermine the competitiveness of U.S. IT
companies.
Third, we note that although removing NTBs will benefit
many economic sectors, like finance and insurance, there is a
major multiplier effect when information and communication
technology, or ICT, goods and ICT-enabled services are
liberalized because they enhance efficiency and innovation
capabilities across sectors. The U.S. and EU should therefore
maximize opportunities for suppliers to provide services over
the Internet on a cross-border and technology-neutral basis.
And TTIP should prohibit specific requirements to locate
servers or data in country as a condition for allowing digital
services. As with the TBC, we strongly support the
administration's objectives to include provisions that
facilitate cross-border data flows. The transfer of information
is increasingly important to all industry sectors. There must
be a clear obligation in the agreement that enables companies
and their customers to electronically transfer information
internally or across borders, store or access publicly
available information and access their own information,
wherever located.
Restricting international data flows as a means of
protecting access to data or ensuring security is both
inefficient and ineffective. This will only slow down the
expansion of trade by so many Internet-dependent companies at a
time when innovation in digital services is benefiting such a
variety of industries.
The U.S. and the EU should use TTIP to bridge their
differences in approaches to privacy and cyber security without
undermining data flows.
Fourth, and finally, along with promoting privacy and cyber
security principles to ensure interoperability in a digital
infrastructure, the agreement should enhance global protection
of trade secrets, again, as mentioned by Ambassador Eizenstat.
There is a strong correlation between cyber attacks and cyber
theft. Although trade secrets are a critical form of IP, they
are subject to some of the weakest IP protections.
We appreciate the opportunity to provide input to the trade
subcommittee on such a critical free trade agreement. Thank
you.
Chairman NUNES. Thank you, Mr. Slater.
[The prepared statement of Mr. Slater follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman NUNES. My first question is for Mr. Grueff. You
describe a little bit of the EU's regulatory system, and I was
hoping that you could maybe go into some of the top barriers
that you see to agricultural products. And I know you had some
ideas and concepts that you mentioned on SPS and perhaps a way
that we can move forward. Also I would kind of like your
opinion on whether or not the EU is actually serious about
removing these barriers and serious about agriculture.
Mr. GRUEFF. Well, as you know, Mr. Chairman, this is a very
challenging topic. I believe that they are--first of all, from
the big picture perspective, that the European Union is very
serious about the TTIP.
I think that any negotiations in the SPS area are going to
be very difficult for them. These are very politically
sensitive issues for them, as I think you know. There are
cultural differences that have very much had an impact on the
policy process. This very much is demonstrated in the issues of
agricultural biotechnology, in which the EU consumers
apparently feel it is important to have the right to know how
food was produced. American consumers, I believe, are more
trusting in the U.S. regulatory agencies and don't have those
kinds of concerns.
There are a wide range of SPS issues, many of them that we
could talk about. One that I would find, I mentioned it in the
written testimony, is the issue of the, what are called
antimicrobial washes, or pathogen-reduction treatments, because
the science is basically the same on both sides. In other
words, in the EU, the scientific advisors for the EU have said
basically these are safe substances, and the political process
did not allow the system to work with the information and for
there to be approvals, and so we have a trade dispute right now
that is lingering at the WTO on that particular issue.
The issue of ractopamine is a very important issue, not
just with the EU. This is the feed for pork and beef production
widely used in the U.S. It is a very important issue, because
there are also bans in Russia and China and other countries.
Again, the U.S. perspective, and I would agree is that the
science is clear on this. There is now an international
standard at the Codex Alimentarius. The EU is not accepting the
international standard. This has very broad implications that
the EU is not accepting the international standard here.
So my point in the oral testimony about this is going to
take time is that it isn't just a matter of negotiating
tariffs, as difficult as that will be. There is a lot more to
these issues. It goes to their view of risk management, their
view of their right to be more risk-averse than perhaps we are
and many other countries.
So it is going to take a very focused and in-depth
approach. And it is going to take also, I might add, a real
team effort on the part of the U.S. regulatory agencies. The
U.S. side is very much going to need the expertise of the Food
and Drug Administration and other regulatory agencies to take
on these issues.
Chairman NUNES. Thank you, Mr. Grueff.
And as you know, our European friends, it is sometimes
tough to decipher between, you know, what is a real issue and
what is just a nontariff barrier to trade. And as our European
friends and the ones who have come to visit me, agriculture is
also a sensitive topic for us, as is food safety. So I
appreciate your comments.
Ambassador, I actually--would you like to comment on the
agricultural issue?
Mr. EIZENSTAT. Yes, if I may.
Chairman NUNES. Sure.
Mr. EIZENSTAT. When I was ambassador to the EU, we, after
some difficulty, got the first genetically modified product
approved, Roundup Ready soybeans and then later tomatoes. And
interestingly, in the last, I would say, 6 months, there has
been a fairly significant increase in European Union approval
of GMO products, so that does indicate at least in this area
that we are making some progress.
Chairman NUNES. Well, as someone who used to hoe weeds,
Roundup Ready crops were a big benefit for those of us who had
to actually work in the fields.
I had an additional question for you, Ambassador, as it
relates to--you mentioned this in your testimony about
financial services. And I know the President's nominee, Mr.
Froman, has expressed that everything should be on the table,
but we have read some reports, heard rumors about some in the
administration who want to exclude financial services. Do you
think this would be appropriate?
Mr. EIZENSTAT. No. I think it would be disastrous, and the
``some'' may be in one of my former departments. I think it is
very important that financial services be included, because
financial services are really the backbone of all the
international trade we do. We have more than a dozen financial
regulatory agencies, and I think it is important that Treasury,
through the Financial Stability Oversight Council, coordinate
their regulations so that we don't have disparate regulations
coming out of each. We avoid extraterritoriality, and we get
those agencies to think globally.
There is also a market access issue, Mr. Chairman, and I
know Mr. Neal is also interested in this issue as well. For
example, our banks simply cannot get full access to many
emerging markets. We can't get consumer banking in China, for
example. So it would be very useful for the EU and the U.S.
together to collaborate in third markets.
And last, TTIP offers a really critically needed forum to
establish a framework to coordinate the extensive but often
disparate array of regulatory efforts on both sides of the
Atlantic. It provides an enormous opportunity to create a
process for discussion in an early stage, to help resolve or at
least mitigate regulatory differences. The goal should be to
promote greater financial compatibility and where possible,
mutual recognition of equivalence.
And the positive impact would also be that if we can agree
between the U.S. and EU, then we can also promote those same
high quality regulatory standards in global financial markets,
particularly in faster growing developing markets. So I think
it is tremendously important. This is not at the expense of
what is happening at the G20. It would supplement it. It is a
terrific forum. It would be an enormous missed opportunity if
financial services aren't included.
Chairman NUNES. Well, thank you, Ambassador.
I would now like to recognize Ranking Member Rangel for his
questions.
Mr. RANGEL. Thank you.
This sounds like a revolutionary advancement that we can
make to improve the trading commerce with the EU and,
therefore, around the globe. I guess it is accepted that an
educated constituency, one that is able to have a job, actually
contributes to commerce, being the consumer, and it could even
give us a brighter economic picture, the same way poverty takes
away from our opportunity to enjoy a higher quality of life for
some.
In these agreements, I notice that the question of visas
and skills or lack of skills or job qualifications are given a
consideration rather than just goods and services.
Ambassador Eizenstat, you have served your government in so
many different capacities, but it just seems to me--is there
anything in the trade bill or could possibly be that deals with
the question of poverty, healthcare, education or to be able to
say that after this revolutionary trade bill passes, that
countries that are in poverty can depend on the increase in
advantages that we make, that somehow that they were on the
agenda as we conclude these type of negotiations?
Any member could answer, but I know what Ambassador
Eizenstat----
Mr. EIZENSTAT. Well, I--Mr. Member, I did an op-ed Article
2 weeks ago in the Washington Post on the need for a public-
private apprenticeship program to provide skilled workers,
because I believe with lower energy prices, we are going to get
more and more companies coming back to the United States who
have gone over, and other companies like Siemens who want to
invest more here and don't have the skilled workers.
This can be done very inexpensively. It is the German
model. It is very much putting an employee, potential employee,
who is at the community college, in a plant to learn a skill so
he or she can actually get that job afterward. It is being done
in States like South Carolina, where they are financing such a
program.
This is not in TTIP, but what there is a workforce
provision to promote the skilled labor mobility between
integrated companies. And this would be tremendously important
to help our workforces have the free flow of commerce to
promote more labor force mobility. So there is a large----
Mr. RANGEL. But this is----
Mr. EIZENSTAT [continuing]. Workforce----
Mr. RANGEL. But this was my point, Ambassador. I am saying
because you could provide a wedge in trade to get individuals
with talents and skills to come in, what is in there to get
people without talents, without skills and not the beneficiary
of these agreements?
You know, when world history is recorded, I think is going
to be one of the biggest things that they have said that
civilization has done in coming together, pulling together our
resources and trying to level the quality of life for everyone,
but somehow there are people all over the world, and indeed in
the United States, that it would appear from the record that
there was no consideration at all as to whether or not
technology even allowed more of them to become unemployed and
go into poverty.
And if you can stretch trade into including such things as
individual skills, why can't you stretch it to include lack of
skills and lack of resources so that the record would be clear
that this isn't just for Europe and America, it is for the
quality of life for the world? I think this is the way we have
got to sell this project to the world: It is for everybody.
Mr. EIZENSTAT. Well, again, this is still a trade
negotiation, and we would have to address skills training
separately. But what we should address, and is to be addressed
and it is part of the mandate, is to promote labor market
mobility, provide an ease of people getting jobs across the
Atlantic----
Mr. RANGEL. How do you--how do you----
Mr. EIZENSTAT [continuing]. Through joint research
projects----
Mr. RANGEL. Ambassador, you say this is trade, and I never
would have raised this until I saw that skills are included in
this now.
Mr. EIZENSTAT. They are. That is correct.
Mr. RANGEL. Well, poverty is included in this as well;
education is included. And so when you say--when I was fighting
international drug trafficking, that is all I heard, that this
is a trade bill, and we have to deal with trade. So I have
given up on trying to stretch what trade is, but I see that,
and I don't know whether anyone disagrees with me, that you
find yourselves very comfortable in talking about who should be
allowed to come into our country based on the skills that they
have. Is that correct?
Mr. EIZENSTAT. That is correct.
Mr. RANGEL. Well, if that is correct, it is a stretch,
don't you think it is a stretch to include that in trade, our
immigration programs?
Mr. EIZENSTAT. Well, again, there is a workforce provision
that will be negotiated, and perhaps that will provide the
latitude for----
Mr. RANGEL. But it has nothing to do with trade. I mean, it
is not in the trade bill.
Mr. EIZENSTAT. It does have to do with trade.
Mr. RANGEL. Will it be in the bill?
Mr. EIZENSTAT. It is in the bill, yes.
Mr. RANGEL. Okay.
Mr. EIZENSTAT. Workforce mobility is specifically mandated
between the EU and the U.S. as a negotiating topic. There is an
agreement that this should be one of the areas that should be
covered.
Mr. RANGEL. Is it your professional opinion that the
question of educating everybody generally to have them to be
more of a consumer around the world and especially in the
United States is not the proper subject for a trade agreement?
Mr. EIZENSTAT. No. I mean, I think that what we want to
promote, and this is also part of it, is to allow, for example,
certification from universities, so we accept each other's
university degrees, having scientists and engineers and others
be able to work on joint collaborative projects across the
Atlantic. So this is going to be the first trade agreement, I
believe and hope, that will actually have a workforce provision
in it.
Mr. RANGEL. Thank you, Ambassador. I didn't make my point
as clear as I wanted. Thank you.
Ms. CARUS. May I speak to that question?
Chairman NUNES. Sure.
Ms. CARUS. I just wanted to speak in support of Ambassador
Eizenstat's statements about workforce mobility. One of the
biggest challenges we face as a small- to medium-sized
enterprise is talent and skilled labor, and this addition to
the bill would be enormously advantageous to companies like
Carus.
Chairman NUNES. Thank you, Ms. Carus.
Mr. Rangel, any more questions?
Mr. RANGEL. No, thank you, Mr. Chairman.
Chairman NUNES. Ms. Jenkins is recognized for 5 minutes.
Ms. JENKINS. Thank you, Mr. Chair.
And I thank you and the ranking member for hosting this
very important hearing. Thank the panel members for
participating.
And first, I would like to echo the sentiments of Chairman
Nunes and his concerns with the European Union's restrictive
SPS barriers.
But having covered that topic sufficiently, I would like to
turn toward another issue, because improving regulatory
cooperation and coherence would be a key benefit of any United
States-EU trade agreement. And the EU regulatory process is
often non-transparent, prevents U.S. stakeholders from
participating, and it is unpredictable. And while Kansas
livestock producers noticed this primarily when facing
restrictions on our U.S. beef and pork, it is true that there
would be sufficient gains from simply bringing the EU into
compliance with the type of commitments that were included in
chorus. And I think it is fair to say that those gains would
not be exclusive to U.S. producers, but would also benefit
producers in the EU.
So really for any of you, how would addressing horizontal
regulatory issues help to open up the EU market, and what are
the relative merits of addressing these horizontal issues as
compared to sector-specific harmonization? Sure.
Mr. EIZENSTAT. One of the things that I have suggested, and
my testimony actually suggested, for well over a decade is that
we need to have certain sectoral agreements. Let me give you an
example; then I will go to the horizontal. The Auto Industry on
both sides of the Atlantic wants to enter into a sectoral
agreement in which they basically accept each other's
standards. It makes no sense that BMW produces a product in
South Carolina that it then can't export to Europe, and that
the BMW they make in Europe can't be exported to the U.S. There
are different bumper standards, for example.
This is an area where mutual recognition should exist; that
is, we recognize that each other's safety standards in autos
may not be identical, but they are adequate to protect each
other. And that is the way the common market works within
Europe. It is not that France and Germany or France and Sweden
have identical regulations, but they accept each other's
regulations as being equivalent.
Second, your point, which is tremendously important, is
horizontal. We can't get that kind of sectoral agreement in
every area, so we should adopt certain horizontal standards.
For example, have an accord that all regulations that have a
transatlantic impact of more than, say, $500 million require
notice to companies on both sides of the Atlantic and the
opportunity to comment; that the least costly regulatory
alternative should be taken; that the process should be
transparent; that it should be science based, which is
tremendously important for agriculture, but for pharmaceuticals
and others. And those kinds of basic principles would be very
important.
Mr. Grueff is certainly correct, and I have suffered for
this in many negotiations with the U.S. on the precautionary
principle, it is a huge barrier, but if we could establish
those kinds of horizontal principles, it would give us a real
leg up so that we go beyond, in the agricultural area, the SPS
area and exceptional.
We establish the fact that we have to have sound science,
least costly alternatives, transparency, notice. If we can
agree on those, then that will at least give us a head start
with our own dispute resolution process, as you probably agree.
That would be a big start. Where we can get identical
standards, like I hope we can get in the auto area, we should
do it.
And Mr. Neal and Mr. Rangel, I mention because of New York,
we have been negotiating for years on common accounting
standards. We use GAAP accounting; they use International
Accounting Standards. I can assure you that both adequately
protect investors. The costs of annual reconciliations by a
European company doing business here and vice versa is, like,
$2 billion. That should be simply accepted that they each,
although they are different, they each adequately protect, they
are equivalent, and we do away with reconciliation.
Ms. JENKINS. Other thoughts?
Mr. GRUEFF. Yes. I agree with the ambassador. If there
could be a horizontal approach to regulatory convergence, I
think that would be a very good development for U.S.
agriculture. I guess looking at our very difficult, sad history
with the European Union on agricultural trade issues over
decades, I am somewhat skeptical. It is certainly worth an
effort.
I think in answer to the chairman's first question to me,
even as our negotiators begin to try to deal with the issues
that you have raised, for example, ractopamine, it is an access
issue for beef and pork and the original beef hormones issue, I
think really this takes negotiators immediately into very
challenging questions like how was--was there a risk assessment
done? How was the risk assessment done? Are you following
international standards? If you are not following international
standards, according to the WTO rules, there have to be very
specific reasons why the member, a WTO member is not following
international standards.
I would think that the approach would need to be very
specific and immediately very challenging in terms of why the
European Union is implementing these specific SPS measures at
the border that it is. If this somehow could be countered with
a horizontal approach, I think that would be ideal. I guess I
am skeptical that it could be done.
Ms. JENKINS. Mr. Slater.
Mr. SLATER. Thank you. Just to add to what has been said, I
think you are going to--it is obvious to me that, at some
point, the parties are going to sign off even though not
everything has been done. We have achieved simplification in
this other area, convergence in this area, maybe even
harmonization in this area.
No approach is going to work across the board, but with a
horizontal regulatory hierarchy, or best practices, you can
keep working on these issues beyond the signature of the
agreement and keep making progress. I do think they have to be
detailed. In addition to notice and comment and some
description of what was done, you have to--it would be great if
the Europeans would be forced to go through and explain what
alternatives they considered and why they were rejected, and go
through all of the feasible alternatives to be able to show
them that there is a better way. I know this is going to be
tough, but that exercise is critical to make progress going
forward beyond when the agreement's concluded. Thank you.
Ms. JENKINS. Thank you.
Mr. EIZENSTAT. Let me say that this is not just an EU
problem, it is a U.S. problem. Our regulatory agencies are
independent oftentimes of the executive branch. They have
domestic focus only. And I can remember meeting in the now
called Eisenhower Executive Office Building with FDA when we
were trying to get mutual recognition. We encouraged the FDA to
at least allow testing in European labs to U.S. standards, not
on identical standards, so they wouldn't have to test twice.
And they said, well, we could accept tests in certain labs in
Europe but not in other countries.
I think we have now reached a stage where we ought to be
able, at the very least, to test in each other's markets to
each other's standards once, not duplicative testing. And you
have a terrific role, because you oversee these independent
agencies, to get them to think in a global fashion. And we have
a regulatory forum between the U.S. and the EU to hopefully do
that. But Congress can play a tremendous role here.
Ms. JENKINS. Thank you.
Thank you, Mr. Chairman. I yield back.
Chairman NUNES. Thank you.
Mr. Neal is recognized for 5 minutes.
Mr. NEAL. Thank you, Mr. Chairman.
Mr. Ambassador, just to let you pursue this a bit. We are
used to setting the table in some of these areas. What
suggestions would you make to our negotiators so that we might
avert the problem of being pulled to the table? And you
mentioned financial services earlier. And we have heard from
agricultural interests, and I am sure we are going to hear from
other sectional interests across the country. But in terms of
financial services, how might you approach harmonizing some of
the issues that you have already described?
Mr. EIZENSTAT. First of all, we really do have an
exceptional nominee for United States Trade Representative.
Mike Froman knows financial services, he has worked in that
industry, he has worked globally, as the President's deputy for
international economic advisor. And so I think we have got a
good start there.
Second is just getting financial services, Mr. Neal, in the
negotiations. They are not in.
Third, again, is getting the Treasury Department to take
the role as the chair of the Financial Stability Oversight
Council to coordinate our own regulatory actions--you have got
agencies that are regulating extraterritorially, or proposing
to do it--so when we come to the negotiating table with the EU
on financial services, we have got a coordinated position taken
by Treasury through the Financial Stability Oversight Council.
Next is, again, working on these market access issues. If
we work together with our financial institutions to try to get
access for our banks and financial services to third countries
that are keeping them out by having both the EU and the U.S.
work together, that would be a huge advantage.
And then last, to the extent, again, that we can develop
common regulatory approaches, it can set a standard for the
world. I think that the U.S. wants to do this. I hope the
barrier that one of the agencies doesn't want to include it in
TTIP can be overcome.
Mr. NEAL. Thank you.
And, Mr. Slater, your description through your testimony
about emerging and expanding localization barriers to trade, I
guess better known as LBTs, they apparently condition market
access for goods and services on, one, requirements to invest
and develop or use local R&D, intellectual property,
manufacturing, and assembly capabilities; two, mandate transfer
technology to another party involuntarily; and, three, request
to disclose proprietary information that would not typically be
needed for regulatory purposes. How do you explain these
barriers and how might they impact Intel and your operations in
Massachusetts?
Mr. SLATER. Thank you, Congressman Neal. These are
relatively new. Let me rephrase that. Some of the ones where
they require local manufacturing content for government
procurement preferences, those are old school. But what is new
is they are going upstream to include intellectual property, to
include R&D. And they are being linked, for example, buying
spectrum. That is a Brazilian LBT. And they put companies in a
tough situation. Do we expand at home--for example, in our
case, at our facility in Massachusetts--or do we chose to
expand in an emerging market where we may forgo a major market
access opportunity.
These are new. The TTIPs should push back strongly against
them, set the gold standard, and prohibit them entirely, and
then commit the parties to promoting the prohibition in other
FTAs and in other forums, because they are a pernicious form of
NTBs. Some of them violate WTO, some of them fall between the
cracks of WTO provisions. But they are relatively new and
untested at this point. They started showing up in India and
now other countries are looking at copying them.
Mr. NEAL. Thank you.
Thank you, Mr. Chairman.
Chairman NUNES. Thank you, Mr. Neal. Gentleman yields back.
Mr. Boustany is recognized for 5 minutes.
Mr. BOUSTANY. Thank you, Chairman Nunes.
And, Ambassador Eizenstat, I was really enthusiastic about
your comments in your written testimony about the geopolitical
implications of getting this done, and the kind of leverage we
will have in dealing with rising economic powers like India,
China, Brazil, and so forth, to get back to a rules-based
trading system.
One of the most interesting aspects of these negotiations
in my mind will be the effort to address a number of the 21st
century issues that have not been traditionally covered in
previous trade agreements. State-owned enterprises, you have
talked about those. Competition, customs, trade facilitation,
global supply chains, and cross-border data flows.
And I believe it is critically important that Congress
develop and pass strong bipartisan trade promotion authority to
set out the negotiating objectives for this negotiation. TPA
will establish the framework for congressional consideration
and implementation of the agreements, and it empowers the
administration to negotiate and conclude the agreements.
So, just for the record, do you think these negotiations
can be concluded and an agreement implemented without trade
promotion authority?
Mr. EIZENSTAT. No.
Mr. BOUSTANY. Thank you.
Mr. EIZENSTAT. They can be launched, but they can't be
concluded, because the EU is not going to accept our final deal
if they know it can be second-guessed when it comes to
Congress. So Congress has a huge role here. There hasn't been
fast track or TPA authority for a number of years, either for a
Republican or Democratic President. It is absolutely essential.
It will be essential for the Trans-Pacific Partnership
agreement to be concluded. But this is your chance to put an
imprint on the TPA as well. So I think it is tremendously
important and it is absolutely impossible to have a concluded
agreement, in my opinion, either in the TPP in the Pacific or
the TTIP without this trade promotion authority.
Mr. BOUSTANY. With regard to this agreement, could you
discuss timing? Should we have trade promotion authority early
in the process?
Mr. EIZENSTAT. The earlier the better.
Mr. BOUSTANY. Okay.
Mr. EIZENSTAT. And if you are going to have it, you might
as well get it for TPP, for the services agreement----
Mr. BOUSTANY. Services agreement, yes.
Mr. EIZENSTAT [continuing]. The plurilateral service
agreements. So I would put it all together in one, rather than
having separate votes at separate times.
Mr. BOUSTANY. Thank you. Also, on a different subject, the
U.S. and the EU have an existing regulatory dialogue called the
Financial Market Regulatory Dialogue, or FMRD. And given the
importance of this dialogue to ensuring the regulatory agendas
of our country and the EU don't work at cross-purposes in
global financial markets, doesn't this trade agreement present
an opportunity to reinforce this type of dialogue?
Mr. EIZENSTAT. Absolutely. It should be seen as enhancing
that dialogue and giving more structure and more discipline to
it.
Mr. BOUSTANY. And if we are to include in the trade
agreement newly expanded requirements of financial regulatory
transparency principles for cooperation, impact assessment, and
a mechanism for commenting and consulting on financial
regulations that could lead to greater regulatory coherence,
would this not advance the dialogue's hugely important task and
benefit both financial services trade flows, not to mention
manufacturing and agricultural trade flows that depend on
efficient financial services?
Mr. EIZENSTAT. Yes, sir, it would. And, again, I would like
if I could to just return to this broader theme. To the extent
that the EU and the U.S. can agree on common approaches, that
can become the world standard. And that means that our
companies, whether in agricultural or manufacturing or
financial services, have a tremendous leg up when they want to
do business in third markets because those third markets will
be under a lot of duress to accept this common EU-U.S.
approach.
If, on the other hand, we fail, you can be sure that China
or other developing countries will be trying to get their
standards approved. And so it is not just improving trade flows
between the U.S. and EU, as important as that is, it is setting
a standard for global approaches.
Mr. BOUSTANY. And that was what I referred to earlier in
the geopolitical side of this in that as we have seen a
stalling of Doha, how do we get back to a real rules-based
trade system with good mechanisms for dispute resolution and so
forth? And I see this as a strong vehicle to impress U.S.
leadership in trade, and I am very excited about the prospects.
Mr. EIZENSTAT. Absolutely.
Mr. BOUSTANY. Thank you. I yield back.
Chairman NUNES. Thank you, Mr. Boustany.
Mr. Blumenauer is recognized for 5 minutes.
Mr. BLUMENAUER. Thank you.
Appreciate the opportunity for your easing us into some of
these issues. There are certainly some, I think, significant
opportunities. I appreciate notions of common accounting
standards or, Mr. Eizenstat, your notion of bumpers, you know,
might suffice if they meet the standards in either the EU or
the United States.
And I do think your point about this perhaps being an
easier entry point than what we have seen, at least in the 17
years I have watched these in Congress--some of them have been
a little choppy--this could potentially be easier and perhaps
serve as a template to do some other important things.
But I am interested in your thoughts about what we do to
make sure that we avoid unnecessary conflicts, areas, for
example, dealing with finance. There is some apprehension in
terms of how far we go in standardization, given the fact that
the United States is imposing a little more significant
regulatory protections to avoid some of the problems we have
had in the past. And there is some pushback with some of our
friends in the EU making sure that whatever we are doing in
this arena is not somehow as a backdoor effort to undo hard-
fought efforts to prevent the next meltdown in the United
States, or, for that matter, giving an undue advantage to some
European institutions that wouldn't have to meet the same
standards, although one has to note that some of these European
institutions availed themselves to Fed facilities during the
last meltdown. Do you have some thoughts on that?
Mr. EIZENSTAT. Yes. I feel quite confident in saying that
the financial services industry does not want to use this as a
backdoor way of diluting the standards and regulations which
are necessary for consumer protection. And also I would say
that, here again, having been ambassador to the EU and spent a
lot of time in Europe, I can assure you that European financial
regulators are just as interested in protecting their investors
and their consumers as we are. We are not dealing with a Third
World country; we are dealing with an institution that has very
high standards themselves. The question is trying to get as
much convergence, of not weakening standards. But if we can get
that convergence, we can save an enormous amount of money.
Mr. BLUMENAUER. We are already seeing some apprehension in
the United States. I am sure everybody has the same goal, but
there is some concern that maybe there is some convergence into
some areas that look a little riskier on the other side of the
pond.
Mr. EIZENSTAT. That is not a concern I share.
Mr. BLUMENAUER. I am glad.
One other area that is of interest to me that is likely to
come up when we are talking about agriculture. There is, as I
understand it, a little different philosophy between the EU and
the United States just in allowing consumers to know what they
are buying. Products are routinely comprehensively labeled in
the EU. In the United States, people do not have access to the
same labeling.
Mr. Grueff, this would seem to be a pretty straightforward
issue of transparency. Do you see this coming up, and thoughts
about its resolution?
Mr. GRUEFF. Yes, sir. It is a very important issue. And I
hope it does come up. Usually where this issue is most
discussed and apparently has the most economic consequence is
in the area of agricultural biotechnology, the mandatory
labeling issue. And as you just described it, really at its
root there are real cultural differences, societal differences,
in terms of the consumer's right to know, the consumer's desire
to know. And in the EU, there is a very strong feeling, I would
say, among--I was stationed in Germany for 4 years myself--I
would say among consumers that they want to have this
information as to how the product was developed, was genetic
engineering employed or not. That is important.
I would say generally, to American consumers that is not
important. But we are all working under the rules of the WTO.
So when it comes to mandatory labeling, I would say that the
U.S. approach is that this is not a role where the government
should be making this a trade barrier, that if consumers have
an interest in knowing this information there will be a
commercial response to that, companies will provide that
information to them. And it really is not appropriate for WTO
members to deal with each other in the way of making it
mandatory.
Mr. BLUMENAUER. Is there any problem with just allowing--
this is not an issue of scientific dispute, is it--knowing what
it is that you are buying? This is not the same in terms of
having some unusually artificial barrier to keep a product out,
just allowing to know what it is.
Mr. GRUEFF. You are right. It is not a food safety issue in
that sense. I would say----
Mr. BLUMENAUER. And it is not a pernicious thing, that
somehow a barrier that can't be overcome or foreclosing a
market.
Mr. GRUEFF. Well, it is a difficult issue and there is a
lot to it. Part of the U.S. perspective I think is that when
you require, when the government on either side of the ocean
requires labeling that a product was genetically produced and
there is no food safety issue, then why----
Mr. BLUMENAUER. Just letting people know what it is. Put
aside whether it is genetically modified or not, that should
not be a trade barrier, should it, just allowing people to know
what they are buying?
Mr. GRUEFF. I think the issue from the U.S. perspective is,
is the government requiring that companies label this for
consumers. And then if you are----
Mr. BLUMENAUER. And you think that is an unnecessary trade
barrier?
Mr. GRUEFF. Yeah, I mean, I would agree with U.S.
perspective on this, that if this is an import requirement,
this is a requirement that would be imposed on U.S. exports,
that this product be labeled, then, yes, I----
Mr. BLUMENAUER. I think that, Mr. Chairman, just at some
point I would be interested in exploring this a little bit.
Because I think this puts us in a very weak position. I think
it is 57 or 67 countries that allow consumers to know what they
are buying, and that is part of what governments do. And I
think if we fall on our sword over something like this, I think
the public opinion is very much in flux over this, you have had
a little experience in California, where there were tens of
millions of dollars spent in an avalanche of kind of an
exciting political campaign. We are not hearing the end of it.
And I would just offer up that I think it would be interesting
to explore it a little further. Because I think there are some
real opportunities with this.
But this is an example of something that I think is a side
issue that could, in fact, complicate this unnecessarily. I
think we have got real issues that we want to contend with,
with our European friends. This, I think, is a stupid fight, to
prevent consumers from just knowing what they are getting.
Picking a fight with Europe over this instead of going along
with what many countries--I think a majority of people around
the world have the right to know what they are purchasing. I
think that that gets in the way of other objectives in the
trade arena, and I would like a chance to explore that a little
further at some point.
Mr. EIZENSTAT. If I can just add a perspective. I think it
is a trade barrier. Certainly consumers should have the right
to know what they are buying and what the components are. But
when there is a non-scientific basis is for simply saying
because something is genetically modified the implication is
that it is dangerous and you don't approve it, that is wrong.
That is a trade barrier. And I think now increasingly the EU is
allowing more GMO products. It is fine to have consumers
understand what has happened, what is in the component, but
when you simply label something and then give the impression
that that makes it dangerous, that can be----
Mr. BLUMENAUER. Your position, where people think if they
know what it is that they won't buy it or if they know what it
is that that is an implication that it is not appropriate to
buy or it might be dangerous, I think is creating a false
battle. And I am not prepared at this point--I mean, we can
talk about what happens when you have got Round-Up-resistant
weeds, which 49 percent of American farmers are finding now,
and they are using even more pesticides.
But I think it is important for us to think about what it
is worth going to the mat over when we are dealing with our
friends in the EU with something that is probably going to be
popping up in various States around the country. I think the
first State that decides that consumers have the right to know,
I think you are going to see a lot of businesses fall off the
bandwagon in fighting against allowing people to know what it
is, because I think that creates the expectation or feeds the
fear that there is something they shouldn't be able to know if
you are not labeling it.
And I don't want to go into it further now, but I do want
to explore it at some point, because I think it is going to
create some unnecessary problems with this trade agreement,
that we have got bigger fish to fry, like Intel people that I
represent, where there are real battles on intellectual
property, there are real battles on standards that matter and
easing this forward. And this----
Chairman NUNES. I would like to thank my good friend from
Oregon. And his time has expired.
Mr. Schock is recognized for 5 minutes.
Mr. SCHOCK. Thank you, Mr. Chairman. Thank you for hosting
this meeting. And thank you to the panel of interesting
witnesses.
First, I would like to start with Ambassador Eizenstat. You
mentioned in your testimony the importance of TPA, not only to
getting the agreement done, but actually in credibility with
our negotiations. And so I thought I would just give you the
opportunity to expand a little bit on that and talk to us about
why TPA is important even just during the negotiating process.
And then our Congress, you heard our chairman at the
opening of this committee, has expressed support for TPA. We
need greater commitment from the administration to build
support for this effort. And so from a Member of Congress'
point of view, there seems to be only upside for the
administration to ask for TPA, since it seems to be important
for them in the negotiating process when it comes to
credibility. But you have served in administrations, multiple
administrations. Are there things we could be doing to help
build support for TPA and encourage the Administration to be
more involved?
Mr. EIZENSTAT. Well, Mr. Froman is going to be going
through hearings on his appointment in the Senate. I would
assume this would be some of the questions about TPA. I can't
imagine the administration wouldn't want to have it. And if
there is bipartisan support for it and if it can be indicated
that there is bipartisan support, that this is not going to be
a knockdown, drag-out, because the worst thing to happen, this
really would throw a kink in the negotiations, is you launch in
mid-July, which is what their hope is, these TTIP negotiations
and then you end up having a bruising battle over fast track at
the outset. So I think they may want to get some momentum in
the negotiations.
But to the extent that the Congress can indicate that there
is bipartisan support at the outset and that there won't be
such a bruising battle, it gives them really a tailwind rather
than a headwind. So I suspect that they are going to want some
assurance that this will, in fact, be a bipartisan program and
not one that, you know, ends up throwing, again, a curveball in
the negotiations before they start. But I think what you are
saying certainly should be welcome to the ears of the
administration.
Mr. SCHOCK. Thank you. I wanted to address the intellectual
property, not so much relative to the U.S.-EU agreement, but
what the agreement between the U.S. and the EU's trade
agreement will mean for intellectual property right fights that
we have for more developing countries. Most of the companies
that do business in my district that are worried about their
intellectual property being stepped on or stolen are not
worried about a European Union country doing it. I am aware of
multiple cases where the U.S. and the EU have already filed
jointly cases before the WTO. And I am just wondering, in any
of the panelists' view, whether a U.S.-EU agreement gives any
more weight or ability for us to protect our IP in both
countries or either country. In other words, does this have any
impact on our fights in China and some of the other emerging
markets?
Mr. EIZENSTAT. In my opinion--and I would like my colleague
from Intel, I am sure this is a big issue--absolutely. If we
can establish a really high level of intellectual property
protection here and then work shoulder to shoulder against
things like, you know, domestic innovation policies where they
basically require forced technology transfers, compulsory
licenses, a whole set of nontariff barriers in the IP area,
this would be, I think, a big step forward in establishing the
high standard of intellectual property protection around the
world at a time when it is under enormous stress across the
board.
So I think it would be a very big step. We do have strong
protections already. But coming in a trade agreement where we
do it jointly I think would have a very big impact on Third
World and emerging markets.
Mr. SCHOCK. Any other panelists? Mr. Slater.
Mr. SLATER. If I may, Congressman Schock. I agree with what
Ambassador Eizenstat said. I think that setting global
principles on IP protection where we have a commonality of
interests, not trying to harmonize the systems, but where we
are concerned about Third World markets, and we are, would be
very beneficial. Every initiative that I know where we have
succeeded in pushing back in China on one of their indigenous
innovation policies, it was because we cooperated with the EU
and usually Japan. And formalizing that cooperation, making it
actually binding and more detailed, would be very, very useful.
The other thing to keep in mind is the trade secret
protection in the EU varies from member state to member state.
The commission is looking at an EU-wide directive on trade
secrets. TTIP could provide the momentum for them to go further
down that road, and that would help. It is hard to argue to
enhance trade secret protections if you, yourself, don't have
the best standard in place.
Mr. SCHOCK. Well, I have more questions, but my time has
expired. So thank you again for being here.
Thank you, Mr. Chairman, for having this meeting.
Chairman NUNES. Thank you, Mr. Schock.
Mr. Reichert is recognized for 5 minutes.
Mr. REICHERT. Thank you, Mr. Chairman.
I apologize for being late and missing some testimony, and
I did get to catch part of the discussion, and I know that you
have touched on this issue a little bit. But I just want to go
back and maybe reemphasize your answers to a couple of
questions.
I am from the State of Washington, and I have just acquired
a new part of my district of some apple growers and some other
agricultural products. We are very excited about the
opportunity of a trade agreement between the United States and
the European Union. It offers critical opportunity for trade
for that industry, and also for other businesses, of course, in
Washington State. We are the most trade-dependent State in the
Union, as probably all of you know.
It also provides a way to tackle some of the challenges
facing Washington tree fruit growers, and even our dairy
producers as they try to access the European market. Each year,
on average, Washington exports 35 percent of its apple crop,
and some of our dairy producers export as much as 50 percent of
their product, but only a small amount of those products go to
Europe. I am hearing from growers and dairy producers in my
State about how nonscience-based regulations and standards and
other nontariff barriers are limiting their access to the
European market. It is essential, I think all of us recognize,
and as I said, I have heard some of the testimony, that these
barriers be addressed in the negotiations.
Mr. Grueff, what do you think can be accomplished through
these trade negotiations in this area?
Mr. GRUEFF. Well, I guess, bigger picture, in response to
your question, our history with the EU, as I pointed out in my
testimony, especially in the sanitary and phytosanitary area,
the health-related area, has not been a good one. And, in fact,
I would say that our way of trying to deal with these issues
has been through WTO dispute settlement, which is really not a
very good way to try to do this.
So this will really be the first time that we are going to
have a structure, a forum for the U.S. and the EU to really
focus on these issues. And so I am hopeful. I know that this is
going to be very difficult, but I am hopeful that the
opportunity will be used very productively.
As to your specific point about, for example, your
district, for our, your district and the U.S. dairy industry, I
think this is a very important opportunity for a number of
reasons. One is the issue of geographical indications, which is
generally viewed as an EU offensive issue. This is the issue of
producers getting to keep the name of the original area where a
product was produced, like Parma ham and so on. But our U.S.
dairy industry says that they feel confident that they will
have much better access to the EU market if there can be some
agreement with the EU regarding some of the biggest issues
regarding geographical indications in dairy, mozzarella and
feta and so on, that if something could be worked out with the
Europeans on this, our dairy industry is very optimistic about
their opportunities in the EU market.
So this is an issue that I certainly expect will be part of
the negotiations. And, again, it would be a platform, a
structure or forum that we just haven't had. So this can
provide some real opportunities.
Mr. REICHERT. I appreciate that. Thank you.
For Mr. Slater, another issue of importance to the
businesses in my State that operate globally is the protection
of cross-border data flow. In both the European Union and the
United States, data privacy is protected, but we have different
systems for providing that protection. Respecting the
difference of those privacy approaches, how can we ensure a
robust protection of cross-border data flows?
Mr. SLATER. Thank you. I am encouraged by an exercise that
is going on right now, where there is a mapping exercise
between the corporate binding rules in the EU and the cross-
border privacy rules that APEC has put together. And they are
mapping out the similarities and differences to ensure
interoperability as much as possible and then find a way to
bridge the differences. I have talked to USTR about this, and I
now want to encourage that approach and to, instead of trying
to harmonize or trying to dilute the EU privacy regime that is
to find a way to maximize interoperability and yet have a right
to strong cross-border data flows. They are not inconsistent.
And the EU, apparently, many of the officials in the EU want
the freedom to have cross-border data flows because they
recognize it is important to their own service industries.
So it is almost like you have to treat the two issues
separately. And even though they obviously touch, they are
heavily dependent on one another to make progress, but I am
encouraged by what they are looking at right now.
Mr. REICHERT. I appreciate that. Thank you.
I yield back, Mr. Chairman.
Chairman NUNES. Thank you, Mr. Reichert.
Well, that concludes our hearing. I do want to thank the
gentleman from New York for his cooperation on and bipartisan
support for agreeing to all the witnesses. I think it makes for
a much more productive hearing like we had today. And I
especially want to thank all of the witnesses for their time
and their patience dealing with our schedule. I hope we didn't
make you late for any appointments, but we do appreciate your
time.
And with that, the meeting is adjourned.
[Whereupon, at 4:22 p.m., the subcommittee was adjourned.]
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