[Senate Hearing 113-227]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-227

 
                      NOMINATION OF MICHAEL FROMAN

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                 on the

                             NOMINATION OF

       MICHAEL FROMAN, TO BE UNITED STATES TRADE REPRESENTATIVE,
             WITH THE RANK OF AMBASSADOR EXTRAORDINARY AND
           PLENIPOTENTIARY, EXECUTIVE OFFICE OF THE PRESIDENT

                               __________

                              JUNE 6, 2013

                               __________

                                     
                                     

            Printed for the use of the Committee on Finance


                  U.S. GOVERNMENT PRINTING OFFICE
87-359                    WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


                          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

                         ADMINISTRATION NOMINEE

Froman, Michael, nominated to be United States Trade 
  Representative, with the rank of Ambassador Extraordinary and 
  Plenipotentiary, Executive Office of the President, Washington, 
  DC.............................................................     6

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    37
Froman, Michael:
    Testimony....................................................     6
    Prepared statement...........................................    39
    Biographical information.....................................    41
    Responses to questions from committee members................    50
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement...........................................   127

                                 (iii)


                  NOMINATION OF MICHAEL FROMAN, TO BE 
                  UNITED STATES TRADE REPRESENTATIVE, 
                      WITH THE RANK OF AMBASSADOR 
                   EXTRAORDINARY AND PLENIPOTENTIARY, 
                   EXECUTIVE OFFICE OF THE PRESIDENT 

                              ----------                              


                         THURSDAY, JUNE 6, 2013

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 11:10 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max 
Baucus (chairman of the committee) presiding.
    Present: Senators Wyden, Schumer, Menendez, Carper, Cardin, 
Brown, Casey, Hatch, Grassley, Thune, Burr, Isakson, and 
Portman.
    Also present: Democratic Staff: Mac Campbell, General 
Counsel; Amber Cottle, Staff Director; Chelsea Thomas, 
Professional Staff Member; Hun Quach, International Trade 
Analyst; Tiffany Smith, Tax Counsel; Savanna Cochran, Intern; 
Laurie Dempsey, Detailee; Bruce Hirsh, Chief International 
Trade Counsel; and Rory Murphy, International Trade Advisor. 
Republican Staff: Nicholas Wyatt, Tax and Nominations 
Professional Staff Member; Richard Chovanec, Detailee; Kevin 
Rosenbaum, Detailee; and Rebecca Nasca, Staff Assistant.

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

    The Chairman. The hearing will come to order.
    William Shakespeare once said, and I quote him, ``Nimble 
thought can jump both sea and land.''
    The USTR brings both nimble thought and nimble action to 
bear on the complex world of trade negotiations and 
enforcement. And this nimbleness allows them to address the 
challenges of trade policy across sea and land.
    The USTR is lean; it is effective. With fewer than 250 
employees, it punches beyond its weight to break down foreign 
barriers to U.S. goods, services, and intellectual property. 
And it negotiates the rules of trade that expand commerce, 
promote growth, and create jobs.
    USTR requires leadership that is equally nimble--leadership 
that can harness USTR's strengths and the strengths of the U.S. 
Government as a whole. It needs a leader willing to put in the 
miles to meet with foreign counterparts and drive a hard 
bargain. A leader willing to partner with us here in Congress 
to develop trade policies that work. And a leader willing to 
put in the hours to understand the challenges facing U.S. 
businesses, farmers, and ranchers--ranchers like Jim Peterson 
who are fighting to sell more U.S. beef around the world and 
are facing unscientific barriers in places like China.
    I am pleased that we have such a leader before us today. 
Michael Froman is the right person for this job. For the past 4 
years, he has demonstrated a mastery of trade policy 
development and implementation.
    He understands the small details, and he sees the big 
picture. He has closed out trade agreements, guided global 
economic policy, and promoted initiatives that have boosted 
America's exports by more than 40 percent. And he has 
skillfully represented the United States at global forums like 
the G-8 and the G-20. He is more than capable to do the job at 
hand. We should confirm his nomination, and we should do it 
quickly.
    President Obama has outlined an ambitious trade agenda, one 
that requires a strong trade representative like Mr. Froman who 
can hit the ground running. The time is ripe. The United States 
has an opportunity to share in the rapid growth of the Pacific 
region and to unlock further economic gains from our already 
deep ties with Europe.
    USTR seeks to complete the Trans-Pacific Partnership 
negotiations by the end of the year. It will soon be ramping up 
free trade agreement negotiations with the European Union, and 
it is hard at work in Geneva on a multilateral services 
agreement, expanding opportunities for U.S. information 
technology products and reducing border delays around the 
world.
    These trade policies will make a difference here at home. 
As a group, the TPP countries are the largest international 
market for U.S. goods and services. Last year, U.S. exports to 
current TPP countries totaled nearly $260 billion, representing 
40 percent of total U.S. goods exports.
    And breaking down trade barriers in TPP countries will make 
a real difference. Japan relaxed its beef restrictions earlier 
this year, and our beef sales are almost 50 percent higher. 
Japan's average agricultural tariffs are more than 20 percent, 
while ours are only 5 percent. When those tariffs come down, 
our sales will go up.
    And the Transatlantic Trade and Investment Partnership will 
also stimulate economic growth and job creation. The European 
Union purchased close to $460 billion in U.S. goods and 
services last year, supporting 2.4 million American jobs. A 
comprehensive agreement that tackles long-standing regulatory 
and agricultural barriers could add even more jobs here at 
home.
    My home State of Montana shows how critical an ambitious 
trade agenda is to good-paying jobs. Montana's manufacturers, 
farmers, and ranchers rely upon open markets to create and 
maintain jobs. In fact, one in six manufacturing jobs in 
Montana comes from exports. In the last decade, Montana's goods 
exports to FTA partners have increased by 250 percent. Last 
year, Montana's wheat growers exported 85 percent of their 
crop.
    Because of the tireless efforts of U.S. trade negotiators, 
ranchers from Clyde Park can now export American beef to Korea, 
and farmers from Churchill can export American seed potatoes to 
Congo. We must fulfill the promise of our ambitious trade 
agenda. Confirming Mike Froman quickly will be the first step, 
but we are not done there. The next step will be to pass Trade 
Promotion Authority and Trade Adjustment Assistance.
    With so many trade initiatives moving to completion and 
getting off the ground, we need TPA now to guide and support 
USTR. And we need TAA, Trade Adjustment Assistance, to ensure 
that our workforce remains ready to compete with anyone, 
anywhere in the world.
    I am pleased that the administration supports TPA and 
worker assistance. Mr. Froman, I look forward to working with 
you to renew TPA and TAA in the next few months so that we can 
lay the groundwork for a successful trade agenda. I will 
continue my efforts to introduce a bipartisan TPA bill this 
month.
    Finally, I would like to emphasize that the USTR must 
continue to harness the resources and energy of the entire U.S. 
Government for our trade agenda to be successful. It must 
continue to be headquartered at the White House, and the U.S. 
Government must continue to pull together behind USTR's 
leadership.
    The President's ambitious trade agenda will require nimble 
thought and nimble action. And I am confident that, with Mike 
Froman at the helm, USTR will meet the ambition that the 
President has set.
    Mr. Froman, members of this committee will probably ask you 
some tough questions today. That is our right; it is our 
responsibility.
    Over the past several years, you have shown that you are 
willing to go the extra mile, over land and sea, to get the 
best deal for U.S. farmers, ranchers, businesses, and workers. 
And I believe you will serve ably as the next U.S. Trade 
Representative. I look forward to our discussion.
    [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. Well, thank you, Mr. Chairman, and thank 
you, Mr. Froman, for appearing here today and joining with us. 
I look forward to hearing your testimony.
    However, before talking about trade policy, I want to take 
a few minutes to talk about the wide disparity between the 
Obama administration's rhetoric and the actions taken by 
administration officials.
    Now, this has particular relevance to Mr. Froman's 
nomination.
    A few months ago, when the Finance Committee was 
considering the nomination of Jack Lew to be the Secretary of 
Treasury, we learned that he had invested in a Cayman Islands 
hedge fund located in the now infamous Ugland House that so 
many Democrats have decried as a tax haven.
    At the time, we reminded people that, in 2008, while 
campaigning for President, then-Senator Obama said that the 
Ugland House was ``either the biggest building in the world or 
the biggest tax scam in the world.''
    And throughout the 2012 campaign, President Obama 
repeatedly attacked Mitt Romney, his opponent, for having funds 
invested in the Caymans. In making such investments, Governor 
Romney was, in the words of the Obama campaign, ``betting 
against America.'' Yet the President had no problem nominating 
someone who made similar investments to be Treasury Secretary.
    As a result of our vetting process, we now have learned 
that Mr. Froman has actively invested roughly half a million 
dollars in the exact same hedge fund located at the Ugland 
House.
    Mr. Froman is, in fact, the third Cabinet-level nominee 
this year to have made use of offshore investments and 
structures, despite the President's unequivocal condemnation of 
these types of activities during the campaign. Moreover, the 
Cayman Islands investment is in a fund that, in turn, has 
invested in companies that outsource jobs or, using the 
President's rhetoric, ship jobs to low-wage countries like 
India.
    On top of that, we all remember in early 2009 when 
President Obama remarked about Wall Street, saying that 
institutions were ``teetering on collapse, and they are asking 
for taxpayers to help sustain them.''
    The President also railed against Wall Street bonuses at 
the time, saying, ``That is the height of irresponsibility. It 
is shameful.'' Elsewhere, he referred to Wall Street bonuses as 
``obscene.''
    Like Secretary Lew, Mr. Froman was employed at Citigroup 
during much of the financial crisis. In late 2008 and early 
2009, American taxpayers provided over $45 billion--with a 
``b''--in direct assistance to Citigroup and backed hundreds of 
billions of Citigroup assets. During those same 2 years, Mr. 
Froman received more than $5 million in bonuses, much of which 
was paid for work performed when Citi was on the verge of 
collapse.
    Once again, we see a contradiction between the President's 
rhetoric with regard to Wall Street and his decision to 
nominate Mr. Froman to be the U.S. Trade Representative.
    Now, I do not raise these issues to suggest that Mr. Froman 
has done something wrong or that he has not complied with our 
tax laws. I believe he has complied, and he has lived within 
the law. Instead, I simply want to point out what appears to be 
hypocrisy on the part of President Obama and this 
administration.
    The President's rhetoric seemed to suggest that offshore 
investments, investments in outsourcing, and Wall Street 
bonuses are not simply bad policy, but morally wrong. Yet the 
same vitriol used to attack the President's political opponents 
does not seem to apply to his nominees for Cabinet positions.
    As I said during the debate over Secretary Lew's 
nomination, the American people are essentially being told that 
they should do as the Obama administration says, not as they 
do. That does not inspire a lot of confidence, to say the 
least.
    That said, I do not believe we should let the 
administration's contradictory statements distract us from 
trying to help grow our economy through trade.
    Indeed, the U.S. Trade Representative is a vital position. 
And despite any disagreements I might have with the Obama 
administration's rhetoric, I believe this nomination should be 
considered on its own merits.
    Trade is an engine of economic growth. Since the end of 
World War II, international trade has helped pull millions of 
people out of poverty, while creating enormous opportunities 
for growth here in the United States.
    Unfortunately, it appears as though U.S. trade policy has 
been adrift for much of President Obama's first term. The long 
delay in submitting the trade agreements with Colombia, Panama, 
and Korea kept U.S. exporters on the sidelines for far too 
long. And now we see they are working out as very good 
agreements. And while new and potentially meaningful 
negotiations have been launched by this administration, not one 
of them seems close to successful conclusion. Mr. Froman, I am 
counting on you to straighten that out.
    This is due both to a lack of real leadership and the fact 
that our trade negotiators do not have the tools needed to do 
their job.
    For example, Trade Promotion Authority expired in 2007, as 
the chairman has pointed out. As a result, our trade 
negotiators lack the authority necessary to negotiate and 
conclude new trade agreements. Unfortunately, there has been no 
real effort by President Obama to secure TPA renewal.
    Members of Congress have fought to fix this problem. We 
pushed for a vote on TPA renewal on the Senate floor 21 months 
ago. Unfortunately, that effort failed, largely due to lack of 
support from our Senate Democratic colleagues.
    To me, this shows that presidential engagement on TPA 
renewal is vital. Without the President's active leadership and 
public support for TPA, it is hard to see how our current 
efforts to renew Trade Promotion Authority can succeed.
    And we must succeed. Today, 95 percent of the world's 
customers live outside the United States. They account for 92 
percent of global economic growth and 80 percent of the world's 
purchasing power. But the United States is falling behind as we 
fight for access to these markets.
    Fortunately, the U.S. has a number of promising initiatives 
underway, including the Trans-Pacific Partnership and 
negotiations with the European Union, both mentioned by our 
distinguished chairman.
    These agreements must be comprehensive, incorporate the 
highest standards of intellectual property rights protection, 
and provide meaningful market access for U.S. exporters. In 
pursuing these initiatives, I hope the administration does not 
lose sight of the importance of our efforts under the auspices 
of the World Trade Organization, including expansion of the 
Information Technology and Government Procurement agreements 
and conclusion of a robust agreement on Trade in International 
Services and Trade Facilitation. Each of these represents an 
important opportunity to further advance trade and grow our 
economy.
    During our March hearing on the President's trade agenda, I 
called on the President to nominate someone to serve as the 
United States Trade Representative who has the trade expertise, 
political savvy, and leadership skills necessary to effectively 
lead this agency. Our nominee today certainly appears to meet 
that test, and I am pleased that you are willing to do this. 
You have served most recently as Assistant to the President and 
Deputy National Security Adviser for International Economic 
Affairs at the White House and in multiple senior economic 
roles under prior administrations.
    I intend to support you, but I did want to raise these 
issues because of, I think, the hypocrisy involved, certainly 
during the last election.
    Mr. Chairman, I want to thank you for holding this hearing 
today. I look forward to hearing from Mr. Froman on how he 
will, if confirmed by the Senate, carry out the duties of the 
U.S. Trade Representative.
    The Chairman. Thank you, Senator.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. Mr. Froman, before we begin, it is customary 
for us to ask the nominees, if they wish, to introduce their 
family.
    Mr. Froman. Well, thank you very much, Mr. Chairman and 
Ranking Member Hatch. It is my pleasure to introduce my wife, 
Nancy; my children, Benjamin and Sarah; and our caregiver, Gina 
Rodriguez. I will ask the committee's indulgence. Today is 
Ben's last day of school, so he may leave the hearing a little 
early, and we will see how long Sarah lasts. But it is my 
pleasure to have them here.
    The Chairman. Okay. Ben, Sarah, Nancy, do you mind standing 
so we can all recognize you? [Applause.]
    And good luck, Ben, on your last day. Knock 'em dead, okay? 
All right.
    As you know, Mr. Froman, our usual practice is to have your 
statement included in the record. If you just could summarize 
it in about 5 minutes, that would be good.

  STATEMENT OF MICHAEL FROMAN, NOMINATED TO BE UNITED STATES 
TRADE REPRESENTATIVE, WITH THE RANK OF AMBASSADOR EXTRAORDINARY 
    AND PLENIPOTENTIARY, EXECUTIVE OFFICE OF THE PRESIDENT, 
                         WASHINGTON, DC

    Mr. Froman. Okay. Thanks, Mr. Chairman, Ranking Member 
Hatch, and all the members of the committee. Thank you for that 
kind introduction, and I am humbled by the confidence that 
President Obama has shown in me by nominating me for this 
position, and grateful and honored to be considered by this 
committee.
    I want to just thank my family for all the love and support 
they have given me to make this possibility of service real.
    I also want to thank my parents and recognize how much they 
have meant to me and what they have contributed to me. My 
mother was an elementary school teacher, a Cub Scout den 
leader, and an active member of the PTA. My father was an 
immigrant who fled Hitler's Germany, grew up in Israel, came to 
the United States to go to school, built a small business, was 
president of his Rotary Club, and continues to be an important 
source of guidance and support today.
    My parents taught me the value of hard work and education, 
the importance of giving back to our community, and the 
privilege to serve and work to improve the wider world. I would 
not be who I am today, and I certainly would not be here today, 
without them.
    In recent weeks, I have enjoyed candid, substantive 
discussions with many of you about trade and America's broader 
economic challenges. There is a long tradition of close 
cooperation between the Finance Committee and USTR, and that is 
a tradition I plan to continue, if I am confirmed.
    As President Obama has made clear, our number-one goal must 
be to promote growth, create jobs, and strengthen the middle 
class. I see USTR's role in that effort to be threefold: first, 
by opening markets around the world so that we can expand our 
exports; second, by leveling the playing field so that our 
people can compete and win in the global economy; and third, by 
ensuring that our trade rights and trade laws that we have 
worked so hard for are fully implemented and enforced.
    I first had the opportunity to work with USTR as a White 
House fellow under President George H.W. Bush, then under 
President Clinton, and over the past 4 years as President 
Obama's adviser on international economic affairs. It is clear 
to me that USTR is a very special place.
    USTR professionals exemplify the finest traditions of 
public service. They work hard, they are nimble, they bring 
intellectual rigor to their mission, and they get things done 
for the American people. If confirmed, it would be an honor to 
lead them.
    As we speak, USTR staff are busy negotiating the 
groundbreaking Trans-Pacific Partnership. They are consulting 
with you on the upcoming negotiations for an unprecedented 
Transatlantic Trade and Investment Partnership. And, in Geneva, 
they are working to energize trade liberalization, including on 
trade facilitation, information technology, and services.
    All of these negotiations are designed to strengthen the 
multilateral, rules-based trading system and press it to 
achieve its highest possible aspirations. If we can conclude 
these agreements--and let me be clear, my view is that it is 
better to accept no agreement than a bad agreement--we will 
have positioned the United States at the center of a network of 
agreements creating free trade with 65 percent of the global 
economy. It is among the most ambitious trade agendas in 
history.
    Trade is also a powerful tool for development, and, if 
confirmed, I look forward to working with you to renew GSP and 
AGOA and to finding innovative ways to facilitate trade and 
regional integration across the developing world.
    But trade policy can only work if it is fair, and we are 
committed to opening markets, but we are equally committed to 
enforcing our trade rights and trade laws and to helping 
displaced workers obtain the skills and jobs they need.
    American workers are the most productive in the world. They 
deserve to compete on a level playing field. This 
administration has made enforcement a top priority: 18 cases 
brought to date and the creation of the Interagency Trade 
Enforcement Center to enhance the depth and reach of our 
enforcement efforts.
    As with so many things, that could not have been possible 
without the support of this committee. Trade policy only 
fulfills its full potential when it reflects close 
consultations between the administration, Congress, and a wide 
range of stakeholders.
    In that regard, if confirmed, I will engage with you to 
renew Trade Promotion Authority. TPA is a critical tool, and I 
look forward to working with you to craft a bill that achieves 
our shared goals.
    Let me conclude by making clear that, if given the honor of 
serving as the U.S. Trade Representative, I will do everything 
in my ability to promote the interests of our workers, farmers, 
and ranchers; our manufacturers and service providers; our 
innovators, investors, and consumers.
    Thank you again for considering my nomination. I am happy 
to take your questions.
    [The prepared statement of Mr. Froman appears in the 
appendix.]
    The Chairman. Thank you, Mr. Froman. I have four obligatory 
questions that we ask of all nominees.
    First, is there anything you are aware of in your 
background that might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Mr. Froman. No, sir.
    The Chairman. Do you know of any reason, personal or 
otherwise, that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Mr. Froman. No, sir.
    The Chairman. Do you agree without reservation to respond 
to any reasonable summons to appear and testify before any duly 
constituted committee of Congress if you are confirmed?
    Mr. Froman. Yes, sir.
    The Chairman. This last we have added recently. Do you 
commit to provide a prompt response in writing to any questions 
addressed to you by any Senator of this committee?
    Mr. Froman. Yes, Senator.
    The Chairman. Thank you.
    All right. You have outlined a very ambitious trade agenda, 
with multiple negotiations going forward. Other countries that 
we are negotiating with would like to have some confidence that 
any agreement that you reach, the United States reaches, will 
be honored. And I am pleased that you personally said you are 
making Trade Promotion Authority renewal a priority and that 
you will 
engage with Congress to get Trade Promotion Authority passed 
quickly.
    Does this mean the President is himself requesting renewal 
of Trade Promotion Authority?
    Mr. Froman. Yes, Mr. Chairman.
    The Chairman. So the President is asking for TPA to be 
renewed?
    Mr. Froman. Yes.
    The Chairman. Good, because there has been some question 
about that, and I am glad to hear that clearly stated.
    Next is an opportunity for you to clear the air a little 
bit about your Cayman Islands investments. Would you just tell 
this committee, describe the fund, how you came to invest in 
it, taxes paid, money earned, et cetera?
    Mr. Froman. Thank you, Mr. Chairman. When I was in the 
private sector, I had the opportunity to participate in an 
employee program to invest in an international fund. I did not 
invest in the international fund because of where it was 
located. I invested in it because it allowed me to diversify my 
portfolio.
    I am no tax expert. My understanding is this is an 
investment partnership fund where all earnings, all gains or 
losses, are passed on through a K-1 to the individual 
investors. I have paid taxes, I have paid every penny of taxes 
due on that fund, and I am not aware of any tax benefit that I 
have received by virtue of investment in that fund.
    The Chairman. If there is any legitimate question about 
your investment in the Caymans, what might it be? Several have 
raised questions, and, if you could just again tell us that 
your investment is on the up-and-up, and all taxes were paid 
and nothing of an illegal nature----
    Mr. Froman. Well, again, I am no tax expert, and I cannot 
speak for other activities in the Cayman Islands. All I can say 
is that, with regard to this kind of fund, all the gains and 
losses of the investments are passed on to the individual 
investors through a 
K-1. I forwarded that K-1 to my accountant and paid taxes, 
every penny of taxes, due on that investment.
    The Chairman. Could you talk just a little bit about China? 
There have been a lot of articles lately, and I was 
particularly struck with the article in the Sunday review 
section of the New York Times about how China is very 
aggressively investing worldwide, and not only direct 
investment, but loans. In fact, I remember a figure that 
Chinese loans last year exceeded World Bank loans for that 
year. And there are real concerns that the playing field is not 
level with China, that the United States is more open. The 
Smithfield investment is an example. They are a pork packing 
plant, but China does not take one ounce of beef. It does not 
seem to be too level to me.
    What leverage does this country have, what leverage can you 
as the USTR undertake to help level the playing field? I do not 
think anybody wants to China-bash, but at the same time, we do 
not want to be taken advantage of. Could you just help us and 
indicate to us what your policy would be with respect to China 
and how we get leverage so we are not just talking, we are 
actually doing something constructive?
    Mr. Froman. Well, Mr. Chairman, probably no greater issue 
is on the trade agenda than our relationship with China, 
because it cuts across so many different issues. We have 
engaged with them through all sorts of different mechanisms--
bilaterally from the highest level, from the President on down, 
through the Strategic and Economic Dialogue, through the Joint 
Commission on Commerce and Trade, through the G-20, through the 
WTO, through the IMF--to take on the issues that we think, as 
you say, create an unlevel playing field between us. And we are 
very focused on making progress wherever we can, both in terms 
of pushing for further domestic reform in China on issues like 
liberalization of their exchange rate policy, reform of their 
financial sector, reform of their state-owned enterprise 
sector, to ensure that our companies that are competing against 
state-owned enterprises around the world have a level playing 
field in which to operate.
    We work also through the enforcement agenda. We have 
brought several cases against China, eight cases against China, 
over the last 4 years--from manufacturing to agriculture to 
services--at the WTO. We brought the only 421 case against 
China with regard to tires, and we see that sector in the U.S. 
rebounding and more jobs created there.
    So we have to use every tool at our disposal, our 
bilateral, 
results-oriented dialogues, international institutions, but 
also our enforcement mechanisms, where necessary, to ensure 
that there is a level playing field for our workers, our 
ranchers, and our farmers.
    The Chairman. Okay. I do not have more time to pursue it 
right now, but I would urge you, once you are confirmed, to 
spend more time thinking about this in an effective way, 
because the playing field is not level, and we have to start 
standing up for ourselves as a country more than we have in the 
past. That means leverage. I believe that no country 
altruistically, out of the goodness of its heart, ever lowers a 
trade barrier. They do not on their own. They only do it if 
there is leverage, if they have to. And you are going to have 
to figure out a way, working with this committee and other 
relevant committees and other entities, to help figure out what 
that leverage is--again, in a constructive way, but leverage 
nevertheless. Because, if we leave this unattended, I think it 
is going to get worse.
    Senator Hatch?
    Senator Hatch. Thank you, Mr. Chairman. The distinguished 
Senator from North Carolina needs to leave, so I will defer to 
him, and then maybe get my time back later.
    Senator Burr. I thank my colleague, and, Mr. Froman, thank 
you for coming to my office and for the conversation we had 
there. And I will assure the chair I am only going to ask one 
question. I think it is an easy question, but I do need a 
specific answer.
    You and I talked at that time about the fact that a poorly 
negotiated TPP agreement could result in the loss of hundreds 
of thousands of U.S. jobs in the textile industry or related 
industries, and specifically, in my State of North Carolina, 
about 35,000 jobs would be in jeopardy. So, when we talked last 
month, you said you understood the importance of the TPP's 
textile provisions for the U.S.
    I am going to ask you, if confirmed as the U.S. Trade 
Representative, will you support the yarn-forward rule of 
origin to prevent countries that do not participate in the TPP 
agreement from gaining a back-door entry into the market at the 
expense of those U.S. companies?
    Mr. Froman. Well, thank you, Senator, and thank you for 
your leadership on this issue. And the short answer is ``yes,'' 
and the longer answer is we have made clear that, with regard 
to textiles, we would have clear rules of origin with yarn-
forward at its center. We also need mechanisms to ensure that 
there is not transshipment. We need to work with our colleagues 
at other agencies, including CBP, to make sure that there are 
enforcement mechanisms to ensure that people are not using 
other markets to subvert the textile restrictions.
    But, yes, the yarn-forward rule is a central part of our 
approach to textiles.
    Senator Burr. Thank you, Mr. Froman.
    I would yield Senator Hatch back the balance of his time if 
he would like it.
    Senator Hatch. Well, thank you.
    The Chairman. He can take it all.
    Senator Hatch. That would be great.
    Let me just say this. As you probably know, USTR is an 
agency in crisis. The Office of Personnel Management conducts 
an annual employee survey to evaluate staff satisfaction in 
Government agencies. A 2012 study found USTR placed last among 
small agencies in effective leadership, as shown by this chart. 
It was 29th on that list, which is disturbing to me.
    You may well tell me that this is a result of constrained 
resources, but the downward trend in employee satisfaction has 
been continuous since 2009, as you can see by this chart from 
bestplacestowork.org. You can see there from those charts, 
especially in this case, the score is almost half of what it 
was in 2009, and the steady decline is really concerning to me.
    Now, what in your opinion is required to effectively lead 
the agency? How do you intend to restore staff morale at USTR?
    Mr. Froman. Well, thank you, Senator Hatch, and I agree 
with you about the importance of staff morale, and it would be 
a very high priority of mine, if confirmed, to focus on it.
    My experience is that staff tends to have high morale when 
they feel like they are working on something important and that 
their work is valued. And I think the trade agenda that we have 
been discussing this morning and that the President has laid 
out--with regard to TPP, TTIP, the negotiations going on in 
Geneva, and several of the other initiatives that the building 
works on--give it a sense of mission and give us the 
opportunity to make improvements in morale. Resources are an 
issue, clearly, but I think the combination of being able to 
secure adequate resources and focus people on the importance of 
the mission that they have before them, and the centrality of 
that mission to the administration's and the country's overall 
economic agenda, will be an important part of turning around 
the line on that chart.
    Senator Hatch. Well, I have a very high opinion of you. You 
come well-recommended, and there is no question about your 
dedicated service, no question about your intelligence, in my 
eyes. And I am glad to hear today that the President is 
formally requesting TPA. I think it is about time. I cannot 
imagine any President not wanting that. I have been calling for 
this for many months, and your comments today are welcome news, 
as far as I am concerned.
    And I do look forward to the President's active support, 
and he can make a lot of headway with me if he will get really 
active in this area, because we are falling way behind. Other 
countries are moving ahead on trade agreements, and we are not. 
So we are counting on you being very energetic, and I do not 
know how you are going to stand to be away from these cute kids 
you have, and your wife, but you are going to have to do it. 
And we appreciate your willingness to serve in this capacity.
    Mr. Froman. Thank you, Senator.
    Senator Hatch. Thanks, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    I want to pick up on your point, Mr. Chairman, with respect 
to enforcement as we begin, Mr. Froman. You and I have talked 
about this, and I believe strongly that the country needs a 
vigorous, proactive approach to identifying and remedying 
unfair trade practices. That is what our businesses deserve. 
That is what our workers deserve.
    Now, as you know, our solar industry has exercised its 
rights to obtain an antidumping CVD order on Chinese solar 
products. China responded by evading the order and unfairly 
retaliating against our producers in this global solar supply 
chain. China acted similarly with respect to a trade case in 
Europe.
    Now, as you and I have talked about, our government cannot 
resolve this on its own. We have to have really a global 
settlement. We have to have an opportunity for governments to 
discuss this, ours and China's and Europe's.
    Now, my understanding is, the administration is engaged now 
with those parties--with China, with Europe--to the goal of 
forging an agreement that would end the retaliatory Chinese 
cases and would level the playing field for America's 
producers.
    My understanding is that you support those efforts and that 
you are one of the leaders in those discussions. Can you just 
share your views on this?
    Mr. Froman. Sure. Well, thank you Senator, and thank you 
for your leadership on this important issue. And it is a 
critically important issue, because it brings together both the 
importance of enforcing our trade laws effectively, the 
importance of seeing the further developments of clean energy, 
and the importance of leveling the playing field so that our 
producers of clean energy products can participate in that 
growing market.
    It is one of the reasons that we have been so active over 
the last few years in bringing cases related to clean energy 
involvement. We brought a case in the WTO against India's 
localization policy in the solar area that has kept out our 
producers. We have brought the first section 301 case in 15 
years against China for wind subsidies and got China to agree 
to drop those wind subsidies. And we have brought a WTO case 
against China----
    Senator Wyden. Since my time is short, do you support a 
global settlement here? And are you participating----
    Mr. Froman. Yes. I think--yes. On the solar issue, in 
particular, this involves the whole supply chain, as you have 
said. It involves polysilicon makers, solar panel makers, and 
solar installers. And, as you said, it involves not just the 
U.S. but the European market as well. There have been some 
initial discussions with both Europe and China about how to 
deal with this on a global basis, and that would be--I would 
look forward to working with you to determine how to do that in 
the best way possible.
    Senator Wyden. If you are confirmed, I want you to own 
those negotiations, because this is a hugely important issue. 
We have to be able to be producers in the renewable energy 
field.
    Question two is on transparency. As you know, I feel 
strongly about this. We have talked about it. Particularly we 
saw, in the PIPA/SOPA * debate with respect to the Internet, 
how strongly the public feels about this.
---------------------------------------------------------------------------
    * The Protect Intellectual Property Act and the Stop Online Piracy 
Act.
---------------------------------------------------------------------------
    If confirmed, will you make sure that the public, in these 
areas where there is a very significant public interest, gets a 
clear and updated description of what trade negotiators are 
seeking to obtain in the negotiations so that we can make this 
process more transparent in the future?
    Mr. Froman. Yes, Senator. I think it is critically 
important that we have very good transparency and very good 
consultations between the administration, between Congress, 
between key stakeholders, and with the public at large. As you 
know, we brief this committee's staff on every proposal before 
we table it in any negotiation. We get their input and their 
feedback. We have a robust program of making available to any 
member of this committee, any member of the Senate, any member 
of the House, the text of negotiating proposals. And we----
    Senator Wyden. Let us plan to talk about it some more. I 
would like that to be online so the American people can be a 
fuller partner in this debate.
    Let me ask you about one other question, since my time is 
short. As you know, genetically engineered wheat was recently 
discovered in an unexpected location in Oregon. The agriculture 
authorities have said that the wheat is safe. As you know, an 
investigation is going on right now. But what I am concerned 
about is, some of our trading partners, unfortunately, have 
responded by suggesting sort of, in the meantime, that they are 
going to discriminate against American wheat imports, and they 
are going to do it despite a lack of evidence that there is a 
problem with this genetically engineered wheat in the stream of 
commerce.
    What I would like you to tell us is, if confirmed, will you 
use all the tools that you have to stand up for America's 
agricultural exports so that they do not face discriminatory 
treatment in these foreign markets?
    Mr. Froman. Yes, Senator.
    Senator Wyden. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thanks, Senator. I appreciate your question 
about transparency, because there have been articles recently 
accusing the administration and USTR of not being transparent 
in trade negotiations, and I think your answer clearly explains 
that these negotiations are fully transparent with respect to 
members of Congress and the staff on what is going on. I 
encourage you to keep that up, because there is nothing worse 
than the American people thinking something is being hidden. I 
encourage you to keep that transparency up.
    Mr. Froman. Absolutely.
    The Chairman. Thank you very much.
    Next is Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman.
    Mr. Froman, thank you for your willingness to serve the 
public. We appreciate it. We thank your family. We know this is 
a family sacrifice, and we thank you very much for that.
    I want to first talk about your position on strong human 
rights, labor, and environmental standards as we look at 
expanding trade opportunities. Having stable trading partners 
is extremely important for us. Good governance is important to 
have stable trading partners. And we have been able to make 
advancements on human rights and on environmental and labor 
standards through trade agreements.
    When the last TPA was negotiated, there were certain 
provisions put into that TPA to guarantee the right to 
organize, to prohibit child labor standards and forced labor 
standards. We also have environmental issues and other human 
rights standards.
    I want to know about your willingness to work with us, to 
use every opportunity we have to expand interests that are 
important to the United States. We have the attention of other 
countries when we have trade agreements. At other times, we do 
not have that attention. Are you prepared to work with us to 
try to advance these goals?
    Mr. Froman. Yes, Senator. I think we agree that it is very 
important that we establish and maintain high standards on 
issues like labor and environment and IPR, and a number of 
other issues, through our trade agreements.
    I would broaden it out, however, and say we need to pair 
that with other efforts that we can pursue with these 
countries, whether it is dialogues around human rights or 
whether it is through things like the Open Government 
Partnership, which really focuses on good governance and 
transparency and anticorruption and accountability. So I very 
much look forward to working with you on those issues.
    Senator Cardin. And I agree with that, but I would 
underscore this point. In trade agreements, you have 
opportunities that are not available at other times, and the 
other opportunities we have to advance good governance, we need 
to follow up. But I think we have been able to make tremendous 
strides for the countries when we have them at the negotiating 
tables. And particularly, when you look at TPA, you should 
certainly have the authority, the broadest possible authority, 
to negotiate on behalf of our country. So I would just urge you 
to work with us and be open to opportunities where we can 
advance these goals.
    Mr. Froman. Thank you, Senator.
    Senator Cardin. I want to talk a little bit about TPA. I 
was in Asia this past week. I had a chance to talk to some of 
the countries that are involved in TPP, particularly Japan. But 
I heard your response to Senator Burr as it relates to the 
yarn-forward issue, and I appreciate that and certainly support 
that position.
    But let me just point out that there are other issues that 
are involved here. In Maryland, we have suit manufacturers that 
are facing very difficult circumstances because of the inverse 
tariff issues on the importation of wool. There is a Wool Trust 
Fund that we need to modernize and move forward.
    Are you prepared to work with us as we look at these trade 
agreements to make sure that we have the appropriate programs 
in this country, such as the Wool Trust Fund, to deal with fair 
competition for U.S. manufacturers?
    Mr. Froman. Yes, Senator. We understand the sensitivity of 
a number of those issues, and we look forward to working with 
you on them.
    Senator Cardin. I appreciate that.
    I want to talk about one other issue which deals with heavy 
trucks. We have Volvo/Mack in Maryland, Mack trucks, which 
makes heavy trucks and is concerned that in the agreements that 
we have with Colombia and Panama, it is a 5-year schedule for 
the elimination of the tariffs. Mexico has moved more 
aggressively. I think it is zero now between Colombia, Panama, 
and Mexico. The agreements also provide that you can accelerate 
that reduction of the tariffs to these other countries.
    Would you be committed to advancing, the best that we can, 
the acceleration of these tariffs, which would certainly help 
U.S. manufacturers?
    Mr. Froman. My understanding is that there is a process for 
accelerating tariffs and there is a Federal Register notice now 
out asking for comments and ideas from industries that would 
like to see that done. I am happy to look into that, if 
confirmed.
    Senator Cardin. I should say accelerate tariff 
eliminations.
    Mr. Froman. Reductions, yes.
    Senator Cardin. I should make sure we have that clear. 
Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Isakson?
    Senator Isakson. Thank you, Mr. Chairman.
    Congratulations on your nomination, and your record is 
outstanding. I wish you the best in your service to the 
country.
    I have a couple of specific questions of interest to 
businesses in the United States of America. You know, the Trade 
Representative has a unique opportunity to right some wrongs. 
When you start negotiating with people, you have the 
opportunity to correct some things that have been bad in terms 
of past practices. And the case of Japan entering the TPP 
negotiation raises a question of great interest to me.
    As you probably know, a number of life insurers in America 
have been working in Japan under agreements with the Japanese 
government for years to the tune of $66 billion in terms of 
investment interest and life insurance. Japan, through the 
Japan Post Insurance, has become the major competitor with 
those life insurance companies to the detriment of their 
business and with preferential advantages granted by the 
Japanese government.
    Will you engage on this issue in the TPP negotiations? 
Because you said your number-two priority was to level the 
playing field. In Japan right now, that playing field has been 
tilted in favor of the government-owned entity, and we need 
some attention to that matter. Will you commit to that?
    Mr. Froman. Yes, Senator. And one of the key issues before 
we agreed to let Japan come into TPP was to address insurance 
access issues. We reached an agreement up front on part of that 
issue and also agreed to a parallel negotiation on insurance. 
So, even beyond what is in the TPP agreement, we will try to 
address the particular bilateral issues with Japan in the 
insurance sector as well.
    Senator Isakson. Well, thank you very much for that 
commitment. I appreciate it.
    When you were in my office, we talked about my interest in 
Africa and trips that we have made there, in particular what we 
did last year where, at the 11th hour, we finally got the 
third-party fabric extension on the African Growth and 
Opportunity Act, which comes up for renewal in 2015. We really 
cannot afford to wait until 2015, until the last minute, to 
renew the AGOA act.
    What are your plans as U.S. Trade Representative to engage 
on AGOA in terms of timing-wise and in terms of effort?
    Mr. Froman. Well, Senator, the AGOA Forum meets in August 
of this year with all the AGOA countries, and, if confirmed, I 
would like to use that as an opportunity to start a process of 
looking at AGOA, looking backwards and seeing what has worked, 
where it could be improved, and then work with this committee--
and I appreciate your leadership in particular on this 
committee and on the Foreign Relations Committee with regards 
to Africa--to make sure that there is a seamless renewal of 
AGOA prior to its expiration in 2015.
    Senator Isakson. Thank you. And, you know, the chairman 
made reference to China and Africa in his remarks, and this is 
important in that relationship. Where we can trump China is 
money, and China's investment for their own benefit is to trump 
us on trade with the African people, and that is a rich 
environment for United States products and advanced technology 
and agricultural products and the like. So Africa is an 
important part of America's economic prosperity in the future, 
and I think something, as a Trade Rep, I hope you will focus 
on.
    Lastly, my last question is with regard to the free trade 
agreement with South Korea and the breakthrough language that 
caused criminal penalties to be likened to the U.S. criminal 
penalties in terms of intellectual property theft. Are you 
familiar with that?
    Mr. Froman. I am not terribly familiar with that, no.
    Senator Isakson. Well, one of the biggest problems we have 
had with, particularly Asia--I do not want to just pick one 
part of the world--is the theft of intellectual property: going 
into American movie theaters, recording a movie, and then 
taking it overseas and marketing it. The South Korean Free 
Trade Agreement had a breakthrough agreement in there to 
criminalize that on a parity with United States law. Will you 
work on doing the same thing as these other agreements come up? 
Because intellectual property is tremendously important for our 
business economic growth and industry.
    Mr. Froman. Well, absolutely, Senator. We very much agree 
about the importance of intellectual property rights 
protection, and we want to strengthen those protections around 
the world, including taking on new issues like cyber-theft as 
part of that, as part of the trade secrets issue. So, yes, we 
will very much work on that.
    Senator Isakson. Well, thank you very much, and best of 
luck to you in your new position.
    Mr. Froman. Thank you, Senator.
    The Chairman. Thank you, Senator.
    Senator Brown?
    Senator Brown. Thank you, Mr. Chairman.
    Mr. Froman, thank you for joining us. I want to talk to you 
a little bit about ``too big to fail'' and the Trade 
Representative's involvement in that. Wall Street and industry-
friendly European regulators are now seeking to use any means 
they can to roll back some of the reforms from Basel III and 
from what we did with Dodd-Frank, seeking to include these 
rollbacks in the U.S.-EU ongoing negotiations, the 
Transatlantic Trade and Investment Partnership negotiations. 
The European Finance Ministers, my understanding is, want to 
stop some of the derivatives rules. Earlier this week, the 
Business Roundtable here advocated that we tie our hands, 
effectively in some ways, unilaterally disarming ourselves from 
addressing ``too big to fail.''
    Do we need strong financial rules in these negotiations and 
to refrain from a race to the bottom?
    Mr. Froman. Well, first of all, Senator, there is nothing 
that we are going to do through a trade agreement to weaken our 
financial regulations, to roll back Dodd-Frank, or to roll back 
the efforts that the administration and Congress have worked on 
for the last 4 years to reform our financial regulatory system 
here and to work through the G-20 and other mechanisms to raise 
the standards around the world.
    With regard to the Transatlantic Trade and Investment 
Partnership in particular, obviously financial services are a 
key part of our economic relationship. There are market access 
issues, and there are regulatory issues. Our view is that 
market access issues should be part of a trade negotiation.
    But after the financial crisis of 2008-09, there was an 
explosion of activity among regulators, both bilaterally 
between the U.S. and the EU, but also through the Bank for 
International Settlements, the Financial Stability Board, and 
the International Organization of Securities Commissions. And 
our view is that that work ought to continue parallel, not in 
the negotiations, but parallel alongside the negotiations, 
towards the resolution of the issues that those regulators are 
working on. And, ideally, at the end of this negotiation, we 
will be able to look and see across the whole U.S.-EU 
relationship, what progress we have made towards bringing our 
economies together. But we are not going to, through our trade 
negotiation, lower our financial regulations.
    Senator Brown. You can assure this committee and this 
Senate that in these large-scale regional trade agreements, 
whether it is the U.S.-EU agreement or whether it is the TPP, 
that we will not--you/we will not--undermine any of the 
financial regulators: FDIC, the Fed, Treasury, any of them?
    Mr. Froman. Yes.
    Senator Brown. Okay. Thank you.
    Let me ask something else on the U.S.-EU trade agreement. 
Does an agreement like this, does the Transatlantic Trade and 
Investment Partnership, need investor-state dispute resolution? 
I understand the argument for investor-state dealing with 
countries that have not had the history of the rule of law and 
the history of investor protections and public enforcement and 
all of that. But why do we need an--or do we need an 
extrajudicial and private enforcement system when U.S. and 
European property rights are as sophisticated and are so 
advanced and protected already?
    Mr. Froman. Well, first of all, Senator, we are still in 
our 90-day period of consultations. We have not yet launched 
the negotiations, and we are in the process of taking in input 
and feedback from members of Congress, stakeholders, and 
others. And so I think this is a topic worthy of discussion as 
part of that consultation process.
    Our goal in all these agreements is to try to establish the 
highest possible standards, and new disciplines where 
appropriate, to raise the overall level of the global trading 
system. How that gets translated in any particular agreement or 
in a particular area, I think is an issue that we just need to 
consult on.
    Senator Brown. Do you think investor-state provisions are 
fundamentally different in an advanced property rights group of 
countries like the EU than in a trade agreement we might have 
signed with a Latin American country?
    Mr. Froman. Senator, at this point I do not have a position 
on that, because I would want to think about how--while you are 
absolutely right there may be different legal regimes in one 
place or another, I would want to think about what impact 
including it or not including it might have on our desire to 
raise the standards overall in the multilateral trading system.
    Senator Brown. Let me ask a question in another direction, 
Mr. Chairman, if I could. A recent study by the Peterson 
Institute found that half or more of excess U.S. unemployment, 
the extent to which current joblessness exceeds the full 
employment levels in the absence of currency manipulation by 
foreign governments, they estimate that up to 5 million jobs 
are lost as a result of that. The National Association of 
Manufacturers has said it is key the administration spare no 
effort to see that currencies are market-
determined and free of government intervention. Two hundred-
plus House members just sent a letter to the President saying--
warning against--they were talking about currency disciplines 
for TPP.
    There is significant sentiment on this committee. There are 
five sponsors--five of the six original sponsors representing 
both parties are on this committee--of my currency legislation, 
which passed the Senate overwhelmingly last year. I think there 
is a great interest in doing something on currency before we 
move forward on either fast-track or on TPP.
    What will you do, what will TPP do, to address the kind of 
currency manipulation which I think unquestionably violates 
international rules and has gone unaddressed?
    Mr. Froman. Well, Senator, first of all, thank you for your 
consistent leadership on this issue, and this is an issue that 
is obviously very high on the agenda. It is an example of 
something we raise with China at every meeting on any level 
with regard to their currency policy, and continuously push 
them to move towards more market-oriented exchange rates, to 
allow adjustments through the exchange rate, and to not engage 
in competitive devaluation. Obviously, the Treasury Department 
has the lead on such issues, but, if confirmed, I look forward 
to working with them and with all of you to determine how best 
to move forward on that.
    With regard to China, there has been some modest progress. 
When we came into power, came into office, the RMB was pegged. 
In June 2010, after several discussions we had with the 
Chinese, they began to let it appreciate. It has appreciated 16 
percent in real terms since. It is not fast enough, not far 
enough. We need to continue to press it at every occasion. And 
we need to find, at each step along the way, what the most 
effective way is to make progress, and we are happy to continue 
to work on that with you.
    The Chairman. Thank you.
    Senator Portman?
    Senator Portman. Thank you, Mr. Chairman, and thank you, 
Mr. Froman, for your willingness to step forward and take on 
this responsibility. You were talking about family earlier, and 
I thank your family, too, for their sacrifice, because it is 
not easy. I had three kids under 15 when I had that job, and it 
does require a lot of travel. But, as Bob Strauss warned me--I 
went around and talked to all the former USTRs--he said, ``Do 
not confuse travel or motion with movement,'' meaning you can 
do a lot without traveling as well. And I am sure you have 
figured that out in your current job.
    You have a great team there. It is a terrific team of 
committed professionals. I am very concerned about what Senator 
Hatch laid out, which is a real crisis of morale. You talked 
about a sense of mission you would try to imbue the agency 
with. I think that is important.
    By the way, it is not just funding, because, when you look 
at that survey, it goes to leadership, and it goes to mission. 
And I do think TPA is part of giving them a mission. In other 
words, without Trade Promotion Authority, which this 
administration has not asked for until the trade agenda this 
year, you know, it is kind of difficult to make progress on 
these issues. In fact, I would argue that, in the 5 years since 
we have had Trade Promotion Authority, the U.S. has fallen 
behind substantially. Senator Baucus talked about that earlier, 
and, as you know, since you and I have talked, it is one of my 
major concerns that we need to get it done so that we can have 
the opportunity, not just to work on TPP and this U.S.-EU 
agreement, but also make more progress on some of these 
bilateral agreements where we tend to make the most progress on 
reducing barriers.
    So I would ask you, can you give personal assurances to the 
committee today that you will indeed be involved and engaged in 
trying to get Trade Promotion Authority through the Congress 
before the end of this year?
    Mr. Froman. Senator, absolutely. Again, thank you for your 
leadership on this issue and your continued support of USTR as 
an institution. We are ready to engage, and we are ready to 
work with the committee. We would like to get the TPA done as 
soon as possible.
    Senator Portman. And you will personally engage in that?
    Mr. Froman. Absolutely.
    Senator Portman. My understanding is, although it was in 
the March report, there has not been a deep engagement.
    In terms of Japan, following on the question from my 
colleague from Ohio, in terms of currency, a broader issue we 
have is in terms of autos. And, specifically, the U.S. now 
exports, as you know, one vehicle to Japan for every 130 
vehicles that we import from Japan. And you have probably seen 
this ad, because it has been in a bunch of the papers. I got it 
out of Roll Call today. But it is about the U.S.'s 0.3-percent 
market share in Japan. It is not just about small vehicles, by 
the way. It is broader than that. It is about currency. It is 
also about non-tariff barriers.
    So I would ask you, how will negotiations with Japan, 
parallel to these TPP talks we are having, address these 
concerns? What are you willing to do in terms of dealing with 
this currency issue, which I think is critical? Let me give you 
some numbers here. Since October of last year, the yen has 
weakened by nearly 30 percent. It gives about a $6,000 
advantage per car to Japanese vehicles. And this is on a 
$30,000 car. So this is a big deal to the Big Three here in the 
United States, and they are looking for a level playing field.
    Can you tell us what you are doing with regard to this 
issue and also other non-tariff barriers as you work with Japan 
on the TPP agreement?
    Mr. Froman. Well, thank you, Senator. Absolutely. This is 
an absolutely important issue as part of TPP, and, before we 
agreed to let Japan join TPP, we engaged in a series of 
negotiations with them about beef, insurance, and, very 
importantly, autos. We reached some agreements up front, both 
with regard to getting increased access to their market, the 
more than doubling of what is called their Preferential 
Handling Procedure program for accelerated imports. We also 
received agreement about how our tariffs would be treated in 
TPP before they joined. And we agreed on terms of reference for 
a parallel negotiation on autos, which are to be binding, 
subject to dispute resolution, and part of the overall TPP 
process.
    And so, we have ongoing work to do with Japan, but we also 
have the TPP process to allow us to do that.
    Senator Portman. Again, we appreciate your assurance today 
you will be personally involved in that.
    With regard to India, quickly, we have a lot of concerns 
about what is going on today in India, especially their 
emerging market access barriers and protectionist measures. One 
is the lack of respect for patents. You have probably followed 
this somewhat in your current job. Basic intellectual property 
protections are being set aside. They have invalidated and 
broken American drug patents, as I say. I think these actions 
are in disregard of WTO rules. I think they are fundamentally 
disruptive to innovation, and I think, frankly, it is a major 
concern, because it could spread.
    In Ohio alone, I would tell you our exports to India have 
shrunk by over 5 percent after years and years of steady 
growth. So I think there is an issue right now with regard to 
India. I would ask you, if confirmed, if you would personally 
engage with India trade issues at what I think is a critical 
time.
    Mr. Froman. Absolutely, Senator.
    Senator Portman. Mr. Chairman, I see my time is coming to 
an end. I have a lot of other questions for you, Mr. Froman, 
and I will supply those to you as questions for the record.
    [The questions appear in the appendix.]
    Senator Portman. But I just want to say again that I 
appreciate your stepping up and taking on this job. It is at a 
critical time. I think there are lots of challenges, but also 
tremendous opportunities, particularly with the Trade Promotion 
Authority as a tool you can use to open up foreign markets to 
our workers and our farmers and our ranchers.
    Thank you, Mr. Chairman.
    Mr. Froman. Thank you, Senator.
    The Chairman. Thank you, Senator.
    Mr. Froman, I think that is a good point to end on. Since I 
have been on this committee, I cannot think of a more 
important, challenging time for a new USTR than now. The world 
has become globalized; the challenges are so much greater. The 
competition is so much greater. The need for more creative, 
effective action is so much greater. And I would like you to 
know that you have the full confidence of this committee 
working with you to accomplish these objectives.
    The United States has to work even harder, more creatively, 
than we have in the past, for our kids and our grandkids, if 
for nobody else, because we want them to have the life that we 
Americans have had. It will only happen if we rise to the 
challenge and work even harder and better than we have in the 
past.
    There are some sub-issues here which have been addressed, 
which I just wanted to agree with. One is the IP issue that 
Senator Portman raised. This is becoming more and more of a 
worldwide problem, with China, India, other countries. And I 
urge you to think more creatively than your predecessors have. 
They have done well, but you have to step up and do more. 
Senator Hatch alluded to it. You are extremely well-qualified, 
you are extremely bright and intelligent. You have experience, 
and you are the man for the job, you are the man for the time, 
and we want to work with you.
    And hopefully that will address another issue that has been 
raised here, correctly, and that is, morale at USTR. I think we 
can address that morale if we go ahead and follow up on what we 
have talked about here today. You are going to find a crack 
team down there. Boy, they just want to really get the job 
done. And it is up to us to help them do that. It is a self-
fulfilling prophecy, you know, a virtuous circle, et cetera.
    So we will work with you. Work with us and let us know what 
needs to be done, and let us just hopefully get you confirmed 
right away so you can be on the job.
    Senator Wyden. Mr. Chairman, I see Senator Hatch too. After 
Senator Hatch goes, I had two brief questions additionally, if 
that would be all right.
    The Chairman. Senator Hatch?
    Senator Hatch. Okay. I just have a few questions regarding 
India that I would like to ask. One of the largest recipients 
of benefits under the Generalized System of Preferences, if not 
the largest, is India. Yet India increasingly shuts U.S. 
companies out of its market through a variety of measures, 
including restriction of imports of products to force companies 
to manufacture in India, forcing companies to give their 
intellectual property to Indian companies to increase local 
employment, and, of course, engaging in preferential market 
access policies to give preferences to domestic companies over 
U.S. companies in the information and communications technology 
space.
    Now, considering that the administration must consider 
whether India has provided equitable and reasonable market 
access in determining whether to extend GSP benefits, do you 
think it is appropriate for India to continue to enjoy GSP 
benefits when it shuts U.S. companies entirely out of its own 
markets?
    Mr. Froman. Well, thank you, Senator Hatch. GSP has 
multiple purposes. Some is for development. Some U.S. firms 
rely on the imports from GSP countries under GSP for their 
production. And so we need to look at multiple facets of GSP 
looking ahead. And GSP expires at the end of July. I would look 
forward, if confirmed, to working with the committee to renew 
GSP. But then I am happy to sit down as well and talk about 
what reforms might be appropriate to GSP in the future.
    Senator Hatch. Do you understand what I am talking about 
here with regard to India?
    Mr. Froman. Absolutely. Now, with regard to India 
specifically, I think there are a number of concerning 
developments regarding their innovation and investment 
environment, and you mentioned a number of them, including 
patents.
    Senator Hatch. I am very concerned with the deterioration 
in the environment for protection of U.S. intellectual property 
rights and innovation in India. The government of India 
continues to take actions that make it very difficult for 
innovative U.S. biopharmaceutical companies to secure and 
enforce their patents in India. For example, I am very 
disturbed by India's recent decision to issue a compulsory 
license for an important medicine on entirely specious grounds. 
Also, counterfeiting and piracy continue to be rampant in 
India, and the government's IPR enforcement efforts remain 
weak.
    Now, given that negotiations have not borne fruit, what 
specific steps would you take as U.S. Trade Representative to 
bring about improvement in India's anti-IP policies and 
practices? And should India continue to have access to GSP 
benefits considering that a factor for consideration is the 
extent to which India is providing adequate and effective 
protection of intellectual property rights?
    Mr. Froman. Well, Senator, I think first we should make 
sure we are using our enforcement tools where we can to press 
India to implement IPR protection, and we brought a case, 
obviously, on localization for solar panels, and we are working 
with industry to determine how best to address some of the 
specific issues that you raised.
    With regard to GSP, as I said, I think we ought to sit down 
after renewing GSP to think through what kind of reforms make 
sense going forward, including how to deal with issues like 
this.
    Senator Hatch. Okay. Well, the United States may enter into 
a bilateral investment treaty with India. And, in contemplation 
of such a treaty, would you please let us know, one, how many 
investment disputes are pending between India and U.S. 
entities, and, two, whether India has been abiding by its 
investor-state commitments with other nations as well? Could 
you do that for us?
    Mr. Froman. Yes, Senator.
    Senator Hatch. If you will do that, I would be very 
appreciative.
    Let me just ask one other question. While the online 
marketplace is critically important to our U.S. creative 
industries, it fails to meet its full potential because of 
rampant online copyright theft. As USTR, what additional steps 
will you take to address copyright theft in the online space 
and to foster legitimate online commerce?
    Mr. Froman. Well, this is a key enforcement priority. We 
made the so-called Notorious Markets Report part of our Special 
301 process. Notorious markets we found in China were two such 
websites where there was a rampant counterfeit product being 
sold, and we managed to shut those down. And we wanted to use 
all of our enforcement tools available to us, including the 
work of the Interagency Trade Enforcement Center, to put 
together cases where appropriate, with the consultation of 
industry, to go after practices like that.
    Senator Hatch. All right. Thank you. Let me just ask one 
other question before my time runs out.
    Last February, this administration issued an executive 
order creating the International Trade Enforcement Center, or 
ITEC, in large part to improve efficiency in bringing trade 
enforcement actions. It has been nearly 16 months since ITEC 
was created, and I was wondering if you would tell us how ITEC 
has been working and how has its efficiency been improved? Are 
there any changes you would recommend or make that you think 
would improve ITEC's effectiveness?
    Mr. Froman. Well, thank you, Senator. ITEC has gotten off 
the ground and is doing really quite well. It has detailees 
from several other agencies--the Department of Commerce, 
Treasury, Justice, USDA, State, and others. And having subject 
matter experts, language experts, country experts, all in the 
same place has allowed it to put together cases that we could 
not have put together before. I will mention the export base 
case against China that we have brought in the WTO. They 
literally had to piece together the puzzle of several hundred 
provincial regulations that showed a picture of extensive 
export subsidies for autos and auto parts. And they would not 
have been able to do that without all those resources working 
together in one place.
    So we are very pleased with the way ITEC has gotten 
started. That is one of several cases that it has managed to 
put together. We are grateful to the Department of Commerce and 
the other agencies for having put up resources and for helping 
to get it off the ground, and we hope, working with this 
committee and others going forward, that it enables it to be 
properly resourced and continues to strengthen it.
    Senator Hatch. Well, thank you. I will submit my other 
questions so you can answer them in writing.
    Mr. Froman. Thank you.
    [The questions appear in the appendix.]
    Senator Hatch [presiding]. Senator Carper, you are next, I 
believe, and then I am not sure who is after you--oh, I think 
it is Senator Carper, then Senator Casey, then Senator 
Menendez.
    Senator Carper. Senator Casey? Does that sound right, 
Senator Casey? I do not want to get in front of you. Okay. 
Thank you. Thank you, Mr. Chairman.
    Well, I have been off in another meeting on immigration 
reform, and I am happy to be back, and I see that your son Ben 
and daughter Sarah may have bailed on you?
    Mr. Froman. Afraid so.
    Senator Carper. How old are they?
    Mr. Froman. Ben is 11 and Sarah is 2\1/2\.
    Senator Carper. My boys are now 24 and 23. When they were 
11 or 2\1/2\, there is no way they would have even walked in 
the door. So the fact that they showed up with Nancy and you 
is, I think, a compliment to them.
    Our older boy, when he was about 22, right out of college, 
was spending some time in India, in New Delhi, working for 
about a half-year there on clean energy issues and so forth--a 
really challenging time, but I think ultimately a good 
experience for him. We got to go over and visit with him and 
learn a little bit more about the country through him and 
through our own time there.
    A number of my colleagues have already raised the issue of 
India. I do not want to pile on with respect to India, but, as 
you are hearing it here today, there are real concerns. They 
are an important trading partner and a really important nation 
for us to get along well with, work with, and to be our partner 
in a lot of ways. Whether the issue is IT, whether the issue is 
poultry, there are legitimate issues that are being raised 
here, and we hope you will be very mindful of those.
    The other thing I would say--when people ask me, how do we 
make the economic pie bigger for the United States, I talk 
about investing in three areas: one of those is to invest in a 
world-class workforce; the second area is to invest in 
infrastructure, broadly defined; and the third area is in R&D 
that can be commercialized and create products and goods and 
services that can be sold all over the world. And also to have 
a tax policy that does the same things so we have tax policy 
working in with our spending policies in those three areas.
    Another thing that is really important for us to do, as you 
know, is to make sure that when we do create those products, 
technologies, or goods and services, we can actually sell them 
into markets that in some cases are hard to get into. So the 
job that you are taking on here, that you have been nominated 
for--and I am really grateful to you, and I would just say to 
your wife and your kids, thank you for letting him do this and 
for sharing him with our country. I was very impressed when I 
met with your husband, Nancy, and he said, ``You think I am 
smart? You should talk to my wife.'' But we are grateful for 
that.
    I have a question that relates to enforcement, and I 
obviously believe, as I think we all do, that trade can be an 
effective tool to level the playing field so that our 
businesses can compete in global marketplaces. However, 
enforcing the rules on the books is essential to fair trade and 
to competition.
    This administration, under the leadership of Ambassador 
Kirk, took steps to ensure that strong enforcement was a key 
component to the trade agenda. And I would just say, at a time 
when the U.S. poultry industry--the reason why I am interested 
in poultry is, there are 300 chickens for every person who 
lives in Delaware. I think the same might be true in Maryland 
and some other States as well. But it is a big deal for us. 
But, at a time when the U.S. poultry industry sees key markets 
close as a result of unscientific non-tariff barriers this 
year, year after year, can you assure us that the USTR under 
your direction will continue the important work of enforcing 
the rules on the books?
    Mr. Froman. Yes, Senator. Enforcement has been a priority 
for this administration. We have brought 18 cases to date, 
including several in the agricultural area, including some in 
poultry--against India for their avian influenza restriction, 
against China for some of its inappropriate use of AD/CVD laws 
against our poultry exports. And we will continue to focus on 
those as we move ahead.
    Senator Carper. Well, good. And a related question is, at 
the same time, can you ensure us that you and the folks you 
would lead will work to address existing barriers for our 
poultry industry through agreements, particularly the 
Transatlantic Trade and Investment Partnership that we are 
working on?
    Mr. Froman. Yes, Senator. We have made clear to our trading 
partners that agriculture and SPS issues in particular, the 
sanitary and phytosanitary standards that are often used as 
trade barriers, need to be addressed through these agreements. 
We have made some progress in the run-up to the negotiation 
through some 
confidence-building measures, and, as we complete the 90-day 
consultation period, certainly this will be on the agenda.
    Senator Carper. Good. And one last question. I was here for 
your testimony before I had to leave, but I want to come back--
others may have already asked this question, but, in terms of 
what we can do to help you and the folks at the Trade 
Representative Office be more effective, could you provide just 
a short to-do list, please?
    Mr. Froman. Well, Senator, thank you for the offer. I 
think, on many of these issues, whether it is TPP, TTIP, 
getting TPA, the Geneva negotiations, ensuring that USTR has 
the support that it needs, we very much look forward to working 
with this committee. Working very closely between USTR and this 
committee has been a long tradition, and we plan to continue 
it.
    Senator Carper. All right. Thanks.
    Mr. Chairman, I would just like, for the record, to 
indicate that I could barely see Mr. Froman's wife's lips move 
when he spoke, and his assertion that actually she is much 
smarter than he was probably well borne out. [Laughter.]
    But we are grateful to you, Nancy, for sharing him with us 
and our country. Thank you for your willingness to serve.
    Senator Hatch. Thank you.
    Senator Casey?
    Senator Casey. Thanks very much, Senator Hatch.
    Mr. Froman, thanks for being with us today, and thanks for 
your willingness to serve. It is a great commitment you are 
making, and your family, so we appreciate that.
    I wanted to ask about two areas. One is on the question of 
TPP and Japan and our debate about autos. But I wanted to start 
with a question about competitiveness and intellectual 
property. We know, we all know, the advantage that we have had 
for a long period of time now because of our great biopharma 
industry here, and we rely upon the IP, the intellectual 
property, that undergirds that advantage we have. And I know it 
is of great concern to the administration and, frankly, people 
in both parties, but there is a real concern that, going 
forward, we are not going to have the kind of protections that 
we should have for our own intellectual property.
    You have seen numbers like this, and, when it comes to a 
particular product, sometimes it can cost as much as $1.3 
billion of investment on average and 10 to 15 years of work to 
develop it. So I want to make sure we have as strong a set of 
protections as possible, and we have, I think, fairly broad-
based agreement on as long a term as possible of data 
exclusivity, a 12-year consensus, I would argue.
    I just wanted to ask about your work as Trade 
Representative upon confirmation. Will you work to make sure 
that we have those kinds of protections in place for that term 
of years?
    Mr. Froman. Senator Casey, I fully agree that our 
innovation and ingenuity is an absolutely central part of our 
comparative advantage as a Nation and of our economy, and we 
need, through our trade agreements, to ensure that we are 
protecting our intellectual property to the highest possible 
standard. And through TPP, as one example, we are working to 
ensure that there are high standards for intellectual property 
protection, and we have begun that process with our TPP 
partners of explaining to them what is in U.S. law with regard 
to data protection and biologics and how it works and why it is 
in there, and that is part of an ongoing discussion that we are 
having with them now.
    Senator Casey. I would urge you to embrace, I think, what 
has been a pretty strong consensus here, and I think throughout 
the country, on the maximum protection possible. And the second 
question is one I know that you have addressed, if not directly 
today, certainly it has been raised, and that is the question 
of Japan and the auto industry and whether or not, after many 
years of efforts, we can open up the Japanese auto market. We 
have had, in my judgment, years of frustration, which I think 
creates kind of a predicate for skepticism when it comes to TPP 
and whether or not, with TPP in place, we are going to have the 
kind of access to the Japanese market as it relates to autos. I 
wanted to get your views on that, because I think it is a major 
issue for a lot of people here as it relates to, not just TPP, 
but broader trade policy.
    Mr. Froman. Well, Senator, first of all, I do not think 
there is anybody who cares more about the health of the U.S. 
auto industry or is invested more in the health of the U.S. 
auto industry than President Obama and this administration. And 
certainly the direction that I have received from him is to 
ensure that what we are doing through TPP gives us the 
opportunity to protect the gains we have made in the auto 
industry, in terms of getting it back on its feet, and gives us 
the opportunity to build on that strength going forward. And 
that is why we have made autos such a central focus of ours in 
the run-up to Japan's proposed entry into TPP. It is why we 
agreed on certain provisions that would give us more immediate 
access to their market as well as deal with our own tariffs in 
the context of TPP, on a terms of reference agreement for how 
to deal with auto issues going forward, including both 
offensive issues around distribution but also enough defensive 
measures here as well. So that is very much a part of this 
overall effort.
    Senator Casey. I am out of time, but I would just, for the 
record, say there is a lot of skepticism about the ability to 
open up those markets, and we look forward to working with you 
on it.
    Mr. Froman. Thank you.
    Senator Casey. Thank you.
    The Chairman. Thank you, Senator.
    Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Froman, as we had the opportunity to discuss, you are 
going to hear one consistent issue that I will raise today, and 
that I will raise upon your confirmation and as you are in the 
job, and that is intellectual property rights protection. The 
United States is a global leader in this respect, and, if we 
create, through the intellectual capacity of our Nation, 
products, and then they can be subverted worldwide, it is 
really an undermining of a significant part of our economy.
    To the extent that some of us are willing to put votes on 
trade agreements, it is because we believe that the enforcement 
provisions that we provide to ensure that the agreement is 
going to put us on a level playing field will help us compete 
against anybody in the world, but not if they have 
disproportionate standards, standards that we live up to but 
they do not. And, certainly, the impact of our trade agreements 
in both national security and economic interests, those are my 
three baskets of concern.
    Upstairs I am chairing a Senate Foreign Relations hearing 
on one of the worst tragedies that we have had in the 
manufacture of clothing, which is the Rana Plaza tragedy. And I 
asked representatives, including of the department you would 
head, how many more lives have to be lost before we act? It is 
my understanding that there has been a petition before USTR 
reviewing labor rights issues in Bangladesh since 2007. That is 
6 years. And we have seen no real progress.
    So I would appreciate hearing how you plan to leverage, 
should you be confirmed, the positions you have, including with 
GSP, to encourage countries like Bangladesh and others to 
improve their safety and worker rights efforts.
    Mr. Froman. Well, thank you, Senator, and thank you for 
your leadership on that issue in the other committee as well. 
The tragic loss of life in Bangladesh is very much high on the 
agenda. As you note, there is a petition pending before USTR, 
and my understanding is that USTR intends to act on that over 
the course of this month, that there currently are interagency 
discussions about how best to proceed.
    So, if confirmed, this is something I very much look 
forward to delving into and working with you on.
    Senator Menendez. Well, my concern is, it has been 6 years. 
Six years. Maybe had we acted, we would not have seen those 
people die, because standards would have been raised, 
conditions would have been improved, labor rights would have 
been observed. And so, I hope that what we will get from you 
is, when it is merited, a robust effort and a recommendation--
only the President, of course, can make that ultimate decision, 
but you are going to be in a key position to make a 
recommendation. And so, I hope you are going to make that type 
of recommendation.
    Secondly, on intellectual property rights, I do not mind 
piling on as it relates to India, because they are piling on 
U.S. companies as it relates to their intellectual property 
rights. And I have been hearing from the pharmaceutical 
industry, I have been hearing from the high-tech industry, I 
have been hearing from other industries, about how India's 
inadequate protection, to put it mildly, and enforcement of 
intellectual property rights is a real challenge.
    For example, in the pharmaceutical industry they say, well, 
it is really about access. Well, it is not about access, 
because they could observe the patent and negotiate prices. So 
it is about protecting their generic industry at the expense of 
the intellectual property created in the United States to 
create global medicines that save lives and improve the quality 
of lives.
    So I would like to hear from you how do we, in fact, intend 
to enforce IP rights? India is only the present example, but 
there are others, like China. You know, we have a company in 
New Jersey that produces the scientific manuals for the U.S. 
and across the world. Their product has been, with impunity, 
taken by the Chinese.
    If countries see no consequences and begin to emulate 
India's actions on our most innovative sectors, we face serious 
problems. So what actions can the administration take and you, 
in your position upon confirmation, to convince, for example, 
India to ensure that the fruits of American innovation are 
protected? And what do you plan to do as the Trade 
Representative?
    Mr. Froman. Well, thank you, Senator. We are very concerned 
about the innovation and the investment environment in India at 
the moment, and you mentioned some of the issues: compulsory 
licensing, patent issues, preferential market access, 
localization. These are issues we need to pursue at every 
opportunity. Secretary Kerry will be there later this month for 
an interagency strategic dialogue at the highest levels in 
India. I am sure it will be brought up there. We will have 
another opportunity in July when some Indian officials are 
here. And ultimately, as you point out, it comes down to the 
possibilities of enforcement as well. We have brought cases 
against India in the WTO, and we have thought that would be the 
best way to resolve issues. And we are consulting with industry 
to determine how best to proceed in these cases as well.
    Senator Menendez. If I may, Mr. Chairman, one last 
question.
    You are very erudite on these issues. I have no doubt about 
that. Also, I think you are also very diplomatic in your 
responses. I want to see a Trade Representative who, at the end 
of the day, is going to stand up for U.S. intellectual property 
rights worldwide so that the benefits of the creative abilities 
of Americans can be preserved worldwide, and they can receive 
the resources from them them.
    So I hope your diplomacy will have limits, because, at the 
end of the day, we have diplomatically been losing a lot of 
ground across the globe, and that is not in the interests of 
U.S. companies, U.S. citizens, and, at the end of the day, our 
economy.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Thank you very much, Senator.
    Senator Thune?
    Senator Thune. Thank you, Mr. Chairman. I want to thank you 
and the ranking member for holding this important hearing 
today. And, Mr. Froman, thank you for your willingness to come 
up and answer our questions.
    We all know trade is an incredibly important part of our 
economy and extremely critical when it comes to improving 
America's competitive position in the world and maintaining a 
high standard of living. And I know you, I think, have talked 
about this already, but, in my view, one of the best things 
that we can do to open new markets would be to successfully 
conclude the Trans-Pacific Partnership and the other agreements 
that will follow. But, in order to do that, we need to enact 
updated TPA, Trade Promotion Authority. And I am heartened by 
your testimony that this is something you intend to engage 
with, with the committee, if confirmed--to renew TPA.
    I understand that the chairman got a formal request today 
for that. Is that right? I hope so, because we have been saying 
for some time this is really important, and there is a lot of 
rhetoric about it, but until there is a request that comes 
forward, it is very difficult for us to act. So I hope that is 
the first order of business.
    I want to ask you a question about something that is 
important to a lot of the agricultural producers in my part of 
the world, and it has to do with--there was a letter I recently 
spearheaded to the U.S. Acting Trade Representative, along with 
13 other Senators, expressing our strong concerns about the 
EU's recent decision to impose a 10-percent duty on all imports 
of ethanol from the United States. American ethanol producers 
believe that what the EU has done in imposing a countrywide 
antidumping duty on all U.S. ethanol imports is both 
unprecedented and unsupported from a legal standpoint, and that 
it will completely close the EU to American ethanol.
    The question is: will you commit, if confirmed, to 
carefully reviewing the EU's action on ethanol? And will you 
pursue every available remedy to ensure that U.S. ethanol 
exporters are treated fairly by the EU?
    Mr. Froman. Yes, Senator.
    Senator Thune. And are you familiar with that issue?
    Mr. Froman. I am, and my understanding is that USTR is 
reviewing the methodology that the EU used in that case, 
precisely for the reasons you cited.
    Senator Thune. Okay. I wanted to ask one other question, 
because this is in the news this week. But earlier this week, 
the President recommended a number of legislative actions to 
strengthen the enforcement of patents, and these 
recommendations included reforms to the process by which the 
ITC issues exclusion orders. We all know that there have been 
some high-profile ITC decisions recently. Without commenting on 
any particular decision, the question is: Do you believe that 
the current ITC process needs reform? And if so, why?
    Mr. Froman. Senator, I am not an expert in that area, but I 
am happy to get back to you on it.
    Senator Thune. Okay. I would appreciate it if you could.
    [The information appears in the appendix on p. 113.]
    Senator Thune. Do you have any comments on the U.S.-EU 
trade agreement or TPP?
    Mr. Froman. Well, on the U.S.-EU trade agreement, we are 
still in our 90-day consultation phase with Congress and 
stakeholders. But we think there is great potential there, both 
to remove barriers, tariff barriers, non-tariff barriers, and 
to address some of the regulatory and standards issues that 
create unnecessary costs and obstacles to trade. We spent the 
last year, year and-a-half, working with the EU to identify 
what the key outstanding issues are, and we think there is a 
lot of momentum over there and a lot of political will to 
address those outstanding issues. So, once we finish the 90 
days and they finish their mandate process, if successful, we 
look forward to launching those negotiations.
    Senator Thune. I would like to just address one other 
issue, if I could, and that is the importance of protecting 
trade secrets in trade agreements, particularly as we look to 
the EU negotiations. As you know, trade secrets, which 
generally include any confidential business information such as 
manufacturing processes, are an extremely valuable asset to 
American companies. Unfortunately, theft of trade secrets, 
especially by or for foreign entities, has dramatically 
increased due to greater global competitiveness and increased 
access to information through the digital infrastructure that 
drives our information economy. So I am wondering if you could 
comment on that and what additional steps might be able to be 
taken to protect American trade secrets.
    Mr. Froman. Thank you, Senator. It is an important issue. 
It is sort of the next generation of IPR protection, where you 
have trade secret theft, and now, of course, cyber-theft as 
well is one of the tools by which trade secret theft goes on. 
There is an administration-wide strategy on dealing with trade 
secret theft, and part of what we are trying to do, through our 
trade talks and our bilateral dialogues with countries, is 
ensuring that they have in place the necessary civil and 
criminal penalties as well so that we can go after these 
practices. And that will certainly be a focus going forward.
    Senator Thune. All right. I appreciate that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Wyden?
    Senator Wyden. Thank you very much, Senator Baucus.
    Let me ask first a question about footwear and the global 
value chain. You all are pushing for a 21st-century or next-
generation agreement, which certainly sounds constructive to me 
in a number of chapters. And I also want to see you all, as 
part of that, avoid some of these outdated provisions that 
would undermine the momentum needed to reinvigorate the global 
economy. This requires that we particularly look at the global 
value chain, research considerations, all of the issues that go 
to the global value chain that defines the operations of so 
many brands.
    If confirmed, will you make sure that, as part of that 
process, as part of the Trans-Pacific Partnership negotiations, 
you look at some of the key areas that relate to this concern, 
like the rules of origin and the tariffs for consumer goods?
    Mr. Froman. Yes, Senator, we will look at all those issues.
    Senator Wyden. Good. The other question I had deals once 
again with the Internet. You know, my view is that the Internet 
is the shipping lane of the 21st century. It has enormous 
benefits to people on a day-to-day basis, but it is also 
reshaping the manner in which commerce is conducted. But there 
are not, as of today, any distinct global trade rules that 
ensure that digital trade does not face protectionist kinds of 
policies, protectionist discrimination. And there is a lot of 
concern, for example, about the big win that was won on the 
PIPA/SOPA issue sort of being unraveled as part of these 
discussions.
    What can you all do to make sure that the digital economy 
gets the attention it needs to ensure that the Internet is free 
and open in global markets, particularly for American producers 
of digital goods and digital services?
    Mr. Froman. Well, Senator, when we talk about the TPP being 
a 21st-century agreement and trying to introduce new 
disciplines for new issues in the global economy, the digital 
economy is clearly one of those areas, one of those new areas 
that we have been focusing on. And so in the TPP negotiations, 
while we are still in the midst of the negotiations, we are 
seeking the free flow of data; we are seeking disciplines 
around restrictions that countries might have in terms of where 
people put their data centers and how this affects cloud 
computing. So it is very much on the agenda. The 
e-commerce and the digital economy are very much on the TPP 
agenda.
    Senator Wyden. One last question. On the TPA renewal 
question, are you all going to send to us a proposal that 
represents your views on what TPA is all about? Or how do you 
envision that unfolding?
    Mr. Froman. Well, Senator, obviously I will need to consult 
with USTR and others, if confirmed, but our intention is to 
engage with this committee and engage with the House Ways and 
Means Committee as you work through TPA issues.
    Senator Wyden. So you would send the chairman, Chairman 
Baucus, and Senator Hatch--you would, in effect, send us your 
statutory negotiating goals so that we can get a sense of what 
your priorities are?
    Mr. Froman. I think we will have to work through what form 
that engagement takes, but we are happy to engage with you.
    Senator Wyden. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Brown?
    Senator Brown. Thank you. Thanks very much for this second 
round, Mr. Chairman, and for sitting through this. And, Mr. 
Froman, thank you for that too.
    We talked on the phone about the issue of state capitalism. 
State capitalism in the market is distorting behavior of state-
owned enterprises, and we know that is an increasing problem in 
terms of these deeply entrenched state capitalism models, if 
you will, and the impact of them on U.S. competitiveness. This 
is a big issue, one that Congress really did not think much 
about when we considered fast-track 11 years ago and one that 
we should think about now.
    Can you assure me that there will not be backtracking on 
the whole issue of state-owned enterprises the further we get 
into TPP negotiations, that we will have strong and forceful 
rules in the TPP context to address SOEs?
    Mr. Froman. Yes, Senator, that is certainly what we are 
seeking. That is one of those new areas, again, of trade that 
we are trying to address through TPP, putting disciplines on 
SOEs that compete with private entities, that they must do so 
on a commercial basis. It is also part of our bilateral 
dialogue with the Chinese in particular, outside of TPP, 
obviously, about their SOE reform effort and how important that 
is to leveling the playing field for our companies.
    Senator Brown. So you are, in an ongoing way, in bilateral 
investment discussions with China? This is the main part of the 
agenda, the SOEs?
    Mr. Froman. Yes, sir.
    Senator Brown. Okay, good. I want to talk to you about the 
steel industry for a moment. A company called RG Steel, with 
plants in Ohio, West Virginia, and New York, closed about a 
year ago. Several thousand people lost jobs. This is an 
industry, the steel industry is an industry, more than most, 
operating on very thin margins, 2-, 3-percent profit, partly 
because of a trade decision made by the administration, ITC, 
Commerce Department, over the last 3 or 4 years. There's a new 
steel plant now called Vallourec in Youngstown. There is a 
$100-million expansion at Lorain Works of U.S. Steel, which I 
visited with the CEO, Mr. Surma, last week. There is other 
steel investment.
    The problem is the negative business environments. We are 
seeing that the narrow margins are in large part because of 
increased imports of steel products resulting from government 
subsidies and unfair trade practices, often Chinese, sometimes 
others.
    If confirmed, would you file a case at the WTO against 
China's steel subsidies?
    Mr. Froman. Well, Senator, I think we need to take a look 
at the whole set of issues, and I do not know whether there is 
a case to be brought at the moment or not on that. I would say 
that we brought a case against China in the steel sector when 
they put on our grain-oriented electrical steel AD and CVD 
duties in an inappropriate way, and we won that case. And we 
are always looking to find mechanisms for dealing with issues 
of unfair trade practices through our trade enforcement laws.
    So it is certainly something the ITEC can look at, and, if 
there is a case to be brought, they will bring it.
    Senator Brown. Well, thank you. My fear is this: that so 
often, by the time we go through this process, if we do not act 
a little more proactively or peremptorily, if that is an 
adverb, the damage to these businesses--we saw it in the paper 
industry in southern Ohio and all across paper manufacturing 
generally, where the damage to the industries was so great, by 
the time that the wheels of government in trade enforcement 
could operate, these companies and this industry really had it 
and probably will never fully recover, and they have not 
recovered appreciably anyway. So I am hopeful that you will 
look at this in a bit more proactive, preemptive way as you 
decide this.
    Lastly, I just wanted to make the invitation to you--and I 
am sure my colleague from Ohio on the Finance Committee, 
Senator Portman, would like to too--to come out to Ohio and see 
a steel plant. I think you seeing steel being made, and its 
importance in the economy in making things and being a leader 
in everything from national security to security of families 
that make steel, would matter so much.
    And I would end with this. There is an ArcelorMittal plant 
in Cleveland which is the first time in world history where 1 
person-hour produced 1 ton of steel. It had never happened in 
world history anywhere, and it happened first in Cleveland, OH. 
So you have a really efficient domestic steel industry that is 
under a lot of pressure because of dumping and because of 
illegal subsidies to Chinese steel.
    Mr. Froman. I look forward to taking you up on that 
invitation.
    Senator Brown. Thank you.
    The Chairman. Thank you, Senator.
    Mr. Froman, you have heard a lot of concerns here. They 
generally revolve around unlevel playing fields, intellectual 
property infringement, state-owned enterprises unfairly taking 
advantage of U.S. companies, and so forth. My question really 
is--I know you are going to try to address a lot of this, and 
other matters that have not arisen. What are the limits on your 
power to address this? What are the limits? What are the 
political limits? What are the legal limits? What is preventing 
you from more forthrightly and aggressively addressing all 
these issues in a very expeditious way? If you could just 
categorize what they are, and I am especially interested in 
potential legal limits. The United States could bring 
unilateral actions before we joined the WTO. That ability to do 
so is now severely restricted. Now, there are some who would 
say that, well, gee, we get a lot out of it. Other countries 
have joined, and they have those disciplines, although other 
countries have not fully joined the WTO and participated in 
those disciplines. I will start first with the legal limits. 
What can you do and what can you not do?
    Mr. Froman. Well----
    The Chairman. First of all, what are the limits? If you 
could do everything--that is where I start out. If you could 
bring any action on any subject to address all that has been 
talked about here, what are the limits?
    Mr. Froman. Well, Mr. Chairman, that is a great question 
that deserves a more thoughtful answer. I will start today, but 
it is something that I would love to continue the dialogue with 
you and others about.
    You know, I think we benefit greatly--we, the U.S., benefit 
greatly--from the rules-based trading system. The WTO may 
constrain our ability to bring unilateral action, but it 
constrains everybody else's ability too. And the dispute 
resolution mechanisms of the WTO have generally been open and 
fair, and we have aggressively pursued our interests through 
them.
    So I do not know whether we need additional legal 
authorities than what we currently have. I think we need to be 
able to get out there with our trading partners to build 
coalitions with other like-minded countries and to do things 
that help underscore that. For the global trading system as a 
whole, it will be better if countries all play by the same 
rules, and those rules are the sort of rules that undergird the 
current WTO system. And that is what we need to do bilaterally 
with the emerging economies, as they arise and play an 
increasing role in the global economy. It is what we hope to do 
through the Transatlantic Trade and Investment Partnership: not 
only open our markets to each other but work together vis-a-vis 
the rest of the world to help raise standards in IPR and other 
areas. So there is a lot to be done in that regard.
    The Chairman. So you do not think you need any more legal 
authority?
    Mr. Froman. Well, I am happy to think through that, but I 
know enough to know that I should not be my own lawyer on this 
one.
    The Chairman. All right. But I think we need to discuss 
this, and I urge you to think about it. You know, it is my 
belief, and I think it is America's belief, it is certainly the 
belief of members of this committee, we are not simon-pure. We 
have some trade barriers too. And other countries are not Darth 
Vader. They do not have black hats. We do not have white hats; 
they do not have black hats. But I think it is also true the 
shade of gray of our hat is a lot lighter than the shade of 
gray of their hats, by and large. And so the playing field is 
really not level. Do you want other countries to play by the 
same rules? A lot of countries do not want to do that. They are 
not rules-based, as much rules-based, as we are as a country.
    You know, we are rooted in--our Founding Fathers came over, 
drafted a durable Constitution and Bill of Rights that are 
based in justice and fairness and procedure and transparency, 
and the assumption that democratic countries work with the form 
of government that we have. That is not true in most other 
countries. They do not have that same foundation. They do not 
have that same basis. They come from much different 
perspectives. Many countries are much less process-oriented, 
they are much more results-
oriented.
    The United States is process-oriented. We believe in rules 
and being fair. That is not true with other countries. And they 
will not be fair in the U.S. view because that is not where 
they come from. And the only way to address those issues, in my 
judgment, is leverage. You have to figure out some way to make 
them--that is a bad choice of words, but some way so they want 
to play fair. Or, if they do not, we have to adjust to another 
world order where justice and fairness may not be the total 
underpinning, might not be our premise, our assumption, of what 
we are trying to accomplish here.
    I am worried about results very much. We Americans regard 
ourselves as fair, you know: the right process, judicial 
process, separation of powers, independent judiciary, et 
cetera. But we also need results. And the world has changed so 
dramatically in the last 10, 15, 20 years. With globalization 
and advances in communications technologies, that has 
undermined, I think, all institutions. We have to think a lot 
differently than we have in the past if our kids and grandkids 
want the same quality of life that we have enjoyed as 
Americans.
    I am very worried about that, and I know you are too. Just 
so you have a sense here, the Senators are going to ask you 
follow-up questions in the future, to what degree have you 
performed in the areas that they have addressed. They do not 
just want to hear more talk. They do not want you, when they 
talk to you again about this--and I am one of them--to come 
back and say, well, gee, we talked about a lot of this, but we 
did not do very much about it, and it is not much better 
really. And that is why I ask the question. What are the limits 
to your power? What do we need to address so that you have more 
power, actually, with respect to our trading partners so we can 
get better results? I just urge you to think very deeply about 
that.
    I will talk to you later. We will have follow-up 
discussions about this. But I think it is one of the central 
questions facing this country: economically, how do we make 
sure that we are not being taken advantage of by some other 
countries? And how do we make sure that we Americans have an 
even higher quality of life than we have had in the past?
    Mr. Froman. Well, I agree completely, and I very much look 
forward to working with you and your colleagues on that.
    The Chairman. I wish you very well. It is a huge challenge. 
I sometimes think that only the paranoid survive. And I hope 
you are paranoid so that you can help America survive.
    Thank you very much, Mr. Froman.
    Mr. Froman. Thank you, Mr. Chairman.
    The Chairman. The hearing is adjourned.
    [Whereupon, at 12:55 p.m., the hearing was concluded.]


                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              




[GRAPHIC] [TIFF OMITTED] T7359.002

[GRAPHIC] [TIFF OMITTED] T7359.003

[GRAPHIC] [TIFF OMITTED] T7359.004

[GRAPHIC] [TIFF OMITTED] T7359.005

[GRAPHIC] [TIFF OMITTED] T7359.006

[GRAPHIC] [TIFF OMITTED] T7359.007

[GRAPHIC] [TIFF OMITTED] T7359.008

[GRAPHIC] [TIFF OMITTED] T7359.009

[GRAPHIC] [TIFF OMITTED] T7359.010

[GRAPHIC] [TIFF OMITTED] T7359.011

[GRAPHIC] [TIFF OMITTED] T7359.012

[GRAPHIC] [TIFF OMITTED] T7359.013

[GRAPHIC] [TIFF OMITTED] T7359.014

[GRAPHIC] [TIFF OMITTED] T7359.015

[GRAPHIC] [TIFF OMITTED] T7359.016

[GRAPHIC] [TIFF OMITTED] T7359.017

[GRAPHIC] [TIFF OMITTED] T7359.018

[GRAPHIC] [TIFF OMITTED] T7359.019

[GRAPHIC] [TIFF OMITTED] T7359.020

[GRAPHIC] [TIFF OMITTED] T7359.021

[GRAPHIC] [TIFF OMITTED] T7359.022

[GRAPHIC] [TIFF OMITTED] T7359.023

[GRAPHIC] [TIFF OMITTED] T7359.024

[GRAPHIC] [TIFF OMITTED] T7359.025

[GRAPHIC] [TIFF OMITTED] T7359.026

[GRAPHIC] [TIFF OMITTED] T7359.027

[GRAPHIC] [TIFF OMITTED] T7359.028

[GRAPHIC] [TIFF OMITTED] T7359.029

[GRAPHIC] [TIFF OMITTED] T7359.030

[GRAPHIC] [TIFF OMITTED] T7359.031

[GRAPHIC] [TIFF OMITTED] T7359.032

[GRAPHIC] [TIFF OMITTED] T7359.033

[GRAPHIC] [TIFF OMITTED] T7359.034

[GRAPHIC] [TIFF OMITTED] T7359.035

[GRAPHIC] [TIFF OMITTED] T7359.036

[GRAPHIC] [TIFF OMITTED] T7359.037

[GRAPHIC] [TIFF OMITTED] T7359.038

[GRAPHIC] [TIFF OMITTED] T7359.039

[GRAPHIC] [TIFF OMITTED] T7359.040

[GRAPHIC] [TIFF OMITTED] T7359.041

[GRAPHIC] [TIFF OMITTED] T7359.042

[GRAPHIC] [TIFF OMITTED] T7359.043

[GRAPHIC] [TIFF OMITTED] T7359.044

[GRAPHIC] [TIFF OMITTED] T7359.045

[GRAPHIC] [TIFF OMITTED] T7359.046

[GRAPHIC] [TIFF OMITTED] T7359.047

[GRAPHIC] [TIFF OMITTED] T7359.048

[GRAPHIC] [TIFF OMITTED] T7359.049

[GRAPHIC] [TIFF OMITTED] T7359.050

[GRAPHIC] [TIFF OMITTED] T7359.051

[GRAPHIC] [TIFF OMITTED] T7359.052

[GRAPHIC] [TIFF OMITTED] T7359.053

[GRAPHIC] [TIFF OMITTED] T7359.054

[GRAPHIC] [TIFF OMITTED] T7359.055

[GRAPHIC] [TIFF OMITTED] T7359.056

[GRAPHIC] [TIFF OMITTED] T7359.057

[GRAPHIC] [TIFF OMITTED] T7359.058

[GRAPHIC] [TIFF OMITTED] T7359.059

[GRAPHIC] [TIFF OMITTED] T7359.060

[GRAPHIC] [TIFF OMITTED] T7359.061

[GRAPHIC] [TIFF OMITTED] T7359.062

[GRAPHIC] [TIFF OMITTED] T7359.063

[GRAPHIC] [TIFF OMITTED] T7359.064

[GRAPHIC] [TIFF OMITTED] T7359.065

[GRAPHIC] [TIFF OMITTED] T7359.066

[GRAPHIC] [TIFF OMITTED] T7359.067

[GRAPHIC] [TIFF OMITTED] T7359.068

[GRAPHIC] [TIFF OMITTED] T7359.069

[GRAPHIC] [TIFF OMITTED] T7359.070

[GRAPHIC] [TIFF OMITTED] T7359.071

[GRAPHIC] [TIFF OMITTED] T7359.072

[GRAPHIC] [TIFF OMITTED] T7359.073

[GRAPHIC] [TIFF OMITTED] T7359.074

[GRAPHIC] [TIFF OMITTED] T7359.075

[GRAPHIC] [TIFF OMITTED] T7359.076

[GRAPHIC] [TIFF OMITTED] T7359.077

[GRAPHIC] [TIFF OMITTED] T7359.078

[GRAPHIC] [TIFF OMITTED] T7359.079

[GRAPHIC] [TIFF OMITTED] T7359.080

[GRAPHIC] [TIFF OMITTED] T7359.081

[GRAPHIC] [TIFF OMITTED] T7359.082

[GRAPHIC] [TIFF OMITTED] T7359.083

[GRAPHIC] [TIFF OMITTED] T7359.084

[GRAPHIC] [TIFF OMITTED] T7359.085

[GRAPHIC] [TIFF OMITTED] T7359.086

[GRAPHIC] [TIFF OMITTED] T7359.087

[GRAPHIC] [TIFF OMITTED] T7359.088

[GRAPHIC] [TIFF OMITTED] T7359.089

[GRAPHIC] [TIFF OMITTED] T7359.090

[GRAPHIC] [TIFF OMITTED] T7359.091

[GRAPHIC] [TIFF OMITTED] T7359.092

[GRAPHIC] [TIFF OMITTED] T7359.093




                                   


