[Senate Hearing 113-160]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-160
 
      THE TRANS-PACIFIC PARTNERSHIP: OPPORTUNITIES AND CHALLENGES
=======================================================================

                                HEARING

                                BEFORE THE 

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 24, 2013

                               __________



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                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan            MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHN CORNYN, Texas
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware           JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania

                      Amber Cottle, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)




                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

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

                               WITNESSES

Bhatia, Hon. Karan, vice president and senior counsel, global 
  government affairs and policy, General Electric Company, 
  Washington, DC.................................................     5
Hanson, Bob, president, Montana Farm Bureau Federation, Bozeman, 
  MT.............................................................     7
Hirschmann, David, president and CEO, Global Intellectual 
  Property Center, U.S. Chamber of Commerce, Washington, DC......     8
Suber, Tom, president, U.S. Dairy Export Council, Arlington, VA..    10

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    27
Bhatia, Hon. Karan:
    Testimony....................................................     5
    Prepared statement...........................................    29
    Responses to questions from committee members................    32
Hanson, Bob:
    Testimony....................................................     7
    Prepared statement...........................................    35
    Responses to questions from committee members................    39
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement...........................................    41
Hirschmann, David:
    Testimony....................................................     8
    Prepared statement...........................................    43
    Responses to questions from committee members................    47
Suber, Tom:
    Testimony....................................................    10
    Prepared statement...........................................    49
    Responses to questions from committee members................    56

                             Communications

Advanced Medical Technology Association (AdvaMed)................    59
Japan Automobile Manufacturers Association, Inc. (JAMA)..........    63
National Milk Producers Federation (NMPF)........................    68
Retail Industry Leaders Association (RILA).......................    70

                                 (iii)


      THE TRANS-PACIFIC PARTNERSHIP: OPPORTUNITIES AND CHALLENGES

                              ----------                              


                       WEDNESDAY, APRIL 24, 2013

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:10 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max 
Baucus (chairman of the committee) presiding.
    Present: Senators Stabenow, Cantwell, Cardin, Bennet, 
Casey, Hatch, Grassley, Crapo, Enzi, Thune, Isakson, and 
Portman.
    Also present: Democratic Staff: Mac Campbell, General 
Counsel; Bruce Hirsh, Chief International Trade Counsel; Hun 
Quach, International Trade Analyst; and Chelsea Thomas, 
Professional Staff. Republican Staff: Chris Campbell, Staff 
Director; Everett Eissenstat, Chief International Trade 
Counsel; and Rebecca Nasca, Staff Assistant.

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

    The Chairman. The committee will come to order.
    In the year 1803, with the Louisiana Purchase on the 
horizon, President Thomas Jefferson sent a confidential letter 
to Congress. He was seeking the appropriation of $2,500 for 
``the purpose of extending the external commerce of the United 
States.''
    He then instructed Captain Meriwether Lewis and Second 
Lieutenant William Clark to explore the newly acquired 
territory. Jefferson wanted to learn more about the people and 
the land. He wanted to find a water route to the Pacific Ocean 
to facilitate commerce across the continent.
    More than 2 centuries later, we continue to look to the 
Pacific to expand and to grow. Since 2009, the United States 
has been engaged in negotiations on the Trans-Pacific 
Partnership, otherwise known as TPP. Since Day 1, the TPP was 
conceived as a high-standard 21st-century trade agreement, and 
TPP leaders have set an ambitious goal to conclude negotiations 
by the end of this year. The TPP presents tremendous 
opportunities to expand U.S. exports and support hundreds of 
thousands of good-paying jobs here in America.
    As a group, the TPP countries are the largest export market 
for United States goods and services. Last year, U.S. goods and 
exports to current TPP countries totaled $619 billion, 
representing 40 percent of total U.S. goods exports. U.S. 
agriculture exports to current TPP countries totaled $47 
billion, making up a third of all U.S. agricultural exports.
    Montana, like the rest of the United States, relies upon 
global markets to maintain and create jobs. One in six 
manufacturing jobs in Montana comes from exports. In 2012, 
Montana's farmers, ranchers, and manufacturers exported nearly 
$2.5 billion worth of grain, beef, and machinery. A third of 
that went to TPP countries.
    In fact, Montana exported more than 117 million bushels of 
wheat around the world, with almost 75 percent going to Asia. 
Without those exports and without the TPP countries, every 
Montanan would have to eat 30 loaves of bread per day in order 
to make up what we export around the world.
    The TPP is exciting, not only because of trade 
opportunities with current parties, but also because of 
opportunities with potential new parties. The TPP is a magnet 
for the fastest-growing economies in the world, those in the 
Asia-Pacific region.
    In 2011, the Gross Domestic Product of nearly all of the 
Asia-
Pacific economies grew faster than the United States' growth 
rate of 1.8 percent. More than half of them enjoyed growth 
above the world average of 3.8 percent, and Asia's share of 
world imports grew from 18.5 percent in 1993 to 31 percent in 
2011. The United States needs to share in that growth, and the 
TPP offers a way to do so.
    Since the United States joined negotiations in 2008, six 
more countries have joined, including fast-growing Malaysia and 
Vietnam. Just last Saturday, the TPP parties invited Japan to 
join the negotiations. This represents a huge step towards 
another key objective, stitching together the economies of the 
Pacific to expand growth opportunities for all.
    U.S. agriculture exports to Japan totaled $13.5 billion 
last year. With $330 million in pork exports in 2012, Japan is 
the number-one destination for U.S. pork, more than the next 
two countries combined. With Japan in the TPP, the agreement 
will represent 30 percent of global trade and 40 percent of 
global Gross Domestic Product.
    Now, Japan has maintained many barriers to our exports, but 
when the third-largest economy in the world removes those 
barriers, tremendous opportunities are created. We saw this in 
February when Japan allowed more U.S. beef to be imported, and 
I am proud to say much of the beef is from my home State of 
Montana.
    The United States is now on track to increase our beef 
exports by nearly 50 percent, to record levels. The TPP will 
remove more of those barriers and deepen our already strong 
trade ties with Japan.
    On their journey to the Pacific, Lewis and Clark faced 
challenges, but, instead of turning back, they found creative 
paths westward. As we continue to expand, we will also face new 
challenges on the road to concluding the TPP. This agreement 
will need to address concerns about state-owned enterprises, 
will need to address unscientific agricultural barriers, and 
will need to ensure U.S. innovators have robust intellectual 
property protection and enforcement.
    These issues will require creative solutions. I look 
forward to continuing to work with my colleagues in Congress, 
with the administration, and stakeholders like the witnesses 
here today, to find solutions. I am also looking forward to 
working with all of you to renew Trade Promotion Authority and 
Trade Adjustment Assistance this year.
    Fast-track authority will help us conclude the TPP 
negotiations, and that will bring concrete benefits for 
American farmers, ranchers, businesses, and workers. I would 
like to see a bipartisan TPA--that is, Trade Promotion 
Authority--bill introduced by June.
    Lewis and Clark helped to unlock the vast potential of the 
land between the Mississippi and the Pacific. With this 
pioneering spirit in mind, let us allow the TPP to unlock the 
vast potential of the lands across the Pacific. Let us navigate 
the challenges before us so we can seize this opportunity to 
continue extending the external commerce of the United States.
    [The prepared statement of Chairman Baucus appears in the 
appendix.]
    The Chairman. Senator Hatch?

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

    Senator Hatch. Thank you, Mr. Chairman, for holding this 
important hearing. I appreciate our witnesses being here today.
    Over a decade ago, Chile, New Zealand, and Singapore 
launched negotiations to more fully integrate their economies. 
The vision was simple: to create a high-standard free trade 
agreement that would serve as a model of integration for the 
Asia-Pacific region. Joined by Brunei in 2005, this agreement 
eventually became known as the P-4.
    Three years later, in a small conference room on the 
outskirts of the U.N. General Assembly meeting, Ambassador 
Susan Schwab formally announced the United States' interest in 
joining the negotiations. The announcement received little 
fanfare here in the United States. Had it been known at the 
time that this small step would eventually lead to what is now 
one of the most ambitious trade agreements the United States 
has ever undertaken, the TPP, I am certain that her 
announcement would have been front-page news.
    Now with the recent statement by the TPP partners that a 
consensus was reached to include Japan in the negotiations, the 
event takes on even more significance. I strongly support the 
vision that underlies TPP, and I welcome Japan's participation 
in these negotiations.
    I believe this agreement offers an opportunity to finally 
open some of the largest and most promising markets to U.S. 
exports. But we cannot rest on our laurels. While the 
opportunities presented by TPP are real, so are the challenges. 
The first challenge we face is concluding an agreement that 
provides real market access for U.S. goods and services.
    Much has been made about the new issues under discussion in 
TPP, many of which I support. But, in pursuing these new areas 
of agreement, I hope our negotiators do not lose sight of the 
fundamentals of free trade and economic integration. 
Negotiating a 21st-century trade agreement is fine, but not at 
the risk of locking in 18th-century mercantilism.
    Without real and beneficial market access, TPP will never 
reach its full potential. It remains to be seen whether the 
Obama administration is willing and able to successfully manage 
negotiations in some of our most sensitive sectors without 
sacrificing real market access for U.S. businesses. Any 
meaningful agreement should set standards and establish rules 
for trade that will benefit American exporters and innovators 
well into the future.
    Transparency, predictability, and strong intellectual 
property protection, it seems to me, will be critical to 
reaching this goal. A successful agreement must include 
commitments reached under the U.S.-Korea free trade agreement 
and address new areas as well. Specifically, these new areas 
include ensuring the free flow of data across borders, robust 
protection for trade secrets, and discipline for state-owned 
enterprises.
    The agreement should have the strongest possible terms of 
protection for our innovative industries. This must include 
following current U.S. law by providing 12 years of regulatory 
data protection for biologics, a goal that the chairman and I 
both share.
    I have raised this issue at every opportunity, and a 
bipartisan group of 27 Senators sent a letter to former 
Ambassador Ron Kirk expressing support for including this 
provision in the agreement, yet the administration still 
refuses to table text reflecting our own U.S. law. They 
repeatedly argue that this bar for data protection for 
biologics is too high, even though that was fought out long 
ago.
    Of course, such concerns have not stopped the 
administration from pushing a liberal social agenda in the 
negotiations. Indeed, many of our trading partners have serious 
concerns with the administration's approach on issues such as 
labor and environmental protections, especially their linkage 
to dispute settlement and trade sanctions.
    These issues are only marginally related to trade, yet the 
administration seems to give them a higher priority than the 
protection of U.S. intellectual property. To fulfill the vision 
of TPP, the United States must be able to rise to these 
challenges. Unfortunately, after 16 rounds and roughly 37 
months of negotiations, it is still not clear whether the 
agreement will ultimately live up to the lofty expectations 
that we have.
    I believe one reason for this uncertainty is that our 
negotiators simply lack the tools necessary to complete the 
job. While I appreciate the administration's interest in 
discussing Trade Promotion Authority, or TPA, I have yet to see 
any real commitment on the part of the White House to achieving 
its quick consideration and approval in Congress.
    Of course Congress can, and will, develop TPA legislation 
without the support and input of the White House, but a formal 
response from the administration for TPA would send a strong 
signal to our negotiating partners and the proponents of the 
Trans-Pacific Partnership that the President is serious about 
making sure the rhetoric surrounding the agreement meets the 
reality of the negotiating table.
    Now, Mr. Chairman, I want to thank you once again for 
holding this hearing today. I look forward to hearing from each 
of our witnesses about the opportunities and challenges that 
they see in negotiating and concluding what could be one of the 
most significant opportunities to expand U.S. exports in the 
last 25 years.
    With your announcement yesterday and today, which is sadly 
reflected upon by, I think, every member of this committee and 
by many in the Senate, I believe that your remaining time in 
the Senate is going to be a time of tremendous, prodigious work 
and accomplishment, and you deserve that kind of support. And 
we intend to try to see that you have that type of support. But 
I hope we can change some of these things and get them a little 
bit straightened out as we finish up this year. This is a very, 
very important issue for all of us.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Hatch. I especially thank 
you for those comments. This is a great opportunity for us in 
this Congress--there is this year, there is next year--to 
accomplish a lot of legislation that is very good for our 
country. So, thank you very, very much. It is a great 
opportunity.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. I now would like to introduce our panel. We 
have four witnesses with us here today. First is the Honorable 
Karan Bhatia, vice president and senior counsel for global 
government affairs and policy with General Electric Company.
    Next is Mr. Bob Hanson, president of the Montana Farm 
Bureau. Bob is a farmer and rancher from White Sulfur Springs, 
MT. Thank you, Bob, for traveling this great distance again to 
come and help us. It is a pleasure to see you.
    Next is David Hirschmann, president and CEO of the Global 
Intellectual Property Center with the U.S. Chamber of Commerce. 
Mr. Hirschmann, thank you so much.
    Finally, Mr. Tom Suber is president of the U.S. Dairy 
Export Council. Thank you for that perspective, which is 
clearly vital.
    Thank you all. As you know, our usual practice is to have 
your statements automatically included in the record and get 
you to summarize your statements. Again, I urge all witnesses 
to let her rip. Do not pull any punches; say what you think. 
Thank you very much.
    Why don't you go ahead, Mr. Bhatia?

   STATEMENT OF HON. KARAN BHATIA, VICE PRESIDENT AND SENIOR 
COUNSEL, GLOBAL GOVERNMENT AFFAIRS AND POLICY, GENERAL ELECTRIC 
                    COMPANY, WASHINGTON, DC

    Mr. Bhatia. Thank you. Thank you very much, Mr. Chairman, 
Ranking Member Hatch, Senators.
    I appear before you today in two capacities: first, as a 
former Deputy Trade Representative who had responsibility for 
overseeing the agency's work leading up to the launch of the 
TPP negotiations from 2005 to 2007; and second, in my current 
role overseeing global government affairs and policy for 
General Electric.
    In both capacities and as a citizen who cares greatly about 
America's competitiveness, economic growth, and global 
influence, I strongly support the Trans-Pacific Partnership 
initiative launched by President Bush and continued and 
expanded by President Obama.
    As a former Deputy USTR, I can attest that the launch of 
TPP was carefully considered by the Bush administration. As you 
will recall, this was a very busy period in U.S. trade policy. 
We were negotiating, ratifying, and implementing multiple FTAs, 
had an active regional agenda, and the Doha Round was still 
going full throttle.
    But notwithstanding our full plate, the TPP captured our 
attention. First, it represented a chance to create a sustained 
path of trade liberalization for the United States going 
forward. With the expiration of Trade Promotion Authority in 
2007, it was not clear what the future of trade liberalization 
would look like for the U.S. TPP presented an opportunity to 
keep advancing an international trade agenda, one that 
reflected U.S. trade policies and enhanced U.S. 
competitiveness.
    Second, with America's relative share of the trade in the 
region eroding and a number of regional agreements that would 
exclude the United States having been proposed, there was 
concern that the U.S. would increasingly be on the outside of 
the Asia-Pacific region looking in. TPP represented an 
opportunity for America to continue to engage and grow in this 
exciting, economically dynamic region.
    Third, TPP really presented a unique opportunity: an FTA 
that was based not on geography or sector, but one based on a 
common philosophy--a shared commitment to the highest level of 
ambition for trade liberalization. In time, we believe that 
this coalition of the most ambitious could create a model 
agreement that would set a new standard and attract others to 
join.
    At that time, of course, there were some things we could 
not predict: the global financial crisis, the resulting 
economic slow-down, the failure of Doha, or the rise of state 
capitalism. But today I would submit that the decision to 
launch TPP was prescient.
    At a time when all of these unforeseen developments could 
have led America and its Asia-Pacific trading partners to turn 
inwards and erect barriers to trade, TPP, which to its great 
credit the Obama administration has continued to pursue and 
expand, has helped solidify the commitment of a growing group 
of countries to trade liberalization.
    Now, in my role at GE, I can attest first-hand to the great 
promise that TPP offers innovative American companies whose 
growth increasingly depends on global markets. Today, 60 
percent of GE's revenue is derived from markets abroad, up from 
40 percent just a decade ago, and much of our opportunity for 
future growth lies in these expanding markets.
    Today, exports to countries like Malaysia, Japan, Canada, 
and Vietnam help support GE operations, making jet engines in 
States like Ohio and, yes, Montana; gas turbines in South 
Carolina and New York; health care devices in Wisconsin and 
Utah; and locomotives in Pennsylvania and Texas.
    Last year, GE had revenues of more than $20 billion from 
the 11 TPP countries, almost 2.5 times our revenues from those 
countries just 5 years ago. But we believe that with a level 
playing field we can do even better, which is why we are big 
supporters of TPP.
    We are very hopeful that the agreement will offer American 
companies like GE an improved operating environment in the 
region by strengthening disciplines around government 
procurement, including addressing disqualifying local content 
requirements; ensuring a level playing field with state-owned 
enterprises; promoting enhanced transparency; promoting easier 
and faster clearance of goods and movement of people; 
eliminating tariffs on manufactured goods; addressing non-
tariff barriers, including those imposed on environmental goods 
and flows of data; and fostering Trans-Pacific innovation with 
21st-century intellectual property disciplines, in particular 
for the protection of trade secrets.
    Above all, we support TPP because we believe that the 
processes of economic reform and openness that TPP will drive 
will support broader and more inclusive economic growth. Simply 
stated, where economies are healthier, more transparent and 
freer, we, our employees, and our shareholders do better.
    In sum, I believe that TPP represents the right course for 
U.S. trade policy. The U.S. was right to join it, the Obama 
administration was right to continue the negotiation and to 
expand it, including most recently to include Japan. It will be 
critical that the agreement fulfill its original goal, being a 
very ambitious agreement among countries committed to reform.
    I have every confidence that the superb negotiating team at 
USTR that is pursuing this negotiation, in close consultation 
with U.S. stakeholders, will obtain just that, and, upon its 
submission, I hope this committee and this Congress will 
support its ratification.
    Finally, Mr. Chairman, if I might, I would just like to 
thank you. Having had the opportunity to testify before you on 
this committee on trade issues on a number of occasions, I know 
well the enormous contribution that you have made to our 
country and to the world in this area, and you will be deeply 
missed. Thank you.
    The Chairman. Thank you so much, Mr. Bhatia.
    [The prepared statement of Mr. Bhatia appears in the 
appendix.]
    The Chairman. Next, Mr. Hanson?

              STATEMENT OF BOB HANSON, PRESIDENT, 
          MONTANA FARM BUREAU FEDERATION, BOZEMAN, MT

    Mr. Hanson. Thank you, Mr. Chairman, for this opportunity 
to speak to you about the trade agreement. My name is Robert 
Hanson, or Bob. I am president of the Montana Farm Bureau, 
which is the largest agricultural organization in Montana. I am 
a board member of the American Farm Bureau board. I am a full-
time rancher, fourth generation, in Montana.
    I would like the opportunity to talk about the Trans-
Pacific Trade Partnership, and mainly about Japan entering it. 
Japan has been a real key issue to Montana. Sixty percent of 
all the agriculture production in Montana is exported out of 
the United States, and the majority of that is grain to the 
Pacific Rim.
    The other countries offer some opportunities which we have 
not experienced yet in Montana, but it is very essential that 
we have this. The administration is going forward with this. We 
are very pleased. We would like to have this agreement be as 
transparent and open as possible.
    The two governments work hand-in-hand, the U.S. and Japan. 
It has been very rewarding that they have moved forward with 
the 30 months of age for cattle recently, on the 1st of 
September. That opened a lot of opportunities and lessened some 
requirements we have in managing our cattle.
    Wheat, corn, soybeans, beef, and pork are the main things 
that go into Japan--not too much corn or soybeans from Montana; 
we do not do very well there. But it has been very lucrative 
for us in a very good market. I have had the opportunity to 
take two trips to Japan on the beef trade, one in 2004 and one 
in 2005, promoting the beef trade and trying to understand 
their culture in relation to our product.
    I found it to be a very open and a good place to market our 
products. The people, in general terms, are very eager for our 
products from Montana, and it would be good to have it opened 
up so they have full access to our market.
    The only other thing I would like to add at this time is, 
it is quite a shock to us having Senator Baucus resign. He has 
really been a statesman for the State of Montana whom we really 
enjoy, and we are going to sorely miss him. We understand why 
he is making the shift. We were kind of laughing about it in a 
certain way, because there are not any of his staff who are as 
old as the time he has been here. All of them are a lot younger 
than his tenure. So we are going to sorely miss him, but we 
have 2 years to go forward, and I think he will do a good job 
on this. So, thank you again for the opportunity to testify.
    Senator Hatch [presiding]. Thank you, sir.
    [The prepared statement of Mr. Hanson appears in the 
appendix.]
    Senator Hatch. Mr. Hirschmann?

   STATEMENT OF DAVID HIRSCHMANN, PRESIDENT AND CEO, GLOBAL 
    INTELLECTUAL PROPERTY CENTER, U.S. CHAMBER OF COMMERCE, 
                         WASHINGTON, DC

    Mr. Hirschmann. Mr. Chairman, Ranking Member Hatch, members 
of the committee, thank you for inviting the Intellectual 
Property Center to testify in this important hearing.
    Like you, we believe that effective intellectual property 
protection is vital to creating jobs into the future of our 
society and the world society. In fact, IP delivers in at least 
four ways: it generates jobs; it stimulates innovation; it 
ensures consumer safety; and, probably not as well understood, 
there is also enormous investment in taking products to market, 
so it ensures that we are able to take new, innovative products 
to markets all around the world.
    So, without an intellectual property agreement, you do not 
really have a full trade agreement, because it is the 
intellectual property and the ability to deliver that and 
invest in marketing around the world that really fulfills the 
promise of trade agreements.
    The case for the Trans-Pacific Partnership is very strong. 
Two billion Asians joined the middle class in the last 20 
years, and another 1.2 billion are expected by 2020. According 
to the International Monetary Fund, the world economy will grow 
by $21.6 trillion over the next 5 years, and nearly half of 
that growth will be in Asia.
    Trade agreements are crafted to build bridges, create jobs, 
and promote global economic growth. However, the United States 
has been falling far behind. The number of trade accords 
between Asian countries surged from just three in the year 2000 
to more than 50 by 2011, and another 80 or so are in the 
pipeline. At the same time, the United States has clinched just 
three trade agreements in Asia.
    The TPP is America's best chance to tap into these exciting 
markets. Its objective is to achieve a comprehensive, high-
standard, commercially meaningful trade and investment 
agreement. The current 12 TPP partners, as the chairman 
mentioned, would become the U.S.'s largest trading bloc, 
representing 40 percent of the world's Gross Domestic Product 
and a third of all trade.
    Working closely with the Office of the U.S. Trade 
Representative and a broad and diverse range of companies and 
industries, the Chamber of Commerce is helping to lead the 
business community's advocacy for the inclusion of strong 
intellectual property protections and disciplines throughout 
the TPP trade agreement, including market access for goods and 
services and investment, as well as path-breaking new rules for 
regulatory coherence, due process, anti-trust enforcement, and 
state-owned enterprises. The opportunity to create a truly 
high-standard agreement is simply too important to miss.
    Now, why intellectual property? Fifty-five million American 
jobs depend on intellectual property. They pay 30-percent 
higher wages on average, and, most importantly for this 
hearing, 74 percent of our exports are tied to intellectual 
property.
    However, the industries that create these exports are 
facing challenges all around the world. IP matters for two 
reasons: it will maximize the benefits of the agreements, both 
for the U.S. and its partners, but it is also important to 
remember that some countries are moving in the wrong direction 
in terms of advancing innovation and IP.
    I would be remiss not to single out the recent negative 
trends, for example, in India. Many of our members across a 
range of industries are struggling with the very difficult 
problems in that country. If the TPP is to be a model 
agreement--as the negotiators said when they laid it out, 
saying that the ambition levels would be the highest in 2011--
it is essential to include binding, enforceable, and robust 
standards for the protection of intellectual property.
    At a minimum, we should seek to meet or exceed the 
standards for patents, trademarks, copyright, and criminal 
enforcement of trade secrets theft in the U.S.-Korea Free Trade 
Agreement, and in some areas such as trade secrets there may be 
an opportunity to go further.
    We would like to especially thank Senator Baucus and 
Senator Hatch for their letter to the Office of the U.S. Trade 
Representative calling for strong IP protections. We also urge 
you to push back on any efforts to weaken IP rights or exclude 
any sector from protection in the agreement.
    In trade negotiations, whenever one party seeks to exclude 
a given commodity or sector from an agreement, others tend to 
follow suit, limiting its reach. For the United States to 
achieve the goal of a truly 21st-century agreement, our 
negotiators must hold fast to the goal of a comprehensive 
accord that avoids carve-outs and exclusions. This is a 
position that enjoys broad and diverse support not only in 
business, but from former USTRs and a whole range of officials 
who have spoken out on this recently.
    We know that USTR has been working tirelessly to ensure a 
high-standard agreement. As part of that, it is essential that 
this administration propose and secure commercially meaningful 
opportunities for all biotech and pharmaceutical companies, as 
Senator Hatch mentioned.
    We believe that the 12 years of regulatory data protection 
for biologic products is essential, as currently provided in 
U.S. law, and will ensure that companies are able to continue 
to invest in lifesaving innovations.
    For the U.S. to remain the world's most competitive, 
innovative economy, we must ensure that our IP-intensive 
industries remain confident that copyrights, patents, and 
trademarks will be protected. We commend this committee for its 
consistent work to advance that goal. We appreciate your 
willingness to work now to ensure that the TPP is indeed a 
high-standard agreement for intellectual property that benefits 
jobs, innovation, consumer access, and safety, both here and 
for each of our 11 TPP partners.
    Chairman Baucus, I would be remiss in not pointing out that 
we will sorely miss your leadership here in the Senate. We 
greatly appreciate the chance to work with you, and 
congratulate you on what you accomplished, but we also know 
that, over the next 2 years, you will accomplish a great deal. 
On behalf of the Chamber, we look forward to working with you 
to make those accomplishments happen. Your leadership on trade 
and TPP is just one example.
    The Chairman. Thank you, Mr. Hirschmann. I think you know, 
as well as my very good friend Bob Hanson, that I do intend to 
double down. We are going to get this thing done. Thank you.
    [The prepared statement of Mr. Hirschmann appears in the 
appendix.]
    The Chairman. Mr. Suber?

              STATEMENT OF TOM SUBER, PRESIDENT, 
            U.S. DAIRY EXPORT COUNCIL, ARLINGTON, VA

    Mr. Suber. Thank you. Chairman Baucus, Ranking Member 
Hatch, and members of the committee, I appreciate the 
opportunity to testify today on behalf of the U.S. Dairy 
Council regarding the challenges and opportunities of the U.S. 
dairy industry in the Trans-Pacific Partnership.
    U.S. DEC supports these negotiations, as it has all the 
recent agreements that have helped expand our increasingly 
export-
dependent sector. It is important to recognize that, if the 
administration brings back an unfair result, the U.S. dairy 
industry will have no choice but to oppose congressional 
approval of the agreement.
    The TPP started with no clear up-side for U.S. dairy. The 
original few countries involved consisted of prior U.S. FTA 
partners, a country without significant dairy consumption, and 
a major competitor with a monopolistic industry structure. 
Despite this grim outlook, we began work to identify offensive 
interests to include in a dairy package that could provide the 
foundation of a positive TPP outcome.
    Today we are pleased that the pieces are in place so that 
this agreement, properly negotiated, could deliver large and 
lasting benefits across the U.S. dairy sector. There are 
several key elements we have identified as necessary in 
assembling this positive overall dairy package.
    The first critical area is broadly shared by most 
throughout the U.S. food and agricultural community: a high-
quality and enforceable sanitary and phytosanitary, or SPS 
chapter. Non-tariff barriers to trade have proliferated in 
recent years, making agricultural tariffs a lesser evil in many 
export markets.
    Given this, U.S. DEC has joined with other groups to insist 
on the importance of securing enforceable SPS obligations that 
build upon the existing WTO SPS agreement. We believe that a 
strengthened reliance on scientific and risk-based requirements 
throughout the TPP region will improve trading conditions while 
maintaining the ability of all countries, including the U.S., 
to preserve food, animal, and plant health, just as has been 
the case with the existing SPS agreement in the WTO.
    The next key area for us is export market access, where our 
industry actually has some of the largest potential gains among 
all U.S. agricultural sectors. In order to provide a positive 
potential export up-side for our industry, it is critical that 
TPP provide fully open access for our products into the 
Canadian and Japanese markets, as well as into Vietnam and 
Malaysia. In fact, a large share of the prospect for a positive 
net outcome for us rests in great part on how the dairy 
negotiations with Canada and Japan are handled.
    U.S. DEC and many others throughout our industry would 
strongly reject a TPP outcome where the U.S. industry is asked 
to accept negative trade impacts with respect to other major 
dairy-
producing countries while omitting export gains in other 
markets, particularly Canada and Japan.
    As part of the TPP bilateral discussions on dairy, it is 
critical this agreement also address the ability of New 
Zealand's quasi-
monopoly dairy firm to use its market power to undermine the 
efforts of U.S. companies in global markets.
    One dairy company in New Zealand is a direct heir of the 
prior state trading enterprise that today controls 90 percent 
of the market. It has benefitted dramatically from past 
government decisions to create and support a national champion.
    These government policies granted the firm exclusive access 
to lucrative overseas import licenses for several years and 
permitted it to inherit key global accounts through 
facilitating a consolidation of virtually all New Zealand dairy 
exports. In the world's single-largest dairy exporting nation, 
this poses a sizeable concern.
    It is simply inappropriate to provide new market access to 
New Zealand without addressing the excess level of market 
concentration resulting from these government preferences. This 
is not simply a strong conviction of American dairy farmers, 
but is shared by many trade-reliant dairy processing companies 
within U.S. DEC.
    Finally, U.S. DEC believes it is important to use the 
opportunity provided by TPP to set more reasonable guidelines 
for the use of common food names, such as parmesan and feta, 
which are under attack by the European Union. This is a de 
facto non-tariff barrier to our cheese exports. As the U.S. 
prepares to embark on trade talks with the European Union, this 
issue takes on even greater significance.
    In closing, let me repeat that U.S. DEC supports the TPP 
negotiations and hopes to actively support the final agreement. 
Economists at the National Milk Producers Federation have 
calculated that, without major reforms in New Zealand and 
without other offsetting dairy market access opportunities in 
the TPP such as in Canada and Japan, U.S. industry would lose 
$20 billion over the first decade of the agreement.
    U.S. DEC's aim is to turn a sizeable loss into a strongly 
positive figure at the end of the day. Our ability to do so 
hinges on how key elements of TPP are ultimately decided.
    Thank you again for the opportunity to testify. I look 
forward to any questions you may have and echo the other 
members of the panel in thanking you for your service over the 
many years, Chairman Baucus.
    The Chairman. Thank you, Mr. Suber, very much.
    [The prepared statement of Mr. Suber appears in the 
appendix.]
    The Chairman. I would like to ask each of you, what is the 
major objective you would like to see accomplished in a 
successfully concluded TPP? If you were to think about one--I 
will give you two objectives. One might be positive; it might 
be preventing something bad from happening. But what are the 
two major objectives that each of you would like to see 
accomplished in this agreement? I will start with you, Mr. 
Bhatia.
    Mr. Bhatia. Thank you, Mr. Chairman. As I reflected in my 
opening comments, for us, for a company like GE that is in so 
many different sectors, that is in all of these different 
countries, we will stand to benefit, frankly, simply from the 
general trend of openness, of market reform, that is going to 
result.
    When we see that kind of initiative moving forward, we are 
going to see growth in those economies; we are going to see 
greater openness. So it is hard to pick any individual sector, 
for instance, or any individual point, and say that alone would 
be critical to our support.
    Having said that, I do think there are a couple of points 
that I would suggest that are a particularly high priority for 
us. One is in the area of government procurement. As you step 
back and you look at the world that we are increasingly 
confronting, the role of governments in economies is growing. 
It is growing more year by year in some senses, and it 
certainly took a substantial step forward post-financial 
crisis.
    So, when you have governments acting in economies as 
consumers, as well as regulators, investors, and so forth, 
having a strong set of disciplines around how the governments 
and state-owned enterprises actually procure, what their 
involvement is in markets, is key.
    In that regard, I would flag one specific trend that has 
been of concern, which is the rise of forced local content 
requirements that we have seen. Now, these may come through 
various different forms, various different means, but they are 
trade-distorting.
    I think they ultimately work to the detriment, not just of 
U.S. companies, but indeed of their own economies. So I would 
flag a strong government procurement chapter as being a key 
one. There are obviously many others, some of which were 
mentioned--state-owned enterprises, IP disciplines, and so 
forth--but that is one example.
    The Chairman. Mr. Hanson, I take it you are also concerned 
about the tobacco safe harbor; for example, the other safe 
harbor provisions that are carve-outs. Mr. Hirschmann mentioned 
that. But what are the couple of things that come to your mind?
    Mr. Hanson. Well, the safe harbor does give us a little bit 
of heartburn. I guess the problem is that I can understand the 
comments about tobacco, but the other side of it is--I guess 
the way I look at it is, it kind of creates a loophole that can 
create some instability in being able to get your product into 
the market.
    We are concerned that companies might use the safe harbor 
to create trade barriers related to that. We would like to make 
sure that the agreement is very transparent and that we can 
have a consistent process going forward so we know where we are 
in our production and are able to market it in a steady fashion 
in the country.
    The Chairman. Mr. Hirschmann?
    Mr. Hirschmann. I suppose it would be cheating on the 
question if I said we wanted it to be comprehensive.
    The Chairman. No, that does not work. [Laughter.]
    Mr. Hirschmann. Obviously, there are 29 chapters, and we 
have teams at the Chamber working on just about all of them. 
But I will talk my book at the Global Intellectual Property 
Center. In that regard we hope that it is a high-standard 
agreement, one that has no exceptions, one that certainly 
preserves U.S. law, particularly on biologics, and builds on 
that. I think in intellectual property as in other areas, if 
you do not move forward, you are indeed falling back. 
Technology changes.
    So I think there is an opportunity to really, not just for 
our country--I mean, this is the U.S. Senate Finance Committee, 
so we are talking about the benefits to the United States--but 
every nation in the TPP will benefit from effective 
intellectual property protection.
    The Chairman. Good. Thanks.
    Mr. Suber?
    Mr. Suber. Well, since 3 of every 5 new pounds of milk 
produced in the country end up going out of the country, growth 
is the highest priority we have in the dairy package we are 
speaking of. That comes from market access. There, Canada 
stands out as the primary one.
    We think that that poses the highest potential new access 
for us, essentially creating a truly open NAFTA free trade 
area, which did not happen from the original FTA with Canada 
and NAFTA itself. But also the issue of the reliability of that 
access is important, not just with Canada but with the entire 
TPP region, and an enforceable SPS agreement would bring that.
    Making sure that the rules of trade are based on science, 
transparency, and timely adjudication of issues, bindingly 
done, is important to make sure that our access is actually 
delivered and will make a difference as we go into the European 
discussions, where those issues will be particularly difficult.
    The Chairman. Right. But how do you deal with New Zealand? 
I have visited New Zealand. I have visited their dairy farms 
down there.
    Mr. Suber. They are very good competitors, and they make 
very good products and are a global player, and they should be. 
Where the issue becomes tricky is that they have, for years, 
provided preferences to the single company there called 
Fonterra. It has essentially created a situation where, either 
inside of our market or external to our market, we find 
ourselves playing on an unbalanced playing field.
    We are not talking about leaving New Zealand out of the 
agreement or leaving dairy out of the agreement, but, if you 
are going to provide new access, you need to reform their 
industry. If this is going to be a high-ambition agreement in 
the 21st century, you need to reform that industry which is 
creating a 90-percent market share for one company.
    In the global market, that company controls about 35 
percent of the global trade, which exceeds by a factor of 2 
what Saudi Arabia controls in oil. So, their market power is 
substantial, and it should be reformed.
    The Chairman. Thank you very much.
    Senator Hatch?
    Senator Hatch. Thank you, Mr. Chairman.
    Ambassador Bhatia, from your experience as a former senior 
government official responsible for negotiating and 
implementing trade agreements in the Asia Pacific and African 
areas, how important is Trade Promotion Authority to the 
successful negotiation, approval, and implementation of the 
Trans-Pacific Partnership?
    Mr. Bhatia. Senator Hatch, TPA certainly is important. I 
think there are probably three real ways in which it is 
important. I think the first is, it is important to help guide 
the negotiators. It is, at the end of the day, a mandate from 
Congress to the negotiators and helps us--helps them--
understand what it is they need to accomplish, to bring back, 
to gain the Congress's approval. So I think it is important in 
that regard.
    I think, second, it is important to close the agreement. I 
think you find your trading partners are concerned and 
sometimes skeptical if they think that the agreement is not 
going to be subject to an up-or-down vote, that it is going to 
potentially be carved back in certain places. So I think it is 
important to close the agreement at the end of the day when you 
hit that point.
    Last, I will say it is important as a sign of American 
leadership in trade. So I think, for all of those reasons, TPA 
is important.
    Senator Hatch. Well, thank you.
    Mr. Hirschmann, let me just ask you this. Just yesterday, 
an article came out focusing on a junior Obama administration 
Health and Human Services official. Now, this official proudly 
bragged about his efforts to steamroll USTR by watering down 
the U.S. intellectual property chapter in TPP in order to 
advance his vision of ``global health policy'' objectives.
    Now, perhaps this explains why, as you alluded to in your 
testimony, the Obama administration has thus far refused to 
commit to seek 12 years of regulatory data protection for 
pharmaceuticals in the TPP negotiation, which reflects current 
U.S. law.
    I am concerned that the administration is more preoccupied 
with placating various left-wing interest groups than it is in 
protecting innovators and content creators who generate a 
significant and increasing portion of U.S. jobs.
    Do you believe there are steps we can take to assist our 
trade negotiators in advocating more effectively on behalf of 
U.S. innovators and content creators? If the administration 
decides to unilaterally depart from the standards reflected in 
U.S. law in determining their negotiating objectives for 
intellectual property and TPP, do you believe that it will do 
lasting damage to U.S. innovators?
    Mr. Hirschmann. Senator Hatch, as you pointed out, it is 
U.S. law, and it received great bipartisan support in Congress 
during the consideration of the health care legislation. So I 
think ultimately negotiators understand that they have to bring 
back an agreement that will be approved, that this committee 
will consider.
    Twelve years of biologic protection is important, and the 
reason it has had such support on a bipartisan basis here in 
the Congress is because it is what is needed to really drive 
the investment in what are lifesaving drugs. So, as a matter of 
health policy, it is the right answer as a matter of trade 
policy.
    Just as a matter of negotiating, U.S. negotiators should 
always start, at a minimum, with U.S. law. I think legislation 
like what you proposed, the Innovation Through Trade Act, that 
would elevate the status of IP within USTR, is a good step. I 
think we should always be looking for ways to strengthen our 
ability to open markets and to ensure IP protection around the 
world.
    Senator Hatch. Well, thank you.
    Mr. Suber, your concerns over the proliferation of trade 
agreements which enshrine the European Union's use of a 
geographical indication system are well-founded, in my opinion. 
I am afraid that, if the United States does not vigorously 
advocate for an alternative system, many competitive export 
opportunities will be lost. So, do you believe the 
administration has an effective strategy for dealing with this 
problem? If not, how can that strategy improve?
    Mr. Suber. Well, thank you for the question. We have been 
gratified by the interest that the administration, both at USTR 
and USDA, has taken on this issue. At first it seemed 
nettlesome and small, but now, as we have explained it to them, 
they see very much the same thing we see: it has denied us 
access; it potentially is a de facto barrier. We do think that 
they are addressing it in the proper way in the background 
negotiations related to TPP. These issues are persistent.
    The European Union considers this one of their very top 
priorities, and they put it into all sorts of other trade 
agreements. So the issue is about monitoring, the issue is 
about persistence, the issue is about diligence and recognizing 
that this is something that can spread--already has spread--
beyond dairy. It is a food issue about preserving the use of 
common food names, our immigrant culture, and the heritage that 
we have from that.
    Senator Hatch. Well, thank you.
    Just one last question for you, Mr. Hirschmann. How 
important is it that we establish the highest standards of 
protection for intellectual property rights in TPP in light of 
the challenges that U.S. innovators face in markets such as 
China and India, just to give two examples?
    Mr. Hirschmann. In addition to making sure that we know the 
rules of the road and that companies can continue to innovate 
and invest in innovative products of all kinds, I think it is 
important to remember that countries like China, India, and 
others are watching to see what we do here. So it is good 
offense, but it is also good defense, and ultimately it will 
accelerate the path.
    In private, I think most Chinese officials understand that 
intellectual property protection is their future. They just are 
not sure quite how to get there. I think this will help spur 
the movement towards strong and effective intellectual property 
protection around the world.
    Senator Hatch. Well, thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Stabenow?
    Senator Stabenow. Well, thank you very much, Mr. Chairman, 
for holding the hearing. I want to start out by saying, Mr. 
Hanson, that you are not only fortunate that the chairman of 
the Finance Committee is from Montana, but, speaking as the 
chair of the Agriculture Committee, I can assure you, nobody 
fights harder for Montana agriculture than this gentleman. So 
he is going to be missed in many, many different capacities, 
but I look forward to working with you, Mr. Chairman.
    The Chairman. I am not going anywhere.
    Senator Stabenow. I know you are not. And I am counting on 
you to help us get a farm bill passed again, so we are looking 
forward to doing that.
    Let me also just echo, Mr. Hirschmann, my strong support 
for what you said about binding and enforceable standards on 
intellectual property rights. We have to make sure that this 
happens. Mr. Chairman, I very much appreciate your holding the 
hearing. This really is a historic opportunity to open markets.
    I would ask and encourage that we also hear from those who 
have concerns, additional concerns, about making sure we get 
this right. Of course, I am referring to the auto industry, 
where Japan's interests now in being a part of this creates a 
situation where we have a country involved that has spent 80 
years blocking our auto industry from fully participating in 
trade. So I know the USTR is working hard. There are some steps 
they have taken that are very positive.
    But the truth is, at the moment we have an industry that, 
last year, was 30 percent of the economic growth of this 
country, that is still in a situation where Japan is sending 
120 automobiles to us for every one we can send to them.
    So it is not just tariffs, but it is very much non-tariff 
barriers that they put in place, where Japanese auto dealers 
cannot sell foreign vehicles. So there are a lot of things that 
we need to get right on this, particularly for Japan, and I 
look forward to working with you on that. This is really 
important, and I am hopeful that we can have an opportunity to 
hear from them as well.
    I also understand, with my Agriculture hat on, how 
significant this is in opening markets. Our bright light, 
frankly, in exports is agriculture in terms of trade surpluses. 
But also, representing a big dairy State, Mr. Suber, I am very 
concerned about what you said in terms of Canada and Japan, and 
making sure that we deal with the SPS obligations in the right 
way so we are not seeing non-tariff trade barriers in that 
area.
    I wonder if you might, just for a moment, talk a little bit 
more about New Zealand. New Zealand is a huge problem here, 
with 90 percent of the market being controlled by Fonterra. 
When we look at, not just the TPP but other things that USTR 
should be doing right now to really overcome what is a huge 
home field advantage for New Zealand, I wonder if you have 
other ideas. We obviously have to get TPP right. But what else 
should we be doing? What should USTR be doing on this?
    Mr. Suber. Well, New Zealand is within its rights, the WTO 
rights, to do as it is doing. The issue we are dealing with 
here within the TPP is how to make it a high-ambition agreement 
in a way that makes it a more fair and open trading system. And 
just to use an illustration of, why is this competition unfair? 
What does it mean to U.S. dairy exporters and suppliers that 
this concentration creates a problem? I think there is a really 
relevant and recent example on this.
    Last October, New Zealand had a situation where one item 
that it was spraying on its field was considered to be 
potentially toxic and was related to the melamine product that 
had caused such consternation in China. Though they discovered 
this in October, in collaboration with their own Ministry of 
Primary Industries they kept it secret from their other 
competitors in New Zealand, they kept it secret from FDA, they 
kept it secret from the world, until their flush period, until 
their big production period had passed so they could secure 
their contracts, so they could get themselves in place, and 
then they revealed it to their domestic competitors as well as 
the world.
    Now, it turned out not to be a huge food safety issue, but 
they clearly had the hush-hush collaboration of their 
government regulators, who, with the exemption from the 
antitrust agreement, are supposed to be watching to make sure 
that they are playing fairly, but are, in fact, preserving 
their market power.
    So that is just an example about robust enforcement that 
currently is lacking there. And essentially, not an entire 
dismantling, but a lowering of the concentration of that 
sector, is in order. That is what USTR should be asking for.
    Senator Stabenow. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Cardin?
    Senator Cardin. Thank you very much, Mr. Chairman. We had a 
chance to talk privately, but I just really want the committee 
to know, and the public to know, that we look to you as one of 
the major reasons why we can advance legislation such as TPP. 
You bring us together.
    Your legacy has been one of bridging the gaps between, not 
only Democrats and Republicans, but philosophical differences 
that exist in the U.S. Senate. You understand more than any of 
us the importance of the work that this committee does in 
getting the policy right for this Nation.
    I know we have a year and a half, but I think you are going 
to be particularly important as we work our way through TPP and 
Trade Promotion Authority. These issues can divide us, but I am 
confident, under your leadership, we will find a way to move 
this forward.
    TPP is particularly important because it deals with the 
rebalance of the Asia-Pacific region, which is an important 
priority of this country. I chair the East Asian and Pacific 
Subcommittee of the Foreign Relations Committee, so I am 
particularly interested in this subject. I thought the manner 
in which you handled WTO with Russia was the right way. It 
needed to get done.
    You recognized, by combining that with a basic human rights 
issue, we would not only accomplish two positive aspects but we 
would broaden the support for moving that legislation forward. 
The challenge in TPP is that you do have countries that run the 
gamut on their advancements on labor rights, on their 
advancements on environmental issues, and on basic values, 
basic human rights issues.
    So we will be looking for your magic, Mr. Chairman, as to 
how we can advance those causes in a way that broadens the 
support base on moving forward on these issues. Now, 
representing my State of Maryland, I will have specific issues, 
like other Senators will have. We have a high-end suit and 
shirt manufacturer in our State, and we are very proud of the 
quality work that company does, the jobs it preserves in my 
State and our country.
    But the yarn-forward rules are going to be very important 
issues for us to take a look at. We must make sure that we are 
not allowing, through a TPP country, the importing of fabric 
that otherwise should not enter our market tariff-free and 
which puts our manufacturers at a disadvantage. So I do not 
have any specific questions, but I would be glad to get just 
your general reactions as to how we can, with such a diverse 
group of countries, make advancements on issues that are 
important to us, such as advancing labor, environment, basic 
rights, et cetera, in a trade bill.
    If you have thoughts on that, I would appreciate you making 
that available to us. I say that in a very positive way, 
because I do think it is not easy to get these types of bills 
to the finish line. When you are dealing with the countries 
that we are dealing with here and the concerns that we would 
have about respect for basic rights, it is going to be an issue 
that we are going to have to deal with.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Next is Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. Thank you for your 
leadership and your open-mindedness as we have talked on these 
issues, and as we move forward.
    Mr. Bhatia, I am concerned about the deeply entrenched 
state capitalist models, the state-owned enterprises, and what 
they mean to companies like yours. You have a major presence in 
my State, for which we are grateful: the lighting business in 
the north and the jet engines and other business in the south 
of Ohio.
    I sent a letter to Acting U.S. Trade Representative 
Marantis urging strong disciplines on state-owned enterprises, 
including considering an injury test to ensure any anti-
competitive actions taken by these SOEs under TPP do not result 
in harm to U.S. businesses. What does GE do if it finds itself, 
either in this country or in a third country, competing with a 
state-owned enterprise with the advantages that an SOE has? 
Where do you go with that?
    Mr. Bhatia. Well, Senator, we attempt to do the best we can 
to close that sale anyway. I mean, it does happen. I was 
mentioning before, the world we see out there increasingly, the 
world post-
financial crisis in particular, governments and government-
owned entities play a bigger role than they did before.
    Partly that is sort of the tectonic shift of plates of 
which countries are coming to the fore. They tend to be 
countries that have bigger state-owned enterprises and where 
the public entities are a bigger part of their economies, and 
partly it is those countries and companies that are going out 
globally much more. So we are competing with state-owned 
enterprises in countries around the world.
    I know the folks at USTR have given a lot of thought to 
this, looking at disciplines that might be applied. I think 
part of it, frankly, comes down to transparency as well--
frankly, understanding where the flow of funds is in this area. 
I know people have been looking at things like the Santiago 
principles, which were adopted for sovereign wealth funds, 
being potentially applied in this area. I think those are all 
useful things.
    One other thing that may not be addressed in the TPP, but I 
would mention it in this area, is the critical importance of 
mechanisms in the United States itself to be able to allow us 
to compete on a level playing field, things like the U.S. 
Export-Import Bank, which are frankly simply, in my mind, 
deterrence mechanisms against the kinds of competitive 
challenges we face out there. So I do not know if that answers 
your question.
    Senator Brown. All right. Talk to me about supply chains. 
They are disbursing quickly as the world is more 
interconnected. It may lower the cost of production for U.S. 
manufacturers, but it does not necessarily create jobs here. 
Chairman Baucus has talked about that before. It does not 
necessarily have a particularly good effect on bringing the 
standard of living up in this country because it can depress 
wages. Companies have been using off-shoring as a way of 
leveraging wages and compensation here.
    You come--as a major, important company in this country and 
in the world--to Congress every so often, asking for trade 
agreements. The question we ask is, how does this actually 
bring jobs to the United States? Convince me. I mean, the TPP 
is going to actually--I mean, I know the anecdotal evidence 
that GE is beginning to re-shore some jobs, but convince me 
that TPP gets us there.
    Mr. Bhatia. So maybe I can approach it from two different 
ways. One is, simply, the export opportunities that TPP means 
for a company like GE. So to take aviation, for instance, with 
its principal point of production, Senator, as you know, in 
Cincinnati, 80 percent of the jet engines we produced last year 
were exported, and they were increasingly exported to the 
markets that we are talking about here today: the fast-growing, 
emerging markets.
    So, absent those emerging markets now and going forward, I 
can tell you that the thousands of jobs that we have throughout 
the United States, including in Ohio, it would be hard to 
maintain and sustain those. So we have to have that, and to the 
extent that TPP enables us to break down barriers and sell more 
easily into those markets, I would say it is critical.
    The second point that you allude to, the idea of global 
supply chains and what they do in terms of jobs, I think the 
point today is, at least in our industry, high technology 
manufacturing where there is some sort of off-shoring, is over 
with.
    The amount of hourly labor that goes into some of these 
products has been relatively modest. A small difference in 
labor costs is not going to make the difference. It is 
technology, it is training, it is the strength of rule of law. 
All of those are the key issues that really determine where it 
goes. So the international global supply chain that we have 
constructed allows us to be competitive around the world and I 
think sustain far more jobs in the United States.
    Senator Brown. The other side of that is, look what happens 
to--I do not want to get into this part now, I have another 
question--our persistent trade deficits. But let me ask you one 
other question, if you could sort of share ideas with us.
    Mr. Bhatia. Sure.
    Senator Brown. How do you ensure that products from 
countries like China, non-signatory countries to TPP--how do 
you ensure that the benefits come to the signatory countries 
and not particularly the state-owned enterprises in these non-
signatory countries?
    Mr. Bhatia. You mean, in terms of having them be able to 
ship products through the TPP countries?
    Senator Brown. Yes. Yes.
    Mr. Bhatia. Look, I think that is a matter of trade 
enforcement. At the end of the day, it is going to be 
important, as it always has been, that there be strong Customs 
and other protections to make sure that non-signatories do not 
get the benefit of it. That is important.
    Senator Brown. So do we write stronger rules of origin 
language in TPP?
    Mr. Bhatia. I think the importance of the rules of origin 
is really that they be consolidated so that you do not have the 
very different ones. But I think, to get to your point, it 
really is a matter of making sure that we have effective 
Customs and other enforcement so that countries and folks are 
not cheating and they are not getting goods through that are 
not really derived from the countries that are signatories.
    Senator Brown. Good. Thank you.
    Mr. Bhatia. Thank you.
    Senator Brown [presiding]. I am done. Yes, sir?
    Senator Grassley. We have a situation here where a lot of 
people were ahead of me, but I am the only one here. So I have 
a short statement and then two questions. Then, if nobody else 
shows up, I assume we are done, but I will have to clear that 
with Senator Baucus's staff.
    I am very glad that we are holding this hearing today. 
Whether I am meeting with a group of Iowa farmers, corporate 
CEOs, or small business owners, they all seem to share similar 
thoughts about global trade: that is, expanding international 
markets is very key to sustaining and growing business.
    Farmers are eagerly watching the development of the Trans-
Pacific Partnership because they see the potential it holds. It 
is a chance to gain greater access to markets for their 
products by lowering tariffs and reducing non-tariff trade 
barriers and specific sanitary and phytosanitary obstacles. I 
am going to have a question on that.
    Businesses of all types and sizes are looking for global 
opportunities to sell products and services, whether it is an 
insurance company in Des Moines or John Deere in Waterloo, 
expanding trade benefits to all of Iowa's communities and 
workers. I also, besides the questions then, want to show my 
support for TPP.
    I am going to start with Mr. Suber. Given the global nature 
of business today, including agriculture, increasing 
international trade and expanding overseas markets are very 
important for dairy farmers. With the potential inclusion of 
Japan in TPP and Canada already at the negotiating table, there 
are now two major markets where U.S. dairy farmers see 
tremendous opportunities in TPP.
    So I would like to have you explain for each, Japan on the 
one hand and Canada on the other, why there is such an 
opportunity for those countries for U.S. dairy, and what do we 
need to do in the TPP negotiations to seize those 
opportunities?
    Mr. Suber. Well, thank you for focusing on those two. Those 
are two of the biggest up-sides for us. Talking specifically 
about Canada, Canada has a very rigid supply management system 
which depends almost entirely on very high tariff walls. The 
existing access that has been there under the WTO is relatively 
small, and they continually try to nullify that access through 
technical barriers to trade in order to withdraw those 
concessions through changing their product standards and 
playing games with their Customs classifications.
    So the issue is, even though it is a large market today, 
most of our product goes in there and then goes out again. It 
is under their re-export program. So simply ensuring that there 
is significant open access into that market over time, 
considering the similarity of our markets and the fact that we 
share one of the longest unguarded borders--well, I guess it is 
now guarded--in the world, makes it a significant opportunity 
for us.
    Now Japan--we do ship a fair amount to Japan today. It is a 
large market for us, primarily cheese and ingredients, but the 
large dairy commodities of butter and powder and certain 
amounts of cheese, processed cheese, are closed to us.
    So the issue of making sure that the market access is 
significant and open over time is what we seek. It is about 
growth and making sure that the rules of trade are honored in 
that way.
    Senator Grassley. Are we proceeding in regard to what we 
need to do to seize those opportunities? Do you feel the 
negotiations are headed in that direction?
    Mr. Suber. Well, they are really just starting with those 
two countries. Of course, with Japan it technically has not 
started yet.
    Senator Grassley. Yes.
    Mr. Suber. There are a fair amount of words coming out of 
Japan that dairy is one of their sanctuary products. Should 
they come to the agreement, we would expect, of course, that 
everything would be included, including dairy and the other 
four sanctuary products they have spoken of.
    On Canada, our government has heard us loud and clear. It 
has acknowledged the importance we attach to Canada and has 
been helping us on the non-tariff barriers I mentioned. We are 
hopeful and confident that they will seek full and open access 
to Canada as well.
    Senator Grassley. And then my second question is to 
President Hanson, as well as to you. The TPP negotiations 
present a crucial opportunity for U.S. agriculture in areas 
other than reducing tariffs. In my opening statement, I spoke 
about the text of the sanitary and phytosanitary chapter that 
could have a major impact down the road on resolving what are 
oftentimes delicate issues.
    So what is your assessment, your's and Mr. Suber's 
assessment, of how the negotiations are proceeding on sanitary 
and phytosanitary issues, and what do you think the SPS chapter 
will need to include in order to work for our farmers?
    Mr. Hanson. Personally, I think the biggest thing we need 
to do is make sure they are transparent so everybody can see 
what the game is. But the second thing is that I am not sure 
how you are going to enforce them, and I guess that is a 
question that I do not think has been answered yet.
    Senator Grassley. All right.
    Mr. Suber?
    Mr. Suber. I would share Mr. Hanson's opinion about 
enforcement. Ultimately, at the end of the day, it is about 
honoring your agreements. There has been a lot of concern 
raised in our country that this will compromise our own food 
safety standards, and I simply have seen no example, credible 
or otherwise, put forth where our existing food standards have 
been compromised by either the WTO agreement under SPS or this 
enhanced SPS enforcement. In fact, our regulators are at the 
table.
    This is a very good thing. It is most unprecedented that 
the food and environmental folks be there, and I think their 
contributions will ensure that it meets our needs and protects 
us, as well as our overseas interests, in trade.
    Senator Grassley. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Thune?
    Senator Thune. Thank you, Mr. Chairman. Thank you all for 
being here today and answering our questions about a subject 
that is awfully important to the American economy and the 
global economy as well.
    I would like to ask Mr. Bhatia, if I might, you were the 
former Deputy U.S. Trade Representative during the Bush 
administration. I would be interested in hearing your view 
regarding the timing of TPA.
    Many of us believe that we need Trade Promotion Authority 
to successfully conclude the Trans-Pacific Partnership and 
other trade agreements, just as the U.S.-E.U. agreement, yet we 
know that renewal of TPA is likely to be contentious and is 
going to take time, obviously, for Congress to process.
    Given that reality, do you believe the Obama administration 
is running the risk of holding up conclusion of TPP if they 
continue to delay their request for TPA? A follow-up question 
would be, do you agree, at least with my assessment, that TPA 
is essential if we want to successfully conclude TPP and other 
trade negotiations?
    Mr. Bhatia. Thank you, Senator. Look, I agree, as I 
mentioned in response to the question from Senator Hatch, that 
TPA is very important. It is important to the negotiations and 
the negotiators, and it will be important to close the deal, so 
I certainly think it is something I would urge the Congress to 
move on. The administration has indicated its interest in 
seeing that as well.
    In terms of timing, look, as you can tell, obviously the 
negotiations have been going forward for several years without 
TPA. I think that can continue to happen. I do think it gets 
harder to get to closure on the very tough issues when your 
trading partners do not have assurance necessarily that the 
deals that they are going to strike are ones that will 
ultimately last in the Congress.
    So I think, if you are a negotiator, you want to get TPA, 
and you probably want to get it as quickly as you can. That 
should not stop the negotiations, though, from proceeding in 
the interim.
    Senator Thune. Right. But do you share the concern that I 
have, perhaps even a fear, that if we do not have TPA, that the 
TPP gets unnecessarily delayed?
    Mr. Bhatia. I think at a certain point, while they are 
moving their way through, we can do it. But, if the goal is to 
close this agreement this year, I think we need to get TPA, and 
we need to get it relatively soon.
    Senator Thune. All right.
    I want to follow up on some questions that Senator Grassley 
raised with regard to sanitary and phytosanitary issues in this 
agreement. To be truly effective--and I guess I would pose this 
to Mr. Suber and Mr. Hanson--I believe commitments in that area 
are going to need to be enforceable so that we can hold our 
trading partners accountable.
    You touched on this in response to a question from Senator 
Grassley: the suggestion, however, that making TPP SPS 
commitments enforceable in the same way that WTO SPS 
commitments are already enforceable would somehow put the 
American food safety at risk. I am just wondering maybe if you 
could rebut those claims. How important are enforceable 
sanitary and phytosanitary commitments to U.S. agricultural 
exporters?
    Mr. Suber. Well, thank you for the suggestion for 
clarification. I think our regulations are primarily based on 
science today. I think we can defend our standards based on 
science. I think we have every opportunity to evolve those if 
different science comes to the fore that may be different than 
the science we may have used. In other words, science evolves.
    But ultimately it should be about making sure that food is 
safe and making sure that the best science is used to determine 
that so it does not get in the way of using food safety as some 
other goal. It is about making sure you meet customer 
preferences, both in quality and in safety.
    So the enforcement mechanism is fundamentally important, 
otherwise it becomes a never-ending chain of consultations and 
discussions without ultimately achieving what the underlying 
goal is, which is to facilitate trade.
    Senator Thune. Yes. Mr. Hanson?
    Mr. Hanson. I concur with what he had to say. The other 
thing is, if you negotiate an agreement, you have to make sure 
that what you negotiate, you can enforce. It has no value if 
you do not.
    Senator Thune. All right.
    There are some in the agricultural community who are 
obviously very excited about this, for obvious reasons. We are 
very excited about the possibilities and what they could mean 
for American agriculture. But there are a number of significant 
outstanding issues that would have to be addressed concerning 
Japan's persistent barriers to certain segments of U.S. 
agriculture, and I would be interested in knowing--and I guess 
this is a question that perhaps any of you could respond to--do 
you view Japan as more of an opportunity or a challenge with 
respect to their inclusion in the TPP, and do you believe that 
the U.S. Trade Representative's office has done an adequate job 
of securing promises from the Japanese government that they are 
truly willing to negotiate in some of these sensitive areas? 
More a general question.
    Mr. Hanson. Well, I guess our feeling that they moved on 
the 30 months of age is an indication that the Japanese 
government was sincere about their position. In Montana, we 
have shipped a lot of grain to Japan. The only question that I 
have had, the way I understand the process, is that the grain 
is bought in Montana by Japanese companies, but the only 
salesman they have or person they can sell it to is the 
government, and then they have to buy it back at a different 
price. That is, to a certain degree in my mind, a little bit of 
an issue.
    Senator Thune. All right.
    Mr. Hirschmann? Anybody?
    Mr. Hirschmann. We welcome Japan's entry and think Japan 
has agreed to participate as a country seeking a high-standard 
agreement, and we believe that is the case. We think it will 
actually make the opportunity out of the TPP far greater and 
help create momentum forward.
    I would add, as you correctly pointed out--and it is not 
specific to Japan--that countries today have many means of 
trying to protect their markets that do not involve the 
traditional trade tariffs. That is why we think this ill-
considered safe harbor proposal that the U.S. administration 
might be considering to exempt a product would actually be the 
wrong approach and will actually backfire on us and will lead 
to other countries finding innovative ways to exempt U.S. 
products from their markets.
    Senator Thune. All right. Great.
    Mr. Bhatia?
    Mr. Bhatia. Senator, I echo that. I think Japan represents 
an enormous opportunity. This has been in some ways sort of a 
major goal of U.S. trade policy for decades, to get Japan to 
open up and reform. It is an enormous economy. It presents 
enormous opportunities for American companies in all of our 
sectors.
    But Japan has been a slow-growth place, and it desperately 
needed reform. If TPP can enable it to gather the political 
will internally to finally make those tough choices, I think it 
could be a tremendously beneficial opportunity for the United 
States and for American business.
    Senator Thune. All right. I appreciate that. Thank you all 
very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Casey?
    Senator Casey. Right on time. Thanks very much.
    I wanted to first of all thank you for the testimony today. 
I have a high degree of skepticism about TPP, and it is of long 
standing. I have had a real concern about it. It seems, even in 
the last generation, if you look at all the engagements and 
debates about trade, we have never really developed a trade 
policy for the country that has been comprehensive and 
bipartisan. We have had a lot of debates about trade 
agreements, and they sometimes have shed some light on the 
problem, but sometimes have been more of a political fight than 
an advancement to a trade policy.
    So I have natural skepticism about this. I have even more 
skepticism when it comes to Japan, even in light of the recent 
news. But just the enormous challenge of breaking into the auto 
market in that country is a great challenge.
    By one estimate, their closed auto market has reached a 
point where we have virtually no penetration at all, even with 
the commitments that they seem to have made more recently. So, 
I approach the issue generally with a high degree of 
skepticism.
    Number two, when I evaluate any agreement, any trade 
agreement, I have to ask two basic questions: the impact on 
Pennsylvania jobs, either retaining or creating, and also the 
impact on the national economy and whether or not this will 
level the playing field, which is difficult to achieve, and 
does it help our manufacturing base? So that is kind of the 
Pennsylvania and U.S. test that I have to apply.
    But I did want to pursue some of the subjects that each of 
you raised. I probably only have time for two. First of all, 
with regard to dairy, Mr. Suber, I was interested in your 
testimony. I realized that you have some skepticism, and you 
articulated support for the process going forward, with a lot 
of conditions.
    The concern that I have just about dairy is that you might 
have, potentially, the perfect storm, where you have a surge of 
imports from New Zealand, and at the same time no real 
meaningful progress as it relates to our folks having an 
opportunity in markets like Canada or Japan. I just wanted to 
get your thoughts on that basic concern that I have.
    Mr. Suber. Well, you are correct that no new market access 
into these interesting countries of Japan and Canada, no way of 
defending our issues because of sanitary and phytosanitary 
issues, and allowing a virtual state-owned enterprise to 
continue to operate, would be a very unfortunate outcome, which 
would lead the U.S. dairy industry to oppose it.
    However, generally speaking, the pieces that are in place 
make this a very positive situation. The negotiations are tough 
with every country in this group. We think that there are good 
opportunities that will in fact continue with the growth in the 
U.S. dairy industry that there has been. We have grown over 10 
times in the last 13 years. We have a trade surplus.
    We are confident we can compete globally, but there is that 
one niggling concern about the virtual state-owned enterprise 
out of New Zealand. The opportunity is there for an up-side 
outcome, and we want to continue to work with our government to 
make that happen.
    Senator Casey. I look forward to further discussion about 
that.
    Mr. Suber. Thank you.
    Senator Casey. I appreciate it.
    I know we do not have much time left, but, Mr. Hirschmann, 
I wanted to highlight part of your testimony on data 
exclusivity. We had, over the course of a long period of time--
and I have a letter that I can reference here--a great 
bipartisan effort that has been undertaken on this issue. I am 
looking at a September 12, 2011 letter.
    If I counted the signatures, there were about 37 Senators 
raising a concern about any reduction in that 12-year time 
period for data exclusivity. It is signed by maybe the greatest 
collection of Democrats and Republicans you could get on one 
letter, a real broad cross-section of the country. Just, your 
comments on that concern that you raised.
    Mr. Hirschmann. Senator, as you pointed out, the reason 
this gets bipartisan support is because investment in the 
billions of dollars it takes to invest in biologics and create 
jobs really is a key American asset, but it is also the best 
way and offers the most promise for solving the world's most 
significant health care challenges.
    You cannot attract that investment without some certainty, 
so, in addition to the number of years, the certainty that the 
Affordable Care Act provided of 12 years on biologics is very 
important to attract that investment. To begin to walk back on 
that or create uncertainty for that, actually has a harm that 
goes well beyond TPP.
    Senator Casey. I appreciate that. I know I am a bit over 
time, but at another time I will have the chance to maybe 
question and discuss with our two other witnesses. We are 
grateful for your presence here, your testimony, and your 
service.
    Mr. Hanson, I hope that in some future time, when I am 
leaving the Senate, that folks in our Farm Bureau in 
Pennsylvania express the same, or even somewhat similar, 
sentiments that you expressed for Senator Baucus here. We are 
going to miss him. Your heartfelt praise for his service is of 
great value, and I think is widely shared here in the committee 
and throughout the Senate.
    I guess I can gavel us out, but I do not have a gavel, so I 
will use a fist. We are adjourned.
    [Whereupon, at 11:33 a.m., the hearing was concluded.]
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